Good morning, and welcome to Medtronic's fiscal year 2022, First Quarter earnings video webcast. I'm Ryan Weispfenning, Vice President and Head of Medtronic Investor Relations. Before we start the prepared remarks, I'm going to share with you a few details to keep in mind about today's webcast.

Joining me are Geoff Martha, Medtronic Chairman and Chief Executive Officer, and Karen Parkhill, Medtronic Chief Financial Officer. Geoff and Karen will provide comments on the results of our first quarter, which ended on July 30th, 2021, and our outlook for the remainder of our fiscal year.

After our prepared remarks, our portfolio Executive VPs will join us and we will take questions from the sell-side analysts that cover the Company. Today's event should last about an hour. Earlier this morning, we issued a press release containing our financial statements and divisional and geographic revenue summaries.

We also posted an earnings presentation that provides additional details on our performance. The presentation can be accessed in our earnings press release or on our website at investorrelations.medtronic.com.

During today's webcast, many of the statements we make 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.

Unless we say otherwise, all comparisons are on a year-over-year basis, and revenue comparisons are made on an organic basis.

First-quarter organic revenue comparisons adjusted only for foreign currency as renewal acquisitions or divestitures made in the last 4 quarters that had a significant impact on total Company or individual segment quarterly revenue growth.

References to sequential revenue changes compared to the fourth quarter of fiscal '21 and are made on an as-reported basis. And all references to share gains or losses refer to revenue share in the second calendar quarter of 2021 unless otherwise stated.

Reconciliations of all non-GAAP financial measures can be found in our earnings press release or on our website at investorrelations.medtronic.com. And 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, let's head into the studio and get started..

Cardiac Rhythm, Surgical Innovations, and Spine. Our results reflected the recovery of elective procedures during the quarter, with most of our businesses finishing at or above pre-COVID levels. Now, while the delta variant is having an impact on procedure volumes in certain geographies, we believe the effects will be manageable.

Healthcare systems are really just better prepared and vaccination rates continue to increase. Our new operating model and the Medtronic mindset, culture enhancements are delivering results. As our first-quarter performance demonstrates, our employees are energized by the transformation of our organizational structure and the competitive culture.

And our most recent employee engagement survey results were the strongest that we've ever had. We continue to focus on accelerating and sustaining the higher top and bottom-line growth of Medtronic. In fact, we've already made a number of disciplined and targeted capital allocation decisions that drive that acceleration.

We've increased our investments at the front-end of major product launches and surgical robots and Renal Denervation, which represent large new markets for Medtronic.

We're growing our R&D investments broadly across the Company, complementing a long list of organic opportunities with disciplined tuck-in acquisitions, such as our recently announced intent to acquire Intersect ENT. Now we expect these actions to drive share gains in our markets today, Which we've talked a lot about.

And to increase our weighted average market growth rate, producing stronger returns for our shareholders. Now, turning to the details of our first-quarter results, we'll start again with a brief look at our market share performance.

It's an important metric that our teams are being evaluated against along with revenue growth, profit, and free cash flow. We continue to see a number of our businesses winning share driven by our innovation and increased competitiveness.

And it's worth noting that when we talk about our share dynamics, we're referring to revenue share in the calendar quarter Q2. We gained share in our three largest businesses this quarter.

Our Cardiac Rhythm Management business continued to perform well above the market, adding over 3 points of share driven by our differentiated Micro family of pacemakers. Cobalt and Chrome high-power devices, and our TYRX Antibacterial Envelope.

In Surgical Innovations, we gained a share as our EndoStapling and advanced energy technology continues to be the preferred and trusted instruments used by surgeons all around the world.

And in Spine, the ecosystem that we offer of spine implants, biologics, and enabling technologies like the preoperative planning software, robotics, imaging, and navigation resulted in above-market growth from Medtronic.

And it's not just our largest businesses that are winning share, we also had share gains in some of our faster-growing businesses like TAVR, Pelvic Health, and Pain stem. As new evidence, technology and sales execution resulted in Medtronic outpacing our competition.

In Pain stem, we did observe a gradual slowdown in permanent implants and trialing procedures in the latter parts of our quarter due to the delta variant, and we do expect that this will affect the market during. Q2. That said, we continue to win share and have a lot of momentum in our Intel with DTM technology.

And with the launch of The Vanta Recharge-free system, our portfolio is complete, highly competitive, and well-positioned. Now while we are winning share in a number of our businesses, we still have areas where we have work to do. In cardiovascular, we continued to lose share in our cardiac diagnostics business.

However, we do expect these trends will reverse over the course of our fiscal year as we ramp up the supply of our link to the insertable cardiac monitoring system. Now we also lost share year-over-year in neurovascular, but we were pleased with our momentum as we ramped our recent product launches.

This included our 2 new flow diverters, the Pipeline Flex was shield technology in the U.S. and the Pipeline Vantage in Europe, as well as our Salter X 3-millimeter Stent Retriever. And finally, in diabetes, we continue to execute our turnaround strategy. But as expected, we continued to lose share in the U.S. as we wait for new product approvals.

