Deal Overview
On May 21, 2025, Medtronic plc (NYSE: MDT; $87.44, Market Capitalization: $112.1 billion), a global leader in medical technology, announced its intent to spin off its Diabetes business into a standalone entity (New Diabetes Company). This strategic move is designed to streamline Medtronic’s portfolio, sharpen its focus on high-margin growth areas, and unlock shareholder value.
Post spin-off, Medtronic (RemainCo) will continue to operate as a diversified MedTech innovator, concentrating on its core franchises in cardiovascular, neuroscience, surgical, and medical-surgical technologies. Further, the company aims to accelerate growth through innovation in areas like pulsed field ablation, renal denervation, soft tissue robotics, and neuromodulation. Meanwhile, the New Diabetes Company (NewCo) will be offering a complete ecosystem for intensive insulin management, including insulin pumps, continuous glucose monitoring (CGM), and digital health solutions. The separation is expected to be completed within 18 months, primarily through a capital markets transaction, with a preferred path of an initial public offering (IPO) followed by a split-off. The transaction is expected to be tax-free to Medtronic shareholders for US federal income tax purposes. The separation will include the Diabetes business employees, product portfolio, pipeline, intellectual property, strategic partnerships, and global manufacturing facilities.
The transaction is anticipated to be accretive to Medtronic’s gross and operating margins, and earnings per share, while enabling the NewCo to pursue focused innovation and growth strategies tailored to the diabetes market. It is also expected to provide the ability to retire Medtronic shares outstanding without reducing cash, resulting in EPS accretion and a reduction in the dividend liability for Medtronic, enabling increased growth-accretive investment. Medtronic expects its dividend per share to remain unchanged pre- and post-transaction with no change to its dividend policy.
The spin-off is subject to customary regulatory approvals, board consent, and market conditions. Que Dallara, current EVP and president of Medtronic Diabetes, will become CEO of New Diabetes Company.
Goldman Sachs & Co. LLC and BofA Securities, Inc. are acting as financial advisors to Medtronic in its review of strategic alternatives for the New Diabetes Company.
Deal Rationale
Medtronic, a global leader in MedTech, is planning to spin off its Diabetes business into a standalone entity, as part of a strategic move to sharpen its focus on higher-margin, faster-growing segments such as Cardiovascular, Neuroscience, and Medical-Surgical, which together account for over 90.0% of its total revenues.
The Diabetes segment, contributing approximately $2.5 billion in FY25 (about 8.0% of Medtronic’s total $32.4 billion in revenue), has consistently underperformed over the past five years, with a revenue CAGR of just ~1.4% compared to Medtronic’s overall ~2.9% CAGR. Segment profitability has also lagged: while Medtronic’s overall operating margin stands at ~15.9%, the diabetes unit has been a drag, reportedly generating operating losses in the low teens in its core U.S. market. In FY19, the segment posted a strong operating margin of 30.9% but steadily declined to 24.8–24.9% through FY21 and FY22, before dropping significantly to 15.8% in FY25.
Multiple headwinds contributed to this underperformance, including FDA regulatory setbacks, such as the 2021 warning letter and delayed approval of the MiniMed 780G insulin pump and Guardian 4 sensor, alongside intensifying competition from more agile players like Dexcom, Abbott, Tandem, and Insulet. These rivals outpaced Medtronic with faster innovation in continuous glucose monitoring (CGM) and closed loop insulin delivery systems. Furthermore, the rising adoption of GLP-1 receptor agonists (e.g., Ozempic, Mounjaro) is shifting treatment paradigms, particularly for Type 2 diabetes, reducing demand for insulin pumps.
Despite a recent rebound, with the diabetes segment growing ~10.7% YoY in FY25 and six consecutive quarters of double-digit growth, the improvement is seen as insufficient to offset the structural challenges and lower returns relative to the rest of Medtronic’s portfolio. By spinning off the diabetes business, Medtronic aims to lift its gross margin by approximately 50 basis points, adjusted operating margins by approximately 100 basis points, and be immediately accretive to adjusted EPS.
As per management, following this separation, Medtronic is expected to increase focus on innovation-driven growth and category leadership for healthcare systems and physician customers. The company will have enhanced benefit from its scale and strategic commercial, manufacturing, and technology synergies.
On the other hand, this separation is expected to enable more focused investment into New Diabetes Company’s pipeline, as well as manufacturing scale and automation, positioning the company for success in Automated Insulin Delivery and Smart MDI, while driving margin expansion over time.
At the same time, it will create an independent, scaled leader in Diabetes, focused on accelerating innovation and differentiated as the only company to commercialize a complete ecosystem to address intensive insulin management.
The separation is also expected to unlock value for Medtronic and its shareholders, as it creates a New Diabetes Company shareholder base more aligned with its financial profile.
Medtronic plc is a global healthcare technology leader that designs and manufactures medical devices and therapies to treat a wide range of chronic and acute health conditions. The company operates in over 150 countries and focuses on improving patient outcomes through innovation in areas such as AI, robotics, and data-driven care.
