07.20.23
Rank: #2 (Last year: #1)
$31.23 Billion
Prior Fiscal: $31.69 Billion
Percentage Change: -1.4%
R&D Expenditure: $2.7B
Best FY23 Quarter: Q4 $8.54B
Latest Quarter: Q4 $8.54B
No. of Employees: 95,000
Global Headquarters: Dublin, Ireland
KEY EXECUTIVES:
Geoff Martha, Chairman & CEO
Karen Parkhill, Exec. VP & Chief Financial Officer
Que Dallara, Exec. VP & President Diabetes Operating Unit
Mike Marinaro, Exec. VP & President, Surgical Operating Unit
Sean Salmon, Exec. VP & President Cardiovascular Portfolio
Brett Wall, Exec. VP & President Neuroscience Portfolio
Bob White, Exec. VP & President Medical Surgical Portfolio
In the 2017 MPO Top Company list, Medtronic usurped the top spot from the leader at that time, J&J, to become the largest medical device manufacturer in the world (by revenue). Fast-forward to this year’s list and readers were greeted by a different company in the lead position—Abbott Laboratories. By a mere $40 million in sales (approximately), the two were separated—seemingly a large amount but not against the backdrop of each firm posting over $31 billion in revenue for their most recent fiscal years.
Had Medtronic enjoyed even a flat financial year, it would have secured the top spot by several hundred million over Abbott. Instead, the company posted a relatively small 1.4% gain over its 2022 total. That, however, was enough to move it into second place. Whether it remains there or retakes the pole position in the next annual list will be revealed in 12 months.
Perhaps it should come as little surprise this is the year Big Blue surrendered its position atop the medtech mountain. Compared to previous fiscal periods, its latest was relatively quiet. M&A activity was less than a typical year, the product announcements seem to be fewer than in past reports, and the biggest news for the company during the financial period involved an announcement that it would streamline its clinical scope with the decision to shed the combined Patient Monitoring and Respiratory Interventions units.
A part of the Medical Surgical unit, the Patient Monitoring and Respiratory Interventions businesses would be spun out into a new company entity (yet to be named), rendering parent Medtronic free to focus its attention on higher-growth markets and revenue acceleration.
The combined businesses would tally anticipated worldwide sales figures in the neighborhood of $2.2 billion, based on the firm’s 2022 fiscal. The units would be equipped with a number of recognizable brands upon which to build its future business. The Patient Monitoring portion includes Nellcor pulse oximetry, Microstream capnography, BIS brain monitoring, INVOS perfusion monitoring, and HealthCast connected care solutions.
The robust portfolio of Respiratory Interventions boasts Puritan Bennett ventilators, Shiley airway portfolio, McGrath MAC video laryngoscopy, DAR breathing systems, as well as PAV+, NIV+, and IE Sync ventilation software solutions.
“We are executing on our portfolio management strategy, taking action to create value for Medtronic and our shareholders. This separation will allow Medtronic to focus our company and our capital on opportunities better aligned with our long-term strategies to accelerate innovation-driven growth, and will position NewCo to unlock value. Independently, NewCo will be a leading connected care company with a compelling leadership position, attractive margins, and potential for growth acceleration with increased investment and dedicated capital allocation,” said Geoff Martha, chairman and CEO of Medtronic. “Looking ahead, we remain focused on active portfolio management with an ongoing process of evaluating potential additions and subtractions to further accelerate Medtronic’s growth over the long-term.”
At the time of the announcement, which was made in October 2022, it was anticipated the separation would be finalized in roughly 12 to 18 months.
While that plan could ultimately be what materializes and the industry will bear witness to the formation of a new multi-billion dollar medtech firm, there could be another pathway for the two businesses. According to a December Bloomberg article, which cited “people familiar with the matter,” Siemens Healthineers and GE HealthCare both expressed interest in acquiring the units. Further, multiple private equity firms have also inquired about the availability of the spun-out segments. It was reported Medtronic was open to such discussions, but nothing has been made public to indicate the original plan was not still in place. If such a sale was to occur, the Bloomberg article put the value of the transaction at around $7 billion.