We understand the current challenges we face in diabetes, and we believe our product pipeline and our differentiated technologies will return us to market growth, as these products move through development approval, and ultimately become available to patients. Now speaking of new products, let's now turn to our product pipeline.

Today, you are seeing the strong flow of new products launching across our businesses. We've launched over 190 products in the U.S., Western Europe, Japan, and China in just the last 12 months. We also continue to advance the innovation we have in development. We are increasing our R&D spend by more than 10% this fiscal year.

This is the biggest dollar increase in R&D spend in our Company's history. The investments we're making in our pipeline will play a key role in accelerating our topline growth. And we're at the front-end of some large opportunities to win share, create new markets, and disrupt existing markets.

Starting with one of our largest future growth drivers, Renal Denervation. We're making good progress on our solution to go after this multibillion-dollar hypertension opportunity.

We expect that the results of our unmet pivotal trial will be ready for presentation at the TCT Conference in November, assuming the interim look at this based in design study reached statistical significance. The unmet clinical trial represents the final piece of a large body of evidence that we intend to submit to the FDA for approval.

The progress in our surgical robotics business has been impressive in recent months. And we have momentum on a number of important milestones and initiatives. But most notable, and something that has energized our entire Company and the robotics team, the first procedures with Hugo were performed at Clinica Santa Maria in Chile by Dr.

Ruben Alvarez in June. And as he said, a picture is worth a thousand words. So let's watch this short clip detailing this important milestone. It's truly amazing to see our robotic technology in use.

And I want to thank the hundreds of Medtronic employees that have worked tirelessly over many years as well as the surgeon and hospital leaders whose partnership help make Hugo a reality. We look forward to expanding the surgical robotics market by addressing the per procedure cost and utilization barriers that have limited robotic surgery to date.

And shortly after the first geological procedures in Chile, we had the first gynecological procedures performed last month at the Pacifica Salute Hospital in Panama. We are receiving positive feedback from early users for our approach to robotic surgery, including our thoughtful design choices.

For example, as you can see by this picture, our open console design allows for natural interaction and participation of the entire surgical team. And it's just one of the many important differentiated features of Hugo.

Looking ahead, we remain on track for CE Mark approval of Hugo following our submission in late March, and we continue to make progress towards starting our U.S. expand Euro pivotal trial, where the first procedures in the U.S. will occur.

Around the globe, a number of hospital systems have expressed interest in our partners and possibility Program, joining a group of pioneering hospitals that will be among the first to use Hugo. In Cardiac Rhythm. We filed for CE Mark for extravascular ICD this quarter. Enrollment is going well in our U.S. pivotal trial.

EV ICD represents a disruptive technology in implantable with feasible space as it can pace and shock without leads inside the heart. And it can do all of this in a single device with the same size and longevity as a traditional ICD. In TAVR, we continue to advance our Evolut platform.

And I am pleased to share with you the news today that we just received FDA approval last week for our next-generation Evolut Fx TAVR system. Now, this innovative system is designed to improve the overall procedural experience through enhancements and deliverability, implant visibility, and deployment stability.

We're planning to start rolling out this next-gen system in the U.S. market later this fall. In neuromodulation, in addition to receiving FDA approval in the quarter for our recharge-free spinal cord stimulator, we also received FDA approval for our SenSight Directional Deep Brain Stimulation lead.

Now SenSight combined with our recently approved Percept PC system is the only DBS system on the market that can sense and record brain activity, in addition to providing normal stimulation to treat diseases like Parkinson's and essential tremors.

We also remain on track to submit our ECAP Spinal Cord Stimulator to the FDA later this calendar year, which has the potential to be a disruptive technology and Pain Stim. Now moving to our Pelvic Health business.

As you know, we don't reveal all of our development programs underway at Medtronic for competitive reasons, but I'm going to unveil a new one today. We've been working in stealth mode on our next-gen InterStim recharge-free device. And earlier this month, we submitted our PMA supplement to the U.S. FDA seeking approval.

This device has some very attractive specs. It's designed with a 10-year battery. It's got a constant current and it's full-body MRI compatible at both 1.5 and 3 Tesla. We're expecting approval in the first half of the next calendar year, and we can't wait to have this best-in-class recharge-free device available for patients.

In diabetes, the international launch of our MiniMed 780G insulin pump continues to go well. The 780G has the highest reported time and range of any insulin pump.

And starting this fall, people with diabetes in many international markets will not only have access to the 780G, but also our no calibration 7-day, Guardian 4 Sensor, and our 7-day extended infusion set. The longest-lasting set on the market.

This complete offering will be highly differentiated and ease patient burden and we're working to bring this technology to other markets. In the U.S., the seven AG and guardians for sensors continued to be under active review with the FDA. And we're expecting to submit our next-gen synergy CGM sensor to the FDA in Q3.

Synergy is disposable, easier to apply, and half the size of our current sensor. I'll now turn it over to Karen to discuss our financial performance in our guidance. Karen..