Medtronic’s operations are structured into four major segments, each addressing a distinct area of healthcare technology. The Cardiovascular segment includes heart rhythm devices, heart valves, and vascular therapies for treating cardiac and circulatory conditions. The Neuroscience segment offers spinal implants, stroke treatment devices, and neuromodulation systems for managing neurological and musculoskeletal disorders. The Medical Surgical segment provides surgical tools, robotic-assisted systems, and patient monitoring technologies, while the Diabetes segment delivers insulin pumps, continuous glucose monitoring systems, and smart insulin pens to help manage diabetes effectively.
Cardiovascular: The Cardiovascular segment is dedicated to treating heart and vascular diseases through advanced medical technologies. It includes three subsegments: Cardiac Rhythm & Heart Failure, Structural Heart & Aortic, and Coronary & Peripheral Vascular. This segment offers pacemakers, implantable defibrillators, heart valves, ablation systems, and vascular stents. In FY25, it generated $12.4 billion in revenue (37.2% of total revenue), growing 5.5%. Medtronic continues to lead in innovations like leadless pacing and pulsed field ablation, addressing both chronic and acute cardiac conditions globally.
• Cardiac Rhythm & Heart Failure (CRHF): CRHF focuses on devices tha manage abnormal heart rhythms and heart failure. It includes pacemakers like the Micra leadless system, implantable cardioverter defibrillators (ICDs), cardiac resynchronization therapy (CRT) devices, and insertable cardiac monitors. The segment also includes cardiac ablation systems and remote monitoring services.
• Structural Heart & Aortic (SHA): SHA provides solutions for heart valve disorders and aortic diseases. It includes transcatheter aortic valve replacement (TAVR) systems like Evolut FX, surgical heart valves, perfusion systems, and endovascular stent grafts. These devices are used in both minimally invasive and open-heart procedures.
• Coronary & Peripheral Vascular (CPV): CPV delivers therapies for coronary artery disease and peripheral vascular conditions. It includes druge luting stents (e.g., Onyx Frontier), angioplasty balloons, renal denervation systems (e.g., Symplicity Spyral), and venous disease treatments like VenaSeal.
Neuroscience: The Neuroscience segment addresses neurological and musculoskeletal disorders through surgical and therapeutic technologies. It includes Cranial & Spinal Technologies, Specialty Therapies, and Neuromodulation. This segment integrates robotics, AI, and navigation systems to improve surgical precision and patient outcomes. In FY25, it generated $9.8 billion in revenue (29.4% of total revenue), growing 4.7%. Medtronic’s innovations in spine surgery, stroke treatment, and neuromodulation continue to drive global adoption.
• Cranial & Spinal Technologies (CST): CST develops surgical solutions for spine and cranial procedures. It includes implants, biologics, and enabling technologies like Mazor robotics, StealthStation navigation, and UNiD AI-driven planning. These tools help surgeons perform complex procedures with greater accuracy.
• Specialty Therapies: This subsegment includes neurovascular, ENT (ear, nose, and throat), and pelvic health therapies. It offers stroke treatment devices like Solitaire and Pipeline, sinus implants like Propel, and bladder control systems like InterStim. These minimally invasive solutions address critical conditions and improve quality of life.
• Neuromodulation: Neuromodulation provides implantable systems for managing chronic pain, movement disorders, and epilepsy. It includes spinal cord stimulators (e.g., Intellis, Inceptiv), deep brain stimulation (e.g., Percept), and drug infusion pumps (e.g., SynchroMed). These technologies personalize therapy using real-time data.
Medical Surgical: The Medical Surgical segment supports hospitals and surgical centers with advanced tools and monitoring systems. It includes Surgical & Endoscopy and Acute Care and Acute Care & Monitoring sub-segments. This segment offers robotic-assisted surgery, AI-powered endoscopy, and patient monitoring solutions. In FY25, it generated $8.4 billion in revenue (25.1% of total revenue), a decrease of 0.1%.
• Surgical & Endoscopy (SE): SE provides advanced surgical instruments and digital surgery platforms. It includes stapling systems (e.g., Tri-Staple), vessel sealers (e.g., LigaSure), robotic-assisted surgery (Hugo RAS), and AI-powered endoscopy (GI Genius). These tools enhance surgical precision and efficiency.
• Acute Care & Monitoring (ACM): ACM focuses on patient monitoring and respiratory care. It includes pulse oximetry (Nellcor), capnography (Microstream), airway management (Shiley), and brain monitoring (BIS). These solutions help clinicians manage critical care and reduce complications.
