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Edited Transcript of MDT earnings conference call or presentation 19-Feb-19 1:00pm GMT

Q3 2019 Medtronic PLC Earnings Call

Dublin Apr 18, 2019 (Thomson StreetEvents) -- Edited Transcript of Medtronic PLC earnings conference call or presentation Tuesday, February 19, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Hooman C. Hakami

Medtronic plc - Executive VP & Group President of Diabetes Group

* Karen L. Parkhill

Medtronic plc - Executive VP, CFO & Principal Accounting Officer

* Michael J. Coyle

Medtronic plc - Executive VP and Group President of Cardiac & Vascular Group

* Omar S. Ishrak

Medtronic plc - Chairman & CEO

* Robert John White

Medtronic plc - Executive VP & President of Minimally Invasive Therapies Group

* Ryan Weispfenning

Medtronic plc - VP of IR

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Conference Call Participants

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* Bruce M. Nudell

SunTrust Robinson Humphrey, Inc., Research Division - MD

* Danielle Joy Antalffy

SVB Leerink LLC, Research Division - MD of Medical Supplies & Devices and Senior Analyst

* David Ryan Lewis

Morgan Stanley, Research Division - MD

* Isaac Ro

Goldman Sachs Group Inc., Research Division - VP

* Joanne Karen Wuensch

BMO Capital Markets Equity Research - MD & Research Analyst

* Kristen Marie Stewart

Barclays Bank PLC, Research Division - Research Analyst

* Lawrence H. Biegelsen

Wells Fargo Securities, LLC, Research Division - Senior Analyst

* Matthew Charles Taylor

UBS Investment Bank, Research Division - Equity Research Analyst of Medical Supplies & Devices

* Matthew Stephan Miksic

Crédit Suisse AG, Research Division - Senior Research Analyst

* Philip Chickering

Deutsche Bank AG, Research Division - Research Analyst

* Rajbir Singh Denhoy

Jefferies LLC, Research Division - MD, Equity Research & Senior Equity Research Analyst

* Robert Adam Hopkins

BofA Merrill Lynch, Research Division - MD of Equity Research

* Robert Justin Marcus

JP Morgan Chase & Co, Research Division - Analyst

* Vijay Muniyappa Kumar

Evercore ISI Institutional Equities, Research Division - MD

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Presentation

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Operator [1]

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Good morning. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Medtronic Third Quarter Earnings Call. (Operator Instructions)

I would now like to turn the conference over to Ryan Weispfenning. Sir, you may begin.

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Ryan Weispfenning, Medtronic plc - VP of IR [2]

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Thank you. Good morning, and welcome to Medtronic's Third Quarter Conference Call and Webcast. During the next hour, Omar Ishrak, Medtronic Chairman and Chief Executive Officer; and Karen Parkhill, Medtronic Chief Financial Officer, will provide comments on the results of our third quarter, which ended on January 25, 2019. After our prepared remarks, we will be happy to take your questions.

First, a few logistical comments. Earlier this morning, we issued a press release containing our financial statements and the revenue by division summary. We also issued an earnings presentation that provides additional detail on our performance and outlook.

During today's earnings call, many of the statements made may be considered forward-looking statements, and actual results may differ materially from those projected in any forward-looking statement. Additional information concerning factors that could cause actual results to differ is contained in our periodic reports and other filings that we make with the SEC, and we do not undertake to update any forward-looking statement.

In addition, the reconciliations of any non-GAAP financial measures are available on our website, investorrelations.medtronic.com. Unless we say otherwise, references to quarterly revenue growth rates and ranges are given on an organic basis, which exclude the impact of any material acquisitions, divestitures and foreign currency and are in comparison to the third quarter of fiscal year 2018. All of these adjustment details can be found in the reconciliation tables included in our earnings press release. Finally, our EPS guidance does not include any charges or gains that would be reported as non-GAAP adjustments to earnings during the fiscal year.

With that, I'm now pleased to turn the call over to Medtronic Chairman and Chief Executive Officer, Omar Ishrak.

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Omar S. Ishrak, Medtronic plc - Chairman & CEO [3]

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Thank you, Ryan, and thank you to everyone for joining us. This morning, we reported another quarter of solid top and bottom line performance. Revenue grew 4.4% organic, reflecting the benefits of our diversified model. We leveraged our top line to grow adjusted operating profit 7.7% and adjusted diluted EPS 10.3% or 8.5% at constant currency.

Execution is our top priority, and in Q3, we executed on multiple fronts to deliver a strong quarter despite difficult comparisons we were facing in the back half of our fiscal year. Revenue outperformance in MITG and RTG, driven by a number of recent product launches offset the challenges in CVG that we talked about in January. The other big driver was emerging markets, which grew 14%, reflecting a strong quarter across all businesses and geographies.

Down the P&L, we saw the benefits this quarter from our focus throughout the organization on margin improvement, resulting in 140 basis points of operating margin expansion, including a benefit from currency. We continue to execute on free cash flow, working to improve our cash conversion and, ultimately, drive greater shareholder value. Through the first 3 quarters of the year, we generated over $4.1 billion of free cash flow compared to $2.9 billion in the prior year. We made significant progress on this front, and I really appreciate the engagement of the entire Medtronic team.

Overall, it was another good quarter for Medtronic, but what continues to be even more exciting than our results is the progress we are making in our pipeline. As I commented last quarter, we believe we have more opportunities for growth than at any time in our company's history. I'll come back to the pipeline shortly, but first, let's review our performance this quarter in a little more detail.

I'll start with our Minimally Invasive Therapies Group. MITG had an outstanding quarter, growing 6.6% with outperformance in both SI and RGR divisions. Our Surgical Innovations division grew 6.4% with strong growth in both Advanced Energy and Advanced Stapling. Advanced Energy products grew in the low double digits, driven by the adoption of enhanced LigaSure vessel sealing instruments and the Valleylab FT10 energy platform. In Advanced Stapling, we grew in the high single digits as our Tri-Staple 2.0 endostapling reloads and Signia surgical stapling system continued to perform well in the minimally invasive surgery market.

Our Respiratory, G.I. & Renal division grew 7% with strong results across all businesses. G.I. grew mid-single digits, led by strength in Beacon endoscopic ultrasound products and Bravo reflux testing systems. Respiratory had high single-digit growth, driven by Puritan Bennett 980 ventilators and Nellcor pulse oximetry products. Renal care grew in the mid-teens with solid sales of Bellco and renal access products.

