Medtronic’s Cardiac and Vascular Group May See Robust Growth



Medtronic’s Cardiac and Vascular Group performance

Medtronic’s (MDT) Cardiac and Vascular Group (or CVG) has historically witnessed quarterly revenue growth rates in the range of 4% to 7% on a year-over-year (or YoY) basis. However, owing to its strong near-term research pipeline and lower previous year base, the company is expected to report growth rates closer to the higher end of the historical range in the second and third quarters of fiscal 2018. CVG’s YoY revenue growth rate, however, may be lower in 4Q18 due to the stronger previous year performance.

Article continues below advertisement

The global Cardiac Rhythm and Heart Failure Disease Management (or CRHF) market was worth $14 billion in fiscal 2016. Medtronic has projected this market to grow at a compounded average growth rate (or CAGR) in the low-to-mid single digits to reach a market value close to $17.0 billion. Medtronic expects to maintain its annual mid-single digit revenue growth for this segment until fiscal 2021 by expanding its market share in the diagnostics and atrial fibrillation segment and launching innovative products in the implantable segment. If these projections prove correct, it could boost the company’s stock as well as the Health Care Select Sector SPDR Fund (XLV). Medtronic makes up about 3.5% of XLV’s total portfolio holdings.

Cardiac Rhythm and Heart Failure Disease Management segment

In 1Q18, the CVG segment accounted for 36% of Medtronic’s total revenues. Sales in the CRHF business made up around 53% of Medtronic’s CVG business revenues in 1Q18.

The implantables business has proved to be a major factor boosting Medtronic stock in the CRHF market since fiscal 2015, driven mainly by the uptake of magnetic resonance imaging (or MRI) safe pacemakers. Since MRI can prove risky for patients with pacemakers, Medtronic has developed Micra transcatheter pacing system, which is currently approved as a safe device by the US Food and Drug Administration for 1.5 Tesla and 3 Tesla MRI. While the company has lost some market share to peers such as Abbott Laboratories (ABT), Boston Scientific (BSX), and St. Jude Medical (STJ), the successful launch of Micra in the US as well as Europe is expected to partially offset this trend. The company also plans to launch Micra in Japan in 1Q18.

In the next article, we’ll discuss growth prospects for Medtronic’s low power CRHF implantables in greater detail.


More From Market Realist