Medtronic F3Q15 – Worldwide sales grow 6% operationally on challenging comparison; MiniMed 640G launches outside the US; Sanofi partnership is killed; Medtronic hires Dr. Bob Vigersky – February 17, 2015

Medtronic reported F3Q15 sales this morning in a call led by CEO Omar Ishrak. Below, we share our top highlights.

Financial and Business Highlights

1. Worldwide Medtronic Diabetes revenue totaled $449 million, growing 3% as reported and 6% operationally year-over-year (YOY). The comparison was challenging, given 16% global growth in F3Q14.  Management said that after adjusting for $23 million in deferred revenue recognized in F3Q14 (MiniMed 530G launch), Worldwide Diabetes sales grew 12%.

2. Record-high US sales of $279 million grew 3% YOY and 9% sequentially in F3Q15. The YOY comparison was Medtronic Diabetes’ hardest ever in the US.

3. Outside the US, growth was 3% as reported and 12% operationally on sales of $170 million. Management briefly mentioned the January launch of the MiniMed 640G/Enlite Enhanced outside the US, though did not share any launch metrics or commentary on the sales. In emerging markets, the Diabetes business saw strong 36% growth, presumably from a low base.

4. For the first time, Medtronic’s press release noted, “The Diabetes Group includes the Intensive Insulin Management, Non-Intensive Diabetes Therapies, and Diabetes Services & Solutions divisions.” No additional color was given on the latter two businesses but as we understand it, head of diabetes Hooman Hakami has structured the businesses into those with a type 1 focus, a type 2 focus, and a focus on supplies and services. We describe the new business structure and leaders in more detail later in this report. In particular, the leads of the new businesses win high praise, particularly the one who landed with all the P&L and well as the one with lots of Medtronic Diabetes experience.

The other big news from today at Medtronic, though this was not mentioned in the conference call or press release, is that Medtronic and Sanofi’s partnership announced at ADA is not moving forward. Medtronic does certainly appear to be very committed on moving ahead on the type 2 front – notably, in addition to the re-organization of the business noted above, Medtronic has also recently hired academic star Dr. Bob Vigersky. Dr. Vigersky is well known for lots of things, especially as a top clinical trialist as well as for his deep understanding of type 2 diabetes. He’ll be the lead medical presence in Medtronic’s business there, reporting to Dr. Fran Kaufman.

5. In late December, the FDA lifted the warning letter on the Diabetes business. As a reminder, an FDA audit in 2013 identified deficiencies related to Medtronic’s pump quality systems.

6. Medtronic has completed the acquisition of Covidien. Though we don’t imagine a huge change for Diabetes, we do note that it will become a smaller part of a larger company.

R&D Highlights

7. Management highlighted the January launch of the MiniMed 640G/Enlite Enhanced CGM in “select” international markets. Launch began in Australia and we assume a European launch has already commenced or will take place soon. We’ll know soon as ATTD starts tomorrow!

8. Medtronic plans to submit a PMA to the FDA for the MiniMed 640G/Enlite 3 system “later this calendar year.” This makes the timeline tight if the company plans to hit the plan shared in its presentation at JPM 2015: a US launch by April 2016 (“FY16”). This was ambitious by any definition and we are glad to see Medtronic management pushing the envelope and making its goals very clear to patients and providers and payers.

9. Management did not share any timing on the MiniMed 670G/Enlite 3 hybrid closed-loop system, though we’ll see the first data at ATTD 2015 this week. At JPM 2015, management expected a launch of the MiniMed 670G by April 2017 in the US and April 2018 in the EU.

10. Prepared remarks mentioned the February 12 DT&T publication of a retrospective analysis of 20,973 MiniMed 530G users. Results were consistent with the ASPIRE in-home study.

Financial and Business Highlights

1. Worldwide Medtronic Diabetes revenue totaled $449 million in F3Q15, growing a bit of a tepid 3% as reported and 6% operationally year-over-year (YOY). The YOY comparison was unquestionably challenging, as worldwide growth was a very strong 16% in F3Q14 (led by 21% growth in the US on the launch of the MiniMed 530G in calendar 4Q13). Indeed, 3% worldwide YOY growth was the weakest seen in the past six quarters, as was the 6% operational growth. However, management said that after adjusting for $23 million in deferred revenue recognized in F3Q14, Worldwide Diabetes sales grew 12%. This makes sense. Sequentially, worldwide revenue rose 4% from sales of $430 million in F2Q15. Medtronic’s company-wide goal is mid-single-digit “operational” growth, meaning the Diabetes business came as expected – that said, the diabetes business is smaller than others at Medtronic, and the hope would certainly be longer term that it would grow faster than it did as reported today. Certainly this will be true as the company moves closer to the closed loop.  