Next, our Restorative Therapies Group had another strong quarter, growing 5.5%, driven by sustained momentum in the Brain Therapies division. Brain grew 13.2% with high teens growth in both Neurovascular and Neurosurgery. In Neurovascular, we're seeing broad strength across our stroke franchise with double-digit growth in stent retrievers, flow diverters, neuro access and embolic products.

In Neurosurgery, we delivered high-30s growth in capital equipment, driven by StealthStation navigation, O-arm imaging, Mazor Robotics and Midas Rex-powered surgical systems. We launched our Mazor X Stealth Edition robotic guidance platform last month, and we've received early enthusiastic feedback for this combination of best-in-class robotics and navigation capability.

We believe our strong capital equipment sales supporting our Brain Therapies growth are a leading indicator for future growth in our Spine business as customers choose to link future spine implant purchases with a capital equipment that they are acquiring. As we execute more of these contracts, we would expect our core spine implant sales to grow over the coming quarters. In our Spine division, while results were flat this quarter when combined with sales of our capital equipment used in spine surgery, which is the way many of our competitors report their results, our Spine division grew 4.6%, including 5.4% growth in U.S. Core Spine. In Brain Therapies, our performance was driven by high single-digit growth in spinal cord stim as the market continues to appreciate the differentiation of Intellis with its evolved workflow algorithm and Snapshot reporting.

Our Diabetes Group grew 6.5% this quarter. As expected, this group is facing difficult year-over-year comparisons in U.S. pump sales in the back half of this fiscal year. Despite this, we grew 5% sequentially from Q2, including high single-digit sequential growth in insulin pumps specifically.

Our performance outside the U.S. was especially strong, with Western Europe, Latin America and China growing 25%, 17% and 16%, respectively.

CGM as a category grew over 30% this quarter with over 60% growth in Western Europe. Our recently launched standalone CGM system, the Guardian Connect, posted its third consecutive quarter of triple-digit growth.

Our Cardiac and Vascular Group grew 1.6% this quarter, in line with the revised forecast we provided in early January, with mid-single-digit growth in both CSH and APV divisions. Coronary & Structural Heart had another strong quarter in transcatheter valves with 16% TAVR growth in the U.S. and 15% in international markets. We're seeing solid momentum in share gains in the U.S. and in other global markets because of the clinical performance characteristics of our Evolut PRO valve, and we're the market leader in many regions around the world, including Western Europe.

In Aortic, Peripheral & Venous growth was driven by the continued launch of the Valiant Navion thoracic stent graft system as well as mid-teens growth in both VenaSeal vein closure systems and IN. PACT Admiral drug-coated balloons. In Cardiac Rhythm & Heart Failure, we had mid-single-digit growth in pacemakers on the strength of our Micra Transcatheter Pacing System and AZURE wireless pacemaker. This was offset by mid-teens decline in heart failure, primarily due to a mid-40s decline in LVADs as a result of market share loss and heart transplant guideline changes.

AF Solutions grew in the mid-teens, driven by continued growth in cryoballoons. We also announced the acquisition of EPIX Therapeutics. EPIX is developing what we believe is a highly differentiated technology for the over $3 billion focal catheter segment of the ablation market.

When combined with our leading cryoballoon technology, EPIX provides us with a complete portfolio of best-in-class AF ablation catheter technology.

It's worth noting that CVG services and solutions faced a number of comparison headwinds, including a revenue recognition change that started in the second quarter, a large order from the U.S. Department of Veterans Affairs in Q3 of last year and the exit of a product line in Q1 this fiscal year. Excluding services and solutions, CVG's growth would have been 110 basis points higher and CRHF's growth would have been 180 basis points higher.

Now turning to emerging markets. Our performance continues to be strong, growing 14% this quarter and now representing 16% of Medtronic revenue. Our strength has diversified across multiple geographies, with China growing 13%, South Asia by 23% and the Middle East and Africa by 20%. In addition, Eastern Europe grew 12%; Southeast Asia, 11%; and Latin America, 9%. Our differentiated strategies of public and private partnerships and optimizing the distribution channel are paying off and making a real difference in emerging markets around the world.

In addition to our solid performance in the quarter, I remain excited about the unprecedented opportunities for growth that our pipeline presents. We're building upon leadership positions in several of the fastest growing markets in med tech by intentionally allocating our capital to high-growth markets and new opportunities. As we invest in these opportunities, we're doing much more than simply improving today's products and therapies. We're disrupting existing markets and inventing new ones. And when we do this, when we successfully disrupt and invent markets, we distance ourselves from the competition and raise our weighted average market growth rate. All of this creates significant value for patients, for physicians, for health care systems and for our shareholders.

It's worth highlighting some of the most exciting elements of our pipeline that we expect to bring to market in the near future. In RTG, as I mentioned earlier, we're just launching the Mazor X Stealth, our integrated robotics and navigation platform, which we expect to drive growth in our Neurosurgery business, along with creating demand for our Core Spine implants. In Neurovascular, we're now in limited market release of our [071] React catheter and continuing the launch of our Riptide Aspiration System. We expect to launch our next-generation Solitaire stent for ischemic stroke by the end of FY '19. In FY '20, we intend to launch our DBS primary cell device with unique sensing capabilities, the first of a series of disruptive product launches planned in our DBS business.

In CVG, we're awaiting the presentation of 2 landmark clinical trials at the American College of Cardiology meeting on March 17. The first is the interim results of our low-risk TAVR study, which has the potential to expand indications for our transcatheter valve therapy to the largest segment of the market. The second is the results of the RAPID trial of our TYRX antibacterial envelope, which could enable guideline changes in cardiac rhythm implantables. In FY '20, we're expected to launch our next-generation TAVR valve, the Evolut PRO [Plus], which features a lower profile and improved predictability of placement for enhanced ease of use. We also expect to launch a next-generation insertable cardiac monitor, the Reveal LINQ 2.0, will which include Bluetooth connectivity, 5-year battery longevity and the ability to monitor additional physiological parameters.

In the second half of FY '20, we're planning to launch new conventional ICD and CRT-D product families based on our [Polaris] high-powered technology platform, and we expect to receive a new drug-coated balloon indication in the U.S. for the AV fistula market. Finally, around year-end FY '20, we're expecting FDA approval for our micro AV transcatheter cardiac pacemaker, which would enable us to access and disrupt over 55% of the eligible pacemaker market, up from 16% today.

