Medtronic Reports $8.1B in Q3 Revenue, Exits Ventilator Business and Announces Key Executive Departure

Source: Siyu MedTech; Editor: Liu Xinyi

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On February 20, 2024, Medtronic (NYSE: MDT) announced its third-quarter financial report for the fiscal year 2024, which ended on January 26. The report showed that the companyQuarterly revenue was $8.1 billion (approximately 58.2 billion RMB), a year-over-year increase of 4.7%.；Quarterly net profit was $1.34 billion, an 8.8% increase year-over-year.。

At the same time as the financial report was announced, Medtronic also announced two major pieces of news: one isTerminate Ventilator Business, secondlyBob White, Executive Vice President and Head of the Medical Surgical Division, Departs.

Coincidentally, just half a month ago, medical giant Philips also announced that it would suspend the sale of certain types of ventilators in the United States. (Review:139.5 Billion Latest Results Released! Recalls, Layoffs, Shutdowns – Is There Any Hope for Philips' Respiratory Business?）

Medtronic CEO Geoff Martha stated:Ventilator Business Losses Continue to Mount Over the Past Year,Its affiliatedPMRI（Patient Monitoring and Respiratory Interventions) Department Q3Revenue of $532 million, a year-on-year increase of 1.9%,Ranked second to last among all the细分 business items listed in the financial reports.。Moreover, the market now prefers ventilators used for treating less severe respiratory issues (low-acuity ventilators).

It is reported that Medtronic had long planned to divest itself of the burden of its ventilator business.

In late October 2022, Medtronic, plc. announced for the first time its plan to spin off the Patient Monitoring and Respiratory Interventions (PMRI) business unit.(Review:Latest! Medtronic Officially Announces Business Split）。

It was expected at the time that the spin-off business would be sold to another company.GE Healthcare, ICU Medical, and other medical technology companies, as well as private equity firm The Carlyle Group, have all demonstratedInterest in acquisitions (Review:Latest! Medtronic Spin-off Business Welcomes New Buyer?）。

Medtronic chose to spin off and sell its business at the time.Mainly because sales in this sector are slowing down.: The respiratory intervention business has declined due to supply chain shortages and reduced demand for ventilators after the peak of the COVID-19 pandemic, while the patient monitoring business has been hit by a decrease in pulse oximeter sales, once again becoming a victim of pandemic-driven demand.

However, this time, taking advantage of the release of its financial report, Medtronic officially announced thatTerminate the ventilator product line, which belongs toPMRIThe remaining part of the business will be renamed "Acute Care and Monitoring (ACM)" department.。

In response, Medtronic stated in its financial report: "Exiting the increasingly unprofitable ventilator product line and merging the remaining business can increase investment in the new ACM division, with a focus on profitable growth."

CEO Martha addedIndication: After exiting the ventilator business, Medtronic can invest more in patient monitoring to maintain its competitiveness against Masimo. Meanwhile, the company can focus more on innovation using data and artificial intelligence.

So, why was only the ventilator product line suspended, instead of following the original plan to...What about selling the Patient Monitoring and Respiratory Interventions division?

The financial report data may be able to explain a little: In the third quarter of the 2024 fiscal year, PMRI's subordinate"Patient Monitoring" business achieved mid-single-digit growth., whereinThe Growth of Nellcor™ Pulse Oximetry Monitors inMore than 20%. Can Medtronic afford to sell such a promising prospect?Of course not.

Moreover, Medtronic stated that it would continue to fulfill existing ventilator contracts to meet the needs of its customers and their patients, and expects the current manufacturers, who hold the majority of the market share, to satisfy customer demands for new ventilators.

Overall, Medtronic'sThis move demonstrates a firm commitment to focusing on profitability.In January this year, Medtronic also announced that the company would close at least five manufacturing sites this year. It would also consolidate eight distribution centers into two super distribution centers and cease business with approximately 200 suppliers to improve operations and the supply chain.

The departure of Bob White, Executive Vice President and head of the Medical Surgical division, appears to be clearly linked to changes in business restructuring, especially since the subsidiary department being reorganized is precisely under the Medical Surgical division.

Medtronic's quarterly revenue is$8.1 billion (Approximately RMB 58.2 billion), an increase of 4.7% year-on-year；Quarterly net profit was $1.34 billion (approximately 9.6 billion RMB), an increase of 8.8% year-on-year., the results were higher than Wall Street's expectations.

By region, Medtronic's business is divided intoU.S. Market、Non-U.S. Developed MarketsAndEmerging MarketsThree major parts, includingFastest Growth in Emerging Markets(9.0%, $1.5 billion), followed by non-U.S. developed markets (7.8%, $2.47 billion) and the U.S. market (1.4%, $4.12 billion).

