Medtronic takes advantage of factors in the medical device industry's external environment. It pursues a strategy of related diversification across multiple medical device business units. A financial analysis finds Medtronic to have higher profitability and returns than competitors, though its stock may be undervalued. Forecasts expect Medtronic to gain market share in response to an upcoming excise tax, with stable growth through 2017 as the industry adjusts.
Medtronic takes advantage of several factors in the medical device industry in which it operates. The incidence of type 1 diabetes is increasing, and active diabetics prefer insulin pumps to injections. However, the Affordable Care Act imposes an excise tax on medical device companies. Medtronic pursues a combination of low-cost and differentiation strategies. It has diversified into related businesses through acquisitions while maintaining its focus on sensing and stimulation technologies. Medtronic has strong financial performance with higher profit margins than competitors. However, the excise tax may reduce industry growth. Over the next 5 years, Medtronic is well-positioned to continue growing through cost improvements and acquiring smaller companies impacted by the tax
In recent years, medical device manufacturers have embarked on an acquisition binge. We’ve seen a series of blockbuster deals as well as numerous smaller transactions. This M&A bonanza has been sparked in part by the belief that absolute scale creates competitive advantage.
But does it? In many other industries, we find a clear correlation between overall scale and profitability. Classic strategy has long focused on building scale because larger companies tend to wield more influence with customers and have a greater ability to maintain pricing discipline. They also benefit from the most accumulated experience with driving down costs and can spread costs over the widest base of business.
Yet in medtech, the correlation between industry scale and profitability is quite weak. Instead, Bain research shows that profitability is more a function of category leadership than overall scale.
Historically, the medical device industry has been highly attractive and relatively stable. As a consequence, established players have been able to compete successfully across the device spectrum, applying common business models and processes without much need for differentiation.
The future, however, is very different as disruptive change is underway. Companies will need to look at new segments and offer end-to-end solutions to secure additional revenue and maintain their profit margins.
Deloitte research found that while many medtech companies are well-positioned to drive the future of health, they likely won’t be able to do it alone. Rather than focusing on making incremental
improvements to their devices, they should focus on using transformative and cognitive technologies
to enhance products and offer services. They could do this by developing or partnering to acquire
sophisticated data analytics capabilities, getting much closer to the consumer, and leveraging new
cognitive technologies to improve operations.
The Fourth Industrial Revolution will permanently change how medical device companies do business. Historically, the medical device industry has created tremendous value via the creation of therapeutic devices. It is now time for the industry to invest more effort in analytics-based solutions that enable seamless, real-time care management.
Trends in Global Medical Device OEM Strategies and Issues for the Medical Dev...Tony Freeman
Presented at the February, 2013 mdmX Conference, Manning Advisors' Tony Freeman reviews issues facing the largest medical device manufacturers and implications for their supply chain.
Many startup companies are struggling to make it out of the “valley of death” – the period between the initial investment and creation of a commercially-viable product.
Financial pressures that stem from health care reform, the transition to value-based care, tougher insurance coverage, and increased regulatory requirements are causing some corporate and venture capital investors to step back from making investments in early-stage, as yet unproven, medtech innovation and technologies.
Consequently, investment and startup activity in medtech has been declining, putting future medtech innovation at risk.
Catalent is the global leader in drug development and manufacturing. It has over 1,300 patents and is well-positioned to benefit from substantial industry growth of 6-10% annually through 2020. While pricing pressures could slow industry growth, Catalent's business model focusing on development, delivery, and supply solutions provides long-term stable revenues. The recommendation is to buy Catalent stock, which trades at $29.13 but has a target price of $35.99 based on discounted cash flow analysis.
Medtronic takes advantage of several factors in the medical device industry in which it operates. The incidence of type 1 diabetes is increasing, and active diabetics prefer insulin pumps to injections. However, the Affordable Care Act imposes an excise tax on medical device companies. Medtronic pursues a combination of low-cost and differentiation strategies. It has diversified into related businesses through acquisitions while maintaining its focus on sensing and stimulation technologies. Medtronic has strong financial performance with higher profit margins than competitors. However, the excise tax may reduce industry growth. Over the next 5 years, Medtronic is well-positioned to continue growing through cost improvements and acquiring smaller companies impacted by the tax
In recent years, medical device manufacturers have embarked on an acquisition binge. We’ve seen a series of blockbuster deals as well as numerous smaller transactions. This M&A bonanza has been sparked in part by the belief that absolute scale creates competitive advantage.
