New head of Medtronic medical device firm vows to expand

THE NEW chief executive at medical device group Medtronic has vowed to further expand internationally and improve returns from the company’s research spending as he seeks to revive growth at the world’s largest medical-device maker.

Omar Ishrak, a former General Electric executive and the first outsider to lead the company, also said the company would seek to become more efficient. Medtronic, which employs 1,850 people at its Irish business in Galway, remained committed to returning cash to shareholders, while exploring smaller acquisitions, he said. He plans no major changes to the company’s diversified portfolio of medical devices beyond the planned sale or spin-off of the external defibrillator business.

Mr Ishrak’s comments, on the company’s fiscal first-quarter conference call, gave the first glimpse of his strategy since he took the helm in June.

“From the point of view of setting the stage, I think he did a pretty good job,” said Morgan Keegan analyst Jan Wald. “He came across as sort of a tough guy, one who is going to be relentless in his pursuit of data and execution. Medtronic has been ‘Minnesota nice’. This may be a little bit of a different environment for them.”

Medtronic is struggling with weak demand and pricing in its important markets for heart defibrillators and spine products.

Factors include the weak economy, a study suggesting heart devices are improperly used in too-sick patients, and allegations in a medical journal that researchers hid serious complications with the company’s Infuse bone growth product. Ishrak said the fallout from those problems will persist.

Emerging markets represent 10 per cent of revenue, and Ishrak said he believes average annual growth rates of 20 per cent are sustainable. The returns on research and development have been “unsatisfactory” over the years. “This is not acceptable and clearly cannot continue, and will require some major changes,” he said.

Net income in Medtronic’s fiscal first quarter to July 29th was $821 million, or 77 US cents a share, compared with $830 million, or 76 cents a share, a year ago. First-quarter revenue rose 7 per cent to $4.05 billion, or 2 per cent after adjusting for a favourable currency impact. Analysts looked for $3.98 billion.

The company’s Irish business made $190.6 million profit in the year to April last on sales of €753.4 million. – (Reuters)