Medtronic Exits Ventilator Market Amid Strategic Portfolio Realignment

Medtronic PMRI Department Adjustment: Exiting the Ventilator Business

On February 20 local time, Medtronic released its Q3 earnings report for the fiscal year 2024. At the same time, it announced that Medtronic has decided to exit its ventilator product line, retaining and merging the remaining PMRI business into a new business unit called Acute Care and Monitoring (ACM).

From the business data, Medtronic's ventilator business had already started to decline. In Q3 2024, Medtronic's Patient Monitoring and Respiratory Interventions (PMRI) revenue reached $532 million, a year-on-year increase of 1.9%, ranking second to last in growth rate among all separately listed business segments in the financial report. The weak profitability of ventilators dragged down the PMRI division.

Medtronic Chairman and CEO Geoff Martha mentioned on the Q3 earnings call for fiscal year 2024 that ventilator profitability continues to decline, with market preference shifting towards low-sensitivity ventilators.

In 2022, Medtronic announced plans to spin off its PMRI division, with rumors at the time suggesting that GE Healthcare and ICU Medical were among those interested in acquiring its divested business.

However, in the latest official announcement, the businesses of Medtronic's PMRI division, except for ventilators, have been retained.

Medtronic stated that exiting the increasingly unprofitable ventilator product line and consolidating the remaining business can increase investment in ACM and focus on profitable growth. With increased investment and an improved competitive landscape, the company is strongly committed to driving enduring category leadership in this newly merged business.

Medtronic stated that it will continue to fulfill existing ventilator contracts to meet the needs of its customers and their patients, and expects the majority of the market's existing manufacturers to meet customer demands for new ventilators.

In recent years, the ventilator market has been experiencing unusual changes. Recall incidents have significantly impacted related companies, while industry competitors and emerging players are also shaking up the market landscape.

As of January this year, Philips also confirmed changes in its respiratory business. According to the official announcement, it will cease sales of key products in its respiratory business line, including medical ventilators and home ventilators, in the U.S. Philips Respironics will focus on the sales of consumables and accessories, such as masks, and will no longer sell hospital ventilators, certain home ventilator products, portable and stationary oxygen concentrators, and sleep diagnostic products.

According to QYResearch data, the global ventilator market size is expected to reach USD 7.37 billion by 2029, with a Compound Annual Growth Rate (CAGR) of 12.4% in the coming years. It is reported that the major global ventilator manufacturers include ResMed, Philips Respironics, Fisher & Paykel Healthcare, Weinmann, Dehaier Oxygen Medical Equipment Co., Ltd., Medtronic, Yuyue Medical, Breas Medical, Apex Medical, etc. In 2021, the top five global manufacturers accounted for approximately 92.0% of the market share.

Top 10 Ventilator Manufacturers Ranking and Market Share in the Global Market

(Source: QYResearch)

The world's top 1 medical device company, Medtronic, is accelerating its adjustments.

As a leading company in the global medical device field, Medtronic's performance and business layout have long been highly regarded. This industry giant is also constantly adjusting and reshaping business details to optimize its structure.

Medtronic's latest financial report shows that the company's global revenue in Q3 of the fiscal year 2024 was $8.089 billion, a year-on-year increase of 4.7%, with organic growth of 4.6%. Strong growth in diabetes, core spine, cardiac surgery, structural heart, and cardiac rhythm management, as well as robust growth in international markets, drove the company’s continued growth momentum.

As of January 26, 2024, Medtronic's revenue for the first three quarters of the 2024 fiscal year was $23.775 billion, representing a year-over-year increase of 4.8%.

Medtronic's portfolio includes established market leaders, synergistic businesses, and highest-growth businesses. This quarter, market leaders and synergistic businesses achieved mid-single-digit growth, while the highest-growth businesses achieved high single-digit growth. Medtronic expects the latter to further accelerate its contribution to overall growth in the coming quarters.

By business segment, Medtronic's cardiovascular business is the largest in scale and also growing at a relatively fast rate. This segment includes Cardiac Rhythm and Heart Failure (CRHF), Structural Heart and Aortic (SHA), and Coronary and Peripheral Vascular (CPV). In Q3 2024, revenue reached $2.929 billion, representing a year-over-year increase of 6.1%. Among these, SHA demonstrated the fastest growth with a year-over-year increase of 10.9%.

Specifically, cardiac pacing achieved high single-digit growth. Driven by the launch of the new generation Micra™ AV2 and VR2 devices, the Micra™ leadless pacemaker continued to deliver strong performance with 15% growth. Cardiac ablation solutions achieved an 11% growth in international markets, with growth momentum still primarily driven by cryoablation, while pulsed field ablation products also received FDA approval.

Neuroscience business includes Cranial and Spinal Technologies (CST), Specialty Therapies, and Neuromodulation. The revenue for Q3 2024 was $2.355 billion, representing a year-over-year increase of 4.8%.

Among them, StealthStation™ navigation, O-arm™ imaging, and Mazor™ robotic systems achieved robust double-digit growth, becoming leading indicators for the future growth of the spinal business.

Surgical business includes Surgery and Endoscopy (SE), Patient Monitoring and Respiratory Interventions (PMRI). Revenue for 2024 Q3 was $2.148 billion, a year-over-year increase of 3.9%.

Diabetes business was the fastest-growing segment among the four business units, with revenue of $6.4 billion in 2024 Q3, increasing by 12.3% year-on-year. The MiniMed™780G system continued to deliver outstanding performance.

Among these, the U.S. market achieved mid-single-digit growth, with nearly 50% revenue growth from the insulin pump business making a significant contribution. Medtronic disclosed that its new user base doubled year-over-year, attracting users who inject multiple times a day as well as those using competitor systems.

In addition, Medtronic plans to submit the 780G with Simplera Sync™ to the FDA in the first half of this year. The sensor has received CE certification, is half the size of the existing sensor, and will be released in limited quantities soon.

Overall, the international market is one of the key drivers of Medtronic's revenue growth. According to reports, Medtronic's growth in the U.S. market was 2% in Q3 of 2024; in non-U.S. developed markets, growth reached 6%, including an 8% increase in Western Europe and a 7% rise in Japan; in emerging markets, growth was 10%, with low double-digit growth in China, partly impacted by centralized procurement.

Medtronic CFO Karen Parkhill noted that Medtronic is raising its full-year revenue and earnings per share guidance, with expected organic revenue growth of 4.75-5% for the full year.

With the new round of expansion of cutting-edge technologies and innovative products in the global medical market, as well as the continuous demand in emerging markets, the strong leadership position of leading device companies will continue to stand out. In this process, the transformation and adjustment of the kings of the medical device industry will also enable them to continuously adapt to the ever-changing new market.