Medtronic CEO Announces Major Shift in Spin-off Strategy and Highlights Focus on High-Growth Segments

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Recently, the Instrument Family learned that,Medtronic CEO Geoff Martha said that no asset divestitures are planned for 2023. That said, the review is still ongoing.In addition, Medtronic also plans to invest more funds into areas with high growth and high return opportunities, including structural heart, neurovascular, cardiac ablation solutions, surgical robotics, and diabetes.

It is reported that Medtronic announced in October 2022 its intention to spin off its Patient Monitoring and Respiratory Interventions businesses into a new company (“NewCo”). These businesses are part of the company’s Medical Surgical portfolio and the spin-off was expected to be completed within 12 to 18 months at that time.However, Medtronic stated this time that these business revenues account for 8% of the company's income, and some operational issues need to be resolved; therefore, the company will slow down the pace of divestiture.

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Plan to Spin Off Three Businesses in 2022

It is reported that in 2022, Medtronic planned to spin off three divisions. Specifically, the company intended to divest its dialysis business, known as the Renal Care Solutions' current product portfolio (Renal Access, Acute Therapies, and Chronic Therapies), and establish a joint venture with DaVita. Additionally, Medtronic planned to divest its Patient Monitoring and Respiratory Interventions businesses, transitioning them into a new company ("NewCo").

Establish a Joint Venture with DaVita Inc.

On May 26, Medtronic and DaVita Inc., the largest kidney care service provider in the United States, announced,Will jointly establish an independent medical company focused on kidney care.

According to the terms, the new company will be jointly owned by Medtronic and DaVita, with each holding an equal stake, and will be led by an independent management team. The board of directors will consist of two directors from Medtronic and DaVita respectively, as well as two independent directors.Medtronic will contribute its Renal Care Solutions (RCS) business, including its current renal access, acute therapies, and chronic therapies portfolios, product lines, as well as global manufacturing, R&D teams, and facilities.

According to reports,DaVita is the largest kidney care service provider in the United States and the world's second-largest company in the hemodialysis services market, only after Fresenius.DaVita itself does not produce dialysis medications or medical devices; it only provides dialysis services. Unlike in China, in the United States, government and medical regulations allow and even encourage hemodialysis patients to receive treatment at qualified private or corporate dialysis centers.

DaVita provides services including: home dialysis (Peritoneal Dialysis PD or Home Hemodialysis HHD), in-center hemodialysis, in-facility dialysis at specialized institutions, and kidney transplant services. Notably, DaVita has continued to grow stronger over the past 20 years, gaining the favor of investment guru Warren Buffett while strategically expanding its presence in China. Since 2012, Berkshire Hathaway, under Buffett's leadership, has repeatedly increased its stake in DaVita’s stock on the secondary market and has become its largest single shareholder.

Divest Patient Monitoring and Respiratory Interventions Businesses

In October 2022, Medtronic's official website announced that,Plans to spin off its Patient Monitoring and Respiratory Interventions businesses into a new company (“NewCo”).

It is reported that patient monitoring and respiratory interventions are part of the Respiratory, Gastrointestinal, and Renal division within Medtronic's Medical Surgical portfolio. In the fiscal year 2022, the combined businesses generated approximately $22 billion in global revenue, accounting for about 8% of Medtronic’s total revenue. The combined businesses demonstrated constant currency revenue growth and a gross margin profile slightly below Medtronic’s overall figures, with an operating profit margin slightly above the company’s overall performance. The combined businesses operate globally, supported by a team of more than 8,000 employees worldwide.

Siemens Healthineers, GE Healthcare Interested in Acquiring Medtronic's Spin-off Business

Notably, in December 2022, according to reports by Reuters and Bloomberg,Siemens Healthineers and GE Healthcare are interested in acquiring two business units spun off by Medtronic. In addition, these two businesses have also attracted interest from private equity firms.(Siemens Healthineers, GE Healthcare: May Bid for Medtronic's Spin-off Business)

Bloomberg reported based on information from insiders: Medtronic is open to selling its business.And the valuation of these businesses exceeds $7 billion.

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No more spin-offs this year, increase investment in high-growth areas

However, not long after,Medtronic CEO Geoff Martha said that no asset divestiture is planned for 2023; however, the portfolio review is still ongoing.It stated that these business revenues account for 8% of the company's income, and some operational issues need to be resolved; therefore, the company will slow down the pace of divestiture.

In addition, Medtronic also plans to invest more funds into areas with high growth and high return opportunities, including structural heart, neurovascular, cardiac ablation solutions, surgical robotics, and diabetes. Additionally, Medtronic CEO Geoff Martha responded to the new progress across these fields.

