- Medtronic said its second-quarter revenue growth rate of 7.5% on an organic basis exceeded its expectations, and it raised its full-year fiscal 2019 organic revenue forecast.
- Growth in the quarter was led by a 26.2% jump in diabetes group revenue, powered by demand for the MiniMed 670G hybrid closed loop insulin pump system in the U.S. market as well as the Guardian Connect continuous glucose monitoring system.
- The Dublin-based medical device giant left its fiscal 2019 outlook for adjusted earnings per share unchanged in a range of $5.10 to $5.15, citing the impact of Chinese import tariffs, foreign currency translations and costs associated with the purchase of the Mazor robotic system for spine surgery.
Medtronic is banking on a steady stream of new product launches that is shifting the company’s focus to higher-growth medical device markets across a range of specialties and away from a reliance on its slower-growing heart rhythm franchise.
CEO Omar Ishrak sounded an even more bullish note than usual on the company’s conference call with analysts, emphasizing its pipeline potential in areas ranging from robotic surgery and diabetes management to thoracic stent grafts, transcatheter pacemakers and renal denervation for control of high blood pressure.
“We’re executing on the strongest and most exciting pipeline in Medtronic’s 70-year history,” Ishrak told the analysts.
Wall Street seemed to generally approve, boosting the company's shares around 3% in mid-morning trade.
Medtronic posted second-quarter adjusted income of $1.66 billion, or $1.22 per share, up 14% from a year ago, on $7.48 billion in revenue, up from $7.05 billion. Highlights from across the company’s divisions included a 26.2% rise in diabetes group revenue, to $583 million, and 18.9% increase in pain therapies revenue to $314 million, helped by its Intellis spinal cord stimulation and its targeted drug delivery platforms.
The company raised its full-year revenue target to a range of 5% to 5.5%, from its previous goal of 4.5% to 5%.
“This was no doubt a strong quarter across the board -- sales, operating margins, EPS,” Leerink analyst Danielle Antalffy wrote in a note to clients. “We believe this solid sales beat is encouraging, particularly as it highlights the clear benefit from ongoing new product launches including the 670G integrated insulin pump and the Intellis SCS (spinal cord stimulation) system.”
In Medtronic’s largest business, the cardiac and vascular group, which includes devices to treat heart rhythm disorders, heart failure and diseased heart valves as well as stents and balloons to open clogged arteries, second-quarter revenue rose 3.1% to $2.86 billion. Both transcatheter aortic valves and devices to treat atrial fibrillation posted mid-teens revenue growth on a constant-currency basis, while the Tyrx absorbable antibacterial envelope generated growth in the high twenties, the company said.
The spine division posted a 0.5% decrease in second-quarter revenue to $656 million. Medtronic is looking to reinvigorate that business with its $1.64 billion acquisition of Mazor Robotics, announced in September. The deal gives Medtronic robotic technology for spinal surgeries that is expected to improve patient outcomes.
Executives on the conference call also gave an update on the company’s robotic-assisted surgery platform targeted for a fiscal 2020 launch. The robot for minimally invasive and general surgery is Medtronic’s single largest R&D investment. Progress is being made on hardware, software and verification testing, and the first launch will take place outside of the United States, they said.
Editor's note: This story has been updated to include details from investor call.