Medtronic to spin off diabetes unit into standalone company

Medtronic spins off diabetes business: ©Tada Images - stock.adobe.com

Medtronic announced it plans to separate its diabetes business into a standalone, publicly traded company, a move the healthcare technology giant says will sharpen its focus on high-margin growth areas and unlock greater value for shareholders.

The unnamed new entity will become the only business to commercialize a complete ecosystem for intensive insulin management, according to the company. The separation is expected to be completed within 18 months via a series of capital markets transactions, starting with an initial public offering followed by a split-off.

“This marks a significant milestone in driving both Medtronic and the Diabetes business to achieve lasting value for Medtronic, our shareholders, customers, and patients,” said Geoff Martha, Medtronic chairman and CEO. “This decision shifts the Medtronic portfolio to have intense focus on our highest margin growth drivers where we have our strongest core competencies.”

The move comes as Medtronic continues to reshape its portfolio, emphasizing growth areas such as soft tissue robotics, renal denervation, and implantable tibial neuromodulation. Post-separation, Medtronic said it expects improved financial performance, including a roughly 50-basis point increase in adjusted gross margin and 100-basis point bump in adjusted operating margins.

The Diabetes unit currently contributes 8% of Medtronic’s revenue and 4% of its segment operating profit. Once separated, it will include more than 8,000 employees and its own innovation, manufacturing, and clinical infrastructure. Que Dallara, executive vice president and president of Medtronic Diabetes, will serve as CEO of the new company.

“As we embark on this exciting new chapter, we celebrate the tireless efforts and dedication of our teams,” Dallara said. “Together, we’re poised to transform lives, giving people the freedom to forget diabetes and live their best lives.”

Medtronic said the transaction is expected to be tax-free to shareholders and will not affect its current dividend policy. The spin-off is subject to regulatory approvals, market conditions, and final approval by the company’s board of directors.

Fourth quarter results

The company also announced its fourth quarter and fiscal year 2025 operating results in tandem with its announcement about the spinoff. Here the key highlights:

• Q4 GAAP diluted EPS of $0.82 increased 67%; non-GAAP diluted EPS of $1.62 increased 11%
• Q4 operating margin increased 380 basis points; Q4 non-GAAP operating margin increased 90 basis points
• Q4 operating profit of $1.4 billion increased 36%; Q4 non-GAAP operating profit of $2.5 billion increased 8%
• Cardiac Ablation Solutions Q4 revenue increased nearly 30% on strength of pulsed field ablation (PFA) products; business delivered $1.0 billion in FY25 revenue
• Submitted Hugo RAS system to the U.S. Food and Drug Administration for a urologic indication in the first quarter of calendar 2025
  
• Commenced largest brain-computer interface launch following U.S. FDA approval of BrainSense Adaptive Deep Brain Stimulation