Dive Brief:
- Medtronic on Thursday reported revenue of $6 billion for its fiscal fourth quarter, a decrease of 26% on a reported basis. Revenues "have suffered due to COVID-19," CEO Geoff Martha told investors on a conference call, and the company isn't out of the woods yet. "We currently expect first quarter revenue growth to be modestly worse than the fourth quarter," CFO Karen Parkhill said.
- Of the medtech giant's four divisions, the Cardiac and Vascular Group saw the steepest decline with quarterly revenue falling 34%, reflecting a decline in deferrable procedure volumes and quarter-end customer bulk purchases. However, Martha said almost all of Medtronic's businesses were negatively impacted by the decline in procedures.
- The results were in line with an update Medtronic provided last month to investors, setting expectations for a significant hit to earnings as hospitals made smaller than usual end-of-fiscal-year orders and revenues from devices used in elective procedures dropped sharply.
Dive Insight:
On Thursday's call with investors, Martha's first as CEO, he cast the results as "consistent" with the negative impact felt across the medtech industry from deferred procedures as a result of the pandemic. At the same time, Martha lamented that Medtronic's results reflect an additional month of COVID-19 impact in April compared to its competitors following a more typical calendar year cycle.
The Cardiac and Vascular Group took the brunt of the drop in deferred procedures from COVID-19, with revenues falling 34% as reported. Even though many of those therapies are less deferrable, Martha said the company still saw "substantial declines" in number of procedures.
In particular, that unit's revenues were hard hit by high-thirties drops in cardiac rhythm and heart failure business, high-twenties declines in coronary and structural heart products, and mid-twenties declines in the aortic, peripheral and venous lines.
Those trends track with researchers who have noted a drop in reported heart attacks and strokes, fearing many patients are not coming to hospitals for needed interventions.
At the same time, the company's Restorative Therapies Group, which includes the brain, spine, specialty, and pain therapies businesses, sustained a near equally harsh 33% decrease in revenue on both a reported and organic basis.
Procedures in those businesses are more deferrable, Martha noted, including in core spine, which declined in the high-twenties, both in the U.S. and globally. That group was also affected by a cut in customer bulk purchases and capital equipment, he said.
Medtronic's Minimally Invasive Therapies Group, which includes the surgical, respiratory, gastrointestinal and renal businesses, was less impacted by the pandemic during the quarter. The company clocked in a reported decrease of 14%.
That group's revenue mix is "weighted more to the middle of the deferability spectrum" and while the group did experience a significant impact from the drop in surgery volumes in the fourth quarter, particularly in the surgical innovations and gastrointestinal businesses which declined in the low-twenties, that trend was offset by growth in respiratory and patient monitoring products which grew in the mid-teens, including high-eighties growth in ventilators.
On a bright note, Medtronic said its ventilator revenue nearly doubled in the quarter and the company is on track to increase production of the breathing machines five-fold from pre-pandemic levels by the end of June.
Least impacted by the effects of COVID-19 was the company's Diabetes Group with revenue down 9% as reported, which Medtronic said was a result of delays in new patient starts on insulin pumps, stemming from physician office closures in response to COVID-19.
Despite the negative affects of COVID-19 in the fourth quarter and beyond, Medtronic touted its strong financial position with "ample liquidity" and announced an increase to its dividend.
