Rank: #1 (Last year: #1) $33.63 Billion
Prior Fiscal: $32.36 Billion
Percentage Change: +3.6%
R&D Expenditure: $2.7B
Best FY25 Quarter: Q4 $8.9B
Latest Quarter: Q4 $8.9B
No. of Employees: 95,000
Global Headquarters: Dublin, Ireland

The rumors have been about Spine for at least 15 years. Going back as far as 2011, when the Spine unit for Medtronic faced substantial headwinds, it’s been speculated the company would be better off without its orthopedic component. At that time, analysts predicted a divestiture of the division could take place. But Omar Ishrak, named CEO earlier that same year, stated Big Blue was better off with different businesses under its roof, including the Spine segment. It did, however, seek to sell Physio-Control at that time.

Fast-forward to a few years ago when the organization announced it was expecting to spinout its Patient Monitoring and Respiratory Interventions businesses. This time, the impetus to do so wasn’t originating from analysts, but rather the head of Medtronic itself. Chairman and CEO Geoff Martha stated two portions of the firm’s Medical Surgical portfolio would be allowed to stand alone as a newly formed corporate entity. However, after further consideration, the spinout idea was ultimately nixed, as the two businesses would form the basis of a new unit called Acute Care and Monitoring. The only portion not remaining was the underperforming ventilator product line, which was announced to be winding down in February 2024. Again, not even a whisper about Spine.

Most recently, Medtronic once again announced a plan to separate from one of its businesses. For the third time, the declaration had nothing to do with Spine. Instead, on the same day the organization provided its latest fiscal year figures (FY25), it also told of its intent to split from its Diabetes unit. According to the company’s news release about the divestiture, MiniMed—a callback to its original name before Medtronic acquired the firm in 2001—would be established and on its own within 18 months. That would include an IPO and the subsequent spinout. Que Dallara, current executive vice president and president of Medtronic Diabetes, was announced to be taking the helm of MiniMed as its CEO.

“Our journey began in 1983, when visionary entrepreneur Alfred E. Mann founded MiniMed and revolutionized diabetes care with many first-of-its-kind innovations that pushed the boundaries of care and helped simplify life with diabetes for countless people around the world,” said Dallara. “We’re thrilled to honor this rich 40-year legacy with a name that carries deep meaning and trust. As we step forward into this new and exciting chapter, we’ll focus relentlessly on fulfilling our Mission to make diabetes more predictable so everyone can embrace life to the fullest.”

ANALYST INSIGHTS: “It will be interesting to see if MDT can finally make inroads with their HUGO robotic-assisted surgery system against Intuitive Surgical. To date, their results have cost a few key internal MDT leaders their jobs. 2026 will inform us if Intuitive should be concerned or not.”

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

According to the aforementioned latest financial year information, the Diabetes division represented 8% of the company’s revenue. In real dollars, that translated into $2.76 billion—a 10.7% increase over the previous 12-month fiscal. Its Q425 gain marked the sixth consecutive quarter of double-digit organic growth. Clearly, Medtronic was not splitting from the business due to poor performance like it did with its shuttered ventilator line.

“This marks a significant milestone in driving both Medtronic and the Diabetes business to achieve lasting value for Medtronic, our shareholders, customers, and patients,” said Martha. “Active portfolio management is an important lever to delivering on our ongoing growth and success, and this decision shifts the Medtronic portfolio to have intense focus on our highest margin growth drivers where we have our strongest core competencies. I’m also excited about what the future holds for the Diabetes business. Que’s impressive track record in driving growth and innovation has set Diabetes on a path to continued success, ensuring the needs of individuals with diabetes are met around the globe.”

Leading the headlines for Diabetes (after the spinout news, of course) was its global partnership with Top 30 peer, Abbott Laboratories. With BD splitting from Embecta several years ago and now the Medtronic separation update, Abbott remains one of the only device makers not exclusively focused on the condition.

The agreement between the two organizations involves collaboration on an integrated continuous glucose monitor (CGM) based on an Abbott platform. Specifically, Abbott will supply Medtronic with a CGM that will work exclusively with Medtronic smart dosing devices and software across both automated insulin delivery and Smart multiple daily injection (MDI) systems. Medtronic will sell the systems exclusively (presumably, later to be handled by the new spinout organization), including the Abbott-based CGM.

“Our partnership with Abbott allows us to expand access to our advanced automated insulin delivery and Smart MDI systems that deliver best-in-class outcomes with the most widely used CGM in the world. We look forward to offering…this integrated CGM to bring more choice to people living with diabetes within one seamless Medtronic experience,” said Dallara.

Then, a day before the close of the 2025 fiscal year, 510(k) applications were submitted to the U.S. FDA for an interoperable pump. According to Medtronic, FDA clearance of the pump would enable system integration with a CGM sensor based on Abbott’s most advanced CGM platform. Specifically, the submissions included a 510(k) application for the MiniMed 780G pump to be used as an alternate controller-enabled insulin pump and a separate 510(k) application for Medtronic’s SmartGuard algorithm to be used as an interoperable automated glycemic controller.

At the same time as the initial Abbott partnership announcement, Medtronic also made it known it had gained approval for its first disposable, all-in-one CGM—the Simplera. The Simplera platform includes the CGM, designed to be used as part of a Smart MDI system with the InPen smart insulin pen and the Simplera Sync sensor, which is to be integrated with the MiniMed 780G system. Earlier in the year, both the Simplera CGM and Simplera Sync sensor obtained CE marks for Europe and were launched into the market.

A few months later, in November 2024, the company announced it gained an FDA clearance for its InPen app that features missed meal dose detection. With that clearance, the system would become the first on the market to recommend corrections for missed or inaccurate insulin doses, providing real-time, personalized insights for individuals on MDI therapy. It was another step on the path toward launching the aforementioned Smart MDI system

Finally in April 2025, the Simplera Sync sensor gained its own approval from the FDA for use with the MiniMed 780G system. According to the organization, the Simplera Sync is a disposable, all-in-one sensor that requires no fingersticks with SmartGuard or overtape and features a simple, two-step insertion process. A limited launch of the sensor is expected to begin in the fall of 2025.

Unfortunately, not all news was positive from the Diabetes unit. Medtronic voluntarily issued a field action starting on July 31, 2024 due to concerns over the battery life in its MiniMed 600 series and 700 series insulin pumps. It was found that a bump or drop of the pump could result in shortened battery life due to internal electrical components being damaged.

The aforementioned $2.76 billion Diabetes contribution to the company’s 2025 revenue tally was the least among the organization’s four main segments. In total, all of the businesses combined to achieve a modest 3.6% rise over the prior fiscal year, with most enjoying gains while just a couple were flat against the prior year.

The company’s $33.54 billion revenue total for FY25 was led by Medtronic’s Cardiovascular division. Its 5.5% rise took it over the $12 billion mark to reach $12.48 billion for the fiscal year. Cardiac Rhythm & Heart Failure led the group’s trio of businesses, bringing in $6.39 billion—a 6.6% gain. Finishing second within the group, both in annual revenue and growth percentage, was Structural Heart & Aortic. Its $3.55 billion reflected a 5.8% expansion. Offering $2.54 billion to the company’s coffers, Coronary & Peripheral Vascular enjoyed an increase of 2.3%.

Alongside leading in sales revenue, the Cardiovascular unit also led the company in regulatory approvals and clearances, as well as product launches.

• May saw the National Medical Products Administration’s approval in China for the Symplicity Spyral renal denervation (RDN) system, the first of its kind to gain the OK in the country.
• In Japan, the company obtained regulatory approval of its PulseSelect pulsed field ablation (PFA) system for treatment of paroxysmal and persistent atrial fibrillation (AFib) patients.
• In September, an extracorporeal membrane oxygenation (ECMO) system, VitalFlow, was launched. This solution bridges the gap between bedside care and intra-hospital transport, offering physicians and clinicians an easier, smarter ECMO experience.
• During October’s EACTS annual congress, Medtronic launched the Avalus Ultra Bioprosthesis valve in Western Europe. According to the company, the technology is its most advanced surgical aortic tissue valve, which was built on 10 years of clinical experience with the Avalus valve.
• Approval of a U.S. Food and Drug Administration (FDA) investigational device exemption was obtained to initiate a clinical trial of the Prevail coronary paclitaxel drug-coated balloon (DCB) for in-stent restenosis and de novo small vessel disease. Data from the trial would be used to support approval of the Prevail DCB in Japan and the U.S.
• FDA approval was granted for the Affera Mapping and Ablation System with Sphere-9 Catheter—an all-in-one, high-density mapping and pulsed field (PF) and radiofrequency (RF) ablation catheter for treatment of persistent atrial fibrillation and for RF ablation of cavotricuspid isthmus-dependent atrial flutter. The approval resulted in Medtronic as the first and only company at the time to offer two PFA technologies for Afib.
• A CE mark was received for the Evolut FX+ transcatheter aortic valve implantation (TAVI) system for the treatment of symptomatic severe aortic stenosis. FDA approval had been secured in March 2024.
• November marked the CMS’s granting of a transitional pass-through (TPT) payment for the Medtronic Symplicity Spyral renal denervation catheter, used in the Symplicity blood pressure procedure.
• Soon after the new year, a CE mark was provided for the Harmony Transcatheter Pulmonary Valve (TPV) System, a minimally invasive alternative to open-heart surgery for congenital heart disease patients with native or surgically repaired right ventricular outflow tract.
• In Japan, the Aurora EV-ICD MRI device and the Epsila EV MRI Lead were launched in March 2025 for the treatment of ventricular arrhythmias.
• FDA approval was obtained for the OmniaSecure defibrillation lead for placement within the right ventricle. The lead connects to an implantable defibrillator, and treats potentially life-threatening ventricular tachyarrhythmias, ventricular fibrillation, and bradyarrhythmias.

Sister unit Neuroscience also enjoyed mid-single-digit percentage enlargement with its 4.7% gain over FY24. That resulted in a revenue contribution of $9.85 billion. All three businesses within also celebrated increases with Neuromodulation standing out as the most impressive. While its $1.93 billion was the lowest in actual dollars, it boasted 10.7% growth. Leading the segment was Cranial & Spinal Technologies (CST), which finished with a 4.6% surge ($4.97 billion). Rounding out the trio, Specialty Therapies notched $2.94 billion for a 1.2% advance.

As a group, the businesses offered several headlines centered primarily around its product innovations.

• Medtronic announced a partnership with Merit Medical Systems Inc. to offer a unipedicular, steerable balloon catheter for treating vertebral compression fractures in the U.S. The agreement was an expansion of an ongoing partnership between the firms, which sees Merit supplying Medtronic’s Kyphon Xpander Inflation Syringes used in balloon kyphoplasty procedures.
• FDA approval of Asleep Deep Brain Stimulation (DBS) surgery for people with Parkinson’s and people with essential tremor, making the organization the first and only company at the time to receive the agency’s OK to offer DBS surgery while a patient is asleep (under general anesthesia) or awake.
• FDA approval of expanded MRI labeling for the Percept PC and Percept RC, as well as Activa PC, RC, and SC. The approval allows additional active scan time for scans below specified B1+rms limits, increasing the options available for diagnostic and functional assessments.
• A CE mark approval in the EU and UK for BrainSense Adaptive deep brain stimulation and BrainSense Electrode Identifier. This was followed by FDA approval in the U.S. for the same technology soon after.
• Bookending the product news with another partnership announcement, Medtronic and Methinks AI, an AI-driven radiological triage and notification system provider, teamed to enhance stroke treatment across Central and Eastern Europe, Africa, Türkiye, and the Middle East.
• Still another agreement with a medical device manufacturer resulted in an exclusive arrangement that established Medtronic as the sole U.S. distributor for Contego’s product portfolio, which provides revascularization treatment for carotid and peripheral vascular disease. The agreement also included an increased investment in Contego and an option to acquire the company. Medtronic has held a minority investment in Contego since 2020.

The segment also experienced a pair of leadership changes about a month after the start of the 2025 fiscal period. As a result of the opening created by Dan Volz’s promotion to senior vice president of global commercial transformation for Medtronic, Linnea Burman became senior vice president and president of the Neurovascular business. Burman had previously been vice president and general manager of Enabling Technologies (part of the CST business).

The other move involved Emily Elswick moving into the role of president of the Pelvic Health business. She was previously vice president, Office of the CEO, and prior to that, vice president and general manager of the Lung Health and Visualization business.

The final business, Medical Surgical, and its two segments were flat fiscal year-over-year by percentage. The combined segment generated $8.41 billion in sales. On its own, Surgical & Endoscopy was credited with $6.50 billion of that total, while Acute Care & Monitoring added $1.91 billion from its side.

While the unit was relatively quiet with regard to product news, it did provide further updates on its clinical trials around its Hugo robotic-assisted surgery system, which is expected to compete with Intuitive’s da Vinci surgical system, already well-established around the world.

• A CE mark was obtained for the Endoflip 300 system to measure pressure and dimensions in the esophagus and pylorus in adults, which will aid in diagnoses of esophageal motility disorders.
• Medtronic agreed to distribute the Dragonfly pancreaticobiliary system from Dragonfly Endoscopy Inc. in the U.S. The platform introduces significant enhancements in pancreaticobiliary endoscopy—a field where procedural standards have remained largely unchanged for decades.

Leadership changes weren’t limited to the Neuroscience business. In late June, Medtronic said farewell to its executive vice president and CFO of eight years, Karen Parkhill, who left Big Blue to take on the position at HP Inc. Then, about six months later, the organization named Thierry Piéton as Parkhill’s replacement. Piéton came over from Renault Group, where he had served as its CFO since March 2022.

“Thierry is a strategic, creative, operationally focused, experienced CFO with a proven track record of delivering innovation-driven growth, margin improvement, and earnings power through strong financial leadership, which is directly aligned with our financial objectives,” said Martha. “We are confident he is the right choice at this important time for Medtronic and can’t wait to benefit from his expertise and leadership.”

In another change, the company saw the end of its ongoing litigation with Axonics over patent infringements. Months after a jury found for Axonics and stated the company did not infringe on any of the three patents-in-suit, Boston Scientific completed its acquisition of the organization. The two Top 30 members then worked to settle the dispute confidentially, which brought an end to all outstanding litigation between Medtronic and Axonics.

$32.36 Billion
Prior Fiscal: $31.23 Billion
Percentage Change: +3.6%
R&D Expenditure: $2.73B
Best FY24 Quarter: Q4 $8.59B
Latest Quarter: Q4 $8.59B
No. of Employees: 95,000

In November 2019, Medtronic filed a lawsuit against Axonics that alleged patent infringements over sacral neuromodulation (SNM) technologies. Axonics’ r-SNM platform has been a competitor to Medtronic’s Interstim system since its first U.S. Food and Drug Administration (FDA) approval in 2019, when the suit was first filed.

Axonics responded by filing seven claims over the ‘069 patent, which covers charging an implantable device having a battery.

In 2020, the U.S. Patent Trial and Appeal Board (PTAB) decided to reject one of Axonics’ claims to invalidate a Medtronic patent. It found Axonics’ argument concerning the ‘324 patent for technology related to implant recharging and temperature control lacked merit.

A year later, PTAB rejected Axonics’ play to invalidate three Medtronic patents in its intellectual property (IP) infringement lawsuit. It upheld claims in Medtronic’s U.S. patents ‘756 and ‘314, which protects technology related to its tined leads. Claim seven for patent ‘069 was also upheld, which protects technology associated with its recharge power control.

In February 2024, Medtronic then filed a complaint with the U.S. International Trade Commission (ITC) with a parallel action in the U.S. District Court for the District of Delaware to block Axonics from improperly importing and selling products that infringe two Medtronic patents related to MRI compatibility of implantable medical devices. The company wanted the ITC to investigate and exclude importation of the offending Axonics products alleged to infringe its patents.

“Medtronic is continuing our efforts to stop Axonics from profiting off of their unauthorized use of our innovations and intellectual property,” Medtronic’s president of pelvic health Mira Sahney told the press. “The pattern is clear: Axonics uses Medtronic technologies to improperly compete in the market. It is time for Axonics to be held accountable for these unlawful acts.”

Axonics believes that the legal action is an attempt to intimidate the smaller company and stifle competition.

“We believe Medtronic’s claims are designed to stifle competition, limit patient and physician choice, and protect the incumbent’s market position,” said Axonics CEO Raymond W. Cohen. “For over 20 years, Medtronic took advantage of its monopoly position in this category and chose not to innovate, develop full-body MRI compatible sacral neuromodulation devices or invest in creating public awareness of advanced therapies for people with incontinence. Axonics took a different path and created a renaissance in sacral neuromodulation therapy by developing long-lived implantable devices and introducing full-body MRI compatibility in this category for the first time. Axonics refuses to be intimidated by Medtronic and intends to defend itself vigorously.”

Axonics’ lawsuit took another hit in March, when the U.S. Patent Office rejected its latest challenge by affirming the validity of two Medtronic patents. Medtronic is now asking the federal court in the Central District of California, where the patent infringement lawsuit is pending, to lift its stay on the lawsuit. The company hopes to proceed to trial on the five valid and affirmed patents so it can present its case in front of a jury.

Medtronic’s return to the summit of the Top 30 arose from a record high $32.36 billion of revenue in its fiscal year 2024 (ended April 26, 2024). The 3.6% increase came about due to growth in most of the company’s businesses, including surgical, cranial & spinal technologies, diabetes, and cardiac pacing. Strength in international markets also played a role in Medtronic’s rise to the top of the medtech elite. This year’s revenue also included $265 million from a one-time intellectual property agreement in Q4 of fiscal year 2023 from Edwards Lifesciences.

Diluted earnings per share (EPS) dropped 2.1% ($0.06) in fiscal 2024 due to increased acquisition and divestiture-related costs and higher net losses on minority investments. This was partially offset by an income tax provision decrease because of a $764 million charge for the U.S. Tax Court opinion in the previous year. Non-GAAP diluted EPS dropped 1.7% ($0.09) mainly due to reduced incentive performance in the prior year.

ANALYST INSIGHTS: “Medtronic’s plans to further consolidate their supply chain bear watching. Public discussions of tiering point to a supply chain structure common in other industries, but not medtech.”

—Anthony Freeman, President, A.S. Freeman Advisors LLC

Cardiovascular business revenues for Medtronic’s fiscal year 2024 were $11.8 billion, an increase of 3%. The company pointed to the strong performance of Micra, transcatheter aortic valve replacement (TAVR), and perfusion as the reasons for success in this portfolio.

Medtronic’s Cardiac Rhythm & Heart Failure business pocketed $6 billion of this, rising 4% over the prior year. The company pointed to the continued adoption of Micra AV2 and VR2, growth from the rollout of the PulseSelect pulsed field ablation (PFA) system and Aurora extravascular implantable cardioverter defibrillator (EV-ICD) system as the main drivers of success in this segment.

The company earned FDA approval for the Micra AV2 and VR2 miniaturized, leadless pacemakers in May 2023. The second generation of the world’s smallest pacemakers have 40% longer battery life—16 and 17 years, respectively—than their previous generations. Micra AV2 includes an algorithm to program AV synchrony to coordinate the heart’s upper and lower chambers and has a higher available tracking capability for faster heart rates, increased from 115 to 135 beats per minute for upper limits. CE mark approval for the two pacemakers followed in January 2024.

FDA approval for the Aurora EV-ICD MRI SureScan and Epsila EV MRI SureScan defibrillation followed in October. The first-of-its-kind EV-ICD is implanted under the left armpit in the mid-axillary region, outside of the heart and veins. This aims to avoid transvenous leads’ complications of vascular injury and vessel occlusion.

The Epsila EV defibrillation lead is placed under the sternum in a minimally invasive approach. Aurora delivers defibrillation, anti-tachycardia pacing (ATP), and back-up (pause-prevention) pacing therapies via a device similar in size, shape, and longevity to traditional, transvenous ICDs.

Medtronic’s PulseSelect pulsed field ablation PFA system to treat paroxysmal and persistent atrial fibrillation (AFib) won FDA approval in December, following CE mark approval a month earlier. It was the first FDA breakthrough-designated PFA technology to receive approval.

PulseSelect PFA provides rapid, effective pulmonary vein isolation (PVI) via consistent, predictable energy delivery and catheter maneuverability. The plug-and-play system can be used with any mapping system, or just fluoroscopy. A phrenic nerve test pulse offers preemptive assessment of catheter proximity to the phrenic nerve before delivering the therapy. Its nine-electrode catheter has fixed spacing to produce the predictable, consistent electric field needed for contiguous ablation. The nine electrodes can also be used for pacing and sensing.

A small, 9 Fr bidirectional catheter boosts maneuverability and access to various anatomical structures. It’s compatible with a 10 Fr sheath, including the company’s custom, bidirectional FlexCath Contour sheath. PulseSelect’s commercialization initiated in early 2024.

Structural Heart & Aortic net sales fell flat in fiscal 2024 with net sales of $3.36 billion. Revenues were affected by $265 million of proceeds from a one-time payment received in Q4 2023 because of an intellectual property agreement with Edwards Lifesciences. This was offset by TAVR growth, including success in Western Europe and Japan due to adoption of the Evolut FX TAVR system. Cardiac surgery sales benefitted from Perfusion growth, particularly in the U.S.

The Evolut FX+ TAVR system grabbed FDA approval for symptomatic, severe aortic stenosis in March 2024. It features larger coronary access windows through a diamond-shaped frame design, four times larger than the Evolut TAVR’s previous iterations. It also touts more space for catheter maneuverability to improve access to coronary arteries of differing patient anatomies. Medtronic claims the new design doesn’t compromise the valve performance, hemodynamics, and radial strength clinicians expect from its Evolut platform. Early commercial experience took place in spring 2024 and full product launch is anticipated for the summer.

The company released new data from its SMART (SMall Annuli Randomized To Evolut or Sapien) trial, the largest head-to-head comparative trial of TAVR, in April 2024. It compared the Evolut TAVR to Edwards Lifesciences’ Sapien platform, demonstrating noninferior clinical outcomes and superior valve performance as measured by bioprosthetic valve dysfunction performance. The trial randomized and treated 716 patients, 87% of which were women.

The Avalus Ultra valve launched a few days before the end of the company’s fiscal year, following FDA approval in January. The next-generation surgical aortic tissue valve features a low profile, a PEEK baseframe, a larger effective orifice area, and a radiopaque coil. Medtronic boasted Avalus Ultra for its ease of implant, clear visibility for valve-in-valve procedures, and straightforward sizing.

“SMART was launched to better understand how the two most commonly used TAVR systems perform in patients with small aortic annuli, and particularly in women who tend to have smaller heart valves,” said Nina Goodheart, senior VP and president of Medtronic’s Structural Heart & Aortic business.

Coronary & Peripheral Vascular revenues rose 4% over the previous year to reach $2.48 billion. Medtronic highlighted growth from guide catheters and balloons as the drivers of this segment’s positive performance, aided by growth in vascular embolization products.

November saw FDA approval for the Symplicity Spyral renal denervation (RDN) system, which is also known as the Symplicity blood pressure procedure. The minimally invasive procedure delivers radiofrequency energy to nerves around the kidneys that can become overactive and contribute to hypertension. Health Canada approval followed in March 2024.

Once the patient is sedated, a catheter is inserted into the artery leading to the kidney. Once the tube is in place, energy is administered to the system to calm the excessive activity of the nerves near the kidney. The tube is then removed without leaving an implant behind. The approval of Symplicity was the culmination of 10 years of clinical research and development of the renal denervation technology.

ANALYST INSIGHTS: “At the 2024 JP Morgan Healthcare Conference, Medtronic CEO Geoff Martha, stated in 2023 Medtronic spent nearly $11 billion on COGs and over half of their employees are involved in global operations and supply chain. He also mentioned Medtronic would close five manufacturing sites this year. Martha further revealed that a metals RFP process resulted in savings of around 10% and that a similar process for plastics would be taking place. The takeaway for contract manufacturers is clear: OEMs—not just Medtronic—are currently highly focused on the efficiency and costs of their supply chains. Consolidation of suppliers has been taking place and will continue. CMs must be clear in what their value proposition/competitive position is and be well prepared to defend their pricing and/or be able to work with OEMs to reduce costs in the future.”

—Andrew Potter, Managing Director, BCS

Neuroscience revenue grew 5% over the previous year, coming to rest at $9.4 billion in proceeds. Strong performance for both the Cranial & Spinal Technologies and ENT portfolios were indicated as the drivers of this business’ growth in FY 2024.

Cranial & Spinal Technologies revenues rose 7% over the previous year to $4.76 billion. Medtronic cited strong performance of AiBLE spinal ecosystem capital and biologics product pull-through as the main reasons for this business’s success.

Specialty Therapies garnered $2.9 billion, growing 3%. ENT sales were the main driver of growth in this business, according to Medtronic.

Net sales for the Neuromodulation business swelled 3%, coming to rest at $1.75 billion. The company’s annual report cited growth in Brain Modulation, including the Western European launch of the Percept RC neurostimulator. Pain Stim success in the U.S. also fortified the business.

The Inceptiv closed-loop, rechargeable spinal cord stimulator hit the European market by way of CE mark approval in August 2023. Inceptiv’s closed-loop feature senses each person’s unique biological signals, then adjusts stimulation moment to moment as needed. It can sense the neural response to stimulation 50 times per second—when response increases (for example, when the patient coughs, sneezes, or bends) Inceptiv automatically decreases stimulation.

The closed-loop capability leverages ECAPs (Evoked Compound Action Potentials) that Medtronic researched and developed for decades to unlock the ability to listen and respond to signals along the spinal cord. Inceptiv also has full-body 1.5T and 3T full-body access with no power or impedance restrictions and its battery can be recharged in about an hour from empty to full. The SCS earned FDA approval at the end of the company’s fiscal year 2024.

January saw FDA approval for the Percept RC deep brain stimulation (DBS) system. The dual-channel, rechargeable neurostimulator’s BrainSense tech captures and records brain signals so therapy can be adapted and personalized. Its battery provides at least 15 years of service life with a weekly recharge and it can be charged from 10% to 90% full charge in under an hour. Patients can undergo 1.5T and 3T full-body MRI when the Percept RC is in bipolar mode under certain conditions, and it allows future software updates for the Percept platform with a neurostimulator device exchange.

The Medical Surgical segment’s net sales for the year were $8.4 billion, a 5% increase compared to the previous fiscal year. Medtronic cited strength across both Surgical & Endoscopy and Acute Care & Monitoring as the main drivers of growth in the business.

The former achieved 6% revenue growth, earning $6.5 billion. Supply expansion-driven growth in advanced surgical technologies and general surgical technologies were cited as the main sources of expansion. Continued success in advanced energy, wound management, electrosurgery, GI Genius, and EndoFlip products also contributed to the segment’s success.

The latter pocketed $1.9 billion of sales, rising 4% over the prior year. The main causes of this growth were said to be Nellcor pulse oximetry products and McGrath MAC video laryngoscopes.

Diabetes revenues for fiscal year 2024 reached $2.5 billion, shooting 10% upward from the previous year’s total. This success arose from continued international expansion of the MiniMed 780G insulin pump system and integrated CGM. MiniMed 780G was launched in the U.S. during the first quarter of the company’s FY 2024, which also bolstered net sales growth.

May 2023 saw the introduction of a $738 million acquisition deal for EOFlow, the South Korean manufacturer of the EOPatch tubeless, wearable, and fully disposable insulin delivery device. EOPatch touts microfluidic tech that’s designed to reliably and accurately deliver insulin and minimize risk of occlusion. Medtronic wanted to integrate EOPatch with its next-gen CGM sensor and the Meal Detection Technology offered on its MiniMed 780G system. However, it terminated the deal for EOFlow in December 2023.

Medtronic said in an SEC filing that it exercised its right to terminate the definitive agreements “based upon multiple breaches under the Agreements.” Medtronic also said it doesn’t believe any termination fee is payable under the agreements. Nixing the deal may have arose from rival insulin pump maker Insulet’s August 2023 lawsuit claiming EOPatch violated three of the patents for its Omnipod pump and that the designs are “practically identical.”

Insulet alleged when EOFlow was founded in 2011, it began with a patch-pump using a different technology than Omnipod for insulin delivery, but around 2016, “Instead of continuing to independently design and develop its own patch pump, EOFlow pivoted and launched a plan to brazenly copy Insulet’s Omnipod System,” hiring former Insulet executives and critical employees to oversee development, manufacturing, approval, and marketing of EOPatch. The company also alleged that EOFlow’s manufacturer, Flex, had misappropriated trade secrets.

Medtronic said cancelling the acquisition didn’t impact fiscal year 2024 adjusted earnings per share.

The all-in-one, disposable Simplera CGM grabbed CE mark approval in September 2023. The no-fingerstick sensor with a two-step insertion process doesn’t need over tape and integrates with Medtronic’s InPen smart insulin pen. A phased European launch of Simplera began during the European Association for the Study of Diabetes (EASD) 59th Annual Meeting in the first week of October 2023.

January 2024 saw CE mark approval for the MiniMed 780G insulin delivery system with the Simplera Sync disposable, all-in-one continuous glucose monitor (CGM), which requires no fingersticks or tape. Simplera Sync has a two-step insertion process and is half the size of Medtronic’s previous sensors. It’s indicated for patients aged seven and up and is compatible with both iOS and Android. According to the company, Simplera Sync can be applied in under 10 seconds. It became available in Europe in a limited release in spring 2024 and a phased commercial European launch is expected this summer.

The remainder of the company’s sales are categorized as its “other operating segment.” This includes historical operations and ongoing transition agreements from businesses, which last year included Medtronic’s ventilator product line and renal care solutions business. Medtronic revealed the decision to exit its ventilator product line and combine remaining patient monitoring and respiratory inventions business into acute care and monitoring in February 2024. The “other” segment reported $221 million in sales.

The company also weathered a pair of recalls during its FY 2024. The first, for a software glitch in its StealthStation S8 Application Version 2.0 and 2.0.1, took place in September and was marked Class I in December. The glitch can cause surgical data to shift location after the initial test is changed, causing plan data to be in an unintended location for the procedure. The recall was a correction, not a removal, and has not yet resulted in injuries or deaths.

The second recall began on Jan. 22 and was deemed Class I in March, this time for the company’s Duet external drainage and monitoring system (EDMS) catheter tubing. It was recalled because of the risk of disconnection from the patient line stopcock connectors. If this happens, risks to patients include infections, cerebrospinal fluid leakage, over drainage of cerebrospinal fluid, and abnormality of the ventricles. Twenty-six injuries were reported due to this issue, with no reports of death at present.

$31.23 Billion
Prior Fiscal: $31.69 Billion
Percentage Change: -1.4%
R&D Expenditure: $2.7B
Best FY23 Quarter: Q4 $8.54B
Latest Quarter: Q4 $8.54B
No. of Employees: 95,000

In the 2017 MPO Top Company list, Medtronic usurped the top spot from the leader at that time, J&J, to become the largest medical device manufacturer in the world (by revenue). Fast-forward to this year’s list and readers were greeted by a different company in the lead position—Abbott Laboratories. By a mere $40 million in sales (approximately), the two were separated—seemingly a large amount but not against the backdrop of each firm posting over $31 billion in revenue for their most recent fiscal years.

Had Medtronic enjoyed even a flat financial year, it would have secured the top spot by several hundred million over Abbott. Instead, the company posted a relatively small 1.4% decrease compared to its 2022 total. That, however, was enough to move it into second place. Whether it remains there or retakes the pole position in the next annual list will be revealed in 12 months.

