Medtronic Spins Off $2.8B Diabetes Business as MiniMed Ahead of IPO

Medtronic First "Cuts" into Diabetes Business.

Source｜Pharmaceutical Research Society

The world's "top medical device giant" is also practicing "letting go."

On May 21, Medtronic announced the spin-off of its diabetes business into a brand-new independent company. The spin-off is expected to be completed within 18 months through a series of capital market transactions, with priority given to an initial public offering (IPO) and subsequent equity carve-out.

Previously, Medtronic also announced the latest personnel appointments, such as appointing Laura Endres, a former executive of Dexcom, as the head of the Diabetes Business in the Americas, and appointing Kate Cronin as the Chief Marketing Officer of the Diabetes Business.

Notably, while announcing the significant news of spinning off its diabetes business, Medtronic released its financial performance for the fiscal year 2025.

According to the financial report, in the 2025 fiscal year, Medtronic achieved annual revenue of $33.6 billion, with organic growth of 4.9%; fourth-quarter income was $3.34 billion, with organic growth of 7.8%; full-year GAAP diluted earnings per share were $3.61, increasing by 31%; the first-quarter dividend for the 2026 fiscal year increased to $0.71 per share, marking 48 consecutive years of dividend growth.

It can be seen that Medtronic's development remains stable. However, on this basis, will the company's adjustment of its business structure and the "spin-off" of its diabetes business shake the foundation and bring significant uncertainty?

01

Diabetes Business "Flying Solo," More Pros than Cons?

Currently, Medtronic mainly has four major business segments, all of which are basically growing without any obvious "weak links."

According to the financial report, in the fiscal year 2025, Medtronic's cardiovascular business achieved an annual revenue of $12.48 billion, with organic growth of 6.3%; the neuroscience business achieved an annual revenue of $9.85 billion, with organic growth of 5.2%.HealthcareSurgical business full-year revenue was $8.41 billion, with organic growth of 0.8%; Diabetes business full-year revenue was $2.76 billion, with organic growth of 11.5%.

Overall, with a diversified business layout, Medtronic has covered treatment areas including arrhythmia, heart failure, cardiac intervention, heart valve replacement, diabetes, gastrointestinal diseases, urological diseases, spinal diseases, neurological disorders, and ENT.

Among them, the top three businesses are Medtronic's primary sources of revenue. Although the diabetes business has shown faster growth, its scale remains relatively small. From this perspective, the divestiture of this business should have a fairly limited impact on Medtronic's overall operations.

Moreover, it is worth mentioning that, in Medtronic's view, its diabetes business has always had certain limitations. On the one hand, the diabetes business follows a B2C approach, mainly providing a complete insulin management solution for diabetic patients, including products such as CGMS (Continuous Glucose Monitoring System), insulin pumps, and insulin pens. In terms of customers, market positioning, supply chain infrastructure, etc., this business does not have much overlap with the group's other B2B businesses that are oriented towards medical institutions, and overall business synergy is weak.

On the other hand, the gross margin and operating profit margin of the diabetes business have long been lower than the company's overall level. After the spin-off, Medtronic will focus on high-margin areas such as cardiac devices and neuroscience, with an expected increase in the overall gross margin and operating profit margin by 50 and 100 basis points, respectively.

All of these have also become motivations for Medtronic to spin off its diabetes business. But, can the diabetes business really "take off" after becoming independent?

From the current business development momentum, Medtronic's diabetes business is not weak. The development history of the relevant division can be traced back to 1983, with rich experience in technology research and development, product sales, and other aspects. At the same time, the market demand for this business is very broad.

According to the latest "Global Diabetes Atlas" released by the International Diabetes Federation, in 2024, the number of adults with diabetes worldwide has reached 589 million. In the population aged 65 years and above, 1 in every 4 people is affected, with a total of 158 million individuals.

Overall, allowing the diabetes business to "fly solo," Medtronic has given it deep consideration, with the core motivation still being "seizing growth."

02

Tariff Pressures Persist as Medtronic Strives to Protect Profits

Medtronic is generally satisfied with its performance in the fiscal year 2025.

Medtronic CEO Jeff Martha gave a high evaluation in the earnings report: "At the operational level, we have achieved an acceleration in revenue growth that has translated into profit momentum, meeting the upper limit of the expected goals promised a year ago. The company's business foundation is solid and continues to strengthen."

However, Medtronic's confidence in future development appears slightly insufficient. It estimates that tariffs imposed by the Trump administration and retaliatory tariffs from other countries will result in a loss of $200-350 million (approximately RMB 1.4-2.5 billion) in the new fiscal year.

And Medtronic is not an isolated case.

In the Q1 2025 report, Johnson & Johnson also estimated the impact of tariffs, stating that they could result in a $400 million profit loss for the company, most of which is related to the Medical Technology division (MedTech). This $400 million includes import tariffs from Mexico and Canada not exempted under the USMCA, as well as steel and aluminum tariffs affecting certain products. Tariffs between China and the U.S. are also included and constitute the major portion.

As for how to maintain growth under tariff pressure, Medtronic's most obvious move currently is to lighten the business "burden," such as spinning off its diabetes business, while controlling cost expenditures.

In January 2024, at the J.P. Morgan Healthcare Conference, Jeff Massa stated that as part of the restructuring efforts to improve the company's profit margins, Medtronic plans to close more than five manufacturing sites, consolidate eight distribution centers into two "super distribution centers," and cease business with nearly 200 suppliers.

Layoffs are also underway. For instance, in early May this year, Medtronic initiated a small-scale layoff, with the diabetes business being the main focus of the adjustment. Internal sources revealed that approximately 100 employees were laid off, involving departments such as sales, R&D, and technical support. Additionally, there is information suggesting that other departments within Medtronic may also be experiencing layoffs.

Obviously, "enhancing profitability" is Medtronic's most urgent task at this stage.

       Original Title: Divesting a Diabetes Business with Nearly $28 Billion in Revenue Is Just "A Drop in the Bucket" for Medtronic