Core Viewpoint - Terumo, a Japanese medtech company, emphasizes the importance of quality in medical devices, particularly in vascular access, highlighting its guidewire as a gold standard in the industry [2][3][4]. Group 1: Company Overview - Terumo is represented by CEO Hikaru Samejima at the JPMorgan Healthcare Conference, marking a significant opportunity for the company to present its vision and innovations [2]. - The company has a long-standing history, with its guidewire being used in the largest number of procedures over the past 40 years, underscoring its reliability and impact on patient recovery [3]. Group 2: Product Significance - The guidewire, while appearing as a simple product, plays a crucial role in medical procedures, significantly influencing patient outcomes [3]. - Terumo's commitment to quality ensures that its medical devices are reliable and effective in daily medical settings, which is essential for patient safety [4].

Terumo Company Conference Call Summary Company Overview - **Company**: Terumo Corporation - **Industry**: Medical Technology (MedTech) - **CEO**: Hikaru Samejima - **Sales**: $7 billion globally with three main business segments: - Cardiac and Vascular - Terumo Medical Care Solutions (TMCS) - Terumo Blood and Cell Technologies (TBCT) [3][4] Key Points and Arguments Business Segments and Growth - **Cardiac and Vascular**: - Revenue from vascular access-related products exceeds 70% [7] - Focus on transforming commoditized devices into high-value offerings [7] - Strong growth in vascular intervention market due to technology advancements [7][8] - **Terumo Medical Care Solutions (TMCS)**: - Emphasis on CDMO (Contract Development and Manufacturing Organization) business, which provides drug administration devices [10] - Aiming for $1 billion in sales by the 2030s, with significant growth potential in self-administered drugs [11][12] - **Terumo Blood and Cell Technologies (TBCT)**: - Focus on plasma collection systems, with rapid growth in the U.S. market [12] - Partnership with CSL for plasma collection centers, expecting continued revenue growth [12][13] Financial Performance and Projections - **Profitability**: - Significant AOP (Adjusted Operating Profit) margin expansion over the last three years, targeting 20% margin for FY 2026 [5][6] - FY 2025 projected revenue growth of 8% and operating profit growth of 24% [5][6] - **Acquisitions**: - Successful track record in M&A, with a disciplined approach focusing on technological excellence, competitive advantage, synergy, financial profile, and cultural fit [13][14] - Recent acquisition of OrganOx, which is expected to maintain high double-digit growth due to its breakthrough technology in organ transplantation [23][24] Market Position and Strategy - **Innovation and R&D**: - Commitment to developing category-leading products and solutions for medical challenges [6][9] - Focus on maintaining robust sales growth and margin expansion through innovation and strategic acquisitions [17][18] - **Regional Strategy**: - U.S. market remains strategically important, with plans to reinforce therapeutic business [33] - Targeting growth in emerging markets like China and India due to increasing medical access [34] Challenges and Risks - **Market Competition**: - Acknowledgment of competitive pressures in the U.S. medtech market [33] - Ongoing evaluation of business performance to identify non-performing segments for potential divestment [20] - **Regulatory Environment**: - Awareness of potential impacts from changes in healthcare policies, such as ACA-enhanced subsidy loss [35] Additional Important Insights - **OrganOx Technology**: - NMP (Normothermic Machine Perfusion) technology is expected to unlock bottlenecks in organ supply, significantly reducing the discard rate of livers [27] - Plans to expand into kidney transplantation by 2030 [30] - **CDMO Market Potential**: - The CDMO market is highly attractive, with a focus on innovative device development and manufacturing capabilities [11][39] - **Long-term Vision**: - Terumo aims to become a global top-tier medtech leader, driven by innovation and a commitment to patient care [17][18]

