Medtronic PLC Q1 2024 Earnings Conference Call Insights

Key highlights from Medtronic PLC (MDT) Q1 2024 Earnings Concall

Management Update:

• [00:04:08] MDT is focusing its R&D investments on technology megatrends like robotics and artificial intelligence.

• [00:12:04] In non-U.S. developed markets, diabetes grew 18%, the highest growth in four years, driven by both 780G adoption and increased CGM attachment rates.

Q&A Highlights:

• [00:26:25] Vijay Kumar at Evercore ISI asked how much of the 30% U.S. diabetes revenue growth was driven by new pump sales and how much was driven by existing pump users upgrading to the 770G. Que Dallara replied that Insulet has seen low 30s AID growth in the U.S. driven by both existing install base of 770G users that have upgraded and new patients, with the highest new patient growth in three years coming from MDI as well as competitive switches.

• [00:28:34] Vijay Kumar with Evercore ISI also asked how did the new anti-corruption campaign in China impact MDT’s business in the quarter, and is there any sign of the channel pausing due to the campaign. Geoff Martha CEO said that MDT is not seeing any material headwind from the anti-corruption campaign in China. The company expects China revenue to return to historical high single digit, low double digit growth in FY24.

• [00:31:39] Robbie Marcus from JP Morgan enquired why MDT expects organic sales growth to decelerate from 6% in 1Q to 4.5% for the rest of the year. Karen Parkhill CFO answered that MDT had a strong start to the fiscal year with mid-single digit growth in 1Q and raised its guidance for 2Q to 4-4.5%. The company expects continued acceleration into the back half of the fiscal year.

• [00:33:33] Robbie Marcus from JP Morgan queried how much more margin expansion can MDT expect from GM and SG&A in FY24 and beyond. Karen Parkhill CFO the company is focused on driving margin expansion, including GM and SG&A. The company is making investments in its global operations and supply chain to drive cost out of the organization.

• [00:35:57] Larry Biegelsen of Wells Fargo Securities asked how MDT feels about the upcoming Simplicity Adcom and FirePulse data, and what the company expects to see in terms of timelines for approval and ramp in the U.S. for renal denervation and growth of AFib business. Sean Salmon said that the company expects U.S. approval of Simplicity in 2H24 and is confident in its pulse field ablation technology, with results from a randomized trial expected later this year.

• [00:38:44] Danielle Antolfi at UBS enquired how MDT is thinking about the impact of GLP-1s on its diabetes business in the next year. Geoff Martha CEO replied that MDT has seen minimal impact from GLP-1s on its business, with the exception of some modest impact in the bariatric surgery market. Medtronic believes that GLP-1s could have a positive impact on the bariatric surgery market in the long term.

• [00:40:34] Danielle Antolfi at UBS also asked about the growth potential of its type 2 diabetes business and its AID pen. Geoff Martha CEO said that MDT believes that there is significant upside potential in the AID market for insulin-dependent patients, whether they are type 2 or type 1.

• [00:41:25] Travis Steed at Bank of America enquired how much success MDT has had with its new TAVR valve and if the 21% growth in Japan is sustainable. Sean Salmon answered that MDT is confident in the performance of its new TAVR valve, both in the short-term and the long-term. The company is expecting to release more data on the valve’s performance in the coming months.

• [00:48:26] Chris Pasquale of Nephron asked how MDT is using artificial intelligence  to improve its products and services. Geoff Martha CEO said MDT is heavily investing in AI and has received regulatory approval for several AI-powered solutions in medical specialties such as GI, spine, and cardiac rhythm. These solutions are improving patient outcomes and access. MDT believes AI will be a key differentiator in the future and is working to scale it across all its businesses.

• [00:52:34] Chris Pasquale of Nephron also asked how MDT’s pricing has changed over the past few years and whether the company believes that the current pricing environment is sustainable. Karen Parkhill CFO said that MDT has built a strong pricing muscle over the past few years and is confident that it can sustain this pricing muscle even in a lower inflationary environment. The company is also focused on improving GM by reducing costs and increasing productivity.

• [00:56:38] Joanne Wuensch at Citi asked whether the strong volumes seen in MedTech this season are a new normal or just pent-up demand from the pandemic. Geoff Martha CEO replied that MDT is seeing strong procedural trends across the board, with growth in the US, Western Europe, Latin America, and emerging markets. The company is not seeing pent-up demand in the areas it operates.

• [00:56:56] Joanne Wuensch at Citi also asked about the timing of the launch of MDT’s surgical robotic system Hugo in the US and the company’s progress in other international markets. Mike Marinaro said MDT is making good progress with its Hugo surgical robotic system, with increasing sales, installations, and indication approvals in multiple international markets. The company is also excited about the setup of its surgical business and the competitive dynamics in the market.