Perhaps it should come as little surprise this is the year Big Blue surrendered its position atop the medtech mountain. Compared to previous fiscal periods, its latest was relatively quiet. M&A activity was less than a typical year, the product announcements seem to be fewer than in past reports, and the biggest news for the company during the financial period involved an announcement that it would streamline its clinical scope with the decision to shed the combined Patient Monitoring and Respiratory Interventions units.

A part of the Medical Surgical unit, the Patient Monitoring and Respiratory Interventions businesses would be spun out into a new company entity (yet to be named), rendering parent Medtronic free to focus its attention on higher-growth markets and revenue acceleration.

The combined businesses would tally anticipated worldwide sales figures in the neighborhood of $2.2 billion, based on the firm’s 2022 fiscal. The units would be equipped with a number of recognizable brands upon which to build its future business. The Patient Monitoring portion includes Nellcor pulse oximetry, Microstream capnography, BIS brain monitoring, INVOS perfusion monitoring, and HealthCast connected care solutions.

The robust portfolio of Respiratory Interventions boasts Puritan Bennett ventilators, Shiley airway portfolio, McGrath MAC video laryngoscopy, DAR breathing systems, as well as PAV+, NIV+, and IE Sync ventilation software solutions.

“We are executing on our portfolio management strategy, taking action to create value for Medtronic and our shareholders. This separation will allow Medtronic to focus our company and our capital on opportunities better aligned with our long-term strategies to accelerate innovation-driven growth, and will position NewCo to unlock value. Independently, NewCo will be a leading connected care company with a compelling leadership position, attractive margins, and potential for growth acceleration with increased investment and dedicated capital allocation,” said Geoff Martha, chairman and CEO of Medtronic. “Looking ahead, we remain focused on active portfolio management with an ongoing process of evaluating potential additions and subtractions to further accelerate Medtronic’s growth over the long-term.”

At the time of the announcement, which was made in October 2022, it was anticipated the separation would be finalized in roughly 12 to 18 months.

While that plan could ultimately be what materializes and the industry will bear witness to the formation of a new multi-billion dollar medtech firm, there could be another pathway for the two businesses. According to a December Bloomberg article, which cited “people familiar with the matter,” Siemens Healthineers and GE HealthCare both expressed interest in acquiring the units. Further, multiple private equity firms have also inquired about the availability of the spun-out segments. It was reported Medtronic was open to such discussions, but nothing has been made public to indicate the original plan was not still in place. If such a sale was to occur, the Bloomberg article put the value of the transaction at around $7 billion.

Such a sale would represent a greater dollar figure than any of the recent M&A moves Medtronic made to bring in firms and technologies in recent years, including those during its latest fiscal. One such deal involved the completion of the Intersect ENT purchase, which was originally announced August 2021. The buy included the firm’s PROPEL and SINUVA sinus implant product lines and technology, intellectual property, and Menlo Park, Calif., facility. At the time of the close, Intersect ENT’s Fiagon brand (which includes the Cube navigation system and VenSure balloon sinus dilation system) was divested to Hemostasis LLC as required by the FTC.

ANALYST INSIGHTS: As anticipated in my comments last year, MDT began to make portfolio moves by announcing the spin-off of its ~$2 billion Respiratory and Monitoring group. This business unit originally came from Covidien. Due to its ventilation products (capital equipment), this market segment was never a good strategic fit for one of the world’s largest disposable medical device companies. Look for a large strategic (e.g., GE, Siemens, Philips) to purchase this business unit. The only question is, “Will it be before or after it is spun out of MDT?”

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

Medtronic also closed another deal that had similarly been announced during its previous fiscal. Affera, a company that provides cardiac ablation technologies, was brought into the fold. Its portfolio included a cardiac mapping and navigation platform that encompasses a differentiated, fully integrated diagnostic, focal pulsed field and radiofrequency ablation solution. Known as the Affera Prism-1 cardiac mapping and navigation platform, the system was compatible with Medtronic and multiple, competitive therapeutic catheters and technologies.

The deal also added the Sphere-9 cardiac diagnostic and ablation catheter, which enables the rapid creation of detailed electro-anatomical maps and delivers radio frequency and pulsed field cardiac ablation therapies, to Medtronic’s offerings. Additional Affera pipeline products such as the Arc-10 coronary sinus diagnostic catheter and Sphere PVI ablation catheter—a single shot device that delivers pulsed field ablation energy—were also included.

The only new M&A activity announced during the latest fiscal involved a co-promotion agreement with CathWorks, which set the wheels in motion for a possible acquisition. The privately held Israeli firm aims to transform how coronary artery disease is diagnosed and treated. As part of the agreement, Medtronic would invest up to $75 million and immediately begin co-promotion of CathWorks’ FFRangio System in the U.S., Europe, and Japan, where it is commercially available.

As part of a separate agreement, Medtronic will have the option to acquire CathWorks once certain undisclosed milestones are met. CathWorks will also have the right to compel Medtronic to acquire the company if Medtronic chooses not to exercise its option. The acquisition option agreement will expire in July 2027, with an estimated acquisition of up to $585 million and potential undisclosed earn-out payments post-acquisition. Medtronic has held a minority investment in CathWorks since 2018.

That partnership represented just one of several established by Medtronic to help spur revenue streams beyond its own product launches. In May 2022, the organization teamed with DaVita to form an independent kidney care-focused medical device company to enhance the patient treatment experience and improve overall outcomes. With technology expertise from Medtronic and kidney care experience from DaVita, the new entity would be positioned to advance the development of differentiated therapies for patients with kidney failure, including those used within the home.

Mozarc Medical, as it would be named upon its launch in April 2023, would be co-owned by Medtronic and DaVita, each with equal equity stakes, and led by an independent management team. Further, it would operate as an independent company governed by a six-person board of directors composed of two directors each from Medtronic and DaVita, and two independent directors.

“Mozarc Medical’s focus will be on meaningful and innovative kidney health technologies that improve the overall patient experience and increase access to care globally,” Ven Manda, CEO of Mozarc Medical, said upon its launch announcement. “At a time when patient preferences are evolving and in-home kidney care is on the rise, Mozarc Medical is uniquely positioned to better serve patients with kidney disease around the world.”

An exclusive U.S. distribution partnership brought BioIntelliSense into the mix in August 2022. Its BioButton wearable offers up to 1,440 vital signs measurements daily, monitoring patients transitioning from higher to lower acuity settings. The technology is a good fit for Medtronic’s Patient Monitoring business as it gains U.S. hospital and 30-day post-acute hospital home distribution rights to the BioButton. [It will be interesting to see if this moves to the spinout organization when that occurs.] The partnership enables the Medtronic Patient Monitoring business to offer access to a medical grade device that provides continuous vital sign measurements of general care patients in-hospital as well as post-discharge. Terms of the deal were not disclosed.

As stated, many of the M&A and partnership transactions were undertaken presumably to spur revenue growth for Big Blue, which experienced a relatively mediocre year. In fact, the 2020 pandemic year aside, it was the first year-over-year percentage loss for the organization in quite some time. While many of those previous fiscals reported modest, single-digit gains, they were still in the right direction. The latest fiscal’s decrease of 1.4% was not.

Still, the firm’s $31.23 billion in net sales total keeps it in rare territory, as it remains one of only two medtech companies to crack the $30 billion mark (with Abbott joining the club in the 2022 reports). Further, it remains a leader in a number of clinical segments and is unlikely to remain as quiet as it was during its latest fiscal year (relatively speaking).

The company’s largest business segment, Cardiovascular, saw a small 1% bump to tally $11.57 billion for the 12 month period, credited primarily to strong sales of Micra, TAVR, and diagnostics. Within that unit, the Cardiac Rhythm & Heart Failure business led all of the sub-sectors with a sales total of $5.84 billion, reflecting a 1% decrease. Structural Heart & Aortic boasted the largest gain over the prior fiscal with a 10% rise to reach $3.63 billion. Rounding out the trio of businesses within the segment was Coronary & Peripheral Vascular, which shrank by 3% to end at $2.38 billion.

Again, looking to the future, the segment made a number of product announcements seeking to increase market share and revenue streams to achieve future growth.

• FDA approval for the Onyx Frontier drug-eluting stent; used for the treatment of patients with coronary artery disease and designed with an enhanced delivery system.
• FDA clearance for the LINQ II Insertable Cardiac Monitor (ICM) for use in pediatric patients over the age of 2. The system is a small, wireless ICM for patients with abnormal heart rhythms who experience infrequent symptoms including dizziness, palpitations, fainting, and chest pain, thereby requiring long-term monitoring or ongoing management.
• FDA approval for expanded labeling of a cardiac lead (SelectSecure MRI SureScan Model 3830) that taps into the heart’s natural electrical system, giving patients needed therapy while avoiding complications sometimes associated with traditional pacing methods, such as cardiomyopathy
• CE Mark for the Aurora EV-ICD MRI SureScan and Epsila EV MRI SureScan defibrillation lead to treat dangerously fast heart rhythms that can lead to sudden cardiac arrest.
• CE Mark for the Affera Mapping and Ablation System, which includes the Sphere-9 Catheter and the Affera Prism-1 Mapping Software. Together, the full system maps and ablates atrial arrhythmias and provides real-time feedback through its intuitive mapping and navigation software.

The Diabetes business also saw a loss (-3%) compared to the company’s prior fiscal, closing its books at $2.26 billion. It also made headlines, however, with several technology announcements of its own.

• Introduction of a new program called My Insights, exclusively developed for individuals using the MiniMed 770G system. Leveraging the user’s data, My Insights relies on data science to provide personalized tips, trends, and reminders patients can use to help with their diabetes management goals.
• U.S. launch of the Medtronic Extended infusion set—the first and only infusion set labeled for up to seven-day wear, according to the company. An infusion set is tubing that delivers insulin from an insulin pump to the body and typically requires a set change every two to three days.
• FDA approval of the MiniMed 780G system with the Guardian 4 sensor requiring no fingersticks while in SmartGuard technology. The system was developed with meal detection technology, which provides automatic adjustments and corrections to sugar levels every five minutes. It provides insulin to help account for when users occasionally forget to bolus or underestimates the number of carbs in their meal.
• Resolution of an FDA warning letter received at the company’s Diabetes headquarters in Northridge, Calif., in December 2021. The resolution of the warning letter follows ongoing remediation actions from the company and proactive actions to continue to strengthen its quality systems.

Unfortunately, the unit did have some bad news in the form of a cybersecurity concern over its MiniMed 600 Series insulin pump system. According to a Reuters article, the FDA issued a warning that the device could be vulnerable to cyberattacks and insulin delivery could be affected through unauthorized access of the product. Medtronic shared in alerting users of the technology to the problem and also provided a recommended solution—permanently turning off the “Remote Bolus” feature.

Within the Medical Surgical segment, unfortunately all aspects saw diminished sales figures. Overall, the unit was down by 8%, which was reflected in a $8.43 billion total. This was primarily blamed on unfavorable currency impact of $454 million, provincial volume-based procurement stapling tenders in China, and a decline in ventilator sales due to the high COVID-19 demand in the prior fiscal. Individually, the two businesses—Surgical Innovations and Respiratory, Gastrointestinal, & Renal—fell 7% and 10% respectively. Surgical Innovations closed its books at $5.66 billion while Respiratory, Gastrointestinal, & Renal dropped to $2.77 billion.

The losses didn’t dissuade the businesses from generating positive news regarding its offerings, however.

• Cosmo Pharmaceuticals and NVIDIA announced a plan to integrate NVIDIA’s AI technologies into the GI Genius intelligent endoscopy module—an AI-assisted colonoscopy tool to help physicians detect polyps that can lead to colorectal cancer. With the addition of NVIDIA’s Holoscan and IGX technologies, Cosmo also announced it was introducing an Innovation Center website, enabling third-party developers with a cloud-based platform to efficiently train and validate their own AI models with the intent to eventually distribute them through the GI Genius module. GI Genius is marketed worldwide by Medtronic.
• News regarding Medtronic’s robotic surgery system, Hugo, generated multiple headlines. The first patient was enrolled in the company’s Expand URO U.S. clinical trial, a urologic-centric study. Hugo also gained access to new regions as well as expansion approvals. These included a CE Mark for general surgery indication; a Health Canada licence for general laparoscopic surgery indication; and a Ministry of Health, Labor, and Welfare approval for urological and gynecological indications in Japan.

The last of Medtronic’s four segments, Neuroscience, presented an up-and-down financial tale. On the whole, the business was up 2% to add $8.96 billion to the company’s coffers. The net sales increase was primarily due to growth in U.S. Core Spine, Neurovascular, ENT, and continued supply risk mitigation. Individually, however, the three sub-sectors all provided different results. Cranial & Spinal Technologies was flat year-over-year to post a contribution of $4.45 billion. Specialty Therapies gained 9% over the prior fiscal, reflected by a $2.82 billion figure. In contrast, Neuromodulation shrank by 2% for a $1.69 billion tally.

The lone product news originating from this segment was with regard to the launch of a Neurovascular Co-Lab Platform. This offering was designed to accelerate urgently needed innovation in stroke care and treatment. The platform is intended to advance technology concepts that have the highest potential to positively impact stroke patients. Through this solution, innovators, entrepreneurs, and physicians gain the ability to collaborate, enhance, and share their breakthrough concepts and products.

$31.69 Billion
Prior Fiscal: $30.12 Billion
Percentage Change: +5%
R&D Expenditure: $2.7B
Best FY22 Quarter: Q4 $8.09B
Latest Quarter: Q4 $8.09B
No. of Employees: 95,000

Medtronic has been atop the MPO Top Companies list for some time now. In 2017’s list, it became the largest medical device manufacturer in the world (by revenue) and has not surrendered the spot since. In October 2021, the company announced a “bold new look” to better reflect that position and its desire to remain as the leading medtech organization going forward.

As part of this announcement, CEO Geoff Martha sat down for a video interview to outline a number of important factors critical to Medtronic’s strategy moving forward. He covered topics including robotics in healthcare, innovative diagnostic technologies, and working with tech industry leaders.

“We are at a pivotal moment in human health. Healthcare budgets are severely stressed, access to quality care is limited, and pervasive systemic healthcare inequities remain for too many,” said Martha.

“Technology will be part of the solution to drive better outcomes for our world and dismantle global disparities in healthcare.”

Another part of this brand refresh involved adding the tagline “Engineering the extraordinary.” The message is said to be a “call to action” to all employees of the organization. Regardless of title, they should try to help drive better outcomes around the globe. In addition to the tagline, the company updated its Medtronic Symbol, which has only changed a few times since Medtronic’s founding approximately 60 years ago.

ANALYST INSIGHTS: Expect management and portfolio disruption in the next 12 months at MDT. Hit by underperformance in their diabetes unit, significant delays in their robot solution market launch timelines, and large supply chain issues in 2022, CEO Geoff Martha needs to shake things up in the next 12 months to improve (Wall) “Street Cred” as industry analysts are expressing disappointment in MDT recent performances. Perhaps some leadership changes, maybe a spin-off of their diabetes business (or another division), or a major M&A…be watching for something to happen (and sooner than later).

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

“Medtronic’s brand must be intentionally and thoughtfully tied to our business objectives and strategy. Our new brand reflects our goal to become the leading healthcare technology company and a cornerstone for societal change,” said Torod Neptune, senior vice president and chief communications officer. “We’ll think about healthcare differently and push that change forward by going beyond our medical devices that already serve millions. We will engineer extraordinary, next-generation healthcare technology—and enable access to that technology for populations all around the world.”

Big Blue will work to hold its leadership position within the medtech space via a number of means, including organic internal development, tactical partnerships, and strategic M&A. With regard to acquisitions, the company wasn’t too active in its latest fiscal year in terms of volume, but with an average price tag of $1 billion for each, its pair of purchases were certainly significant.

In August 2021, it was announced Medtronic was buying Intersect ENT, a global provider of medtech solutions for ear, nose, and throat. The purchase involved the acquisition of all outstanding shares of the company for $28.25 per share, which translated to an enterprise value of approximately $1.1 billion.

The buy brought Intersect ENT’s portfolio of products into the fold, which included PROPEL and SINUVA sinus implants. These innovations are clinically proven solutions that open sinus passageways and deliver an anti-inflammatory steroid to aid in healing. It was stated by Medtronic that by combining these products with the organization’s navigation, powered instruments, and existing tissue health products, a broader suite of solutions could be offered to assist surgeons treating chronic rhinosinusitis patients.

The transaction was completed just a couple weeks following the close of the ’22 fiscal.

The second deal, publicized in January 2022, involved Affera—a privately held developer and manufacturer of cardiac mapping and navigation systems as well as catheter-based cardiac ablation technologies. Although the firm had no products on the market at the time of the announcement, its Affera Prism-1 cardiac mapping and navigation platform and Sphere-9 cardiac ablation catheter provided Medtronic with investigational technologies designed to enable rapid creation of detailed maps used by electrophysiologists (EP) to diagnose arrhythmias and deliver cardiac ablation therapy, respectively.

“The EP ablation market is an exciting and fast-moving segment of cardiology,” said Rebecca Seidel, president of the Cardiac Ablation Solutions business, part of the Cardiovascular Portfolio at Medtronic. “Bringing Affera into our organization, with our established footprint in the cardiac ablation space, will strengthen our ability to provide innovative therapies and enable Medtronic entry into additional EP technology segments, such as mapping and navigation, for the first time.”

The deal was reported to be valued at $925 million, which included $250 million to be paid upon the completion of unnamed contingent factors.

Embarking on the aforementioned partnerships led to cooperation with several other firms. One such agreement involved Medtronic entering into a contract with Vizient to add the former’s Touch Surgery Enterprise to the latter’s offerings. A fully integrated hardware and software system connected to the cloud, Touch Surgery Enterprise works easily with many laparoscopic and robotic scopes, enabling hospitals to take the first step to digitizing their OR while leveraging existing equipment. Vizient is dedicated to helping healthcare organizations improve their performance and serves more than half the United States’ acute care providers, including academic medical centers, community hospitals, pediatric facilities, and non-acute care providers.

Another arrangement saw collaboration between Big Blue and Mpirik, a provider of a suite of software including cloud-based, automated patient screening, and care pathway management for cardiovascular disease, patient communication, and data collection/analysis platform. In this situation, a pilot program was announced to address disparities in care associated with the prevention of sudden cardiac arrest (SCA). The collaboration, which also involved Vizient, sought to identify patients at higher risk for SCA, and identify them earlier in their care journey.

Still another agreement made bedfellows of Medtronic and another MPO Top Company—GE Healthcare. The two announced a collaboration focused on the unique needs and demand for care at ambulatory surgery centers (ASCs) and office-based labs. The goal was to enable customers to be able to access extensive product portfolios, financial solutions, and personal service. Given the high costs and complexities associated with expanding an existing ASC or building a new one, the deal provides the most relevant offerings from each organization to the care facilities.

These initiatives help bolster the company’s continued growth, which has been relatively positive in recent years (pandemic setbacks aside). In its latest fiscal, the company held its top spot with a revenue take of $31.69 billion. This figure represented a 5% gain over the previous 12-month period. This was attributed primarily to the return of procedures compared to the volume experienced in the first and second quarters of the 2021 fiscal year. It was also noted, however, that supply chain issues (especially in the fourth quarter) prevented a greater increase from being achieved.

Within the organization’s largest segment—Cardiovascular—positive single-digit gains were seen across all businesses. As such, the whole unit rose 6% over the previous fiscal. Similarly, the Cardiac Rhythm & Heart Failure portion also grew by 6% to tally $5.91 billion in revenue. This was a result of growing sales of several products, but offset somewhat with the loss of HVAD system sales due the decision to eliminate the availability of the product as of June 2021.

Sister business, Structural Heart & Aortic, was up 8% to contribute $3.06 billion to the firm’s coffers. Continued adoption of the CoreValve Evolut (a transcatheter aortic valve replacement technology) and strong sales of Extra-Corporeal Life Support (ECLS) devices were credited as the reason for the growth.

Rounding out the segment, Coronary & Peripheral Vascular blossomed 5% to offer $2.46 billion to the organization’s revenue total. This was driven by strong performance of the Abre venous self-expanding stent system for Deep Venous disease, as well as the company’s superficial venous product portfolio, including the VenaSeal and ClosureFast systems.

The Cardiovascular segment’s product offerings also generated a fair number of headlines:

• • CE mark for the Evolut PRO+ TAVI System, which includes four valve sizes with an external pericardial tissue wrap that provides advanced sealing for the largest annular range (for self-expanding TAVI technology) on the market (at the time of the announcement).

• • U.S. FDA expanded approval for the Arctic Front Family of Cardiac Cryoablation Catheters for treatment of recurrent symptomatic paroxysmal atrial fibrillation as an alternative to antiarrhythmic drug therapy as an initial rhythm control strategy.

• • Launch of the Prevail drug coated balloon (DCB) catheter in Europe following CE mark. The Prevail DCB is used during percutaneous coronary intervention procedures to treat narrowed or blocked coronary arteries in patients with coronary artery disease.

• • U.S. FDA clearance for two AccuRhythm AI algorithms for use with the LINQ II insertable cardiac monitor. AccuRhythm AI applies artificial intelligence to heart rhythm event data collected by LINQ II, improving the accuracy of information physicians receive so they can better diagnose and treat abnormal heart rhythms.

• • U.S. FDA approval of a self-expanding transcatheter aortic valve replacement (TAVR) system—the Evolut FX TAVR system. Designed to enhance ease-of-use and provide greater precision and control, the technology maintains the hemodynamic and durability benefits of the Evolut platform for patients with symptomatic severe aortic stenosis.

• • National Medical Products Administration approval of the CoreValve Evolut PRO TAVR system for the treatment of severe aortic stenosis for symptomatic patients in China who are at high or extreme risk for open heart surgery.

• • Approval from Japan’s Ministry of Health, Labor and Welfare for the sale and reimbursement of the Micra AV Transcatheter Pacing System, as well as the product’s launch.

• • FDA approval of the Freezor and Freezor Xtra Cardiac Cryoablation Focal Catheters to treat the growing prevalence of pediatric Atrioventricular Nodal Reentrant Tachycardia—a life-threatening abnormal heart rhythm.

The second largest segment, Medical Surgical, enjoyed a 5% gain over the previous fiscal to add $9.14 billion to the 12-month total. The two businesses that compose this unit reflect sales at a 2:1 ratio, with Surgical Innovations representing the larger portion. One of only two Medtronic divisions to achieve double digit growth, it rose 11% to close at $6.06 billion. It was reported that the primary cause was increased Advanced Surgical instruments sales.

Conversely, Respiratory, Gastrointestinal, & Renal shrank (one of only two divisions to do so) by 7%. The loss was largely due to declines in ventilator demand as compared to fiscal year 2021.

Seeking to attempt to limit the chance of future decreases, the Medical Surgical segment was quite active in announcements around innovation being developed and launched.

• • U.S. commercial launch of the SonarMed airway monitoring system. This innovation utilizes acoustic technology to check for endotracheal tube obstruction and verify position in real-time, giving clinicians vital information required to make more informed, life-saving decisions for their smallest patients.

• • U.S. FDA clearance of the INVOS 7100 cerebral/somatic oximetry system for children from birth through age 18. The system picks up key signals to inform time-critical decisions by pediatric clinicians related to hemodynamic management, ventilation, and resuscitation for premature infants, neonates, children, and other patients treated by pediatric clinicians.

• • U.S. FDA clearance of the PillCam Small Bowel 3 system for remote endoscopy procedures. The PillCam SB3 @HOME program combines Medtronic’s PillCam technology with Amazon logistics—a combination intended to ensure both timely and accurate results for patients from the comfort of their homes.

• • The Hugo robotic-assisted surgery system made its worldwide clinical debut in Santiago, Chile, in June 2021. The first procedure—a prostatectomy—was performed by Dr. Ruben Olivares at Clinica Santa Maria. A month after the debut, the Hugo was used in the first gynecological procedures (including hysterectomies and myomectomies), which took place in Panama. Then, in September, the first procedure was performed in Asia-Pacific (India), also a prostatectomy. CE mark approval was gained a month later followed by the first clinical procedure on the European continent when a prostatectomy was performed in Belgium in February 2022.

The next segment, Neuroscience, enjoyed a 7% rise to finish the fiscal at $8.78 billion, which was funded by its three divisions. The largest, Cranial & Spinal Technologies, ballooned by 4% to increase the firm’s total by $4.46 billion. This gain was primarily bolstered by strong sales of the Midas Rex-powered surgical instruments and StealthStation Navigation and O-arm Imaging System.

Specialty Therapies, Medtronic’s other double-digit growth division, saw a 12% gain to offer $2.59 billion in contributed revenue. The additional sales were driven by the strength of Pelvic Health (InterStim Micro neurostimulator and SureScan MRI leads), ENT (StealthStation ENT Navigation System), and Neurovascular (flow diversion, hemorrhagic stroke, and liquid embolic products) offerings.

The last of the trio, Neuromodulation, ended the fiscal up 8% due to growth of both Pain Therapies and Brain Modulation and also reflected a recovery in procedural volumes. The business provided $1.74 billion to the firm’s financials.

Similar to its peers, the Neuroscience segment provided insights on a number of products.

• • U.S. FDA approval and first U.S. implants of the SenSight Directional Lead System used for deep brain stimulation (DBS) therapy. SenSight is a DBS directional lead that combines the benefits of directionality with the power of sensing, allowing physicians to deliver precise, patient-specific DBS therapy for the treatment of some symptoms associated with movement disorders.

• • Deployment of the CareGuidePro, a mobile application and web portal that serves as a virtual guide for patients throughout their Medtronic spinal cord stimulation therapy journey. The patient’s care team, including physicians and Medtronic, may also use the platform to help manage and support the patient’s experience with spinal cord stimulation.

• • U.S. FDA approval of Vanta, a high performance recharge-free implantable neurostimulator with a device life that can be optimized up to 11 years. At comparable settings, the Vanta neurostimulator offers nearly twice the device life than competitive primary cell devices.

• • CE mark approval of the company’s radial artery access portfolio, which includes the Rist 079 Radial Access Guide Catheter and Rist Radial Access Selective Catheter. The Rist 079 is specifically designed for the unique demands of accessing the neurovasculature through the radial artery versus access through the transfemoral artery.

• • U.S. FDA approval of the Intellis rechargeable neurostimulator for the treatment of chronic pain associated with diabetic peripheral neuropathy (DPN). DPN is a debilitating and progressive neurological disorder that affects approximately 30% of people with diabetes.

• • U.S. FDA approval of the InterStim X recharge-free device, provided for advanced therapy options and the most personalized system to deliver sacral neuromodulation therapy.

• • U.S. launch of the NuVent Eustachian tube dilation balloon for the treatment of chronic, obstructive Eustachian Tube Dysfunction. The balloon enables surgeons to deliver treatment in an outpatient or office setting.

The uniquely focused Diabetes segment diminished by 3% in the 2022 fiscal, finishing at $2.34 billion for the 12-month period. A decrease in U.S. sales was the cause attributed to the loss.

The firm was proactive, however, in its approach to stimulating future gains through new offerings to the market. It offered information on several of these projects.

• • CE mark for expanded functionality of the company’s InPen smart insulin pen for multiple daily injections. The InPen is integrated with real-time continuous glucose monitoring (CGM) via one convenient smartphone app. The system automatically records insulin doses, tracks active insulin, and recommends mealtime and correction doses based on an auto-populated bolus calculator.

• • CE mark for the Guardian 4 sensor, which requires no fingersticks for calibration or diabetes treatment decisions. The approval allows the sensor to be integrated with either the MiniMed 780G insulin pump system or InPen, or for stand-alone CGM use.

$30.12 Billion
Prior Fiscal: $28.93 Billion
Percentage Change: +4%
No. of Employees: 90,000

Medtronic’s 2021 fiscal period marked quite the debut for its new CEO. Although taking a spot on the Board of Directors in November 2019, the firm’s latest fiscal (which began April 27, 2020) marked Geoff Martha’s first full 12-month recorded financial period at the helm of the world’s largest medical device manufacturer.

Not only did he help the organization navigate the challenges brought on by a worldwide pandemic, but Martha also steered the company to revenues of over $30 billion for only the second time in its history. More impressive still, that final tally came after a 13 percent decrease in Q1 and a 1 percent drop in Q2 when compared to the same periods during its 2020 fiscal.

Perhaps a beneficiary of the unusual timeframe the firm uses for its fiscal year (a nod to its founding; always ends on the last Friday of April), the organization saw a return of pre-COVID level sales during its fourth quarter, which rose an astounding 37 percent over the prior year.

“We reported a strong end to our fiscal year, with our fourth quarter results demonstrating continued momentum. Our recovery improved throughout the quarter, with most of our markets returning to near normal, pre-COVID growth rates,” said Martha. “In addition to supporting our employees, customers, and communities during the pandemic, we accomplished important milestones, including launching new products, investing in our pipeline, and changing our operating model, just to name a few. As we look ahead, these actions set us up to drive accelerated revenue growth in the year ahead and over the long term.”

Once the dust settled, Big Blue found itself with revenues 4 percent higher than the previous fiscal. The rise saw the company’s coffers grow from $28.91 billion in 2020 to $30.12 billion in 2021.

The change in operating model Martha referenced in his statement regarding the fourth quarter had no impact on the company’s reportable segments, but it did establish new labels for its business groups. Put into effect on Feb. 1, the new model reflected the company’s segments as clinical portfolios rather than groups. The new names are Cardiovascular Portfolio (formerly Cardiac and Vascular Group), Neuroscience Portfolio (formerly Restorative Therapies Group), Medical Surgical Portfolio (formerly Minimally Invasive Therapies Group), and Diabetes Operating Unit (formerly Diabetes Group).

Many of those units saw increases year-over-year in net sales. Cardiovascular, consistently Medtronic’s largest portfolio, gained 3 percent as it went from $10.47 billion to $10.77 billion. Within that segment, Cardiac Rhythm & Heart Failure topped sales totals (as well as throughout the company among all sub-segments). It also enjoyed the second largest percentage gain companywide at 9 percent. The segment contributed $5.58 billion (vs. $5.14 billion in 2020) to the company’s total sales.

The other two segments of Cardiovascular, unfortunately, did not see near the success. Structural Heart & Aortic was flat against the previous fiscal, finishing at $2.83 billion (a decrease of only $8 million compared to the prior year). Coronary & Peripheral Vascular, on the other hand, saw a loss of 5 percent (the largest in the company), falling from $2.49 billion to $2.35 billion.

Medical Surgical, the second largest portfolio, tallied $8.74 billion in 2021’s fiscal, up 5 percent from $8.35 billion. Comprising that business is Surgical Innovations, which was the only sub-segment that experienced a loss compared to the prior year, and Respiratory, Gastrointestinal, & Renal, which had the highest percentage gain of all divisions at 16 percent. Translated to real figures, Surgical Innovations shrank from $5.51 billion to $5.44 billion. Conversely, Respiratory, Gastrointestinal, & Renal ballooned from $2.84 billion to $3.30 billion.

Just behind that segment in total revenue was Medtronic’s Neuroscience portfolio, which enjoyed 6 percent growth ($7.73 billion to $8.20 billion). Cranial & Spinal Technologies reported the highest dollar revenue contribution at $4.29 billion (compared to $4.08 billion in 2020), but that reflected the lowest percentage increase at 5 percent within the segment. Specialty Therapies and Neuromodulation both achieved a 7 percent gain, finishing at $2.31 billion (versus $2.15 billion) and $1.60 billion (versus $1.50 billion) respectively.

