Medtronic

History

Medtronic was founded in 1949 in northeast Minneapolis by Earl Bakken and his brother-in-law Palmer Hermundslie as a medical equipment repair shop.

Through their repair business, Bakken came to know Dr C. Walton Lillehei, a doctor in the field of heart surgery then at the University of Minnesota Medical School. The deficiencies of the pacemakers of the day were made painfully obvious following a power outage over Halloween in 1957 which affected large sections of Minnesota and western Wisconsin. As a direct result of this blackout, a pacemaker-dependent paediatric patient of Lillehei died. The next day, Lillehei spoke with Bakken about developing some form of battery-powered pacemaker. Stemming from this need, Bakken modified a design for a transistorized metronome to create the first battery-powered external artificial pacemaker.

The company expanded through the 1950s, mostly selling equipment built by other companies, but also developing some custom devices. Bakken built a small transistorised pacemaker that could be strapped to the body and powered by batteries. Work into this new field continued, producing an implantable pacemaker in 1960. It built a headquarters in the Minneapolis suburb of St. Anthony in 1960 and moved to Fridley in the 1970s. Medtronic's main competitors in the cardiac rhythm field include Boston Scientific and St. Jude Medical. In 1998, Medtronic acquired Physio-Control for USD538 million.

In 2005, 2008, and 2010 PETA threatened to submit a shareholder resolution in order to improve animal welfare standards in the company. In 2005, PETA attempted to stop five specific animal experiments which they deemed "crude and cruel". In 2008, PETA protested the outsourcing of animal testing to countries with lax animal welfare laws such as China. In 2010, PETA attempted to stop Medtronic's reported use of live animals in testing and training. In response Medtronic conducted a feasibility study to see whether banning the use of live animals was practical. This study concluded that it was not and Medtronic continues to use live animals for testing and training, but has said that they will look for alternatives in the future. In each case PETA withdrew its shareholder resolution after talks with Medtronic's leadership.

After 2008 and the global financial crisis, Medtronic stock value dropped dramatically. Despite sales and margin well above the average of most industries, with steady revenue growth since 2008 and a gross margin above 60%, Medtronic initiated a series of restructurings in 2008, 2009, 2010, and 2011, including Physio-Control's spin-off for USD487 million, and the stock price now approaches pre-recession values.

In May 2014, Medtronic agreed to pay over USD1 billion to settle patent litigation with Edwards Lifesciences after years of protracted legal battles.

In June 2014, Medtronic announced its acquisition of Covidien, plc of Ireland for USD42.9 billion in cash and stock. This was the largest acquisition in its history. Following the acquisition, Medtronic ceased to be a Minnesota-based company, moving its headquarters to low-tax Ireland, allowing it to avoid taxation on more than USD14 billion held overseas.

In February 2016, the company announced it would acquire Bellco from private equity firm Charme Capital Partners.

In June 2016, the company announced its acquisition of HeartWare International Inc. for $1.1 billion.

Acquisition history

The following is an illustration of the company's major mergers, acquisitions and historical predecessors:

Business units

Medtronic is composed of six main business units which develop and manufacture devices and therapies to treat more than 30 chronic diseases, including heart failure, Parkinson's disease, urinary incontinence, Down's syndrome, obesity, chronic pain, spinal disorders, and diabetes

Cardiac rhythm disease management

The cardiac rhythm disease management (CRDM) is the oldest and largest of Medtronic's business units. Its work in heart rhythm therapies dates back to 1957, when co-founder Earl Bakken developed the first wearable heart pacemaker to treat abnormally slow heart rates. Since then, CRDM has expanded its expertise in electrical stimulation to treat other cardiac rhythm diseases. CRDM has also made an effort to address overall disease management by adding diagnostic and monitoring capabilities to many of its devices. An independently operating Dutch pacemaker manufacturer Vitatron, acquired by Medtronic in 1986, is now a European subsidiary of the Medtronic CRDM unit. Medtronic and Vitatron pacemakers are interrogated and programmed by Medtronic Carelink Model 2090 Programmer for Medtronic and Vitatron Devices, using separate interfaces.