Thank you, Geoff. Our first-quarter organic revenue increased 19%. And adjusted EPS increased 127%, significant growth as we anniversary the downturn from the pandemic impact last year. Our end markets are recovering and we continue to launch new technology and gain market share, which is reflected in our growth and profitability.

Our adjusted EPS was $0.09 better than consensus with the entire beat coming from higher revenue growth and operating profit.

As I noted on our last earnings call, we did not adjust our first-quarter results for the extra week of sales last year given the concurrent reduction of customer purchases, As these 2 items roughly offset each other at the total Company level.

That said, not all areas of the Company had large quarter-end customers both purchasing activity, diabetes, for example. As a result, I would point out that our Diabetes growth rate would be roughly 6 points higher in the first quarter, had we adjusted for the extra week. On our cadence of recovery, the monthly improvement trends continued.

Average daily sales in June were stronger than in May and July was stronger than June. That said, we did begin to see a slowdown in certain businesses in the last few weeks of July related to the spread of the delta variant in the U.S.. If not for the COVID impact in July, our first-quarter performance would have been even stronger.

Turning to our P&L, we saw significant year-over-year improvement in our margins. 670 basis points on gross margin and over 1,000 basis points on operating margin. Our operating margin was better than expected as investments we initiated in the first quarter took longer to ramp, but are expected to pick up starting in the second quarter.

Turning to capital allocation, we continue to balance our investment for future growth while returning cash to our shareholders, primarily through our strong and growing dividend. As we've noted for several quarters, we are increasing our level of tuck-in acquisitions.

Having announced seven for a total of $2.3 billion since the start of fiscal '21, Less than three weeks ago, we announced our intent to acquire Intersect ENT. Our ENT business has quietly been a strong performer for us, led by a great team with a track record of consistently outperforming the market.

With the addition of intersects complementary products, We can accelerate the growth profile of this business for years to come. The deal is accretive to our weighted average market growth rate. Initially neutral, but quickly accretive to earnings and has expected returns well ahead of our cost of capital. Now, turning to our guidance.

As you know, it is still early in our fiscal year. We had a strong first quarter. And despite the current impact from COVID, we are optimistic about the outlook for the year. Given how early it is in the year, we are maintaining our revenue guidance for the full year at 9% plus or minus.

If recent exchange rates hold, the foreign currency would have a positive impact on full-year revenue of $100 million to $200 million down from the prior 400 million to 500 million I gave last quarter. By segment, we continue to expect cardiovascular and neuroscience to grow 10% to 11%.

Medical-Surgical Portfolio to now grow 8% to 9%, and diabetes to be roughly flat, all on an organic basis. On the bottom line, we are raising the lower end of our guidance by our first quarter bit, offset by a lower expected benefit from FX. We now expect non-GAAP diluted EPS in the range of $5.65 to $5.75.

An increase from our prior range of 560 to 575. This includes a currency benefit of $0.05 to $0.10 at recent rates, down from the $0.10 to $0.15 benefit we signaled last quarter. Our Second Quarter is likely to reflect the current impacts from COVID, particularly in a handful of businesses in cardiovascular and neuroscience.

So we expect organic growth in the quarter of around 4% with a currency tailwind of 0 to $50 million at recent rates. Keep in mind that we are facing a particularly tough comp in our Ventilator business, which peaked in the Second Quarter last year. Ex ventilator sales, we expect organic growth in the quarter, around 6%.

By segment, we expect cardiovascular to grow 5% to 6%, neuroscience, 6% to 7%, and both medical-surgical, and diabetes to be flat to up 1%, all on an organic basis. Excluding ventilator sales, medical-surgical is expected to grow 8% to 9%. We expect EPS between $1.28 and $1.30 with a current tailwind of about $0.04 at recent rates.

As previously mentioned, we do believe the near-term COVID impact on our business will be relatively less severe than prior waves, given hospital preparedness and increasing vaccination rates around the globe. That said to be conservative, our guidance does not assume that procedures canceled in the near term will be rescheduled.

So to the extent, those procedures are simply delayed, that should be an upside. We are confident as ever in the strength of our underlying business, our execution, and the impact of our new products. We saw that in the first quarter.

And as we move past the current impact of COVID, we feel really good about the underlying strength for the rest of the year. Before I send it back to Geoff, I'd like to step back and acknowledge how much our employees have accomplished over the last year since the pandemic started.

And our results this past quarter reflect that unwavering focus by our global team to drive our business and fulfill our mission. And for that, I'm incredibly proud. Back to you, Geoff..

Okay. Thanks, Karen. Next, I'd like to cover a few ESG related topics. Inclusion, diversity, and equity, as well as product quality. First, inclusion, diversity, and equity something that is personally important to me and important to our success at Medtronic.

Now, we best fulfill our mission when we have a workplace for ID&E for all of our employees is championed. While we know there's much more to be done, we've made a lot of progress here, and this is being recognized by others. I mentioned our Diversity Inc.

award last quarter, and we were recently recognized by several other organizations for the innovative and inclusive work environment. We were named as one of Fast Company's best workplaces for innovators in 2021.