All Requirements of FDA Insulin Pump Warning Letter Have Been Met

Among them, in the field of diabetes,Medtronic Still Faces FDA Warning Letter, Recall of MiniMed 600 Series Insulin Pumps

It was reported that in September last year, the U.S. FDA issued a safety warning for the Medtronic MiniMed 600 Series Insulin Pump System, stating that there were potential cybersecurity risks in the wireless communication components of the insulin pump, continuous glucose monitoring (CGM), and blood glucose meter.

The notice shows that hackers can infiltrate the system and alter the insulin dosage for users. Potential issues related to the communication protocol of the pump system may allow unauthorized access. When the pump is paired with other system components, individuals nearby, apart from the user or caregiver, may also be able to access the pump.

If unauthorized access occurs, the pump's communication protocol may be compromised, which could lead to the pump delivering too much or too little insulin. Both insulin overdose and underuse can result in patient shock or even death. On September 30, Medtronic responded that this risk was discovered through internal testing conducted recently by Medtronic. Under specific circumstances, communication between the pump system components might be affected by unauthorized access.

In response, Medtronic stated,The company has met all the requirements of the warning letter, but it is unclear when the FDA will lift the warning letter, which is necessary for the company to gain approval for its new MiniMed 780G insulin pump.

It is reported that Medtronic MiniMed 780G is Medtronic's most advanced insulin pump system, officially launched on June 7, 2022. It utilizes Medtronic's proprietary SmartGuard hybrid closed-loop technology and has been approved for use in Canada. As of September 2022, the system has been introduced in more than 60 countries worldwide but has yet to receive approval from the U.S. FDA.

Hugo Robot Conducts Clinical Trials in the United States

In the field of surgical robotics,Medtronic CEO Geoff Martha said he is excited about the launch of Medtronic's Hugo robotic-assisted surgery system, which has a CE mark in Europe but remains an investigational product in the United States.

Last month,Its official website disclosed that the first patient participated in the Expand URO U.S. clinical trial of the Hugo robotic-assisted surgery (RAS) system.Robot-assisted prostatectomy was performed by Dr. Michael R. Abern at Duke University Hospital in Durham, North Carolina.

Medtronic Plans to Use Hugo in Research for a Range of Urological Procedures, Including Radical Prostatectomy, Radical Cystectomy, and Partial or Radical Nephrectomy. The Study, Granted an Investigational Device Exemption (IDE) by the FDA, Aims to Enroll 122 Patients Across Six Sites in the United States. Additionally, Dr. James Porter, a Urologist at Swedish Medical Center in Seattle, Washington, is the Principal Investigator for the U.S. Expansion URO Study.

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Appointment of New Chief Quality Officer

In addition,In seeking to transcend includingSerious recall incidents involving discontinued HVAD and diabetes devices,Medtronic CEO Geoff Martha recently announced on LinkedIn that the company has hired Scott Cundy, a senior regulatory and quality management executive from Danaher, as its new Chief Quality Officer.

Scott Cundy

It is reported that before joining Medtronic, Scott Cundy worked at Danaher for more than a decade, continuously earning promotions.Previously served as Vice President of QRCA for Danaher's Diagnostics and Life Sciences Platform.Notably, this appointment also marks Scott Cundy's return, as he previously held roles in quality, regulatory, and clinical affairs within Medtronic’s cardiovascular portfolio in the early 2000s.

Medtronic CEO Geoff Martha said, "Scott Cundy's strong background in product quality, engineering, and regulation, along with his deep executive experience and operational rigor, will enable us to continue critical and impactful work within our safety and quality functions."

Noel Colon

And MedtronicNoel Colon, the former Chief Quality Officer, serves as the Senior Vice President of R&D at the company.It is reported that Noel Colon was responsible for overseeing all global quality operations of the company and was a member of the Medtronic Executive Committee while serving as the Chief Quality Officer. He joined Medtronic in March 2008 as the Senior Director of Manufacturing and Supplier Quality for Cardiac Rhythm Disease Management (CRDM). Most recently, from 2017 to 2019, Noel served as the Vice President of Quality for Restorative Therapies Group (RTG). Prior to that, he was the Vice President of Operations for Medtronic Energy and Component Center (MECC) and CRDM Pharmaceuticals from 2012 to 2017. From 2011 to 2012, he served as the Vice President of Manufacturing and Supplier Quality for the Cardiovascular Group (CVG).

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Medtronic announced in October 2022 that it would spin off its patient monitoring and respiratory interventions business into a new company ("NewCo"). However, less than three months later, the CEO stated that the company no longer plans to proceed with the asset spin-off in 2023. The CEO noted that the announced spin-off business accounts for 8% of the company’s revenue and requires resolving certain operational issues. What will the future hold? We'll have to wait and see.

In addition, it also plans to invest more funds into fields with high growth and high return opportunities, such as structural heart, neurovascular, cardiac ablation solutions, surgical robotics, and diabetes. Besides, it has just appointed a new Chief Quality Officer, which means Medtronic will pay more attention to the improvement of product quality, and the future is worth expecting.