Diabetes enjoyed a modest 2 percent rise over the previous period, going from $2.37 billion to $2.41 billion.

ANALYST INSIGHTS: Under Geoff Martha’s leadership, MDT has continued to refocus its portfolio. While streamlining core products to gain higher margins, Martha has stopped selling its HVAD products while preparing to launch its Renal Denervation technology. Most importantly, MDT is pumping huge money into its HUGO RAS (Robotic Assisted Surgery) as it begins its assault on Intuitive Surgical and their Robotic footprint. Let the “battle of the robots” begin.

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

In addition to the aforementioned operating model changes, Medtronic also saw some revisions at its upper leadership level. In an expected move, former CEO Omar Ishrak continued his separation from the medtech giant with the announcement that he would retire from his position as executive chairman and chairman of the board on Dec. 11, 2020.

“I am excited about the future of the company, and I am certain that under Geoff’s leadership and the collective guidance of the Board of Directors, Medtronic will reach new heights,” said Ishrak. “The Medtronic Mission provides the company with a true and genuine sense of purpose, which the leadership of the company has followed diligently for over 60 years. I know that continued adherence to the guiding principles embodied in the six tenets of the Mission will ensure long-term success.”

Also in December 2020, it was announced Sean Salmon, executive vice president and president of Diabetes, would serve double duty as he took on the role of president of Cardiovascular. The position became vacant upon the departure of its former president, Mike Coyle, who left at the end of the year. Coyle went to iRhythm to serve as its CEO, but left after only five months into the job, citing personal reasons for his exit. Whether Salmon will remain as the head of both segments remains to be seen.

As always seems to be the case with Medtronic, the changes didn’t stop there. The company made several strategic acquisitions to help strengthen its offerings in key areas. In July 2020, the organization announced it would purchase Medicrea for 7 euros per share (or approximately 139 million euros/$158 million). The transaction, which was finalized in November 2020, brought more than 30 510(k)-cleared or CE marked implant technologies utilized in spinal surgeries for adult deformity, pediatric deformity and degenerative disease to Medtronic. The deal was also expected to enhance Medtronic’s artificial intelligence and robotic surgery capabilities for spine procedures.

A month after the initial announcement of that agreement, Medtronic declared it was agreeing to terms that would bring Companion Medical into the fold. As manufacturer of the InPen, Companion offered the only U.S. FDA-cleared smart insulin pen system paired with an integrated diabetes management app on the market. According to a company statement, the acquisition of Companion Medical builds upon prior Medtronic strategic acquisitions, including Nutrino and Klue, that form the building blocks to design powerful algorithms leveraging the company’s deep data science and AI capabilities.

Wrapping up the trifecta of monthly M&A announcements, at the end of September, it was revealed that Avenu Medical would join the organization. Based in San Juan Capistrano, Calif., Avenu is focused on the endovascular (minimally invasive) creation of arteriovenous fistulae (AV) for patients with end-stage renal disease undergoing dialysis. Its Ellipsys Vascular Access System is a single-catheter, ultrasound-guided device that inserts a catheter percutaneously into the arm to create a durable AV fistula. The procedure is performed in the hospital outpatient department, ambulatory surgery center, or physician’s office. The device has been granted a CE mark and is FDA cleared.

When it wasn’t growing through a purchase, Medtronic still expanded its reach with strategic partnerships. One such arrangement made headlines as it addressed the need for ventilators during the COVID-19 pandemic. Like other medtech giants who coupled with non-traditional manufacturers to enhance its total production capabilities, Medtronic paired up with Foxconn Technology Group so the latter could produce Puritan Bennett 560 (PB560) ventilators in the U.S.

Vafa Jamali, senior vice president and president of the Respiratory, Gastrointestinal and Informatics business, said in June, “No single company can meet the current demands for ventilators that are critical in the fight against COVID-19. Joining together with Foxconn immediately increases our production capacity to meet the increased demand and creates a flexible manufacturing model for us.”

The two companies connected after Medtronic publicly shared the design specifications for the PB560 through the Medtronic ventilator open source initiative, which launched earlier in 2020.

In another arrangement, Medtronic partnered with Surgical Theater to allow an interface between the latter’s SyncAR augmented reality (AR) and Medtronic’s StealthStation S8 surgical navigation system. The end result is expected to enable neurosurgeons to use AR technology in real-time to enhance visualization during complex cranial procedures. Using fighter-jet simulation technology, the SyncAR platform allows surgeons to visualize structures in the brain, test virtual surgical tools, and plan surgeries before entering the operating room.

With a focus on future diabetes technologies, Blackstone Life Sciences—a private, global investment platform with capabilities to invest across the lifecycle of companies and products within the key life science sectors—invested $337 million in Medtronic. Under terms of the agreement, Medtronic will receive up to $337 million in funding over the next several years to fund four identified Diabetes R&D programs, which were not disclosed. Medtronic’s engineering, clinical, and regulatory teams will perform the development work to activate these programs. The funding received will be equal to the R&D expenses incurred. If successfully commercialized, Medtronic will pay royalties, which are expected to be in the low- to mid-single digit range as a percentage of sales.

Jumping to the robotic surgical space, Titan Medical announced it had entered into development and license agreements with Medtronic. The agreements provided for the development of robotic-assisted surgical technologies for use by both Titan and Medtronic in their respective businesses. Titan would receive a series of payments totaling up to $31 million for Medtronic’s license to such technologies, as technology milestones were completed and verified.

In still another unique pairing, Medtronic and The Foundry, a medical device company incubator, announced they had established a parternship that went back to mid-2017. This arrangement was established to invest in and create a company with the goal of developing an innovative transcatheter mitral repair technology (TMVr). The arrangement provided for structured investment tranches from both Medtronic and The Foundry and included an exclusive right for Medtronic to acquire the resulting company, Half Moon Medical. In 2020, Half Moon received U.S. FDA approval of an early feasibility study in patients with severe, symptomatic mitral regurgitation and expected first implants soon after the announcement.

Eliminating challenges around patent legalities, Medtronic and Tandem Diabetes Care Inc. entered into a non-exclusive patent cross-license agreement for certain technologies in the field of diabetes. Cross-licensing each other’s patent portfolios would enable both companies to focus on helping people with diabetes through innovation of future products and services, while avoiding the distraction of potential legal disagreements.

In order to address cybersecurity concerns with its pacemakers, Medtronic sought help from Sternum, an IOT cybersecurity startup out of Israel. The company, which had already helped secure approximately 100,000 of Medtronic’s devices by mid-April 2021, noted the cybersecurity issue was with the remote system used to update the devices. The solution involves an autonomous security system that provides protection without the need for updates or patches.

Medtronic also issued a bevy of product news releases on regulatory approvals and clearances as well as market launches. Following are a number of Big Blue’s announcements.

• • FDA Breakthrough Designation for the Emprint Ablation Catheter Kit, which is intended to be used in conjunction with the Emprint microwave generator and Medtronic lung navigation platform to provide a minimally invasive, localized treatment of malignant lesions in the lung.

• • FDA approval for Pipeline Flex Embolization Device with Shield Technology, which was to advance flow diversion therapy by introducing the first surface-modified implant device that demonstrates reduction in material thrombogenicity—a reduction in the tendency of the surface treatment material to create clots.

• • European launch of the world’s first infusion set, able to be worn up to seven days.

• • FDA approval of Breakthrough Device Designation (BDD) program product candidate Harmony Transcatheter Pulmonary Valve, the first minimally invasive therapy created to treat patients with a specific type of congenital heart defect of the right ventricle, which makes it difficult for blood to travel from the heart to the lungs.

• • CE mark for the SenSight directional lead system for deep brain stimulation therapy as treatment of symptoms associated with movement disorders and epilepsy.

• • Approved revised commercial labeling for the Intellis Platform with Differential Target Multiplexed programming for the treatment of chronic, intractable back and leg pain.

• • FDA approval for expanded MRI labeling of InterStim II and InterStim Micro sacral neuromodulation systems that use SureScan MRI leads, allowing for a wider range of MRI scan parameters and shorter wait time between MRI scans.

• • FDA approval of the DiamondTemp Ablation system, which treats patients with recurrent, symptomatic paroxysmal atrial fibrillation and who have been unresponsive to drug therapy.

• • U.S. commercial launch of the Carpediem Cardio-Renal Pediatric Dialysis Emergency Machine, indicated for use in acute kidney injury or fluid overloaded patients requiring hemodialysis or hemofiltration therapy. It is intended to provide continuous renal replacement therapy to patients weighing between 2.5 and 10 kilograms.

• • Launch of InPen integrated with real-time Guardian Connect CGM data. InPen is an FDA-cleared smart insulin pen on the market for people on multiple daily injections.

• • FDA 510(k) clearance of the NIM Vital nerve monitoring system, which enables physicians to identify, confirm, and monitor nerve function to help reduce the risk of nerve damage during head and neck surgery.

• • FDA approval for the Abre venous self-expanding stent system, indicated for use in the iliofemoral veins in patients with symptomatic iliofemoral venous outflow obstruction (i.e., deep venous obstruction).

• • U.S. launch of Adaptix Interbody System, the first navigated titanium implant with Titan nanoLOCK Surface Technology—a proprietary blend of surface textures on the macro, micro, and nano levels.

• • FDA approval and CE mark for new one-month of dual-antiplatelet therapy labeling with an expanded indication for high bleeding risk patients implanted with the Resolute Onyx Drug-Eluting Stent.

• • FDA BDD status for the TYRX Absorbable Antibacterial Driveline Wrap, which is intended to securely hold a percutaneous driveline in patients receiving a ventricular assist device.

• • FDA BDD status for the Intrepid Transcatheter Tricuspid Valve Replacement system in patients with severe, symptomatic tricuspid regurgitation—a disease in which the diseased, damaged, or malfunctioning tricuspid valve allows blood to flow back into the heart’s upper right chamber causing eventual heart failure or death.

• • FDA approval of the MiniMed 770G hybrid closed loop system, offering SmartGuard technology (as featured in the MiniMed 670G system), with the added benefits of smartphone connectivity and an expanded age indication down to 2 years old.

• • FDA approved revised commercial labeling for the Evolut TAVR platform that modified a precaution for the treatment of bicuspid severe aortic stenosis patients at a low risk of mortality during surgical aortic valve replacement.

• • U.S. launch of InterStim Micro neurostimulator for sacral neuromodulation therapy, which sends electrical impulses to the sacral nerves located in the lower back to improve bladder and bowel control. Also, FDA approval of InterStim SureScan MRI leads used with the Micro and with the recharge-free InterStim II, and allow full-body 1.5 and 3 Tesla MRI-conditional scans.

• • FDA clearance and CE mark approval for its LINQ II insertable cardiac monitor with remote programming, which enables clinicians to optimize device settings without the need for patients to return to the office or hospital.

• • FDA approval of the Percept PC Deep Brain Stimulation (DBS) system with BrainSense technology, which makes Percept the first and only DBS neurostimulation system with the ability to chronically capture and record brain signals while delivering therapy to patients with neurologic disorders associated with Parkinson’s disease, essential tremor, dystonia, epilepsy, or obsessive-compulsive disorder.

• • CE mark and European launch of the Evolut Transcatheter Aortic Valve Implantation (TAVI) system for patients with severe native aortic stenosis who are at a low risk of surgical mortality.

• • CE mark for the Micra AV Transcatheter Pacing System, the world’s smallest pacemaker with atrioventricular (AV) synchrony. Micra AV is indicated for the treatment of patients with AV block, a condition in which the electrical signals between the chambers of the heart (the atria and the ventricle) are impaired.

• • CE mark for the MiniMed 780G system, a closed loop insulin pump system for the treatment of Type 1 diabetes in people age 7 to 80 years old.

$28.91 Billion
Prior Fiscal: $30.56 Billion
Percentage Change: -5.0%
No. of Employees: 93,792

Last year, Medtronic made a significant announcement regarding a change in leadership. At the start of its next fiscal (which began April 27, 2020), the firm would have a new CEO in place. The previous chairman and CEO of the world’s largest medical device manufacturer—Omar Ishrak—would retire as its chief executive, but remain as part of the board as the newly created position of executive chairman as well as serving as chairman of the board. Ishrak held the CEO role for nine years, during which time Medtronic grew significantly.

“As Omar approaches the company’s mandatory executive officer retirement of 65 years of age next year, we have ensured Medtronic has the right leadership at the right time to advance its mission and deliver shareholder return through a seamless transition,” said Scott Donnelly, Medtronic’s lead director, and chairman, president, and CEO of Textron Inc. “The Board is extremely grateful to Omar for his outstanding leadership—as the company’s annual revenues have doubled and its market capitalization has increased by more than $100 billion during his tenure. We are confident Omar’s contributions to Medtronic will continue as executive chairman.”

During his tenure, Medtronic made the largest acquisition in medtech history when it bought Covidien in 2014 for $42.9 billion. The move was part of a redefined growth strategy that saw M&A used strategically to increase the company’s reach. Ishrak is also credited with inspiring the firm to embrace the concept of value-based healthcare, while also strengthening its position in emerging markets.

“Leading Medtronic as CEO is an honor and a privilege, and I know that Geoff is the right leader to take Medtronic to the next level of its growth and evolution. Geoff is a results-oriented, dynamic, and innovative business leader who is passionately committed to our mission, the advancement of our growth strategy, and the development and diversity of our people. I am confident he has the right track record, commitment, vision, and judgment to lead our company,” explained Ishrak.

The former CEO was referring to Geoff Martha, previously executive vice president (EVP) and president of the Restorative Therapies Group (RTG). Medtronic’s Board of Directors unanimously appointed Martha to assume the newly created role of president as of November 1, 2019. He would also be made a member of the board as of the same date. Then, at the start of the new fiscal, he would move into the CEO role.

“I’ve had the pleasure of working closely with Omar throughout his tenure,” said Martha. “I think I speak for all of us when I say we are tremendously grateful for his leadership over the past nine years, and for his steadfast commitment to the Medtronic Mission. He has provided us with a solid foundation on which to continue the journey.”

ANALYST INSIGHTS: MDT continues to operate generally under four main business units, focusing on more than 30 chronic diseases. They continue with acquisitions in all four business units. The acquisition of Digital Surgery, a surgical AI company, earlier this year follows on the heels of their 2019 acquisitions of AV Medical, Titan spine, Klue, and EPIC Therapeutics. Look for this trend to continue as connected health and telehealth have accelerated their rapid rise further with the arrival of the COVID-19 pandemic. MDT sees this change happening and will not be left behind.

—Mark Bonifacio, President, BCS LLC

Martha joined the organization in 2011 and was named EVP and president of Medtronic’s RTG in 2015. He reorganized the group around key therapy areas and helped to restore consistent sales growth. Martha oversaw a record performance in fiscal year 2019, contributing more than $8 billion in revenue to the firm. During the same period, the $2 billion quarterly average represented historic highs for the company.

Also moving into a new position, Brett Wall, who had been senior vice president and president of the Brain Therapies division of RTG, was promoted to EVP and group president of RTG in November. Wall made his way to Medtronic via the Covidien purchase, where he was president of Neurovascular and International. His 25 years of industry experience has seen him in roles including senior sales, marketing, and operational leadership positions with ev3, Boston Scientific, and C.R. Bard.

In another leadership move, the Diabetes Group gained a new head on October 21, 2019. Sean Salmon, previously senior vice president and president of Coronary and Structural Heart within the Cardiac and Vascular Group of Medtronic, was named EVP and group president of Medtronic Diabetes. He replaced Hooman Hakami, who left the firm after working there for five years. According to Ishrak, while under the oversight of Hakami, the business introduced the world’s first hybrid closed-loop insulin pump system—the MiniMed 670G System—and increased Diabetes Group revenue by over $700 million.

Salmon joined the organization in 2004 and spent 15 years in increasingly senior management roles. He led the firm’s entry into the drug eluting stent market. As president of Coronary and Structural Heart, Salmon led the Coronary and Renal Denervation, Cardiac Surgery, and Structural Heart business units and led numerous functions including Clinical, Regulatory, R&D, Quality, Health Economics & Reimbursement, Business Development, and Strategy.

These moves were announced during a time marred by Medtronic’s first down fiscal period in some time. The organization dropped from its previous record revenue high of $30.56 billion in its 2019 fiscal—the first time a medical device manufacturer topped the $30 billion mark. In 2020’s fiscal, all businesses and segments saw decreases with one exception to finish the period at $28.91 billion. The tally was just slightly above the revenue total for the firm’s 2016 fiscal.

ANALYST INSIGHTS: Another interesting note on MDT; in June 2020, Blackstone group’s life sciences division announced a $337M (USD) R&D investment into MDT’s diabetes device technologies. This is noteworthy as Blackstone’s investment looks to advance some specific programs. If successful, MDT will pay royalties to Blackstone (expected to be in the single digits, though not disclosed). For Blackstone’s life sciences division, the investment represents the first of its kind in the medical devices space. Soon after this announcement, MDT announced the positive results of its pivotal U.S. trial with their MiniMed AHCL, closed loop insulin pump. A long sought after “automating” of the delivery of both base-level insulin as well as correction doses to avoid high and lows.

—Mark Bonifacio, President, BCS LLC

The Cardiac and Vascular Group led all four of Medtronic’s businesses with $10.47 billion, a 9 percent drop over the previous fiscal. Leading the unit was Cardiac Rhythm & Heart Failure, which develops, manufactures, and markets products for the diagnosis, treatment, and management of heart rhythm disorders and heart failure. It depreciated 12 percent to end at $5.14 billion. Providing therapies to treat coronary artery disease and heart valve disorders, the Coronary & Structural Heart division was down 5 percent to finish the fiscal period at $3.54 billion. Contributing $1.79 billion to the coffers was Aortic, Peripheral, & Venous, which was a 7 percent decline. The unit is comprised of a comprehensive line of products and therapies to treat aortic disease, such as aneurysms, dissections, and transections, as well as peripheral vascular disease and venous disease.

The Minimally Invasive Therapies Group diminished 1 percent from $8.48 billion to $8.35 billion. The segment is made up of two businesses—Surgical Innovations and Respiratory, Gastrointestinal, & Renal. The former decreased 4 percent compared the previous period to finish at $5.51 billion. Surgical Innovations provides advanced and general surgical products, including surgical stapling devices, vessel sealing instruments, wound closure, electrosurgery products, hernia mechanical devices, mesh implants, and gynecology products and therapies. The latter, which was the one bright spot for Medtronic in its latest fiscal, completed its 12 month period up 4 percent—$2.84 billion. Respiratory, Gastrointestinal, & Renal offers products for minimally invasive gastrointestinal and hepatologic diagnostics and therapies, patient monitoring, respiratory interventions including airway management and ventilation therapies, and for the treatment of renal disease

The segment most directly impacted by the aforementioned leadership moves, RTG, shrank 6 percent overall to tally $7.73 billion. Responsible for devices and therapies indicated for the treatment of neurological disorders and diseases, as well as surgical technologies designed to improve the precision and workflow of neuro procedures, Brain Therapies withdrew by 1 percent to finish at $2.92 billion. The sector developing and selling medical devices and implants used in the treatment of the spine and musculoskeletal system fell 6 percent in the latest fiscal to complete the period at $2.5 billion. The Specialty Therapies business delivers products and therapies to treat diseases of the ear, nose, and throat, as well as help control the systems of overactive bladder, urinary retention, and chronic fecal incontinence. It wrapped up the term with $1.19 billion in revenue, a 9 percent loss. Pain Therapies had the most dramatic decrease in the segment with a 14 percent fall. The $1.11 billion in sales was for technologies including spinal cord stimulation systems, implantable drug infusion systems for chronic pain, and interventional products.

The Diabetes Group is focused solely on Type 1 and Type 2 of the chronic disease. It contributed $2.37 billion to the organization’s total revenue, which was 1 percent less than the prior fiscal.

Maintaining its tried and true technique for spurring growth to help boost the fiscal’s sagging figures, Medtronic took part in a relatively active season of acquisitions. The deal announcements began just a couple weeks after the close of the previous fiscal period. In May, reports indicated the organization was purchasing Titan Spine, a privately-held firm that provided titanium spine interbody implant and surface technologies. While the financial details were not disclosed, the buy does bring a comprehensive line of titanium, surface-enhanced interbody fusion devices to the Medtronic Spine portfolio.

The company then made a string of three acquisition announcements in as many months. The first was a strategic buy in the diabetes space. Two weeks before the start of 2020, Medtronic declared it was bringing Klue into the fold. The firm’s software revolved around behavior tracking that provides real-time insights into when a person is consuming food. It was expected the system could be incorporated into Medtronic’s Personalized Closed Loop (PCL) insulin pump system.

ANALYST INSIGHTS: Wall street continues it’s positive outlook on MDT, despite the well documented COVID-19-related slowing in elective procedures, which has had a short term effect. MDT has made it clear they will continue to invest both organically and inorganically in order to keep pace with the rapidly changing landscape in our post COVID-19 world.

—Mark Bonifacio, President, BCS LLC

“Bringing Klue and their unique meal detection capabilities into our organization will accelerate our progress to help people with diabetes live with greater freedom and better health,” said Alejandro Galindo, president of the Advanced Insulin Management division, a part of the Diabetes Group.

The PCL solution gained U.S. Food and Drug Administration (FDA) Breakthrough Device Designation in February 2019. Klue was the second in recent acquisitions centered around diabetes care and enhancement of the PCL system; the other was for Nutrino Health in 2018.

A week after the new year, Medtronic made known another purchase. Stimgenics LLC, based in Bloomington, Ill., developed a novel spinal cord stimulation waveform known as Differential Target Multiplexed (DTM) spinal cord stimulation. The therapy to treat chronic pain was already being delivered via Medtronic’s Intellis platform so bringing it all under one roof seemed to make sense.

“Medtronic is committed to providing clinically proven therapeutic options for millions of patients suffering from chronic pain around the world,” said Marshall Stanton, M.D., president of the Pain Therapies business, which is part of the RTG at Medtronic. “We believe that DTM therapy will advance the treatment of chronic pain, supported by clinical evidence and preclinical research on a neuronal-glial mechanism of action. It’s an exciting, new proprietary SCS waveform that will be available on the Intellis platform.”

To bolster its robotic surgical portfolio, the organization brought aboard Digital Surgery, a privately held developer of surgical artificial intelligence (AI), data and analytics, and digital education and training. The terms of the deal were not disclosed.

“Capabilities and solutions in the data and analytics space play a critical role in our continued focus on advancing minimally invasive surgery—from education and training to clinical decision support to reducing cost and unwarranted variability,” said Megan Rosengarten, vice president and general manager of the Surgical Robotics business, which is part of the Minimally Invasive Therapies Group at Medtronic. “We are thrilled to bring the Digital Surgery team and their expertise into Medtronic, not only due to the strategic fit from a technology perspective, but due to the shared belief that patients around the world deserve access to quality surgical care. By pairing digital solutions with robotic platforms and instrumentation, we can have a big impact on expanding patient access.”

In addition to bringing new capabilities and technologies into the fold through targeted purchases, Medtronic partnered with several organizations to increase the level of care delivered to a number of patient groups. One such arrangement with Novo Nordisk A/S targeted diabetics; specifically, the two entities sought to develop solutions to integrate insulin dosing data from future Novo Nordisk smart insulin pens into continuous glucose monitoring devices from Medtronic, such as the Guardian Connect system. By integrating glucose monitoring and insulin dosing data, people with diabetes and their healthcare professionals and caregivers would be able to automatically track both items in a single place. Further, being able to view both glucose and insulin data together can facilitate more productive conversations between patients and their doctors.

Another diabetes-centric partnership saw the medtech giant pair up with Tidepool, a 501(c)(3) nonprofit organization dedicated to making diabetes data more accessible, actionable, and meaningful. The pair agreed to work together to develop an interoperable automated insulin pump system. Specifically, Medtronic would produce a Bluetooth-enabled MiniMed pump to be compatible with Tidepool Loop, an open-source automated insulin delivery app for iPhone and Apple Watch that was still in development at the time of the agreement. Further, Medtronic would also contribute financially to Tidepool to support the integration development effort as well as to develop a software development kit to enable iPhone-to-pump communication.

Turning its attention to stroke care, Medtronic teamed with Viz.ai to accelerate adoption of AI software in U.S. centers dedicated to the condition. The Viz.ai solution leverages the AI to identify suspected large vessel occlusion (LVO) strokes and automatically notify specialists. It connects to hospital computed tomography scanners and alerts stroke specialists within minutes a suspected LVO stroke has been identified, sending the radiological images directly to their smartphones where they can be viewed. Through the agreement, Medtronic would distribute Viz.ai’s existing LVO detection and triage software services. Medtronic’s Solitaire Platinum revascularization device is a stent that retrieves clots from occluded blood vessels in the brain for patients experiencing acute ischemic stroke due to an LVO.

ANALYST INSIGHTS: With Geoff Marta taking over at CEO at MDT, don’t expect much to change as Omar Ishrak (former CEO) remains as executive chairman. MDT will continue to focus on growth across their platforms, both inorganically and organically. The COVID impacts will quickly be in their rearview mirror.

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

As part of its emphasis on value-based healthcare, Medtronic was on one end of a five-year agreement to develop and deploy such initiatives to help ChristianaCare apply the right medical technologies and therapies to patients who may benefit most, with shared financial accountability between the two organizations. The planned focus for the partnership includes opioid-induced ventilatory impairment, heart failure, and diabetes. Learnings from the Delaware-based collaboration would have the potential to impact health beyond the region since its diverse patient population offers an ideal test ground to develop and scale new value-based initiatives.

“We recognize that creating healthier communities requires integrated care models, passion to improve the status quo, and an aligned purpose of helping patients live healthier and fuller lives,” said John Liddicoat, M.D., executive vice president and president of the Americas Region at Medtronic. “This collaboration with ChristianaCare reinforces our joint commitment to healthcare innovation through value-based arrangements.”

Further revealing aspects of its forthcoming robotic surgical system, Medtronic announced a partnership in which it has been working to incorporate Karl Storz’s three-dimensional (3D) vision systems and visualization components into its platform. For four years, the two firms had been coordinating to integrate the vision solution. “Surgeons can be confident our robotic assisted platform will provide market leading 3D visualization technology combined with best-in-class surgical stapling and energy instruments,” proclaimed Megan Rosengarten, vice president and general manager of the Surgical Robotics business, part of the Minimally Invasive Therapies Group.

While Medtronic’s strategy for increasing revenue through the purchasing of complementary businesses and innovations is well known, there is still a strong product pipeline to ensure organic growth is enjoyed as well. The firm shared news on a variety of technologies in development, gaining regulatory clearances and approvals, as well as those being brought to market.

• Gained a CE mark for Cobalt and Crome portfolio of BlueSync-enabled implantable defibrillators and cardiac resynchronization therapy defibrillators, offering physicians heart failure diagnostic insights.
• Received FDA approval for trial evaluating new energy source with pulsed electric fields designed to interrupt irregular pathways in the heart to treat atrial fibrillation.
• Launched Efficio software, which provides enhanced, secure access to patient data and delivers actionable insights in a secure cloud environment, to help clinicians efficiently manage targeted drug delivery therapy with SynchroMed II.
• Earned the FDA approval of the Micra AV leadless pacemaker to treat AV block.
• Obtained a CE mark for the InterStim micro neurostimulator and InterStim SureScan MRI leads, offering sacral neuromodulation therapy to Europeans suffering from incontinence. The firm also announced it submitted a PMA supplement for the technologies with the FDA.
• Gained a CE mark for the Percept PC neurostimulator DBS system with BrainSense technology, which allows physicians to review patient-specific brain signals.
• Launched the Solitaire X revascularization device in the U.S.; the system offers new options for improving outcomes in treating stroke.
• Received FDA approval for its Attain Stability Quad MRI SureScan heart lead, which was designed for precise placement and stability
• Obtained FDA approval for CareLink SmartSync Device Manager, a tablet-based device manager that provides portable and secure wireless programming of the company’s BlueSync devices.
• Launched the Telescope Guide Extension Catheter to support complex coronary cases, as it enables smooth delivery of coronary stents and balloons.
• Announced FDA clearance and launched the SelectSite C304-HIS deflectable catheter system for use in procedures involving His-bundle pacing.
• Gained FDA approval for expanded indication of the Evolut TAVR (transcatheter aortic valve replacement) System to treat symptomatic severe aortic stenosis patients at low risk for surgical mortality (i.e., younger, more active patients).
• Introduced the Envision Pro Continuous Glucose Monitoring System in Europe, enabling type 1 and type 2 diabetes patients and their physicians to see accurate glucose levels and trends over time to develop more optimal diabetes therapy plans.
• Obtained FDA approval and launched the Evolut PRO+ TAVR System for the treatment of symptomatic severe aortic stenosis patients.
• Gained FDA Breakthrough Device Designation for developing stent graft system to treat thoracoabdominal aortic aneurysm.
• Launched the GI Genius Intelligent Endoscopy Module, an AI-based system for a colonoscopy.
• Received Breakthrough Device Designation for a fully implantable left ventricular assist device for patients with advanced heart failure.
• Launched the Activa Patient Programmer, which leverages a user-friendly, custom-configured Samsung mobile device to enable patients to manage their deep brain stimulation therapy more simply and discreetly.
• Announced Shonin approval and launch of the Valiant Navion Thoracic Stent Graft System in Japan; system enables the minimally invasive repair of thoracic descending aortic aneurysms and complicated type B aortic dissections.
• Received FDA approval of the IN.PACT AV drug-coated balloon to treat arteriovenous fistula lesions.
• Expanded the scope of Surgical Synergy with the FDA clearance of the Stealth Autoguide System for cranial procedures.

COVID-19 Consequences

Q4 2020 Revenue: $6.0 Billion (ended April 24, 2020)
Q4 2019 Revenue: $8.1 Billion (ended April 26, 2019)
Percentage Change: -26%

The financial impact COVID-19 had on the world’s largest medical device manufacturer offers an ominous preview of what’s potentially ahead for next year’s Top Company Reports. Medtronic saw a 26 percent shortfall year over year in its last fiscal quarter. As such, it can be attributed as the most significant factor in the firm’s 5 percent overall loss for the year. The reduction in medical procedures during the period had an obvious impact on sales and, ultimately, the bottom line.

That’s not to say, however, that Medtronic hasn’t been quite active in lending its assistance in whatever ways it could in battling the virus. In a surprising yet generous move, the firm made the full design specifications for one of its ventilators, including manuals, design documents, and software code, open source. This enabled anyone to access the files for the Puritan Bennett (PB) 560 portable ventilator in order to manufacture it. The unit had originally been intro-duced in 2010 and offers a compact design, enabling easy portability.

In a related story, the company also announced its team-up with Foxconn Industrial Internet, a business group within Foxconn Technology Group, to produce 10,000 of the PB560 ventilators. Foxxconn passed the regulatory and quality requirements of Medtronic to enable it to manufacture the units. The arrangement has the units being produced in Foxconn’s Wisconsin facility, but they would be marketed and sold by Medtronic. The partnership was established as a direct result of Medtronic’s ventilator open source initiative.

These efforts are in addition to the company stating in March it had increased ventilator production by 40 percent and was attempting to double its capacity to manufacture the device.

