Medtronic to spin out respiratory, patient monitoring divisions amid flagging ventilator sales

Medtronic laid out plans to spin out its patient monitoring and respirator businesses into a separate company, pitching it as a global player with devices across the hospital and the home spanning $2.2 billion in annual sales.

The new enterprise will shepherd the medtech giant’s Puritan Bennett brand of ventilators—which had once seen wide demand during the early phases of the COVID-19 pandemic, though sales have since dramatically declined—as well as Medtronic’s connected bedside monitors, pulse oximetry sensors and anesthesia hardware.

The company will also offer IT services for connecting data to electronic medical records as well as telehealth platforms for engaging with patients outside the hospital.

Hiving off those two divisions will allow Medtronic to “enable greater investment focus in the areas of highest strategic priority,” the company said in its announcement. That includes its cardiovascular, neuroscience and medical surgical operations which, along with a relatively smaller diabetes business, accounted for about $29.4 billion in 2022 fiscal-year sales.

According to Medtronic, the new venture’s revenues will be split about 60-40 between patient monitoring and respiratory interventions, respectively. Those two segments together brought in about $2.2 billion in sales during the 2022 fiscal year. 

The spinout is slated to take place in the next 12 to 18 months, at some point after the company’s 2023 fiscal year concludes at the end of next April. CEO Geoff Martha also said in the company’s announcement that Medtronic would continue to evaluate "potential additions and subtractions" from its portfolio over the long term.

Earlier this year, Medtronic posted nearly flat revenue growth across its largest businesses for its third fiscal quarter, with sales drops in the U.S. attributed to the lingering effects of COVID-19 and a labor shortage among healthcare workers that dragged down the volume of medical device procedures. For the three-month period ending in January, during the peak of the omicron wave, cardiovascular and neuroscience segments each reported 1% growth over the previous year, while the medical surgical portfolio dropped 1%.

More recently, however, Medtronic reported an 8% decline in sales for the first quarter of its 2023 fiscal calendar, which closed in late July. With revenues of about $7.4 billion, the company said last August (PDF) the reduction stemmed from international supply chain shortages as well as “unfavorable comparisons” to strong ventilator sales the year before due to COVID-19. 

That quarter saw ventilator sales decline by a percent in the “low-fifties” versus the previous year, with demand “well below pre-pandemic levels.” Medtronic’s patient monitoring business, meanwhile, grew in the “low-single digits,” hampered by declines in pulse oximeter sales.