Such a sale would represent a greater dollar figure than any of the recent M&A moves Medtronic made to bring in firms and technologies in recent years, including those during its latest fiscal. One such deal involved the completion of the Intersect ENT purchase, which was originally announced August 2021. The buy included the firm’s PROPEL and SINUVA sinus implant product lines and technology, intellectual property, and Menlo Park, Calif., facility. At the time of the close, Intersect ENT’s Fiagon brand (which includes the Cube navigation system and VenSure balloon sinus dilation system) was divested to Hemostasis LLC as required by the FTC.
ANALYST INSIGHTS: As anticipated in my comments last year, MDT began to make portfolio moves by announcing the spin-off of its ~$2 billion Respiratory and Monitoring group. This business unit originally came from Covidien. Due to its ventilation products (capital equipment), this market segment was never a good strategic fit for one of the world’s largest disposable medical device companies. Look for a large strategic (e.g., GE, Siemens, Philips) to purchase this business unit. The only question is, “Will it be before or after it is spun out of MDT?”
Medtronic also closed another deal that had similarly been announced during its previous fiscal. Affera, a company that provides cardiac ablation technologies, was brought into the fold. Its portfolio included a cardiac mapping and navigation platform that encompasses a differentiated, fully integrated diagnostic, focal pulsed field and radiofrequency ablation solution. Known as the Affera Prism-1 cardiac mapping and navigation platform, the system was compatible with Medtronic and multiple, competitive therapeutic catheters and technologies.
The deal also added the Sphere-9 cardiac diagnostic and ablation catheter, which enables the rapid creation of detailed electro-anatomical maps and delivers radio frequency and pulsed field cardiac ablation therapies, to Medtronic’s offerings. Additional Affera pipeline products such as the Arc-10 coronary sinus diagnostic catheter and Sphere PVI ablation catheter—a single shot device that delivers pulsed field ablation energy—were also included.
The only new M&A activity announced during the latest fiscal involved a co-promotion agreement with CathWorks, which set the wheels in motion for a possible acquisition. The privately held Israeli firm aims to transform how coronary artery disease is diagnosed and treated. As part of the agreement, Medtronic would invest up to $75 million and immediately begin co-promotion of CathWorks’ FFRangio System in the U.S., Europe, and Japan, where it is commercially available.
As part of a separate agreement, Medtronic will have the option to acquire CathWorks once certain undisclosed milestones are met. CathWorks will also have the right to compel Medtronic to acquire the company if Medtronic chooses not to exercise its option. The acquisition option agreement will expire in July 2027, with an estimated acquisition of up to $585 million and potential undisclosed earn-out payments post-acquisition. Medtronic has held a minority investment in CathWorks since 2018.
That partnership represented just one of several established by Medtronic to help spur revenue streams beyond its own product launches. In May 2022, the organization teamed with DaVita to form an independent kidney care-focused medical device company to enhance the patient treatment experience and improve overall outcomes. With technology expertise from Medtronic and kidney care experience from DaVita, the new entity would be positioned to advance the development of differentiated therapies for patients with kidney failure, including those used within the home.
Mozarc Medical, as it would be named upon its launch in April 2023, would be co-owned by Medtronic and DaVita, each with equal equity stakes, and led by an independent management team. Further, it would operate as an independent company governed by a six-person board of directors composed of two directors each from Medtronic and DaVita, and two independent directors.
“Mozarc Medical’s focus will be on meaningful and innovative kidney health technologies that improve the overall patient experience and increase access to care globally,” Ven Manda, CEO of Mozarc Medical, said upon its launch announcement. “At a time when patient preferences are evolving and in-home kidney care is on the rise, Mozarc Medical is uniquely positioned to better serve patients with kidney disease around the world.”
An exclusive U.S. distribution partnership brought BioIntelliSense into the mix in August 2022. Its BioButton wearable offers up to 1,440 vital signs measurements daily, monitoring patients transitioning from higher to lower acuity settings. The technology is a good fit for Medtronic’s Patient Monitoring business as it gains U.S. hospital and 30-day post-acute hospital home distribution rights to the BioButton. [It will be interesting to see if this moves to the spinout organization when that occurs.] The partnership enables the Medtronic Patient Monitoring business to offer access to a medical grade device that provides continuous vital sign measurements of general care patients in-hospital as well as post-discharge. Terms of the deal were not disclosed.
