During Medtronic’s investor day on June 6 in New York, the company said it expects to deliver approximately $40 billion in free cash in the next five years.
Of the $40 billion in cash, Medtronic plans on returning $20 billion to shareholders, using $10 billion for mergers and acquisitions and debt reduction and allocating $10 billion for what CEO Omar Ishrak referred to as “financial flexibility.”
Ishrak said in prepared remarks that Medtronic projects to have mid-single digit revenue growth on a constant currency basis and double-digit earnings per share growth on a constant currency basis.
From fiscal year 2011 to fiscal year 2016, Medtronic’s revenue increased from $15.9 billion to $28.8 billion. Ishrak also discussed Medtronic’s $50 billion acquisition of Covidien, which closed in January 2015 and was the largest deal in Medtronic’s history.
Ishrak said the deal was accretive to cash earnings per share in fiscal year 2016 and would be significantly accretive in the coming years. In April, Medtronic defended the Covidien deal after the U.S. Department of Treasury issued temporary and proposed regulations on tax inversions.
Ishrak cited a few therapies in Medtronic’s Cardiovascular & Vascular Group that will likely contribute to the company’s revenue growth. He mentioned the IN.PACT Admiral drug-coated balloon, the Micra Transcatheter Pacing System and the Evera MRI Surescan implantable cardioverter defibrillator, all of which are FDA-approved.
Mike Coyle, Medtronic’s executive vice president of the Cardiovascular & Vascular Group, said in prepared remarks that the group’s revenue increased 9 percent in fiscal year 2016 to $10.2 billion. Revenue increased 10 percent for the cardiac rhythm and heart failure unit, 9 percent for the coronary and structural heart unit and 10 percent for the aortic and peripheral vascular unit.
Coyle added that the group’s customer base has expanded and now includes interventional physicians and surgeons, materials managers, cardiovascular line administrators, hospital executives, multi-specialty clinical practices, integrated practice units, payers and patients.
Coyle noted that the company expects to launch new sizes of the IN.PACT Admiral drug-coated balloon in fiscal year 2017 in the U.S. and an updated version of the CoreValve Evolut R System for transcatheter aortic valve replacement procedures in fiscal year 2018 in the U.S.
Medtronic also expects to introduce the Resolute Onyx drug-eluting stent in fiscal year 2018 in the U.S., according to Coyle.
During the next five years, Coyle expects a compound annual growth rate of 5 to 6 percent in the Cardiovascular & Vascular Group.