Interface News Reporter |
Interface News Editor |Xie Xin
Medtronic Announces Exit from Ventilator Market
On February 20, Medtronic released its financial results for the third quarter of the 2024 fiscal year, reporting global revenue of $8.089 billion, driven by significant growth in demand for cardiovascular and diabetes devices. At the same time, Medtronic announced its decision to discontinue its ventilator product line and merge its two operating units, Patient Monitoring and Respiratory Interventions, into a single operating unit named Acute Care and Monitoring (ACM).
In terms of performance, Medtronic's ventilator sales were less than ideal. In the third quarter of the 2024 fiscal year, Medtronic's PMRI (Patient Monitoring and Respiratory Interventions) results were driven by single-digit growth in patient monitoring, with the Nellcor™ pulse oximeter achieving more than twentyfold growth; respiratory intervention performance decreased by a single-digit percentage, as the low single-digit growth in airway business was offset by the decline in ventilator sales.
Medtronic CEO Geoff Martha mentioned on the earnings call, "The ventilator business is becoming increasingly unprofitable, with further slowdown in growth. Moreover, the market is shifting towards lower-acuity ventilators, causing Medtronic's high-acuity products to lose their competitive edge." This ultimately prompted Medtronic to abandon its ventilator product line.
In fact, as early as 2022, Medtronic had already been planning to spin off its PMRI business. In October of that year, Medtronic announced on its official website that this move aimed to streamline its portfolio and focus on its high-growth businesses to accelerate sales growth. However, in the end, Medtronic only eliminated the ventilator business within PMRI.
This is related to a turning point in the competitive landscape of its patient monitoring business. As mentioned earlier, the Nellcor™ pulse oximeter, which falls under the patient monitoring business, achieved more than twentyfold growth, and Medtronic has once again seen growth potential in this market. Masa stated in the aforementioned earnings call that Medtronic has found a path to growth in patient monitoring devices, particularly gaining a competitive edge over its main rival, Masimo.
Massa believes that shutting down the ventilator business is in the company's best interest and stated that the saved funds will increase investment in new divisions, particularly in remote patient monitoring.
Coincidentally, Philips also announced the cessation of ventilator sales in the U.S. a month ago. On January 25, Philips issued an announcement on its official website stating that it would halt the sale of key products in its respiratory business line, including medical ventilators and home-use ventilators, within the United States. Philips Respironics will focus on selling consumables and accessories, such as masks, and will no longer sell hospital ventilators, certain home-use ventilator products, portable and stationary oxygen concentrators, or sleep diagnostic products. Notably, outside the U.S., both ventilators and related consumables will continue to be sold.
Philips' Exit from the U.S. Ventilator Market Linked to a Nearly Three-Year-Long Ventilator Recall Incident. From April 2021 to August 2023, Philips was required to recall approximately 5.5 million devices, including CPAP, BiPAP, and mechanical ventilators, due to the potential degradation and release of harmful and possibly carcinogenic substances from a sound-absorbing foam material used in these devices. The U.S. FDA classified the recall as a Class I recall, defined as situations where "use or exposure to the violative product may cause serious adverse health consequences or death." The National Medical Products Administration also issued multiple notices requiring Philips to recall the affected devices sold in the Chinese market. According to the Guangdong Medical Device Industry Association, the recall involved over 28,000 units in the Chinese market, including non-invasive ventilators, home sleep apnea devices, and mechanical ventilators.
Philips was significantly affected by this recall incident. In April 2023, Philips stated that it had set aside 575 million euros (631 million US dollars) for litigation costs related to its global recall of ventilators.
Compared with the booming sales of ventilators during the COVID-19 pandemic, the current withdrawal of major international ventilator manufacturers seems rather bleak. According to a 2020 report by Southern Weekly, during the pandemic, the price of ventilators surged 4-5 times, yet they were still "hard to come by," replacing masks and thermometers as the most scarce epidemic prevention medical supplies in the global market.
Medtronic mentioned in its Q2 fiscal year 2020 earnings report that its respiratory and patient monitoring products, including the Nellcor pulse oximeter, Microstream capnography monitor, BIS brain monitoring consumables, Puritan Bennett 980 ventilator, and McGRATH video laryngoscope, achieved high single-digit growth. Philips stated in its 2020 annual report that its Connected Care business experienced significant growth due to the surge in market demand for ventilators and patient monitoring equipment caused by the COVID-19 pandemic.
Chinese manufacturers such as Yuwell Medical and BMC Medical have also doubled their performance. In 2020, Yuwell Medical achieved a revenue of 6.726 billion yuan, increasing by 45.08% year-on-year; the net profit was 1.759 billion yuan, increasing by 133.74% year-on-year. Among them, overseas income reached 1.878 billion yuan, increasing by 135.77% year-on-year. BMC Medical achieved 560 million yuan, increasing by 117.29% year-on-year; the net profit was 228 million yuan, increasing by 487.23% year-on-year.
Moreover, due to the global surge in demand and shortage of ventilators, in 2020, Medtronic shared the complete set of intellectual property rights for its PB 560 ventilator globally on its official website, including design schematics, production specifications, manuals, software codes, etc.
Chinese-Made Ventilators See Technological Breakthroughs During This Period. According to CCTV Finance, the core component of the ventilator, the "blower," independently developed by the R&D team of Yuyue Medical, has been practically applied during the pandemic.
More than three years later, the ventilator market has changed dramatically. Before the Philips recall incident, ResMed and Philips had long dominated the majority of the global home non-invasive ventilator market. According to Southwest Securities, the competitive landscape of the global home non-invasive ventilator market is highly concentrated, with ResMed and Philips occupying nearly 80% of the market share.
After Philips began recalling ventilators in 2021, its market share continued to shrink, and ResMed became the biggest winner. ResMed's revenue soared from $1.09 billion in 2020 to $4.22 billion in 2023.
Moreover, the incident has also been quite beneficial for manufacturers in China. According to a research report by East Money Securities, in 2022, due to the impact of competitor Philips' respiratory machine recall incident, YHJY Medical's orders in the U.S. market increased significantly, achieving a revenue of 1.415 billion yuan, a year-on-year increase of 113.64%; and a net profit attributable to the parent company of 380 million yuan, a year-on-year increase of 161%.
Another domestic ventilator manufacturer, Mindray Medical, also stated in its 2022 annual report that the company's patient monitors, anesthesia machines, ventilators, and hematology analyzers have achieved a top-three market share globally.
Philips was hit hard by the recall incident, and Medtronic then announced the elimination of its ventilator business. This could be a good opportunity for Chinese-produced ventilator manufacturers to seize market share.