By department, Medtronic's business is divided intoCardiovascular、Neuroscience、Medical SurgeryAndDiabetesAll four segments, all four businesses achieved positive growth, among whichThe growth in the diabetes business was the most significant.(12.3%, $6.4 billion); followed by cardiovascular (6.1%, $29.3 billion); neuroscience (4.3%, $23.6 billion), and medical surgery (3.9%, $21.5 billion).

Next, let's take a look at the detailed situation of the four major businesses.

(1) The Slowest-Growing Business: Medical Surgical (the business department to which ventilators belong)

This Quarter MedtronicIncreaseGrows the SlowestQuarterly Revenue of Medical Surgical Business$2.15 billion, year-on-year growth3.9%；

It is subdivided into two departments: Surgical and Endoscopic (SE) and Patient Monitoring and Respiratory Interventions (PMRI).

• PMRI：Total revenue of $5.32 billion, a year-over-year increase of 1.9%,Ranked second to last among all the细分 business items listed in the financial reports.；HoweverNellcor™ Pulse OximetryThe monitor performed brilliantly,Growth exceeding 20%;Respiratory interventions saw a decline in the single digits, with airway business growing at a low single-digit rate, and ventilator sales performing poorly.。

• SE: General surgical technology achieves mid-single-digit growth, with strong performance in wound care and hernia products; advanced surgical technology achieves low-single-digit growth; endoscopy achieves mid-single-digit growth;

This Quarter MedtronicThe Fastest Growing Diabetes BusinessOnce fell into a long-term困境 due to a warning letter from the FDA.

In December 2021, the FDA noted that Medtronic's MiniMed 600 Series insulin pumps had been reported to have issues thousands of times. However, Medtronic did not appropriately classify the risks to patients nor initiate a recall, resulting in the issuance of a warning letter.

Since then, Medtronic's commercialization process for diabetes-related products in the U.S. has been almost completely halted, and its diabetes business has largely relied on the international market.

By April 2023, Medtronic announced that the FDA had lifted the warning letter related to its diabetes business headquarters, and the diabetes business began to recover.

This quarter, the diabetes business reported mainly as follows:

• The growth in the U.S. market was primarily driven by the ongoing launch of the MiniMed™ 780G system and the more than 40% high growth in insulin pumps, with a continuously increasing customer base for insulin pumps on a quarter-over-quarter basis.

• Growth in developed markets outside the U.S. is driven by the continued adoption of the MiniMed™ 780G system and the increased usage rate of CGM devices combined with insulin pump systems.

• The MiniMed™ 780G system with Simplera Sync™ CGM has received CE certification and is expected to have a limited release in Europe in spring 2024, followed by a phased commercial launch across Europe in summer 2024.

Medtronic's cardiovascular business isThe Current Largest Business, The business quarterly revenue$2.93 billion, year-on-year growth6.1%；

The cardiovascular business is divided into three major departments: Cardiac Rhythm and Heart Failure (CRHF), Structural Heart and Aorta (SHA), and Coronary and Peripheral Vascular (CPV).

• CRHF: High single-digit growth in cardiac pacing therapy drives low single-digit growth in rhythm management, with the Micra™ Transcatheter Pacing System achieving mid-single-digit growth; Cardiac Ablation Solutions achieves low double-digit growth in international markets.

• SHA: Aortic and heart surgeries achieved low double-digit growth; structural heart realized high single-digit growth driven by the adoption of Evolut™ FX, with double-digit growth achieved in Western Europe and Japan;

• CPV: Coronary artery business mainly achieved high single-digit growth due to guide catheters, balloons, and drug-eluting stents; peripheral vascular business achieved mid-single-digit growth, with vascular embolization products achieving low double-digit growth and drug-coated balloons achieving high single-digit growth.

In addition, this quarter, the PulseSelect Pulsed Field Ablation System and the Nitron CryoConsole cryoablation generator received CE certification and FDA approval; the next-generation leadless pacemakers, Micra AV2 and Micra VR2, received CE certification. (Review:First Pulsed Field Ablation System Approved! Medtronic Surpasses Boston Scientific!）

• CST: Core Spine business achieved high single-digit growth globally and in the United States, Biologics achieved mid-single-digit growth globally and in the United States, Neurosurgery business achieved mid-single-digit growth, overall performance benefited from the continued adoption of the company's AiBLE™ ecosystem;

• Neurovascular achieved mid-single-digit growth, with double-digit growth in flow diversion; ENT achieved mid-single-digit growth, driven by the strength of power equipment, single-use consumables, and localized drug-delivery sinus implants; the divestiture of the Pelvic Health product line had a negative impact, but sacral neuromodulation within it achieved mid-single-digit growth, with continued market adoption of the InterStim X™ system.

• NM: Brain modulation achieves low single-digit growth, primarily driven by approximately 15% growth in the Western European market following the launch of the Percept™ RC rechargeable brain stimulator equipped with BrainSense™ technology; Pain Stim maintains low single-digit growth.

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Editor-in-Chief | Zhao Qing Reviewed by | Yi He