Source: Instrument Family, no reprinting without authorization, and reprinting is allowed 24 hours later.

Recently, Medtronic Chairman and CEO Geoff Martha stated at the J.P. Morgan Healthcare Conference that as part of the company’s restructuring efforts to improve profit margins,Medtronic Plans to Close More Than Five Manufacturing Sites and Six Distribution Centers, and Cease Business with Nearly 200 Suppliers.

Currently, Medtronic has refused to disclose which manufacturing sites will be affected. According to information on its official website, Medtronic operates 78 factories worldwide. It is reported that,The above six distribution centers will be merged into two other locations, after which a total of eight distribution centers will be consolidated into two large centers, but the company refused to disclose the specific locations.

Geoff Martha said that in the past few years, the company has been evaluating every aspect of the supply chain.These initiatives focus on its global operations and supply chain, aiming to bring "the greatest near-term savings" to the company.

In fact,Previously, Medtronic stated that the company had begun "significantly cutting costs" to address macroeconomic issues. In April 2023, Medtronic began global layoffs.At that time, Geoff Martha did not disclose the specific number of layoffs.

01

Shut Down Production Base

Integrated Distribution Center

In his speech at the J.P. Morgan Healthcare Conference, Geoff Martha said: "Over time, one of our biggest opportunities is to leverage our scale and drive leverage gains, which are related to our global operations and supply chain."It is understood that last year, Medtronic spent nearly US$11 billion on cost of goods sold.

Geoff Martha said,The company's top priority is to restore its profitability, and introduced Medtronic's recent restructuring and adjustment of incentive measures, product approvals and releases,And new initiatives such as the Medtronic AI Excellence Center.

Geoff Martha

Previously, Medtronic's Executive Vice President of Supply Chain, Greg Smith, stated in an interview thatThe company will reduce the number of suppliers and focus more on strategic suppliers.This time,Geoff Martha announced that the company would cease business operations with nearly 200 suppliers.Moreover, he indicated that a complete metal Request for Proposal (RFP) process generated approximately 10% savings, while a similar plastic RFP process has just begun.

At the same time,Medtronic's culture and incentive measures have increased labor productivity by 5%.Especially what Medtronic refers to as "lean processes and a performance-driven culture." Meanwhile,Medtronic has introduced 28 automated inspection projects using automation and digital technologies, eliminating manual inspections at 8 locations.

In addition,Medtronic has also implemented demand planning software to improve accuracy.The company stated that the significant reduction in orders has improved product availability.

Medtronic stated,Future initiatives include automation expansion, productivity improvement, and waste reduction, reducing finished goods and raw material inventory through real-time data analysis and connectivity, and proactive SKU management.And authorize Medtronic's 450,000 global operations and supply chain employees "as problem solvers with consistent incentives."

Medtronic's suppliers provided other cost-saving ideas, and the device manufacturer plans to accelerate the implementation of these initiatives.

Geoff Martha said: "We have implemented consistent key performance indicators,The implementation of automation and predictive systems not only improves cost efficiency but also reduces working capital levels as we move forward.……We are increasingly confident that we can deliver sustained cost increases above inflation. This will be a driver of the company's strategy to improve gross margins — not the only one, but a meaningful driver. We look forward to sharing more progress as we move forward."

02

Medtronic Has Introduced Multiple Policies to Cut Costs

In fact, Medtronic had already introduced several cost-cutting measures in 2023.

In April 2023, Medtronic mentioned in an email to employees that the company was working hard to address higher operating costs and began to advance layoffs in its international business.In the email, CEO Geoff Martha did not disclose the specific number of layoffs, but he indicated that the layoffs would occur in the coming months, with the specific layoff list to be determined based on factors such as teams, countries, and regions.

Medtronic Announces "Significant Cost Cuts" in Final Quarter of Fiscal Year (Ended April 28, 2023)

In response to foreign media, Medtronic stated: "These decisions are never easy, and we treat all affected employees with great care."Medtronic will follow a fair and consistent process and provide comprehensive transition resources for affected employees during this period.”

On April 12 of the same year, Medtronic announced that it was carrying out job cuts at a factory in Sunnyvale, California.59 employees will be affected by the layoffs.

It is reported that this factory is related to Epix Therapeutics, a developer of radiofrequency cardiac ablation technology acquired by Medtronic for $316 million in 2019.Medtronic Plans to Restructure and Relocate the Factory's Operations Department, Eliminating All Positions. According to company disclosures, the reason for the layoffs is the plan to transfer the production line to its catheter manufacturing facility, the Parkmore site, located in Galway, Ireland.

In addition,In March 2023, Medtronic launched a voluntary early retirement incentive program in an effort to complete a significant cost-cutting plan before the end of the fourth quarter.Medtronic stated in its public announcement that the Voluntary Early Retirement Program (VERP) is a "limited opportunity for early retirement with enhanced benefits" and also a way for the company to avoid layoffs. Compared to large-scale layoffs, it can reduce unemployment, severance payments, and litigation costs.

Regarding Medtronic's layoff plan, some industry insiders analyzed: "In fact, with the continuous development of the medical industry and the intensification of competition, layoffs have become a common phenomenon in the medical device industry.In the process of enterprise development, optimizing the company structure through layoffs, mergers, or splitting production lines is essentially for the better forward development of the company. One should not subjectively assume that layoffs or selling businesses indicate poor development."Remaining unchanged is not the measure of a company's healthy development."

