Medtronic stock moves lower amid declines in surgical stapler business

The massive robot-making, pacemaker-inventing medtech company Medtronic is facing a financial snag: the humble stapler.

Company stock tumbled about 7% in early trading Tuesday as investors reacted to news of declines in Medtronic’s multibillion-dollar business in surgical staplers and supplies, which hold skin together after surgery.

CEO Geoff Martha said the franchise is facing competitive pressure and distributor issues.

“These pressures aren’t new,” Martha said told analysts Tuesday about competition for the stapling franchise. “And we’re committed to returning the surgical business to a stronger growth profile more aligned with the corporate average.”

The stapler snag added to a mixed quarterly report for Medtronic, as the company’s profit slightly beat Wall Street expectations but sales fell below expectations. The Fridley-run company reported progress in the multibillion dollar pulsed field ablation segment to treat atrial fibrillation, and celebrated its hypertension-treating electrode for renal denervation moving toward Medicare coverage.

Medtronic reported third-quarter adjusted net profit of $1.8 billion on $8.3 billion in sales for the three months ending on January 24. Sales grew by 4.1% on an organic basis. The company reported adjusted net profit of $1.39 per share for the quarter.

The massive medtech company saw sales swell for its pulsed field ablation (PFA) products treating AFib, the common heart arrhythmia. Martha said the product’s segment will be a $1 billion business for the fiscal year, “and we have line of sight to $2 billion as our PFA portfolio expands to new accounts around the world.”

“We believe the safety profile of our PFA technology is a significant point of differentiation competitively, and it is one of several factors that gives us high confidence in our outlook,” Martha said. Johnson & Johnson MedTech temporarily paused U.S. cases of its PFA system while it investigated the cause of four reported adverse events, and has since resumed them after what it called a “comprehensive investigation.” Boston Scientific also competes in the segment.

Martha pointed to the company’s Symplicity Spyral device for hypertension as a potential growth driver. Medtronic stock surged last month after the company revealed the Centers for Medicare and Medicaid Services is creating a national coverage analysis for a procedure using Symplicity to treat high blood pressure. The analysis may lead to Medicare covering the catheter-based procedure by October, if not earlier.

Despite broad availability of medications, many people with hypertension don’t have it under control, Martha said.

“The current standard of care just isn’t working,” Martha said. “Patients want this new therapy, physicians can easily do the procedure and health systems support it. The opportunity here is just massive, and we’re poised to be the leader in addressing this large and unmet need.”

Martha said the company’s also on track to submit its surgical robotics system Hugo to the U.S. Food and Drug Administration for urology indications approval by the end of next month. In international markets, the company has doubled Hugo procedures year-over-year, Martha said. He said the product will be a growth driver for the surgical business in the next fiscal year.

Hugo, with its robotic arms tipped with surgical equipment, is part of the same medical surgical business division as Medtronic’s staplers. Changes in distributor buying patterns pulled down the division for the quarter.

The medical surgical division decreased 0.4% on an organic basis compared with 5% sales growth in the company’s largest division, its cardiovascular portfolio. A couple of Medtronic’s larger distributors dropped down their staple inventory levels below normal amounts, Martha said.

Earlier this month, Boston Scientific reported companywide sales growing 19.5% on an organic basis in its most recent quarter. Abbott Laboratories, a health care and medtech company employing about 5,000 workers in the Twin Cities, previously reported quarterly sales for its medical device division increasing 14% on an organic basis.

Medtronic’s quarterly call with analysts marked the last for interim chief financial officer Gary Corona. Thierry Piéton, an alum of General Electric and French automaker Renault Group, will will step into the role on March 3.

“He has a very strong reputation for his operational focus and ability to lead organizations to drive marginal improvement, portfolio management, and earnings power to create shareholder value,” Martha said.

The company held its organic sales growth guidance for fiscal year 2025 to a range 4.75% to 5%. It also kept its guidance for diluted adjusted earnings per share to a range of $5.44 to $5.50.

“Look, we’ve made a number of changes to the company, and the turnaround definitely hasn’t been overnight,“ Martha said. ”It’s been building with 9 quarters in a row of mid-single-digit growth, and now we’re clearly entering a new phase with the growth drivers kicking in. And these are big growth drivers."