FRIDLEY, Minnesota –Medtronic’s ups and downs last week could have made executives seasick. But it didn’t bother Bill Hawkins, the medical device giant’s chief executive, who said in an conference call last week that his company was “solid” and, despite sales slumps in many key markets, predicted his company was diversified enough to tough it out.
That perspective is going to come in handy. Because despite the somber pledge for better days, things are unsure at best and, at worst, won’t get much easier any time soon.
Competitors are aggressive and cutting into Medtronic’s key markets. Plus, the Minneapolis Star Tribune pointed out that health-care reform could include a review of how medical devices are reimbursed through Medicare, and it’s an open question whether the Obama-led Food and Drug Administration will help or hinder the path for new medical devices.
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Last week, if anything, helped strengthen Hawkins’ sea legs for the choppy waters ahead. On May 19 alone, the company announced:
- Revenues fell 1 percent to $3.8 billion in the fiscal fourth quarter from the previous fourth quarter, hampered largely by $211 million in adjustments to translate foreign currencies to the U.S. dollar.
- Profits fell a whopping 69 percent to $250 million (pdf) from the year-ago quarter because of a one-time charitable donation, restructuring charges, a legal settlement, and the costs of acquiring three companies and some intellectual property from a fourth.
- It would cut between 1,500 and 1,800 jobs worldwide, including 600 in Minnesota, to streamline and align it with long-term growth prospects.
There were items that tempered that bad news. The Star Tribune pointed out that Medtronic has $1 billion in free cash flow, which could be used to acquire more new companies. Plus, while Medtronic cut jobs it also added 2,100 positions in areas including research and development.
Plus, on the same day of its earnings announcement, Medtronic said new research helped its Endeavor drug-eluting stent and it struck a strategic alliance with drugmaker Eli Lilly and Co. to deliver diabetes education to people who use insulin and their caregivers (Medtronic makes insulin pumps and continuous glucose monitors used by diabetics to control their disease, while Lilly makes insulin).
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But Medtronic’s “hangover from product recalls” — as described by one analyst to The Wall Street Journal– remained intact. The Associated Press reported that Medtronic had warned doctors that 37,000 of its heart pacemakers might be defective. The company said it had received two reports of patient deaths that might be related to the pacemakers.
Then, a day later, a letter written by Iowa Sen. Charles Grassley to Hawkins surfaced in the New York Times. Grassley, a Republican and ranking member on the powerful Senate Finance Committee — and a loud voice in the nation’s health care reform debate – asked Hawkins why a previous request for this company’s paid medical consultants omitted the name of an orthopedic surgeon who has since been accused of overstating the benefits of a Medtronic product used to repair bone and spine injuries.
By Friday, the Times was reporting that the ex-Medtronic consultant had taken a leave of absence from his post at Washington University School of Medicine in St. Louis, Mo.
“We exited fiscal 2009 stronger than we began,” Hawkins said according to the Wall Street Journal.
Let’s see what he’ll say after fiscal 2010.