But does it? In many other industries, we find a clear correlation between overall scale and profitability. Classic strategy has long focused on building scale because larger companies tend to wield more influence with customers and have a greater ability to maintain pricing discipline. They also benefit from the most accumulated experience with driving down costs and can spread costs over the widest base of business.
Yet in medtech, the correlation between industry scale and profitability is quite weak. Instead, Bain research shows that profitability is more a function of category leadership than overall scale.
Historically, the medical device industry has been highly attractive and relatively stable. As a consequence, established players have been able to compete successfully across the device spectrum, applying common business models and processes without much need for differentiation.
The future, however, is very different as disruptive change is underway. Companies will need to look at new segments and offer end-to-end solutions to secure additional revenue and maintain their profit margins.
Deloitte research found that while many medtech companies are well-positioned to drive the future of health, they likely won’t be able to do it alone. Rather than focusing on making incremental
improvements to their devices, they should focus on using transformative and cognitive technologies
to enhance products and offer services. They could do this by developing or partnering to acquire
sophisticated data analytics capabilities, getting much closer to the consumer, and leveraging new
cognitive technologies to improve operations.
The Fourth Industrial Revolution will permanently change how medical device companies do business. Historically, the medical device industry has created tremendous value via the creation of therapeutic devices. It is now time for the industry to invest more effort in analytics-based solutions that enable seamless, real-time care management.
Trends in Global Medical Device OEM Strategies and Issues for the Medical Dev...Tony Freeman
Presented at the February, 2013 mdmX Conference, Manning Advisors' Tony Freeman reviews issues facing the largest medical device manufacturers and implications for their supply chain.
Many startup companies are struggling to make it out of the “valley of death” – the period between the initial investment and creation of a commercially-viable product.
Financial pressures that stem from health care reform, the transition to value-based care, tougher insurance coverage, and increased regulatory requirements are causing some corporate and venture capital investors to step back from making investments in early-stage, as yet unproven, medtech innovation and technologies.
Consequently, investment and startup activity in medtech has been declining, putting future medtech innovation at risk.
Catalent is the global leader in drug development and manufacturing. It has over 1,300 patents and is well-positioned to benefit from substantial industry growth of 6-10% annually through 2020. While pricing pressures could slow industry growth, Catalent's business model focusing on development, delivery, and supply solutions provides long-term stable revenues. The recommendation is to buy Catalent stock, which trades at $29.13 but has a target price of $35.99 based on discounted cash flow analysis.
Medtronic is a medical technology company that develops life-changing technologies to treat chronic diseases. They work closely with physicians around the world and have six major business units focused on different medical conditions and therapies. Medtronic serves medical professionals by developing innovative technologies and uses a blend of Lean and Six Sigma practices in their business model. They are constantly innovating both new technologies and business processes to improve patient care and lives.
Health Policy Supporting Innovation in Korean Medical Device Sector (July 11,...Sung Yoon Bae
Presented in the AMCHAM Healthcare Innovation Seminar, held in Seoul, Korea on July 11, 2012.
Title: Toward Better Health Policy Supporting Innovation in Korean Medical Device Sector
Date: July 11, 2012
Speaker, Sung Yoon Bae, Professor of Healthcare Management, Inje University, Busan, Korea
Medtronic Inc. is one of the largest medical device manufacturers in North America, founded in 1949 and headquartered in Minneapolis. It has two major business units: Cardiovascular and Restorative Therapies. The document analyzes Medtronic using Porter's Five Forces, a SWOT analysis, and discusses risks, technology applications, a McKinsey analysis, financial analysis, and social responsibilities. It makes recommendations, including settling lawsuits, maintaining brand reputation, pursuing emerging markets, and continuing investment in technology development.
