Mazor reported a 1.1 percent decrease in fourth quarter spine revenue, but when combined with the spine division of the brain therapies capital equipment, including Mazor X, spine revenues were up 5.6 percent.
"The launch of the Mazor X Stealth navigated robotic system is off to a strong start and building momentum," said Chairman and CEO Omar Ishrak during the first quarter earnings call, as transcribed by Seeking Alpha. "We sold 26 systems this quarter, increasing our spine robotic market share to more than 70 percent, with an installed base that is now more than three and a half times that of our closest competitor. While Mazor sales are driving the brain therapies group, we believe they are also a good leading indicator of future growth in our spine division, as customers purchasing our Mazor system are also choosing to increase their share of Medtronic spinal implants."
During the fourth quarter, 80 percent of the Mazor systems Medtronic sold were to customers entering into combined capital and implant contracts. The percentage of Mazor robotic cases using Medtronic spinal implants also experienced a double-digit increase to more than 60 percent in the fourth quarter.
Michael Coyle, executive vice president and president of Medtornic's cardiac and vascular group, reported the company has experienced faster growth and more market share with hospitals that include the robot than those that don't. "Customers that have big spine centers where we were zero and our competitors had these accounts very well covered," said Mr. Coyle. "[Now] they're calling us and we're getting in there and not only getting robotic share but we're getting non-robotic cases. So, it is quite dramatic and so we're very happy with it."
Spine isn't the only Medtronic group gaining momentum; its pain stimulation business reached the No. 1 market share position in the fourth quarter for the first time in more than two years.
In the 2020 fiscal year, Medtronic plans product launches overseas and to deepen its presence in China. Mr. Ishrak sees opportunity in China because the population is so large. Business in China has grown sequentially quarter over quarter, and Medtronic expects double-digit growth from the country. However, the proposed tariffs by President Donald Trump could make growth in China challenging.
"The tariffs do see somewhat of a headwind in terms of our margins, but it's one that we will cover and we will offset," said Mr. Ishrak. "We faced some of that in FY 2019 which we successfully managed to offset and we don't expect a major increase in FY 2020, but there may be some towards the back half of the year which we will manage."