As stated, many of the M&A and partnership transactions were undertaken presumably to spur revenue growth for Big Blue, which experienced a relatively mediocre year. In fact, the 2020 pandemic year aside, it was the first year-over-year percentage loss for the organization in quite some time. While many of those previous fiscals reported modest, single-digit gains, they were still in the right direction. The latest fiscal’s decrease of 1.4% was not.
Still, the firm’s $31.23 billion in net sales total keeps it in rare territory, as it remains one of only two medtech companies to crack the $30 billion mark (with Abbott joining the club in the 2022 reports). Further, it remains a leader in a number of clinical segments and is unlikely to remain as quiet as it was during its latest fiscal year (relatively speaking).
The company’s largest business segment, Cardiovascular, saw a small 1% bump to tally $11.57 billion for the 12 month period, credited primarily to strong sales of Micra, TAVR, and diagnostics. Within that unit, the Cardiac Rhythm & Heart Failure business led all of the sub-sectors with a sales total of $5.84 billion, reflecting a 1% decrease. Structural Heart & Aortic boasted the largest gain over the prior fiscal with a 10% rise to reach $3.63 billion. Rounding out the trio of businesses within the segment was Coronary & Peripheral Vascular, which shrank by 3% to end at $2.38 billion.
Again, looking to the future, the segment made a number of product announcements seeking to increase market share and revenue streams to achieve future growth.
Within the Medical Surgical segment, unfortunately all aspects saw diminished sales figures. Overall, the unit was down by 8%, which was reflected in a $8.43 billion total. This was primarily blamed on unfavorable currency impact of $454 million, provincial volume-based procurement stapling tenders in China, and a decline in ventilator sales due to the high COVID-19 demand in the prior fiscal. Individually, the two businesses—Surgical Innovations and Respiratory, Gastrointestinal, & Renal—fell 7% and 10% respectively. Surgical Innovations closed its books at $5.66 billion while Respiratory, Gastrointestinal, & Renal dropped to $2.77 billion.
The losses didn’t dissuade the businesses from generating positive news regarding its offerings, however.
The lone product news originating from this segment was with regard to the launch of a Neurovascular Co-Lab Platform. This offering was designed to accelerate urgently needed innovation in stroke care and treatment. The platform is intended to advance technology concepts that have the highest potential to positively impact stroke patients. Through this solution, innovators, entrepreneurs, and physicians gain the ability to collaborate, enhance, and share their breakthrough concepts and products.
$31.23 Billion
Prior Fiscal: $31.69 Billion
Percentage Change: -1.4%
R&D Expenditure: $2.7B
Best FY23 Quarter: Q4 $8.54B
Latest Quarter: Q4 $8.54B
No. of Employees: 95,000
Global Headquarters: Dublin, Ireland
KEY EXECUTIVES:
Geoff Martha, Chairman & CEO
Karen Parkhill, Exec. VP & Chief Financial Officer
Que Dallara, Exec. VP & President Diabetes Operating Unit
Mike Marinaro, Exec. VP & President, Surgical Operating Unit
Sean Salmon, Exec. VP & President Cardiovascular Portfolio
Brett Wall, Exec. VP & President Neuroscience Portfolio
Bob White, Exec. VP & President Medical Surgical Portfolio
In the 2017 MPO Top Company list, Medtronic usurped the top spot from the leader at that time, J&J, to become the largest medical device manufacturer in the world (by revenue). Fast-forward to this year’s list and readers were greeted by a different company in the lead position—Abbott Laboratories. By a mere $40 million in sales (approximately), the two were separated—seemingly a large amount but not against the backdrop of each firm posting over $31 billion in revenue for their most recent fiscal years.
Had Medtronic enjoyed even a flat financial year, it would have secured the top spot by several hundred million over Abbott. Instead, the company posted a relatively small 1.4% gain over its 2022 total. That, however, was enough to move it into second place. Whether it remains there or retakes the pole position in the next annual list will be revealed in 12 months.
