Medtronic plc (MDT) Earnings Call Transcript & Summary

All right. I think we're getting ready to get started here. Good morning, everyone. My name is Amit Hazan, the medical technology analyst at Goldman Sachs. And this is Day 1, the beginning of the 42nd Annual Goldman Sachs Healthcare Conference. And I can't think of a better way to kick that off than with the largest med tech company out there, Medtronic. And really excited to have Geoff Martha, President and Chief Executive Officer, with us today to do that. So Geoff, first and foremost, thanks so much for joining us.

No. Thanks, Amit. Thanks for having me. Looking forward to this.

Yes. Me too, absolutely. And I thought what we could do, Geoff, is we'll do the COVID update because I think a lot of folks want to hear about that just given that prominence still out there. And then maybe spend a little bit of time on just on your broader growth strategy for Medtronic, and then we'll dive into everybody's favorite opportunities for you.

So -- but let's start with COVID, and kind of and get that out of the way. It's been very top of mind, I think, especially since last week in med tech, that there was a lot of noise around elective procedures maybe not recovering as fast as folks would have liked, still yet to really figure out what that means. But how much can you say about utilization for you in May and early June versus April? And maybe talk to different categories and regions, of course, but any update you could give would be terrific.

Yes. Look, I'd say just to start off, in summary, I mean, things are for us coming back nicely across the board. But we have like a 2x2 grid here, your regions around the world and your therapies. And regionally, China has been back to normal. United States is coming back very quick and is almost -- I'd say all of our therapies are anywhere from over 100% of pre-pandemic levels to kind of at the low end, 85%. And it's been getting better by month, by week, and we continue to see improvement here. And then you've got Europe, which I just talked to our European team last week in some depth. And like we've been thinking all along, it's going to hit an inflection point like the United States. Once the vaccinations in the United States got to a certain level, we really saw things open up. And we're kind of getting to that point now with Europe. It's a couple of months behind U.S., but it's coming. And then of course the tragedy here is the emerging markets outside of China, with -- where COVID is still a real issue. You hear a lot in the press about India. And I tell you, I'm speaking with our Indian team quite a bit. And other companies and U.S. government around India. And a lot of issues there right now. It's coming down, the cases, but it's going to be a while. And same with like Latin America and other parts of Southeast Asia. So they're on the further end. But for us, that's been manageable because it's not as big. Once you take out China from our emerging markets business, it's something we can manage. But the U.S., which most people are asking about, that has come back quickly. And then you look at the different therapies. And there's really no surprises. I know there was some conversation last week about orthopedics, and I think that was coming from more of the ortho side, hips and knees. And I don't know, we're not in that business, so it's hard for me to comment. But on the spine side, we've seen a pretty good comeback. And I don't -- we don't see any bolus of patients kind of waiting out there. We see them coming back in and getting their procedures. And we definitely have a range of more -- less selective, like stroke and coronary. And then more elective, things like obesity surgery or I guess you can even put spine in that category. And clearly, look, obesity and ENT and a few other things are a little slower to come back, but still coming back quickly. Slower than coronary, but coming back quickly, and they're at that 85% or more of pre-pandemic volumes. So we don't -- in summary, we don't see like a bolus of patients waiting in the wings in our therapies in the United States. I think that was the main comment, that you're going to see later in the year. Now if that happens, we'll be ready for it. But right now, all our conversations with hospitals are helping them support and physician support a pretty rapid recovery in the United States.

Okay. I want to maybe push you a little bit on the backlog comment. If we just take high level, you look at your sales for most of calendar 2020, I mean, you were down about 10%, and that's not going to equate exactly. Everybody gets that. You've got stroke. You've got these other categories that we know are not going to have a backlog. But you do have categories that of patients that would have come in, your sales would have been better, they would have come in, and those are more elective procedures. Those patients are still out there. They're still alive. Why the conservatism on backlog actually potentially helping you on the top line over the coming 12, 18 months?

Yes. I just -- I think, first of all, it's -- the patients waiting out there is contributing, I think, to a more rapid recovery than people had expected. I guess I was commenting on that there's like this huge bolus out there. that 6 months from now, is going to emerge after the summer and have this -- because that was the comments I heard. And that's not something we're seeing. I do think, in certain therapies, you're going to see pretty good growth even relative to kind of pre-pandemic levels. And -- but it's not going to be like wait, wait, wait and then there's a bolus. I think it's going to -- you're going to -- we're going to see some pretty good activity here over the next couple of months across all these elective therapies. And so I don't know if it's conservative than we'll see it come through. But the piece I was really talking about was this big bolus waiting out there in the fall.

