Medtronic Earnings Call NUGGETS: Growth Strategy in Emerging Markets, Pacemaker Biz
Growth Strategy in Emerging Markets
Matthew Dodds – Citigroup: Omar for you, the U.S. definitely has turned around for you the last couple of quarters, but if you look at emerging markets through the last three quarters now you’ve been below 20%. I think your goal was actually to be above 20%. So what are you seeing? My sense is this has got to be China, Latin America just looking at some of the growth rates. Is this execution? Or is it more market?
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Omar Ishrak – Chairman and CEO: I would actually say that it’s more execution rather than anything. As we put our growth strategy in places, it is going to take a while and there is going to be some level of variability quarter-over-quarter this period as we put our long-term strategies in place. I don’t think it’s the market itself because the healthcare demand is actually strong, countries – China is still investing heavily in healthcare, despite their overall economy there is some pressure, but the government is very interested on investing in healthcare. In places like Latin America and in India there is demand from the population, so we don’t see that as the market itself, we just need to make sure that our strategies all get into place and over time we will try to drive little more consistency here, but that’s what we are facing right now.
Matthew Dodds – Citigroup: Do you think 20% range for this fiscal year is still the goal?
Omar Ishrak – Chairman and CEO: That’s certainly our goal, absolutely.
Michael Weinstein – JPMorgan: So, Omar, you have gotten with this quarter you are gaining of course back up to what looks like about the 3.5% range, so a nice quarter. A couple of businesses that appear to hold you back a little bit this quarter is one the pacemaker business and two diabetes was a little bit light in the U.S. So, I was hoping you could talk about and maybe Mike can jump in on the pacemaker market, because it’s not a Medtronic issue. Why are not only has pricing gotten a little bit worse in pacemakers, but volumes appear to be contracted and I would love your opinion on that? Two maybe for Chris, maybe you can just comment on why the U.S. diabetes business was flat this quarter?
Omar Ishrak – Chairman and CEO: Sure, let me make a few comments upfront and then I will ask Mike and Chris to make some comments as well. First, the PC market, we see about three or four reasons here in general. I know results were a bit weaker than expected, it was mostly price. Remember we anniversaried our REVO MRI launch, so that’s had some impact, but also the destocking and the reduction in bulk purchases in pacing was a factor. In the end also the procedure volume was lower and we haven’t quite got to the bottom of exactly why. I’m sure Mike will have some thoughts on that. So I’ll let him comment on that in a minute. In terms of diabetes, the results were primarily related to a replacement cycle issue. We were building excitement for the new products and it might remain a challenge until we get our FDA approval in FY ’13, but it’s primarily a replacement cycle issue in the U.S. that’s what we’re seeing. So, Mike you want to go first if you would, talk about the pacing market question.
Michael J. Coyle – EVP and Group President, Cardiac and Vascular Group: As Omar mentioned, it is the three items that he outlined. On the procedure volume side I would say that really we saw the procedure volume starting to drop in the first half of FY ’12 and they actually began to stabilize on market implant rates here in the U.S. in Q3 of last year. So, we’re now heading into the third quarter where they have been relatively stable. In fact, up slightly. So, we think the prior year comparisons are showing significant declines, but as we get later into the year we think that those will normalize. As for what’s behind it? We’ve been trying to dig into that and really have not come up with good answers. So, it looks like the general economy may have something to do with that, but generally speaking, we don’t have a good answer other than to say it appears to now have stabilized and we should start to see that by our Q3.
Omar Ishrak – Chairman and CEO: Chris, you want answer on diabetes.
Christopher J. O’Connell – EVP and Group President, Restorative Therapies Group: Certainly, the growth in the U.S. was a little more modest than we expect and the market, as we’ve been commenting in recent quarters, has been a little bit softer in the recent years, so with the consumer economy. As Omar said, our replacement cycle is currently negative in the U.S. However, I will say that our new pump starts what we call new pumps in our new patients was positive in the quarter, which makes us feel good. In addition to that, the international business was very strong. The big event in the U.S. is obviously going to be the launch of this 530G at the end of the fiscal year. So we’re all looking forward to that.