Further, the organization also launched two solutions from its Medtronic Care Management Services (MCMS) business, each designed to help assess, monitor, and triage support for patients who may be concerned about COVID-19. One was the Respiratory Infectious Disease Health Check, which was offered to existing MCMS customers. The second was a new COVID-19 Virtual Care Evaluation and Monitoring solution Medtronic made available to U.S. health systems, health plans, and employers. The latter offering uses a virtual assistant to evaluate patients through a CDC guideline-based survey for COVID-19 symptoms.

AT A GLANCE
$30.56 Billion
Prior Fiscal: $29.95 Billion
Percentage Change: +2.0%
No. of Employees: 90,017

Eight-year-old Earl Bakken’s fascination with Frankenstein would eventually change the world.

In the early 1930s, Bakken and his friends frequented Columbia Heights, Minn.’s Heights Theater to catch Saturday matinees. Young Bakken found himself captivated by Colin Clive’s performance as Dr. Frankenstein—he was particularly enamored by the possibility of restoring life.

“What intrigued me the most, as I sat through the movie again and again,” Bakken recalled in a memorial issued by Medtronic, “was the creative spark of Dr. Frankenstein’s electricity. Through the power of his wildly flashing laboratory apparatus, the doctor restored life to the un-living.”

Young Bakken’s creative spark flourished throughout his childhood. By nine, he had built a phone system stretching across his street to a friend’s house. Other childhood inventions included a radio fashioned from a crystal set and a five-foot-tall blinking, speaking robot.

“I had an uncle who was an electrician, and he kept telling my mother, ‘you’ve got to stop that child from playing with that electricity, he’s going to kill himself,” he recounted.

Following his confirmation in 1937, a minister was the first to suggest young Bakken use the science he loved to benefit humanity—words that resonated with him for the rest of his life. “I recognized later that was my spiritual calling,” Bakken said in 2008.

Bakken graduated high school in 1941 and enlisted in the Army Signal Corps, serving four years in World War II as a radar instructor. He then attended the University of Minnesota on the G.I. Bill, earning an undergraduate degree in electrical engineering. He entered graduate school for electrical engineering shortly thereafter and began doing part-time work repairing medical electronic equipment in Minneapolis’ Northwestern Hospital.

At the time, post-WWII hospitals were beginning to use electronic equipment but lacked the staff to maintain and repair it. Feeling the spark of opportunity, Bakken left school and co-founded Medtronic with brother-in-law Palmer Hermundslie in an unheated boxcar used as the Hermundslie family’s garage on April 29, 1949. (Perhaps this is why Medtronic ends its fiscal year on the last business day in April?)

Their first month’s revenue was eight dollars.

“Even by startup standards, the place was pretty crude,” Bakken wrote in his autobiography. “On the positive side, the price was right. The Hermundslies didn’t charge the company rent.”

The business struggled—but thanks to it, Bakken began to build valuable relationships with doctors at Minneapolis university hospitals. There he met staff surgeon C. Walton Lillehei, the pioneer of open-heart surgery.

The next—unfortunately, fatal—spark of opportunity struck in 1957. On Halloween night, a Twin Cities power outage caused the death of an infant dependent on an AC-operated pacemaker. Dr. Lillehei, who was then pioneering procedures to help “blue babies” born with often-lethal heart defects, recruited Bakken to devise a battery-operated pacemaker to prevent further loss of life. To build it, Bakken adapted a circuit described in Popular Electronics for an electronic transistorized metronome, creating the world’s first external wearable, transistorized pacemaker. (Many view this as Medtronic’s true “birth.”) After four weeks of work, Bakken tested his pacemaker at a university animal lab, which confirmed it worked as intended. To his immense surprise, Bakken saw the device attached to one of Lillehei’s pediatric patients the next day.

In 1960, the first implantable pacemaker was installed inside a human patient. Bakken and Hermundslie reached a licensing agreement with the inventors, giving the small company exclusive manufacturing and marketing rights for the device, and Medtronic took off. It was also then that Bakken wrote the Medtronic mission statement, which reads in part: “To contribute to human welfare by application of biomedical engineering in the research, design, manufacture, and sale of instruments or appliances that alleviate pain, restore health, and extend life.”

Throughout the years, Medtronic refined its heart devices and expanded into other medical businesses like diabetes treatment, brain surgery, and spine therapy, holding fast to its mission statement.

Bakken led Medtronic for 40 years, retiring as chairman in 1989. Upon leaving the Medtronic board in 1994, he built a home in Hawaii. There he was a prominent volunteer and philanthropist, becoming chairman of the Board of Directors of the Five Mountain Medical Community as it developed the North Hawaii Community Hospital. He had several devices implanted in himself, including stents, insulin pumps, and a Medtronic pacemaker.

“I’m on my second pacemaker, and I’m on about my third or fourth insulin pump,” Bakken told the Pioneer Press in December 2010. “So I’m glad I invented the company, or I wouldn’t be sitting here.”

Ninety-four-year-old Earl Bakken passed away peacefully in his home on Hawaii’s Kiholo Bay on Oct. 21, 2018.

“The contributions Earl made to the field of medical technology simply cannot be overstated,” Medtronic chairman and CEO Omar Ishrak said in a statement commemorating Bakken’s life. “His spirit will live on with us as we work to fulfill the mission he wrote nearly 60 years ago—to alleviate pain, restore health, and extend life.”

ANALYST INSIGHTS: Medtronic continues to be a juggernaut with strong fundamentals. However, the company had a bit of a wobble recently with their false start in orthopedics, flagging spine revenue, and slow move into robotics.

—Patrick West, Partner, Mirus Capital Advisors

Fortunately, Bakken lived long enough to watch the business he built 70 years ago in his brother-in-law’s garage officially become the world’s largest medical technology company in 2017. Medtronic has led MPO’s Top 30 ever since, and this year is no different. As the first medical technology enterprise to reach $30 billion in revenue—$30.56 billion last year, to be exact—the late Bakken’s company sits atop the list of elite medtech makers once again.

The slight 2 percent sales bump to reach this milestone arose from healthy growth in Medtronic’s Restorative Therapies and Diabetes groups. The July 2017 divestiture of its Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses to Cardinal Health—consisting of dental and animal health, chart paper, wound care, incontinence, electrodes, SharpSafety, thermometry, perinatal protection, blood collection, compression, and enteral feeding offerings—partially offset the gains. Sales were flat in non-U.S. developed markets, with consistent growth in Japan and Korea, partially offset by declines in Australia. Performance in China, the Middle East and Africa, Eastern Europe, and both South and Southeast Asia also flourished.

Medtronic’s flagship Cardiac and Vascular enterprise remained relatively flat with $11.5 billion in sales, growing 1 percent. Success in Coronary & Structural Heart as well as Aortic, Peripheral & Venous division sales provoked this growth. Slumping Cardiac Rhythm and Heart Failure proceeds partially counteracted these gains.

Cardiac Rhythm and Heart Failure segment sales dropped 2 percent to $5.8 billion, mainly as a result of declines in Heart Failure, Care Management Services, and Cath Lab Managed Services (CLMS). CRT-D replacements and left ventricular assist device (LVAD) headwinds due to a competitor’s product launch in the U.S., coupled with changes in U.S. heart transplant guidelines precipitated the Heart Failure business’s downturn. The continued strength of the Arctic Front Cardiac CryoAblation Catheter System and increased TYRX absorbable antibacterial envelope adoption fortified the Arrhythmia Management business. The Reveal LINQ insertable cardiac monitor’s strong performance stimulated the Diagnostics segment’s success.

Last June, unexpected power source switching in the HeartWare HVAD system (an LVAD for advanced heart failure) made it the subject of a Class I recall. Potential transient interruption in the HVAD system and controller’s electrical connection was found to cause unintended switching to the device’s secondary power source, potentially causing momentary stop and restart. Further, unintended power switching carried a risk of unexpected audible beeping as it resolves, which could confuse the patient or caregiver as the controller may display sufficient battery capacity or AC/DC connectivity. Medtronic advised users to ensure two power sources are connected to the device at all times. The company also made a lubricant solution available to apply to HeartWare HVAD’s power source connectors to mitigate unexpected transient power switching. As yet there have been no confirmed reports of catastrophic harm related to the issue. (At the time, Medtronic estimated the per patient probability of serious adverse events at about 0.003.)

A month later, Medtronic achieved FDA approval for a less invasive implant approach for the HVAD system. The nod made it the only LVAD approved in the U.S. for thoracotomy, a small lateral surgical incision between the ribs on the left side of the chest. Typically LVADs are implanted via median sternotomy, during which the surgeon makes an incision down the middle of the chest and separates the breastbone. Medtronic also made new surgical implant tools tailored to thoracotomy for the HVAD available at the time.

“Implanting the HVAD via thoracotomy preserves the chest for a subsequent procedure that patients may need, such as a heart transplant,” Edwin McGee Jr., M.D., professor and director, Heart Transplant & Ventricular Assist Device Program, Loyola University Medical Center, Maywood, Ill., explained to the press. “It also has been shown to result in shorter hospital stays.”

The SelectSecure MRI SureScan Model 3830 cardiac pacing lead obtained an FDA label expansion last July to include stimulation of the bundle of His, making it the only pacing lead on the market approved to do so. Permanent His bundle pacing is an alternative to right ventricular pacing, harnessing the heart’s native His-Purkinje system.

Medtronic’s SynchroMed II drug delivery system also gained FDA approval last July to administer Remodulin (which is made by United Therapeutics Corporation) for pulmonary arterial hypertension patients. An intravascular catheter was newly developed to intravenously deliver Remodulin to those previously receiving it via an external infusion pump. Medtronic and United Therapeutics pursued parallel regulatory findings for the device and drug.

The firm began a pilot study for its investigational Extravascular Implantable Cardioverter Defibrillator (EV ICD) last August. The EV ICD involves a lead placed outside the heart and veins to deliver defibrillation and anti-tachycardia pacing therapy in one system. The pilot study will assess the EV ICD system in 20 patients at four sites. The system is intended to offer benefits of traditional transvenous ICDs. EV ICD is the same size and shape as conventional ICDs, without any leads in the heart or veins. It’s implanted in the left mid-axillary region below the left armpit, with the lead placed under the sternum.

Coronary & Structural Heart sales advanced 5 percent to $3.7 billion. The CoreValve Evolut PRO TAVR’s global strength and continued adoption in intermediate-risk patients was partially responsible for this growth. Healthy sales of the Bio-Medicus Next Gen Cannulae, guide catheters, and coronary balloons also fortified sales.

Aortic, Peripheral & Venous revenue jumped 4 percent to $1.9 billion. Part of this was a result of The Centers for Medicare & Medicaid Services granting final approval for the VenaSeal vein closure system’s reimbursement payment last January. Growth in percutaneous transluminal angioplasty (PTA) balloons also augmented last year’s proceeds.

Last February witnessed the U.S. launch of the Resolute Onyx 2.0-mm drug-eluting stent (DES), the smallest sized DES on the market at the time. It joined the Resolute Onyx 4.5- and 5.0-mm DES to provide the broadest DES size matrix available, allowing treatment for patients with the smallest coronary vessels to the largest. The new stent will help interventional cardiologists treat coronary artery disease patients with small vessels often untreatable with larger stents during percutaneous coronary intervention.

The IN.PACT Admiral drug-coated balloon (DCB) received FDA approval to treat long superficial femoral artery lesions up to 360 mm in peripheral artery disease patients last April. The 200-mm and 250-mm lengths of the device attained FDA approval last June.

Last October saw FDA approval for the Valiant Navion thoracic stent graft system for minimally invasive repair of all lesions of the descending thoracic aorta, including aneurysms, blunt injuries, ulcers, hematomas, and dissections. Valiant Navion allows patients with small iliac arteries to receive thoracic endovascular aneurysm repair, a less invasive approach compared to open surgical procedures. The system features both proximal covered and proximal bare metal stent configurations. Valiant Navion received CE mark approval a month later.

The Minimally Invasive Therapies Group amassed $8.5 billion in sales, dropping 3 percent from the year prior. Currency conversion had an unfavorable effect to the tune of $164 million, and the 2017 shedding of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses to Cardinal Health also affected the segment’s performance.

Before the divestiture, the Surgical Solutions and Patient Monitoring & Recovery Divisions were realigned into the Surgical Innovations and Respiratory, Gastrointestinal, & Renal divisions. The former gathered $5.8 billion of proceeds, jumping 4 percent from the year prior. Surgical Innovations’ strength was a consequence of new products—namely, the LigaSure vessel sealing instruments with nano-coating, Exact and L-Hook, and both the Tri-Staple 2.0 endo stapling specialty reloads and Signia powered stapler.

Medtronic began a collaboration with Philips last January to develop and commercialize the LungGPS Patient Management Platform to streamline lung nodule patient management from identification through diagnosis, treatment, and long-term survivorship. Together, the two medtech giants will provide solutions to integrate hospital data, patient management, and clinical workflows. The LungGPS platform hopes to facilitate identification and management of patients with incidental pulmonary nodules within disparate hospital information systems. LungGPS’s natural language processing quickly searches and analyzes data contained within various reports, highlighting relevant information. Philips’ lung cancer screening software automates routine administrative tasks and standardizes clinical workflows.

Respiratory, Gastrointestinal & Renal franchise sales dropped 14 percent to $2.7 billion due to the divestiture. Apart from that decline, continued adoption of MicroStream capnography monitoring products, pulse oximetry, ventilators, and video laryngoscopy products and growth in renal access products drove sales in this segment.

ANALYST INSIGHTS: Medtronic continues to expand its business through M&A across multiple market segments. While it has placed many bets for future growth, none of its investments are greater than its commitment to robotics. CEO Omar Ishrak has made it clear 2020 will be ‘the year of the robot’ for Medtronic. It will be interesting to observe whether they can create adoption for its Mazor, SuperD, and other robotic platform investments.

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

Medtronic issued a voluntary field corrective action for its Puritan Bennett 980 ventilator series, which is used to support a patient’s breathing, last December. The corrective action, which the FDA identified as a Class I recall, was a software update to address customer feedback. The software updates external USB drive performance and its impact on graphical user interface (GUI) functionality and the labeling displayed on the GUI during ventilator use.

The Restorative Therapies Group collected $8.2 billion, growing 6 percent over the previous year. This was mainly driven by strong performance in the Brain Therapies, Specialty Therapies, and Pain Therapies divisions. The first of these grew an impressive 11 percent to reach $2.6 billion in sales. Strong sales of stent retriever, flow diversion, neuro access, coil, and embolic protection products contributed to a part of these gains. Neurosurgery revenue growth was provoked by strong capital equipment sales of the Mazor X robotic guidance systems, StealthStation S8 surgical navigation systems, Midas Rex powered surgical instrument systems, O-Arm Imaging Systems, and Visualase MRI-guided laser ablation systems.

Medtronic began the deal to acquire Israel’s Mazor Robotics for $1.6 billion last September, building on a prior arrangement between the two that had included Medtronic taking a stake in Mazor and serving as the sole distributor of the robotics company’s Mazor X system. By combining its spine implants, navigation, and intraoperative imaging technology with Mazor’s robotic-assisted systems, Medtronic intends to offer a fully-integrated procedural solution for surgical planning, execution, and confirmation.

“Over the past two years it’s become clear to us that enabling technology like this is the future,” Geoff Martha, president of Medtronic’s Restorative Therapies Group, told Bloomberg. “It improves outcomes in spinal surgery and reduces the variability. Once we realized this is clearly the future, we knew we had to integrate all this technology.”

The deal was an effort to hasten the move toward guided, robotic procedures. Medtronic and Mazor unveiled their new Mazor X system at last year’s North American Spine Society conference. Mazor X identifies spine abnormalities and creates a patient-specific surgical implant, potentially positioning Medtronic to better compete with rival Globus Medical. The deal for Mazor, completed last December, was valued at about $1.7 billion.

Last January saw an FDA nod for the Riptide Aspiration system, which retrieves thrombus (blood clot) through the Arc Catheter and restores blood flow in ischemic stroke patients. In the procedure, a catheter is inserted through an incision in the leg and up the blocked artery to remove the clot. It is intended for revascularization in those with acute ischemic stroke secondary to large vessel occlusive disease within eight hours of onset.

The Visualase MRI-Guided Laser Ablation System obtained CE mark approval last April. The Visualase system delivers laser energy to the target area with an applicator to destroy unwanted soft tissue. MRI images guide precision and controlled ablation during the procedure. The system has been FDA cleared since July 2017.

Medtronic’s Deep Brain Stimulation (DBS) therapy gained FDA approval as adjunctive treatment to reduce the frequency of partial-onset seizures in adult patients who are drug-resistant to three or more antiepileptic medications last May. DBS therapy for epilepsy works by applying controlled electrical pulses to the brain’s anterior nucleus of the thalamus, part of a network involved in seizures. The approval was based on seven-year follow-up data collected in the company’s SANTE trial, which demonstrated seizure frequency reduction, a six-month seizure-free period for some patients, and no significant cognitive declines or worsening depression.

A month later, the clinician programmer and Activa programming application for DBS therapy achieved FDA approval. The programming application was developed with input from over 100 clinicians and is managed on the Samsung Galaxy Tab S2 tablet interface. Activa DBS therapy treats both Parkinson’s and dystonia.

The Spine franchise accrued $2.7 billion in revenue, dropping 1 percent. Despite the slip, the segment saw incremental growth due to increased spinal impact attachment rates in conjunction with the company’s Surgical Synergy strategy, which integrates spinal implants with robotics, imaging, navigation, power instruments, and nerve monitoring.

Infuse Bone Graft was FDA approved for two new spine surgery indications last April. The second expanded indication for Infuse in just over two years, it can now be used with polyetheretherketone (PEEK) implants in oblique lateral interbody fusion (OLIF) 25 and 51 and anterior lumbar interbody fusion (ALIF) procedures at a single level.

A day later at the American Association of Neurological Surgeons (AANS) annual meeting, Medtronic launched TiONIC technology—a titanium 3D printed platform for spine surgery implants. TiONIC technology’s enhanced surface textures are created with a differentiated laser method, increasing osteoconductivity and promoting bone response. ARTiC-L, for use in transforaminal lumbar interbody fusion (TLIF) spine surgery, was the first implant to feature TiONIC technology. The implant’s 3D printed honeycomb design provides an osteoconductive scaffold for bony ingrowth and improved mechanical load distribution.

The Synergy TLIF workflow was also unveiled at last year’s AANS meeting. The spine surgery procedural workflow combines Medtronic’s O-arm System imaging and SteathStation imaging guidance technologies to create a completely navigated, minimally invasive procedure allowing for fewer intraoperative surgical steps. The new CD Horizon Solera Voyager 5.5 System has percutaneous and mini-open rod insertion options for treating both degenerative and adult deformity conditions. The system’s non-cannulated ATS screw reduces the number of screw placement steps from nine to three (vs. traditional pedicle screw placement).

Last September saw the Infinity OCT (occipitocervical-upper thoracic) Spinal System’s launch. Infinity OCT immobilizes and stabilizes the spine while it fuses. It includes a multi-axial screw with 60 degrees of angulation in any direction, a locking cap with a quick-start thread, and 3.0- and 5.5-mm screws. When paired with the company’s O-arm imaging and StealthStation navigation system, Infinity OCT can simplify complex posterior cervical procedures. It can be used in cases of degenerative disc disease, instability or deformity, tumors, and traumatic spinal fractures or traumatic dislocations.

Specialty Therapies proceeds expanded 5 percent to accrue $1.6 billion. Strong sales of Aquamantys bipolar sealers and PlasmaBlade dissection devices, as well as ENT growth, provoked this segment’s success.

A smart programmer for the InterStim system, which delivers sacral neuromodulation therapy to treat overactive bladder, chronic fecal incontinence, and non-obstructive urinary retention, obtained FDA approval last December. The smart programmer streamlines multiple devices into a single, touch screen Samsung mobile device and allows care personalization by letting patients simply and discreetly manage therapy. Physicians can also check MRI eligibility and view insights and access for a detailed view of the patient’s therapy experience.

With $1.3 billion of revenue, Pain Therapies jumped 10 percent from the previous year. The Intellis spinal cord stimulation (SCS) platform drove sales in this segment, as did the firm’s Evolve workflow algorithm, Snapshot reports, and Targeted Drug Delivery products.

A new clinician programmer for the Synchromed II pump was approved last January. Its visual tools and intuitive workflows simplify therapy management, running on a tablet with vibrant screen display. Visual enhancements include a side-by-side comparison of therapy changes and flex dosing graphics.

The firm launched OptiSphere embolization spheres, a resorbable embolic platform to embolize hypervascular tumors, last April. OptiSphere is manufactured for Medtronic by Vascular Solutions, a Teleflex Inc. subsidiary. Its spherical shape allows smooth embolic delivery and even, predictable distribution.

Medtronic’s Kyphon HV-R bone cement secured FDA clearance last June to fix sacral vertebral body fractures using sacroplasty. The 510(k) broadened the company’s commitment to treat fragility fractures beyond vertebral compression fractures caused by osteoporosis, cancer, or benign lesions.

The Control Workflow evidence-based approach for the Synchromed II pain pump launched last October. It includes oral opioid weaning considerations that can be fitted to each patient and helps physicians to identify those likely to have positive outcomes with the pain pump. It supports oral opioid tapering and drug holidays to minimize intrathecal medication dose during treatment, which several studies have determined may be more effective than a combination of oral and intrathecal pain treatment.

SynchroMed II’s myPTM Personal Therapy Manager received FDA approval last October. myPTM lets patients alleviate unpredictable pain with on-demand doses within therapeutic limits set by their doctor. The application is used on a touchscreen Samsung J3 smart device. It features clear dose delivery, access to therapy details, and lockout alerts if the patient exceeds the prescribed limit.

The Diabetes Group vaulted 12 percent upward with $2.4 billion in proceeds. Continued demand for the company’s MiniMed 670G hybrid closed-loop system (which claimed both CE mark approval and FDA approval for children ages 7-13 last June) and high CGM user sensor attachment and utilization drove sales upward. Further expansion came as a result of strong insulin pump sales in Europe, Latin America, and Asia Pacific. Guardian Connect CGM system sales padded further growth.

Last February saw the launch of the MiniMed Mio Advance infusion set. The newest addition to the MiniMed family aims for more convenient set changes by reducing the number of steps necessary. Its design lets users insert the device with one hand and can easily access hard-to-reach sites like the lower back. It has no visible needle and contains a built-in insertion device for consistent insertion force.

A few days later, the FDA approved a new arm indication for the Guardian Sensor 3. The approval lets patients wear the sensor on their upper arm, allowing further flexibility and enhanced performance and accuracy for glucose readings.

The FDA approved the Guardian Connect CGM system for patients aged 14-75 years last March. It is the only CGM system that can alert of potential high or low glucose events up to 60 minutes in advance. Guardian Connect also offers access to the Sugar.IQ smart diabetes assistant so patients can analyze their glucose level’s response to food intake, insulin dosages, daily routines, and other factors.

Medtronic added nutrition-related data services, analytics, and technologies firm Nutrino Health to its family last November. Medtronic hopes to reduce diabetes patients’ food and nutrition management burdens by implementing Nutrino’s extensive food and analysis infrastructure, nutrition expertise, and AI-driven personal insights into its technology. Further, Nutrino had been developing algorithms to predict glycemic responses to food. Medtronic and Nutrino’s partnership began in 2016—Nutrino played a role in the introductions of Medtronic’s updated iPro2 myLog app used with professional CGM solutions (which launched last June powered with a FoodPrint food data app powered by Nutrino) and the Sugar.IQ diabetes assistant app used with Guardian Connect. (The Sugar.IQ app also became commercially available in the U.S. last June.)

$29.7 Billion
NO. OF EMPLOYEES: 91,267

Stephanie Rodenberg-Lewis, a Katy, Texas, elementary school teacher, has Type 1 diabetes. She used a Medtronic insulin pump for 15 years before switching to another brand due to concerns with accuracy and personal preference. When it was announced in May 2016 that UnitedHealthcare was going to have an exclusive coverage agreement with Medtronic for insulin pumps, she was not pleased. She had previously determined that she would not return to the Medtronic product and was decidedly not pleased when her health insurance provider was asking her to do just that.

“I have this disease that I did not ask for, did not cause, and now you’re telling me you’re going to make the decision for me (about) the device that keeps me alive?” Rodenberg-Lewis told the Associated Press (AP) in June 2016.

UnitedHealthcare, on the other hand, saw the move as a necessary means to find ways in which to cut costs from healthcare, which continue to rise. “We can’t just wish away the high cost of medical care,” Linda Blumberg, a health economist with the nonprofit Urban Institute, told the AP. “We’ve got to think about…ways in which we can bring down costs while not significantly hurting quality.”

While Dr. Richard Migliori, UnitedHealthcare’s chief medical officer, did cite cost as a contributing factor in the company’s selection of Medtronic’s diabetes care technology offerings to back in the exclusive agreement, he also specifically noted a clinical feature as a reason as well. Medtronic’s insulin pump has the option where the device stops insulin flow if a user’s blood sugar levels drop dangerously low.

While agreements between health insurers and pharmaceutical and medical device companies are not unusual, the UnitedHealthcare/Medtronic arrangement was one of the first to impact a traditionally consumer-made decision regarding choice of healthcare technology. Other contracts have not directly impacted patients, such as those centered around devices like implants where the patient would not have a particular choice on the technology used anyway. Followers of healthcare trends, however, point to this decision possibly affecting patients more in the future as other firms follow suit with their own arrangements. In an era of growing consumer-based healthcare, patients are likely to face this type of exclusivity agreement more often.

The news marked an unfortunate start to Medtronic’s fiscal year, which began April 29, 2016, but the company was quick to recover with regard to positive PR, specifically from the diabetes community. In September, the firm announced its hybrid closed loop system—the MiniMed 670G system—had earned FDA approval. The system was the first such technology for Type 1 diabetics to automatically deliver the correct dosage of insulin to the user without requiring intervention. Powered by a sophisticated algorithm called SmartGuard HCL, the device was a significant milestone for diabetes care management and, hopefully, eliminated some of the resentment over the UnitedHealthcare arrangement.

“With SmartGuard HCL, the ability to automate basal insulin dosing 24-hours-a-day is a much-anticipated advancement in the diabetes community for the profound impact it may have on managing diabetes—particularly for minimizing glucose variability and maximizing time in the target range,” Richard M. Bergenstal, M.D., principal investigator of the pivotal study and executive director of the Park Nicollet International Diabetes Center in Minneapolis, said in a news release issued by Medtronic. “The data from the pivotal trial were compelling and I am confident this therapy will be well-received by both the clinical and patient community.”

A first of its kind, the 670G system—colloquially referred to as an “artificial pancreas,” although Medtronic shies away from the use of that name—leverages a glucose sensor that communicates with an insulin pump to automatically regulate the insulin flow. While it would still be approximately nine months before the device would see its U.S. market launch (June 2017), those familiar with the development effort for such a device to be made available were thrilled.

“It is a major news event that a system of this kind has been approved—the first time a pump will administer insulin as a result of information it receives from a sensor,” Derek Rapp, CEO of the Juvenile Diabetes Research Foundation, said in a Medtronic news release.

Indeed, the news tied to Medtronic’s Diabetes Group—made up of Intensive Insulin Management, Non-Intensive Diabetes Therapies, and Diabetes Services & Solutions—was some of the loudest for the firm during its 2017 fiscal year. Conversely, the unit was a distant fourth in order of sales contributions to Medtronic’s $29.7 billion in net sales. The company’s three other business segments offered significantly higher sales figures. Leading the firm, the Cardiac and Vascular Group, home to the Cardiac Rhythm & Heart Failure, Coronary & Structural Heart, and Aortic & Peripheral Vascular divisions, posted $10.5 billion in sales. Surgical Solutions and Patient Monitoring & Recovery divisions make up the Minimally Invasive Therapies Group, which provided $9.9 billion in sales. Rounding out the top three segments, Restorative Therapies, which covers the divisions for Spine, Brain Therapies, Specialty Therapies, and Pain Therapies, saw $7.4 billion in net sales during the fiscal year.

ANALYST INSIGHTS: While performing well in revenue growth but underperforming in bottom line increases (since the Covidien acquisition), the recent hiring of former JPMorgan Medical Industry analyst Mike Weinstein was seen as a positive for the future portfolio management of Medtronic. Watch for Medtronic to continue to leverage their portfolio depth and lead the way in “risk sharing” arrangements with their hospital customers.

—Dave Sheppard, Co-Founder and Principal, MedWorld Advisors

The company inched closer to the elusive $30 billion in medical device and technology sales figure in fiscal 2017, up from its 2016 total of $28.8 billion—an increase of 3 percent. In fact, the elevation was markedly diminished when compared to the prior year’s meteoric rise, which saw sales jump from $20.3 billion in 2015, a number that represents sales for the company prior to full integration of former Top 30 company Covidien, into its report, which is now represented as the majority of the Minimally Invasive Therapies Group.

That modest growth over 2016 was reflected across all segments as well. Cardiac and Vascular Group increased 3 percent from $10.2 billion, bolstered primarily by strong net sales in Arrhythmia Management within Cardiac Rhythm & Heart Failure, largely due to growth in AF Solutions and Diagnostics (most attributable to acceptance of the Arctic Front Advance Cardiac CryoAblation Catheter system). Coronary & Structural Heart also contributed to the rise due primarily to the ongoing launch of the Evolut R 34mm transcatheter aortic heart valve in the United States and Europe.

Minimally Invasive Therapies enjoyed 4 percent growth from $9.6 billion in 2016. The gains here were primarily driven by strong sales in Advanced Stapling and Advanced Energy (Surgical Solutions). Gains were experienced in Stapling from increased adoption of endo stapling specialty reloads with Tri-Staple technology. In Energy, the LigaSure vessel sealing instruments launch and Valleylab FT10 energy platform adoption were primarily responsible for the rise. Also contributing to the growth was a combination of factors in Airways and Ventilation Management (Patient Monitoring & Recovery). Most notable in this unit were strong sales of the Puritan Bennett 980, strength in Patient Monitoring Nellcor pulse oximetry products, and growth in emerging markets.

The 2 percent rise experienced by the Restorative Therapies Group over the prior year’s $7.2 billion total could be attributed to solid gains in the Brain and Specialty Therapies group, which made up for the losses experienced by Pain Therapies. In Brain, progression was seen from sales of the Axium Prime Extra Soft detachable coil; growth in flow diversion from the Pipeline Flex embolization device; increases in stents due to the Solitaire revascularization device (which was slightly offset by a voluntary recall of certain product lines); and strong sales of neurosurgery capital equipment, disposables, and the O-arm O2 surgical imaging system. Specialties Therapies’ sales were bolstered by the performance of Advanced Energy (Aquamantys Transcollation and PEAK PlasmaBlade products), Pelvic Health (InterStim implant), and ENT (NuVent balloons and Fusion Compact navigation).

The 3 percent growth in the Diabetes Group was primarily driven by both U.S. and international sales of the MiniMed 630G, interest in the Priority Access Program for the aforementioned MiniMed 670G, and international sales of the MiniMed 640G with the Enhanced Enlite sensor.

Looking ahead, it’s challenging to determine from which segments Medtronic will see significant growth in its next annual report as the amount and size of M&A activity in which the company was involved in fiscal 2017 was significant. Certainly, it wasn’t the size of the mammoth deal that saw Covidien absorbed, but the transactions were still substantial in their own right.