Okay. Okay. So let's move on and talk about just your overall strategy at Medtronic, especially since you've gotten there. And in particular, I think the debate that we seem to hear from investors a lot is just about this kind of tug and pull between top line growth and spending initiatives and where that should land and what that means. So I figured -- if we were spending some time on that today. So maybe let's just start with the top line. Let's just talk about, just remind people what your durable kind of aspirational rates of sales growth are, underlying growth perspective kind of in the long-range plan now for you as Medtronic.

So what we talked about at Investor Day was like a 5%-plus top line growth, LRP, and I -- long-range plan. And I would emphasis the plus. And then you have COVID math in there. I mean, it will be higher than we just guided, I think, in 9% for our FY '22. So it's going to be higher because of comps. But like take out the -- go pre-COVID, we're saying 5%-plus LRP with an 8% to 9% or 8%-plus on the EPS side and an over 80% cash conversion. And so that's where we are. And I do think the underlying business that we have is really strong. I mean, even with some of the kind of hits we had to take here lately, like with our MCI -- like our LVAD business, we're still guiding up in our revenues. The underlying business is strong and due to the product pipeline.

Okay. Yes. And so let's talk about that, the pipeline and the R&D priorities. I think that's going to be a key aspect of selling this to investors. And so a lot of the big products that we're going to get to later today that we tend to talk to, I mean, those have been at Medtronic and been investments for quite some time. And I remember Omar used to say, "Medtronic has the best pipeline in its history." I'm still hearing that from you today, which is very encouraging. And we'll get into some of those. But I thought one thing we could spend the time on a little bit before that is, you created early on this concept of the 30 companies, each at a $1 billion. You turned over the P&L to each of them. And so the question I have for you on that is, what kind of R&D is coming out of that so far? What are you excited about that you'll see in the coming years that you're kind of truly tagging to this philosophy? Or is it just too early to ask that question?

Well, it's a little too early if you're going to get into specific products because, as you know, our pipeline takes a little bit time to build, and we just rolled this out here in February. But that being said, what this does, the structure does, is it gives the executive team and the company and myself, the Board of Directors, much more clear line of sight to all of our end markets, a level of transparency. And we've adjusted some of our kind of operating mechanisms and metrics and just to kind of -- emphasizing additional things into what's important, to look at those end markets, to clearly understand the market potential at a granular level, the market growth today and for the next couple of years. The competitive landscape. And then understand our competitive positioning vis-a-vis everything, but in particular, our technology, our product pipeline. And to do that, not at some big group level like cardiovascular, but to do it at a very granular level like low power and cardiac rhythm and -- versus the insertable loop recorder business, and very granular. And with that, I think it's going to give us -- and with this policy of, look, we've got to figure out a way to fully fund our businesses to be very competitive. And that's a subjective assessment, like what's fully funded? But certain businesses that are more PMA products are going to need higher R&D than maybe some 510(k). Some are going to need more investment in growth to compete because the market's growing. So -- but we'd make an assessment. And so out of this, I think you're going to see -- we've been stung by a few blind spots in the past, where a competitor sneaks up on us and goes in through a seam, and -- I don't know. So it gets us in an area we weren't looking. Here, I think you're going to see -- you shouldn't see that. Hopefully not ever, but at least not as much. And you'll see a robust pipeline at that granular level. And we're starting to see that already as businesses are coming up and saying, "Here's where we anticipate some growth and anticipate some problems." And we're addressing that much earlier, both on the playing defense as well as playing offense. So that's -- and the portfolio right now is in great shape, but I think you're going to see it expand. The pipeline get even -- just to continue to grow.

Okay. Okay. So it sounds like more nimble, which is great to hear. So we have -- we kind of rolled that into the recent guidance and R&D for the year, up over 10%. I think when we've looked at your R&D in the past, 7.5% of sales or so. The -- that level would have suggested maybe some underspending if we compared it to a lot of your competitors. And so now you're growing it by 10%. Do you need that as a permanent increase in R&D spend? Is this kind of the new normal for you?

