Medtronic will exit the ventilator market and turn its remaining patient monitoring and respiratory businesses into a new unit, the company said Tuesday, reversing a plan announced more than one year ago to spin off the businesses.
CEO Geoff Martha told investors on an earnings call that shutting down the ventilator business was ultimately in the best interest of the company, and the savings would increase investments in the new unit, particularly in remote patient monitoring.
“The business became increasingly unprofitable throughout the last year. The growth slowed even more, and the dynamics within the segment are changing, moving to lower acuity ventilators. Our unique and worthy contributions are more in the higher acuity, hospital-based [products],” he said.
Martha said the decision was “difficult” and specifically called out how the business “dramatically” expanded production during the COVID-19 pandemic amid ventilator shortages as cases climbed around the world.
Despite the difficult decision, Medtronic determined the spinoff strategy no longer benefited the company.
Medtronic announced in October 2022 that it would separate the patient monitoring and respiratory interventions (PMRI) businesses. At the time, the move looked like yet another healthcare company spinning out or selling lower-growth businesses to focus on other areas considered more profitable.
Instead, Medtronic will now exit the ventilator market and combine the remaining PMRI businesses into a new unit called Acute Care and Monitoring, which will include pulse oximeter, remote patient monitoring, airway management and respiratory monitoring products. Martha said changes both within Medtronic and the market during the process of separation influenced the company to change course.
“Our improved competitive positioning — in our monitoring business, in particular — changed over the last year. As we are working on the process, we continue to run the business, and it performed well. And the competitive dynamics versus our main competitor, Masimo, changed significantly for the positive for us,” he said. “We believe that we can ensure that change is durable with the increased investment.”
The CEO also stressed the importance and value of data as part of the decision to hold onto the patient monitoring products.
J.P. Morgan analysts wrote in a note to investors they expect the new unit to have “higher top-line growth post ventilator exit, though small relative to total company.”
Medtronic expects an estimated non-GAAP charge in the range of from $350 million to $425 million in its fiscal fourth quarter because of the decision, according to the company’s earnings presentation.
Pulsed field ablation
The company gave brief updates on its PulseSelect pulsed field ablation (PFA) device when questioned by analysts on the call. The system, which was the first PFA device to receive approval from the Food and Drug Administration, launched in the U.S. early in Medtronic’s fiscal fourth quarter.
Martha noted the “learning curve” for the system is short. Sean Salmon, president of Medtronic’s cardiovascular portfolio, said the feedback so far with PulseSelect has been positive, and surgeons have gotten procedure times down to about 30 minutes.
While Medtronic received the first FDA approval for a PFA system, its time as a lone product on the market was brief. Soon after Medtronic’s approval, the FDA approved Boston Scientific’s Farapulse PFA system.