As the best place to work for disability inclusion by the Disability Equality Index, and we were one of the 15 Companies awarded the secretary of defense Freedom Award, for our efforts to support our military and veteran employees. Next, I wanna emphasize our continued focus on product quality.

Striving without reserve for the greatest possible reliability and quality in our products is a key tenant of the Medtronic Mission and core to our commitment to improving the outcomes for patients. In fact, there is nothing more important than patient safety. In Q1, we made the decision to stop HVAD sales.

We did this because of a growing body of clinical comparisons indicating that our device had a higher frequency of adverse events than a competitor's product. This decision was consistent with our commitment to patient safety. Importantly, we remain committed to supporting current HVAD patients, their caregivers, and healthcare professionals.

At Medtronic, we have a purpose deeply rooted in our mission. And our employees translate this mission into tangible, day-to-day actions, which in turn create an impact in our society. When I reflect on product quality in IDE, we've made progress, but there's always room for improvement.

One step is ensuring that we have the right incentives in place to drive the actions that will elevate our impact. Our board and executive leadership have been evaluating our annual incentive plans.

And as a result of this, we're planning to further strengthen our existing quality metrics, and we intend to introduce new IDE metrics into our incentive plans. These will help guide our plans and drive our work on a daily basis and ultimately hold us accountable to translate our actions into even greater impact.

For those of you that would like to learn more about our ESG efforts underway at Medtronic, I encourage you to save the date to virtually attend our first-ever ESG Investor and Analyst Event, which we're planning to broadcast on Wednesday, October 13.

You're going to hear from leaders from across Medtronic covering important topics including inclusion, diversity, and equity, and product quality and safety. And I'll close by noting that we are on track to accelerate our revenue growth. We're executing on our pipeline. And we're winning share in the marketplace with our leading technology.

And we have some really big opportunities ahead of us with near-term milestones in both renewed innovation and surgical robotics businesses.

And the energy across the organization is palpable as we operate under a new model and instill our new cultural traits, including acting boldly, competing to win, moving with speed and decisiveness in everything that we do, and getting results and getting them the right way. And to our employees, many of whom I'm sure are watching today, thank you.

I truly appreciate your efforts to deliver these results. Look, these are exciting times and I'm really looking forward to all that we're going to accomplish over the coming months. Momentum is building and we're creating value and there is a lot more to come. With that now let's move to Q&A.

Now we're going to try to get to as many analysts as possible, so we ask that you limit yourself to just one question. If you have additional questions, you can reach out to Ryan and the investor relations team after the call.

With that, Francesca, can you please give the instructions for asking a question?.

[Operator Instructions]. Lastly, please be advised that this Q&A session is being recorded.

For today's session, Geoff Martha and Karen Parkhill are joined by Sean Salmon, EVP and President of the Cardiovascular Portfolio and the Diabetes Operating Unit, Bob White, EVP and President of the Medical-Surgical portfolio, and Brett Wall, EVP and President of the neuroscience portfolio. We will pause for a minute to assemble the queue.

We'll take the first question from Bob Hopkins from BofA Global Research. Bob, please go ahead..

Okay. Thank you and thanks for taking the question.

Just as a technology check here, can you hear me okay?.

Yeah, sure, we can hear you. We can hear you just fine, Bob..

Excellent. Thanks, Geoff, and congrats on a good start to your fiscal year. I guess since we're limiting it to one question, I'll ask something a little bit more short-term-oriented.

And that is that you guys mentioned that at the end of July you started to see a little bit of a slowdown, I'm just curious, is that slowdown stabilized at this point, or are things still getting worse? And if you could give us a sense of what you're seeing geographically, especially in China, that would be appreciated too.

So just want to get a sense of where the things have stabilized relative to what you saw start to happen at the end of July. Thank you..

Hi, Bob. It's Karen and thanks for the question. So the slowdown that we started to see the last couple of weeks in July has continued into August. And we do expect the delta variant to impact us, particularly in the U.S. or this quarter.

And particularly in certain of our businesses in cardiovascular and neuroscience, really those businesses that are impacted by deferrable procedures like in cardiac diagnostics, ICDs, pain stems, Spine, and also in those businesses that require ICU bed capacity for the procedure, like in TAVR.

That said we expect this delta variant to -- to infection rates to peak probably in late August to early September and hospital and ICU capacity to improve a few weeks after that. And so by the time we exit our Second Quarter, we expect procedures to be back to more normal, but we've reflected all of this in our guidance for the Second Quarter.

And we're really bullish about the underlying strength of our business, not just in the Second Quarter, but -- but in the back half and the full year ahead..

In China?.

You asked about China. Look, Bob, we're seeing alluded impact so far in China, much less so than in the prior waves. I mean, they're pretty aggressive, when they see a COVID case, they can isolate that geographic area and they do reduce mobility via consumer mobility if you will, but they've kept the hospitals open.

