Medtronic profit up as ICD sales improve
CHICAGO (Reuters) - Medtronic Inc. (MDT.N) reported a forecast-beating 10 percent rise in quarterly earnings on Tuesday on strong sales of its vascular, neurology and diabetes products and improving demand for its heart rhythm devices.
Medtronic said the U.S. market for implantable cardioverter defibrillators (ICDs), which can save lives by shocking racing hearts back to normal rhythm, grew 5 percent from the quarter before, although industry sales remain softer than a year ago.
Investors cheered the news, sending shares of Medtronic, the largest maker of the devices, up 3.3 percent in after-hours trading.
"The ICD number looks pretty solid. There were some very low expectations, especially if you saw how the stock was trading heading into the quarter," Leerink Swann analyst Jason Wittes said.
The ICD market has not recovered as quickly as some had hoped after product recalls in 2005 and 2006 by Guidant Corp. -- now a unit of Boston Scientific Corp. (BSX.N) -- depressed sales. Medtronic's results follow better-than-expected ICD sales in the latest quarter from both Boston Scientific and St. Jude Medical Inc. (STJ.N).
"We are cautiously optimistic that we are starting to see acceleration in the market," Medtronic Chief Executive Art Collins said in an interview.
Fiscal fourth-quarter net income rose to $812 million, or 70 cents a share, from $740 million, or 61 cents a share, a year ago. Wall Street analysts, on average, had forecast 62 cents a share, according to those polled by Reuters Estimates.
Fourth-quarter revenue rose 7 percent to $3.28 billion.
Sales of ICDs, Medtronic's largest product line, rose 2 percent in the quarter from a year ago, to $770 million.
"The ICD market appears to be in a modest recovery but still nowhere near the growth rates of a couple years ago. We can probably attribute at least part of it to the aggressive ad campaign that Medtronic is running," Lazard analyst Alex Arrow said.
Medtronic said its revenue in the overall Cardiac Rhythm Disease Management business, which also includes pacemakers, rose 4 percent to $1.29 billion.
The Minneapolis-based medical device maker said its share of the worldwide ICD market remained at 52 percent.
Spinal revenue rose 10 percent, and revenue from vascular products including stents to treat clogged arteries increased 22 percent. Neurological revenue rose 15 percent and diabetes revenue increased 22 percent.
For fiscal 2008, Medtronic said it was comfortable with Wall Street forecasts for its revenue to grow in the low double-digits. It said it expects earnings per share to grow at a somewhat faster rate than revenue. The company said it was changing its policy on earnings guidance and would no longer provide precise dollar estimates.
The company, which sells its Endeavor drug-coated stent outside the United States, said it believes a U.S. launch for the product in the second half of this year remains achievable. A U.S. regulatory panel will meet in September or October to discuss the device, used to prop open heart arteries that have been cleared of plaque.
If approved, Endeavor will compete with Boston Scientific's Taxus stent and Johnson & Johnson's (JNJ.N) Cypher.
Medtronic also expects to resume sales of external defibrillators in its Physio-Control unit in the second half of fiscal 2008. It stopped shipping products this year after problems with its quality systems were discovered. Medtronic said it still expects to spin off the unit once those issues are resolved.
(Additional reporting by Bill Berkrot in New York)
