Medtronic spins off diabetes business to focus on core segments

In a significant corporate restructuring, Medtronic plc announced plans to spin off its Diabetes business into a new standalone entity, referred to as the New Diabetes Company. This decision comes as part of a broader strategy to concentrate on higher-margin, rapidly growing segments, namely Cardiovascular, Neuroscience, and Medical-Surgical, which collectively account for over 90% of Medtronic's total revenues. By separating the Diabetes segment, Medtronic aims to enhance its focus on these profitable areas that need specialized investment and innovation. The decision to create the New Diabetes Company is expected to foster a more concentrated investment approach in the diabetes product pipeline. This includes advancements in technologies such as Automated Insulin Delivery and Smart MDI, which are anticipated to drive margin expansion over time—a crucial aspect for the newly formed entity. Moreover, this strategic separation is designed to unlock value not just for Medtronic but also for shareholders who will have a shareholder base more aligned with New Diabetes Company's distinct financial profile and operational strategies. Financially, the Diabetes segment has shown significant growth, with a year-over-year revenue increase of 10.3% to reach $728.0 million, bolstered by high adoption rates of devices like the MiniMed 780G system and successful international upgrades for insulin pumps. Overall revenue for Medtronic in the fourth quarter of FY25 grew 3.9% year-over-year to $8.9 billion, driven by notable performances in both the Diabetes and Cardiovascular segments. This growth bolsters the rationale for the spin-off, suggesting that both Medtronic and the New Diabetes Company can pursue more targeted strategies that suit their unique market dynamics. The Cardiovascular segment particularly saw strong revenue growth, primarily due to favorable trends in cardiac rhythm devices and remote monitoring services. The restructured approach allows for Medtronic to remain competitive and agile within its core segments while enabling the New Diabetes Company to capitalize on advancements tailored to diabetes management technology. In summary, the split reflects an acute awareness of market demands and a desire for operational efficiency, positioning both Medtronic and the upcoming Diabetes company for future growth and success.