• Prepared remarks on Medtronic’s overall business noted that “CVG/RTG and Diabetes all have significant ongoing product launches that are contributing to our results today.” We assume this comment referred to both the MiniMed 530G in the US and the 640G outside the US (more below on both). It was notable to see Diabetes mentioned in such a high level comment on the business, suggesting management is pleased with the results and has high hopes for the business.

Figure 1: Worldwide, US, International Sales (2005-2014)

Table 1: Medtronic Diabetes Worldwide Sales

2. Record-high US sales of $279 million grew 3% YOY and 9% sequentially in F3Q15. The YOY comparison was Medtronic Diabetes’ hardest ever in the US, given F3Q14’s 21% growth on the fresh US launch of the MiniMed 530G. In today’s call, management did say that “strong adoption” of the MiniMed 530G/Enlite has continued in the US. Indeed, in subtracting out the $23 million in deferred revenue recognized in F3Q14, the US business would have grown 12% YOY by our estimates. Assuming sales did actually grow 12%, it appears that five quarters in, Medtronic has sustained the launch of the MiniMed 530G (though with a slight taper) – 21% YOY growth (F3Q14), 15% (F4Q14), 16% (F1Q15), 12% (F2Q15), “12%” (F3Q15). Since F4Q14 didn’t have a major addition of deferred revenue (only $4 million), we should get a truer sense of the launch’s trajectory in the US in the upcoming quarter (F4Q15). We note that the US provided just under 70% of F3Q15 growth, down slightly from 76% in F2Q15 and 80% in F3Q14.

Table 2: Medtronic Diabetes Sales – US

3. Outside the US, growth was 3% as reported and 12% operationally on sales of $170 million. The YOY comparison was fairly neutral on international growth of 8% in F3Q14 – not overly challenging given the size of the business. Certainly, the 12% operational growth in F3Q15 was an encouraging sign for the international business, and suggests the strengthening US dollar is depressing reported growth. International sales declined 2% sequentially from F2Q15 sales of $173 million – this could be due to a number of things, including increased Dexcom presence internationally (we’re not sure how big a difference that would make however as it is CGM only). The business will have a very challenging comparison in F4Q15 (the next quarter to be reported).

• Management briefly mentioned the January launch of the MiniMed 640G/Enlite Enhanced outside the US, though did not share any launch metrics or commentary on the sales. Launch started in Australia, and per remarks in Q&A, it sounds like a European launch has already happened – we confirmed that it had indeed after the call. In January, Medtronic only said that launches in “additional markets” are expected over the next several months. We have heard good things about this device from patients and certainly envision the international launch helping sales this year. Certain EU countries like Italy haven’t launched yet because they are timing their launch with key regional diabetes meetings.

• In emerging markets, the Diabetes business saw strong 36% growth, a rise from 27% growth last quarter. Per the 2014 Analyst Meeting, ~ 8% of Medtronic Diabetes’ business came from emerging markets, translating to approximately ~$35 million in sales this quarter. To put that into perspective, Tandem’s US sales from 1Q14-3Q14 totaled ~$32 million (~2% of US pump market share), giving context to the size of even Medtronic’s emerging markets business. Overall, though still small, it presumably has lots of potential for growth. Medtronic has put a major company-wide focus on growing emerging markets, meaning there should be more sales and focus here in the coming years. While emerging markets are perhaps not the most ideal candidates for traditional integrated pump CGM therapy, we had thought perhaps the partnership with Sanofi for type 2 diabetes drug-device combinations could bring a low-cost, V-Go-like device worldwide – now, we wonder if Medtronic may just eventually buy Valeritas.

Table 3: Medtronic Diabetes Sales – International

4. There was important news today in Medtronic’s press release as well as key learnings after the call. Indeed, first, it was a big deal that Medtronic mentioned for the first time “The Diabetes Group includes the Intensive Insulin Management, Non-Intensive Diabetes Therapies, and Diabetes Services & Solutions divisions” –  we have more on these business units in this report. This re-org relates to two other pieces of news. First, it turns out that the Medtronic/Sanofi partnership deal has been killed – presumably since the partnership was inked with a different head of diabetes at Medtronic (Katie Szyman), it might have been more surprising if it had moved forward, particularly because the original Sanofi press release more or less said that the two companies were agreeing to pursue an agreement – it was never clear exactly what the focus was. We also note that the MannKind deal with Sanofi, announced in August, didn’t necessarily align with the Medtronic partnership (though it could’ve worked all else equal). Notably, also big new news - Medtronic Diabetes has hired a big-time KOL in Dr. Bob Vigersky, a famous endocrinologist from Bethesda, and quite a win for Medtronic.  While none of these items were actually discussed on the call, as they are so central to Medtronic’s business, we discuss all below.  

