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Medtronics Management Provides Insight Into its Product Pipeline

Medtronics Management Provides Insight Into its Product Pipeline

We attended the Medtronic analyst meeting in New York City, where management provided insight into its product pipeline and vision entering fiscal 2015. Commentary focused on plans for innovation both in new technologies and increasing the company s economic value. In our view, Medtronic is positioned to deliver on its guidance of 3%-5% top-line growth based on its solid flow of new products, focus on clinical evidence, and regulatory capabilities.

The 400 basis points of EPS leverage in guidance is also achievable and likely durable, in our view. We rate the shares Market Perform as we view these growth rates as likely realistic rather than conservative and valuation already reflects these dynamics. Highlights Product Launches. Management stated that the company has 200 projects worth more than $30 billion in incremental revenue over the next five years. This was one of the company s first opportunities to discuss its plans and expectations for the product following the recent $1 billion-plus settlement with Edwards Lifesciences (EW $80.42; Outperform).

Management expects the transcatheter aortic valve replacement (TAVR) market will grow in the low 20% range in fiscal 2015, with its own growth almost double that, as it is just entering the large domestic market. We remain optimistic regarding the overall revenue opportunity in TAVR, but Medtronic will in part be working for Edwards via the royalty it will pay. We expect Edwards Sapien XT and Sapien 3 valves to keep the clinical playing field at least level, if not favoring Edwards, despite the recent clinical data presentations. 2. MiniMed Duo The company discussed sensor innovation with its Enhanced EnLite that launched in Europe in fourth quarter fiscal 2014 and touched on the EnLite 3 U.S. trial beginning in the near future.

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We will look to next week's annual meeting of the American Diabetes Association for input to whether this new sensor offers improved accuracy and performance, as EnLite remains a relatively poor performer compared with DexCom s (DXCM $36.13; Outperform) G4 Platinum. On the therapy innovation front, the company announced CE mark approval for MiniMed Duo, a combined sensor and infusion set that offers a single point of insertion and enables an even smaller footprint for those patients using CGM and an insulin pump. This will enhance the patient experience, but we believe accuracy trumps form factor when it comes to continuous glucose monitors.

Medtronics Management Provides Insight Into its Product Pipeline

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