Diversified Business Portfolio Helps Medtronic Report Strong First Quarter Earnings Per Share
* Reported earnings of $599 million and diluted EPS of $0.51 grew 87% and 96%, respectively over the prior year’s quarter.
* Diluted EPS of $0.55 grew 15% after adjusting for certain charges and including stock option expense in both years.
* Revenue of $2.897 billion grew 8%.
* Double digit revenue growth in the Spinal, Vascular, Neurological and Diabetes businesses helped offset weakness in the U.S. implantable cardioverter defibrillator (ICD) market.
MINNEAPOLIS – August 22, 2006 – Medtronic, Inc. (NYSE:MDT) today announced financial results for its first quarter of fiscal year 2007 ended July 28, 2006.
Medtronic recorded first quarter fiscal year 2007 revenue of $2.897 billion, an 8 percent increase over the $2.690 billion in the first quarter of fiscal year 2006. Foreign currency translation had a positive impact of $6 million this quarter. As reported, first quarter fiscal year 2007 net earnings were $599 million, or $0.51 per diluted share, as compared to net earnings of $321 million, or $0.26 per diluted share for the same period last year, representing growth of 87 percent and 96 percent, respectively. Adjusted first quarter 2007 net earnings were $639 million, or $0.55 per diluted share, as compared to adjusted net earnings of $584 million, or $0.48 per diluted share for the same period last year, representing an increase of 9 percent and 15 percent, respectively. As detailed in the attached table, adjusted net earnings for these periods (1) excludes the impact of a certain litigation charge of $40 million in first quarter 2007, (2) excludes the impact of purchased in-process research and development (IPR&D) charges of $295 million in the first quarter 2006 and (3) includes incremental SFAS No. 123(R) stock-based compensation expense of $32 million in first quarter 2006.
“Strong performances in Medtronic’s Spinal, Vascular, Neurological and Diabetes businesses helped offset weakness in the U.S. implantable defibrillator market during the quarter,” said Art Collins, Medtronic chairman and chief executive officer. “We are encouraged by the strength of our new product pipeline, and we continue to make investments in R&D, market development and operating infrastructure to support future growth.”
Cardiac Rhythm Disease Management Business
Cardiac Rhythm Disease Management (CRDM) reported first quarter revenue of $1.250 billion, representing a decrease of 1 percent over the same period last fiscal year.
ICD revenue of $673 million was down 6 percent, driven principally by a decline in the growth of the U.S. ICD market. The Company believes the ICD market remains significantly under penetrated and that several factors contributed to last quarter’s unanticipated decline. Medtronic expects the ICD market to reaccelerate as a result of a number of initiatives it is undertaking to both increase market share and spur market growth in the U.S. ICD market.
ICD revenue outside the United States was strong, growing 21 percent over the prior year quarter and Medtronic’s worldwide market share for ICDs was flat over the same period last fiscal year. Worldwide pacing revenue of $460 million grew 3 percent. Worldwide market share for pacemakers was up over 2 percentage points. Medtronic’s Emergency Response Systems business reported revenue of $101 million, a 16 percent revenue increase over the same period last fiscal year.
CRDM quarterly highlights include:
* The Concerto™ and Virtuoso™ line of ICDs were commercially launched in Europe and in the U.S. These are Medtronic’s first devices with wireless telemetry, enabling remote communication between the implanted device and programmers in a clinician’s office and at implant, or between the device and a patient home monitor.
* The company launched a multi-center clinical trial to determine the safety, efficacy and functionality of the Chronicle® ICD when used in heart failure patients indicated for ICD therapy. The trial involves approximately 850 patients with mild-to-moderate heart failure at up to 75 sites in the U.S.
* The Medtronic Carelink® Network, available on both pacing and ICD platforms, continued to expand to nearly 1,000 clinics monitoring over 80,000 patients in the U.S.
* Adapta™, Versa™ and Sensia™ pacemakers all received FDA approval this fiscal quarter and were launched in August. These pacemakers provide physiologic pacing adapted to the needs of individual patients and include an exclusive Managed Ventricular Pacing (MVP) mode. MVP enables the device to be programmed to deliver pacing pulses to the heart’s lower right chamber only when necessary, which recent studies indicate may reduce a patient’s risk of developing heart failure and atrial fibrillation.
* The LIFEPAK® 1000 external defibrillator launched last quarter, received strong market acceptance this quarter as it was introduced into accounts in the U.S. The LIFEPAK 1000 is designed for professional emergency responders and includes novel technology to improve response times in treating Sudden Cardiac Arrest.
Spinal and Navigation Business
Spinal and Navigation reported first quarter revenue of $599 million, representing 14 percent growth over the same period last fiscal year.
Spinal and Navigation quarterly highlights include:
* The launch of the CD HORIZON® SEXTANT® II system has been a major factor as more surgeons adopt this revolutionary method of minimally invasive pedicle screw implantation.
* INFUSE® Bone Graft, a recombinant version of a naturally occurring protein capable of stimulating bone growth for both spinal and acute tibial fracture indications, had revenue growth of more than 25 percent over the same period last year.
* The DIAM™ Spinal Stabilization System received FDA approval for an investigational device exemption for use in a clinical study, allowing the first of three planned clinical trials in the U.S. to begin. The study will compare the DIAM implant to a traditional posterior fusion system and approach. The DIAM System is designed to alleviate pain in degenerative stenosis patients who suffer predominantly from radiating leg discomfort and moderate low back pain.
* Medtronic artificial discs continue to gain momentum outside the U.S., led by particularly strong performance of the MAVERICK™ Artificial Lumbar Disc family and the PRESTIGE® LP Cervical Disc.
