One of Medtronic’s (NYSE:MDT) key planks – inking supply-and-service deals with hospitals – topped $1 billion in sales and is expected to expand into new markets, CEO Omar Ishrak told analysts yesterday.
"We are actively expanding our cath lab managed services business model globally, with several new accounts in Middle East and Africa, Latin America and Canada," Ishrak said during a conference call discussing Medtronic’s 3rd-quarter results.
Ishrak, who has long insisted that value-based healthcare will be the salvation of the medical device industry, called the company’s growing services business a key platform of that vision. In these service arrangements, Medtronic finances the construction of new cath labs or hybrid operating rooms and manages their operation and workflow, in return for commitments to fixed, per-patient fees that include the cost of any Medtronic devices used in the procedures.
"As of the end of Q3, we had over 50 long-term agreements with hospital systems representing a billion dollars in revenue over the life of the contracts, which have an average span of 5 to 6 years. As we look ahead, we’re working and converting a full pipeline of cath lab managed services contracts with hospital providers around the world," Ishrak said today.
Ishrak recently told investors at the J.P. Morgan Healthcare Conference last month that the now completed $50 billion Covidien acquisition would help the company expand the managed services business into operating rooms around the world, given the strength of Covidien’s product lines in the OR.
"We will have more assets than anyone else in the space, and that’s what Covidien has for us in a long run," he said. "We’re in the driver’s seat to truly transform healthcare."
Medtronic yesterday saw shares jump to a 52-week high after it said profits grew 28.2% to $977 million, or 98¢ per share, on sales growth of 3.7% to $4.32 billion for the 3 months ended Jan. 23. Adjusted to exclude 1-time items, earnings per share were $1.01; on Wall Street, analysts were looking for adjusted EPS of 97¢ on sales of $4.25 billion for the quarter.
MDT shares closed at $78.07 each today, after reaching a high of $78.30 in heavy trading.