• First, the new divisions. These three divisions were first mentioned in the November call’s Q&A, though the reorganization actually took place in September. No specifics have been shared on what products the latter two business segments are taking on. In broad strokes, the leaders of the new business units and areas of focus break down as shown below (per remarks from November and Close Concerns research).
  • Alejandro Galindo leads Intensive Insulin Management
  • Laura Stoltenberg heads up Non-intensive Diabetes Therapies; and
  • Annette Brüls leads Diabetes Service & Solutions
    • Notably, only one of the business leaders has experience at Medtronic Diabetes. Ms. Brüls has extensive experience both at Medtronic Diabetes as well as other Medtronic divisions, while both Mr. Galindo and Ms. Stoltenberg come from outside Medtronic (from GE, directly and indirectly, respectively). Former business leaders who previously led CGM, Carelink, etc. are either no longer at Medtronic or engaged in other roles. We give more detail below about each business unit. It is interesting to see how the new Medtronic Diabetes President, Hooman Hakami (who is very popular as we understand it), restructured the company; clearly the company’s focus on international and emerging markets comes through, as there is extensive experience on this front. We look very forward to meeting Mr. Galindo and Ms. Stoltenberg; we have talked to Ms. Brüls at length and are extremely impressed with the way she thinks about diabetes. We look forward to watching both her as well as Ms. Stoltenberg effectively build new businesses at Medtronic Diabetes. Mr. Galindo will be expanding an existing business, of course, and it will be terrific to see what happens when a leader can focus on driving the closed loop (not that that is his only responsibility, but it is the first time that the closed loop leader doesn’t have to also run supplies, etc.). 
• More on the three new business units:
  • #1: Intensive insulin management in type 1 and type 2 diabetes. This is Medtronic’s core pump and CGM and closed loop business and is being run by Alejandro Galindo, whose official title is VP and General Manager of Intensive Insulin Management. Mr. Galindo gets rave review; he is characterized as “fantastic, a quick learner …” As we understand it, he wore a pump and CGM for months after he joined, to gain patient experience (throughout the industry, this is not very common). We think that the intensively managed type 2s belong to this business as well – it is said that this is the largest (and only) P&L at Medtronic.
    • Mr. Galindo will lead the work behind driving insulin delivery and CGM “as the standard of care” for the type 1 kid, type 1 adult, and intensively managed type 2 populations globally – this is the core, of course, of Medtronic’s current business, although all the disposables will be run by Annette Brüls (see below). Mr. Galindo is a GE refugee, having joined Medtronic after 20 years there, where he most recently was head of emerging markets in GE’s Healthcare Systems unit. From a geographic perspective, it will be interesting to see how much of his focus at Medtronic Diabetes is in the emerging markets; presumably most of his major focus will be on driving the closed loop. Mr. Galindo’s work at GE sounds broad – he did pretty much everything, from what we hear, including portfolio management, finance, market penetration, customer service and what GE calls customer satisfaction, and was said to be good at everything. He has particularly strong experience on the M&A front there, where he was very involved in partnerships – so we wonder if it was his call to end the Sanofi relationship (it may have been Sanofi – we haven’t been able to figure out what happened here to derail things yet – though to be fair, there was not yet an offering, so arguably the train had not left the station yet and really there was nothing to derail!). Mr. Galindo’s got an MBA and Master’s degree in Finance from Indiana University, as well as a BS in Industrial and Systems Engineering from Monterrey Tech in Monterrey, Mexico – to boot, he’s fluent in English, Spanish and Portuguese.
  • #2: Non-intensive diabetes solutions for type 2 diabetes. Laura Stoltenberg will be running this unit – her official title is VP and General Manager of Non-intensive Diabetes Therapies. According to Medtronic, this area is designed to identify new technologies and product platforms to drive insulin delivery and CGM for type 2 patients. There is not a lot of experience anywhere in industry on this front, and while Laura doesn’t have diabetes experience, let alone type 2 experience, she is likely also a very fast learner! We aren’t sure about who is included here as target patients; as we understand it, some type 2 patients who are very intensively managed may fall under “Intensive Insulin Management” but this is a small minority of type 2 patients.
    • Management characterized this business unit as its “step into type 2 in a broad way.” We had assumed it would begin with the Sanofi partnership first announced at ADA, building off an Analyst Day focused on type 2 and the Opt2mise trial results published in the Lancet this past summer. – this business will be headquartered in Minneapolis and no one yet knows what offering will be.
