Medtronic
(NYSE: MDT)
Chair and CEO Geoff Martha focused on the push for profits at the world’s largest medical device manufacturer in his presentation at the J.P. Morgan Healthcare Conference today.
“Our top priority is restoring our earnings power — full stop,” he said, citing Medtronic’s recent reorganizations and changes to incentives, product approvals and launches, and new initiatives like the Medtronic AI Center of Excellence.
“We continue to be this mission-driven company that you know Medtronic to be and our customers and patients know Medtronic to be, but at the same time, performance driven,” he said. “You’ve got to be both. It’s not one without the other: no margin, no mission.”
Martha also offered details of Medtronic’s efforts to leverage its buying power and improve efficiency, including manufacturing site closures, distribution center consolidations and other operations and supply chain initiatives. (Go to Medical Design & Outsourcing for more details.)
Medtronic’s highest-growth opportunities
Martha identified Medtronic’s three highest-growth opportunities as cardiac ablation, diabetes and structural heart.
“These make up 20% of our revenue today, but they’re in [large] markets that are growing fast and … growing faster than the overall company,” Martha said. “They’re now getting a disproportionate amount of our capital investments like R&D, and we expect them to become a larger portion of our revenue as we go forward.”
Medtronic estimates the cardiac ablation market at $8 billion, with the opportunity to seize more of it thanks to the PulseSelect pulsed field ablation (PFA) system, which recently became the first of its kind to win FDA approval. Martha also reported “good progress” in bringing its Affera Sphere-9 PFA mapping and ablation catheter to market, with U.S. investigational device exemption (IDE) results in the first half of this year.
Medical Design & Outsourcing: Why Affera’s cardiac ablation technology is worth $1B to Medtronic
Diabetes is an even larger opportunity for Medtronic, with the company estimating $14 billion market and double-digit growth. Medtronic says it is the only company investing in a “complete ecosystem of differentiated technology” for intensive insulin patients.
“We’ve had a lot of momentum building here,” he said. “The market for intensive insulin patients is shifting from one that is primarily standalone [continuous glucose monitoring, or CGM] with multiple-daily injection (MDI) today, to one that is smart dosing using either automated insulin delivery or smart MDI systems. And by the end of the decade, we believe smart dosing systems will be the technology used by the majority of the market.”
“No company is as well positioned to go after this opportunity than Medtronic given our insulin-delivering devices — including pumps and pens today and a patch system that’s under development — along with CGM sensors and leading algorithms and customer support,” he continued.
Related: Medtronic wins CE mark for MiniMed 780G with Simplera Sync disposable, all-in-one CGM
Finally, structural heart is a $6 billion opportunity for Medtronic, with Martha touting the performance of Medtronic’s Evolut FX transcatheter aortic valve replacement (TAVR).
“Our Evolut platform has shown superior valve performance compared to surgery in randomized trials. … We see a lower rate of death or disabling stroke. And the TAVR performance continues to get better each year compared to surgery,” Martha said. “These are phenomenal results. No other valve has shown this, and this gives us a real advantage in the market.”
The Medtronic AI Center of Excellence
Martha also announced the creation of the Medtronic AI Center of Excellence. Though he didn’t offer too many details about timing, location or leadership, he said it’s an effort to leverage common artificial intelligence platforms across the company’s portfolio such as Medtronic Endoscopy’s GI Genius.
“These are FDA-approved products where you’re seeing meaningful improvements to the current standard of care that translate to better patient outcomes, translate to lower cost, translate to better access,” he said. “It’s a lot of work. This isn’t about ChatGPT. We have to train the models ourselves with a lot of high-quality data. But the impact is amazing here. As we move forward, you’re going to hear more and more about this from us.”
Medical Design & Outsourcing: AI basics from Medtronic Chief Technology and Innovation Officer Ken Washington
Medtronic leaders discuss the future
“We’re feeling really good. … It all starts with innovation and growth and having a $32 billion revenue company growing mid-single digits, powered by innovation. I think that’s a pretty good thing,” Martha said. “We believe that growth is durable and we’re driving the earnings power.”
Asked about fiscal 2025 (Medtronic’s fiscal year ends in April), EVP and CFO Karen Parkhill said Medtronic is still planning for fiscal 2025 and can’t yet offer formal guidance.
“But we’re looking ahead with great confidence to ’25,” Parkhill said. … “We’ve got a really strong pipeline that creates that durable, mid-single-digit topline … We’re really focused on this earnings power down the P&L [profit and loss], to deliver that leverage down the P&L, and to over time — with our strong and growing dividend — to get back to delivering that double-digit total shareholder return.”
Medtronic revenue decreased 1% year-over-year to $31.2 billion in fiscal 2023, while annual profits decreased 25% to approximately $3.8 billion.
Medtronic has posted four straight quarters of mid-single-digit growth, with CFO Karen Parkhill noting another was coming soon.
Medtronic is scheduled to release Q3 2024 results on Feb. 20 and Q4/full-year 2024 results on May 23.
Other news from Medtronic on MassDevice today: Medtronic wins FDA nod for ‘game-changing’ DBS device