Diabetes: The Diabetes segment is dedicated to managing Type 1 and Type 2 diabetes through smart, connected technologies. It includes insulin pumps (e.g., MiniMed 780G), continuous glucose monitoring (CGM) systems (e.g., Guardian), and smart insulin pens (e.g., InPen). In FY25, the segment generated $2.8 billion in revenue (8.2% of total revenue), growing 10.7%. Medtronic’s diabetes solutions aim to automate insulin delivery and simplify disease management. The MiniMed 780G system features SmartGuard technology, which adjusts insulin every 5 minutes and includes a meal detection algorithm. The Guardian CGM system provides real-time glucose data, while the InPen smart pen integrates with CGM to guide dosing. Medtronic is focused on expanding access to automated insulin delivery systems and competing with pharmaceutical alternatives by emphasizing long-term glycemic control and patient empowerment.
4Q25
Total revenue grew by 3.9% YoY to $8.9 billion (+1.1% vs. consensus), driven by strong performance in Cardiovascular and Diabetes segments. International markets and new product launches made significant contributions to the growth. Cardiovascular segment revenue grew 6.6% YoY to $3.3 billion, driven by a 9.2% YoY increase in the Cardiac Rhythm & Heart Failure segment, a 6.9% YoY increase from the Structural Heart & Aortic segment, offset by a 0.2% YoY decline in the Coronary & Peripheral Vascular segment. Neuroscience segment revenue increased 2.9% YoY to $2.6 billion, driven by a 4.0% YoY increase in the Cranial & Spinal Technologies segment, a 9.5% YoY increase in the Neuromodulation segment, offset by a 2.4% YoY decline in the Specialty Therapies segment.
Medical Surgical segment revenue improved 0.6% YoY to $2.2 billion, driven by a 0.2% YoY increase in the Surgical & Endoscopy segment, and a 6.3% YoY increase in the Acute Care & Monitoring segment. Diabetes segment revenue grew 10.3% YoY to $728.0 million, driven by strong US adoption of the MiniMed 780G system with high Continuous Glucose Monitor attachment and international pump upgrades to the Simplera Sync sensor.
Adjusted operating income grew 7.6% YoY to $2.5 billion (-0.3% vs. consensus), and the corresponding margin improved ~94 bps to 27.8%, driven by strong revenue growth across key portfolios and disciplined expense management. Operating leverage from higher sales and lower SG&A as a percentage of revenue also contributed to margin expansion. Adjusted net income increased 7.8% YoY to $2.1 billion (+2.7% vs. consensus), and the corresponding margin grew ~84 bps to 23.3%. Adjusted diluted earnings per share came in at $1.62 (4Q24: $1.46), beating the consensus estimates by 2.7%.
FY25
Total revenue grew by 3.6% to $33.5 billion (+0.1% vs. consensus), driven by strong performance in Cardiovascular and Diabetes segments, with notable growth in Cardiac Ablation. Continued innovation, international expansion, and new product approvals also supported overall growth. Cardiovascular segment revenue grew 5.5% to $12.5 billion, driven by a 6.6% increase in the Cardiac Rhythm & Heart Failure segment, a 2.3% increase from the Coronary & Peripheral Vascular segment, offset by a 0.1% decline in the Structural Heart & Aortic segment. Neuroscience segment revenue increased 4.7% to $9.9 billion, driven by a 4.6% increase in the Cranial & Spinal Technologies segment, a 10.7% increase in the Specialty Therapies segment, and a 1.2% growth in the Neuromodulation segment.
Medical Surgical segment revenue declined 01% to $8.4 billion, due to 0.2% decline in the Surgical & Endoscopy segment, and offset by 0.1% growth in the Acute Care & Monitoring segment. Diabetes segment revenue grew 10.7% to $2.7 billion. Adjusted operating income grew 4.5% to $8.6 billion (in line with consensus), and the corresponding margin improved ~23 bps to 25.8%, driven by strong revenue growth and lower SG&A expenses. Adjusted net income increased 2.3% to $7.1 billion (+0.8% vs. consensus), while the corresponding margin contracted ~27 bps to 21.1%. Adjusted diluted earnings per share came in at $5.49 (FY24: $5.20), beating the consensus estimates by 0.6%.
Company Description
Medtronic plc (Parent)
Medtronic plc, headquartered in Galway, Ireland, is the world’s leading healthcare technology company, committed to alleviating pain, restoring health, and extending life. With over 95,000 employees across more than 150 countries, Medtronic delivers innovative solutions for more than 70 health conditions. The company operates through four primary segments: Cardiovascular, Neuroscience, Medical Surgical, and Diabetes. These segments encompass a wide range of technologies, including cardiac rhythm devices, spinal and brain therapies, surgical tools, and insulin delivery systems.
New Diabetes Company (Spin-Off)
The New Diabetes Company will emerge as a leading global direct-to-consumer diabetes care provider, uniquely offering a comprehensive ecosystem for intensive insulin management. With a portfolio that includes insulin pumps, continuous glucose monitoring (CGM) systems, and digital health solutions, it empowers individuals to manage diabetes with greater ease and freedom. Backed by a dedicated team of over 8,000 employees and a robust global infrastructure, the company is poised to accelerate innovation in Automated Insulin Delivery and Smart Multiple Daily Injections (MDI).