The pipeline at MITG is equally impressive. We're currently expanding into key specialty areas of our Tri-Staple technology, and we're launching our new Microstream advanced capnography solutions for the Capnostream 35 portable respiratory monitor. We're also currently launching a next-generation Sonicision ultrasound dissection system.

Regarding our robotic-assisted surgery platform, we're hitting key milestones and are on track for an expected launch in FY '20. We've had several pre-submission meetings with regulatory bodies around the world, including the U.S. FDA. More than 100 surgeons have used the system and provided us with very positive feedback. We're also partnering with physician societies to develop guidelines for use of the platform. We believe this robotic-assisted surgery platform, combined with our industry-leading surgical instruments and surgeon training centers around the world, will expand the market for minimally invasive surgery.

In Diabetes, we're continuing the introduction of the 670G into new geographies around the world. In FY '20, we expect to launch our advanced hybrid closed-loop system with Bluetooth, which we're calling the MiniMed 780G. The 780G will feature next-generation algorithms designed to improve time-in-range to over 80% by automating insulin delivery following a snack or a meal. In addition, the system will reduce the burden of carb counting and enable remote monitoring and remote software downloads. We also expect to submit our application for non-injective designation for our Guardian Sensor 3 in the next few months.

So we expect the next 5 quarters or so to be very exciting as we bring these innovative pipeline products to market. However, I'm equally excited about our longer-term pipeline. In CVG, we're developing several technologies that will create large and important new markets, including the INTREPID transcatheter mitral valve replacement system and the SYMPLICITY Spyral renal denervation system for hypertension. We also expect to disrupt existing markets with our pulse field ablation technology for AF and the extravascular ICD. When launched, all of these new products are expected to create multiple new multibillion-dollar growth opportunities.

In RTG, we're developing InterStim Micro , a 3-cc sacral nerve micro stimulator for bladder control with full-body MRI compatibility. In DBS, we expect to build on our sensing technology to develop a closed-loop deep brain stimulation system. In addition, we are planning to introduce a cranial-mounted DBS system, leveraging our differentiated miniaturization and battery technology. I'm really excited about our plans to disrupt the deep brain stimulation market with a series of new products and make a real impact to patients.

In MITG, we continue to develop disruptive products for these markets too, with our portable hemodialysis system as well as the next-generation capsule endoscopy product called PILLCAM GENIUS. Overall, we expect to launch more than 90 products over the next 5 years in MITG.

In Diabetes, I hope you saw our announcement this morning that the FDA has granted breakthrough device designation to our personalized closed-loop system. This system will feature real-time personalized algorithms that are designed to automate insulin delivery on a personalized basis that continuously adapts to the user. The system will also provide insights and predictive diagnostics unique to the individual, all of which will dramatically simplify diabetes management for the patient. In addition to this product, we're also advancing our CGM sensor pipeline by reducing the need for calibration and making the sensors smaller and longer lasting, all while using cognitive computing to enhance personalized insights. Of course, our pipeline is deeper than the few highlights that I've mentioned today, but the key takeaway is that we're executing well on the strongest and most exciting pipeline in Medtronic's near 70-year history.

Let me now ask Karen to take you through a discussion of our third quarter financials. Karen?

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Karen L. Parkhill, Medtronic plc - Executive VP, CFO & Principal Accounting Officer [4]

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Thank you, Omar. Our third quarter revenue of $7,546,000,000 represented organic growth of 4.4%. Foreign currency had a negative $149 million impact, and adjusted diluted earnings per share was $1.29 and grew 10.3%. Adjusted operating margin was 29.2%, increasing 140 basis points in the quarter and 120 basis points through the first 9 months of the year, including a tailwind from currency. We continue to drive underlying operating margin improvement as we execute on our company-wide Enterprise Excellence Program, driving improved efficiency, cost savings and generating leverage on solid sales growth. As a result, our SG&A this quarter improved by 70 basis points.

Our adjusted nominal tax rate was 13.4%, which was better than expected due to the increased benefits associated with the finalization of taxes owed on certain returns. For fiscal '19, we expect our tax rate to be in the range of 13.5% to 14%, including the nonrecurring tax benefits that we have received year-to-date. Excluding those benefits, our full year adjusted nominal tax rate would be approximately 15%. And with the addition of changes associated with U.S. tax reform, we continue to expect a tax rate of 16% to 17% in fiscal year '20.

Third quarter free cash flow was $1.8 billion. Improving cash generation is a priority for all of us at Medtronic, from the top of the company on down, and you've seen the results of our increased focus on cash flow in our performance over the last several quarters. We remain committed to disciplined capital deployment, balancing reinvestment with returning a minimum of 50% of our annual free cash flow to our shareholders. Year-to-date, we have returned $3.9 billion to shareholders, including $1.8 billion of net share repurchases, resulting in a total shareholder payout of 77% on adjusted net income.

We also remain focused on increasing our return on invested capital through strong execution with our disciplined investment process around R&D and tuck-in acquisitions, including 3 we recently announced: Mazor, Nutrino and EPIX. We believe that this focus, combined with our strong and growing dividend, can create long-term value for our shareholders.

Before turning the call back to Omar, I would like to update our guidance. For fiscal year '19, we are raising our organic revenue growth guidance to 5.25% to 5.5%, which is the top half of our prior range. This reflects continued strength in MITG and RTG, offsetting the second half headwinds in CVG and difficult comparisons in Diabetes. For the year, we now expect RTG to grow 5.5% to 6%, up from 5% to 5.5%; and MITG to grow 5.5% plus or minus, up from 5% plus or minus. We continue to expect CVG to grow 3% to 3.5% and Diabetes to grow in the low to mid-teens.

For the fourth quarter, we would expect growth for MITG and RTG to be between 3.5% and 4%, for CVG to look similar to the third quarter and for Diabetes to look roughly flat year-over-year. I would highlight that our expected fourth quarter growth for Diabetes is a bit of an anomaly given the prior year comparison, when we were able to finally clear our large backlog for 670G and sensor orders. And on a 2-year stack basis, the fourth quarter growth from Diabetes should look more normal. Most importantly, as we move into next year, we believe fourth quarter growth represents a likely bottom and, as such, would expect growth to improve for both Diabetes and the company.

Turning to margins. We continue to forecast 50 basis points of full year underlying operating margin expansion as we deliver to more than absorb the impact from product mix headwinds, China tariffs and the dilution from the Mazor acquisition.

