7 key notes on Medtronic's Q1: CEO Omar Ishrak's take

Spinal Tech

Here are 10 takeaways from the conference call with Medtronic CEO Omar Ishrak discussing the company's first quarter of the new fiscal year and where Medtronic is headed in the future, based on a transcript from the call published in Seeking Alpha.

1. The company is still focused on three major growth strategies: therapy innovation, globalization and economic value. "We believe our three growth strategies are the right ones to achieve long-term growth and the resulting diversification, differentiated approach and competitive advantages will enable us to deliver on our baseline financial expectations," he said.

 

2. Medtronic recently formed a joint venture giving the company controlling interest in its largest distributor in Saudi Arabia, which is expected to deliver incremental revenue and improved margins in country. The company saw notable improvements in China, India and Russia.

 

3. The CMS proposed bundled payment initiatives mandate for hip and knee replacements could have an impact on the company's business. Medtronic doesn't currently have hip or knee replacement lines, but similar initiatives could spread to other specialties. Participating hospitals are at risk for the cost and quality of joint replacement surgery and post acute care for 90 days after surgery.

 

"As bundled payments take hold, we expect to offer unique comprehensive solutions to healthcare providers, encompassing our devices, associated diagnostics and home-based patient monitoring programs, all wrapped in risk sharing business models," Mr. Ishrak said.

 

4. The Covidien integration was reported as successful thus far. There was continued revenue growth across all of the company's groups and geographies, fulfilling the first integration priority. The second is to achieve expected minimum of $850 million in cost synergies by the end of the 2018 fiscal year.

 

5. The company is using indirect sourcing plans, optimizing contracts and improving purchasing power to achieve savings. The company also realized real estate savings from closing 60 facilities — many of which had redundant field offices or distribution centers.

 

6. The spine market grew in low single digits and the United States core spine business underperformed the market. Medtronic realigned RTG commercial sales management and expects this change to better align incentives and improve the focus on cross-selling in the surgical synergy program that includes spine implants and navigation equipment.

 

7. The company expects recent and upcoming product launches in the core spine business to reach scale, which would improve its performance. The technology includes the Alleviate expandable cage and Solera Voyager System in the thoracolumbar spine.

 

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