Yes. I mean I think this 10% increase in the baseline, and it gets you, which is over 8% of or sales in R&D. I think that -- I would assume that's the new baseline. I'm looking at this holistically, our R&D budget that shows up on our income statement, but also some of this early stage M&A is an extension of R&D. And when we're looking at -- we look at it holistically. And also some of these deals, like with Blackstone, this is also kind of an incremental R&D. And look, I -- we're seeing a lot of opportunities right now in med tech, given the -- just the advancements in technology and how I think, overall, med tech and Medtronic is more competitive versus other alternatives out there vis-a-vis pharma and other options patients have. And so I could see us -- I definitely see opportunity to spend more on R&D -- or invest more, I would say. But I don't want investors to get confused, that we're saying, "Okay, we're going to do that at the expense of our commitments around the EPS growth." We have room. I think we are -- like this last past year, we took out 3 layers. So for example, on a G&A perspective, we took out 3 layers of the company. And that's helping fund some of this. And I would argue that, that trade-off is well worth it. There was some bureaucracy that we could have -- we can do without. It makes us a more nimble company, anyway. We did it for that reason. We did it for this whole being more nimble. Not for cost, but the cost savings was a side benefit that we put into R&D. And I think we've got more opportunity to continue to create natural leverage between our gross margin line and our operating margin line. And we also have opportunity in our gross margin line. This is why we brought in a new Head of Global Operations and Supply Chain from -- who ran it for Walmart. I think health care, med tech and certainly Medtronic, it has opportunity to run -- from an operational and supply chain perspective, run the company more effectively and more efficiently and create the oxygen in our gross margin line. But all -- as much as possible, I'd like to kind of reinvest, as long as we see the opportunities, to get that top line up and keep it up sustainably. So long answer to your question, but I do think this new level of R&D is where we'll be. And I'd like to, if we can execute on some other natural leverage in our operating margin line and create some oxygen in our gross margin line, I'd like to take it up further, assuming we continue to see the opportunities that we're seeing today.

Yes. No, that's great. And it rolls up a few of my follow-ups that I would have had. So just kind of to consolidate that a little bit and ask the question directly. At the operating margin line, Karen used to talk about this is -- this goes back a few years, admittedly, before you. But she used to talk about 40, 50 basis points of operating margin improvement per year. Are you able to talk to aspirations at the operating margin line for you?

Yes. No, I'm not going to -- I don't want to get into that level of granularity. I mean, we're -- I'm trying to focus people on the EPS growth and keep to those commitments and not make commitments on every line of the income statement so we have some flexibility. But obviously, to get to the EPS, you guys know the math. I mean, there's got to be a certain amount of revenue growth and you need a certain level of margin. So we're not committing Because the timing may not be x amount per year, maybe a little lumpier, as we execute some programs. But it's clearly a goal. And at the very least, what I'd like to do is get back to -- I'd like to get back to our pre-COVID operating margin levels and pre-COVID -- just pre-COVID margin levels, right? So I think there was some concern. There was some of the reaction I got on our earnings calls. Hey, great that you're increasing R&D investment. This is what we like to see, and couple it with some of these tuck-in M&A deals. And that sounds great. But what does that mean for your margins? And I'd say our goal is to get back to our priority -- a priority is to get back to pre-COVID margins. But I'm not committing to expanding them from there. But if we are able to expand them from there, some of that, I'd like to reinvest. But -- so we're not committing to some perpetual kind of margin improvement every year. I just at least want to get back to pre-COVID levels. And I do think there's room to go beyond that, but I think that would be -- some of that would be reinvested back into growth, assuming those opportunities are still there, but I don't see them going away. I see med tech advancing vis-a-vis, like I said, other alternatives. I'll use pharma as an example, where we are now, because of miniaturization, because -- just because there's less invasive. And we get better outcomes than in the past. And things like cryoablation for Afib, we're now first line. Well, we're going to get it -- or we anticipate getting a first-line indication from the FDA based on the data we published -- that was published in the New England Journal of Medicine. Here's an example of what I'm talking about. I could -- neuromodulation, I can see kind of becoming a bigger growth engine as it becomes more effective and less invasive. And these are areas, and I can go on and on, where we can do -- there's a lot of scientific discovery still to be done and a lot of product development to be done.

