October 1, 2020

Medtronic’s New Leader Outlines Growth Strategy

The new chief executive of Medtronic, the world’s largest medical device maker, vowed on Tuesday to revive the company’s growth by further expanding it internationally and improving its returns from research spending.

Omar Ishrak, who took over the company in June, said Medtronic remained committed to returning cash to shareholders and to exploring smaller acquisitions.

He also said he planned no major changes to the company’s diversified portfolio of medical devices except for the planned sale or spinoff of its external defibrillator business.

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

The company reported quarterly results that met analysts’ estimates. Net income in its fiscal first quarter, which ended July 29, was $821 million, compared with $830 million during the same period a year ago. Revenue in the quarter rose to $4.05 billion, 7.3 percent higher than the same period a year earlier. Analysts had expected $3.98 billion.

Medtronic shares rose 6.2 percent to close at $33.10, reflecting relief the results were better than some had feared and optimism that Mr. Ishrak, a former executive at General Electric, had struck the right note on Tuesday.

“From the point of view of setting the stage, I think he did a pretty good job,” said Jan Wald, an analyst at Morgan Keegan Company.

“He came across as sort of a tough guy, one who is going to be relentless in his pursuit of data and execution,” he said.

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

In part, the slow demand is the result of a weak economy. But a study suggesting that heart devices are improperly used in patients who are too sick for them, and accusations in a medical journal that researchers hid serious complications with the company’s Infuse bone growth product, have also slowed sales.

Mr. Ishrak said the fallout from those problems would persist.

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Senators Seek Information on Side Effects of Medtronic Bone-Growth Product

Two senators on Tuesday expanded an investigation of the medical device maker Medtronic, demanding that the company turn over records involving millions of dollars in payments to researchers and internal correspondence with doctors who had published its research on a controversial bone-growth product.

Senator Max Baucus, Democrat of Montana and chairman of the Senate Finance Committee, and Senator Charles E. Grassley, Republican of Iowa, wrote to Omar Ishrak, Medtronic’s recently named chairman and chief executive, seeking extensive documents related to its bone-growth product, Infuse.

“Reports that doctors conducting medical trials while on Medtronic’s payroll may have hidden serious side effects for patients are deeply troubling,” Senator Baucus said in a statement. “We need to do everything we can to ensure companies aren’t concealing serious medical complications from patients just to increase profits,” he added.

Medtronic, in a statement late Tuesday, said it would respond to the senators’ request. The company did not comment specifically on the accusations of unreported complications and financial bias in research, but said it routinely reported all adverse events to the Food and Drug Administration “irrespective of any financial relationship between the company and the clinical investigator or study author.”

Marybeth Thorsgaard, a spokeswoman for Medtronic, said three specific complications listed in the letter — abnormal bone growth, swelling in the neck and throat, and a form of sterility — were all listed as side-effect warnings on the Infuse product label.

The senators’ query was prompted in part by a forthcoming spinal journal article saying some of the 13 Medtronic-sponsored studies of Infuse had failed to properly disclose complications.

The Justice Department has been investigating the marketing of Infuse, according to Securities and Exchange Commission filings by Medtronic since late 2008, and to people who have been contacted more recently by federal investigators.

And in May, Senator Baucus wrote to the company to ask why it had canceled contracts with Novation, a group-purchasing organization. The senator said he was concerned that patients or hospitals could end up paying more for Medtronic products. Senate staff is reviewing Medtronic’s confidential reply.

The senators set a July 11 deadline for Medtronic to respond, saying that they wanted the company to furnish “all documents and communications” with researchers, medical journals, the F.D.A., advisory board members and other Medtronic consultants, concerning adverse events or complications from the product.

Infuse is a bioengineered protein used instead of real bone in many graft operations. The F.D.A. has warned of serious problems for some spinal surgery patients. Infuse, approved by the F.D.A. for limited purposes in 2002, is widely used for broader purposes, as doctors are allowed to do.

Medtronic had $15.9 billion in sales and $3.1 billion in profit last year. The company does not break out sales by products, but Infuse has been one of its best sellers.

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Encouraging Numbers, at First Glance

During the recession, the state’s unemployment rate never reached the double-digit peak suffered by the nation as a whole. Since the recovery began, it is among a handful of states whose rate has fallen at a faster clip than most other states. Minnesota’s rate is now 6.6 percent, well below the 9 percent across the country.

Farmers in the state’s large agricultural sector have benefited from surges in the prices for their corn and soybeans. Among big companies with headquarters in the state, 3M and General Mills have recently reported strong earnings growth, and Target and United Healthcare are hiring.

Dig a little, though, and the foundation looks wobblier. Economists point out that some of the drop in state unemployment merely reflects people giving up on the job search or retiring early, as well as an aging work force with fewer young people hunting for jobs.

“It really seems slow here,” said David Vang, an economist at the Opus College of Business at the University of St. Thomas. “So if we’re rapid, other places must be terrible.”

Many people look to Minnesota as a state whose demographics, varied industries, educated citizenry and public policy could together provide a bit of a shield against hard times. But a closer inspection shows a disconnect between the more encouraging economic data of late and the harsher reality that people so often describe, here and across the country.

According to government data, which show that state unemployment peaked at 8.5 percent in the downturn, employers slashed roughly 154,000 jobs but have added back fewer than 27,000 — or only about 18 percent of those lost.

Big local employers including Medtronic, a medical device maker, and Hutchinson Technology, which makes components for disk drives, have announced layoffs in recent weeks. Small to medium-size companies say they are nervous about government policy and are reluctant to hire.

A depressed real estate market remains a drag on the local economy — as it does in many other places. In March, foreclosed homes made up more than 40 percent of sales in the Twin Cities. Construction workers have been idle for years, with little hope of imminent work. And the state government must resolve a $5 billion budget shortfall that some fear will lead to job cuts.

Over all, the nation continues to face a battery of economic challenges. Last week’s employment data showed a welcome bit of job creation for several months’ running, but other recent reports have been more lackluster. Unemployment insurance claims have been running at a higher level, and the main association of small businesses said it expected hiring to be sluggish.

Minnesota has some ability to outpace the rest of the country, with its tilt toward medical and food manufacturing and agricultural strength.

“In some ways it looks like it’s doing a little bit better,” said Terry J. Fitzgerald, senior economist at the Federal Reserve Bank of Minneapolis. “But not a lot better.”

Still, part of the reason Minnesota’s headline unemployment rate may have shown more rapid improvement is that it has fewer young people competing for jobs. According to Thomas Stinson, the state economist and a professor at the University of Minnesota, the proportion of workers in the 20-to-40 age group has slid from nearly half in the 1980s to about 38 percent now.

The people in the 40-to-60 age group, Mr. Stinson said, “are the people whose 401(k)’s got hit so hard and whose housing values have gotten hit so hard. So part of the reason for the slow recovery is that people are not spending, but are rebuilding their 401(k)’s. And we haven’t seen the release of pent-up demand that we would have normally seen” after a recession.

The state also faces many of the same trends that hamper job growth elsewhere. To the extent they are hiring, companies like 3M and General Mills are adding more people abroad than domestically. Connie Pautz, a spokeswoman for Hutchinson Technologies, which will cut about 600 people — or nearly half its Minnesota staff — over the next 12 months, said the company had automated much of its operations. “So we don’t need as many people,” she said.

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