With respect to earnings, given our operational performance through 3 quarters, including our ability to offset the headwinds I just mentioned, we are increasing our fiscal year '19 adjusted EPS guidance to $5.14 to $5.16, up from $5.10 to $5.15.

While the impact from currency is fluid, if recent exchange rates hold, our full year revenue would be negatively affected by approximately $425 million to $475 million. And despite the headwind on the top line, given the benefits of our hedging program, FX is expected to be a modest positive to fiscal '19 operating margin, earnings and free cash flow.

Finally, on the heels of strong free cash flow performance over the last 9 months, we are increasing our expected fiscal '19 range to $5 billion to $5.2 billion, up from $4.7 billion to $5.1 billion. And in fiscal year '20, we expect to make additional progress on improving our conversion of non-GAAP earnings into free cash flow as we continue to drive increased focus across the organization.

Now I'll return the call back to Omar.

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Omar S. Ishrak, Medtronic plc - Chairman & CEO [5]

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Thanks, Karen. Before we go to Q&A, I want to take a moment to thank all of our employees around the world for executing to deliver another strong quarter and fulfilling the Medtronic mission.

As I mentioned at the start, this was another solid quarter where we delivered the top line along with strong adjusted operating profit and EPS growth.

You're also seeing our ability to generate strong free cash flow. This is important as it enables us to both reinvest and return to our shareholders.

As a reminder, we continue to allocate our capital to our biggest growth opportunities as we focus on driving our WAMGR, our weighted average market growth rate, upwards and to the right. Our investments are resulting in a pipeline of numerous growth opportunities that has never been stronger. We expect to develop and bring to market the innovations that will improve the lives of millions of people around the world, help health care systems become more efficient and, ultimately, grow the intrinsic value of Medtronic. And when we do this, we expect our shareholders to benefit as well.

We know there's much work to be done, but I'm excited about where Medtronic is headed.

With that, let's now move to Q&A. In addition to Karen, our 4 group presidents, Mike Coyle, Bob White, Geoff Martha and Hooman Hakami, are also here to answer your questions.

(Operator Instructions) If you have additional questions, please contact Ryan and our Investor Relations team after the call. Operator, first question, please.

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Questions and Answers

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Operator [1]

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Our first question will come from the line of David Lewis with Morgan Stanley.

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David Ryan Lewis, Morgan Stanley, Research Division - MD [2]

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Just 2 quick ones for me here, Karen and then, Hooman, so a related follow-up. So Karen, you've been very helpful on tax guidance for 2020 as well as currency. Can you just help us think about margin guidance next year, Karen, when I think about gross margin mix headwinds, slower growth relative to SG&A savings? So is 50 basis points still a decent way of thinking about 2020? And then, Hooman, for you, I appreciate the fourth quarter commentary. How should we think about Diabetes heading into next year? Is this still going to be a high single-digit growth business for Medtronic? Or should we start thinking more about mid-single digits as you anniversary the first wave of 670G?

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Karen L. Parkhill, Medtronic plc - Executive VP, CFO & Principal Accounting Officer [3]

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David, thanks for the questions. So on margin for next year, we are confident in our long-range plan and that continuing into next year, of our ability to deliver between 40 and 50 basis points of underlying -- annual underlying operating margin expansion.

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Hooman C. Hakami, Medtronic plc - Executive VP & Group President of Diabetes Group [4]

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Okay. David, I'll take the next one. And maybe before talking about FY '20, it's probably instructive to talk about the comps that we're dealing with in Q3 because this impacts Q3, it impacts Q4. And you've seen a deceleration in the year-over-year growth versus what we posted for the past 4 quarters, but we have indicated all year that we're coming up against these more difficult comps. And I'll just maybe call out a few of the critical ones. If you recall, David, in the back half of last year, we started to increase CGM capacity that allowed us to fulfill shipments and up demand for both pumps and CGM that carried over from the first half of last year. In addition, in Q3 of this year, we anniversary-ed Animas. And so all of the consumable revenue and all of the out-of-warranty conversions no longer provide a year-over-year benefit. And then the third thing, in Q3 of last year, we also had one of the last large commercial payers approve the reimbursement of 670G.

All of these 3 things distort the year-over-year performance in Q3. They'll do so as well in Q4, and it's primarily a U.S. dynamic.

And maybe just to kind of point at it -- point out some perspective to give you a flavor for the impact of the comps. Last quarter, Diabetes delivered $583 million of revenue and we grew 27%. This quarter, we're delivering $610 million of revenue, which is 5% higher than it was a quarter ago, and our growth rate is 6.5%. And so hopefully, that should give you a sense of the difficult comps. That's going to carry into Q4, and you heard sort of the outlook from -- in the commentary from Karen for Q4, but from a growth rate standpoint, we absolutely expect Q4 to be the low point for Diabetes growth. We expect the comp dynamics to normalize. We expect the return to growth in Q1 of next year. And then, for FY '20, certainly, the full year comp impact will normalize, and we are very confident that Diabetes is going to grow above the corporate average, as we've indicated all along.

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Operator [5]

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Your next question comes from the line of Joanne Wuensch with BMO Capital Markets.

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Joanne Karen Wuensch, BMO Capital Markets Equity Research - MD & Research Analyst [6]

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As we go back to our models and take a look at fiscal year '20, could you please remind us of some of the puts and takes as we think about all of that? I know you previously commented on foreign exchange and tax, but I would just want to make sure that Street numbers get set up correctly as we head into next year.

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Karen L. Parkhill, Medtronic plc - Executive VP, CFO & Principal Accounting Officer [7]

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Thanks, Joanne. Appreciate the question. Yes, we are continuing to work our annual plan right now, so it's early for us to issue our full year outlook. We'll do that on our fourth quarter call. But from what we can see today, we are confident in our ability to deliver a 4%-plus top line revenue growth on an organic basis despite the fact that our pipeline is weighted to the back half of the year, and that's obviously in line with our long-range plan. As I mentioned to David, too, we're also confident in our ability to continue to drive annual underlying operating margin expansion to the tune of 40 to 50 basis points, also consistent with our long-range plan.

I mentioned that you should continue to model our tax rate next year to be between 16% and 17%. We're continuing to work that tax rate as well as any other additional financial levers, but at this point, we are comfortable with current Street consensus. And on an FX basis, FX has been a headwind for us in the fourth quarter. We expect that to -- in the third and fourth quarter. We expect that to continue into next year. From an FX perspective, we would expect FX to be about several hundred million dollars on top line on the headwind and a modest impact on the bottom line.