Financial Data and Key Metrics Changes - The company reported a $10 million pull forward in revenue for Q2, which was a result of shifts in customer demand [4][6] - Sales beat expectations by $2 million, and guidance for CRM and N was raised from low to mid-single digits to mid-single digits [4][8] - The backlog at the end of Q2 was approximately $700 million, consistent with the previous quarter [6][7] Business Line Data and Key Metrics Changes - Cardiac Rhythm Management (CRM) growth was guided to mid-single digits, reflecting a tightening of previous guidance [8][11] - CMV (Cardiac and Vascular) segment growth was approximately 14% in Q1 and normalized to 14% in Q2, with expectations of slower growth in the second half [9][10] - The company anticipates mid-teens growth for CMV this year, indicating a strong year-over-year performance [11] Market Data and Key Metrics Changes - The renal denervation (RDN) market is currently small, estimated at less than $100 million globally, with potential growth to $200 million to $250 million next year [18][19] - The company has good visibility into customer demand, with a rolling 12-month forecast provided by customers [12][13] Company Strategy and Development Direction - The company is focusing on expanding its capabilities in coatings through recent acquisitions, which are expected to enhance customer relationships and upselling opportunities [38][39] - The strategic focus remains on four growth markets: electrophysiology, structural heart, neurovascular, and neuromodulation, which are considered dynamic and attractive [45][51] Management's Comments on Operating Environment and Future Outlook - Management noted no significant changes in demand from customers amid macro volatility [16] - The company is optimistic about returning to pre-COVID gross margins of 31% and operating margins of 18.8% through continuous improvement and operational efficiency [60][61] Other Important Information - The company has no immediate plans for significant capacity expansions but has recently expanded two facilities in Ireland [48] - Pricing is expected to be neutral on average, with 70% of the business under contract [49] Q&A Session Summary Question: What is the thought process behind the guidance? - Management explained that the guidance remains unchanged due to good visibility into order patterns and a consistent backlog [6][8] Question: What are the components driving deceleration in CMV? - Management indicated that variability in product launches and timing of demand are influencing the growth rates [10][11] Question: How is the company addressing capacity for new products? - Management confirmed that they have long-term visibility into customer demand and plan capacity years in advance to avoid constraints [21][22] Question: What is the outlook for the RDN market? - Management sees potential in the RDN market but acknowledges it is currently a small part of the business [18][19] Question: How does the company view the pricing environment? - Management expects pricing to be neutral on average, with opportunities for adjustments in the non-contracted portion of the business [49] Question: What is the company's approach to M&A? - Management emphasized that M&A is strategic, focusing on capabilities that fill gaps, with a responsible approach to valuations [63][64]

Financial Data and Key Metrics Changes - The company reported a $10 million pull forward in revenue for Q2, which was a result of shifts in customer demand profiles [4][5] - The sales beat by $2 million, and the guidance for CRM and N was raised from low to mid-single digits to mid-single digits for the full year [4][5] - The backlog at the end of Q2 remained stable at approximately $700 million, providing good visibility for the next two quarters [5][6] Business Line Data and Key Metrics Changes - Cardiac Rhythm Management (CRM) growth was guided to mid-single digits, with a notable deceleration in CMV growth expected in the second half of the year [7][10] - CMV grew about 14% in Q1 and normalized for pull forward, also grew about 14% in Q2, implying a guidance of 7% for the second half [8][10] - The company expects mid-teens growth for CMV this year, indicating a strong year-over-year performance [10] Market Data and Key Metrics Changes - The renal denervation (RDN) market is currently small, estimated at less than $100 million globally, with potential growth to $200 million to $250 million next year [14][15] - The company sees opportunities in the tricuspid and mitral markets, which are part of the structural heart focus [34][35] Company Strategy and Development Direction - The company is focused on maintaining good visibility into customer demand and has a long-range planning process to ensure capacity meets future growth [18][40] - Recent acquisitions in coatings capabilities are expected to enhance customer relationships and create upselling opportunities [28][29] - The company aims to return to pre-COVID gross margins of 31% and operating margins of 18.8% through continuous improvement and operational efficiency [39][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the underlying strength of the markets they operate in, particularly in electrophysiology, structural heart, neurovascular, and neuromodulation [32] - The pricing environment is expected to be neutral on average, with 70% of the business under contract [33] Other Important Information - The company has a strong pipeline for M&A, with valuations trending lower than in previous years, and continues to seek strategic acquisitions [42][43] - The company is not currently planning any significant capacity expansions but has made recent expansions in Ireland [33] Q&A Session Summary Question: What is the outlook for cardiac rhythm management growth? - The guidance assumes 8% growth in the second half versus 2% in the first half, with new products and customer demand contributing to this acceleration [19] Question: How does the company view the renal denervation market? - The RDN market is seen as having potential tailwinds, with expectations of significant growth in the coming years [14][15] Question: What is the company's strategy regarding M&A? - The company is focused on strategic acquisitions that fill capability gaps and has a responsible approach to valuations [42][43]