Dive Brief:

• Medtronic's best spine results in recent memory and expansion of TAVR technology into low-risk patient procedures supported Wall Street-beating quarterly sales of $7.7 billion, up 3% as reported or 4.1% organically.
• Those gains offset lingering competitive challenges in left ventricular assist devices, which have dogged Medtronic for the last year with Abbott taking share, and drug-coated balloons and drug-eluting stents recovering from FDA scrutiny of a late mortality signal tied to paclitaxel devices. The company also faced growing pains with sales of its Tyrx envelope product, meant to reduce infections from cardiac implantable electronic devices, due to transition to a new manufacturing facility.
• Medtronic reiterated full-year organic revenue growth expectations of approximately 4%, anticipating growth will accelerate in the second half of the year.

Dive Insight:

The earnings call was the first since Medtronic announced President Geoff Martha, former head of the Restorative Therapies Group, would succeed CEO Omar Ishrak on April 27, 2020.

Martha told investors that under his leadership, Medtronic will be "laser focused" on increasing organic growth, plans to get "more aggressive" with tuck-in M&A, and will prioritize "reinvigorating" its diabetes business.

The diabetes unit, which at $596 million in quarterly revenue accounts for roughly 8% of Medtronic's overall business, is also under new leadership. Former coronary and structural heart executive Sean Salmon was named head of the group last month.

Medtronic appeared to further suffer from loss in U.S. market share on both the glucose monitoring and insulin delivery sides of the business, with domestic sales declining 6.9%, compared to the previous quarter's 5.6% slide.

Ishrak remained bullish on anticipated patient demand for 780G, its forthcoming hybrid closed loop system, whose pivotal trial results are slated for presentation at the Advanced Technologies & Treatments for Diabetes conference in February. But he acknowledged that gaining on continuous glucose monitor competitors with more advanced sensor technology will "take a little longer to resolve."

With Martha's promotion, the Restorative Therapies Group transitioned to the oversight of Brett Wall and grew 6% during the quarter, helped by adoption of the Mazor robotic surgery system and integration of the Titan Spine acquisition. Executives declined to specify the amount of Mazor robots that Medtronic has sold, but similar to last quarter, touted strong pull-through on implant sales thanks to the surgical platforms.

Cardiac and Vascular Group head Michael Coyle said Medtronic expects FDA approval of the Micra AV system for patients with atrioventricular block during the fourth quarter (which, on Medtronic's calendar, is next spring). Studies of the device supporting the new indication were presented over the weekend at the American Heart Association meeting. Micra systems helped support mid-single digit growth in pacemakers during the quarter ended Oct. 25, the company said.

Medtronic said it plans to hold an investor day next June.

"We're encouraged by these results and think the prospect for sequential sales growth acceleration in F2H'20 will keep interest in MDT's stock high," analysts at Cowen said in a note to investors following the earnings release.