INFUSE SALES LEADING MEDTRONIC SPINE TO HEALTH (Orthopedics This Week)

Medtronic Inc.’s spine’s most recent quarter’s sales beat Wall Street expectations. Most surprisingly, Infuse is credited with causing the surprise.

Yes, you read that right. Biologic sales for Medtronic’s second quarter rose 9% on a reported basis while Core Spine and Interventional Spine, which consists of the company’s balloon kyphoplasty product line slipped 1% and 6%, respectively. Management said the company’s kyphoplasty sales were affected by a product supply issue related to the cement delivery system..

BMP (bone morphogenetic protein—Infuse) sales of a $120 million, according to Medtronic’s CFO Gary Ellis, grew with stable underlying demand. “While sales of BMP bounced round a bit, we do believe we have turned the corner and would expect BMP sales growth to be slightly positive going forward.”

After Carragee, after The Spine Journal and NASS (North American Spine Society), surgeons have decided their patients need the product. Omar Ishrak, the company’s chairman and CEO, and his spine team never flinched. They just shrugged off NASS and let the evidence speak for itself.

Spine Revenue Flat

Overall spine revenue of $746 million grew 1%. Core Spine’s flat year-over-year result was a “modest improvement” from last quarter, said Ellis. “We are encouraged that both the global and U.S. Core Spine markets continue to stabilize and are beginning to show bias towards low-single-digit growth.”

Ellis added that the Core Spine business is launching a number of new products this fiscal year, which he expects will return the company’s overall spine business to modest growth in fiscal 2015. “In addition to working with surgeons to develop the leading technology in spine, our business continues to focus on procedural innovation and our surgical synergy program, which integrates enabling technologies, surgical tools, spinal implants and our expertise.”

The company generated $951 million in free cash flow during the quarter and is committed to returning 50% of that to shareholders in the form of dividends.

Spine Market Growing

Now that Medtronic has reported its results, all the spine players have reported quarterly sales figures.

RBC Capital Markets’ Glenn Novarro said worldwide spine market growth during the quarter appears to be in the 3.5%-4.5% range on a constant currency basis.

He believes the underlying health of the worldwide spinal market improved sequentially, owing to better U.S. growth. He estimates that the U.S. spine market was up 3%-3.5% and international growth was up 6.5%-7.0% on a constant currency basis.

Smaller Players Gaining Market Share

Smaller spinal manufacturers continue to gain market share. Novarro says NuVasive, Inc. which gained approximately 60 basis points of worldwide market share in the quarter while LDR Holding Corporation gained about 30 basis points of share. Other large share gainers included K2M, Inc. and Globus Medical, Inc.. He expects continued market share gains from the smaller spinal manufacturers for the remainder of 2014 and into 2015.

“Given the better than expected [third quarter] spine results, we now believe the worldwide spine market will grow in the 3%-3.5% constant currency range for 2014,” concluded Novarro.

 

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