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Medtronic flutters in 1Q
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August 18, 1998: 8:02 p.m. ET
Implant maker posts profits of 32 cents a share; pins hopes on heart devices
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NEW YORK (CNNfn) - Citing a sharp decline in sales of stents and balloon catheters, cardiac implant maker Medtronic Inc. posted lackluster profits Tuesday in its fiscal first quarter, but expressed confidence that innovative products now on the European market would help resuscitate growth within the next year.
Medtronic, a leading medical technology company based in Minneapolis, Minn., reported net income of $150.4 million, or 32 cents a diluted share, up from $146.5 million, or 31 cents a share a year earlier.
Revenue rose 4 percent to $653.2 million from $646.3 million, excluding the negative impact of $15.6 million in foreign currency translation.
On Aug. 6, Medtronic warned that despite improved corporate profits, the company would not meet Wall Street projections for earnings of 34 cents a share.
In response, investors hammered Medtronic stock, driving it down 7-3/8 to 52 in active trading.
On Tuesday, Medtronic (MDT) shares ended up 2-1/8 at 57-3/8 as investors focused on predictions by the company's chairman and chief executive officer, William George, that several new products used to regulate and monitor heart rhythm were "winning rapid acceptance in international markets" and would soon generate growth in the U.S.
George forecast growing sales in the second half of fiscal 1999, driven by products about to be launched in the U.S.: the Kappa 700 pacemaker and the Gem DR defibrillator.
The Kappa 700 system, for which regulatory clearance is still pending in the U.S., underpinned a 10 percent increase in Medtronic's international revenue sales in the fiscal first quarter. The Gem defibrillator, which is also subject to approval in the U.S., fueled a 30 percent rise in overseas sales.
George said he expects further increases once these products are sold in the U.S.
In an interview with CNNfn Tuesday, George expressed high hopes for two new products described in a Medtronic statement as "major milestones" in the monitoring and treatment of heart failure.
One of those products, the Medtronic InSync Cardiac stimulator implant, introduced in Europe Tuesday, is designed to synchronize the right and left sides of the heart, as well as its upper and lower chambers.
The other device, the Chronicle Implantable Hemodynamic Monitor, is a long-term implant that allows doctors to medical manage patents with heart failure. Medtronic said that in early clinical trials of the products in Canada and Europe, patients who received treatment showed improved heart function and quality of life.
George told CNNfn Tuesday he believed the products would vastly improve the lot of the estimated 5 million people who suffer from heart failure in the U.S., making it the leading cause of hospitalization among the elderly. (WAV 209Kb) or (AIFF 209Kb)
Medtronic said revenues from cardiac rhythm management rose 6 percent in the latest quarter from a year ago, matched by growth in cardiac surgery sales.
Sales of neurostimulation and drug delivery products rose 22 percent and 20 percent, respectively, from the year-ago period. George said he expects Medtronic's neurological business to drive core growth of 15 percent to 20 percent over the next five years as the company continues to expand.
Medtronic said regulatory procedures are on track for a public stock offering in September, and for final acquisition approval of Physio-Control International Inc. and AVECOR Cardiovascular Inc. later in the fall.
George said Tuesday the strong dollar had effectively shaved 3 percent of the company's total revenues.
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Medtronic
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