And I think they handled it pretty well. So we've seen limited impact so far in China..

Great. Thank you..

Thanks, Bob. Next question, please, Francesca..

We'll take the next question from Robbie Marcus, from JPMorgan. Robbie, please go ahead..

Great. Thanks for taking the question. Congrats had a good quarter. Maybe just a follow-up on the last question, a little bit here. Karen, I know you don't give quarterly guidance, but I just want to make sure the [Indiscernible] appropriately factoring in your comments. We're a little shy of 8.2 billion in sales for consensus and $1.35 for fiscal Q2.

Maybe just help us gauge if that's an appropriate place to be giving your comments on the COVID impact and any other cadence through the rest of the year, you will be willing to point us to. Thanks a lot..

Thanks, Robbie. So for the Second Quarter with The impact of the delta variant, we're expecting growth of around 4%, as we mentioned. That includes what we estimate to be about 150 basis points impact from COVID, so -- so stronger underlying growth outside of COVID.

And I would also remind you that we've got ventilators coming down off of our peak in the Second Quarter last year. That's another about 200 basis points headwind. And then with our decision to no longer sell on distributing LVADs in our MCS business. That's another about 50 basis points headwind.

So the true underlying strength when you take out COVID or the impact of events And MCS is around 8% for the quarter. In terms of EPS, we're guiding for the quarter $1.28 to $1.30, which includes a currency tailwind of about $0.04. And if we think about the rest of the year, we'll give Q3 guidance on our Q2 earnings call.

But I would keep in mind that you can expect our investment to step up over the next coming quarters, really as we progress towards these important new product launches. Hopefully, that's helpful..

Yeah. Thanks, Karen..

Thanks, Robbie, next question, please, Francesca..

We'll take the next question from Matt Taylor from UBS Equities. Matt, please go ahead..

Hi. Good morning and a good start to the year.

Can you hear me okay?.

Sure. Matt. Yeah, we can..

Okay. I just wanted to ask you for some more color on the progression through the quarter. And the reason for the question in that way, is I want to understand how things were coming back as a proxy for how they could come back again after the delta variant passes.

So can you give us any color on how strong things got in July before you saw the impact or help us understand what the impact was in the second half of July?.

We were working through the prior waves of backlog fairly quickly and we continue to see improvement from our last earnings call. we had -- May was better than April. June is better than May. July is better than June. And it wasn't until the last few weeks of the month that we started to see the pullback.

And again, it was -- it's isolated to where we're feeling is more in developed countries, the U.S. being a big one, Japan, Australia, New Zealand, and -- and just use U.S. example. It's really limited to the areas geographically in the U.S. where you have lower vaccination rates. It's that simple.

And where you have higher vaccination rates, we're not seeing it. The other thing that is -- if you look at a Venn diagram of the concentric circle it's those geographies and then the procedures that we're seeing are just like we saw in the first wave.

The ones that slowed down first as either the more highly electable ones like pain stim or Spine or ICDs, or in our world cardiac diagnostics, those are more elective, I would say or and I would say is procedures that require an ICU stay like a TAVR procedure. So those are the ones that we're seeing it, the pullback.

And it's in the regions of the U.S. to use that example, where vaccination rates are lower. And again, hospitals are better equipped. Karen already went through, we think this is going to be peak here at the end of August that the kind of the hospitals, the infection rates if you will, hospitalization rates will trail that by a couple of weeks.

We do think this is shorter-lived and easier managed than the prior waves. So I mean that's been the progression, so it hasn't quite peaked yet. And like I said, we didn't start seeing, I would say, the pullback till the last few weeks in July.

And at that point, we were pretty much back to either 100%, in some cases over 100% of pre-COVID levels in our therapies..

Thanks for the call, I'll leave it there. Thank you..

Thanks, Matt..

Francesca, next question, please..

We'll take the next question from Larry Biegelsen from Wells Fargo Securities. Larry, please go ahead..

Good morning. Thanks for taking the question. For Sean, this quarter, I probably got more questions on Renal Denervation than anything else related to Medtronic.

So I guess my question is, Sean when will you know the interim look is positive? What's your confidence that it'll be positive and if it doesn't end on this interim alone, in this interim look, when will the trial end? And any read-through from that trio trial, which was another unmet trial that showed about a 4 -- 4.5-millimeter mercury difference on ambulatory systolic blood pressure.

Thanks for taking the question, Sean..

Hey Sean, you're on mute..

You hear me now?.

Yeah, we can. You're going strong, but no one could hear you..

I understand. We don't really -- we have no information..

We lost Sean again. This is our fifth earnings call, this is our first technical glitch, so I was feeling pretty good. I'll see if we can get back Sean. There you go. Well, while he's trying to get back on it. Look, he was starting to say there, we really haven't gotten new information since the last call we had with you.

We do anticipate because of the Bayesian trial design and how it's set up that we'll get it. We know we get another interim look here in the fall. And there's the reason for optimism here because part of the denominator going into the trial was the feasibility work that we did and we know what those numbers look like.