Topping M&A headlines for the firm in the 2017 fiscal was the announcement that it had agreed to divest a portion of its Patient Monitoring & Recovery Division (part of Medtronic’s Minimally Invasive Therapies Group) to Cardinal Health for $6.1 billion. Specifically, the deal involved sending the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses (representing 23 total product categories), as well as 17 dedicated manufacturing facilities. The deal does allow for the retention of Medtronic’s respiratory and monitoring products, including ventilators and certain monitors, plus its renal care solutions business.

“This is a positive transaction for all involved—Medtronic, Cardinal Health, and our respective shareholders and employees—who we believe will all thrive under this change in ownership. In addition, it signifies our commitment to disciplined portfolio management,” Omar Ishrak, Medtronic chairman and CEO, said in a company news release first announcing the sale. “Medtronic has had a specific focus over the past several years on ensuring that we are delivering compelling clinical and economic value to health systems and patients around the world. Ultimately, we came to the conclusion that these products—while truly meaningful to patients in need—are best suited under ownership that can provide the investment and focus that these businesses require. At the same time, we can put these proceeds to work, investing over the long-term in higher returning internal and external opportunities that are more directly aligned with our growth strategies of therapy innovation, globalization, and economic value.”

The product lines involved in the deal arrived at Medtronic through the Covidien acquisition and contributed approximately $2.3 billion for the 12 months ending October 2016 with more than 70 percent of total U.S. sales. The types of products included dental/animal health, chart paper, wound care, incontinence, electrodes, SharpSafety, thermometry, perinatal protection, blood collection, compression, and enteral feeding offerings.

“We are thrilled about today’s announcement, as this well-established product line is complementary to our medical consumables business and fits naturally into our customer offering. For this reason, this product portfolio has been on our radar for many years,” George S. Barrett, Cardinal Health chairman and CEO, said in his company’s news release announcing the agreement. “We distribute some of these products today and have been collaborative partners with the leadership of this business. Given the current trends in healthcare, including aging demographics and a focus on post-acute care, this industry-leading portfolio will help us further expand our scope in the operating room, in long-term care facilities, and in home healthcare, reaching customers across the entire continuum of care.

The deal involving the former Covidien businesses was finalized during Medtronic’s next fiscal year in July 2017. Proceeds of the transaction, according to Medtronic, would be used to repurchase stock and pay down debt. David Heupel, senior analyst with Thrivent in Minneapolis, however, told the Star Tribune that he envisioned the funds from the sale could be used for acquisitions of innovative, higher-tech devices. Perhaps he was basing this prediction on the company’s acquisitions that occurred earlier in its 2017 fiscal year.

The largest of the purchases was announced in June 2016, involving HeartWare International. Medtronic shelled out approximately $1.1 billion for the manufacturer of less-invasive miniaturized circulatory support technologies for the treatment of advanced heart failure. The company is most notable for its HVAD System, which, at the time of the deal’s announcement, featured the world’s smallest full-support ventricular assist device (VAD) and was designed to reduce surgical invasiveness, improve patient recovery times, and enhance patient outcomes. HeartWare was also developing the MVAD system, a heart pump 40 percent smaller than the HVAD, according to a report by Reuters. The company, however, was apparently experiencing issues in clinical trials such as clotting-related side effects.

“The addition of HeartWare’s portfolio adds to our expanding portfolio of diagnostics, therapeutics, and services that address heart failure patients,” Mike Coyle, executive vice president and president of the Cardiac and Vascular Group at Medtronic, said at the time of the acquisition announcement. “The team at HeartWare has established excellent relationships with its hospital customers and built a strong position and reputation in the marketplace. This transaction, once closed, will be a further, important step toward Medtronic offering a complete suite of solutions to address patient needs across the heart failure care continuum.”

About a month prior to the HeartWare announcement, Medtronic primed its M&A activity by first nabbing the gynecology unit from fellow MPO Top 30 company Smith & Nephew. The deal, valued at $350 million, was centered around the TRUCLEAR System, a medical technology platform used to remove abnormal uterine tissue such as polyps and fibroids offering a less invasive option to surgical procedures such as a hysterectomy. The gynecology division produced $56 million in revenue for Smith & Nephew in 2015.

“We believe gynecology is one of the most underserved specialty procedure areas. Smith & Nephew has developed a rapidly growing business that expands minimally invasive treatment options for gynecology patients,” Chris Barry, senior vice president and president of the Surgical Innovations business, Minimally Invasive Therapies Group at Medtronic, said in a company statement. “This acquisition expands our existing GYN portfolio and we believe creates opportunities to further explore and develop global therapies and solutions that improve GYN surgery.”

Finally, while not a full acquisition, Medtronic still made a splash in the surgical robots space with investments in Mazor Robotics. The Israeli-based firm has been developing a robotically assisted spine-surgery system called Mazor X. According to a report in the Star Tribune in July 2016, the company’s flagship guidance system, the Renaissance, as well as its predecessor, has been used in over 16,000 successful spinal surgeries. Medtronic’s investments grant the company exclusive distribution rights as well as a percentage stake in Mazor.

Navigating these M&A waters can be a challenging task and requires someone at the helm with strategic financial skills. Recognizing this, the firm announced in May 2016 that Karen L. Parkhill would be moving into the role of CFO, replacing the retiring Gary Ellis. Ellis had played a critical role in closing a number of acquisitions, including the blockbuster Covidien deal, which also saw the company’s headquarters relocate to Dublin, Ireland via an inversion. With these types of maneuvers in mind, Medtronic recruited Parkhill from Comerica, a Dallas-based financial-services company. She also lists J.P. Morgan Chase & Co. as a former employer, where she was involved with its investment bank.

“I am delighted to add someone with Karen’s deep expertise and insights to the Medtronic leadership team,” Ishrak said in a company statement. “Given Karen’s extensive background across all of the major disciplines within finance, and her direct experience as an investment banker, CFO at JP Morgan’s Commercial banking business, and CFO at Comerica, I am confident in her ability to lead our global finance organization and believe she will be a strong representative to our investors and Wall Street. I look forward to the ideas and perspectives she will bring to our leadership team—including from her experience as a director with the Methodist Health System—during this transformational time at Medtronic and in the healthcare industry.”

While the purchasing of companies and technologies is a fantastic way to get innovative products to market faster, Medtronic also maintains a very healthy development pipeline with new offerings for healthcare professionals emerging throughout the year. The firm’s 2017 fiscal year saw a variety of fruits come to bear, whether through regulatory clearance or approval or market launch. Following is a list of some of the more notable announcements:

• FDA approval for the Visia AF MRI SureScan and Visia AF single-chamber implantable cardioverter defibrillators, which detect previously undiagnosed and/or asymptomatic atrial fibrillation (AF) and monitor recurrent AF while treating life-threatening rhythms in the lower chambers of the heart.
• FDA approval and U.S. launch of the CoreValve Evolut PRO valve for the treatment of severe aortic stenosis for symptomatic patients who are at high or extreme risk for open heart surgery.
• FDA clearance of NuVent, an EM sinus dilation system, for patients with scarred, granulated, or previously surgically-altered tissue.
• FDA clearance of StrataMR valves and shunts, an addition to Medtronic’s family of Strata Adjustable Valve Systems used in the treatment of patients with hydrocephalus and cerebrospinal fluid (CSF) disorders.
• FDA approval for the Claria MRI Quad Cardiac Resynchronization Therapy Defibrillator (CRT-D) SureScan device for patients with heart failure.
• FDA approval, U.S. launch, CE mark, and European launch of the CoreValve Evolut R 34 mm valve—the largest sized transcatheter aortic valve replacement (TAVR) system available in the United States and Europe (at the time of the announcement).
• FDA clearance of the HawkOne Directional Atherectomy System in a new size for treating patients with peripheral artery disease.
• FDA approval for its suite of cardiac rhythm and heart failure devices and leads to be scanned in both 3 and 1.5 Tesla (T) magnetic resonance imaging (MRI) machines.
• FDA clearance of the TrailBlazer angled support catheter for use in the peripheral vascular system.
• FDA clearance of StealthStation Cranial Software as an aid for deep brain stimulation lead placement.
• Japan’s MHLW approval of the Reveal LINQ Insertable Cardiac Monitor System, the smallest insertable cardiac monitoring device available (at the time of the announcement).
• FDA approval of the IN.PACT Admiral drug-coated balloon as a treatment for in-stent restenosis in patients with peripheral artery disease.
• FDA approval of the Enlite sensor for use with iPro2 Professional Continuous Glucose Monitoring system, which enables healthcare providers to obtain a more complete picture of glucose control for the diabetes patients they treat
• CE mark for SureTune2 software, which provides patient-specific visualization to help physicians make decisions on how to program—or tune—their patient’s deep brain stimulation therapy.
• Reimbursement approval from the Japanese MHLW for the recapturable, self-expanding transcatheter CoreValve Evolut R System for patients with severe aortic stenosis unable to undergo surgery.
• CE mark approval for the HawkOne directional atherectomy system in a lower profile size for treating patients with peripheral artery disease.
• FDA clearance for the CardioInsight Noninvasive 3D Mapping System, used to map a wide range of irregular heart rhythms in the upper and lower chambers of the heart, and provide electroanatomic 3D maps of the heart.
• FDA approval of the Freezor Xtra Cryoablation Catheter for treating patients with atrioventricular nodal re-entrant tachycardia.

While the overall outlook for Medtronic’s 2017 fiscal year was positive, there were a few unfortunate bumps in the road for the industry giant. First, near the end of the 2016 calendar year, it was announced that a Chinese regulator was fining the company $17.2 million for price fixing. The National Development and Reform Commission (NDRC) said in a statement that Medtronic had carried out monopolistic behavior with its distributors and local partners to fix prices and set lower limits on the resale price to hospitals. A spokesperson stated that the company was accepting of the NDRC’s decision.

Then, just before the end of the company’s 2017 fiscal year in late April, Medtronic announced it was pulling its latest stents from India due to the country’s price cap. It submitted an application for withdrawal of its Resolute Onyx product. The firm made the decision only two months after the National Pharmaceutical Pricing Authority had slashed prices of stents by up to 85 percent. The response to the price cap followed on the heels of fellow device maker, Abbott, which was seeking to withdraw two types of its own stents.

$28.8 Billion
NO. OF EMPLOYEES: 88,063

One of the most beloved movie endings ever filmed almost never made it onscreen.

The script for the 1971 musical fantasy “Willy Wonka and the Chocolate Factory” originally ended with Grandpa Joe shouting, “Yippie!” and then fading to black. But Emmy award-winning director Mel Stuart wanted a better closing line, and reportedly phoned writer David Seltzer from the set to request a more memorable finale.

Seltzer could only come up with one idea, though it was a bit cliché. In the film’s final scene—cherished by millions of fans worldwide—the eccentric title character announces he is giving his entire factory to Charlie Bucket, a kind-hearted, honest, but poor boy who lives with his widowed mother and four bedridden grandparents in the slums of an unnamed European city. As Charlie’s disbelief turns to gratitude, Wonka hugs the boy, then tells him, “But Charlie, don’t forget what happened to the man who suddenly got everything he always wanted.”

“What happened?” Charlie asks, amazed.

“He lived happily ever after,” Wonka replies, smiling.

Of course he did. It is a movie, after all.

Hollywood is notorious for its happy endings, but such closure is not as readily found off-screen. Fairy tales and their all-is-well finales are pure fiction; the real world doesn’t work that way—it’s cold, inconsistent, and oftentimes unfair. It offers no guarantees on contentment.

Joy can be particularly elusive in business, even for companies that follow Wonka’s guide to eternal euphoria. Apple Inc.’s Cinderella-like evolution, for example, should theoretically ensure the multinational technology firm lives happily ever after. But since ascending to the Most Valuable Company throne six years ago, Apple has grappled with a litany of serious issues—among them the death of co-founder Steve Jobs, concerns about its innovative prowess, declining iPhone sales, underwhelming products (think Apple TV and the Apple watch), and stagnating stock value.

Certainly not the enchanted future Tinseltown would have dreamed up.

Medtronic plc is experiencing similar dream disillusionment as it settles into its new role as the planet’s top medtech firm. Bolstered by the integration of a historic $50 billion acquisition, Medtronic garnered $28.8 billion in fiscal 2016 sales to surpass rival Johnson & Johnson for top industry billing and bragging rights. It was a crowning achievement, as transformative for the company as it was impressive in both size and scope.

Perhaps more important than the prestige of Medtronic’s achievement, however, is the opportunity it provides the 68-year-old multinational firm to improve healthcare worldwide. “…the full integration of Covidien—acquired in late FY2015—has greatly expanded our global reach and impact,” Chairman and CEO Omar Ishrak wrote in his introduction to the 2016 Integrated Performance Report. “More than 65 million people benefited from Medtronic technologies—two every second—as we helped our customers deliver more seamless, integrated care for patients across the healthcare continuum.”

Two people every second.

Not too shabby for an enterprise that began in a 600-square-foot-garage and grossed a mere $8 in its first month of operation.

Indeed, Medtronic’s journey from humble beginnings to world domination is a remarkable feat that deserves recognition. On the Silver Screen, it would represent the perfect ending to the traditional rags-to-riches story, save for the post-credit affirmation of the company’s everlasting joy.

But perfection is an anomaly in the real world, muddling efforts by true larger-than-life entities like Apple and Medtronic to secure a happy ending. Certainly, Medtronic’s prospects for eternal bliss dimmed moderately in FY16 due to product recalls, a consent decree, slumping spinal and neuromodulation sales, and lingering discord over its controversial bone fusion technology.

Two of Medtronic’s five product recalls affected devices the company inherited in its blockbuster deal for Covidien plc. One of those field actions stemmed from a “wider-angle bend” in the firm’s Shiley neonatal and pediatric tracheostomy tubes, which are inserted into the windpipe during tracheostomy procedures to help patients breathe and remove lung secretions. The defect injured 12 patients but caused no deaths.

The Class I Shiley recall affected 8,192 U.S. units in eight product lines, including cuffed and cuffless versions of the tubes, as well as those packaged in disposable bedside trays. It was the third Class I action in five years for the Shiley portfolio, a product family that Medtronic currently touts as a “market-leading line of tracheostomy solutions.” In 2010, Covidien recalled 52 different versions (more than 400,000 units total) of Mexican-made Shiley tubes over complaints about air leaks, then pulled 330,000 units from the market two years later due to gripes with connections and “functions of the inner and outer cannula,” according to the U.S. Food and Drug Administration’s (FDA) database.

Medtronic’s other Covidien-related product recall involved battery packs used with the Covidien Oridion labeled Capnostream 20 and 20p patient monitors, external devices used in both clinical and home settings to assess respiratory status and identify changes in breathing. The packs were associated with a higher risk of thermal damage—a defect the company eventually traced to a manufacturing change instituted by a third-party contract manufacturer. Medtronic received seven reports of thermal damage out of the 9,817 recalled battery packs, with one recorded fire that resulted in minor burns to the user.

In between the two Covidien-induced recalls, Medtronic pulled from the market 6,912 loading system units for its CoreValve Evolut R transcatheter aortic valve replacements (particulates presence), 650 Puritan Bennett 980 ventilators (software glitch), and nearly 100,000 Insync III Model 8042 pacemakers. Medtronic acknowledged potential power failure issues with three models of the latter device (8042, 8042B, and 8042U) but noted a relatively negligible mishap rate, between 0.16 and 0.6 percent (affecting 65 to 162 devices worldwide). Defects ranged from incorrect heart pacings and fluctuations in longevity to early elective replacement warnings and inaccurate power-flow readings from leads. Although the company received one report of a patient death, authorities could not link it to the power failure issue.

The SynchroMed II implantable drug pump also proved troublesome for Medtronic in fiscal 2016, but not by reason of recall (although that outcome would have been preferable for the company). Instead, Medtronic agreed by consent decree to end all production and sales of the device until it corrects “major violations” of quality system regulations at the pump’s Columbia Heights, Minn.-based manufacturing plant. The FDA had repeatedly apprised Medtronic of problems at the facility, issuing the company three warning letters based on five inspections (2006-2013) that exposed inadequate processes for identifying, investigating, and correcting quality problems; design change documentation failures; and design specification deficiencies.

ANALYST INSIGHTS: Medtronic continues to deliver on the promises made at the time of the Covidien acquisition. The $800 million annual savings has largely come to pass. The company has market share leadership in a majority of categories of high-value devices. While the transition was bumpy for some divisions and unclear for their supply chain partners, Medtronic has made it through the acquisition to the other side. Watch for additional moves to ensure dominance in their selected markets, along with a willingness to shed the remainder of their non-strategic assets.

—Tony Freeman, President, AS Freeman Advisors LLC

Medtronic signed the FDA/U.S. Justice Department consent decree without admitting liability. Ishrak and Thomas Tefft, senior vice president and president of the company’s Neuromodulation division, were specifically named in the edict and thus are also party to the agreement. In a news release announcing the decree, executives vowed to enhance the Neuromodulation quality system and implement “design changes…to address issues the company previously communicated.”

“We are committed to the highest level of quality, and have pursued significant efforts in recent years to enhance the performance of the pump and to address the FDA’s expectations,” Tefft said in prepared remarks. “We are confident that our efforts to date will contribute to the timely and thorough completion of these activities while preserving access to this important therapy in the interest of patients, their caregivers, and physicians.”

The SynchroMed II drug infusion system is approved to treat chronic intractable pain, severe spasticity, and cancer. Since its 2003 debut, however, the pump has generated more than its fair share of problems for Medtronic, triggering five Class I recalls and eight Product Advisories (company letters cautioning doctors of potential device malfunctions).

Since signing the FDA decree in late April 2015, Medtronic management claims the company has made steady progress toward resolving the SynchroMed II’s manufacturing issues. Yet drug pump sales remain abominable as the company works to get back in the FDA’s good graces. “As expected, we face challenges in our Neuromodulation division,” Ishrak said during a fiscal 2016 earnings conference call last year. “While we continue to make progress against our FDA Consent Decree commitments, we are still experiencing double-digit revenue declines in our drug pumps. Our revenue has been relatively stable sequentially for four quarters, so we expect drug pump growth to be roughly flat going forward.”

The damage, though, has already been done. Medtronic’s plummeting drug pump sales contributed to a 3 percent decline in Neuromoduation division revenue (to $1.92 billion), howbeit the dropoff also was spawned by the January 2016 divestiture of the company’s intrathecal baclofen drug as well as lower pain stimulation and flat deep brain stimulation proceeds. The division’s overall loss was partially offset by Gastro-Uro revenue growth, which benefited from increasing InterStim Therapy demand.

Spine was the only other product franchise that underperformed in FY16 (period ended April 29, 2016), posting a 2 percent sales slide to $2.92 billion. Medtronic attributed the declivity to dwindling core spine and interventional revenue, both of which succumbed to global pricing pressures. Solid bone morphogenetic protein (BMP) growth in the United States partly neutralized the shortfall, but that gain was itself negated by falling BMP revenue overseas due to an InductOs shipping hold in Europe.

BMP’s strong U.S. showing, however, failed to exempt the product from additional scrutiny. A front-page story in the Minneapolis Star Tribune last April detailed the circumstances surrounding Medtronic’s “misfiled” report on treatment complications with its bone fusion product, Infuse. The newspaper claimed the company informed the FDA of over 1,000 Infuse-related “adverse events” more than five years after they occurred.

Medtronic, naturally, criticized the article, claiming it made “false insinuations” and failed to include important information about a retrospective chart review (RCR) of Infuse data and the company’s remedial actions. “…the article suggests Medtronic attempted to conceal information about the RCR, including information about adverse events reported in the data. This suggestion is false…” the company contended in direct response to the Star-Tribune story. “Medtronic has acknowledged that at the time the RCR was discontinued back in 2008, it was not properly archived and the information collected was not fully assessed for reportability to the FDA. We have taken a number of steps to update our clinical policies and our training to enhance our reporting practices.”

While hardly overblown, the company’s Star Tribune spat nevertheless attracted the attention of U.S. Sen. Al Franken (D-Minn.), a member of the Senate Health, Education, Labor and Pensions Committee, and ardent medtech industry advocate. In a surprising departure from past viewpoints, Franken asked both Medtronic and the FDA for detailed information about patient injuries, including the severity of the trauma and their relationship to Infuse. He also requested an accounting of approved and off-label treatment uses.

“The information portrayed in the [Star Tribune] article suggests that Medtronic conducted a study of its Infuse device, and for five years, failed to report thousands of complications related to the device to the FDA,” Franken wrote in an April 12, 2016, letter to the FDA oulining his requests. “This lack of information potentially skewed the risk profile of the device, which may have affected the treatment of thousands of additional patients.”

Franken’s assertion is at the crux of a new class-action lawsuit filed against Medtronic by thousands of patients treated with Infuse. The suit alleges product liability and fraud over the company’s Infuse Bone Graft LT-Cage Lumbar Tapered Fusion Device System, a thimble-like titanium product that keeps bone graft at the fusion site, maintains proper height between vertebrae, and stabilizes the spine during fusion. Court documents accuse Medtronic of employing an illegal, false, and deceptive marketing scheme to promote the sale of Infuse for off-label uses.

ANALYST INSIGHTS: What’s next? With the Covidien acquisition now three years away, and after shedding the Covidien legacy medical supplies business, what is the device behemoth’s next move? Most likely more acquisitions, maybe even another blockbuster. Stay tuned.

—Mark Bonifacio, Founder & President, Bonifacio Consulting Services

With a happy ending in Spine marred by declining revenue and recurrent Infuse controversy, Medtronic was forced to look elsewhere for a fairy tale-like finale to its fiscal 2016 finances. And it found such closure in all other product franchises.

In fact, the gains realized in Medtronic’s seven other reporting divisions more than compensated for losses in Spine and Neuromodulation, thanks to the full integration of Covidien. In the Restorative Therapies Group alone, the more than four-fold increase in Neurovascular net sales (345 percent to $587 million) single-handedly annihilated any negative impact the two backsliding sectors may have had on overall company revenue, which mushroomed 42.3 percent. Likewise, the losses had no effect on Medtronic’s FY16 net income or operating profit, which surged 32.2 percent and 40.5 percent respectively.

One of four product franchises formed from the Covidien acquisition, the Neurovascular division outshined its Group brethren through strong sales of the Solitaire FR mechanical thrombectomy device, Pipeline Flex (United States and Japan), and Pipeline Flex with Shield technology (Europe). The Pipeline Flex is a flow diversion device used to treat large and giant wide-necked brain aneurysms that are attached to parent vessels measuring between 2.5 and 5 mm in diameter; the version with Shield technology includes a surface synthetic biocompatible polymer.

Surgical Technologies also helped offset the poor performances in Spine and Neuromodulation, increasing revenue 8 percent to $1.77 billion. Growth in this division was driven by power systems such as Aquamantys, which uses transcollation technology to provide hemostatic healing of soft tissue and bone; and PEAK PlasmaBlade, as well as Midas Rex products, monitoring devices, and O-arm imaging systems.

The gains realized in Surgical Technologies and Neurovascular revenue in fiscal 2016 not only annulled the losses in the two contracting franchises, they also pushed Restorative Therapies Group total sales up 7 percent to $7.2 billion. The Neurovascular division’s birth was primarily responsible for the increase, though an additional selling week in the first quarter of FY 16 also helped, according to Medtronic.

Besides breeding the Neurovascular franchise, the Covidien purchase also sired the Aortic & Peripheral Vascular, Surgical Solutions, and Patient Monitoring & Recovery divisions, the latter two of which are housed within the newly created Minimally Invasive Therapies Group. Its fiscal 2016 performance was practically legendary, with total Group revenue quadrupling (skyrocketing 301 percent) to $9.56 billion.

Fostering the Minimally Invasive Therapies Group sales surge were staggering revenue spikes from its two product divisions. Surgical Solutions proceeds increased more than fourfold, or 307 percent, to $5.26 billion, due mainly to robust demand for the Endo GIA Reinforced Reload device (a stapler) with Tri-Staple technology, the LigaSure Maryland Jaw 37 cm laparoscopic sealer and divider, and the Valleylab FT 10 energy platform—a suite of electrosurgical tools and advanced vessel sealing products equipped with LigaSure technology. The company’s gastrointestinal diagnostic product platform also helped drive sales growth.

The 293 percent jump in Patient Monitoring & Recovery proceeds (to $4.3 billion) was beholden to strong U.S. sales of respiratory and patient monitoring equipment (sensors, airway products, acute ventilator systems); patient care and safety devices (electrodes, compression, SharpSafety, dialysis products); and nursing care goods (incontinence, enteral feeding, wound care products).

The newborn Aortic & Peripheral Vascular division posted an equally impressive showing in fiscal 2016, bolstering revenue 52 percent to $1.63 billion on strong sales of the IN.PACT Admiral drug-coated balloon, Valiant Captiva TAA stent graft, Aptus Heli-FX endoanchor, and Endurant IIs Abdominal Aortic Aneurysm three-piece system, an endograft ideal for patients with challenging distal aortic and iliac anatomy.

Like its siblings, the Aortic & Peripheral Vascular division’s extraordinary earnings rubbed off on its parental unit, leading to a 9 percent sales hike (to $10.1 billion) in the Cardiac and Vascular Group. Small but nonetheless solid gains in Cardiac Rhythm & Heart Failure and Coronary & Structural Heart revenue also helped boost proceeds, as the two divisions improved sales 4 percent and 2 percent respectively.

Cardiac Rhythm & Heart Failure achieved growth ($5.46 billion in total sales) from strong sales of the Arctic Front Advance Cardiac CryoAblation Catheter system, Reveal LINQ insertable cardiac monitor and Evera MRI SureScan ICD (implantable cardioverter defibrillator). Launched in the second quarter of FY16, the Evera SureScan defibrillator allows ICD patients to undergo full-body magnetic resonance imaging (MRI) scans in any position. The device is paired with the Sprint Quattro Secure MRI SureScan DR4 leads, which is proven safe for MRI use.

Coronary & Structural Heart revenue ($3.1 billion total) received a lift from the CoreValve Evolut R recapturable system’s U.S. and Japanese performance, the Resolute Onyx drug-eluting stent’s European acclaim, U.S. demand for the Resolute Integrity drug-eluting stent, and the debuts of the Non-Compliant Euphora and Semi-Compliant Euphora balloon dilatation catheters.

Medtronic experienced a bit of déjà vu in its Diabetes Group, where net sales increases and growth drivers mimicked the previous fiscal year. Proceeds, for example, swelled 6 percent—as they did in FY15—to $1.86 billion, riding the coattails (once again) of the MiniMed 530G System with Enlite sensor, and the MiniMed 640G System with the Enhanced Enlite sensor. The company, however, made a significant effort in FY16 to break the monotony for 2017 by fortifying its bid to become a more comprehensive diabetes solutions provider.

ANALYST INSIGHTS: Omar Ishrak has made a positive impact on revenue and EBITDA thru “pulling the right levers” since taking over Medtronic. Acquisitions, Cash-Flow and Portfolio Management will continue to be a key emphasis in the months to come. Watch for Medtronic to continue to defend its market position by furthering its leadership in “risk-sharing” agreements with its customers.

—Dave Sheppard, Co-Founder and Principal, MedWorld Advisors

Medtronic’s anti-boredom measures included new partnerships with electronics giant Samsung, analytics startup Glooko, and fellow medtech behemoth Becton, Dickinson and Company (BD). The alliances are intended to improve access to diabetes technology, as well as provide diabetics and their caregivers with secure, seamless, and timely access to integrated diabetes data.

Medtronic and Samsung agreed to co-develop Android smartphone apps that pull data from Medtronic’s insulin pumps and continuous glucose monitoring devices. The apps provide diabetics with convenient access to their blood glucose data through Samsung mobile phones and wearable devices.

The Android apps are designed to work with Medtronic’s pocket-sized MiniMed Connect device, which transmits data from the MiniMed 530G and Revel insulin pumps to a corresponding smartphone app for the patient, and to a remote web display for providers. Medtronic claims that MiniMed allows patients to better manage their condition through enhanced connectivity with their healthcare teams.

The company’s deal with Glooko integrates Medtronic’s CareLink platform with Glooko’s secure, cloud and mobile-based diabetes management platform. Patients who use CareLink to view insulin and glucose data can use Glooko’s platform to examine additional data—including food, medication, fitness, and biometrics—that is vital to managing the disease. Glooko’s system also gives the data to healthcare providers so that interventions, such as adjusting insulin doses or identifying high-risk patients, can be made to prevent hospitalizations.

The collaboration with BD calls for Medtronic to commercialize a new, BD-manufactured insulin infusion set with FlowSmart Technology for type 1 diabetics. The FDA-approved infusion set features a side-ported catheter design to reduce silent occlusions, and the smallest insertion needle (30 gauge) to minimize insertion pain and trauma.

“While the market remains competitive, we feel strongly that our diabetes business is well-positioned to drive sustained growth around our broader-based efforts,” Ishrak told analysts on a FY16 earnings conference call. “That is one aspect of growth in diabetes. I think we are very excited about what we can do about overall [diabetes] patient management through our agreements.”

Partnerships, however, are just one of the ways in which Medtronic is attempting to improve disease management. Through the firm’s 14 acquisitions in FY16 (totaling $1.5 billion), the firm also seeks to better control cardiac disorders, vascular abnormalities, respiratory conditions, and surgical error. The purchases included:

• • CardioInsight Technologies, developer of a system (Ecvue) that combines electrical data from the body’s surface and 3D anatomical data to create images of the heart’s electrical activity. The Ecvue system has been used in more than 1,400 patients in the United States and Europe.

• • Aptus Endosystems Inc., a Sunnyvale, Calif.-based company that specializes in advanced technology for endovascular aneurysm and thoracic endovascular aneurysm repair. Aptus also developed the TourGuide Steerable Sheath for delivering peripheral vascular products. The sheath has tip deflection technology for navigating challenging anatomies, which the company claims reduces the need for multiple catheters.

• • RF Surgical Systems Inc., developer of a system to detect retained surgical items (gauze, sponges, or towels) that could be left inside the body after a procedure.

• • Twelve Inc., a Redwood City, Calif., startup developing a transcatheter mitral valve replacement product.

• • Medina Medical, a Menlo Park, Calif.-headquartered firm that makes a self-expanding mesh device to treat weakened blood vessels in the brain.

• • Lazarus Effect, innovator of a mesh cover for stent retrievers of blood clots. The product is described as a “novel nitinol ‘mesh cover’ that folds over a stent retriever device during clot retrieval and ‘candy wraps’ the stent with the clot inside.” It is designed to trap extra thrombi not captured by the stenting device in the clot retrieval process, thereby improving outcomes of this interventional procedure.

• • Aircraft Medical, a Scottish manufacturer of video laryngoscopes, a device that simplifies challenging intubations. By allowing clinicians to visualize a patient’s throat during intubation, video laryngoscopes increase the likelihood of first-attempt success and minimize potential damage to the patient’s throat and windpipe. Aircraft Medical’s expanded line of product choices have sought to address a number of different challenging clinical scenarios to increase success in both routine and problematic intubations.

• • Bellco, a privately held Italian firm that offers blood purification treatments for patients suffering from renal failure, multiple organ failure, and sepsis. The company also provides acute dialysis machines for patients with end-stage renal disease.

$20.2 Billion
NUMBER OF EMPLOYEES: 92,500

It’s going to be difficult, if not downright impossible, for Medtronic plc to top its 2015 fiscal year.

During that historic 12-month period, the company purchased Covidien plc for a record $50 billion, creating the world’s second-largest medical device company (Johnson & Johnson still leads, even with slumping device revenue) and sparking a national debate over the deal’s structure. Under terms of the all cash-and-stock purchase, Medtronic redomiciled overseas, reducing its corporate tax rate in a controversial practice known as an inversion. The move was among a slew of inverted deals that eventually prompted the U.S. Treasury Department to impose limits on re-incorporations and restrict related-party debt for American subsidiaries.