Okay. So you mentioned Blackstone, maybe one last point there on just the philosophy of the investment. I'm curious, it's been a year or so, roughly speaking, since it was announced. Just give us a sense of how that's gone so far, whatever color you can add. And also how replicable do you think that, that could be in other areas?

Yes. So it's early, but so far so good. I mean, we're -- in Diabetes, we're funding a lot more than maybe we otherwise would have done. Or for example, we're funding a lot more without taxing the rest of the company because I'm not a big believer in saying, "Okay. Business Y. -- business X, like in this case Diabetes, we're going to put a bolus of funding in. And business Y and Z, you 2 businesses need to wait for 2 more years because we've got this commitment to investors." I want to keep that commitment to investors, of the EPS growth, but figure out a way to fund them all in a timely way because you just can't have gaps in your portfolio. And so this helps us do that, and the return on this is better than M&A. It's not as good as if we could do it all 100% organic, but it's better than M&A. And I do think it's replicable. We just funded -- in addition to Diabetes, we funded, accelerated our EV ICD program recently doing with Blackstone. And we're going to file that EV ICD with the FDA this quarter. So it's enabling us to go faster. And so how replicable? We'll see. I mean, the -- and we can look at other investors. These investors have a certain risk profile they're looking for. They have a certain return they're looking for. They have a certain timing of that return. And so we need to get a stable of investors. But I don't want this to be all of R&D like this, just a portion, and I don't know exactly what that will be. But it's definitely replicable and I definitely think it helps us. And again, it's always premised on, I've said it like 5 times now, is that we continue to see the opportunities we're seeing today. I'm just a big believer in going after these -- our end markets are good, they have a lot more potential, to think bigger about them, think and make some investments and hold your teams accountable to delivering on those investments.

So let's spend just a minute talking about the other side of this. Obviously, you can also grow your weighted average market growth by thinking about divestitures. So how do you think about that? What opportunities exist for you in slower markets. Is that at all a focus right now?

It is. It is. And then we've got -- what we've done here is we've created what we call this capital allocation committee of our business leadership, Karen, our CFO. We've got one of our region leaders in there. It's a relatively small group. Our Head of Strategy. And we debate. And we just had like a 2-hour session last night. We -- it's just a couple -- we meet. It's a couple -- it seems like it's a couple of times a month, more frequently, depending on what's going on. And we're debating, number one, on the portfolio of the company. Are we -- do we have the right portfolio? Do we have the right businesses? Do we need to -- if we're going to divest some, which ones would you do and how does that look? And what -- forget about -- beyond tuck-ins, those are big segments that we should get into. But right now -- we did divest our patient supplies business to Cardinal Health in 2017. I think that was like a $6 billion-plus deal. I mean, so we do, do this. I do think it needs to be material to -- divestitures are difficult. It's a lot of work, rather, I should say. And you want to make sure there's some scale to them. And I know when we bought Covidien, we right away thought this patient supplies businesses in Covidien was an opportunity to divest. And I was part of that upfront decision-making. But when it was actually divested, I was in another role. But it's that same philosophy. We got to look at our portfolio, both on what we need to divest. We spend quite a bit of time on that. If you look at your businesses, there's always a bell curve, right? No matter what 10 businesses you have, there's going to be a couple that fit better to your strategy than others, no matter what, and so by definition. So we're looking at what we would say is on the left side of that bell curve and really examining them and having conversations every quarter with the Board as well. So lot of activity. I'm not signaling a deal. But we're not just kind of sitting here saying, "Hey, we're comfortable." We're always going to kind of look and try to increase that [ number ]. Because look, you wake up in the morning, if you're in higher-growth markets, you get a tailwind. Your day is easier when you're in higher-growth markets.

Yes. Yes. Good point. So let's migrate towards the key product opportunities that everybody loves to talk about. And maybe before we get there, we'll stay a little bit higher level and talk about market share. Just obviously an overwhelming commentary from you since you've taken over about share gains in different categories. And quite frankly, sometimes, it's hard to keep up. Sometimes, it's hard to put the numbers together. You're on different reporting time periods. And for those of us trying to do the work on our side, objectively, it's a little bit hard to piece stuff together. So -- but we've heard this from you, and this has come even before your plan to incentivize reps to be paid on this metric potentially. And so what I'm wondering is, what's the magic piece? What has been happening since you took over that is driving these share gains in all of these different categories that you cite?