And it is part of a -- look is -- we still have existing registries out there. And the body of evidence just continues to build even outside through our registries and other activities going on that leads us to believe that it's positive. But look, this is why we do these trials.

And then the next look that's the question, Sean, I don't know if you're back on Sean, but if this interim look doesn't -- doesn't get to where we need to get to what's the next interim look after the fall here?.

Can you hear me now? Am I back?.

Yeah. Yeah..

It really is dependent on the between-group difference and standard deviation. So we don't have fix date, it will be this time, and that time, it gets there when it gets there. If it puts your mind at ease and all, we had the same situation around with the SURTAVI trial, and remember that. That was also based on design.

It didn't reach its statistical significance on its first interim look, but it did on the second one. And of course, 2-year results were almost identical to that when they finally hold out. So it will just push down, there's still are 3 looks at this but as just said, we're confident we're gonna get there for everything.

But we don't know anything, so until -- until the Events Committee lets us know that we're good to present. So that's our plan, we're going about and we'll go from there. The retro Trio, look, it's good for leverage-positive share and controlled study, and I don't think that patient population for our regiments is so comparable necessarily.

So it really isn't a return..

Thanks, Sean..

Hey, thanks, Larry. Let's take the next question, please. Francesca..

The next question comes from Vijay Kumar from Evercore ISI. VJ Please go ahead..

Hey, guys. Thanks for taking my question. Not based on our solid start to the year. Geoff neither one on the product side, can you remind us of the U.S. timelines for approvals on Hugo, SICD, and diabetes.

And I'm curious now that you're placing Hugo, what has been the early learning so far? Has it been in line with expectations, or perhaps surprised you to the positive there?.

Sure. I'll let just secure Bob on some of the more specifics of Hugo and Sean on the cardiovascular timing there. But I'll just say look, you saw the video and we were just out. The surgeon's feedback has been great. Very excited and look as I talked to the other health systems around the world, there's definitely an appetite. They want us to win here.

So that's a positive sentiment. The demand is high, surgeon feedback initially is strong and we just had our whole leadership team at one of our operational centers here for the robotics business. They have a couple of R&D centers around the world and a large operational center in Connecticut.

Our whole XCOM was there and they just made so much progress. And we're feeling pretty good right now, but I'll let Bob give you more of the specifics..

Thanks, Geoff and VJ, thanks for the question.

We are -- with the first case is behind us really energized by the possibility that Hugo is going to bring to us, and let's just say that the surgeon and your staff who've experienced Hugo has been super positive, and what they've loved most VJ is really the quarter, what's to our system design, the modularity, the open council, the 3D visualization, the flexibility of the platform and they are really starting to think about ways that they're going to be able to apply the technology to expand robotic-assisted surgery.

And the other thing, VJ I'll share with you touched surgery enterprise.

You'll recall our acquisition of digital surgery a couple of years ago, has been used in all the Hugo cases and the surgeons are really impressed by the analytical capabilities, the benefit to the video stores capabilities, case sharing, and the likes so really excited on the feedback. And then, the first part of your question with respect to U.S.

commercial problems really going to depend on the time to complete the clinical trial and the FDA review. And as Geoff mentioned, as he kicked off the session today, we're making really good progress on our EXPAND Uro trial.

We're gaining ethics committee approval working through the IRB, conducting site training, getting clinical study, site activation, and for competitive reasons, I'm not going to go through all the sites. But we're really excited to treat our first patient in the U.S.

So we're feeling good and look, we're on the path to building a multi-billion dollar surgical robotics business, Vijay. So Geoff, back to you..

Thanks. I think Vijay had a question on the ICD, Sean.

I think it was the timing of the approval there, I believe Vijay?.

So Vijay, we [Indiscernible] mark this quarter, the [Indiscernible] for the U.S. approval is currently enrolling. We think that we should see the mark sometime in the first half of calendar year '22, and it will be approximately a year later..

Thank you, Vijay. Let's go to the next question, please, Francesca..

Okay the next question comes from Travis Steed from Barclays. Travis, please go ahead..

Hi. Good morning and congrats on a good start to the year.

I did have another question on the Renal Denervation and -- and thinking about the adoption curve if the data -- look something like the pulse study is what's the process to get payors onboard? How do -- how do you build the referral channel and how quickly could -- could revenue ramp and if you think about the MCIT, the -- the delay there, do you actually need that to get to that $1 billion RDN market size in 2026?.

Yes, sure I know. Sean, speak up..

Sure, Thanks, Geoff. Thanks for the question. You're right that reimbursement is the most important thing we have to get right in a few things.

We have already set approvals in CE Mark countries right now and we have now the European society of cardiology is of high potential, put out a statement in July, recommending already in this part of the treatment paradigm, that kind of things as guidelines, recommendations, society recommendations important for payer sneaker considerations.

In the U.S. your right will be the best way to get the coverage approved. That has been delayed by the change in administration that's under review right now.