Besides trimming its tax rate, the blockbuster merger enabled Medtronic to increase its fiscal year revenue by 19 percent and helped the company become more diversified and balanced, given Covidien’s focus on surgical tools and hospital-based technologies. It also expanded Medtronic’s exposure to smaller cities in emerging markets, which currently constitute 12.7 percent of total revenue, up slightly from 12.3 percent in FY14. And it better positions the company to lead the push toward value-based healthcare by integrating patient care services that balance cost and access challenges.

“Ishrak changed the ethos of the company, expanding it from a device maker into one that also offers services and partners with healthcare providers,” Raj Denhoy, a medical technology research analyst at Jefferies LLC told Barron’s last fall. “It was a bold move.”

And a necessary one as well. With the U.S. healthcare industry favoring risk- and value-based business models over traditional fee-for-service systems (thanks to Obamacare), medtech companies are increasingly reducing their dependence solely on medical devices to sustain growth. At Medtronic, that newfound freedom has inspired collaborations with hospital systems, payers, governments, and companies to develop integrated health solutions that complement and enhance product value through traditional wraparound services and solutions.

In FY15, those solutions targeted diabetes and patient home monitoring. Medtronic partnered with both Sanofi S.A. and IBM on diabetes treatment and management, leveraging its devices and care management products with its cohorts’ existing solutions to improve patient outcomes. The company is matching its insulin pumps and glucose monitoring technology with Sanofi’s insulin products to ameliorate type 2 diabetes management, particularly for patients having trouble controlling their blood sugar levels. The pair has been battling type 1 diabetes with a similar agreement, offering an implantable insulin delivery system to European patients.

Medtronic and Sanofi are also working together on care management services, developing an education plan for type 2 diabetics who cannot control their glucose levels through medication. The program will guide these patients through the initial phase of insulin treatment. “One of the priorities of the alliance will be to deliver novel drug-device combinations, including new form factors that are affordable, convenient, and easy to use to increase therapy adherence and deliver better outcomes,” the two companies said in a June 2014 joint statement.

Medtronic’s hookup with IBM aims to improve outcomes as well, albeit via personalized care plans that provide decision support for healthcare providers and patients. The companies are also exploring ways to leverage IBM’s Watson Health Cloud platform to improve Medtronic and other partners’ closed loop algorithms, which attempt to mimic the functions of a healthy pancreas.

In keeping with its mission to create new, value-based solutions, Medtronic subsidiary Cardiocom agreed last year to provide a telehealth platform for the LHC Group, a Lafayette, La.-based provider of healthcare services for home health, hospice, and post-acute care. The partnership integrates Cardiocom’s Commander Flex remote patient monitoring system with LHC’s T3 (Transitions, Training, and Triage) care management program. The T3 plan—designed to reduce avoidable medical issues and emergency room visits—targets patients with complex conditions such as heart failure, hypertension, chronic obstructive pulmonary disease, and diabetes through daily monitoring of vital signs and communication.

The LHC Group alliance gives Cardiocom telehealth partnerships with four of the five largest U.S. home healthcare companies. Medtronic acquired Cardiocom in 2013 for $200 million to form its Hospital Solutions business, an enterprise that has served more than 80,000 patients through a series of long-term contracts.

The Hospital Solutions business gained a managed services arm in August 2014 with Medtronic’s $350 million purchase of NGC Medical, a manager of cardiovascular suites, operating rooms, and intensive care units at 30 hospitals in Italy and throughout Europe. Medtronic previously held a 30 percent stake in NGC Medical.

The LHC-Cardiocom partnership gives Medtronic more than 40 agreements with hospital systems, including 21 pacts from the NGC merger. The agreements, according to executives, represent more than $900 million in committed revenue over the five- to six-year average contract period.

“As more health systems and Accountable Care Organizations look toward maximizing value and population health models, post-acute care providers are playing a critical role in ensuring patients remain healthy through the transition from the hospital to their homes,” Daniel Cosentino, Cardiocom vice president and general manager, said in a statement.

While certainly a sound investment, partnerships like those between Cardiocom and LHC are most likely to increase as Medtronic embraces emerging bundle payment and risk-sharing business models, and distances itself from product-only growth strategies. “Of all the healthcare industries, medical devices faces the biggest challenge from the shift to a fee-for-outcome system. Hospitals are gaining clout when it comes to deciding if a medical device gets used by doctors and the price they pay,” Jean Hynes, manager of the Vanguard Health Care Fund (a Medtronic shareowner), explained to Barrons. “Omar (Ishrak) is way ahead of the curve in figuring out this new world in terms of how to compete.”

Indeed, Medtronic Chairman and CEO Omar Ishrak’s ingenuity has yielded significant financial gains for his company. In fiscal 2015 (year ended April 24, 2015), revenue jumped 19 percent to $20.2 billion—due largely to the Covidien acquisition—and the company’s stock appreciated 33 percent, or 20 percentage points better than the S&P 500’s overall performance. In addition, operating margin improved by roughly 60 basis points, which corresponded to about 200 basis points of operating leverage.

Operating profit, however, slipped 1.2 percent to $3.76 billion and net income fell 12.7 percent to $2.67 billion as volatile currency rates undercut earnings by $666 million.

That instability had a negligible effect on foreign sales, though. Non-U.S. developed markets revenue ballooned 13 percent to $6.37 billion, and emerging market proceeds surged 23 percent to $2.58 billion, according to Medtronic’s fiscal 2015 annual report. Executives attributed the rise in foreign sales to the fourth-quarter creation of the Minimally Invasive Therapies Group, solid gains in the company’s three other business segments, significant new product growth in the Australia-New Zealand region, and steady sales in Western Europe of catheter lab managed services. Similarly, broad-based procedural growth and new product launches bolstered U.S. sales 22 percent to $11.3 billion.

“We delivered solid results in FY15,” Ishrak wrote in his annual letter to shareholders. “The most important event of our fiscal year was the Covidien transaction. The combination of Medtronic and Covidien positions us as a clear industry leader and has set the stage for us to lead the transformation of healthcare. In many ways, this acquisition has initiated a new era for Medtronic.”

The company’s new era began quite auspiciously, with solid gains reported in all business segments. The Cardiac and Vascular Group (CVG) posted the highest sales growth in five years, driven by several new product launches, organic R&D, and steady earnings from old favorites like the Reveal LINQ Insertable Cardiac Monitor System, which is used to identify a diagnosis from unexplained syncope, atrial fibrillation, and cryptogenic stroke. The Group increased revenue 6 percent to $9.36 billion on the strength of its three internal divisions—Cardiac Rhythm & Heart Failure, Coronary & Structural Heart, and Aortic & Peripheral Vascular.

Cardiac Rhythm & Heart Failure proceeds rose 5 percent to $5.24 billion due to robust Reveal LINQ sales as well as the U.S. launch of the Viva XT CRT-D with Attain Performa quadripolar CRT-D lead system (September 2014) and Japanese debut of the Evera MRI SureScan ICD (November 2014). The Viva Quad XT device, equipped with a proprietary AdaptivCRT feature, preserves normal heart rhythms and automatically adjusts to patients’ needs to customize therapy. The system includes VectorExpress technology, which reduces lead programming time by providing doctors with clinically actionable data to help them select optimal pacing configurations for each patient.

Medtronic claims its Evera MRI system gives patients “the most unrestricted access” to magnetic resonance imaging scans. The device, available in single and dual chamber implantable cardioverter defibrillators, reduces skin pressure by 30 percent. It is paired with the Sprint Quattro Secure family of ICD leads.

Cardiac Rhythm & Heart Failure division sales also were buoyed by global demand for the Arctic Front Advance Cardiac CryoAblation Catheter, and steady sales from the catheter lab managed services subsidiary.

Coronary & Structural Heart proceeds climbed 3 percent to $3 billion, though the division’s performance was partially offset by fluctuating currency rates and pricing pressures in the United States, Japan, India, and Western Europe. Nevertheless, sales inched higher due to U.S. growth in CoreValve transcatheter aortic heart valve revenue, and the international introductions of both the CoreValve Evolut R recapturable system and Resolute Onyx drug-eluting stent. The latter product is the first to contain CoreWire technology, an advancement that wraps a dense core metal in a cobalt alloy outer layer, which helps increase radiopacity (i.e., procedural visibility). The stent also features thinner struts to improve deliverability without compromising radial and longitudinal strength.

The Aortic & Peripheral Vascular division delivered the best CVG performance, growing net sales 20 percent to $1 billion. Covidien’s peripheral business—specifically, its chronic venous insufficiency products—contributed to the increase, as did demand for IN.PACT Admiral drug-coated balloons. Other growth drivers included the Valiant Captivia Thoracic Stent Graft System and Endurant 2S Abdominal Aortic Aneurysm Stent Graft System.

Like its CVG kin, Medtronic’s Restorative Therapies Group posted its best gains in five years, but the final numbers were still below management’s expectations. Growth in Surgical Technologies proceeds was partially offset by sagging spine sales and a $127 million loss to foreign currency volatility. Even so, Restorative Therapies still achieved an overall 4 percent increase compared to FY14, generating $6.75 billion in sales. The Group’s overall health was driven by the birth of the Neurovascular division (formerly part of Covidien), and solid growth in both the Surgical Technologies and Neuromodulation divisions.

Surgical Technologies generated the Group’s highest overall sales hike, expanding revenue 7 percent to $1.67 billion. Contributing to the growth were power systems, Aquamantys Transcollation, and PEAK PlasmaBlade technologies, as well as Midas Rex products, monitoring, and O-arm imaging systems. Sales also received a lift from the second-quarter launch of NuVent sinus balloons and the $105 million purchase of Houston, Texas-based Visualase Inc., a startup that developed a U.S. Food and Drug Administration-approved MRI-guided laser and image guided system for minimally invasive neurosurgeries, including surgical thermal ablation. The system uses tiny drill holes to destroy tissue that otherwise would be removed through invasive craniotomies. Gains from the Visualase acquisition and NuVent launch, however, were partially offset by Medtronic’s divestiture of its MicroFrance surgical tool line and French manufacturing facility. The divested portfolio consisted of hand-held reusable instruments used in ear, nose, and throat surgeries, and laparoscopic procedures.

Acquisitions figured prominently into Neuromodulation’s 2015 fiscal year as well but did not impact net sales. Proceeds rose 4 percent over FY14 to $1.97 billion on the strength of Medtronic’s gastro/urology products and deep brain/pain stimulation technology, particularly the RestoreSensor SureScan MRI system, an implantable pain-relieving device for the spinal cord.

The sales drivers likely inspired Medtronic’s August 2014 purchase of Sapiens Steering Brain Stimulation and its December 2014 merger with Advanced Uro-Solutions.

The $200 million Sapiens acquisition gives Medtronic an R&D hub in The Netherlands and a revolutionary technology to treat patients with neuro-degenerative diseases. Sapiens currently is finalizing the development of a new device that potentially could offer more precise deep brain stimulation treatment by using a 40-point electric stimulation system to interact with the brain. Medtronic’s three U.S.-approved device leads use just four electrodes.

“This acquisition broadens our neuroscience position with innovative brain modulation technology that, along with our portfolio of DBS solutions, may one day transform the way physicians are able to treat patients with neurodegenerative diseases like Parkinson’s disease and essential tremor,” Lothar Krinke, Ph.D., vice president and general manager of Medtronic’s brain modulation business, said when the Q2 deal was announced.

The purchase of Elizabethton, Tenn.-based Advanced Uro-Solutions, creator of the NURO system, boosts Medtronic’s offerings in overactive bladder treatment and pits the company directly against Cogentix Medical Inc. for market share. Cogentix (a Uroplasty Inc.-Vision Sciences Inc. amalgam) has been marketing its Urgent PC neurostimulator for several years; the device sends a signal to the sacral nerve through the tibial nerve to regulate urinary function. Uro-Solutions’ NURO system, on the other hand, uses electrical pulses to stimulate the nerves controlling bladder function.

Neurovascular net sales totaled $132 million in fiscal 2015. The division, formerly part of Covidien, generated revenue from sales of its coils, stents, flow diversion equipment, and access product lines, as well as the U.S. launch of the Pipeline Flex, an embolization device designed for minimally invasive large and giant brain aneurysm treatment. The product diverts blood flow away from an aneurysm, reconstructing the parent vessel’s diseased section.

Spine spoiled Medtronic’s near-perfect financial report card, posting FY15’s only loss. Division sales slipped 2 percent to $2.97 billion as Interventional spine proceeds fell victim to weak demand in Europe, pricing pressures in Germany, and overall foreign currency volatility. Neither modest U.S. procedural growth nor new product launches—the Prestige LP Cervical Disc and Pure Titanium Coated interbody fusion devices—could overcome domestic pricing pressures and lingering stagnation in the  bone morphogenetic protein market.

Diabetes Group sales neutralized the losses in Spinal, rising 6 percent to $1.76 billion. Growth drivers included the MiniMed 530G System with Enlite Sensor and MiniMed 640G System with the Enhanced Enlite CGM sensor. The latter product is designed to help prevent hypoglycemia by automatically suspending insulin delivery when glucose levels are expected to fall below a set baseline, and then resuming delivery upon level recovery. The pump features a simple user interface, full-color screen, waterproofing, and remote bolus.

Medtronic’s Minimally Invasive Therapies Group was a revenue dynamo, generating $2.38 billion in sales in only three months (from Jan. 26, 2015, through April 24, 2015). An inheritance of the Covidien purchase, the Group contains most of the merged firm’s former operations, split among Surgical Solutions and Patient Monitoring & Recovery divisions. The Groups products include those for advanced and general surgical care such as stapling, vessel sealing, and other surgical instruments; sutures; electrosurgery products; hernia mechanical devices; mesh implants; gastrointestinal, interventional lung, and advanced ablation solutions; products for patient monitoring and recovery such as ventilators, capnography, and other airway devices; sensors; monitors; compression and dialysis products; enteral feeding; wound care; and medical surgical products including operating room supplies, electrodes, needles, syringes, and sharps disposals.

Oximetry sales drove Patient Monitoring & Recovery revenue, while strong demand for stapling and energy products bolstered Surgical Solutions proceeds.

$17 Billion
NO. OF EMPLOYEES: 85,000

Without a doubt, Medtronic is a company of firsts.

Most of its milestones, of course, are breakthroughs in healthcare technology—the first battery-operated external pacemaker (1957); the first commercially produced implantable pacemaker (1960); the first implantable, programmable neurostimulation device for chronic pain (1983); the first implantable cardioverter defibrillator (1993); the first insulin pump with real-time glucose monitoring (2006); and there are many other examples, in innovation as well as in the company’s far-reaching philanthropic work.

But, 2014 saw another—and perhaps less auspicious, depending upon your point of view—first for the world’s largest standalone medical device company. With its nearly $50 billion purchase of Dublin, Ireland-based Covidien plc, Medtronic pulled off the largest-ever “inversion” deal (at the time) in U.S. history. Medtronic Inc., once headquartered just outside Minneapolis in Fridley, Minn., became Medtronic plc, now rooted in its acquisition’s base in Dublin. Inversion deals are structured to reduce U.S. income taxes and typically involve a U.S.-based company acquiring a foreign firm and relocating there for tax purposes.

The deal for Covidien was announced in June 2014, just after the start of Medtronic’s 2015 fiscal year. The deal was completed in January this year. The cash-and-stock transaction was valued at approximately $49.9 billion, based on Medtronic’s closing stock price of $75.59 per share on Jan. 26. Under the terms of the transaction, each ordinary share of Covidien outstanding as of the closing was converted into the right to receive $35.19 in cash and 0.956 percent of an ordinary share of Medtronic plc. Each share of Medtronic Inc. common stock outstanding as of the closing was converted into the right to receive one ordinary share of Medtronic plc.

(Editor’s note: Though MPO’s Top Company ranking is compiled using fiscal 2014 figures, our coverage of Medtronic in this issue in large part will examine the company’s history-making purchase, which happened in the company’s 2015 fiscal year.)

According to Joanne Wuensch, an analyst with BMO Capital Markets in New York, N.Y., the deal for Covidien puts Medtronic in a better position to negotiate with hospital administrators, a group that has gained purchasing power as doctors increasingly become employees and hospitals limit what brands they carry. The expanded Medtronic will have offerings in six of the top 10 purchasing arms of the hospital, she said.

“They can go in not just with a bucket of products as they have previously, but with a full buffet table,” she told Bloomberg Business after the deal was completed. “It does facilitate the partnership between the device manufacturers and the hospital providers, being able to make more purchases from a fewer number of sellers.”

Despite moving overseas to seek a lower tax rate, Medtronic officials said they would spend an additional $10 billion over the next decade in investments, acquisitions and research and development in the United States (in part, from the tax savings, according to the company). The company’s headquarters will move to Ireland, but officials said it would retain its facilities in Minnesota—and largely be run from there, as most of its executives will continue to be based in the Gopher State.

When the deal was announced, Richard Cohen, a retired Twin Cities stockbroker and decades-long Medtronic investor, noted that Medtronic’s effective departure from Minnesota felt like a slap in the face to a state that nurtured it in its initial stages with funding and investment.

“The thing that bothers me the most is that this is a Minneapolis-based company that depended on the Minnesota investment community for its initial financing, that attracted investment from Minnesota investors first,” Cohen told the Minneapolis Star-Tribune newspaper. “The ones that were there in the beginning are the ones that are going to get screwed.”

Omar Ishrak, Medtronic’s CEO, took a much broader view of the deal.

“The medical technology industry is critical to the U.S. economy, and we will continue to invest and innovate and create well-paying jobs,” Ishrak said in a statement. “These investments ultimately produce new therapy and treatment options that improve or save lives for millions of people around the world. We are excited to reach this agreement with Covidien, which further advances our mission to alleviate pain, restore health and extend life for patients around the world. This acquisition will allow Medtronic to reach more patients, in more ways and in more places.”

Many U.S. lawmakers were not convinced. Medtronic’s purchase of Covidien along with other similar deals where domestic companies use mergers to reincorporate overseas for tax reasons created consternation on Capitol Hill. U.S. lawmakers moved swiftly to block such efforts.

“These transactions are about tax avoidance, plain and simple,” Sen. Carl Levin (D-Mich.) said in a prepared statement. “Our legislation would clamp down on this loophole to prevent corporations from shifting their tax burden onto their competitors and average Americans.”

In September, the U.S. Treasury Department announced tax restrictions that would make it harder and more expensive for U.S. companies to reincorporate abroad.

The measures included the prohibition of financial maneuvers called “cash boxes” and inversions, and they would prevent “hopscotch” loans that allow American firms to access foreign cash without paying U.S. taxes.

“This action will significantly diminish the ability of inverted companies to escape U.S. taxation,” U.S. Treasury Secretary Jacob J. Lew said after the department’s announcement. “For some companies considering deals, today’s action will mean that inversions no longer make economic sense.”

Venture capitalists also expressed concern over the blockbuster deal. Large mergers such as this only consolidate the medtech market more, leaving less space for small companies, and less opportunity for small startups to find buyers.

“The impact of this [deal] will be felt for many years,” Mir Imran, chairman of medical technology accelerator InCube Labs, told The Wall Street Journal. Imran has launched 19 companies since the 1980s, and has done business with both Medtronic and Covidien.

Last year, Nfocus Neuromedical Inc., a hemorrhagic-stroke treatment company launched by InCube, was acquired by Covidien, he said.

“Prior to this merger, Covidien was very acquisitive of startup companies, and Medtronic was also quite active,” he said. “But post-merger, the new Medtronic will be focused on integrating the two businesses … so, for the next two or three years, [it] will be less focused on investing in and acquiring young companies. For the world of medtech startups, this is not good news.”

Casper de Clerq, a partner at Norwest Venture Partners who has been investing in medical technologies for more than two decades—and whose firm last year invested alongside Medtronic in a $20 million Series D round for sinus-implant company Intersect ENT Inc.—said that certain areas of emerging medical technology could be hit especially hard by a merger that, at least temporarily, takes two major buyers off the grid.

In October, the company reiterated, despite government action, that the deal was still a strategic one, including the belief that the combination would “support and accelerate” Medtronic’s three strategies” of:

• • Therapy innovation: With its expanded portfolio of products and services and ability to accelerate strategic investments and investments in technology, the “new” Medtronic would be a preeminent leader in developing, investing in and delivering therapy and procedural innovations to address the major disease states impacting patients and healthcare costs in the United States and around the world;

• • Globalization: With a presence in more than 150 countries, the combined entity would be better able to serve global market needs. Medtronic and Covidien have combined pro forma revenues of approximately $27 billion including approximately $13 billion from outside the U.S., of which $3.7 billion comes from emerging markets. Covidien’s capabilities in emerging market R&D and manufacturing, joined with Medtronic’s clinical expertise across a much broader product offering, significantly increases the number of attractive solutions the new company would be able to offer globally; and

• • Economic value: Medtronic has adopted an intense focus on aligning with its customers to create more value in healthcare systems around the world by combining products, services and insights into solutions aimed at expanding access and reducing healthcare costs. With Covidien, Medtronic would be able to provide a broader array of complementary therapies and solutions that can be packaged to drive more value and efficiency in healthcare systems.

Officials also noted the combination would also result in the diversification of Medtronic’s revenue base due to a stronger foundation in emerging-market R&D and manufacturing and the addition of industry-leading capabilities and expertise in general and advanced surgery and patient monitoring.

Medtronic also revealed the proposed management structure of the new company. The new Medtronic is composed of four major business segments, headed by Medtronic’s three existing group presidents plus Covidien group president Bryan Hanson. The four segments will comprise Medtronic’s existing cardiac and vascular group, valued at $8.8 billion; its restorative therapies group worth $6.5 billion; its diabetes group, worth $1.7 billion; and the fourth, the Covidien Group, currently valued at $10.4 billion.

Covidien’s neurovascular business will function as an independent business under the umbrella of Medtronic’s restorative therapies group. The company also announced four geographic regions around which the combined company will operate: Asia Pacific, the Americas, EMEA (Europe, the Middle East and Africa) and Greater China—down from Medtronic’s present seven regions.

“While we will move to four regions in the future—versus the seven regions represented in the Medtronic structure today—this is in no way intended to reflect a diminished importance or focus on those markets that previously served as regions, nor will I remain any less focused on seeing that these markets reach their potential and objectives,” Ishrak said. “Rather, this approach will ensure we have the appropriate leadership involvement in these markets on a daily basis as we grow our overall scale and complexity.”

Other Acquisitions

The brass at Medtronic seem to be multitaskers on the deal-making front.

In August 2014, the company paid $350 million to buy NGC Medical S.p.A., a privately held Italian company that manages cardiovascular suites, operating rooms, and intensive care units for hospitals. Medtronic already owned 30 percent of the business, which works with hospitals in Italy but also is expanding in Europe, the Middle East and Africa.

“Medtronic is intent on finding new ways to partner with physicians, hospital systems, patients, payers and governments around the world to meet their cost and access challenges and to deliver high-quality healthcare,” said Rob ten Hoedt, executive vice president and president of Medtronic’s European business. “Medtronic has made significant progress over the past year since launching our hospital solutions business. NGC’s managed services expertise further enhances this momentum.”

The company also spent $200 million in cash to purchase privately held Sapiens Steering Brain Stimulation, based in Eindhoven, the Netherlands, which develops deep brain stimulation (DBS) technologies.

The system being developed by Sapiens would allow for more precise stimulation of intended targets in a patient’s brain, according to Medtronic. Sapiens and Medtronic will continue work on the project while beginning clinical research into integrating the technologies into Medtronic’s existing portfolio. “This acquisition broadens our neuroscience position with brain modulation technology that, along with our portfolio of DBS solutions, may one day transform the way physicians are able to treat patients with neurodegenerative diseases like Parkinson’s disease and essential tremor,” said Lothar Krinke, Ph.D., vice president and general manager of the Brain Modulation business at Medtronic.

The Eindhoven facility will serve as a global research and development center for Medtronic’s Neuromodulation business, complementing the firm’s existing research and development operations, officials noted.

In June, Medtronic Inc. announced plans to buy Corventis Inc., a venture-backed, St. Paul, Minn.-based maker of wireless health-monitoring patches. Terms of the deal were not disclosed. Medtronic officials instead called the deal a “staged investment.”

Michael Coyle, president of Medtronic’s cardiac and vascular group said during an investor conference that Medtronic partnered with Corventis to develop the startup’s patch, which monitors heart rate, fluids and respiratory activity. Data is transmitted over a cellular network.

The Nuvant Mobile Cardiac Telemetry (MCT) system from Corventis, cleared by the U.S. Food and Drug Administration (FDA) in 2010, is designed to help physicians around the world better diagnose cardiac arrhythmias such as atrial fibrillation. The device is small and is worn on a patient’s chest.

According to Corventis, Nuvant MCT “provides continuous monitoring of symptomatic and asymptomatic cardiac abnormalities so physicians can detect problems in a timely way.”

The company’s other marketed device, the Avivo Mobile Patient Management system is designed to provide continuous insight into the health status of ambulatory patients, such as those living with heart failure or fluid management problems, so healthcare providers can proactively identify concerning trends and intervene before problems progress. The device has received CE mark in Europe and FDA clearance.

Originally best suited for emerging markets, according to Coyle in a transcript of the meeting, the company now predicts a market for the technology in the United States and Europe. Coyle said the devices might be able to serve as an alternative to holter monitors, which commonly are worn to monitor heart rhythms.

Medtronic’s cardiovascular market rival, St. Jude Medical Inc., recently purchased Atlanta, Ga.-based CardioMEMS, which makes an implantable cardiac monitoring technology. Analysts said that acquisitions such as this will become more common as large companies pursue home health and monitoring technologies as longer-term healthcare solutions for reducing costs and improving outcomes.

In January 2014, Medtronic acquired TYRX Inc., a privately held, New Jersey-based developer of implantable combination antibiotic drug and implanted medical devices. TYRX’s product offerings include the FDA-approved AIGISRx R fully resorbable antibacterial envelope, which is designed to reduce surgical site infections associated with cardiac implantable electronic devices, and the AIGISRx N Antibacterial Envelope, for use with spinal cord neuromostimulators. The all-cash transaction includes an initial payment of $160 million plus potential earn-out and performance-based milestone payments.

According to the company, while the risk of infection from an implanted pacemaker or defibrillator is low for most patients, repeated operative procedures after the initial device implant are associated with a substantial incremental risk of infection. It is estimated to cost the U.S. healthcare system more than $1 billion per year. “TYRX has developed an innovative, proven technology to reduce infection risk, making the procedure safer for patients and removing significant costs from the healthcare system,” Medtronic officials said.

Finally Getting to the Core

The beginning of the 2014 calendar year saw Medtronic enter the increasingly competitive transcatheter aortic valve replacement (TAVR) market in the United States. The FDA approved Medtronic’s CoreValve technology, which already had been approved in Europe in 2007. The agency okayed the self-expanding transcatheter CoreValve valve replacement system for severe aortic stenosis patients who are too ill or frail to have their aortic valves replaced through traditional open-heart surgery. Untreated, these patients have a risk of dying approaching 50 percent at one year, according to the company. Notably, the FDA granted approval of the CoreValve device without an independent device advisory panel review after reviewing the clinical outcomes in the extreme risk study of the CoreValve U.S. pivotal trial, which the watchdog agency claims demonstrates that the CoreValve system is safe and effective with high rates of survival and low rates of stroke and valve leakage reported.

“The low rates of stroke and valve leakage with the CoreValve system—two of the most concerning complications of valve replacement because they increase the risk of death and have a dramatic impact on quality of life—set a new standard for transcatheter valves,” said Jeffrey J. Popma, M.D., director of Interventional Cardiology at the Beth Israel Deaconess Medical Center in Boston, Mass., and co-principal investigator of the trial. “The CoreValve U.S. Pivotal Trial was rigorously designed and applied clinical best practices. The trial results have redefined optimal TAVR outcomes in the areas that matter most to physicians and their patients, and the results are especially remarkable given the complex medical conditions and extreme frailty of this population.”

In the U.S. trial, the CoreValve System achieved exceptional hemodynamics, or blood flow, post-implant with results similar to the gold standard, surgical valves, Medtronic reported. Additionally, valve leakage (known as paravalvular leak or PVL) rates were low and decreased over time as the self-expanding valve conformed to the shape of a patient’s annulus—an improvement that has not been reported in other major TAVR studies.

The CoreValve System was developed to serve the needs of a broad range of patients. The FDA approved the entire CoreValve platform including the CoreValve Evolut 23 millimeters (mm), and the CoreValve 26 mm, 29 mm and 31 mm valves.

A self-expanding nitinol frame enables physicians to deliver the device to the diseased valve in a controlled manner, allowing for accurate placement. All valve sizes are delivered via a small (18 Fr, or 6 mm) TAVR delivery system, making it possible to treat patients with difficult or small vasculature.

The FDA approved CoreValve for high-risk patients in June 2014. The next-generation recapturable CoreValve Evolut R transcatheter valve and the CoreValve EnVeo R delivery catheter system are available in Europe and other countries that recognize the CE mark.  The company received FDA approval for an expanded indication for CoreValve in April this year. Japanese regulators gave their OK for CoreValve in Japan in May.

Show Me the Money

The company reported fiscal year 2014 revenue of $17 billion, an increase of 4 percent on a constant currency basis after adjusting for a $175 million negative foreign currency impact, or 3 percent as reported. As reported, fiscal year 2014 net earnings were approximately $3.1 billion or $3.02 per diluted share, a decrease of 12 percent and 10 percent, respectively. The Cardiac and Vascular Group (cardiac rhythm disease management, coronary, structural heart and endovascular) posted sales of $8.9 billion (up 2 percent). The Restorative Therapies Group (spine, neuromodulation and surgical technologies) recorded $6.5 billion in revenue (also up 2 percent). The Diabetes Group had $1.7 billion in sales (flat compared to FY13). Overall company sales for FY15 (ended April 24) were $20.3 billion.

$16.59 Billion
NO. OF EMPLOYEES: 46,000

Three seconds. It’s become the go-to metric lately for decision-making, website loading, first impressions, and love declarations. Scientific research also has shown the timespan can effectively distract the human mind and spoil productivity.

Medtronic Inc. has long used the clock to measure its own success, gauging its annual progress not only in dollars but in moments of time as well. In FY13 (ended April 26, 2013), the company improved upon its mission to alleviate pain, restore health and extend lives by gaining an additional second, impacting millions of  patients worldwide.

“As I reflect on our results, I am pleased to announce that we have achieved an important milestone in our Mission: Every three seconds, someone somewhere in the world benefits from a Medtronic product,” Chairman/CEO Omar Ishrak told shareholders at the end of his fiscal 2013 annual report. “Over the past 12 years, we have lowered this metric by seven seconds, which impacts millions of additional lives, an enormous accomplishment.”

Enormous, indeed: Medtronic’s three-second product benefit metric translates into 18.19 patients per minute, 26,197 per day and 9.562 million for FY13—or the entire population of New York City “and then some.”

The company’s fiscal-year accomplishments weren’t too shabby either—sales jumped 2.5 percent (5 percent on a constant currency basis) to $16.6 million and non-GAAP diluted earnings per share grew 8 percent to $3.75, or 300 basis points faster than revenue. In addition, Medtronic generated $4.4 billion of free cash flow, roughly half of which was used to distribute more than $1 billion in dividends and repurchase more than $1.2 billion of common stock.

