Speaking during the Fridley, Minn.-based company’s “Investor Day” virtual presentation, Martha made one thing clear:
“We are going on the offensive,” Martha said at the start and echoed throughout the program.
About six months into his tenure as CEO, Martha has been outspoken about the direction of the company. He has been touting plans for a “new Medtronic” that is more nimble and competitive.
The company has kicked off a major restructuring — with expected annual savings of $450 million to $475 million by 2023, and Martha recently said he’s only looking forward to whatever the post-pandemic, new normal brings.
The restructuring includes a new operating model designed to reduce the layers of decision-making, separating into 20 “empowered operating units,” or segments that are given control they didn’t have before, such as full profit & loss responsibility, product development/clinical resources control and the power to direct their own sales organizations in larger geographies, including China.
CFO Karen Parkhill said most cost savings will be related to selling, general and administrative expenses and the removal of group infrastructure. There was no mention of layoffs or job cuts related to the restructuring, as Martha pointed out that employees are excited about the coming changes.
“Employee morale has never been higher,” Martha said. “That’s not hyperbole. Coming out of the pandemic, as we’re making these changes, morale jumped way up. These are welcome changes.”
While the pandemic may have accelerated some changes the company decided to implement, Martha said it will lead to a culture change in which bold thinking and competitiveness fold into a “rigorous plan of attack.”
Martha thought he might have insulted his employees with the implication that they weren’t competitive, but said he’s seen a hunger to “go out and make Medtronic’s market share equal to its technology leadership.”
“This is our time to be bold and add grit into the organization to go along with our mission,” Martha said. “All of this will lead to accelerated growth, which will create a lot of value for our shareholders.”
Highlights from Medtronic’s “Investor Day”
Medtronic touts itself as the market leader in Europe for transcatheter aortic valve replacement (TAVR) with its Evolut platform of replacement heart valves.
The company said it gained 1% of the market share in the U.S. over the past year, which it believes marks a turning point for the platform’s domestic market.
“Ultimately, we believe Evolut is the best valve choice for the majority of patients,” said Nina Goodheart, president of the company’s structural heart business. “This will translate into share gains in the market.”
Medtronic said it expects the TAVR market to grow in the low teens to over $7 billion by 2025. In response to that expected growth, Martha said the company is “aggressively investing” in the space, while Goodheart announced that the company is going head-to-head with the competition.
In keeping with Medtronic’s overarching “going on the offensive” mantra used throughout the investor meeting, the company shared that it is conducting a head-to-head randomized comparison of the Evolut Pro and Evolut Pro Plus against the Edwards Lifesciences Sapien 3 and Sapien Ultra in 700 patients.
Medtronic is continuing its efforts to compete with Intuitive Surgical in the surgical robotics space, leading to multiple acquisitions and development agreements since Medtronic unveiled its new Hugo system that is set to rival the da Vinci SP in September 2019.
“This market is highly underpenetrated,” Martha said. “Our solution is addressing the barriers of cost and utilization.”
Martha said the company expects to file for CE Mark approval and FDA investigational device exemption in the first quarter of 2021, while GM of surgical robotics Megan Rosengarten announced the launch of its Touch Surgery Enterprise surgical video capture platform, offering access to surgical video and data immediately following procedures.
“The intersection of surgical video data, AI and visualization opens a world of opportunity,” Rosengarten said. “We’ve only just scratched the surface with this opportunity.”
Nearly one year ago, Sean Salmon took over the Medtronic diabetes business. In the investor meeting, he discussed the growth the company is targeting despite trailing the competition.
“This is a high-growth market, but we’ve been missing out of late,” Martha noted.
Salmon said the company is looking to close product gaps, particularly in continuous glucose monitoring (CGM).
Medtronic believes growth will be boosted by its June agreement for a $337 million investment from Blackstone to advance new, innovative products designed to reduce the burden of diabetes management.
The August acquisition of insulin pen manufacturer Companion Medical for an undisclosed amount adds to the Medtronic diabetes portfolio.
“We’re carving out a differentiated market position,” Salmon said.
Medtronic placed first in the healthcare equipment and services category and 29th overall on the list, with contributing factors to the ranking including its response to COVID-19 and efforts in promoting inclusion, diversity and equity, among other things.
The Foundry partnership
Medtronic today announced a partnership with The Foundry to develop an innovative transcatheter mitral repair (TMVR) technology.
Both companies will provide structured investment tranches, with Medtronic given an exclusive right to acquire the resulting company — Half Moon Medical — upon the achievement of certain milestones.
Half Moon recently won FDA approval for an early feasibility study of patients with severe, symptomatic mitral regurgitation and expects first implants in the coming weeks.