Headquarters: Minneapolis, Minnesota
Projected 2024 sales: $38.9 billion
Projected 2024 R&D spend: $2.7 billion
2017 sales: $30 billion
2017 R&D spend: $2.2 billion
Medtronic appears set to hold its top spot over the next few years, according to Evaluate’s predictions, driven in large part by its footholds in the cardiac device market, as well as investments and acquisitions in surgical robotics and technology. Although the medtech giant posted the smallest amount of growth in 2017 revenue compared to its rivals, at a mere 0.8%, its income crested over the $30 billion mark and accounted for 7.4% of all medical device sales.
By 2024, Evaluate expects that number to grow 3.8% annually to $38.9 billion, while its global market share dips slightly to 6.5%. In cardiology, however, Medtronic is on track to remain the leading heart device maker, with a share of at least 19.5% after pulling in $14.2 billion from the sector in 2024, up 3.2% from 2017’s $11.4 billion in revenue.
And with its acquisition of the remainder of Mazor Robotics this year, Medtronic aims to merge the Israeli company’s guidance systems with its implants, navigation and imaging products to offer an integrated suite for spine surgery with eyes on the long term. Calling robotic-assisted procedures “the future of spine surgery,” Medtronic’s Restorative Therapies Group said it expects the $1.64 billion deal to generate a double-digit return on investment within the next four years, with increasing contributions to follow.
Medtronic ended up paying about $1.3 billion for the remainder of the company, following previous investments in Mazor’s work. The deal is expected to close in Medtronic's third quarter, ending Jan. 25, 2019.
Meanwhile, Medtronic spent and will spend the most on R&D: 2017’s $2.2 billion is expected to grow about 2.8% annually, to reach $2.7 billion in 2024. According to Evaluate, despite the fact that most of the top medtech companies are expected to spend smaller percentages of their revenue on R&D in 2024 than before, the total market’s R&D spend may increase by 4.5% each year.
When you’re a company as large as Medtronic—competing in everything from artificial pancreas devices to spinal cord stimulation for nonopioid pain treatments—a bit of an identity crisis can be expected. That’s how Bernstein analyst Lee Hambright described Medtronic’s slight pivot in its messaging earlier this year, with CEO Omar Ishrak shifting focus away from his marquee pursuits of generating economic value and furthering globalization toward becoming a key leader in technology development, namely by “creating new therapies that result in new markets,” as described in the company’s June investor day presentation.
There, Medtronic outlined a plan for 4% annual increases in revenue, backed by stronger investments in higher growth technology markets such as robotic surgery, neuromodulation, mitral valve replacement and personal diabetes devices. In the company’s 2012 fiscal year, Medtronic’s focus on these so-called growth markets made up less than one-quarter of its work compared to traditional markets. Today, they account for a little over one-third—and according to Ishrak’s presentation in New York, the company’s goal is to boost that proportion to 50-50 by FY 2022.
Up ahead, Hambright expects Medtronic to focus on smaller, complementary or bolt-on M&A deals focused on technology. Larger deals, such as its $50 billion buyout and inversion with Covidien in 2014 and 2015, pose financial and strategic risks.
In addition, Medtronic plans to save on its global operations by further consolidating its manufacturing—down from 92 sites a few years ago to about 55 in the next few years—and reduce its supply chain base by about 50%. Currently, the company maintains about 70 sites, with plans to employ contract manufacturing where needed.
And by transitioning more to direct-to-customer sales and joint ventures in international markets, Medtronic hopes to reduce its number of distribution centers and administrative facilities by 15% to 20%, helped along by automating some business processes and consolidating its customer service and call centers.