Medtronic To Reorganize Its Restorative Therapies Group
Medtronic announced a shake up of its restorative therapies group in hopes of boosting margins after a period of slow growth.
On Tuesday, when the the Fridley-based med-tech company’s reported its fourth quarter results, its restorative therapies group posted revenues of $1.6 billion, a gain of 1 percent year-over-year. However, that sector of Medtronic, which is the third largest out of four groups, had the smallest growth margin. While all other groups saw consistent gains, the company’s restorative therapies group was the only one to have specialized businesses post declining sales.
Specifically, sales of its spine business fell 1 percent from a year ago to $737 million, while its neuromodulation business took a 5 percent dive to $494 million. The saving grace for Medtronic’s restorative therapies group turned out to be its surgical technologies and neurovascular businesses, both of which had significant sales growth compared to last year.
The result could have been worse, Medtronic CEO Omar Ishrak told analysts on Tuesday. A “speed to scale initiative, which accelerates innovation and enables rapid deployment of [a] product,” was adopted by its spine business. The move, according to Ishrak, proved beneficial and will be adopted by the other business within its restorative therapy group.
“As part of these changes, [the restorative therapies group] is adopting the general manager structure that has proven very successful in driving a steady cadence with meaningful innovation in our cardiac and vascular group,” Ishrak said. “Additionally, [it] has aligned its commercial organization, enabling the group to use its breadth to deliver solutions to hospital administrators and payers, while maintaining focus on specialist physicians.”
Despite the changes, Medtronic anticipates its neuromodulation business will face a number of challenges in the coming months. Drug pump sales have taken a double-digit tumble, Ishrak said, and the company expects its drug pump revenues to be flat moving forward.
“In [deep brain stimulation] and pain stim we are facing increased competition, but as we look ahead we are optimistic” Ishrak said. To keep an edge, the company will focus its pain stimulation strategies toward the opioid epidemic.
Yet Ishrak admits the “pain stim and [deep brain stimulation businesses] could be under some pressure for the next several quarters.”
Medtronic chief financial officer Gary Ellis also touched on the recent divestiture of its intrathecal baclofen drug. By unloading the drug, Ellis said, its neuromodulation business lost roughly $7 million to $8 million in quarterly sales.
The main focus of Medtronic’s restorative therapies group reorganization will also shift toward diseases and conditions over technology. Four core businesses now make up the group, those being: spine; brain therapies (including deep brain stimulation, neurovascular and neurosurgery, and pain stimulation); pelvic health; and specialty therapies (including advanced energy and ear, nose and throat devices).
The change-up, according to Bryan Hanson, president of Medtronic’s minimally invasive therapies group, will make the businesses “smaller, more focused and granular.” In the long term, Medtronic expects the adjustment will make it more competitive against its rivals St. Jude Medical and Boston Scientific.