Well, look, I think that it's been focused. I mean, I do think we are, across more businesses, gaining share than we have over the last, I don't know, 10 years. And I think a big company like ours, you can't have 100 different initiatives. It's a big ship, and you got to be focused if you're going to change the trajectory of that ship, change this direction. So we really focused on market share gain and said, "Look. Make no mistake." And this has been one of the challenges in communicating this internally. A little bit externally, but more internally is, "Look, we're not going away from market development. That's what makes Medtronic special." I mean, a mission-driven company, identifies an unmet need, applies our technology and clinical expertise to come up with a solution for that unmet need; do some feasibility work, health economics work, pivotal data, then we globalize it to be the new standard of care, and then grow that market. That's what Medtronic, I think, separates itself on. However, once we do all that hard work and we've taken all that risk and spent all that money, I want to make sure that we continue to focus on growing those markets and taking share. And when competitors -- so many of our competitors are used to us doing that heavy lifting and then come in right behind us with tighter marketing and a more competitive kind of -- and I'm not just talking about their sales force. It's a more competitive mindset in their company, and they take the share, too much share from us too early, and that just absolutely drives me nuts. And so that's what this is. Is in addition to doing the market development, we've got to be tougher and more focused on market share. So we really hit that message because I think it was a gap. And so that's what's really helping to drive it, plus this granularity, breaking the businesses down to these 20 operating units, and publicly saying, "Here's how you did quarter-over-quarter on your share, and we've got winners and losers." It's green and red. No need for yellow. Green and red. And no one likes to be red, right? And it is difficult to measure sometimes because, just for all the reasons you would think, I mean sometimes, certain companies don't report. unbundle their reporting. It's buried in a bunch of other numbers. It's difficult. So we've really worked hard on this. And I've told our team, "Don't get too caught up in the precision." In some cases, we're very precise. And in some cases, it's more of a triangulation. But we focus on it, we talk about it, we publicize, and now we're going to pay the management on it. Our reps are based on kind of a very heavy leverage on volume, but then the management is based on -- more on share this year, is this new fiscal year. And so it's resulted in, I think, across many of our businesses, a different stance, a different focus, tighter marketing. And you're seeing that play out in some share gains.

Okay. So when you think about categories, there's obviously a lot we could list that you talked to that I think you feel pretty confident you're gaining share. Maybe remind people of the key ones and then speak to the other side, where there's still work to do, and how you think about turning those around.

Well sure. I mean, in terms of the ones that are -- again, I got to start with our Cardiac Rhythm business, right? I mean, it's a big business for us, several billion dollars, how Medtronic was started with the pacemaker, and it's super profitable. And we're -- we think we grew 2 to 3 -- we know we grew 2 to 3 points year-over-year with Micra, our leadless pacemaker and then our new high-power platform, Cobalt and Crome with all the remote capabilities. And that business is just doing -- is just crushing it. And it's up against some really strong competition with a lot of legacy relationships. And we're coming in strong and taking share, and we've got a great pipeline to keep it going. And they can -- so that's our Cardiac Rhythm business as a -- share position is at a share position we haven't seen in over a decade. It's well over 50%. The other one that's really, I think, on the front end of some share -- significant share gains is our Spine and Neurosurgery business. We call it CST now, Cranial & Spinal Technologies. So you got your spine lands and your enabling technology like robotics and navigation. That business, another big one. And with our strategy around this enabling technology, robotics in particular, taking spine from an art to a science, you're seeing that's going to consolidate the market. And we're starting to see the outcomes from that in that we took share year-over-year and sequentially last quarter. Another one would be our Gastrointestinal business, another year-over-year and sequentially, we took share. We got PillCam coming out in different parts of the world. Our ENT business doesn't get a ton of press, but it's very profitable. One of our top 2 or 3 profitable businesses. And it grew another point year-over-year. Pelvic Health, that's a battle with Axonics. It's nice to see a business, like we're over like $700 million or something like that, and that's significantly bigger than Axonics and our only competitor, and we're outgrowing them. Neuromodulation. Here's one, I think, doesn't get nearly enough love. Pain Stim, DBS. We're on the front end of -- especially with DBS, just a multiyear market expansion and share gain with our sensing platform and our new steerable leads, and we just launched this clinical trial to close the loop for DBS for Parkinson's. So you can get personalized therapy by patient. And so these are all some great areas. Where we have work to do -- and we've been investing in these businesses for a while. Where we have work to do is Diabetes. We've talked about that. We made the investment, we continue to make the investment, but it's going to take a couple of years to really get back to full market growth. But we're making steps as we launch our 780G, our extended wear infusion sets, our new sensor. So as a -- from a system perspective, I think we're very competitive. But we're another generation, another sensor generation away, from being competitive on a stand-alone CGM basis. Another one is our Cardiac Diagnostics business, our insertable loop recorder. We got new competition coming in. We've owned that market, and so we've got to fight back that competition. And then TAVR. It bothers me that even though in Europe, we're the share leader. In the U.S., there's a pretty big gap with Edwards. Great competitor. It's a great market. Both Edwards and Medtronic are doing a great job to innovate, create great patient outcomes and expand the market and do it the right way in terms of -- with great clinical evidence. That being said, I don't like the gap between us and Edwards. And I think our technology -- our share is not commensurate with our technology. And so we did gain a little share year-over-year, like 1 point of share last quarter, but I'd like to see that more consistently and start to close that gap. So those 3 areas are areas we're watching for improvement.

