On October 21, 2018, the founder of Medtronic, Earl Bakken, passed away at the age of 94. Medtronic was a company created to fill a life-threatening need. Dr. C. Walton Lillehei was a cardiology physician who often performed life-saving surgeries on children. In many cases, patients were required to be attached to a pacemaker. At the time, in the 1950’s, these were very large and heavy devices that required a continuous source of power. On October 31, 1957, a blackout occurred causing a patient of Dr. Lillehei’s to die, due to the failure of the device. This inspired the collaboration between Earl Bakken, an American engineer, and Dr. Lillehei to develop the first external, battery-operated wearable pacemaker with a transistor. This relationship lead to one of the world’s largest medical device companies of the century, Medtronic.
In healthcare, the medical device market may not be as attractive and dynamic as the currently exploding cannabis market, which continues to show great success. Investors are excited to dash their cash into cannabis and seem to turn away from medical device companies like Medtronic. Yet, Medtronic reported $29,710m in revenue as of 2017, which has a 13.85% growth rate as of 2016. Additionally, so far in 2018, Medtronic has earned $29,953m in revenue. Medtronic’s growth and fuel comes from its cardiovascular devices, but the company is expanding into all areas of medical devices steadily.
Figure 1. revenue of Medtronic in 2018 by therapeutic area
|Source: GlobalData, Medical Intelligence Center (October 29th 2018)
ENT = ear, nose, and throat; IT = information technology
It is commonly understood that the healthcare industry, specifically pharmaceuticals, has really plateaued since the early 2000’s, and that medical device companies are slow in capital return. However, when a company continues to expand, in such a competitive marketplace, investors should not turn away. With continued FDA approvals of novel devices, investors should feel safe in expanding their investment portfolios into medical device companies such as Medtronic.
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