Medtronic looking at early-stage acquisitions

Medtronic (NYSE:MDT) CEO Omar Ishrak said yesterday that the medical device titan is planning to use the billions in foreign cash it gained access to when it acquired Covidien to buy up early-stage technologies and add them to its product pipeline.

Fridley, Minn.-based Medtronic paid $50 billion for Covidien in January, allowing it to re-incorporate in Ireland. That, in turn, allows the company to spend the cash generated overseas without paying U.S. income tax on top of local taxes. Ishrak, discussing Medtronic’s 4th-quarter results with analysts yesterday, said some of that cash will go to acquiring medical device startups.

“We’re going to look at early technologies, in the U.S. primarily, where there maybe opportunities which we haven’t been able to participate in to the degree that we’d like to, to create a long-term technology pipeline of early-stage technologies that we think can make a difference,” Ishrak said.

Medtronic will still “opportunistically” look at larger buyouts, he added, “but that’s a matter of our overall financial bandwidth and our management bandwidth.”

Medtronic yesterday reported fiscal 4th-quarter results that beat Wall Street’s expectations on both the top and bottom lines, despite a slide into red ink.

The company posted a loss of -$1 million, or 0¢ per share, on sales growth of 60.0% to $7.30 billion for the 3 months ended April 24, compared with the same period last year. But adjusted to exclude 1-time items, earnings per share were $1.16, a full nickel ahead of The Street, where analysts were looking for earnings of $1.11 on sales of $7.19 billion.

For the full year, Medtronic reported a profit decline of -12.7% to $2.68 billion, or $2.41 per share, on sales growth of 19.1% to $20.26 billion compared with fiscal 2014. Adjusted to exclude 1-time items, earnings per share were $4.28, 11¢ under The Street’s forecast. Analysts were looking for full-year sales of $27.73 billion.

“I am encouraged by our strong 4th-quarter performance, the 1st quarter that reflects the combined results of Medtronic and 3. In addition to making solid progress on our integration of Covidien, these results reflect disciplined execution across our three core strategies of therapy innovation, globalization, and economic value,” chairman & CEO Omar Ishrak said in prepared remarks. “As we look ahead to fiscal year 2016, we remain focused on consistently delivering on our strategic and financial commitments. We feel the company is well positioned to be a catalyst in transforming healthcare to a value-based model, using medical technology and services to deliver improved outcomes and efficiency, together with our provider partners around the world.”