Medtronic

Medtronic ($MDT)
CEO: Omar Ishrak
Based: Dublin, Ireland
2015 sales: $28.8 billion*
2014 sales: $20.3 billion
Change: +42%

2015 was a "transformative year" for Medtronic, which closed its $50 billion megamerger with Covidien in Q4 2015, which ended April 24. And while the merger and the subsequent integration of Covidien assets remain the headline act, Medtronic made a number of smaller deals in 2015 that picked up the pace of inorganic growth.

Though Medtronic tops the med tech revenue ranks and is the largest pure-play devicemaker worldwide, the Covidien buy saw Medtronic almost double in size and also extended its reach into emerging markets. According to Market Realist, Medtronic's Middle East and Latin America businesses almost doubled in size in 2015. CEO Omar Ishrak highlighted four priorities regarding the Covidien deal, most notably achieving $850 million in cost synergies by the end of FY2018, tapping into Covidien's sales force to push drug-coated balloon sales and leveraging its Neurovascular unit to complement its existing products.

The majority of Covidien's assets were reborn as Medtronic's Minimally Invasive Therapies unit, which clocked 6% growth with $2.4 billion in sales in Q4. Its Neurovascular offerings gave Medtronic's Restorative Therapies Group a boost in sales: the unit grew 5% to $1.65 billion. Medtronic's FY2016 report will be its first as a combined company, but the devicemaker saw some immediate growth in drug-coated balloons and Neurovascular, which grew 23% in Q4. As for its In.Pact Admiral drug-coated balloon, Medtronic announced in Q3 that it would build a €13 million facility in Galway, Ireland, expanding its presence in its new tax home. The In.Pact Admiral drove growth in the Aortic and Peripheral Vascular segment, which logged $406 million in Q4 sales, an increase of 9%. As Covidien's Neurovascular sales force gets folded in, Chief Financial Officer Gary Ellis expects In.Pact sales to grow ever stronger.

Other key 2015 product launches include the tiny heart monitor, Reveal Linq, which doesn't yet have a competitor and recorded 20% sequential growth in Q4. In addition to its own growth, Reveal Linq also drives pacemaker sales for Medtronic, as more syncope patients are being diagnosed using the monitor. Mike Coyle, president of Cardiac and Vascular, was confident about its prospects: "I think we're now at a point, as we look at our five-year plans where we think this will be a billion dollar contributor to the overall product company in terms of just its diagnostic sales."

Cardiac and Vascular grew 10% to $2.2 billion in Q4. In addition to strong performance by Reveal Linq, the Cardiac unit enjoyed a boost from its TAVR, the repositionable CoreValve Evolut R. "In international markets, our business took share sequentially due to the strong adoption of our CoreValve Evolut R," Ishrak said. The device won FDA approval in Q1 2016

While Medtronic has seen several bright spots in 2015, all has not been smooth sailing. Its Pain Stimulation unit was flat in Q4, thanks to a decline in U.S. sales caused by a "negative reimbursement change." And the Spine subgroup of the Restorative Therapies division declined 2% in Q4.

Diabetes has been an area of focus following a restructuring of that segment in Q3. At the time, Medtronic was seeking to build on its dominance in Type 1 diabetes, driven by the success of its MiniMed insulin pump. "The genesis of the structure is really for us to become a much more holistic diabetes company, not just a Type 1 pump and sensor company but a truly global diabetes care organization and that is the emphasis behind the organizational changes," Hooman Hakami, EVP and president of the Diabetes Group, said on the Q3 call.

The Diabetes division gained 6% the following quarter. Medtronic continued to be active in the space, acquiring Dutch diabetes research clinic Diabeter in Q4, and launching partnerships with Samsung and diabetes data startup Glooko in Q1 2016. Medtronic and Samsung are teaming up to enhance the lives of diabetes patients with remotely accessible diabetes data and integrating mobile and wearables into diabetes management. It is collaborating with Glooko on incorporating data from Medtronic insulin pumps and continuous glucose monitors into Glooko's diabetes management platform.

In addition to the Diabeter buy, Medtronic picked up TMVR company Twelve for $408 million in Q2, bladder control startup Advanced Uro-Solutions in Q3 for an undisclosed sum, video laryngoscope maker Aircraft Medical for $110 million in Q3, and magnetic hearing device startup Sophono in Q4.

The majority of Medtronic's 2015 sales were in the U.S., but sales in emerging markets grew 23%, highlighting an area for future growth. In Q1 2016, Medtronic was on the prowl for deals in China as it sought lower-price customers for its line of "value products." Medtronic has a "vast number" of distributors in countries such as India and China, Ishrak said on the Q4 2015 call. "[We] are consolidating logistics to platform distributors in order to meet more stringent supply chain policies. In the Middle East, we are building strong joint venture partnerships with local distributors to accelerate therapy adoption in the local markets."

*Due to Medtronic's fiscal year ending on April 30, total 2015 medical device sales are estimated using EvaluateMedTech's consensus forecast methodology.

-- Amirah Al Idrus (email | Twitter)

Read more:
In latest Covidien deal synergy, Medtronic to build $14M manufacturing facility in Ireland
Medtronic buys Aircraft Medical for $110M to cut respiratory failure from unsuccessful intubation
Medtronic to buy Twelve for $408M+, joining Abbott and Edwards on the transcatheter mitral valve bandwagon
Medtronic aims for diabetic consumer tech in deals with Samsung, Glooko and connected MiniMed clearance
Omar Ishrak: Medtronic on the lookout for M&A deals in China
Medtronic's Ishrak setting his sights on India for future growth
Medtronic slides into hearing devices with magnetic implant startup acquisition
Medtronic works to boost neuromodulation with bladder control startup acquisition
Launches lead the way as Medtronic beats the Street
Medtronic looks beyond Type 1 with a diabetes reorg

Read more on