03

The Three Fastest-Growing Businesses

In his speech at the Datong Healthcare Conference, Geoff Martha emphasized that Medtronic will continue to be a mission-driven company focused on customers and patients, while also being performance-driven. He also stated,Closing production bases and integrating distribution centers are aimed at focusing on its global operations and supply chain, bringing the company "the largest near-term savings."

It should be noted that in his speech, Geoff Martha also emphasized Medtronic's three fastest-growing businesses,Namely, cardiac ablation, diabetes, and structural heart.According to reports,These revenues account for 20% of the company's current income, but the markets they are in are growing rapidly, at a rate faster than the entire company.

Cardiac Ablation

It is understood that Medtronic estimates the cardiac ablation market at 8 billion US dollars, and due to the PulseSelect pulsed field ablation (PFA) system, there is an opportunity to capture more market opportunities. Last month,Medtronic's PulseSelect Receives FDA Approval for Treating Paroxysmal and Persistent Atrial Fibrillation, Becoming the World’s First PFA Device to Gain FDA Clearance, Marking a Milestone Achievement.

PulseSelect Pulsed Field Ablation (PFA) System

Moreover, Medtronic's Affera Sphere-9 PFA mapping and ablation catheter has made "good progress" in reaching the market.In March 2023, the Affera Mapping and Ablation System successfully obtained the CE mark, including the Sphere-9™ catheter and Affera™ Prism-1 mapping software.It is reported that the system creates a new paradigm in electrophysiology through the Sphere-9 Pulse Field Ablation (PFA), Radiofrequency (RF), and High-Density (HD) mapping catheter, which can map and ablate atrial arrhythmias (rapid, abnormal heart rhythms) and provide real-time feedback via its intuitive mapping and navigation software.

Diabetes

Diabetes is a bigger opportunity for Medtronic, which estimates the diabetes market to be worth $14 billion with double-digit growth. Medtronic stated,It is the only company that invests in a "complete differentiated technology ecosystem" for critically ill diabetes patients.

Medtronic stated: "The market for critically ill diabetes patients is currently shifting from the predominantly standalone [Continuous Glucose Monitoring, or CGM] and Multiple Daily Injections (MDI) to smart dosing using automated insulin delivery or intelligent MDI systems.By the end of this century, we believe that smart metering systems will become the technology used in most markets."

As one of the diabetes giants, Medtronic also made frequent moves in 2023.In April, its latest generation hybrid closed-loop insulin pump system, MiniMed 780G, received FDA approval (having been approved for marketing in over 100 countries since 2020).For patients with Type Ⅰ diabetes aged 7 years and above, using the Guardian™ 4 sensor, fingerstick-free monitoring is enabled under SmartGuard™ technology.

MiniMed 780G

This product, also known as an artificial pancreas, boasts the lowest blood glucose target setting available on the market (as low as 100 mg/dL), which is closer to the average blood glucose level of non-diabetics. It is also the only pump equipped with an infusion set that can be worn for 7 days, doubling the wear time.

May 2023,Medtronic Expands Further with the Acquisition of Korean Diabetes Technology Company EOFlow for 971 billion KRW (5.2 billion CNY).EOFlow's core product, EOPatch, is the world's second tubeless, disposable patch insulin pump following Insulet Corporation's OmniPod. It has been launched in South Korea, Europe, Indonesia, and the United Arab Emirates, and has received the FDA Breakthrough Device Designation.

Structural Heart Disease

In the field of structural heart disease,Medtronic's representative product, the Evolut™ FX Transcatheter Aortic Valve Implantation (TAVI) System, received the CE mark in October 2023.This system is the latest generation of the CoreValve™ / Evolut TAVI platform.

The Evolut™ FX system is designed to enhance system usability.And provide higher precision and more reliable control throughout the surgical procedure,It maintains the excellent hemodynamics and durability of the Evolut platform while introducing product and procedural innovations for patients with symptomatic severe aortic stenosis.

Evolut™ FX System

It is reported that the Evolut™ FX system adopts the same supra-annular valve design, and its hemodynamic performance has been shown to be superior to surgical aortic valve replacement (SAVR) in large-scale randomized clinical trials.The fourth-generation Evolut technology is equipped with gold marker points on the stent, allowing operators to directly visualize the depth and leaflet position during implantation.

In addition, the Evolut™ FX system adopts a redesigned catheter tip, which makes the insertion profile smoother. It is a more flexible delivery system capable of 360-degree free movement and features stable, predictable deployment. Similar to its predecessor (Evolut PRO+),The latest system includes four valve sizes, suitable for the largest range of indicated patient treatments and featuring the lowest delivery system profile currently available on the market.

——

Previously, Medtronic's fiscal year 2023 data showed that the company's total revenue for the fiscal year 2023 was $31.227 billion, a year-on-year decrease of 1.4%.

After a slight decline in financial performance in the fiscal year 2023, Medtronic has entered a transformative year, not only making significant moves to divest but also announcing layoffs and cost-cutting plans.However, from the statements of Chairman and CEO Geoff Martha, it can be seen that Medtronic remains hopeful for a business recovery and has provided an optimistic outlook.

Entering the 2024 fiscal year, the latest financial data from Medtronic shows that the company achieved revenue of approximately $8 billion (about 56.8 billion RMB) in Q2 of the 2024 fiscal year (FY24), which ended on October 27, 2023, representing a year-over-year increase of 5.3%.

In fact, apart from the three rapidly growing businesses emphasized by Geoff Martha mentioned above, Medtronic has also established the Medtronic AI Excellence Center to create new growth opportunities for the company.So, driven by the priority of "restoring profitability as the top task," what kind of development will Medtronic see in 2024?We will continue to follow up.