    • Ms. Stoltenberg has twenty years of experience in sales and marketing, strategy, corporate development and global general management, much of it at GE. She was most recently Chief Commercial Officer and Chief International Officer at Exact Sciences Corporation, a molecular diagnostic start-up; there, she put together the global commercialization strategy for a new cancer-screening test. We hope she can work on pre-diabetes approaches as well as type 2 at Medtronic. Ms. Stoltenberg has an MBA from Columbia Business School, and Bachelor's Degrees in Electrical Engineering and Management from Bucknell University.
    • As to what is happening inside this business unit, we are not yet sure. We imagine they were considering building pre-filled simple patch devices when they were working with Sanofi (such as it was) – it will be interesting to see the direction they will go with that partnership over. Specifically, we believe a huge number of type 2 patients should be wearing intermittent CGM – actually, any type 2 with an A1c over 7% should have access to it, because it is incredibly important to keep all patients under good control and for type 2 patients, not let the progression of the disease prompt patients to move into a funk. With intermittent CGM, if they aren’t doing well, they could see it, and it would be easier for doctors to suggest therapy. We are not yet sure where the iPro product and franchise landed in the reorganization – either in Mr. Galindo’s shop or Ms. Stoltengerg’s shop. We assume that this area will think about how some intensively managed type 2 patients use the company’s traditional integrated pump and CGM businesses and aren’t yet sure where the associated P&L would be. Lucky for this business unit, Dr. Vigersky will be a part of it - see below.
  • #3: Diabetes services and solutions, Medtronic Diabetes’ third business unit, which will focus on improving the customer experience by bringing together data management and customer support solutions, including consumable supplies and financial services. Annette Brüls will run this unit; her official title is Vice President and General Manager of Diabetes Service & Solutions.  She is already very well regarded at Medtronic Diabetes internally and all eyes are on her as she moves to head up the global business unit that manages consumables, data management, patient management, and financial services for the Diabetes Group.
    • Ms. Brüls was previously VP of Western Europe and Canada for Medtronic Diabetes, responsible for creating and driving business growth plans in the region. As we understand it, she beat the ambitious plan every year in her time there, driving double-digit top and bottom-line growth with her team despite being in an economic downturn. She was also previously VP of Marketing for the Cardiac Rhythm Device Management Division at Medtronic. During her extensive career in medical devices, Annette has worked in a number of positions in the EU, including clinical studies, sales, marketing and business leadership in the cardiology sector at Guidant and Abbott Vascular. Before joining Medtronic in 2007, she served as Vice President, Marketing, EMEA at Abbott Vascular. Annette has a BS in Civil Engineering and a Master of Science degree in Electrical Engineering with honors from the University of Liege. She also won Medtronic’s President’s Club Award in 2012, which is a very big deal. She is fluent in German, English, French and Dutch.
    • This new foray will leverage the existing CareLink data management platform and the recently-acquired Cardiocom business. The mention of “consumable supplies” made us think that a business like Neighborhood Diabetes (purchased by Insulet in 2011) is in the realm of possibility, where Medtronic could play more of a one-stop-shop role. Other possibilities could include teams nurses/educators to help patients mange their diabetes, or perhaps support for clinics in interpreting CGM/pump downloads. We also note, of course, that insulin pumps aren’t “sold” in all markets.  It is our understanding that in China, for instance, the hospitals loan them to patients.  The concept of leasing capital-intensive equipment and performance-based contracting is well understood in more progressive industries led by progressive companies like GE.  Given there are a lot of GE alumni at Medtronic Diabetes now, we would expect more movement on this front – this is disposables and much more – and we look forward to learning more about how this extremely popular leader will be spending her time.
• More on the partnership with Sanofi that is now dead: There is not much to say on this front – the rumor mill could show reasons for both companies to end the partnership, which was never really fully understood. Some may say that Mr. Hakami ended the partnership because the strategy behind it wasn’t clear; some could say Sanofi ended it in part because of its partnership with MannKind. Now that the Sanofi deal is off, we’re intrigued about M&A possibilities – there are plenty of interesting small companies that Medtronic could buy, to be sure. We’ll keep our ear close to the ground for updates.
• As noted earlier, Medtronic recently hired Dr. Bob Vigersky to serve as the top medical lead in the non-intensive diabetes solutions for type 2 diabetes, reporting to Dr. Francine Kaufman, who oversees all the doctors at Medtronic Diabetes. Hiring Dr. Vigersky is a major win for Medtronic and for the head of this business.

