Medtronic says can hit targets even if spine slows

By Susan Kelly

CHICAGO, June 7 (Reuters) – Medtronic Inc (MDT.N) said a focus on faster-growth emerging markets will help it hit its financial targets this year even if its sluggish spine and heart rhythm device businesses come up short.

Speaking to analysts in New York on Monday, company executives also touted a pipeline of more than 60 new device and surgical products slated for launch, including an MRI-safe pacemaker, new spinal technologies and a next-generation sensor for continuous glucose monitoring to manage diabetes.

“We are intentionally and consciously focused on diversifying our portfolio,” Medtronic Chief Executive William Hawkins said in a presentation that was web cast.

Medtronic reiterated its fiscal 2011 goals for earnings of $3.45 to $3.55 per share on revenue growth of 5 percent to 8 percent excluding the impact of currency fluctuations, saying it expects double-digit growth in its cardiovascular, neuromodulation and diabetes units to help offset more modest expectations for its cardiac rhythm and spinal businesses.

The company expects revenue in its cardiac rhythm device business to grow in a range of 2 percent to 5 percent, compared with 4 percent last year, and growth in its spine business to accelerate to 4 percent to 7 percent, up from 2 percent.

Both diabetes and neuromodulation, which includes devices for pain management, are expected to grow in the 9 percent to 11 percent range, roughly similar to the year before.

Growth in cardiovascular products, which include heart valves as well as stents to open clogged arteries, is seen tempering slightly to a range of 10 percent to 15 percent.

Costs for new product launches, integration of recent acquisitions and higher pension expenses will be offset with continued cost reduction initiatives, Medtronic said.

Facing maturing markets in the developed world, the company is aiming longer term to generate 20 percent of its revenue from emerging markets such as China, India, Russia, Latin America and Africa, up from 7 percent last year.

“We expect our revenue mix from emerging markets to triple in the next five years. This has been a very fast-growing part of our business, where we have disproportionately invested over the last couple of years,” Hawkins said.

Part of the company’s strategy will be to develop products specifically tailored to local markets, Hawkins said. For example, the company is establishing a research center in Western Europe that will develop spinal products for that market. “We are definitely globalizing R&D,” Hawkins said.

The company will also seek smaller, “tuck-in” acquisitions to broaden its geographic reach, he said.

Medtronic’s struggling spine business, the only unit to fall short of company targets in fiscal 2010, is in the last leg of a three-year turnaround plan designed to revive growth through new product introductions, expanded biologics indications and clinical evidence to support balloon kyphoplasty as the standard of care for spinal compression fractures.

“We have huge confidence it is going to lead to a renaissance in our spine business,” said Medtronic Executive Vice President Chris O’Connell. (Reporting by Susan Kelly; Editing by Tim Dobbyn)



Josh Sandberg

Josh Sandberg is the President of Ortho Spine Partners and Partner for The De Angelis Group. He also serves as Co-Founder and Editor of OrthoSpineNews.

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