Medtronic Exits Ventilator Market, Raises FY24 Outlook

Medtronic has decided to exit its ventilator product line in what the company said is an “increasingly unprofitable” environment.

At the beginning of COVID-19, Medtronic’s ventilators placed the company at the front lines of pandemic relief. The medtech giant swiftly answered reports of shortages by ramping up manufacturing at its Ireland facility, announcing partnerships to boost production, and even publicly sharing the design specifications of its Puritan Bennett 560 ventilator.

“Medtronic recognizes the demand for ventilators in this environment has far outstripped supply,” said Bob White, executive vice president and president of the minimally invasive therapies group at Medtronic, at the time. “No single company will be able to fill the current demands of global healthcare systems. However, with all manufacturers increasing their production and through partnerships with governments, hospitals, and global health organizations, Medtronic is committed to getting more ventilators into the market and to the right locations in the world to help doctors and patients dealing with COVID-19.”

Then at the end of 2021, the company’s Puritan Bennett 980 series ventilators — which were inherited from the acquired Covidien — were recalled due to an error in the technology’s manufacturing assembly. According to the Class I notification, a capacitor used in the ventilator had been incorrectly assembled which could potentially cause the device to stop working mid-use.

Previously, the device, which won CE Mark and FDA approval in 2014, had seen other recalls including two Class I notices that same year. The first 2014 recall involved a dimming screen and burning smell coming from the device and the other detailed a software defect.

Now with the announcement of its exit from the portfolio, Medtronic said it will continue to honor existing ventilator contracts “to serve the needs of its customers and their patients, and expects that existing manufacturers, who today account for the majority of the market, can meet customer demand for new ventilators moving forward.”

Announced as part of the company’s Q324 financial results, Medtronic highlighted the portfolio axe while also reporting it will retain and combine its remaining patient monitoring and respiratory interventions (PMRI) businesses into one business unit named Acute Care and Monitoring (ACM). Combining the two businesses, according to the Q324 report, will “allow for increased investment in ACM with a focus on profitable growth.”

The decision capitalizes on the company’s focus on demonstrating its profitability to investors. A year before this announcement, Medtronic said it would spin off its PMRI businesses as part of ongoing portfolio assessment to allow for more focus on investments. Ultimately, however, Medtronic leadership has decided to end the ventilator business. Additionally, company CEO Geoff Martha said in January that the company was closing at least five manufacturing sites, consolidating distribution centers, and stopping business with approximately 200 suppliers to help improve operations and supply chain issues.

Medtronic raises FY24 outlook

The financial report also highlighted that the company saw a revenue of $8.1 billion in Q324, an increase of 4.7% as reported and 4.6 organic. “The company's organic revenue results reflect continued momentum across the company, driven by strong growth in diabetes, core spine, cardiac surgery, structural heart, and cardiac pacing, as well as strength in international markets,” according to Medtronic.

Additionally, Q324 reported a GAAP diluted earnings per share of $0.99, an 8% increase, and non-GAAP diluted earnings per share of $1.30.

In response to the company’s Q3 outperformance, its full year 2024 revenue growth and earnings per share guidance have been raised from the prior 4.75% to a range of 4.75% to 5%. The FY24 diluted non-GAAP earnings per share guidance has been raised from $5.13 to $5.19 to the new range of $5.19 to $5.21.

"In addition to delivering durable sales growth, we also drove improvements to our margins, as our cost efficiency programs helped to offset the impact of inflation, tax, and currency, contributing to our EPS and cash flow performance in the quarter," said Karen Parkhill, Medtronic EVP & chief financial officer, in the press release announcing the Q324 results. "Based on our year-to-date performance, including another solid financial performance this quarter, we are raising our full-year guidance on both the top and bottom lines. We remain focused on restoring our earnings power and creating value for our shareholders."