5. In late December, the FDA lifted the warning letter on Medtronic’s Diabetes business. As a reminder, Medtronic’s May 2013 call mentioned that an FDA audit recently identified “some deficiencies” related to the company’s “insulin pump quality systems.” From that time until now, management has primarily mentioned the issue in terms of its negative impact on gross margins. While Medtronic corrected the issues promptly, we assume the FDA timeline of officially lifting the letter took some time and most likely, these insulin pump quality system problems delayed FDA approval of the MiniMed 530G.

6. Medtronic has completed the acquisition of Covidien. Though we don’t imagine a huge change for Diabetes, we do note that it will become a smaller part of a larger company. Under old Medtronic, Diabetes represented ~10% of the company’s sales, while under “Medtronic PLC” (the merged company with Covidien), Diabetes is only ~6% of sales. Notably, Medtronic will now report revenues in four groups (Cardiac & Vascular; Covidien; Restorative Therapies; and Diabetes), and Diabetes President Hooman Hakami will continue to report directly to CEO Omar Ishrak. On the plus side, due to the acquisition, there will be significant tax savings for Medtronic, and possible some of the savings will translate into greater R&D investment across Medtronic. However, a larger company means upper management and the Board could focus less on diabetes (four divisions to worry about now vs. three before) – we certainly hope this doesn’t happen.

R&D Pipeline Highlights

7. Management highlighted the January launch of the MiniMed 640G/Enlite Enhanced in “select” international markets. As noted in our coverage at the time, the launch began in Australia and was expected in “additional markets” over the next several months. We assume a European launch has already commenced or will take place soon. No details were given in the call on adoption at this point in time, or on the plan for other launches around the world. The launch timing was on the quicker side of the “early 2015” guidance given in December when the 640G user evaluations were completed, though about 18 months delayed from the initial expectation to launch in Summer 2013.

• In Q&A, CEO Omar Ishrak specifically mentioned the “MiniMed 640G” as one of two examples of Medtronic’s “rich pipeline.” It’s outstanding to see attention to this product at the highest levels of Medtronic, given all the company has in other therapeutic areas.
• The MiniMed 640G’s key features include: (i) SmartGuard (suspends insulin delivery with a 30-minute prediction horizon and resumes insulin delivery once glucose levels recover); (ii) Enlite Enhanced sensor (“Enlite 2”) – MARD of 13.6% when calibrated 3-4 times daily, the same labeling as the original Enlite; (iii) remote bolus from the Contour Next Link 2.4 meter; (iv) waterproof; (v) full-color, light-adjusting screen; (vi) improved user interface; and (vii) more robust on-device reports.
• The direct-to-patient marketing, including some compelling patient ambassador videos, focuses on an intelligent, safer, and easier to use insulin pump system. See our report from January for more details on how Medtronic is positioning this new pump system.

8. Medtronic plans to submit a PMA to the FDA for the MiniMed 640G/Enlite 3 system “later this calendar year.” This makes the timeline tight if the company plans to hit the plan shared in its presentation at JPM 2015: a US launch by April 2016 (“FY16”). Medtronic’s ongoing pivotal study of the MiniMed 640G/Enlite 3 sensor (n=84) is expected to conclude at the end of April. A PMA submission in July would translate to a speedy FDA review of ten months, a potentially tall order given the number of changes with this pump (SmartGuard, new pump platform, new Enlite 3 sensor), although this FDA is quite ambitious on the device front. In addition, we did write last May that Medtronic was working hard with the FDA to quickly bring this pump to the US market, so perhaps a sub-12-month review is possible.

9. Management did not share any timing on the MiniMed 670G/Enlite 3 hybrid closed-loop system, though we’ll see the first data at ATTD 2015 this week. The very highly regarded Dr. Trang Ly (Stanford University, Stanford, CA) will share outpatient camp data on the MiniMed 670G/Enlite 3; previously, we’ve only had a brief look at Enlite 3 accuracy at EASD 2014 from Dr. Bruce Buckingham (Dr. Ly’s boss). Meanwhile, Dr. Anirban Roy (Medtronic Diabetes, Los Angeles, CA) will share results from a “Physiological and Technical Stress Test” of the system in an outpatient setting. We always love learning more about the day to day impressions of very new technology and will be very eager to see this data.