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Operator [8]

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Your next question will come from the line of Bob Hopkins with Bank of America.

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Robert Adam Hopkins, BofA Merrill Lynch, Research Division - MD of Equity Research [9]

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So just one clarification, either Omar or Karen. I think you said a couple of times on the call that fourth quarter organic revenue growth rate would kind of be the low point for Medtronic. So I just -- to be specific, what is -- could you just remind us what is your specific Q4 organic revenue growth rate? And I just wanted to confirm that I heard that correctly, that you think, going forward, that's the low point.

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Karen L. Parkhill, Medtronic plc - Executive VP, CFO & Principal Accounting Officer [10]

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Yes. So when you look at our full year forecast or full year guidance for revenue growth, that would imply about 3% plus or minus for the fourth quarter, Bob. And that's what we're referring to as our low point.

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Robert Adam Hopkins, BofA Merrill Lynch, Research Division - MD of Equity Research [11]

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Okay. And then the other things I wanted to kind of follow up on is just in terms of the upcoming ACC meeting. I was wondering if you could just help us sort of set expectations heading into that meeting. Sort of any comments around setting expectations would be helpful. And then, specifically on TYRX, maybe help us -- if that study is positive, can you kind of frame the market opportunity and how you might be able to bundle with ICDs? Just if that trial is positive, how should we be thinking about the incremental opportunity there?

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Omar S. Ishrak, Medtronic plc - Chairman & CEO [12]

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Okay. Mike?

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Michael J. Coyle, Medtronic plc - Executive VP and Group President of Cardiac & Vascular Group [13]

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So Bob, obviously, the 2 late-breaking clinical trial presentations that we have coming up at ACC are the low-risk TAVR study and TYRX. Both of those have been accepted and will have also simultaneous publication. On the TYRX in particular, we would estimate, right now, about 1/3 of what we would consider high-risk device implants actually use the TYRX product. So that would imply that if -- we have, obviously, a 7,000-patient study, we would have the power to answer the question of who's going to benefit from this; that it would give us, if positive, ammunition to basically highlight this as the standard of care in what we would consider high risk. And what we consider high risk is any large device implant, so an ICD or CRT device, CRT-P device; or any de novo implant of those; or any replacement procedure, including pacemakers.

So again, right now, we have a utilization of about 1/3 of our cases are actually using a TYRX. By being able to add about $1,000 per procedure and given the unique nature of this technology that it's only available from us, we think we can use it to drive market share as well in terms of both initials and, potentially, even on replacement basis. So we consider it to be a very important technology and a very important study.

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Operator [14]

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Your next question comes from the line of Matthew Taylor with UBS.

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Matthew Charles Taylor, UBS Investment Bank, Research Division - Equity Research Analyst of Medical Supplies & Devices [15]

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So appreciate you talked about a lot of big pipeline drivers that are coming up here in fiscal '20, and I was curious if we could get any kind of update on your surgical robotics program. That's one where investors have a lot of focus, and we're still waiting for some more details on what that looks like and when it might come into the fold. So can you give us the latest and greatest there and just how you're feeling about that program?

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Omar S. Ishrak, Medtronic plc - Chairman & CEO [16]

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Bob, go ahead.

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Robert John White, Medtronic plc - Executive VP & President of Minimally Invasive Therapies Group [17]

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Yes. Thanks, Matt. Appreciate the question. So as Omar mentioned during his commentary, we've had actually over 100 surgeons use our robotic systems, and in fact, just a couple of weeks ago, I had the chance to sit in with one of them during our preclinical labs as we did a partial nephrectomy. And as I chatted with the lead surgeons, you could tell it was a really impressive experience, both from the aspect of the way the system performed, the procedure, the workflow associated with the system. And so as we previously communicated, we're absolutely on track for an FY '20 launch. But importantly, and I think interesting to you, is once procedures have begun and we're collecting additional clinical data, they will arrange opportunities for you to experience one of these cases live. So we're excited with our progress, we're excited with the feedback we get, and we're excited to bring the system.

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Operator [18]

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Your next question comes from the line of Matt Miksic with Crédit Suisse.

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Matthew Stephan Miksic, Crédit Suisse AG, Research Division - Senior Research Analyst [19]

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I'll keep it to one. So for Karen, you mentioned -- just maybe for background, the changes you talked about in January to the tax rate and the impact on the bottom line growth, clearly non-op impact. And you've reiterated here just a couple of questions ago, I think, the top line growth of 4-plus percent and the 40 to 50 basis points of margin improvement. So operationally, if we look at 2020, I guess I'm asking a question but kind of confirming that it's fair to think about, operationally, the sort of long-range plan in effect and hitting on those metrics. I guess the question is -- below the line, you mentioned some financial opportunities, and I guess I'm thinking below the line, either in the debt line or other non-op lines, to sort of help offset the non-op impact of tax. If you could maybe flesh out what some of those might be and perhaps what some of those were as you were heading into the end of the year as to how you can potentially offset that, would be very helpful.

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Karen L. Parkhill, Medtronic plc - Executive VP, CFO & Principal Accounting Officer [20]

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Yes. Thanks, Matt. Appreciate your question, and definitely appreciate the fact that you got that our long-range plan holds for next year on an operational performance basis. Below the line, there are additional financial levers. Looking at our tax rate and what we can do to work to improve that. Also looking at our interest expense and income line item and then, obviously, share repurchase. We will focus on all of those levers. And when we have updates on that, we'll be sure to give them to you.

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Omar S. Ishrak, Medtronic plc - Chairman & CEO [21]

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Well, let me just throw in a little word here. I understand, operationally, all the things that Karen just said. And you understood, and I confirm that. But let's not forget our pipeline. Our pipeline is extremely exciting. We have some really exciting new product introduction next year. The micro AV is one that I'm really excited about, the robotics and so on. So let's not forget that. Operationally, we'll be there, but the pipeline sets us up not only for next year but for the future as well.

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Operator [22]

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And your next question comes from the line of Pito Chickering with Deutsche Bank.

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Philip Chickering, Deutsche Bank AG, Research Division - Research Analyst [23]

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I think you have a very impressive short-term and long-term pipeline of new products. When I sit back and look at the R&D spend as a total -- I think, as a percent of total revenues, it's been pretty consistent despite the strong pipeline. So 2 questions. The first one, with the strong pipeline ahead, does it make sense to increase R&D spend to take advantage of your momentum you have on new products? And second, from a process perspective, how is the IRR tracking versus your own internal expectations? And how has it changed over the last few years?

