Defibrillators, spinal products and insulin pumps fuel record revenues
28 May 2005
Minneapolis, USA. Medtronic, Inc. (NYSE: MDT) has announced record
revenues for its fiscal year and fourth quarter ending April 29, 2005.
Medtronic recorded fiscal year revenues of $10.055 billion compared to
$9.087 billion generated in fiscal 2004. Reflecting the weaker dollar,
foreign currency translation had a positive impact on annual revenues of
$166 million compared to last year. Before special charges, net earnings for
the fiscal year were $2.271 billion or $1.86 per diluted share. Full-year
actual earnings were $1.804 billion or $1.48 per diluted share.
Fiscal fourth quarter revenues rose to $2.778 billion from the $2.665
billion reported in the fourth quarter one year ago. Foreign currency
translation had a positive impact on quarterly revenue of $32 million
compared to the fourth fiscal quarter of last year. Excluding special
charges taken in the fourth quarter of fiscal 2005, net earnings were $645
million or $0.53 per diluted share. Actual quarterly net earnings were $194
million, or $0.16 per diluted share.
"Medtronic concluded fiscal year 2005 with strong operating performance
in our two largest product lines, ICDs and Spinal products, that
collectively represent over 42 percent of current quarter revenues," said
Art Collins, chairman and chief executive officer of Medtronic. "Diabetes
products also closed out the year on a favourable note and Medtronic's
annual revenues exceeded $10 billion for the first time in the company's
"In addition to recording market share gains in a number of key
businesses, several significant clinical trials such as the CARE-HF heart
failure study were successfully completed,” Collins added. “Also, a
long-standing legal dispute in our Spinal business was concluded with the
acquisition of a broad portfolio of spine-related intellectual property in
May 2005. We enter fiscal year 2006 with good momentum, and I look forward
to a number of new product launches that should help support continued
strong growth across our business."
Factors to consider when reviewing financial performance
In reviewing annual and quarterly financial performance, it should be noted
that the fourth quarter of fiscal year 2005 included one less week as
compared to fiscal year 2004. The negative impact on quarterly revenue of
one less selling week in the quarter is difficult to assess accurately;
however, it is mathematically estimated to add between seven and eight
percentage points to the recorded growth rates. In addition, during the
fourth quarter, the company recorded a $630 million pre-tax expense for
costs related to the settlement of a legal dispute with Gary Michelson, M.D.
and Karlin Technologies, Inc., and an arbitrator’s decision related to
litigation with ETEX Corporation. Also, as allowed under the American Jobs
Creation Act of 2004, Medtronic has elected to repatriate approximately $935
million from its foreign subsidiaries, resulting in a special tax charge of
$49 million. Repatriation is expected to occur in the fourth quarter of
fiscal year 2006.
Cardiac rhythm management business
Cardiac Rhythm Management reported record annual revenues of $4.616 billion
and fourth quarter revenues of $1.265 billion. Medtronic’s largest product
line, ICDs, generated revenues of $682 million, an increase of 14 percent
when compared to the prior year’s 14-week quarter. On a sequential basis,
the overall ICD market increased $132 million over the third quarter and
Medtronic captured approximately 62 percent of this market growth, with ICD
revenues increasing $82 million when compared to the third fiscal quarter of
2005. Pacing revenues of $438 million in the fourth quarter declined 13
percent when compared to the fourth quarter of fiscal 2004. Growth in the
pacing market has slowed as physicians appear to have turned their focus to
the ICD market. Significant Cardiac Rhythm Management events in the quarter
- CARE-HF and COMPASS-HF trial results were presented at the American
College of Cardiology Scientific Session.
- The U.S. Food and Drug Administration (FDA) approved the EnRhythm™
dual chamber pacemaker. The EnRhythm promotes natural heart activity by
significantly reducing unnecessary pacing in the heart’s right
- The Medtronic CareLink® Network continues to expand as the total
number of clinics on the system now exceeds 540 with approximately
35,000 patients being monitored.
- The FDA approved the use of V-V (ventricle to ventricle) timing for
Medtronic’s InSync Sentry™ and InSync Maximo™ cardiac resynchronization
therapy defibrillators (CRT-Ds). V-V timing allows physicians to
separately adjust the timing of electrical therapy delivered to a heart
failure patient’s two ventricles, which can optimize the beating of the
heart and enhance the flow of blood throughout the body.
- Medtronic announced a voluntary field action regarding certain ICDs
and CRT-D model defibrillators manufactured between April 2001 and
December 2003. This action was in response to field reports and internal
testing that showed a very small percentage of certain devices (0.01
percent) had experienced rapid battery depletion that could limit
therapy. The company successfully worked with physicians to address
approximately 87,000 devices affected in the field. No patient deaths or
injuries have been reported relating to the battery issue.
Key developments expected to occur during the first quarter of fiscal
2006 include the introduction of the EnTrust ICD in the United States and
other geographies, the launch of the EnRhythm pacemaker in additional
geographies, enhanced physician access to OptiVol™ Fluid Status Monitoring
data for heart failure patients with an InSync Sentry™ system, and continued
market growth in the ICD market.