• As a reminder, we learned at JP Morgan 2015 that a launch of the MiniMed 670G is expected by April 2017 in the US and April 2018 in the EU. A lot has to go right for the company to hit this US timeline, which implies a pivotal study, regulatory review, and launch in two years. Few specifics have been shared on the MiniMed 670G algorithm, though we assume it will be a rather conservative treat-to-range algorithm.
• Medtronic has at least two other recently updated closed-loop studies of note:
  
  • Hybrid Closed-Loop Hotel Studies With Medtronic PID Controller (Stanford; n=54). Expected completion date: July 2015.
  • The Performance of an Artificial Pancreas at Home in People With Type 1 Diabetes (St Vincent's Hospital Melbourne; n=24). Expected Completion Date: January 2015. 

10. Prepared remarks mentioned the February 12 publication of a retrospective analysis of 20,973 MiniMed 530G users. The real-world data came from CareLink uploads gathered from October 15, 2013 to July 21, 2014. The results were published in DT&T with Dr. Fran Kaufman as the last author.

• Notably, patient-days where the system’s Threshold Suspend feature was enabled showed 69% less time in hypoglycemia (sensor glucose <50 mg/dl) vs. patient-days when the feature was not enabled (0.64% vs. 2.09%, respectively; p<0.001). Sensor glucose data from full-time users of threshold suspend reflected a 62% reduction in values ≤50 mg/dl and a 6% reduction in values ≥300 mg/dl vs. data from nonusers (p<0.001 for each).
• The results were consistent with those from the ASPIRE in-home study (48-LB at ADA 2013), where patients using threshold suspend experienced a 57% reduction in time spent <50 mg/dl with threshold suspend vs. the control group.
• If this new data sounds more impressive than ASPIRE in-home, that could stem partly from a slightly different way in which it is being summarized. The ASPIRE in-home data focused on nocturnal hypoglycemic events per patient week (32% less frequently in the threshold suspend group) and mean area under the curve (magnitude plus duration) of nocturnal hypoglycemia events (decreased 38% in the threshold suspend group compared to control). We do think time spent <50 mg/dl is a good way to summarize the impact of the MiniMed 530G, as this is where reduction in hypoglycemia really counts – the risk of severe hypoglycemia rises significantly in this range, and more time spent <50 mg/dl drives hypoglycemia unawareness. Plus, given that the MiniMed 530G suspends at a low threshold, it’s probably unrealistic to expect a huge change in moderate hypoglycemia. For that, we look to the upcoming MiniMed 640G ...
• Medtronic is one of the best in the pump business at gathering data to support the value of its devices, and we salute the company for continuing to work on this. Of course, this is propelled by CareLink, as well as a larger budget to invest in such efforts. We expect that to change in the coming years (including with Insulet and Dexcom, who both plan to/are investing in this area), and as better downloading software like Tidepool makes proprietary systems less of a differentiator.

Pipeline Summary

Questions and Answers

Q: [...] Second, there's a number of drivers this quarter, and over the last couple of quarters that have been for new products. But also in some cases, your market is getting better and you’re gaining share in this market. Can you just talk about the sustainability as we think about FY 2016 and start to think about our pro forma models?

A: [...] With respect to your second point Mike, I agree that there were lots of new products that helped us, and so we had revenue growth actually over our mid-single digit targets fueled by a lot of the new products, and improving markets like you pointed out. We have a pretty rich pipeline if you think about it. The (note – the tape was not comprehensible here!) balloon's going to come out. In Diabetes we have the 640G in Europe, which has just launched. So we've got a series of new products that are coming out so we have some level of sustainability in terms of the product releases. But, look let me just say, that the more important point here is the mid-single digit growth.

There will be quarters where you go hopefully only up rather than down. But our real goal here is to sustain this mid-single digit trajectory through diversification of our product lines and businesses, diversification of our geographies (where we get the growth from), and particularly from emerging markets (diversifying within emerging markets as well). And finally, diversifying as to the nature of the revenue. More service revenues. If you do all of that, we think we can get a business that can deliver consistently in the mid-single digits and I think that's what we're zeroing in on rather than swings one way or the other that may happen from quarter to quarter.

-- by Adam Brown and Kelly Close