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Medtronic reveals steep COVID-19 financial impact

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Medtronic logo updatedMedtronic (NYSE:MDT) issued a financial update revealing that weekly revenue in the U.S. is down 60% amid the COVID-19 pandemic.

The Fridley, Minn.-based medtech giant explained in a news release that the business impact remains fluid, but the company expects COVID-19 to negatively affect its fourth-quarter (ended April 24) results, and the quarter will reflect an additional month of impact compared to other companies on a calendar-based fiscal year.

Certain product lines are in high demand as a result of COVID-19, including products from Medtronic’s cardiac & vascular group, minimally invasive therapies group and diabetes group, which make up approximately 10% of the company’s pre-coronavirus global revenue.
Weekly revenue is down approximately 60% on its year-over-year average in the U.S., which represented approximately 53% of Medtronic’s total revenue before COVID-19. Revenue in China is down 50% year-over-year and it is down approximately 20-30% year-over-year in Western Europe.
Medtronic said it has continued to invest in R&D and its employees, including its sales force, and it continues to make progress with its pipeline and work with regulatory authorities on timelines that the pandemic hasn’t affected. The company has placed clinical trials that are currently enrolling on temporary pause to allow for hospitals to focus on COVID-19.
The company cited a strong balance sheet with approximately $11 billion in cash and investments as of the most recent quarter, along with an undrawn $3.5 billion credit facility and no public debt maturing until March 2021. It plans to continue making capital allocation decisions to progress its long-term strategies.
“While the expected short-term impact to our financial results is significant, it is consistent with the impact discussion broadly across the medical device industry,” Medtronic president Geoff Martha said in the news release. “Importantly, we are starting to enter the early stages of a global recovery. As hospitals begin to resume broader treatment of non-COVID-19 patients around the world, we expect our business to begin to recover as well.
“In addition, given the financial strength of the company, we are executing strategies to come out of this pandemic even stronger, attracting and retaining top talent and increasing and innovating the products and services that we offer physicians, patients, and healthcare systems to win in the evolving marketplace.”

Medtronic also explained that its manufacturing and distribution facilities are sanitized, its employees are utilizing personal protective equipment (PPE) and practicing social distancing and the company implemented additional screening and access protocols.

Field employees are provided access to PPE, and Medtronic is offering its U.S. employees and their family members a free virtual COVID-19 evaluation and monitoring tool. The company also included coronavirus-related benefits, such as reward programs, protection from impacts to sales incentive compensation, emergency leave pay for employees whose roles can’t be performed remotely and increased contributions to its employee emergency assistance fund for those experiencing a financial impact due to COVID-19.

“I am incredibly proud of the response of our 90,000 global employees,” Medtronic chairman & CEO Omar Ishrak said. “I want to recognize and thank our customers, partners, and the healthcare community at large, for their efforts to combat this pandemic. Individually, and collectively, we will persevere.”

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