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Omar S. Ishrak, Medtronic plc - Chairman & CEO [24]

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Let me just take a cut at that and then Karen maybe you can add to it. First of all, our pipeline is funded. So we're spending R&D money to fund our pipeline, and we will ensure that, that happens. As we see overall operational success, the first place we'll put our money into is organic R&D spending because that's the highest return that we can get out of any kind of investment that we make. Having said that, we also always look at continued R&D productivity. We look at sharing between different groups, transferring of technology between one group and another that makes our R&D more efficient, and it actually accelerates pipeline. Miniaturization technology and battery technology are the 2 biggest examples where our fixed capability can move across different groups and make that R&D quite efficient. So that's the way we look at that. And I think, from a return perspective, they're certainly within our projections, the organic ones, and I think most of the acquisitions, too, have had returns that are better than our cost of capital. So Karen, you want to add anything to that?

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Karen L. Parkhill, Medtronic plc - Executive VP, CFO & Principal Accounting Officer [25]

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No, well said. The only thing I would add is that we're focused on improving our overall return on invested capital for the whole company, and obviously, our R&D pipeline is a big part of that. And as we look at tuck-in acquisitions, we'll focus on making sure that those ROICs are strong and accretive for the company, too.

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Operator [26]

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Your next question comes from the line of Vijay Kumar with Evercore ISI.

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Vijay Muniyappa Kumar, Evercore ISI Institutional Equities, Research Division - MD [27]

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So just maybe I'll limit myself to one question. Maybe I'll have 2 bits in that question. But Omar, for you, if you look at the organic for the company, to come in really, really strong, we're looking at close to 5.5% for fiscal '19. You're talking about pipeline. When we think about first half versus second half of next year, are we looking at first half maybe at the low end of your 4% to 5% and maybe back half coming in at the high end? And when this pipeline -- when it actually comes to fruition, is that organic going to accelerate in fiscal '21? And then, Karen, for you, just quickly on margins. 40 to 50 bps at constant currency, but I think I heard you say FX headwind, a few hundred million dollars on the top, but more modest. Does that imply that FX is going to be a benefit next year on margins?

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Omar S. Ishrak, Medtronic plc - Chairman & CEO [28]

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Okay. First of all, I think you're right about the pipeline, that it is back-end loaded towards the second half of the year, and as the quarters progress, you'll see the benefit of that in our growth rates. And I think you read that correctly. But I think, more importantly, the other point that you made is that product introductions are the starting point. These things carry through into FY '21. And then some of these products will get approval in other countries, and other new products will also come up towards FY '21. So again, from a product introduction perspective, you'll see a gradual increase, back-end loaded like you mentioned. And the growth rate will correspondingly follow that, lower in the first half, higher in the second half. I think that's the right way to look at it.

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Karen L. Parkhill, Medtronic plc - Executive VP, CFO & Principal Accounting Officer [29]

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And then the other thing I would add, Vijay, is that we mentioned that we think that our fourth quarter growth rate is the low point for us, and so you can think about that as you look ahead next year, too. And then from a benefit -- your question about benefit on FX on the operating margin line, we see FX as being a headwind for us, and you can expect a little bit of a headwind on the operating margin line right now, at least where rates are today and where our hedging is right now.

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Operator [30]

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Your next question comes from the line of Robbie Marcus with JPMorgan.

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Robert Justin Marcus, JP Morgan Chase & Co, Research Division - Analyst [31]

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Hooman, I wanted to circle back to Diabetes, and you talked about the outlook for 2020. But I want to touch on the breakthrough designation you got this morning for the personalized closed-loop pump. Maybe talk about what the recently acquired Nutrino Health adds to this, when we might see data and approval of this in the U.S. and outside the U.S. Is there new hardware involved on the CGM and pump side? And maybe touch on how this compares to where you think the competition is in next-generation systems.

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Hooman C. Hakami, Medtronic plc - Executive VP & Group President of Diabetes Group [32]

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Okay. Thanks, Robbie. What I'll say is there's probably not enough time on this call to do personalized closed loop justice, but I'll give you kind of a flavor for it. We really think that personalized closed-loop is going to be a system that truly paves the way for a true closed-loop system. Now and because of that, we just -- we don't feel that closing the loop is aspirational any longer. It's actually achievable. And if you really think about today's algorithms, Robbie, they're -- they essentially behave the exact same way for every single patient, even though every single patient is different. Personalized closed-loop changes all that. It's real-time system. It automates all facets of insulin delivery in a way that is personalized and adaptive to the user. In addition, the system is going to provide unique insights to help the patient -- help them with predictive diagnostics, which we think is going to dramatically simplify diabetes management for the patient. And so we really think this is going to be a transformative system, and we're thrilled to have received breakthrough designation for it from the FDA.

Now as far as launch date goes and all of that, we just received the breakthrough designation. For competitive reasons, I think it would be premature to talk about launch dates. But what I will say, and you touched on this, is that we're investing heavily in personalized closed loop. Our acquisition of Nutrino was made with personalized closed loop in mind. We are fully resourced from an R&D standpoint to drive this program as aggressively as possible, and we're excited to share more details with you as we progress with the program.

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Robert Justin Marcus, JP Morgan Chase & Co, Research Division - Analyst [33]

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Is that something we might see data at ADA 2020?

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Hooman C. Hakami, Medtronic plc - Executive VP & Group President of Diabetes Group [34]

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Yes. So ADA 2020, I think we will outline for you more details around personalized closed loop, for sure. And I think what you will see -- as we start to more articulate what the system is and what the capabilities are, you'll see that it will be completely differentiated with respect to not only what's out there today but what's also coming.

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Operator [35]

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Your next question comes from the line of Bruce Nudell with SunTrust.

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Bruce M. Nudell, SunTrust Robinson Humphrey, Inc., Research Division - MD [36]

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I have a question for Mike. Mike, I know the upcoming trials at ACC are embargoed, but could you just help investors think about, on the basis of death and stroke in particular, is superiority needed to change the paradigm of surgery versus TAVR in that low-risk population? And I think it's important because there are probably around 30,000 surgeries that suddenly come on the table. Just your thoughts about surgery might be great, but does the tie go to the runner? Or do you actually need superiority to kind of change the discussion between patients and practitioners?