Chris Cleary, Vice President of Corporate Development, Medtronic presented at MEDTECH 2014 on Fulfilling the Mission: Medtronic Embraces Change to Respond to an Evolving Healthcare Landscape.
Opportunity analysis of life science tools market in India - A srinivas sash...Srinivas Sashidhar
An analysis of the life science tools market in India and the market opportunity.
Please note this is a proprietary research on my views in a series of srinivas sashidhar's healthcare instinct. Your views and comments are welcome.
I am also open to individual assignments on market consulting in healthcare related markets.
You can follow my blog at https://kchsashi.blogspot.com/
The document discusses opportunities and challenges for GSK's marketing strategy due to various political, economic, social and technological factors. It analyzes GSK's strengths like focus on R&D and parent synergy, as well as weaknesses like limited liquidity position. Opportunities discussed are launch of new products and growth in healthcare markets like India. Threats include uncertain R&D outcomes and government regulations. The document also discusses trends reshaping the healthcare industry like empowered patients and use of real-world data. Major changes in digital health are driving new opportunities for pharma companies.
This document provides information about getting fully solved assignments from Stuffstudy5. Students can send their semester and specialization name to Stuffstudy5@gmail.com or call 09816280608 to obtain solved assignments. The document also includes 5 questions related to stakeholders in the healthcare sector, with each question asking to write notes on 2 out of 3 topics. Sample answers are provided for some of the topics.
The document provides an overview of the EU medical device market environment. It discusses the largest medical device markets being Germany, France, UK, Italy and Spain. It also examines differences between the US and EU markets, noting regulatory approval enables market access in the EU but reimbursement is not guaranteed in the US. Additionally, the document outlines reimbursement processes and factors affecting medical device market growth in the EU such as an aging population and demand for efficiencies.
Mercer Capital's Value Focus: Medical Device Manufacturers | Q4 2015 | Five T...Mercer Capital
Mercer Capital provides medical device manufacturers, related start-up enterprises, and private equity funds with valuation services, including purchase price allocation, 409a compliance, goodwill impairment testing, and other transaction and valuation advisory services.
The market shift toward value-based care presents unprecedented opportunities and challenges for the US health care system. Instead of rewarding volume, new
value-based payment models reward better results in terms of cost, quality, and outcome measures. These largely untested models have the potential to upend health care stakeholders’ traditional patient care and business models.
Medtronic is a global medical device company headquartered in Ireland with over 90,000 employees worldwide. It develops, manufactures and markets medical equipment and therapies for over 70 conditions. Key areas include cardiovascular, orthopedics, diabetes and more. While Medtronic dominates many markets, it faces challenges around product reliability, regulatory compliance, costs and competition. The document analyzes Medtronic's financials, markets, competitors and recommends prioritizing investments in emerging markets and developing products for mid-tier segments in those regions.
Shedding Some Light on the Insights Lurking in the PMA DatabaseRevital (Tali) Hirsch
May 28, 2016 marked forty years of modern day federal authority over medical devices in the U.S. Not only is this period brief in and of itself, but it’s also shorter by half compared to the duration of federal authority over pharmaceuticals, which began with the Food, Drug and Cosmetics Act of 1938. In the past several years the FDA has been the target of much criticism with regards to the approval of high-risk medical devices. Some of that critique is likely merited, but it is important to keep in mind that the medical device arm of the FDA is a work-in-progress that has had considerably less time to invent itself in the larger context of history.
This paper compares and contrasts different stakeholders’ perspectives and takes a deeper dive into the data. In doing so, this paper outlines practical changes and enhancements to the PMA database that can be carried out in the immediate present to increase transparency between the FDA and Industry.
The deeper dive also identifies several potential avenues for follow-on research, including PMAs that do not reach a positive conclusion and PMAs that are sponsored by early-stage and/or inexperienced filers. Insights from such research may hold the key to longer-term regulatory process improvements within the existing framework to promote high-risk medical device innovation and shorten these devices’ time-to-market without compromising the higher standards of the domestic regulatory system or the safety of patients.