Okay. That's a great overview on both sides. Let's talk a little bit about some of these key areas that people like to talk about. The surgical robot, I think, is one we should spend a few minutes on given the proximity to market here. So you give more specific guidance of $50 million to $100 million in revenues for fiscal '22. That, to me, in the first year of a robot launch is certainly not conservative. I certainly hope you make it, but it sounds like it's a target that -- it's a lot to do given your products are not approved yet. So I wanted to talk to you a little bit about that. I wanted to get a sense from you on the launch outside the U.S. and how you expect that to go. We've watched robotics for a long time. And as you said, I think last week, which I totally agree with, this is probably the most complex technology in med tech. So how careful do you have to be in doing this launch? When I said the $50 million to $100 million seems aggressive, it's not that I don't think there's going to be demand, it's more that I'm thinking about that limited launch and what you have to do from your side to control that. So can you talk to that relative to that guidance and how you balance that?

Sure. Look, it's a great question. And it has been -- this is a complicated system. And we're just glad -- we're very pleased that we were able to, despite COVID, which delayed us a little bit here, to get the CE Mark filed as well as the U.S. IDE, get that U.S. IDE trial accepted by the FDA. So we're off and running. And we sold our first few robots outside of those regions in areas like India and Latin America that don't have the same regulatory barriers. But you're right. So the good news here is -- it is very complicated. But the good news here is demand, it's clear to us that demand is not our issue. And I get questions like, "Are you going to go where Intuitive Surgical is not?" Well yes, we'll go -- we'll play our hand in our strength in emerging markets and outside the U.S. where Intuitive isn't as strong. But also right into the heart of their business, these robotic centers, they want -- they're calling us. They want the other technology. Our technology is different. And the features that -- the design choices we've made with the open console, the modular design, the fact that it works with our -- and will work with -- works with our instruments and will work with more of our instruments over time given our huge surgical instrument footprint in surgery. These are very intriguing. And they want these -- and robotics is at the very early stage. The soft tissue robot is like 3% or less penetrated despite how long Intuitive has been at it. And they've done a great job building the market, it's still only less than 3% penetrated. The rest is open and laparoscopic. And so there's a huge opportunity. We're on the front end. These centers in the U.S. and some in Europe, they want both technologies. And so demand won't be our issue. So what we want to do here is launch in a careful way and make sure that we're protecting the experience. And this will be difficult because we've got contract manufacturers. We've got a pretty kind of big supply base, a diverse supply base. And we've got to train physicians, but we've also got to train our own people on the robot and how it works. And our maintenance business, we've got to build up, expand it. We're going to use the same break/fix maintenance sales force or team, field team that we have we've built up for other enabling technologies, like in the spine robot and navigation and imaging. But we're going to build off that. But all this has to happen and create a good user experience. And we will have hiccups. There will be suppliers that let us down. There will be -- as we start to get to scale this, there will be some manufacturing processes that need to be tweaked. And we just want to make sure. That's the big limiting factor here, is to make sure that, that patient experience is good. And we learned this in just the robotics. I mean, the Mazor launch that -- and we bought the company, Mazor, after they launched the Mazor X. And we had to live with it, but there were certain reliability issues as these robots landed in different ORs around the world. And we had to work through those. And so there will be less -- I hope less of that here because we put it through more testing. But certainly, that's what we're protecting, that's the limiting. And so the number does sound like -- $50 million to $100 million in year 1 sounds like -- it does sound a little intimidating, especially when you don't get a CE Mark till the fall, is what we're anticipating and start the Europe launch. But we do think the demand is high enough, and we'll be ready to achieve those numbers.