International sales were particularly solid, rising 7 percent on a constant currency basis (2 percent as reported), with revenue in emerging markets (Brazil, Russia, India, China) surging 17 percent, according to the company’s annual report. In the fourth quarter of FY13, emerging markets generated 12 percent of revenue—a testament, no doubt, to Ishrak’s laser-like focus on BRIC economies.

That focus intensified in fiscal 2013 with the $816 million acquisition of orthopedic implant maker China Kanghui Holdings Inc. and $66.2 million investment (for a 26.4 percent stake) in LifeTech Scientific Corporation, a Shenzhen, China-based manufacturer of minimally invasive cardiovascular and peripheral vascular disease treatment devices. The latter deal gave Medtronic the right to distribute LifeTech products and buy additional shares of the company upon the achievement of specific financial and/or developmental milestones.

“China is key to our global strategy as we continue to expand our geographic footprint and strive to meet the needs of local cardiovascular patients, and this agreement reaffirms our commitment to this important market,” Mike Coyle, executive vice president and president of Medtronic’s Cardiac and Vascular business group, said when the LifeTech deal was announced.

Another affidavit of Medtronic’s commitment to the Chinese market coincided with the August 2012 opening of its Shanghai Innovation Center—the firm’s first research and development facility outside the United States and Europe. The move fulfills Ishrak’s vow to create local product R&D in China and increases its local engineering staff to more than 250 total.

Medtronic has pledged to hire and train an additional 1,000 skilled workers in China over the next five years, several hundreds of whom will develop new medical technologies within the Innovation Center. The facility also will function as an incubator for Chinese doctors to commercialize novel ideas into clinical solutions.

“We are far from finished in growing our international capabilities and footprint,” Ishrak said in the firm’s FY13 annual report. “Our primary near-term focus is to capitalize on the enormous opportunity in the global premium segment, which we have identified as a $5 billion annual opportunity. We will continue to pursue this opportunity by driving penetration of our existing and new therapies, raising patient and physician awareness of our offerings, and supporting the development of infrastructure and training of physicians where necessary.”

Ishrak certainly delivered on his near-term promise, further infiltrating foreign and domestic markets with the FY13 launches of the Resolute Integrity drug-eluting stent (for coronary artery disease treatment) in Japan, the Advisa MRI pacemaker (for abnormally slow heart rhythm) in the United States and Japan, the RestoreSensor SureScan MRI spinal cord stimulation system (for chronic pain) in Europe and the CD Horizon Solera spinal implants/surgical instruments in the United States and other global markets.

Resolute’s Japanese debut as well as its U.S. market penetration—it was launched in the fourth quarter of FY12—propelled Medtronic’s coronary device sales 11 percent to $1.7 billion in fiscal 2013. The Coronary and Endovascular business posted the highest profits in the company’s Cardiac and Vascular Group, which itself grew 3 percent to $8.6 billion due to strong sales of coronary, endovascular and atrial fibrillation products. Endovascular unit sales jumped 11 percent to $867 million, while atrial fibrillation device revenue soared 17 percent to $243 million and Structural Heart business proceeds rose 4 percent to $1.1 billion.

Those gains were somewhat offset by pricing pressures, declining growth rates in Western Europe beginning in the third fiscal quarter of 2013 and lower sales of defibrillation systems, pacing systems and cardiac rhythm disease management (CRDM) products.

Despite showing signs of stabilization in FY13, and slightly higher U.S. procedure volumes, CRDM unit sales fell 2 percent to $4.9 billion. Executives attribute the decline to unfavorable foreign currency exchange rates and weak defibrillation system sales due to increased competition and pricing pressures in the United States and Western Europe. Still, the company managed to cap its defibrillation system revenue loss at 2 percent (slipping to $2.7 billion) through solid sales of its shock reduction and lead integrity alert technologies, the  Viva/Brava portfolio of cardiac resynchronization therapy with defibrillation (CRT-D) devices, increasing lead-to-port ratios and share gains. The Viva/Brava CRT-D product family features a new algorithm called AdaptivCRT, which improves patients’ response rates to CRT-D therapy by preserving their normal heart rhythms and continuously adapting to individual patient needs, according to Medtronic.

Foreign exchange rates, pricing pressures and declining U.S. implant volumes proved too strong an obstacle to offset with international share gains realized through the Japanese launch of the Advisa DR MRI SureScan pacemaker in the second quarter. As a result, pacing system sales fell 4 percent to $1.9 billion.

Executives attributed the growth in atrial fibrillation revenue to the continued global acceptance of the Arctic Front Cardiac CryoAblation Catheter system, while Structural Heart’s net gain was linked to strong sales of transcatheter aortic heart valves and growth in the company’s cardiopulmonary product lines.

Endovascular unit sales were driven by new product launches, including the Endurant Abdominal Aortic Aneurysm Stent Graft System (in Japan), and the Valiant Captivia Thoracic Stent Graft System, which debuted in the United States in the fourth quarter of FY12 and in Japan and China in Q1 of fiscal 2013. Strong worldwide sales of peripheral stent products and drug-eluting balloons also contributed to the growth.

Results in Medtronic’s Restorative Therapies Group practically mirrored its sister unit, with gains in three  divisions counteracting losses in one. The black sheep in this group was the Spine division, where sales slid 4 percent to $3.1 billion due to revenue declines in bone morphogenic protein (BMP) and core spine products.

Also like its sister, Restorative Therapies Group sales were negatively impacted by unfavorable foreign exchange rates, pricing pressures and increased competition. But the Restorative Group still managed to grow revenues 3 percent to $7.8 billion due to strong sales in  its Surgical Technologies, Neuromodulation, and Diabetes units.

Surgical Technologies unit profits ballooned 14 percent to $1.4 billion thanks to robust sales of capital equipment, including O-arm imaging and StealthStation S7 surgical navigation systems, Midas Rex powered surgical equipment, and Advanced Energy products, namely the Aquamantys bipolar sealers and PEAK PlasmaBlade electrosurgical devices. Net sales in the unit also were positively affected by balanced growth of disposables and service revenue in Medtronic’s neurosurgery and ENT (ear, nose, throat) businesses.

Neuromodulation sales increased 7 percent to $1.8 billion, driven primarily by the continued U.S. adoption of RestoreSensor spinal cord stimulator, new implant growth of Activa DBS system for movement disorder, and solid demand for InterStim Therapy devices to treat bladder, urinary and bowel conditions. Sales were particularly strong in Western Europe, where the SureScan spinal cord stimulation system is approved for full-body magnetic resonance imaging scans.

Strong international sales of the Paradigm Veo insulin pump and the Enlite CGM sensor drove a 3 percent gain in diabetes net sales ($1.5 billion), the growth was partially offset by a decline in U.S. insulin pump sales as the company awaits approval of its MiniMed 530G device.

The culprits in Spine’s FY13 slide fell victim to the usual setbacks—pricing/competitive pressures, a challenging reimbursement environment in certain markets and unfavorable foreign exchange rates. Bigwigs attributed the 2 percent decline in core spine sales ($2.6 billion) to weak demand for balloon kyphoplasty procedures (BKP), minimally invasive surgery to repair spinal fractures. The loss in core spine profits was partially offset (but not enough to prevent an overall decrease, obviously) by the introductions of AMT implants, the Capstone Control, and Bryan ACD Instrument Set as well as the continued adoption of Solera, Atlantis Vision Elite, and other biologics products. A further sales slide was prevented with Medtronic’s focus on enabling technologies, including O-Arm imaging, StealthStation surgical navigation, and Powerease powered surgical instruments.

Medtronic’s BMP products suffered from weak demand as well; sales plummeted 15 percent to $528 million as fallout continued over the Infuse bone graft controversy. The company has yet to shake the 3-year-old scandal that erupted with a scathing series of Spine Journal articles that accused the multinational firm of bribing doctors to under-report risks associated with the product.
Around the same time, a U.S. Senate report claimed various studies promoting the bioengineered synthetic bone graft substance likely were biased because they were written by Medtronic employees.

4. Medtronic
$15.9 Billion

KEY EXECUTIVES:
Omar Ishrak, Chairman and CEO
Michael J. Coyle, Exec. VP & Group President, Cardiac and Vascular Group
Christopher J. O’Connell, Exec. VP & Group President, Restorative Therapies Group
Richard Kuntz, M.D., M.Sc., Sr. VP & Chief Scientific, Clinical and Regulatory Officer
Stephen N. Oesterle, M.D., Sr. VP, Medicine and Technology
H. James Dallas, Sr. VP, Quality and Operations

NO. OF EMPLOYEES: 40,000

GLOBAL HEADQUARTERS: Minneapolis, Minn.

When CEO Art Collins retired after six years at the helm of Medtronic Inc. in 2007, the buzz, of course, was about who would replace him. Two top internal candidates certainly were in the running. One was Michael DeMane, president of Medtronic’s spine business at the time, and the other was Chief Operating Officer Bill Hawkins. Hawkins was viewed as a steady hand as part of the company’s leadership team. DeMane was more of an aggressive maverick, whose drive for growth brought with it some legal and regulatory scrutiny (he later moved on to spine company Lanx Inc. as CEO in 2010 and then to spine stimulation firm Nevro Inc. in 2011).

As anyone who follows the industry knows, Hawkins won out, but his tenure of less than five years was relatively short-lived compared with his predecessors. He retired a little after the end of the company’s fiscal year (Medtronic’s fiscal cycle is earlier than most. Fiscal 2011 ended on April 29, 2011). It wasn’t that Hawkins was unprepared, but he took the helm during uncertain times. He tried to make the company more efficient—making key acquisitions and divestitures—but Wall Street remained unimpressed. During his tenure, Medtronic stock fell from around $54 to $37 (though that period includes the Great Recession). The company also had to deal with some legal wrangling over faulty defibrillator leads and issues with its Infuse bone graft product. Medtronic also is a company in transition. It’s a mature firm, and its pacemaker and implantable cardioverter defibrillator businesses aren’t the growth drivers they used to be.

Medtronic looked outside the company for its next chief executive. They found him at GE Healthcare. Omar Ishrak, former CEO of GE Healthcare Systems, became Medtronic’s CEO in June 2011. During Ishrak’s 16-year tenure with Chalfront, St. Giles, United Kingdom-headquartered GE Healthcare, he also served as senior vice president of GE Corp. and was a member of the GE Corporate Executive Council. The company experienced significant growth in clinical systems and ultrasound devices; revenues for the Clinical Systems Division almost doubled from 2004 to 2009, reaching approximately $5 billion. Revenues in the ultrasound business grew from $400 million in 1998 to $1.8 billion in 2010. Ishrak, who is a member of the board at the Blood Center of Wisconsin and a member of the Health Leadership Council of the Save the Children Foundation, previously held senior and management roles at Philips Ultrasound, Diasonics Inc. and Elbit Ultrasound Group. He holds a bachelor’s degree and a Ph.D. in electrical engineering from the University of London, King’s College.

“I am honored and excited to have the opportunity to lead Medtronic—a great company with a renowned, mission-based heritage of saving and improving lives,” Ishrak said. “I look forward to working with the Medtronic team to continue to advance the company as a global healthcare leader.”
The company hopes that Ishrak will be the new product marketing whiz that he was with GE and that he’ll be aggressive about pursuing new markets at home and abroad, particularly in developing countries.

As the new CEO grabbed the reins, Medtronic posted FY11 revenue of $15.9 billion, an increase of 1 percent as reported or an increase of 2 percent after adjusting for $12 million of favorable foreign currency impact and approximately $200 million of revenue benefit from the extra week in the first quarter of fiscal year 2010. Net earnings were $3.1 billion, which was flat, or $2.86 per diluted share, an increase of 3 percent.

International revenue of $6.8 billion grew 6 percent both as reported and after adjusting for a $12 million favorable foreign currency impact and the benefit of the extra week in fiscal year 2010. International revenue represented 43 percent of total company revenues for the year. Strong market sales were reported in China, India and Latin America. Company executives reported that “steady growth” across most businesses and geographies was offset by “challenging dynamics” in the U.S. implantable cardiac defibrillator (ICD) and spinal markets. Starting in the first quarter of fiscal year 2011 the firm began to operate under two reportable segments and two operating segments, the Cardiac and Vascular Group (composed of the Cardiac Rhythm Disease Management [CRDM], CardioVascular, and Physio-Control businesses—Physio-Control was sold to Bain Capital during fiscal 2012 for $487 million) and the Restorative Therapies Group (composed of the Spinal, Neuromodulation, Diabetes, and Surgical Technologies businesses).

The Cardiac and Vascular Group at Medtronic reported worldwide sales of $8.5 billion, which was flat compared with 2010. Group performance was driven by double-digit sales growth in AF (atrial fibrillation) Solutions, Coronary and Peripheral, Structural Heart, and Endovascular, and offset by declines in CRDM implantables. The implantable cardioverter defibrillator (ICD) market slowdown in the United States partially was offset by the performance of the Protecta ICD, which had strong sales in Europe and was approved by the U.S. Food and Drug Administration (FDA) late in the fourth quarter of 2011. The FDA also approved the Revo MRI SureScan pacing system, designed for use in a magnetic resonance imaging environment.

The Restorative Therapies Group reported worldwide sales of $7.4 billion, which increased 2 percent. Within the group, spinal sales totaled $3.4 billion (core spinal revenue was $2.5 billion, while biologics sales were $884 million), down 2 percent. Neurovascular sales were $1.6 billion, up 2 percent. Diabetes-related sales were $1.3 billion, up 9 percent. Surgical technologies were up 8 percent to $1 billion.

In April 2011, Medtronic combined its U.S. Cardiac and Vascular Group sales functions into a single, unified cross-divisional sales organization, effective at the start of Medtronic’s new fiscal year, May 1, 2011. David Roberts, formerly vice president of sales for the Cardiac Rhythm Disease Management business at Medtronic, assumes the leadership of this new 2,700-person organization as the national vice president, Cardiac and Vascular Group Sales. The Cardiac and Vascular Group of businesses at Medtronic operates across 15 cardiovascular market segments.

“Our Cardiac and Vascular Group of businesses have historically focused primarily on clinicians as the primary decision makers for medical device selection for their patients,” said Michael Coyle, executive vice president and group president of the Cardiac and Vascular Group of businesses at Medtronic. “With the growing partnership between clinicians and administrators as they work together to address the changing healthcare environment, our strategy going forward is to leverage Medtronic’s breadth of talent, technologies, products and services across our 15 market segments to help hospital administrators address their unmet needs, while maintaining and strengthening our ability to serve clinicians and their patients. This new leadership strategy and structure uniquely positions Medtronic as the only medical device company capable of doing both.”

Among the acquisitions in FY2011, Medtronic bought privately held Ardian Inc., a developer of catheter-based therapies to treat hypertension and related conditions. The purchase price was $800 million in cash up front, plus additional cash payments equal to annual revenue growth through the end of Medtronic’s 2015 fiscal year. Medtronic had previously invested in Ardian and, prior to completion of the acquisition, held an 11.3 percent ownership stake in the company. Ardian’s flagship product, the Symplicity catheter system, addresses uncontrolled hypertension through renal denervation, or ablation of the nerves lining the renal arteries. It received the CE Mark and Australia’s Therapeutic Goods Administration listing, but is not yet approved by the U.S. Food and Drug Administration (FDA) and is undergoing clinical trials prior to FDA approval. Acquiring Ardian offers Medtronic the opportunity to lead the development of renal denervation for the treatment of uncontrolled hypertension. The acquisition augments Medtronic’s existing interventional therapies and complements the company’s expertise in catheter design and ablation technologies. Hypertension is the leading attributable cause of death worldwide (see the Datawatch column on page 46). It is a significant, escalating global healthcare problem affecting approximately 1.2 billion people and is associated with an increased risk of heart attack, stroke, heart failure, kidney disease and death. Hypertension is estimated to have a direct cost to the global healthcare system of more than $500 billion annually.

In a move to expand biologics product offerings, Medtronic acquired Osteotech Inc. for $123 million.

“This acquisition is an important step in building a broader business in regenerative biologics,” said Tom McGuinness, general manager of Medtronic’s Biologics business. “The acquisition complements our bone healing portfolio and will expand our current presence in spine, orthopedic trauma and dental into new treatment areas including joint reconstruction, foot and ankle, sports medicine and neurosurgery.”

Osteotech’s product line includes Grafton demineralized bone matrix, and MagniFuse bone grafts and Plexur biocomposites, which are used in a broad range of musculoskeletal surgical procedures.

A number of new Medtronic products received the FDA nod in FY11.

The FDA approved Medtronic’s Revo MRI SureScan pacing system designed for use in a magnetic resonance imaging (MRI) environment and approved as MR-Conditional. Shipments of Revo MRI will begin immediately. Until now, MRI procedures had been contraindicated for patients with implanted pacemakers due to the potential for serious adverse events. According to Medtronic, an estimated 200,000 pacemaker patients in the United States have to forgo MRI scans each year, which are critical for making a wide range of health diagnoses. As the population ages, the use of pacemakers is growing, with approximately 5 million patients worldwide who currently are implanted with a pacemaker or implantable cardioverter-defibrillator. At the same time, the use of MRI as a diagnostic tool is increasing, with approximately 30 million scans completed in 2007. People older than age 65 are twice as likely to need an MRI compared with younger patients, and between 50 and 75 percent of patients with electronic cardiac devices likely will need an MRI over their device’s lifetime. Prior to the introduction of Revo MRI, pacemaker patients could face serious complications if they were exposed to the powerful magnetic fields generated by MRI machines, which can be as much as 30,000 times more powerful than the Earth’s magnetic field. Complications to exposure could include interference with pacemaker operation, damage to system components, or a change in pacing capture threshold, which is the minimum amount of current required to evoke a cardiac contraction.

The FDA gave its OK for Medtronic’s InterStim therapy for bowel control. InterStim therapy, previously available to treat the symptoms of overactive bladder and non-obstructive urinary retention, now also is approved for the treatment of chronic fecal incontinence in patients who have failed or are not candidates for more conservative treatments. InterStim is a minimally invasive option proven to improve or restore bowel control in more than 80 percent of patients who received the therapy in a multi-center clinical trial, according to the company. The implantable system uses mild electrical stimulation of the sacral nerves to influence the behavior of the pelvic floor muscles and bowel. As a result, the therapy significantly reduced fecal incontinent episodes for a high percentage of clinical trial patients. The system consists of a thin wire lead and a neurostimulator, or pacemaker-like device, as well as external clinician and patient programmers. The technology originally was cleared by the FDA in 1997 for urinary urge incontinence.

Medtronic received FDA approval for the CD Horizon Legacy Spinal System for the treatment of adolescent idiopathic scoliosis (AIS), a condition that affects nearly 6 million people in the United States (1 million of those patients are children). Characterized by a side to side curvature of the spine, AIS usually develops in children older than 10; its cause currently is unknown. Medtronic’s CD Horizon Spinal System consists of rods, hooks, and screws that are implanted in the spine to correct the curve. The system is available in multiple rod diameters and screw sizes so surgeons can choose the appropriate size based on a child’s condition, anatomy, and activity level (3.5 millimeter rods most commonly are used in pediatric cases), according to the company’s 510(k) application to the FDA. Doctors have used the CD Horizon Legacy Spinal System since 2004 in more than 500,000 surgeries.
Medtronic applied for the 510(k) clearance to allow surgeons to use “pedicle screw-based constructs” to treat pediatric cases of AIS, the firm’s application stated. Besides information about the system such as materials used and precise sizes of components, Medtronic provided the FDA with published clinical data of pediatric AIS patients treated with the CD Horizon pedicle screw instruments. The data included the results of more than 600 pediatric patients treated with pedicle screw constructs alone and more than 900 patients treated with a hybrid construct of both pedicle screws and hooks. David L. Skaggs, M.D., professor and chief of orthopedic surgery at the Children’s Hospital in Los Angeles, Calif., said pedicle screws can help children retain their active lifestyles and possibly reduce the need for future surgeries. “Using pedicle screws in the treatment of adolescent idiopathic scoliosis gives my patients the best chance of correcting their spine and chest deformities, and preventing future surgeries,” he said.

The company also resolved issues with two FDA warning letters. The agency sent two warning letters to the firm—one in November 2009 regarding the company’s Mounds View, Minn., facility and another in June 2009 regarding its manufacturing facility in Juncos, Puerto Rico. Medtronic received an FDA warning letter following an August 2009 inspection of the company’s Mounds View facility, which serves as the headquarters of the Cardiac Rhythm Disease Management business. The company also received an FDA warning letter following a December 2008 inspection of the company’s facility in Juncos, which is a manufacturing location for the Neuromodulation, Diabetes and Cardiac Rhythm Disease Management businesses.

Medtronic officially opened the doors of its new manufacturing facility in Singapore in March 2011. The new site was built to respond to the future expected growth of cardiac devices in Asia. By the end of 2011, Medtronic invested more than $56 million to the development of its Singapore facility. Singapore also serves as the distribution hub for the Asia-Pacific region. The new facility, which began operations in January, was designed to enable Medtronic to respond more effectively and efficiently to the needs of customers and patients with cardiac rhythm disorders, improving standards of care in Asia.

Unrelated to the expansion in Singapore, Medtronic announced plans in February 2011 plans to reduce its workforce by 4-5 percent by the end of April the same year due to slower growth in some of the markets the company serves.

For fiscal 2012 (ended April 30), Medtronic posted gains. The company reported revenue of $16.2 billion, an increase of 3 percent on a constant currency basis after adjusting for a $273 million positive foreign currency impact or 4 percent as reported. Net earnings were $3.6 billion or $3.41 per diluted share, an increase of 17 percent and 19 percent, respectively.

$15.8 Billion
NO. OF EMPLOYEES: 40,000

Not many companies still adhere to a mission that was hatched half a century ago, well before medical device manufacturing was considered a bona fide industry and outsourcing became an accepted business practice. Yet Medtronic Inc. has always remained true to its core objective, written by co-founder Earl Bakken in 1960 to provide a strategic focus for the promising young firm. Still in its original format (Medtronic executives refuse to change a word of it), the mission tasks employees with working toward a common goal: to “alleviate pain, restore health, and extend life.”

Medtronic executives attribute much of the company’s past success to Bakken’s mission, claiming the engineer, entrepreneur and hospital equipment repairman provided the 62-year-old firm with both a purpose and a roadmap for fulfilling it. But there is another word executives usually associate with the mission, one that was not originally penned by Bakken (and won’t be added to the mission anytime soon) but is just as critical to the company’s past and future accomplishments: Innovation.

“This year marks the 50th anniversary of our mission,” former Medtronic Chairman and CEO William A. Hawkins reminded shareholders in a letter published within the company’s 2010 annual report, his last with the company. (Hawkins retired at the end of FY2011 and was succeeded by Omar Ishrak, former president and CEO of GE Healthcare). “As I reflect on this milestone and its relevance today, I am reminded of what Earl intended when he put pen to paper. Implicit in the Medtronic Mission is the idea that innovation has the fundamental power to transform the lives of the patients we serve. Innovation is in our DNA; it’s cultural, informing everything we think and do…A common theme is why we innovate—our Mission—to alleviate pain, restore health, and extend life. Innovation has been at the root of our success and will continue to fuel our global growth …”

Innovation certainly fueled Medtronic’s global growth in fiscal 2010. Net sales rose 8.3 percent to $15.8 billion and gross profit climbed 8.3 percent to $12 billion for the year ended April 30, 2010.

Executives attributed the increases to double-digit revenue growth in four of the company’s seven operating segments, robust device sales outside the United States and a spate of new product launches that included a low-glucose suspend insulin pump and the EnRhythm MRI SureScan pacing system, the second generation of advanced pacemakers designed specifically to endure the rigors of magnetic resonance imaging (MRI). Both products are sold in Europe but have not yet been cleared by the U.S. Food and Drug Administration. In addition to the insulin pump and pacemakers, Medtronic added a new platform to its drug-eluting stent portfolio, introduced a new spinal system (Vertex Select Reconstruction System Occipitocervical Module) that provides orthopedic surgeons with additional options to repair neck and upper back injuries, and launched an endoscopic irrigation system for removing bacteria from the paranasal sinuses. The system, dubbed the Hydrodebrider, is used to treat chronic sinusitis.

Medtronic also received Humanitarian Device Exemption approval in FY2010 for the Melody transcatheter pulmonary heart valve, which uses a minimally invasive procedure rather than the traditional open-chest approach. The Melody valve allows doctors to deliver replacement valves via a catheter through the body’s cardiovascular system, thereby eliminating the need to cut open the chest. Cardiologists called the device “an enormous breakthrough” for congenital heart disease patients.

With its various product launches and foray into the remote wireless patient monitoring realm, the company’s newly-formed Cardiac Rhythm Disease Management (CRDM), CardioVascular and Physio-Control Group easily topped Medtronic’s other division in sales. During the second quarter of fiscal 2010, the company announced the consolidation of its seven segments into two operating groups; Hawkins said the move was designed to capitalize on existing synergies across the businesses and advance the firm’s goal of operating as an integrated company focused on chronic disease.

Overall, the CRDM, CardioVascular and Physio-Control Group generated $8.5 billion in sales, a 9.8 percent increase compared with the $7.8 billion the group reported in fiscal 2009, according to the 2010 annual report (which, incidentally, did not break down sales between the two new operating groups, but rather by the seven separate product segments).

CRDM sales reached $5.2 billion, a 5 percent increase compared with the $5 billion the segment reported in fiscal 2009, ended April 24. Executives attributed the solid growth to robust global sales of the Vision 3D portfolio and the popularity of both the Secura implantable cardioverter defibrillators and the Consulta cardiac resynchronization therapy-defibrillators. Both devices feature Conexus wireless technology that allows clinicians to remotely transfer patient data and improves communication between the implanted device and programmer at the time of surgery, during a follow-up doctor visit or while the patient is at home. Overall, defibrillation systems sales climbed 7 percent to $3.16 billion.

Pacing systems sales, on the other hand, remained flat in FY2010 at $2 billion, due mostly to pricing pressures and the June 2009 Class I recall of certain Kappa and Sigma pacemakers (some devices had wiring problems that could have caused them to fail). Pacing systems sales, however, were partially offset by sales growth outside the United States of the Adapta pacemaker product line, which features an atrial-based pacing mode that reduces unnecessary pacing in the right ventricle of the heart while providing the safety of a dual chamber backup. Studies have suggested that reducing unnecessary pacing in the right ventricle may reduce the risk of developing heart failure and atrial fibrillation.

Executives expect fiscal 2011 CRDM sales to be impacted by better market infiltration of the company’s Vision 3D portfolio as well as the commercialization of its Protecta SmartShock line of devices, which was launched internationally late in the fourth quarter of fiscal 2010. The Protecta portfolio leverages the Vision 3D platform to deliver single, dual and triple chamber defibrillators with new algorithm technology that could reduce the frequency of inappropriate shocks. The increased use of devices with OptiVol (which measures fluid levels in the chest) as well as the launch of an MRI pacing system for use in MRI machines also is expected to affect FY2011 CRDM sales.

CardioVascular sales jumped 18 percent to $2.8 billion, with sales of coronary stents comprising about half of that total, or $1.48 billion. Endovascular items and structural heart devices comprised the remaining half, contributing $495 million and $880 million, respectively, to the total. The company attributed the double-digit sales growth in each product category (24 percent for endovascular devices and 18 percent for structural heart merchandise) to increased sales of several products, including the Talent Abdominal Aortic Aneurysm Stent Graft, Thoracic Stent Graft and Endurant Abdominal Stent Graft systems as well as the CoreValve transcatheter valve, tissue surgical valves and cannulae products. Two acquisitions also played an important role in maintaining Medtronic’s market share in the Cardiovascular space in fiscal 2010 and ensuring its future growth—the $350 million purchase of Invatec and two affiliated companies, Fogazzi and Krauth Cardiovascular, in January 2010, and the $370 million purchase of ATS Medical Inc. three months later. The Invatech deal gives Medtronic the ability to market drug-eluting balloons covering the coronaries and lower extremities, while the ATS merger has enabled the company to provide Open-Pivot bileaflet mechanical and 3f pericardial valve technology to cardiac surgeons.

The company’s Endeavor and Endeavor Resolute drug-eluting stents continued to perform well in FY2010, generating $767 million in worldwide revenue, a 27 percent increase compared with the $603 million the products earned for Medtronic in fiscal 2009. Executives expect the both stents to drive future sales, particularly as the device becomes more accepted with Japanese patients.

Physio-Control products such as external and automated defibrillators posted solid gains but contributed the least amount of revenue to the group. The company’s annual report shows that Physio-Control product sales climbed 24 percent to $425 million.

Medtronic’s other operating group—Spinal and Biologics, Neuromodulation, Diabetes and Surgical Technologies—may not have generated as much revenue as the CRDM sector in fiscal 2010, but it nonetheless posted a solid 6.7 percent net sales increase. The group posted $7.2 billion in total sales, with spinal and biologics devices comprising nearly half of that amount ($3.5 billion) and both neuromodulation and diabetes products each contributing nearly an equal amount—$1.5 billion and $1.2 billion, respectively. Surgical technology products brought up the rear, generating $963 million for the group.

Though they ranked second in sales only to CRDM devices, Medtronic’s spinal and biologics product sales remained virtually unchanged from FY2009, managing to gain merely an additional $100 million in sales in fiscal 2010. Much of that growth was driven by global sales of the Horizon Legacy and TSRH Spinal System. Biologics contributed $868 million to the group’s bottom line, a 3 percent increase compared with the $840 million that biological products generated in fiscal 2009.

Neuromodulation product sales, on the other hand, swelled 9 percent in fiscal 2010; executives attributed the growth there to higher global sales of InterStim and Medtronic Deep Brain Stimulation therapies, as well as momentum from Activa PC and Activa RC neurostimulator sales in Europe.

Diabetes product sales followed a similar route, ballooning 11 percent on higher sales of the company’s Durable pump systems, the international launch of the MiniMed Paradigm Veo during the third quarter and the domestic debut of the MinMed Paradigm Revel in the fourth quarter. Sales also received a boost from the June 2009 acquisition of PreciSense A/S, a Denmark-based company that develops continuous glucose monitoring technology. Another factor that contributed to the sales surge was Medtronic’s settlement with suppliers involved in the July 2009 recall of specific lots of Quick-set infusion systems used with the MiniMed Paradigm infusion pumps. Medtronic initiated the recall after discovering that certain infusion sets did not allow the insulin pump to vent air pressure properly, which potentially could have caused the pump to deliver the wrong amount of insulin. The recall did not have a significant impact to total net sales for fiscal 2010.

Surgical technologies posted the largest sales surge of the group, thanks to the launch of the NIM 3.0 Nerve Monitoring System and continued popularity of both the Fusion EM IGS System and the MR7 pneumatic system, an advanced electromagnetic-based image-guided surgery system for sinus procedures. Sales also were positively impacted by the improved international performance of the O-Arm Imaging System, a multi-dimensional surgical imaging system used in spine and orthopedic procedures.

$14.6 Billion
NO. OF EMPLOYEES: 38,000

Not every company can overcome a litany of economic, regulatory and political challenges and still turn a profit. Medtronic Inc. managed such an unlikely feat in fiscal 2009 by striving to deliver better healthcare to both patients and the market.

That struggle, along with a tenacious focus on its core mission of alleviating pain, restoring health and extending patients’ lives, helped the device giant emerge from the most serious economic downfall since the Great Depression with double-digit earnings growth and top market positions in five of its seven business segments.