Perhaps it should come as little surprise this is the year Big Blue surrendered its position atop the medtech mountain. Compared to previous fiscal periods, its latest was relatively quiet. M&A activity was less than a typical year, the product announcements seem to be fewer than in past reports, and the biggest news for the company during the financial period involved an announcement that it would streamline its clinical scope with the decision to shed the combined Patient Monitoring and Respiratory Interventions units.
A part of the Medical Surgical unit, the Patient Monitoring and Respiratory Interventions businesses would be spun out into a new company entity (yet to be named), rendering parent Medtronic free to focus its attention on higher-growth markets and revenue acceleration.
The combined businesses would tally anticipated worldwide sales figures in the neighborhood of $2.2 billion, based on the firm’s 2022 fiscal. The units would be equipped with a number of recognizable brands upon which to build its future business. The Patient Monitoring portion includes Nellcor pulse oximetry, Microstream capnography, BIS brain monitoring, INVOS perfusion monitoring, and HealthCast connected care solutions.
The robust portfolio of Respiratory Interventions boasts Puritan Bennett ventilators, Shiley airway portfolio, McGrath MAC video laryngoscopy, DAR breathing systems, as well as PAV+, NIV+, and IE Sync ventilation software solutions.
“We are executing on our portfolio management strategy, taking action to create value for Medtronic and our shareholders. This separation will allow Medtronic to focus our company and our capital on opportunities better aligned with our long-term strategies to accelerate innovation-driven growth, and will position NewCo to unlock value. Independently, NewCo will be a leading connected care company with a compelling leadership position, attractive margins, and potential for growth acceleration with increased investment and dedicated capital allocation,” said Geoff Martha, chairman and CEO of Medtronic. “Looking ahead, we remain focused on active portfolio management with an ongoing process of evaluating potential additions and subtractions to further accelerate Medtronic’s growth over the long-term.”
At the time of the announcement, which was made in October 2022, it was anticipated the separation would be finalized in roughly 12 to 18 months.
While that plan could ultimately be what materializes and the industry will bear witness to the formation of a new multi-billion dollar medtech firm, there could be another pathway for the two businesses. According to a December Bloomberg article, which cited “people familiar with the matter,” Siemens Healthineers and GE HealthCare both expressed interest in acquiring the units. Further, multiple private equity firms have also inquired about the availability of the spun-out segments. It was reported Medtronic was open to such discussions, but nothing has been made public to indicate the original plan was not still in place. If such a sale was to occur, the Bloomberg article put the value of the transaction at around $7 billion.
Such a sale would represent a greater dollar figure than any of the recent M&A moves Medtronic made to bring in firms and technologies in recent years, including those during its latest fiscal. One such deal involved the completion of the Intersect ENT purchase, which was originally announced August 2021. The buy included the firm’s PROPEL and SINUVA sinus implant product lines and technology, intellectual property, and Menlo Park, Calif., facility. At the time of the close, Intersect ENT’s Fiagon brand (which includes the Cube navigation system and VenSure balloon sinus dilation system) was divested to Hemostasis LLC as required by the FTC.
ANALYST INSIGHTS: As anticipated in my comments last year, MDT began to make portfolio moves by announcing the spin-off of its ~$2 billion Respiratory and Monitoring group. This business unit originally came from Covidien. Due to its ventilation products (capital equipment), this market segment was never a good strategic fit for one of the world’s largest disposable medical device companies. Look for a large strategic (e.g., GE, Siemens, Philips) to purchase this business unit. The only question is, “Will it be before or after it is spun out of MDT?”
—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors
Medtronic also closed another deal that had similarly been announced during its previous fiscal. Affera, a company that provides cardiac ablation technologies, was brought into the fold. Its portfolio included a cardiac mapping and navigation platform that encompasses a differentiated, fully integrated diagnostic, focal pulsed field and radiofrequency ablation solution. Known as the Affera Prism-1 cardiac mapping and navigation platform, the system was compatible with Medtronic and multiple, competitive therapeutic catheters and technologies.
