Medtronic CEO and Chair Geoff Martha [Photo courtesy of Medtronic]
With Medtronic selling off and spinning off businesses, CEO and Chair Geoff Martha recently shared his strategy on divestitures and the high-growth areas where he wants to invest more.
Martha was speaking at this month’s Goldman Sachs Annual Global Healthcare Conference, where he also offered his perspective on labor conditions, supply chain issues, international markets, plans to increase R&D spending and the latest on the Hugo surgical robotics system.
How Medtronic — the world’s largest medical device company — and its leader think about which businesses to sell and which to build can help competing device developers, partners and suppliers better understand medtech’s changing landscape.
Medtronic’s divestiture strategy
Medtronic announced plans in May 2022 to spin off its kidney care/dialysis business, followed in October with an announcement of plans to spin off its patient monitoring and respiratory interventions businesses. While Martha has said not to expect more divestitures in the near-term, the company’s review of its portfolio is an ongoing process.
“When we’re looking at some of these divestitures, we’re looking at [how does that investment] rack up compared to some other opportunities we have,” Martha said.
He offered the kidney care spinoff as an example. Medtronic is a 50% partner with DaVita on the new company, Mozarc Medical.
“We’re very excited about it, we … believe in that technology,” he said. “But the P&L (profit and loss) investment that would take and the impact on the rest of the P&L just didn’t rise above the line versus what else we have.”
Medtronic’s top growth markets
Medtronic closed on its purchase of Affera’s Sphere-9 mapping and ablation catheter for AFib in 2023. [Photo courtesy of Affera]
Instead, Medtronic wants to invest its resources in what Martha called “high-flyers.” These are five areas that Medtronic believes are secular growth markets with long-lasting and substantial opportunities.
“We’ve got these top five areas: neurovascular, structural heart, soft-tissue robotics, diabetes, AFib (atrial fibrillation). These are areas that we could definitely put more money into, and that’s what we’re really focused on.”
Related: Why Affera’s cardiac ablation technology for AFib is worth $1B to Medtronic
That comes with a few caveats. While prioritizing those areas for new investment, Medtronic still needs to support its core businesses: cardiovascular, cardiac rhythm, surgery, and spine.
“You can’t just stretch them too far,” Martha said. “You’ve got to make sure they have enough for meaningful iteration. And then the balance — we want to make sure we’re investing enough so they don’t take a step back.”
Those top five high-flying businesses need to be executing. In April, Medtronic’s diabetes business said it finally resolved quality issues raised in 2021 by an FDA warning letter and is now free of the regulatory restrictions associated with the letter.
“We’re very confident the business can get back to double-digit growth,” Martha said.
Learn more about Medtronic’s recent diabetes progress — including product launches and the next-gen pipeline — at MDO sister site Drug Delivery Business News and the May 31 episode of MedtronicTalks featuring Medtronic EVP and Diabetes President Que Dallara.
Previously: Medtronic’s M&A strategy explained by CFO Karen Parkhill