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Michael J. Coyle, Medtronic plc - Executive VP and Group President of Cardiac & Vascular Group [37]

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Well, certainly, we've seen patients being highly enthusiastic about less invasive approaches to therapy. And so there is a large patient pool that is associated with these technologies in TAVR and ultimately, in the mitral space. So I think non-inferiority is certainly a good starting point at this stage, if that's where it ends up. But over time, from my perspective, as we get more experience with these technologies and we see durability in the technology, we're going to see significant patient pull to expand the market.

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Operator [38]

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Your next question comes from the line of Isaac Ro with Goldman Sachs.

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Isaac Ro, Goldman Sachs Group Inc., Research Division - VP [39]

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Omar, I had a question, I guess, for you and both -- Karen on expense growth in the context of your margin goals. You have a number of pretty compelling technologies on the table between robotics, the TAVR market expansion, Diabetes heading into next year. So I'm interested in how you -- if you can help frame the way in which you're going to fund those growth initiatives whilst delivering the margin expansion. There are a couple areas of obvious savings on the SG&A line that would help. I'll offer that.

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Omar S. Ishrak, Medtronic plc - Chairman & CEO [40]

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You're right. Look, there's 2 big areas that we look at. In the SG&A line, we're looking at better productivity in our go-to-market methodologies in our -- primarily on the back office -- commercial back offices, which we're concentrating and putting into one place. That actually saves a lot of money. We are also using new types of technologies to be able to do these processing tasks much more efficiently. So the commercial back office and the commercial go to market, not from a salesperson perspective but more from a support perspective, is a good area of opportunity for us, and that will yield a lot of dividends. The other one which we've mentioned all along, and that program is in full flight, and -- we've got a program to reduce the number of manufacturing sites we have, from, I don't know, 80 or 90 a few years ago to more like 50 to 60. And I mean, that clearly gives us some level of productivity.

In addition to that, we have a continuing effort in each factory to improve the efficiency of our lines through different quality processes that are continuously improving and improving in sites which already have those processes, and we put them into new sites as they get ready for production. So I think those are the main drivers through which we get cost reduction, the back office -- commercial back office and the cost-out programs that are concentrating on manufacturing sites. Our supply -- our overall indirect and direct supply, also because of our size, is a leverage point. And finally, our services from our functions are ones that we monitor a lot, like HR, finance, legal, et cetera. We monitor those services, and we compare them to benchmarks against companies of our size, and we expect to be best in class. In one or 2 of those areas, we're higher because of the integration we had to do, but over the next few years, we'll get them to best of class. And that'll also give us -- free some extra funds to do the R&D, which we're focused on. I think I covered it. Karen, anything to add?

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Karen L. Parkhill, Medtronic plc - Executive VP, CFO & Principal Accounting Officer [41]

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You totally covered it. I would just say that our Enterprise Excellence Program is specifically designed to drive that operating margin expansion and enable us to continue to invest heavily in R&D.

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Operator [42]

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Your next question comes from the line of Larry Biegelsen with Wells Fargo.

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Lawrence H. Biegelsen, Wells Fargo Securities, LLC, Research Division - Senior Analyst [43]

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One for Karen, one for Mike. So Karen, on the guidance, in fiscal Q4 is about 3% organic, you said, and you expect that to be the bottom. I guess my question is, when we look at the first half of fiscal 2020, why would it be higher than that 3%? What drives the improvement? Anything besides the Diabetes comps getting easier? And then, Mike, I think drug-coated balloons at mid-teens growth this quarter came in better than people expected. Just any color commentary on the outlook for that business?

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Karen L. Parkhill, Medtronic plc - Executive VP, CFO & Principal Accounting Officer [44]

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Sure. Thanks, Larry. You already noted the comps, which is a big deal. We had very tough comps in the back half, and that changes as we move into next quarter. When we think about CVG, too, we expect that to improve as we launch new products, but also keep in mind that we will anniversary the revenue recognition change that we made to the services and solutions part of CVG in the first quarter. And then we'll also anniversary the MCS decline in the third quarter. So hopefully, those things help you.

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Michael J. Coyle, Medtronic plc - Executive VP and Group President of Cardiac & Vascular Group [45]

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And Larry, as it relates to the drug-coated balloons, we actually were quite pleased with the growth profile of the business. Obviously, in January, we were a little concerned when the meta-analysis came out, where we saw certain accounts basically kind of pushing the pause button on utilization while they waited for additional data. I think the communication across the board from the manufacturers looking at their own data in detail and especially our randomized controlled data from both the U.S. pivotal trial, the Japan trial and our global registry data were helpful in terms of providing a patient-level analysis. And then we've seen independent publications, like the one we saw in JAMA here last week, that basically was showing, on claims databases, no correlation with death for paclitaxel. So as more and more data come out, it's obviously getting the market more comfortable with the conclusions around the performance of the technology. We know it offers significant efficacy benefits relative to standard balloon technology. And for us, we're looking at continued expansions of indications for use into new areas. We should have U.S. approval for an AV fistula indication in FY '20, and we continue to do work on below the knee. So we see that technology as an important, strong, long-term growth driver for our APV business.

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Operator [46]

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Your next question comes from the line of Danielle Antalffy with SVB Leerink.

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Danielle Joy Antalffy, SVB Leerink LLC, Research Division - MD of Medical Supplies & Devices and Senior Analyst [47]

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Mike, a quick question for you on heart failure business, and as expected, we saw some weakness in LVAD. Curious how you're seeing that continue to play out there. How much of that would you characterize was impact from competition versus the change in the transplant guidelines? Just trying to get a sense of the go-forward outlook just for that market and for that business overall, and then I had one quick follow-up.

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Michael J. Coyle, Medtronic plc - Executive VP and Group President of Cardiac & Vascular Group [48]

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Sure. Well, the 2 issues that I identified at the JPMorgan meeting were almost simultaneous, right, the approval of the competitive HeartMate 3 product and the changes to heart failure guidelines. As we went through the quarter, the front end of the quarter really took the brunt of that sort of market correction. We think the U.S. market was down 20% to 25% as basically LVADs -- patients with LVADs were kind of put to the bottom of the list for heart transplants. And obviously, a lot of those patients are now being bridged and transplanted with technologies like ECMO. So the question will be, "How do they do in their transplant surgeries when they're on a less robust support system over time?" And obviously, that's going to take quarters to play out in terms of being able to look at what it does to the overall market. But clearly, the bigger issue for us was the competitive share shift that we saw. Our competitor brought out a meaningful improvement over their older technology. There was a lot of interest in the market to try it and see how it was performing. We had seen some of those accounts coming back, but there is a big correction that now has taken place.