Vascular reported annual revenues of $851 million and fourth quarter
revenues of $233 million. Quarterly performance was solid across the
business’ broad coronary portfolio in all global markets. Worldwide coronary
stent revenues of $82 million during the fourth quarter were strong in
markets outside the U.S., where the Driver™ Coronary Stent System maintained
its leading bare-metal stent position in Europe and Japan. Fourth-quarter
Vascular highlights included:
- Particularly strong performance in Japan, where the Driver stent was
launched in August, with stent revenues increasing 40 percent over the
prior year’s 14-week fourth quarter to $25 million in the fourth fiscal
- Positive Endeavor™ II trial results were released at the American
College of Cardiology (ACC) meeting. The trial data was well received by
physicians and added to the anticipation surrounding the Endeavor Drug
Eluting Coronary Stent.
- The Endeavor IV clinical trial was initiated. Enrollment has begun and
is projected to be complete within 10-12 months.
- The company obtained CE Mark approval for its Valiant Thoracic Stent
Graft with Xcelerant® Delivery System in Europe.
The company continues to prepare for CE Mark and commercialization of the
Endeavor Drug Eluting Coronary Stent System in markets outside the United
States. Medtronic will be presenting additional clinical data from the
Endeavor II clinical trial at the upcoming Euro PCR (The Paris Course on
Revascularization) meeting this week in Paris.
Cardiac surgery business
Cardiac Surgery reported annual revenues of $669 million and fourth
quarter revenues of $185 million. Sales were led by strong performance of
tissue heart valves. Fourth quarter heart valve revenues of $65 million were
relatively flat when compared to the prior year 14-week quarter, but up 16
percent sequentially. Quarterly highlights included:
- The Coalescent U-CLIP® Anastomotic Device was launched outside the
United States. The product enables heart surgeons to create high-quality
anastomoses without tying knots or managing sutures.
- Perfusion systems achieved growth within the market segment despite
contraction throughout the industry.
In the first fiscal quarter of 2006, Medtronic expects the full U.S.
launch of the Mosaic Ultra heart valve. The company also recently announced
the release of the next-generation Cardioblate BP2 Surgical Ablation System.
Neurological and Diabetes Businesses
Neurological and Diabetes posted annual revenues of $1.794 billion and
fourth quarter revenues of $496 million. Neurological revenues of $265
million for the fourth quarter were led by the strong growth of Activa®
Therapy. Gastroenterology/Urology revenues of $52 million were relatively
flat with the prior year 14-week quarter. Diabetes revenues of $179 million
experienced 20 percent revenue growth over the year ago period. Quarterly
- The RESTORE™ Rechargeable Neurostimulation System was launched in the
United States late in the fourth quarter. Initial sales have been
strong. RESTORE offers the most powerful, longest lasting battery among
competitive rechargeable neurostimulators, with a life of up to nine
years, as well as the longest recharge interval available in a
- The Paradigm® family of insulin pumps continued to sell well globally.
In fiscal 2005, Paradigm 512 and 712 pumps were launched into Western
Europe and key Asian markets, while Paradigm 515 and 715 insulin pumps
were launched in the United States.
- A new Obesity Solutions business was formed to focus on developing and
marketing device technologies to address the epidemic of obesity.
Approximately 65 million Americans are defined as obese and it is
estimated that obesity costs the U.S. healthcare system more than $100
billion per year. Obesity has also been shown to increase the risk of
developing other serious conditions such as diabetes, heart disease,
high blood pressure, stroke and cancer.
Looking forward, Medtronic expects to launch its Synergy Plus+™
Neurostimulation System in the first quarter of fiscal 2006. SynergyPlus+
will provide an unmatched number of program options for chronic pain
patients with low-to-moderate stimulation needs.
Phase 1 of the diabetes STAR trial, designed to evaluate the benefits of
real-time glucose readings integrated with insulin pump therapy, is expected
to begin enrollment in the first quarter of fiscal 2006. The company also
expects to launch a consumer continuous glucose monitoring system, followed
by an insulin pump with glucose sensor integration.
Spinal/ENT and Navigation Businesses
Spinal/Ear, Nose and Throat (ENT) and Navigation revenues for the fiscal
year were $2.125 billion, with fourth quarter revenues of $599 million.
Within this platform, performance was again led by the Spinal division where
quarterly revenues were $498 million. Quarterly highlights included:
- The CD HORIZON® LEGACY™ 6.35, the newest addition to the company’s CD
HORIZON Spinal System, was instrumental in driving growth during the
- Enrollment in the PRESTIGE LP® Cervical Disc clinical trial,
Medtronic’s third artificial disc trial in the cervical spine, began
this quarter. This is the fourth U.S. clinical trial that the Spinal
division has initiated in the area of dynamic stabilization.
- INFUSE® Bone Graft continued to experience expansion as surgeon
adoption for its spinal indication remained strong.
- The European Commission approved the usage of InductOs for use with an
LT-CAGE Device for single-level anterior lumbar spinal fusion this
- In the OUS markets, Medtronic’s portfolio of dynamic stabilization
products, which includes DIAMTM, MAVERICKTM Artificial Lumbar Disc,
PRESTIGE® Cervical Disc and BRYAN® Cervical Disc, continue to gain
- Medtronic recently acquired over 100 issued U.S. patents, over 110
pending U.S. applications and approximately 500 foreign counterparts
from Gary Michelson, M.D. and Karlin Technologies, Inc. The agreement
also settled all outstanding litigation between the parties.
Going forward, Medtronic’s Spinal business is expected to benefit from a
variety of product launches which were introduced earlier in fiscal 2005
such as the CAPSTONE™ and LEGACY systems. In the first quarter, the company
expects that INFUSE will continue to grow within the tibial fracture
indication in the U.S. market.