May 29, 2024Medtronic Announces issuance of €3 billion (approximately RMB 23.528 billion) in Senior Notes.

This issuance includes €850 million 3.650% senior notes due 2029, €850 million 3.875% senior notes due 2036, €600 million 4.150% senior notes due 2043, and €700 million 4.150% senior notes due 2053.

The company expects to use the proceeds from the issuance for general corporate purposes, including potential debt refinancing and working capital needs. This announcement comes at a time when,Medtronic, plc.'s stock price is $81.49, with a year-to-date performance of -0.66%.The pricing of the priority notes will provide the company with additional financial flexibility to secure funding for future investments and growth opportunities.

This issuance of senior notes demonstrates Medtronic's commitment to strengthening its financial position and capital structure.

Priority Notes are actually a type of corporate bond with priority in liquidation and compensation rights. This debt is secured by corporate assets, characterized by lower risk but also lower returns, and has an issuance cap, usually limited to the scope of the company's fixed assets. For listed companies, issuing bonds can provide more capital for production, and Priority Notes offer the advantages of not having to worry about changes in corporate control and low bond issuance costs.

Goldman Sachs analysts said in a report released on May 30 that Medtronic's competitors are heavily investing in new products to drive growth.By contrast, Medtronic has maintained relatively stable R&D expenditure over the past three years, amounting to approximately US$2.7 billion annually.However, if Medtronic wants to keep up with the competition, it must increase R&D spending, otherwise growth will slow down.

So, in which areas will Medtronic invest the funds obtained from this massive bond issuance?

Triggering the Patent Dispute

From a personnel perspective, Medtronic has recently carried out a round of executive reshuffling.

Senior Vice President and President, Neurovascular Business

On May 28, it was announced that Linnea Burman has been appointed to succeed Dan Volz as Senior Vice President and President of the Neurovascular business, part of the Neuroscience portfolio focused on stroke treatment. Burman will oversee product development, commercial execution, portfolio strategy, and the overall financial performance of the business. Dan Volz has been appointed Senior Vice President of Global Commercial Transformation at Medtronic.

Linnea Burman

Burman previously served as the Vice President and General Manager of Enabling Technologies for Medtronic's Cranial and Spinal Technologies (CST) business. She helped establish CST by driving commercial growth strategies, innovative solutions, and a collaborative culture.

President of Pelvic Health Business

On the same day, it was announced that Emily Elswick, former Vice President of the CEO Office, was appointed President of Medtronic's Pelvic Health Business. She will also serve on the Neuroscience Leadership Team.

Emily has served in global leadership roles in the medical technology and telecommunications industries for over 26 years, including 20 years at Medtronic. She served as Vice President and General Manager of Medtronic's Lung Health and Visualization business, leading a cross-functional global organization focused on developing minimally invasive diagnostic and therapeutic solutions to help improve patient outcomes worldwide.

Both will serve in the neuroscience department.

The Patent War Begins

In February this year, Medtronic also launched a patent war in this field, announcing that it had filed a lawsuit with the US International Trade Commission (ITC),Blocking the sales of certain devices from Axonics, which launched the world’s first long-lasting, small-sized, full-body MRI-compatible rechargeable SNM system Axonics, and urethral bulking agent Bulkamid.

Notably, the company inThe final acquisition agreement with Boston Scientific was just reached on January 8, 2024, at a price of $71 per share, totaling $3.7 billion (approximately 26.2 billion RMB).

Sacral Neuromodulation (SNM) system delivers pulsed electrical stimulation to the sacral nerves (S2~S4) via a sacral nerve stimulator, acting on neural pathways to modulate abnormal sacral nerve reflex arcs, thereby significantly improving voiding/storage and defecation/retention dysfunctions, commonly known as the "bladder pacemaker."

Medtronic's sacral neuromodulation therapy has been applied clinically since 1994, making it the first company to enter this field and establish a dominant position.However, since the launch of Axonics' products,Has gradually captured 27% of the sacral neuromodulation market.

Especially, the battery life of Axonics' fourth-generation product, Axonics R20™, has exceeded 20 years, with the charging frequency reduced to once every 6 to 10 months. Compared with Medtronic's InterStim X™, it is smaller in size and longer in service life.

Medtronic claims that Axonics "unfairly imports and sells products that infringe on two of Medtronic's patents, which are related to MRI compatibility of implantable medical devices."

Medtronic's latest annual report shows that the company's annual revenue increased, but net profit fell. After the financial report was released, the market saw the stock drop by about 5% on May 23.

On May 23, 2024, Medtronic announced its financial performance for the fourth quarter of fiscal year 2024 (ended April 26, 2024) and the full-year results. Revenue for the fourth quarter was $8.6 billion, a year-over-year increase of +0.5%, with organic growth of +5.4%. For fiscal year 2024, total revenue reached $32.364 billion, a year-over-year increase of +3.6%, with net profit at $3.676 billion, a year-over-year decrease of -2.2%.

Cardiovascular Product Portfolio

Including the Cardiac Rhythm and Heart Failure (CRHF), Structural Heart and Aorta (SHA), and Coronary and Peripheral Vascular (CPV) divisions.

Q4 revenue was $3.13 billion, a year-over-year decrease of 5.2%, with organic growth of 4.0%; fiscal year 2024 total revenue was $11.831 billion, a year-over-year increase of 2.7%, with organic growth of 5.0%.

Neuroscience Product Portfolio

Including Cranial and Spinal Technologies (CST), Specialty Therapies, and Neuromodulation divisions.

Revenue in the fourth quarter was $2.545 billion, a year-over-year increase of 5.6%, with organic growth of 6.5%. Revenue for fiscal year 2024 was $9.406 billion, a year-over-year increase of 5.0%, with organic growth of 5.2%.

Medical Surgical Suite

Including Surgical and Endoscopic (SE) as well as Acute Care and Monitoring (ACM) departments.

Revenue in the fourth quarter was $2.198 billion, a year-over-year increase of 3.5%, with organic growth of 4.5%. Revenue for fiscal year 2024 was $8.417 billion, a year-over-year increase of 5.4%, with organic growth of 4.7%.

Diabetes Business

Revenue in the fourth quarter was $6.6 billion, representing a year-over-year increase of 10.9%, with organic revenue growth of 11.1%. Diabetes revenue for fiscal year 24 was $2.488 billion, reflecting a year-over-year increase of 10.0%, with organic growth of 8.6%.

The launch of the MiniMed™ 780G system drove strong growth.

——

As Medtronic's revenue and profits declined from 2022 to 2023, Geoff Martha, Chairman and Chief Executive OfficerThe compensation of Karen Parkhill, Executive Vice President and Chief Financial Officer, decreased year-over-year., the median salary of employees also decreased by 14%, to $67,073 (approximately RMB 490,600).

Medtronic alsoModified its Medtronic Incentive Plan (MIP),Because the senior management failed to meet the financial performance targets and did not receive MIP bonuses.

At the same time, the organization and personnel are continuously streamlined. In January this year, Geoff Martha announcedPlan to close at least five production bases and merge eight distribution centersFor two "super distribution centers." The company disclosed in its recent annual report filed with the U.S. Securities and Exchange Commission,The global number of employees is approximately more than 95,000. In February 2022, this figure was 101,867 employees.

It can be seen that Medtronic may face considerable performance pressure in 2024. So, in which areas will Medtronic invest the funds raised through this large-scale bond issuance? Can it achieve the expected growth? Medical Device News will continue to follow up.

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