In 2007, Medtronic recalled its Sprint Fidelis product, consisting of the flexible wires, or leads, which connect a defibrillator to the interior of the heart. The Sprint Fidelis leads were found to be failing at an unacceptable rate, resulting in unnecessary shocks or a failure to administer a shock when needed; either can be lethal. The scope of this problem continues to be a matter of research. Studies since the recall, disputed by Medtronic, suggest the failure rate of already-implanted Sprint Fidelis leads is increasing exponentially. Medtronic liability in this matter is limited by various court decisions.

Spinal and biologics

Spinal and Biologics is Medtronic's second largest business, and Medtronic is the world leader in spinal and musculoskeletal therapies. In 2007, Medtronic purchased Kyphon, a manufacturer and seller of spinal implants necessary for procedures like kyphoplasty.

In May 2008, Medtronic Spine agreed to pay the US government USD75 million to settle a qui tam (whistleblower) lawsuit alleging that Medtronic committed Medicare fraud. The company was charged with illegally convincing healthcare providers to offer kyphoplasty, a spinal fracture repair surgery, as an inpatient rather than outpatient procedure, thereby making thousands more in profits per surgery.

A "special report" by writer Steven Brill in Time showed that, according to Medtronic's quarterly SEC filing of October 2012, the company has on average a 75.1% profit margin on its spine products and therapies.

Cardiovascular

Medtronic's therapies in this business span the major specialities of interventional cardiology, cardiac surgery, and vascular surgery. The products are used to reduce the potentially debilitating effects of coronary, aortic, and structural heart disease.

Neuromodulation

Neuromodulation is the second oldest and third largest department of Medtronic. Its products include neurostimulation systems and implantable drug delivery systems for chronic pain, common movement disorders, and urologic and gastrointestinal disorders. Medtronic's Neuromodulation relies on innovative development methodologies to build cutting edge medical technology devices with embedded software. The department's revenues in 2014 amounted to $1.9 billion, or 11% of Medtronic’s total revenues.

Diabetes

Medtronic Diabetes is the diabetes management manufacturing and sales division of Medtronic, based in Northridge, California. The original company, Minimed Technologies, was founded in the early 1980s by Alfred Mann and spun off from Pacesetter Systems in order to design a practical insulin pump for lifelong wear. Most devices at the time were either too large or impossible to program and extremely unreliable. The release of the lightweight, menu-driven MiniMed 500 series changed the landscape, and was a major factor in bringing insulin pump usage to the mainstream. In 1996, the MiniMed was redesigned by the innovation consulting RKS Design to look more flashy, more elegant, and resemble a beeper; the friendliness of the device boosted adoption rate and sales increased by 357%. In the early 2000s Medtronic purchased Minimed to form Medtronic Minimed.

On 11 May 2009, Medtronic announced it had chosen San Antonio, Texas, for the location of its new Diabetes Therapy Management and Education Center. The company announced that it expected 1,400 new jobs would be created to staff the 150,000-square-foot (14,000 m²) facility.

In September 2016, the FDA approved a device called MiniMed 670G which automatically pumps insulin to a diabetic patient's body on sensing its absence or reduction.

Surgical technologies

The Surgical Technologies business designs and manufactures products for the diagnosis and treatment of ear, nose, and throat (ENT) diseases and cranial, spinal, and neurologic conditions. It also encompasses a surgical navigation division that designs "StealthStation" systems, software and instruments for Computer Assisted Surgery (CAS) and a special intraoperative X-ray imaging system known as the O-arm Imaging System. Many of these products are used for minimally invasive surgical procedures. In 2016, Surgical Technologies as a business unit was dissolved and each site folded into new business groups.

Technology safety

Jay Radcliffe, an independent security researcher, presented a speech at the BlackHat 2011. He revealed a security vulnerability in the Medtronic brand insulin pump, allowing an attacker remote control of that pump. Medtronic responded by assuring users of the full safety of their devices.

In 2008, a team of computer security researchers was able to take remote control of a Medtronic cardiac implant. The team, using an unused implant in a lab, was able to not only control the electrical shocks delivered by the defibrillator component, but also glean patient data from the device.