As its 2021 fiscal year drew to a close in April, Medtronic laid out plans for the road ahead, which it predicted would represent a quieter, less tumultuous time as the world recovered from the pandemic-induced uncertainty of the preceding year.
Instead, for the first quarter of its fiscal calendar, the device maker was forced to grapple first with the discontinuation of its HeartWare ventricular assist pump and then with the rising spread of the delta variant of COVID-19.
Medtronic also spent the quarter fashioning itself a safety net made up of a variety of new product launches and its continued focus on tuck-in acquisitions—resulting in better-than-expected revenues, totaling just under $8 billion.
That intake represents a year-over-year increase of nearly 20% compared to the same period in 2020, and only a slight drop from the $8.2 billion Medtronic raked in during the preceding quarter ending April 30.
“On our cadence of recovery, the monthly improvement trends continued. Average daily sales in June were stronger than May, and July was stronger than June,” Karen Parkhill, Medtronic’s chief financial officer, said during an earnings call. “That said, we did begin to see a slowdown in certain businesses in the last few weeks of July related to the spread of the delta variant in the U.S.”
That slowdown has continued into August and will likely impact areas of Medtronic’s business like cardiovascular and neuroscience that rely on elective procedures and require ICU beds, Parkhill said, but the downward slope is expected to even out by the end of the company’s next quarter.
That recovery will undoubtedly continue to be helped along by Medtronic’s continued expansion into new product areas, an expansion it has forged with the help of both organic launches and tuck-in acquisitions.
In the first quarter alone, it bulked up its ear, nose and throat portfolio with the $1.1 billion purchase of steroid-eluting implant maker Intersect ENT, while also beginning the first procedures with its Hugo robotic-assisted surgery system.
The company also kicked off recruitment for the first clinical study using its Medtronic Discovery App and landed a range of FDA and CE mark green lights for devices ranging from spinal cord stimulation implants to diabetes management devices to atrial-fibrillation-detecting algorithms.
As a result, Medtronic registered growth in almost every segment: Though revenues from its diabetes business dropped about 3%, they were balanced out by 25% surges in both the medical surgical and neuroscience sectors.
Even the cardiovascular segment saw double-digit growth of about 15% year over year, despite the company’s decision to discontinue its implantable heart pump.
“Striving without reserve for the greatest possible reliability and quality in our products is a key tenet of the Medtronic mission and core to our commitment to improve outcomes for patients,” CEO Geoff Martha said during the call. “In Q1, we made the decision to stop HVAD sales. We did this because of a growing body of clinical comparisons indicating that our device had a higher frequency of adverse events than our competitors’ products.”
Looking ahead, Martha said, Medtronic is expecting boosts from “near-term milestones” in its surgical robotics business and its long-awaited renal denervation system—which it’s hoping will offset the year-over-year drops that will inevitably occur in comparison to the insurmountable peak Medtronic’s ventilator business experienced during its second fiscal quarter of 2020, per Parkhill.
The medtech giant will also continue to pursue its dual expansion strategy of tuck-in acquisitions and new product launches.
Perhaps next up in the latter category is the latest iteration of Medtronic’s transcatheter aortic valve replacement system, the Evolut FX, to treat severe aortic stenosis. The system’s FDA approval was announced alongside Medtronic’s first-quarter earnings, backed by clinical results presented earlier this year demonstrating its long-term success as a replacement for risky open-heart surgeries.