Or if I'm really would be whether or not [Indiscernible] gives you the coverage that we just go the same way we do it then maybe other therapy we are building it pair by pair [Indiscernible] geography including the U.S.. You having [Indiscernible] the payment and coating and next steps.

So there's a good proportion of the patients that are going to be commercial insurance anyway. And we've been doing that work and it was part of the reason why we bought out their clinical trials trial strategy the way we did, showing patients on medications.

So, it is going to be in the commercial world, payer by payer and it's going to be for Medicare. Will get [Indiscernible] rolling. We'll have covered, by the way, we work those payment coating there. But it's hard to handicap how fast the ramp goes because we don't have clarity on that last point..

Okay, thank you, Travis. Let's Go to the next question, please, Francesca..

We'll take the next question from Josh Jennings from Cowen and Company. Josh, please go ahead..

Hi. Good morning. Thanks for taking the questions.

Maybe a question for Sean on the TAVR franchise and just interested to hear, sorry multipart question, but interested to hear about how the marketing efforts and the -- the data that's coming out on patient -- precedent patient mismatch because where we are like technique, bringing the pacemaker rate down, then we launching that book on FX here in the U.S., expectations for -- for shared gains in the U.S.

and then maybe any updates on the timing of low-risk reimbursement in Japan and any high level of views on Medtronic's for us in China getting a share on market size and just timelines there for Medtronic's TAVR franchise. Thanks for taking the question..

Yes. Sure. So we have picked up share in the U.S. as well as in Europe recently. And I think that customer overlap, lowering the pacemaker rate, and increase the predictability of procedures have been barely really helpful. In Europe, we've launched the PRO+ just recently. We got also approval, as you know, in Japan for the low-risk indication.

Typically, it's about a quarter before our reimbursement gets in line with that. And then, of course, China is an opportunity for us. We've been working on local clinical strategy there, and we have good progress going. There's a lot of -- more solution.

Now for -- China is a little bit of a nascent market yet for converts, it's still under a good growth curve but it's restricted to just a few centers within a very big city at this point in time. I will really be -- -- the penetration into low risk everywhere, typically nine states continue to be the biggest growth driver.

And of course, as we expanded to Asia, Matt pace in future analysis going, everything's looking pretty in Southern but for the COVID challenges are -- that happened because of the concentrated nature of our business in a short line, Feeling really good about where we are pipeline, FX is been -- really big improvement in the predictability of we do.

That's one of the biggest [Indiscernible] for people to learn, that come up on expandable, that stability implant, and market bounds lines, it's exactly where's it's being placed [Indiscernible] to the new implant, a technique to spend really a home run for us..

Thank you, Josh. Next, let's go to the line of Anthony Petrone from Jefferies. Anthony, please go ahead..

Great, thanks. 2 quick points here.

Just on the commentary on this procedure volumes, tracking either at 100% or slightly above certain in categories until they get expectedly bring through there at the midpoint in August that were once again at some discount to 100%, if so where is that settling, And then just on diabetes a few quick follow-ups to Vijay.

780G launch in Europe, is that still on track second half? And then the 780G clearance as well as ICGM designation for standalone sensors. Is that still expected in the second half? Thanks..

I'll let Sean answer the diabetes questions, but on the procedure volumes, as we said, we believe the cases, if you will, COVID cases peak sometime at the end of August, early September, and then hospitalizations lag that by a few weeks. So that would peak in mid-September.

And then we would make up those cases hopefully over the course of the year, but we would go -- start getting back to those pre-COVID levels.

I hope to point out that our guidance does not assume that we make up these cases, but that is a possibility here given -- how quickly we recovered the cases during the other prior waves that were much worse than we anticipate the delta variant being. But that's on the procedure volumes.

Diabetes, you mentioned 70 G and Europe, which is already approved so I don't know if you meant to say the U.S. but in Europe, the 780G is on the market and doing really well.

And that's -- we're optimistic because we're seeing the performance in Europe in the best time and range of any comp, and the user feedback and the physician feedback have been off the charts positive. So excited about that, but you had a few other questions there about ICGM and maybe I'm assuming maybe your question was 780G in the U.S.

though, maybe Sean (ph), you want to take those?.

Thanks, Geoff (ph). The combination of seven 780G with sense as a required confirmation or non - adjunctive has been filed with the U.S., and we're seeing really good interactive back-and-forth reduced sense.

That's really good, but that's Europe launch right in the second quarter where you have no fingersticks sensor mix and where infusion set and 780G, that's really a nice combination. Of course, we love to bring that to the U.S. as soon as possible. But things are on track as far as we can tell.

As you may know in that division FDA has been very busy with COVID, so it's hard to handicap exactly when timelines happen. But we do think [Indiscernible] making good progress in [Indiscernible].

Thanks, Anthony. Let's go next to Matt Miksic from Credit Suisse. Matt, please go ahead..

Hi, thanks so much. So just a follow-up on some of the comments you made on sort of the COVID pressure in the U.S.

and elsewhere if you could maybe give some additional color around what the strengths and weaknesses look like regionally, whether you're seeing so far any indication I know bed availability and capacity is one element, and of course, patient sentiments, willingness to get cases done is another.