This document discusses Quality Systems, Inc. and its subsidiary NextGen Healthcare Information Systems. It provides an overview of the company's business, markets served, products, growth strategy, financial performance, management team, and competitive advantages in the healthcare information technology industry. Key points include Quality Systems' focus on developing practice management and electronic health record software, its track record of strong revenue and earnings growth, experienced management team, and positioning to benefit from positive industry trends driven by government initiatives.
Global Trends in Medical Device and Diagnostic OEM Strategy and Implications ...Tony Freeman
Manning Advisors is pleased to announce the publication of its 2017 Global Trends in Medical Device and Diagnostic OEM Strategy and Implications for the Supply Chain. As in past years we looked at the major issues facing medical device OEMs and how those issues drive their relationship with their suppliers.
Our findings this year include:
Medical Device OEMs focusing on improved organic growth
2016 saw major OEMs relying heavily on acquisitions to improve revenues
OEMs see the eventual end of needle-moving acquisitions and are focusing on how to accelerate organic growth
Fee-for-value reimbursement and growing use of informatics are leading to redesign of product suites
The Supply Chain is consolidating around fewer, larger players
The supply chain is also consolidating via acquisitions
OEMs are embracing risk reduction by working with larger supply chain partners
The new threat to existing supply chain companies is the penetration of the market by giant global contract manufacturers like Flextronics and Celestica
Opportunity exists for smaller, nimble players who can assist OEMs in bring product to market more quickly
Opportunity also exists for specialized manufacturers
Feel free to contact me to discuss the issues or to arrange for an onsite presentation to your Board or management team. I look forward to an intriguing discussion.
You may reach me at tfreeman@manningadvisors.com or at (917) 868-0772 directly.
Best regards,
Tony Freeman, Managing Director
Manning Advisors LLC
90 Park Avenue, 17th Floor
New York, NY 10016
Over the next two decades, we expect that the health care sector will look a lot different than it does now. While many CEOs know they need to adapt, it’s a lot harder than it looks. Deloitte’s 2019 Health Care CEO Perspectives Study looks at what lies ahead.
Major transformation cannot happen overnight and will require visionary leadership, innovative ideas, courage in the face of uncertainty, and persistence. The Deloitte Center for Health Solutions and the Monitor Deloitte Health Care Strategy practice interviewed 25 health system and six health plan CEOs to create the Deloitte 2019 Health Care CEO Perspectives Study that articulates how CEOs are thinking about their changing responsibilities and role in effecting change. Each of the interviewed CEOs leads a large health care organization, with most earning an annual revenue of US$1 billion or more.
The document discusses several major trends in the US healthcare industry in 2014 as the Affordable Care Act continues implementation. Key points include:
1) Companies are reinventing themselves and blurring traditional lines as insurers seek to directly manage healthcare delivery to control costs, providers enter the insurance business, and retailers expand healthcare services.
2) With traditional venture capital pulling back from healthcare, corporate venture arms are investing more heavily in startups, bringing cash as well as expertise, connections, and other resources.
3) Employers are increasingly interested in private health insurance exchanges as a way to define their contribution while giving employees more choice and potentially reducing administrative costs and budget unpredictability.
2016 trends in global medical device strategy and issues for the supply chainTony Freeman
In its 2016 annual review of the global medical device supply chain Manning Advisors identifies two core trends driving both OEM and supplier strategy. The first trend, consolidation, has paused to allow integration of large acquisitions made in the last three years. The second trend, changing products to compete in a fee-for-value rather than fee-for-service reimbursement environment, drives new technologies and capabilities. These trends continue to redistribute favored firms in medical devices.
Connected health technologies have the potential to improve health outcomes and reduce costs by enabling more coordinated and preventative care that is centered around the individual patient. However, fully realizing this potential will require overcoming challenges such as entrenched healthcare structures, regulations focused on acute care, and payment systems that currently reward volume over value. New partnerships and business models may be needed to drive innovation in connected health and support wider healthcare reforms aimed at prioritizing population health.