“This fiscal year saw an unprecedented convergence of challenges in the economy and our industry,” Medtronic Chairman and CEO William A. Hawkins told shareholders in a letter published within the company’s 2009 annual report. “The global economic crisis, public and government demands for greater financial transparency, challenges to the existing federal regulatory regime, a new administration, and looming healthcare reform have all contributed to an uncertainty that is expected to prevail into 2010. Despite these challenges—perhaps because of these challenges—we ended this past fiscal year stronger, more nimble and more resilient than ever before.”

Medtronic also ended the fiscal year much richer. Net sales rose 8 percent to $14.6 billion and gross profit climbed 10 percent to $11 billion for the year ended April 24, 2009. Executives attributed those sizable increases to double-digit sales growth in the company’s Cardiovascular and Surgical Technologies business segments, robust product sales outside the United States, and the successful integration of Kyphon Inc., a Sunnyvale, Calif.-based developer of minimally-invasive spinal technologies. Medtronic purchased Kyphon in November 2007 for $4.2 billion to “help accelerate the growth” of its spinal business; over the last five quarters Kyphon (as part of Medtronic’s Spinal segment) clearly has accomplished its mission, contributing $907 million to its parent company’s bottom line.
While they were not the most profitable, Kyphon products nevertheless recorded the highest sales growth rate in fiscal 2009. Sales more than doubled, according to Medtronic’s annual report, going from $298 million in fiscal 2008 to $609 million in 2009.

Overall, the company’s Spinal segment generated $3.4 billion in sales, a 14 percent increase compared with the $2.9 billion it recorded in fiscal 2008. More than half of the fiscal 2009 revenue ($1.9 billion) came from the sale of core spinal devices such as the CD Horizon Legacy and Mast product lines. Biologics contributed $840 million to the segment’s total revenue, a 3 percent increase compared with the $815 million biological products generated in fiscal 2008.

In contrast, the Cardiac Rhythm Disease Management (CRDM) segment amassed the highest number of dollars for the company, but recorded the least amount of growth. In fiscal 2009, CRDM sales amounted to $5 billion, a mere 1 percent increase compared with the $4.9 billion the segment reported the previous fiscal year. Executives attributed the flat growth to foreign exchange rates that impacted sales by $25 million and a slight decrease in sales of pacemakers and related products due to competition from rivals Boston Scientific Corp. and St. Jude Medical Inc.

Pacing systems sales fell to $1.9 billion but they were partially offset by sales growth outside of the United States. That growth was driven mostly by sales of the Adapta pacemaker product line, which features an atrial-based pacing mode that reduces unnecessary pacing in the right ventricle of the heart while providing the safety of a dual chamber backup. Studies have suggested that reducing unnecessary pacing in the right ventricle may reduce the risk of developing heart failure and atrial fibrillation.

In addition to its Adapta pacemaker products, Medtronic’s foreign pacing sales also benefited from the July 2008 release of the Reveal DX Insertable Cardiac Monitor in Japan. Deemed a high-priority medical device by the Japanese government, the memory stick-sized Reveal DX is inserted under the skin of the chest area where it can record and save arrhythmia patterns for up to three years.

Executives said pacing sales—as well as defibrillator sales—received an additional boost from the Medtronic CareLink Service, an electronic system that enables clinicians to review data about cardiac devices in real time and access stored data about patients and devices on a website. More than 360,000 patients worldwide are currently monitored through the company’s CareLink Service, a 44 percent increase compared with the 250,000 patients monitored in fiscal 2008.

Besides its CareLink Service, future CRDM sales are expected to be impacted by the January 2009 acquisition of Ablation Frontiers Inc., a privately held company in Carlsbad, Calif., that has developed a device for treating heart arrhythmias. Ablation Frontiers’ technologies have since been folded into Medtronic’s Atrial Fibrillation Solutions franchise.

Defibrillation systems—Medtronic’s largest product line—garnered $2.9 billion in sales during fiscal 2009, a 2 percent increase compared with the $2.8 billion those devices generated for the company in the previous fiscal year. Medtronic received U.S. Food and Drug Administration approval for several new defibrillator products during fiscal 2009, including the Sprint Quattro Secure S Single Coil defibrillation lead. The new products are expected to impact fiscal 2010 sales.

Some of the new products Medtronic released in fiscal 2009 had virtually an immediate impact on sales. The U.S. launch of the Endeavor drug-eluting stent in the fourth quarter of fiscal 2008 helped increase the sales of coronary stents and other coronary/peripheral products by 16 percent to $1.3 billion. Worldwide, the Endeavor and Endeavor Resolute drug-eluting stents generated $603 million for Medtronic, a 44 percent increase compared with the $418 million the products earned for the company in fiscal 2008. Executives expect the Endeavor stent to continue to generate sizeable revenue for Medtronic, particularly since it was approved in Japan last year and is now being sold there.
Endovascular products produced the second-highest sales growth rate for Medtronic (behind Kyphon devices). Sales ballooned 40 percent to $398 million, according to the company’s annual report. Executives said the increase was driven mainly by domestic sales of the Talent Abdominal Aortic Aneurysm Stent Graft System and Thoracic Stent Graft System as well as the international launch of the Endurant Abdominal Stent Graft System in July 2008.

Sales of revascularization and surgical therapies products grew 4 percent to $447 million, while structural heart disease device sales inched up 1 percent to $300 million. Together with the sales of endovascular products, stents and other coronary/ peripheral products, the company’s Cardiovascular segment amassed $2.4 billion, a 14 percent increase compared with the $2.1 billion the segment yielded in fiscal 2008.

The Cardiovascular segment is expected to be a lucrative one for Medtronic over the next fiscal year as the company integrates Ventor Technologies Ltd. and CoreValve Inc. into its business. The firm acquired both Ventor and CoreValve in the fourth quarter of fiscal 2009 for a combined $1 billion ($325 million for Ventor and $700 million for CoreValve). The companies, which develop transcatheter heart valve technologies for the replacement of aortic valves, were purchased to help Medtronic provide “additional momentum” to its growth strategies.

Some of the momentum for Medtronic’s growth during fiscal 2009 came from the Neuromodulation and Diabetes segments, each of which grew 9 percent. Neuromodulation net sales totaled $1.4 billion, while Diabetes products generated $1.1 billion. Within the Neuromodulation segment, sales were robust, with neuro-implantable products earning $1.1 billion (a 7 percent increase compared with fiscal 2008) and gastroenterology and urology devices grossing $289 million (a 19 percent jump compared with fiscal 2008).

The Surgical Technologies segment experienced a growth rate similar to the Neuromodulation and Diabetes sectors, rising 10 percent to $857 million. The most profitable products in that segment were those for the ear, nose and throat, which collected $352 million in fiscal 2009. Conversely, the least popular were navigation devices, which netted $185 million in sales but posted a 16 percent increase compared with the $159 million those products earned in fiscal 2008.

Medtronic’s smallest revenue producer in fiscal 2009 was the Physio-Control segment, which manufactures the LIFEPAK 15 defibrillator/monitor and the LIFEPAK 20e defibrillator/monitor. Sales in this segment grew 4 percent to $343 million.

In an effort to streamline operations and align the firm with its long-term growth outlook, Medtronic announced plans last year to reduce its global workforce by 1,500 to 1,800 employees. The plan cost the company $27 million (in restructuring charges) in the final quarter of fiscal 2009 and $41 million (after taxes) in the first quarter of fiscal 2010.

$13.5 Billion
NO. OF EMPLOYEES: 38,000

Expanding Our Role.

That is the theme Medtronic Inc. used in its 2008 annual report, and it was an appropriate one, given the steps the company took in the last fiscal year to help shape the future of healthcare. Recognizing that many of its markets were changing, Medtronic funneled more of its fiscal 2008 resources into areas that foster innovation and growth.

“For years, Medtronic has been the leader of the medical technology sector,” William A. Hawkins, Medtronic president and CEO, reminded shareholders in a letter published within the report. “Now, we

The Medtronic Reveal DX insertable cardiac monitor continuously monitors the heart’s electrical activity in order to help physicians diagnose whether or not symptoms such as fainting and dizziness have a cardiovascular cause. Photo courtesy of Medtronic.

are becoming more. As we enter a new era of healthcare, we are helping to shape what ‘quality’ healthcare means for patients. We are more than a provider of medical devices that save and improve lives. We are [a] leader in understanding the role medical technology plays in diagnosing, treating, monitoring and preventing chronic diseases…The solutions to many healthcare problems will only be resolved when the public and private sectors work together to address issues such as patient access, quality and cost. Medtronic will continue to expand our leadership and meet these challenges head on.”

The company was true to its word in fiscal 2008. It invested more than $1.2 billion, or about 10 percent of its total revenue, in research and development. Medtronic also formed a new group called Strategy and Innovation, which combined the company’s Corporate Strategy, Business Development, Ventures, and Science and Technology functions. The new group is responsible for identifying R&D opportunities that extend beyond what individual business units would develop on their own.

Medtronic expanded its role in the spinal market with the November 2007 acquisition of Kyphon Inc., a Sunnyvale, Calif.-based company that develops devices that restore and preserve spinal function using minimally invasive technology. Executives with both companies said the $4.2 billion acquisition enabled Medtronic to solidify its footprint in the spinal device sector. The merger has already had an impact on Medtronic’s bottom line: In fiscal 2008, Kyphon contributed $298 million of revenue to the Spinal business.

In keeping with its mission to expand its role in healthcare, Medtronic acquired Restore Medical Inc., a St. Paul, Minn.-based firm that makes medical devices to treat sleep disorders such as snoring and sleep apnea. A Medtronic executive said the $29 million merger helped fill a hole in the company’s product portfolio. Though Medtronic sells products that help surgeons remove soft tissue from upper airways, the July 2008 acquisition has enabled the company to offer doctors alternative systems that are less invasive and traumatic and can be used on patients that do not undergo surgery.

Medtronic also beefed up its Cardiac Rhythm Disease Management (CRDM) segment late last year with the $387 million acquisition of CryoCath Technologies Inc., a Montreal-based firm that manufactures products to treat cardiac arrhythmias. The move gives Medtronic access to CryoCath’s flagship product, Arctic Front, a minimally invasive cryo-balloon catheter designed specifically to treat atrial fibrillation. The device is available in Europe but still being studied in the U.S. and Canada.

Medtronic’s CRDM segment is one of the most profitable for the company. In fiscal 2008, the segment generated $4.96 billion in sales, a 2 percent increase compared with the $4.87 billion in sales the company reported in fiscal 2007. Favorable foreign currency exchange rates contributed about $160 million to the total.

The $4.96 billion in CRDM sales comprised more than one-third of the $13.5 billion in sales the company took in between April 27, 2007 and April 25, 2008. That overall sales figure represented a 10 percent increase compared with the $12.29 billion Medtronic reported in fiscal 2007. Favorable foreign currency exchange rates boosted sales by about $400 million.

Medtronic’s Spinal segment, which markets products such as bone growth substitutes, and devices for vertebral compression fractures and spinal stenosis, experienced the most significant growth in fiscal 2008, expanding 23 percent. That segment posted $2.98 billion in sales.

The Cardiovascular business generated $2.13 billion in sales, a 12 percent jump compared with the $1.9 billion in sales the segment reported in fiscal 2007.

Products marketed and sold within this division include coronary and peripheral stents and related delivery systems, endovascular stent graft systems, heart valve replacement technologies and tissue ablation systems, and open heart and coronary bypass grafting surgical products.

Medtronic’s Neuromodulation segment reported $1.3 billion in sales, an 11 percent increase compared with the $1.18 billion in sales posted in fiscal 2007.

Sales in the company’s Diabetes segment grew 18 percent, reaching $1 billion, while sales of Surgical Technologies products (used to treat conditions of the ear, nose and throat) swelled by 17 percent, totaling $780 million. Physio-Control sales fell 15 percent, dropping to $329 million from $385 million in fiscal 2007.

Sales of (cardiac) pacing systems were $2 billion, a 6 percent increase compared with the $1.8 billion Medtronic reported in fiscal 2007. Defibrillation system sales fell 1 percent, slipping to $2.89 billion.

Executives attributed the decline to the voluntary “market suspension” of the company’s Sprint Fidelis defibrillation leads due to the possibility of lead fractures. The recall had triggered dozens of lawsuits from patients with Fidelis leads (a thin electronic cable) connected to their hearts. These patients were forced to decide whether to undergo risky surgery to remove the faulty device.

At the time of the recall, Medtronic officials claimed the malfunctioning device killed five patients, but they later revised that number to 13. Earlier this year, a federal judge dismissed the lawsuits associated with the Fidelis lead recall, ruling that Congress can make it easier (legislatively) for patients to sue device makers.

Though Medtronic dodged that bullet, the company spent $123 million to settle 2,682 legal claims over its Marquis line of implanted cardiac defibrillators.

The company warned consumers in 2005 about a potential battery shorting problem in various Marquis-brand defibrillators. About 11,000 Marquis defibrillators were surgically removed from U.S. patients and replaced with a safer device; an additional 2,000 patients overseas had the defibrillator removed.

Despite these setbacks, Medtronic launched a number of new products in fiscal 2008, including Prestige, the first cervical artificial disc for the spine to be approved in the United States; Endeavor, a “second-generation” drug-eluting coronary stent, and RestoreULTRA, a small, thin rechargeable neurostimulator.

$12.3 Billion
NO. OF EMPLOYEES: 38,000

The company whose products benefit nearly 6 million patients annually boasted double-digit percentage gains for four of its eight business units by the end of its fiscal 2007, ended April 27 that year. Medtronic Chairman Art Collins ended his tenure as president and CEO (positions from which he transitioned in August 2007) on a strong note, with fiscal 2007 net sales of $12.3 billion, 9% growth from $11.3 billion for fiscal 2006. Net earnings also grew 10% to $2.8 billion. The increases were led by growth in the Vascular, Diabetes, Spinal and Navigation, and Neurological businesses, as well as international sales.

Current President and CEO Bill Hawkins should be poised to continue Medtronic’s long-term growth, as the company had more than 200 clinical trials underway or planned by the close of the fiscal year—fitting for a corporation that increased its fiscal 2007 R&D spending by 11% to nearly $1.24 billion (about 10% of the company’s revenue). The strategy of looking to future innovation has paid off handsomely in the past, as approximately two-thirds of fiscal 2007’s revenue came from sales of products introduced within the previous two years. Aiding the effort was the addition of more than 2,000 employees as well as facility expansions to increase capacity. New facilities in the United States, Puerto Rico, Switzerland and Ireland played a role, too.

Medtronic arguably is best known as a market leader for pacemakers and defibrillators, and it managed to ride out a particularly rough year for the latter group of products. Although Cardiac Rhythm Disease Management (CRDM) sales of nearly $4.88 billion were flat at 2% growth for fiscal 2007, this number could have been worse had pacing systems not posted a 6% gain to $1.895 billion, compliments of product launches including Adapt, Versa and Sensia pacemakers. As the overall US market for implantable cardioverter defibrillators (ICDs) declined in 2007, the company’s depreciation was only 1% for this category due to strong international sales—total US sales for ICDs dropped 9% to $2.08 billion, while international sales climbed 29% to $835 million with sales growth for the wireless Virtuoso ICD and the Concerto cardiac resynchronization therapy defibrillator. Overall CRDM sales grew 2% for fiscal 2008 to $4.96 billion. While ICD sales dropped 1% again, the company believes an eventual turnaround in the US market as well as opportunities in what it terms an underpenetrated worldwide market should bring favorable change in the future.

In the fourth quarter of fiscal 2007, Medtronic opted to separate its Physio-Control unit from the CRDM segment. The unit, which is a subsidiary offering external defibrillators, emergency response systems, data management solutions and support services used by hospitals and emergency workers, posted a 7% decrease for the year, going from $412 million in fiscal 2006 to $385 million in fiscal 2007. Physio-Control products made at Medtronic’s Redmond, WA facility were temporarily suspended in January 2007 due to quality issues. This voluntary action reduced US sales by 20%, though the company said this impact was partially offset by 19% growth in international sales, which were aided by sales of the Lifepak CR Plus Defibrillator. The company’s recently announced fiscal 2008 results for the year ended April 25, 2008, showed that Physio-Control once again was impacted by the quality problem, as sales decreased 15% from 2007 revenues to $329 million.

Medtronic’s largest-growing segment in fiscal 2007 was the Vascular business, which had a sales increase of 28% to $1.2 billion. Coronary Vascular sales grew 31% to $918 million, primarily due to international sales of the Endeavor drug-eluting stent, which generated $300 million in revenue for the year, along with $260 million in sales for the Driver bare metal stent product line. Endovascular/Peripheral product sales grew 20% as the company capitalized on its fourth-quarter 2006 US launch of the AneuRx AAAdvantage Stent Graft System and increased international sales of the Valiant Thoracic Stent Graft System.

The Cardiac Surgery segment—including heart valve products, perfusion systems, positioning/stabilization systems for heart surgeries, surgical accessories and surgical ablation products—grew 6% to $704 million in fiscal 2007. Growth was fueled mostly by the Valves (9% growth) business, which had a 10% increase in tissue valve sales for products such as the Mosaic line, the Melody Transcatheter Pulmonary Valve and Ensemble Transcatheter Delivery system outside the United States. The Perfusion (4% growth) business also was a main driver, due to stronger international sales for Medtronic’s cardiopulmonary and cannulae product lines.

In April 2007, Medtronic combined its Vascular and Cardiac Surgery segments. The newly named CardioVascular business reported total net sales of $2.13 billion for fiscal 2008. The US launch of the Endeavor stent in the fourth quarter was a main driver of the Coronary stent unit’s 27% growth for the year to $710 million.

In fiscal 2007, Medtronic posted an impressive gain in the Diabetes segment, which grew sales 20% in fiscal 2007 to $863 million. Within this segment, external pump sales were $389 million, representing 32% growth from fiscal 2006 due to strong sales of the Paradigm REAL-time sensor-augmented pump system that integrates continuous glucose monitoring and insulin pump functionality. This system also helped Medtronic’s Diabetes segment continue to prosper in fiscal 2008, with an 18% annual sales increase to approximately $1.02 billion.

Neurological business, Medtronic’s fourth-largest sales segment for fiscal 2007, grew 16% with total net sales of $1.183 billion. Within this category, Neurological Implantables grew 15% to $962 million, driven by sales of products such as the RestoreADVANCED and PrimeADVANCED neurostimulation systems for pain management and Activa Therapy for treatment of movement disorders associated with Parkinson’s disease and essential tremor. Increased sales of the Synchromed II drug delivery pump also helped. Gastroenterology and Urology products increased 21% collectively to $221 million, with gains led by sales of the InterStim product line for treatment of overactive bladder and incontinence and the Prostiva line for treatment of an enlarged prostate. Overall, the Neurological segment changed in fiscal 2008 with the divestiture of the Gastroenterology and Urology diagnostics product lines, and the category was renamed as the Neuromodulation segment. This business increased 11% to $1.3 billion for the fiscal year; when adjusting for the divestiture of the aforementioned product lines, the unit actually grew 15%.

For Medtronic’s Spinal and Navigation segment, sales grew 13% in fiscal 2007 to $2.54 billion. Within the company’s minimal access technology portfolio, CD Horizon Sextant II, a percutaneous lumbar fixation system with minimal access technologies that reduce procedural steps, was the main growth driver. Capstone and Crescent Vertebral Body Spacers also led to growth within the Spinal Instrumentation business. Biologics, with had net sales of $696 million (a 22% increase from fiscal 2006), had continued success with the Infuse Bone Graft; introduced in fiscal 2003 for spine, Infuse received FDA approval in late fiscal 2007 for use in certain oral maxillo-facial and dental regenerative bone grafting procedures. Navigation increased 18% to $127 million due to strong sales of the PoleStar N2O, an intra-operative MRI Guidance System and O-arm Imaging System, a multi-dimensional surgical imaging platform for use in spine and other orthopedic surgery. For fiscal 2008, Spinal revenue was even healthier than it was in fiscal 2007, with revenues totaling $2.98 billion, a 23% increase.

The Ear/Nose/Throat (ENT) segment, which also contains neurologic technology-related products, posted a single-digit gain of 8% in 2007, bringing its total net sales to $539 million. Core ENT sales were $278 million, a 5% increase from fiscal 2007. Medtronic said these sales were impacted by the loss of revenue from the company’s third-quarter fiscal 2006 sale of its tanometry product line. Neurologic Technologies had a net sales gain of 11% to $261 million for fiscal 2007.

Given the previously cited fiscal year 2008 results, it should come as no surprise that Medtronic brought back the days of double-digit gains for overall net sales—the company recorded a 10% increase to $13.5 billion compared with fiscal 2007.

“Medtronic had a strong close to the year,” said Hawkins. “The stabilization of the ICD market, the launch of our Endeavor drug-eluting stent and strong performance in virtually every business and geography provides positive momentum as we begin our new fiscal year.” For fiscal 2009, the company expects revenue of between $15 billion and $15.5 billion.

The company is looking to streamline operations and restructure its organization. Earlier this year, Medtronic announced it would reduce its staff by approximately 1,100 as part of its global restructuring and in response to a slower ICD and stent market. This spring, Michael DeMane, chief operating officer, also left the company. Several other additions were named, however, including the appointment of Jean-Luc Butel as president of Medtronic International. Steve LaNeve, formerly president of Medtronic Japan, also was named senior vice president and president of Medtronic’s Spinal and Biologics business, replacing Pete Wehrly, who left the company.

$11.3 Billion

Key Executives:
Art Collins, Chairman and CEO
William A. Hawkins, President and COO
Gary Ellis, Sr. VP and CFO
Susan Alpert, Sr. VP and Chief Quality and Regulatory Officer
Stephen Mahle, Exec. VP and President, CRM
Scott R. Ward, Sr. VP and President, Cardiovascular

No. of Employees: 37,000

World Headquarters: Minneapolis, MN

Medtronic—the leader in the $6 billion implantable cardioverter defibrillator (ICD) market—continues to post gains, despite a sales slowdown for the small devices with the large $30,000 price tag.

For fiscal year 2006 (ended April 28), the company reported $11.3 billion in net sales, while net earnings showed a significant 42% bump to $2.6 billion compared to 2005. For 2006, revenue for six of the company’s seven divisions (Cardiac Rhythm Disease Management; Spinal and Navigation; Neurological; Vascular; Diabetes; Cardiac Surgery; Ear, Nose and Throat; and Physio-Control) reported double-digit growth.

Cardiac Rhythm Disease Management reported annual revenue of $5.2 billion, representing growth of 13%. Medtronic’s largest product line, ICDs, generated annual revenue of $2.9 billion, an increase of 24%.

The company’s Neurological business reported annual revenue of $1 billion, which represents 10% growth compared to fiscal 2005. During FY 2006, the FDA approved the RestorePRIME Neuromodulation System for chronic pain.

Medtronic Vascular, which manufactures stent technology, reported annual revenue of $939 million, a 10% increase. During this period, the company’s AneuRx AAAdvantage abdominal aortic aneurysm stent graft with the Xcelerant delivery system received FDA approval.

Strong sales results for the Diabetes unit—$722 million and 11% growth—were driven by sales of insulin pumps, according to Medtronic. Late in the fiscal year, the company received FDA approval for the Paradigm REAL-Time Insulin and Continuous Glucose Monitoring System, which Medtronic said is the world’s first insulin pump integrated with continuous glucose monitoring.

Defibrillator sales may be slipping, but for fiscal 2007 (ended April 27) profit rose 10% to $2.8 billion and revenues hit a record $12.3 billion, a 9% increase. Though Medtronic’s defibrillator sales grew more than 20% annually in fiscal 2005 and 2006, for the first quarter of fiscal 2007, the company reported its first decline in orders—a 6.3% dip—compared to a year earlier, after a series of battery failures and product recalls damaged patient and physician confidence. Medtronic’s second quarter of fiscal 2007 ended with 4.2% higher sales than the previous year, before defibrillator sales turned down again, falling once again to 1.7% in the third quarter of 2007, compared to a year earlier. The high-power defibrillation unit of the company’s Cardiac Rhythm Disease Management division ended the year flat compared to fiscal 2006 (a decline of less than 1%). Overall, at fiscal year end in 2007, the company reported $4.9 billion for its Cardiac Rhythm Disease Management division compared to $4.8 billion for 2006.

According to industry analysts, ICDs are critical to Medtronic performance because of the devices’ 75% profit margins. Medtronic officials maintain that the market still has plenty of room for growth. Of the 1.3 million US patients medically eligible for the devices, only about 35% have had the device implanted, the company said. Despite the optimism, Medtronic officials are preparing for slower sales. In June, the company announced plans to cut 350 to 500 jobs within its Cardiac Rhythm Disease Management division. Employees will be given the option of transfers to other areas of the company, early retirements or voluntary buyout packages. The company will resort to involuntary measures, such as layoffs, to achieve the cuts if not enough employees enroll in the voluntary program.

In an attempt to shock defibrillator sales back to life, Medtronic began a $100 million promotional campaign in September after recalls prompted caution among doctors and patients and hurt fiscal 2007 first-quarter sales.

A casualty of more streamlining is Medtronic’s Physio-Control division. In January, the unit suspended shipments of automated external defibrillators after the FDA identified quality-control issues at a facility in Redmond, WA. Shipments may resume in the next six to 12 months, the company said. Medtronic has said it plans to spin off Physio-Control, which recently eliminated 300 jobs.

Not content to lead the industry in the ICD market, Medtronic also is going after securing a position among the drug-coated stent players. The company has been engaged in ongoing trials for its Endeavor line. The results of recent studies have shown positive three- and four-year results, demonstrating that Endeavor doesn’t cause the potentially deadly blood clots that have been associated with the older-generation heart stents currently approved in the United States—Boston Scientific’s Taxus and Cypher, manufactured by Johnson & Johnson’s Cordis division.

Medtronic said it expects to gain approval for the Endeavor following review by an FDA advisory panel in September. Endeavor already has been approved for use in Europe, and the company has seen its Vascular division reap the benefit. Coronary Vascular annual revenue of $918 million was a 31% increase compared to fiscal 2006. Growth was driven by strong Endeavor sales outside the United States, the company said. Endovascular and Peripheral Vascular reported annual revenue of $287 million, a 20% increase.

To add to its growing stent lineup, the company currently is involved clinical trials for its Endeavor Resolute line. Resolute combines Endeavor with BioLinx, a proprietary, biocompatible polymer designed by Medtronic. BioLinx is different from other polymers in that its outer surface is water friendly, which leads to high biocompatibility with the body. At the same time, the interior of the polymer is hydrophobic, which helps to control the drug release, according to Medtronic.

This August, Medtronic will undergo yet more change when Chief Executive Art Collins retires. He’ll be replaced by President and Chief Operating Officer William Hawkins. Collins, who has been with the company since 1992, will remain as chairman until August 2008. He was named CEO in 2001 and became chairman in 2002.

For fiscal 2008, Wall Street is predicting Medtronic revenue to grow in the low double digits. Collins has said that he is “cautiously optimistic” that that ICD market is showing signs of recovery.

$10.1 Billion
No. of Employees: 33,000

Founded in 1949, Minneapolis, MN-based Medtronic is no stranger to capitalizing on opportunity while meeting challenges head on. Therefore, it’s not surprising that the manufacturing giant managed to stay the course while increasing net sales to more than $10 billion (11%) in fiscal year 2005 (ended April 29, 2005). However, with the overall cardiology market seeing slower growth this year, Medtronic—along with its competitors—could face even more hurdles that may affect its revenues in coming months.

In the past year since 2005’s earnings were reported, however, Medtronic hasn’t shown any signs of losing momentum. Recently released FY 2006 numbers show another record for the company as net sales surpassed $11.3 billion (12% growth). Furthermore, net earnings were also up to $2.6 billion, representing a healthy 42% increase.

“Medtronic’s strong annual and fourth-quarter performance reflects the balance of our portfolio and underscores the importance of maintaining a diversified business,” said Chairman and CEO Art Collins. “We are encouraged by the strength of our new product pipeline and continue to make major investments to support growth in the coming fiscal year and beyond.”

In 2005, six of the company’s seven businesses were blessed with double-digit sales increases. The most newsworthy was the Spinal, ENT (ear/nose/throat) and Navigation division, which grew 20% to $2.1 billion. Neurological and Diabetes also saw double-digit gains with an 11% rise to $1.8 billion. Cardiac Rhythm Management came in third with 9%, reaching $4.6 billion. Already this year, all these divisions are posting healthy gains—most by double digits again.

With all this growth comes a continued strategy of investing more dollars in R&D—nearly $1 billion in 2005. Apparently this paid off that year, since as much as two thirds of corporate revenues stemmed from products introduced in the last two years. Some of the new products rolled out included the Intrinsic ICD and InSync Sentry cardiac resynchronization device with defibrillator backup (CRT-D); Paradigm 515 and 715 insulin pumps for diabetes; Verte-Stack Capstone PEEK (Capstone) Vertebral Body Spacer for spinal surgery; and Restore fully rechargeable neurostimulator for pain management. The company is continuing to introduce new products at a steady pace. Since February, Medtronic has received FDA approval for the AneuRx AAAdvantage, a minimally invasive abdominal aortic aneurysm stent graft with the Xcelerant delivery system; Micro-Driver coronary artery stent system; Minimed Paradigm REAL-time Insulin Pump and Continuous Glucose Monitoring System; Performer Cardiopulmonary Bypass System; Concerto CRT-D; and Virtuoso ICD.

After receiving FDA approval in December for the PROSTIVA RF Therapy system for treatment of benign prostatic hyperplasia, Medtronic kicked off its launch for commercial release of the product in May.

In the midst of all these introductions, the company is expecting to receive US clearance in 2007 to market its Endeavor stent, which is already being used in 85 countries. In June, Endeavor received reimbursement approval in France and regulatory approval in China.

With all this new business, Medtronic completed some major facility expansions in Tennessee (spinal business), Ireland (vascular) and Puerto Rico (diabetes and neurological). The cardiac rhythm management business is getting a major boost as well through new initiatives in Minnesota. To integrate all of Medtronic’s global operations, which serve more than 120 countries, a new enterprise-wide information system was implemented.

Along the way, the news hasn’t all been good for the company. In July 2005, Medtronic sent out a voluntary communication to its customers urging them to carefully inspect their hard-shell carry cases for the LIFEPAK CR Plus automated external defibrillator after it surfaced that some of them had problems with a blocked pressure vent.

Later that year, in November, Medtronic recalled some of its Sigma pacemakers due to a problem with a solvent used to clean the wires.

Litigation has also kept the company busy. In February, Medtronic Sofamor Danek announced that it filed suit against Biomet and its subsidiary, EBI Spine, L.P., for infringement on seven patents related to its spine products. Santa Rosa, CA-based Kyphon is another target of Medtronic, as the company filed suit alleging that Kyphon is infringing on at least four of Medtronic’s patents related to balloon dilatation catheters and spinal treatment. Finally, a suit was filed against Guidant Corporation in Dublin, Ireland, charging that Guidant’s MULTI-LINK Vision and Xience V coronary stents infringe patents under exclusive worldwide license to Medtronic Vascular from evYsio Medical Devices of Canada.

In spite of some of these problematic situations, nothing appears to stand in the way of Medtronic achieving its goals. In May, Medtronic announced that it projects 2007 revenue to keep climbing to as much as $13 billion, and 2008 projections are between $14 billion and $15 billion.