Vascular reported first quarter revenue of $280 million, representing 37 percent growth over the same period of the last fiscal year. Vascular experienced solid growth across all of its major businesses and geographies.
Vascular quarterly highlights include:
* The Endeavor® drug-eluting coronary stent is now commercially available in over 100 countries outside the U.S. Medtronic received Endeavor regulatory approval in China and reimbursement approval in France. Endeavor drug-eluting stent market share exceeds 20 percent in markets with full commercial release.
* Long-term clinical results from ENDEAVOR I and ENDEAVOR II trials were presented at the Paris Course on Revascularization meeting in May. This data demonstrated Endeavor’s significant and sustained efficacy and safety performance over time, with low rates of repeat procedures and no observations of late stent thrombosis. Enrollment was completed in the ENDEAVOR IV Clinical Trial in the U.S., and the launch of Endeavor in the U.S. is still anticipated in calendar year 2007.
* The Micro-Driver coronary stent, a bare metal system designed specifically to perform in small vessels, received FDA approval and has been positively accepted in the U.S. market.
Neurological reported first quarter revenue of $276 million, representing 17 percent growth over the same quarter one year ago. Growth was driven by new products and strong performance across all therapies, in particular, neurostimulation for chronic pain, movement disorders and overactive bladder.
Neurological quarterly highlights include:
* RestorePRIME™, a non-rechargeable neurostimulator for the treatment of chronic pain which affects an estimated 75 million people in the U.S., was launched in several countries, including the U.S. RestorePRIME offers the broadest number of programming options and the largest stimulation coverage area of any non-rechargeable neurostimulator.
* InterStim® II neurostimulation system for the treatment of overactive bladder and urinary retention was launched worldwide. The InterStim therapy uses sacral nerve stimulation to improve bladder function. InterStim II’s enhancements include greater flexibility to accommodate more patients, a streamlined implant procedure and simplified programming. The improved patient programmer also provides patients more control of their therapy.
* Prostiva™ RF (radio-frequency) therapy for the treatment of symptomatic benign prostatic hyperplasia (BPH), or enlarged prostate, was launched in the U.S. Prostiva RF therapy delivers low-level radio frequency energy to a precisely targeted area of an enlarged prostate.
Diabetes reported first quarter revenue of $196 million, representing 13 percent growth over the same period last fiscal year, supported by worldwide insulin pump growth of more than 20 percent.
Diabetes quarterly highlights include:
* The Guardian® Real-Time Continuous Glucose Monitoring System received FDA approval and is expected to be available nationwide by the end of the calendar year. This stand-alone glucose monitoring system provides patients with real-time glucose trend graphs and predictive alarms informing them when their glucose levels become too high or too low, enabling better management of diabetes.
* The three-phase STAR clinical trial program comparing outcomes on continuous glucose monitoring and insulin pump therapy to multiple daily injections continues. The STAR I trial enrollment is complete and results are expected in the fall. Focus groups with STAR II participants are underway and STAR III is scheduled to begin enrollment in the fall.
* The results of a series of clinical trials demonstrating the benefit of Guardian Real-Time Continuous Glucose Monitoring System compared to traditional blood glucose meters will be published later this year, and are expected to provide further clinical support for reimbursement of continuous glucose monitoring products.
Cardiac Surgery Business
Cardiac Surgery reported first quarter revenue of $168 million, representing 2 percent growth over the same period last year.
Cardiac Surgery quarterly highlights include:
* The Octopus® Evolution Tissue Stabilizer was launched in the U.S. Used in beating heart surgery to hold cardiac tissue in place while the surgeon repairs the heart, the Octopus helps speed procedure times and provides improved stability and targeting for the surgeon.
* The EDGE Physician Training Program continues to be expanded to cardiac surgeons in an effort to provide leading-edge training on new vascular and cardiac-related techniques and therapies.
Ear Nose and Throat Business
Ear, Nose and Throat (ENT), which also includes neurologic technology products, reported first quarter revenue of $128 million, representing 7 percent growth over the same period last year.
ENT quarterly highlights include:
* Powered drills and endoscopic shavers revenue grew 15 percent with sinus and otologic systems growing at twice the estimated market growth rate. Nerve integrity monitors grew over 20 percent in the quarter.
* Revenue for the Strata™ valve, a programmable device for the treatment of hydrocephalus, grew over 50 percent over the same period last year.
In reviewing the quarter, Collins concluded, "While this past quarter presented some challenging market dynamics, we remain optimistic about the underlying strength of our diversified business base and our future growth prospects.”
Medtronic will host a webcast today, Aug. 22 at 4:30 pm EDT (3:30 CDT), to provide information about its businesses for the public, analyst and news media. This quarterly webcast can be accessed by clicking on the Investor Relations link on the Medtronic home page at www.medtronic.com., and this earnings release will be archived at www.medtronic.com/newsroom. Within 24 hours, a replay of the webcast and a transcript of the company’s prepared remarks will be available in the “Presentations & Transcripts” section of the Investor Relations homepage.
Medtronic, Inc., headquartered in Minneapolis, is the world’s leading medical technology company, alleviating pain, restoring health and extending life for people with chronic disease. Its Internet address is www.medtronic.com.
This press release contains forward-looking statements, including statements regarding clinical trials, new products, market growth and market acceptance and other developments, which are subject to risks and uncertainties, such as competitive factors, difficulties and delays inherent in the development, manufacturing, marketing and sale of medical products, government regulation, general economic conditions and other risk and uncertainties described in Medtronic’s Annual Report on Form 10-K for the year ended April 28, 2006. Actual results may differ materially from anticipated results. Medtronic does not undertake to update its forward-looking statements.
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