Medtronic plc (NYSE:MDT) Q2 2023 Earnings Call Transcript

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So those dynamics are continuing to play out around the world, but probably more in Europe and France and Germany than we see in other countries. And then we had a little bit of slowness on our own through Japan. Japan had a flare of COVID the summer, which was difficult. And we also had a problem where there was a sheet that we use for the procedure that we don’t make that became unavailable because of supply challenges, and that led to some share loss in Japan. But overall, the TAVR is really strong for us with FX launching, and we’re excited about back half to get to a full release of that product into all the accounts.

Karen Parkhill: And on your China VBP question, Travis, about 15% to 20% of our back half guide down is due to the incremental China VBP being pulled forward from next year from our perspective from what we had assumed. China declined 9% in the second quarter. And that was because of an impact of VBP and spine. For the rest of this fiscal year, we don’t expect China to be a material growth driver for us. And in fact, for the full year, we’re expecting low single-digit declines in China. That said, as we look forward into FY’24, we will continue to have some VBP, but I think the vast majority will be behind us, and China should be a contributor of growth again next fiscal year.

Geoff Martha: Just a little bit more color on the VBP. I mean we had visibility to these national tenders, and we factored that in earlier in the year. But what we didn’t have real good visibility to some of these provincial tenders that came out here in the last couple of months. And that’s part of the change in the guidance. And to Karen’s point, look, longer-term, we still think China is a growth market, but it’s not right now, and we factored that into our guidance.

Travis Steed: Great. Thank you.

Geoff Martha: Thank you, Travis. Next question please, Ryan.

Ryan Weispfenning: The next question comes from Vijay Kumar at Evercore ISI. Vijay, please go ahead.

Vijay Kumar: Hey, guys. Thanks for taking my question. Geoff, my first question was on the back half guidance. When you look at 2Q, second quarter organic slightly north of 2% and the back half guidance of 3.5% to 4%. How do you risk is that 3.5% to 4%? Can you give us a bridge of what gets easier? I think you had some easier wind comps, etcetera. And I think related to that, is this €“ why is Medtronic confident that this is not a firm share loss in surgical innovations?

Geoff Martha: Okay. Thanks for the question, Vijay. Let me take the €“ well, I’ll take the share loss question first and then I’ll get to the back half and maybe I have Karen talk to that one as well. But in SI, our surgical innovations, this €“ first of all, this is a contracted business with health systems and mainly us and our main competitor in that space. And in the past, there have been circumstances when the shoe is on the other foot when our competitor had a recall and have had recalls. And we did the same thing where we got picked up some incremental revenue and some share because the two big competitors are make-up the majority of what the hospitals are buying in the surgery space, but these hospitals do honor these contracts.

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