And I think, whereas, we were looking at sort of a 35% market share prior to that new product coming in, during this quarter, it was closer to 20%. On a global basis, it has settled out at sort of a 25% share for us, and I think that is probably a good way of thinking about the go forward for the overall market. We obviously have a lot that we're working on in terms of our thoracotomy indication for a less invasive surgical placement for the HVAD technology, and we have a number of important technology developments that are taking place to the system that we think can help improve complication rates to both grow the market and grow our share. So -- but at least in the short term, this will be a headwind for us for the next several quarters.

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Danielle Joy Antalffy, SVB Leerink LLC, Research Division - MD of Medical Supplies & Devices and Senior Analyst [49]

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Okay. And you answered my follow-up on what's next.

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Operator [50]

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Your next question comes from the line of Kristen Stewart with Barclays.

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Kristen Marie Stewart, Barclays Bank PLC, Research Division - Research Analyst [51]

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Karen, I just wanted to quickly make sure I understood your comments correctly on the consensus EPS for next year. I think you had said you were comfortable in that, that implies about, I guess, 5.6%-ish growth. I thought, in January, you guys were saying that it might be 150 basis points off the CAGR. How should we just think about that overall kind of growth for next year? And then just longer term, I think in the breakout commentary, Mike had mentioned something about growth perhaps coming in a little bit higher in 2021 because of some of the new products. And just want to kind of flush out how we should really think about that 8% mark.

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Karen L. Parkhill, Medtronic plc - Executive VP, CFO & Principal Accounting Officer [52]

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Thanks for the question, Kristen. So FY '20, we've talked about we've got the big headwind of our tax rate. We also have some FX headwinds that I mentioned. And so at this point, yes, we are comfortable with current Street consensus, and we will give our annual outlook on our fourth quarter earnings call. We're continuing to work our long-range plan, but at this point, I would say we're comfortable. As we think about the strength of our pipeline though, it is weighted towards the back half of next year and beyond, and so we're really excited about that "and beyond" piece of it.

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Omar S. Ishrak, Medtronic plc - Chairman & CEO [53]

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Yes. Just to sort of confirm that, Kristen. Clearly, as the pipeline comes through, it's going to -- so the growth rate is going to accelerate, and we're very confident in the plan that we've laid out of a 4-plus percent growth rate over time. And it's too early to talk about FY '21 at this point, but clearly, the expectation is that as the quarters go by here, the rate will grow -- will rise, and just the pipeline itself would imply that. So we're confident in an increasing growth profile over time as we look into the future.

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Kristen Marie Stewart, Barclays Bank PLC, Research Division - Research Analyst [54]

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Okay. And then I think the 2 things that you mentioned on pipeline, INTREPID and SYMPLICITY longer term. Just real on -- quickly on INTREPID. Are you now able to do that transseptally? And any sort of data that we could be expecting on either that program or SYMPLICITY in the near term?

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Omar S. Ishrak, Medtronic plc - Chairman & CEO [55]

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I think, Mike, go ahead.

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Michael J. Coyle, Medtronic plc - Executive VP and Group President of Cardiac & Vascular Group [56]

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Yes. So on INTREPID, we continue to enroll in the APOLLO study. We've been very pleased we have not seen any drop-off in enrollment rates in the wake of the COAPT data. And we continue to work -- these are all transapically delivered technology or products right now. We continue to work on the pipeline for transfemoral, and obviously, we're still making a sort of strategic decision around how small do we need to make the profile of the device. We can make it transfemoral right now or in a transseptal design, but it's a large technology. So it's a decision of whether to actually make that a -- engineer a smaller solution and then go into market with it -- or into clinical trials with it or to go with a larger version that we're currently developing. It's still a work in process. And then on the SYMPLICITY trial, we continue to enroll in both the off-med and on-med pivotal trial results -- which will be the basis for the PMA approval. We would expect data availability for that early in FY '21.

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Operator [57]

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Your final question will come from the line of Raj Denhoy with Jefferies.

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Rajbir Singh Denhoy, Jefferies LLC, Research Division - MD, Equity Research & Senior Equity Research Analyst [58]

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Maybe, Omar, I could ask about emerging markets, another very strong quarter. I think it contributed about -- a little above 2 points of your growth in the quarter. So maybe you could help us understand if there are particular products that are driving that and how we can get comfortable with the sustainability of that contribution going forward.

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Omar S. Ishrak, Medtronic plc - Chairman & CEO [59]

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Well, yes, I'm glad you brought that up. I was going to make a comment anyway because, for sure, our pipeline is exciting, but the emerging markets performance and its consistency and its gradual increase over time is something that we feel pretty good about. And I think the way to look at that is that, look, there's no question about the demand rising and the fact that there's a huge opportunity to increase penetration of existing products which have been approved like for years. And we've, over time, built core expertise in how you do that, in aligning patient awareness, building -- helping build infrastructure and training physicians and then deploying our technologies. So that process -- and then going direct or optimizing our go-to-market strategies in those emerging markets. You put all of that together, that's our strategy.

Now that isn't something that you just flip a switch and do it. You build that expertise over time, and we've done that over the last, I'd say at least, 5 to 7 years. And we have got a pretty clear understanding of how to continue to grow on that platform. And so we're pretty consistent -- we're pretty confident about the consistency of this double-digit profile in emerging markets. And sure there'll be macroeconomic changes here and there, but by and large, the health care need is somewhat independent of that. And also, the geographic diversification we have within emerging markets has proven to be an asset in enabling us to demonstrate consistency. So yes, we're very confident in emerging markets of maintaining the double-digit profile and one that we've built a track record on, built experience on and one that you can depend on.

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Ryan Weispfenning, Medtronic plc - VP of IR [60]

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Omar, do you want to finish?

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Omar S. Ishrak, Medtronic plc - Chairman & CEO [61]

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Yes, sure. Thanks. Thanks, everyone. Thanks for your questions. And on behalf of the entire management team, thanks for your continued support and interest in Medtronic. We look forward to updating you on our progress and the results for our full year on our Q4 earnings call, which we currently anticipate holding on Thursday, May 23. So thanks again to everyone for participating and for your support.

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Operator [62]

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Ladies and gentlemen, this does conclude today's call. Thank you all for joining, and you may now disconnect.