View | Modify | Create | Collaborate
The growth in the recent past has been led by higher sales of its MiniMed devices. This trend will likely continue with MiniMed 670G hybrid closed loop system, which is seeing strong demand in the U.S., and the company is expanding the products in international markets. 670G is the world’s first hybrid closed loop system that optimizes glycemic control for patients with type 1 diabetes.
Below are key drivers of Medtronic's value that present opportunities for upside or downside to the current Trefis price estimate for the company's stock:
Headquartered in Dublin, Ireland, Medtronic plc. supplies self manufactured medical devices and therapies to treat more than 30 chronic diseases across 150 countries in the world. Medtronic operates in the following broad segments - Cardiac and Vascular Group (Cardiac Rhythm & Heart Failure, Coronary & Structural Heart, Aortic & Peripheral Vascular), Minimally Invasive Technologies Group (Surgical Solutions, Patient Monitoring and Recovery), Restorative Therapies Group (Spine, Neuromodulation, Neurovascular, Surgical Technologies) and Diabetes Group. The company is a global leader in the Cardiac Rhythm Disease Management, Spinal, and Neuromodulation segments. Its main competitors are Johnson & Johnson, Boston Scientific, and Abbott.
Medtronic acquired Crospon, a endoscopic diagnostics company in Feb 2018. Crospon offers tools to diagnose, and measure gastroesophageal motility disorders. The deal was valued at around $45 million. Earlier in 2015, Medtronic acquired Covidien for approximately $50 billion.
Surgical & Patient monitoring products, Neurological products, Cardiac rhythm management devices, Cardiovascular products, and Diabetes products are the major sources of revenue for the company. This is explained by the following factors:
Medtronic continuously launches new and innovative products in the market to retain or increase its market share. In 2018, the FDA approved Medtronic's Remodulin to treat patients with Pulmonary Arterial Hypertension. It also secured an approval for Less-Invasive Heart Pump Implant Procedure for its HVAD system. These approvals should aid the future growth.
Through a few strategic acquisitions, Medtronic has expanded its business and increased market share. It acquired Crospon, a endoscopic diagnostics company in Feb 2018. Crospon offers tools to diagnose, and measure gastroesophageal motility disorders. Earlier in 2015, Medtronic acquired Covidien for approximately $50 billion. In the past, it acquired Ardian for $800 million and Osteotech for $123 million in 2011 to boost its Cardiovascular and Spinal sales, respectively.
The COVID-19 pandemic resulted in restricted movement of people across the globe in 2020. Most of the hospitals and healthcare institutions were focused on treatment of Covid-19 related patients and working on emergency cases. As such, there was a decline in elective surgeries, which impacted Medtronic's sales. However, now that several countries have undertaken large scale vaccination programs for Covid-19, we forecast a gradual rise in the company's revenues.
In 2018, Medtronic initiated a global restructuring program, which includes optimization of its processes, and is aimed to improve operating margins. The company expects annual gross saving of around $3 billion from 2022 under this program. This program should help the company increase sales through enhanced focus on high-growth areas, and also cut costs.
Medtronic is witnessing an increasing share of international sales that have mainly come from China, India, and Brazil. Medtronic's revenue from outside the U.S accounted for 47% of its overall net sales in FY 2019.
Stringent healthcare regulations have implemented checks on the pricing structure of medical device companies, which is expected to negatively affect the profits of the industry.