The deal also added the Sphere-9 cardiac diagnostic and ablation catheter, which enables the rapid creation of detailed electro-anatomical maps and delivers radio frequency and pulsed field cardiac ablation therapies, to Medtronic’s offerings. Additional Affera pipeline products such as the Arc-10 coronary sinus diagnostic catheter and Sphere PVI ablation catheter—a single shot device that delivers pulsed field ablation energy—were also included.
The only new M&A activity announced during the latest fiscal involved a co-promotion agreement with CathWorks, which set the wheels in motion for a possible acquisition. The privately held Israeli firm aims to transform how coronary artery disease is diagnosed and treated. As part of the agreement, Medtronic would invest up to $75 million and immediately begin co-promotion of CathWorks’ FFRangio System in the U.S., Europe, and Japan, where it is commercially available.
As part of a separate agreement, Medtronic will have the option to acquire CathWorks once certain undisclosed milestones are met. CathWorks will also have the right to compel Medtronic to acquire the company if Medtronic chooses not to exercise its option. The acquisition option agreement will expire in July 2027, with an estimated acquisition of up to $585 million and potential undisclosed earn-out payments post-acquisition. Medtronic has held a minority investment in CathWorks since 2018.
That partnership represented just one of several established by Medtronic to help spur revenue streams beyond its own product launches. In May 2022, the organization teamed with DaVita to form an independent kidney care-focused medical device company to enhance the patient treatment experience and improve overall outcomes. With technology expertise from Medtronic and kidney care experience from DaVita, the new entity would be positioned to advance the development of differentiated therapies for patients with kidney failure, including those used within the home.
Mozarc Medical, as it would be named upon its launch in April 2023, would be co-owned by Medtronic and DaVita, each with equal equity stakes, and led by an independent management team. Further, it would operate as an independent company governed by a six-person board of directors composed of two directors each from Medtronic and DaVita, and two independent directors.
“Mozarc Medical’s focus will be on meaningful and innovative kidney health technologies that improve the overall patient experience and increase access to care globally,” Ven Manda, CEO of Mozarc Medical, said upon its launch announcement. “At a time when patient preferences are evolving and in-home kidney care is on the rise, Mozarc Medical is uniquely positioned to better serve patients with kidney disease around the world.”
An exclusive U.S. distribution partnership brought BioIntelliSense into the mix in August 2022. Its BioButton wearable offers up to 1,440 vital signs measurements daily, monitoring patients transitioning from higher to lower acuity settings. The technology is a good fit for Medtronic’s Patient Monitoring business as it gains U.S. hospital and 30-day post-acute hospital home distribution rights to the BioButton. [It will be interesting to see if this moves to the spinout organization when that occurs.] The partnership enables the Medtronic Patient Monitoring business to offer access to a medical grade device that provides continuous vital sign measurements of general care patients in-hospital as well as post-discharge. Terms of the deal were not disclosed.
As stated, many of the M&A and partnership transactions were undertaken presumably to spur revenue growth for Big Blue, which experienced a relatively mediocre year. In fact, the 2020 pandemic year aside, it was the first year-over-year percentage loss for the organization in quite some time. While many of those previous fiscals reported modest, single-digit gains, they were still in the right direction. The latest fiscal’s decrease of 1.4% was not.
Still, the firm’s $31.23 billion in net sales total keeps it in rare territory, as it remains one of only two medtech companies to crack the $30 billion mark (with Abbott joining the club in the 2022 reports). Further, it remains a leader in a number of clinical segments and is unlikely to remain as quiet as it was during its latest fiscal year (relatively speaking).
The company’s largest business segment, Cardiovascular, saw a small 1% bump to tally $11.57 billion for the 12 month period, credited primarily to strong sales of Micra, TAVR, and diagnostics. Within that unit, the Cardiac Rhythm & Heart Failure business led all of the sub-sectors with a sales total of $5.84 billion, reflecting a 1% decrease. Structural Heart & Aortic boasted the largest gain over the prior fiscal with a 10% rise to reach $3.63 billion. Rounding out the trio of businesses within the segment was Coronary & Peripheral Vascular, which shrank by 3% to end at $2.38 billion.
Again, looking to the future, the segment made a number of product announcements seeking to increase market share and revenue streams to achieve future growth.