Okay. Does that guidance contemplate a U.S. approval as well within your fiscal year?

No. No, that's -- we won't get that.

Okay. And outside the U.S., are you limited at all by indications or instruments?

Yes, that's the other factor. I mean, so beyond this, we will be limited by indications. So If you go -- for the CE Mark, it will be first be used in urologic procedures, followed by gynecology. So first will be urologic then gynecology. So that's -- the other limiting factor will be the indication expansion over time.

Okay, okay. Let's touch on Diabetes quickly. I mean, you mentioned it, too. I just get a sense from you on how you're thinking about getting back into -- time frame-wise into stopping share loss on the pump side, if you can talk to that specifically. And then my naive take on all this, I think about the markets in Diabetes, and you've got a market that doesn't grow that much in total. The insulin pen market is interesting, it's going to be competitive. But by far, the biggest market probably over the next 5, 10 years, arguably, is going to be the standalone CGM market. And so when I hear you guys talk, I hear you talk a lot about getting back to defending your share in pumps and tie CGM to that. I don't hear you talk a lot about that opportunity in the standalone CGM market, which to me is, by multiples, much more interesting over the next 5, 10 years. Talk to me a little bit about the defending share and then why not hearing more about stand-alone CGM as an opportunity.

Look, I don't disagree. Standalone CGM is a huge opportunity. It's the faster-growing part of the market. It's becoming really big. Unfortunately, we're behind. We'd fallen behind on that. And we've got our new Guardian Sensor 4 approved in Europe and hopefully will get approved in the U.S. soon. It's hard to predict the FDA right now, especially around diabetes. There -- it's -- they make O'Hare Airport look efficient right now. I mean, they're just backed -- our product approvals are backed up so much in the diabetes area. It's tough. But it's starting. They are actively reviewing our files now and it's getting better. But they've been working their butts off on COVID, and now they're starting to be able to shift some of their attention back to diabetes. But we got the Guardian Sensor 4 out there in Europe. Our next-generation Zeus -- I'm sorry, after that, Synergy, we'll be filing. And that Synergy, We just released data on Guardian Sensor 4 within a closed loop system. It works very well. It measures the highs and lows very accurately and allows for patients who don't bolus to stay in auto mode on our pump and keep those timing ranges. It's pretty phenomenal user feedback we're getting, but it's still not really competitive on a standalone basis. Synergy, which we'll be filing some time in the fall in the U.S., that cuts the size down by half and makes it a lot easier to use. Like the procedure to insert and tape the sensor on as much easier. And -- but it won't be till our next generation beyond Synergy, which we've already -- we've significantly derisked. We're already starting building the manufacturing for. It's a whole new platform. That's when we'll start to get competitive on standalone. And that's well 1 year to 2 years out before you'll start see that. But in the meantime, we're starting to take share. Like in Europe, for example, we have our latest and greatest pumps with CGM. Remember, there is a CGM there, where we make -- and our infusion sets with those consumables where we make a lot of profit. We're starting to take share back with that technology. We did last quarter. And when that gets to the U.S., we expect to take share there. And then you mentioned smart pen. Paired, again, with the sensor, we intend to create a whole new market, a whole new segment there of meaning. And so we'll be very competitive in that standalone -- I'm sorry, smart pen with a sensor, creating that market and growing it rapidly; plus the pump with the sensor, taking share back there. And that's all near term. And then -- and [ Nina ], what is it, is it 2 years? Somewhere in that ballpark, we'll have a [ sense of that ] can compete on a standalone basis. But we'll -- this business will start to grow above the Medtronic average. And over the next couple of years, start to grow at the market average.

Right, Geoff. Well, we are a few minutes over, so we'll have to stop there, unfortunately. I want to thank you again for the time and being part of this conference again. We always love having you. So thank you so much and best of luck to you this coming fiscal year.

Yes. Thanks so much, Amit. I really appreciate it. And thanks, everybody, for tuning in. Appreciate the support and the interest.

Great. Thanks.