So wondering if you're seeing anything, so there appreciate the additional color..

Thanks, Matt for the question. So in terms of regionally, the impact that we're seeing is mostly in the U.S. and we've talked about that. We do have Japan and certain countries in Asia-Pacific like Australia, New Zealand, and Vietnam being impacted because lockdowns are still in place there. In Europe, we're seeing the impact in the UK.

And in Latin America, we're not seeing a big impact on the Delta variant at this point. So hopefully that's helpful. In terms of patient sentiment and the impact around capacity availability, we do expect this impact to be short-lived.

And really it's because hospitals are better equipped as Geoff talked about, vaccination rates are increasing around the world. And the patient sentiment is understanding that we need to have life go on with the COVID variant. And so we're seeing that.

And so we do expect a recovery here to be faster, certainly than it was in the first wave and even in the second wave..

On patient sentiment, I would say it's much better than it was a year ago. There were a lot of unknowns. There was no vaccination. I think you're seeing a lot of people that have a concern have gotten vaccinated and there are others that have not that have a different viewpoint on the virus.

And but all-in-all, patient sentiments are in a much better spot. And as Karen pointed out, hospitals are much better equipped..

Okay. Thanks, Matt. Francesca, let's take the next question, please..

We'll take the next question from Jayson Bedford, from Raymond James. Jason, please go ahead..

Good morning. The question perhaps for -- for Karen on our margin. Are you still expecting a 400 million negative -- $400 million negative impacts to our margin for the year of the investments in Hugo and RDN? How much of that was realized in 1Q and then just on 2Q, up margin looks like it's in that 25.5-- 26.5 to 27% range, is that fair? Thanks..

Thanks for the question, Jason. We are still expecting strong investment against those already in and the robot. And yes, a $409 million impact to the operating margin for the year from those two very important programs which represent what we believe to be the largest opportunity in Med-Tech.

In terms of how much that hit in the first quarter, we expected some ramps and those investments plus others in the first quarter. And we didn't see all of those ramps in the first quarter, so we're expecting more in the second quarter just because of the fact that we're hiring lots of people and it takes a little bit of time.

So we are expecting that ramp in the second quarter and in the third quarter beyond that. What I would say on operating margins for the second quarter is that we'll still expect a few 100 points basis points improvements in operating margin for the second quarter.

So despite all of that investment, we still expect very strong year-over-year improvement. Okay. Thanks, Jason (ph). We have time for one more question.

Can we take that, please, Francesca?.

We'll take that final question from Danielle Antalffy from SVB Leerink. Danielle, please go ahead..

Thank you, everyone, so much for squeezing me in, and congrats on the start to the fiscal year. Just a question on M&A strategy. Congrats on the interest FX deal, this makes a tonne of strategic sense. I guess just at a high level of is that how we should be thinking about the approach to M&A going forward.

More on this sort of if you could comment on where -- now that intersects are in the fold, where else we should be thinking about Medtronic looking to fill gaps. Thank you so much..

Thanks for the comments and the question Danielle (ph). The tuck-in strategy is definitely the one that we're focused on. And it's been consistent with what we've been doing over the last couple of quarters. I think we've done 7 deals over the last 1.5 years or so for about $2.3 billion.

This one is roughly a billion dollars, this is the kind of deal I would expect from us. This one happens to be earnings neutral in the first 12 months and accretive thereafter. It's accretive to our average market growth rate at the segment with any ENTs growing in the mid-teens. And the returns are strong.

Well, well above our weighted average cost of capital. These are the kind of deals we -- that we would like to see. They are in areas that we're strong. So the -- ENT is one of our stronger businesses, Karen pointed out in her opening remarks.

In terms of where to look beyond, I mean that's tough to forecast, I'd say this we're -- we are looking it at all of our different operating units and the different segments that they serve. We spent a lot of time and resources looking at different opportunities and engaging different companies.

Yes, we've got opportunities across the portfolio and it's difficult to predict where the next one, next one will be, but it will -- we're still very focused on this tuck-in strategy. And I'd like to say that we're not buying growth here. We're growing what we buy, we buy these earlier stage companies.

And there tends to be a lot of synergies that drive, that drive growth, whether it be technical or clinical, or a big one would be commercial, especially outside the U.S. since a lot of these companies tend to be U.S. based, these startups.

That's how I'd answer that, and hopefully, we can continue to keep this going because it does add to our weighted average market growth rate.

Okay, thanks, Danielle. Geoff, please go ahead with your closing remarks..

Okay. I will. And thanks to everybody for the questions and we definitely appreciate your support and your continued interest in Medtronic. And look, I hope you all join us for our Q2 earnings webcast, which we anticipate holding on November 23rd, where we will update you on our continued progress here. So with that, thanks for watching today.

Hope you enjoyed it, the drumline is back. Please stay healthy and safe. And have a great rest of your day. Thank you..