- FDA approval for the Onyx Frontier drug-eluting stent; used for the treatment of patients with coronary artery disease and designed with an enhanced delivery system.
- FDA clearance for the LINQ II Insertable Cardiac Monitor (ICM) for use in pediatric patients over the age of 2. The system is a small, wireless ICM for patients with abnormal heart rhythms who experience infrequent symptoms including dizziness, palpitations, fainting, and chest pain, thereby requiring long-term monitoring or ongoing management.
- FDA approval for expanded labeling of a cardiac lead (SelectSecure MRI SureScan Model 3830) that taps into the heart’s natural electrical system, giving patients needed therapy while avoiding complications sometimes associated with traditional pacing methods, such as cardiomyopathy
- CE Mark for the Aurora EV-ICD MRI SureScan and Epsila EV MRI SureScan defibrillation lead to treat dangerously fast heart rhythms that can lead to sudden cardiac arrest.
- CE Mark for the Affera Mapping and Ablation System, which includes the Sphere-9 Catheter and the Affera Prism-1 Mapping Software. Together, the full system maps and ablates atrial arrhythmias and provides real-time feedback through its intuitive mapping and navigation software.
- Introduction of a new program called My Insights, exclusively developed for individuals using the MiniMed 770G system. Leveraging the user’s data, My Insights relies on data science to provide personalized tips, trends, and reminders patients can use to help with their diabetes management goals.
- U.S. launch of the Medtronic Extended infusion set—the first and only infusion set labeled for up to seven-day wear, according to the company. An infusion set is tubing that delivers insulin from an insulin pump to the body and typically requires a set change every two to three days.
- FDA approval of the MiniMed 780G system with the Guardian 4 sensor requiring no fingersticks while in SmartGuard technology. The system was developed with meal detection technology, which provides automatic adjustments and corrections to sugar levels every five minutes. It provides insulin to help account for when users occasionally forget to bolus or underestimates the number of carbs in their meal.
- Resolution of an FDA warning letter received at the company’s Diabetes headquarters in Northridge, Calif., in December 2021. The resolution of the warning letter follows ongoing remediation actions from the company and proactive actions to continue to strengthen its quality systems.
Within the Medical Surgical segment, unfortunately all aspects saw diminished sales figures. Overall, the unit was down by 8%, which was reflected in a $8.43 billion total. This was primarily blamed on unfavorable currency impact of $454 million, provincial volume-based procurement stapling tenders in China, and a decline in ventilator sales due to the high COVID-19 demand in the prior fiscal. Individually, the two businesses—Surgical Innovations and Respiratory, Gastrointestinal, & Renal—fell 7% and 10% respectively. Surgical Innovations closed its books at $5.66 billion while Respiratory, Gastrointestinal, & Renal dropped to $2.77 billion.
The losses didn’t dissuade the businesses from generating positive news regarding its offerings, however.
- Cosmo Pharmaceuticals and NVIDIA announced a plan to integrate NVIDIA’s AI technologies into the GI Genius intelligent endoscopy module—an AI-assisted colonoscopy tool to help physicians detect polyps that can lead to colorectal cancer. With the addition of NVIDIA’s Holoscan and IGX technologies, Cosmo also announced it was introducing an Innovation Center website, enabling third-party developers with a cloud-based platform to efficiently train and validate their own AI models with the intent to eventually distribute them through the GI Genius module. GI Genius is marketed worldwide by Medtronic.
- News regarding Medtronic’s robotic surgery system, Hugo, generated multiple headlines. The first patient was enrolled in the company’s Expand URO U.S. clinical trial, a urologic-centric study. Hugo also gained access to new regions as well as expansion approvals. These included a CE Mark for general surgery indication; a Health Canada licence for general laparoscopic surgery indication; and a Ministry of Health, Labor, and Welfare approval for urological and gynecological indications in Japan.
The lone product news originating from this segment was with regard to the launch of a Neurovascular Co-Lab Platform. This offering was designed to accelerate urgently needed innovation in stroke care and treatment. The platform is intended to advance technology concepts that have the highest potential to positively impact stroke patients. Through this solution, innovators, entrepreneurs, and physicians gain the ability to collaborate, enhance, and share their breakthrough concepts and products.