Is your company ready to meet today’s challenges?Lidia Gasparotto
Visit us online at:
www.ibm.com/electronics/medicaldevices
Is your company ready to meet today’s challenges?
Ask yourself the following questions:
Are your products linked to clinical information systems? •
Is your supply chain optimized to track inventory, handle complaints and •
recalls and manage assets?
Can you comply efficiently with divergent security and privacy regula- •
tions?
Does your company get new products to market as quickly as your •
competitors?
Are your operations efficient and profitable? •
Does your company’s IT environment facilitate the formation of strategic •
alliances with insurance companies, HMOs, hospital buying groups and
supply chain logistics companies?
Can you reduce your tax liabilities through the use of commissionaires?
IBM has developed and refined the tools you need.
The document provides an analysis of Medtronic, a medical device company. It summarizes Medtronic's business strategies, including pursuing both low-cost leadership and product differentiation. It also discusses Medtronic's corporate strategy of related diversification across different medical device business units. Finally, the document analyzes Medtronic's financial performance and profitability compared to competitors, finding that Medtronic has higher profit and operating margins, indicating strong operational effectiveness.
What were they trying to achieveIn 1991, DIA attempted to rem.docxphilipnelson29183
What were they trying to achieve?
In 1991, DIA attempted to remodel and upgrade the arduous, time-consuming luggage check-in and transfer system. The idea involved bar-coded tags being fixed to each piece of luggage that went through ‘Destination Coded Vehicles’. This would fully automate all baggage transfers, integrate all three terminals, and reduce aircraft turn-around time significantly.
Why did they fail?
The main cause of failure was the scope creep of quality and cost schedule. When the company DIA was contracted to help in BAE’s project, they failed to meet the time schedule of the company. They instead stuck to their schedule of two years. The management took unnecessary risked because the project was underscored yet the management took unnecessary risks. Another item in their agenda which the company ignored: the company ignored the airline’s planning sessions and omitted the airline as a stakeholder. The project, as a result, featured oversized sports/ski equipment luggage and separate maintenance track and another track was not designed at all. The large part of the system was not done and had to be redone. This made the airport to be delayed by 16 months and has had a loss of $2 billion were incurred as a result. The project was later scrapped.
Lesson learned in the project is stakeholder engagement in project management. From the project management principles, the two companies failed to communicate to one another during the project until it was too late. Communication is one of the pillars in for project success. Another mistake which DIA committed was failing to plan and consult regularly.
References
Hartmann, T., & Spit, T. (2016). Legitimizing differentiated flood protection levels–Consequences of the European flood risk management plan. Environmental Science & Policy, 55, 361-367.
Benson, D., Lorenzoni, I., & Cook, H. (2016). Evaluating social learning in England flood risk management: An ‘individual-community interaction’perspective. Environmental Science & Policy, 55, 326-334.
Chan, M. J., Huang, Y. B., Wen, Y. H., Chuang, H. Y., Tain, Y. L., Wang, Y. C. L., & Hsu, C. N. (2015). Compliance with risk management plan recommendations on laboratory monitoring of antitumor necrosis factor-α therapy in clinical practice. Journal of the Formosan Medical Association.
Running head: BCG MATRIX COMPETITIVE ANALYSIS FOR MEDTRONIC 1
BCG MATRIX COMPETITIVE ANALYSIS FOR MEDTRONIC 2
BCG Matrix Competitive Analysis for Medtronic
Tyrell S Grant
BCG Matrix Competitive Analysis for Medtronic
BCG Matrix
Medtronic is a multinational organization that specializes in the production of different medical devices. The company has different Strategic Business Units (SBU) that are also known as departments. The departments are divided depending on the roles being played, and these are what that determines that amount of finances that will be invested in the department. The reason is that the different roles earn profits or .
Medtronic is a medical technology company that develops life-changing technologies to treat chronic diseases. They work closely with physicians around the world and have six major business units focused on different medical conditions and therapies. Medtronic serves medical professionals by developing innovative technologies and uses a blend of Lean and Six Sigma practices in their business model. They are constantly innovating both new technologies and business processes to improve patient care and lives.
Health Policy Supporting Innovation in Korean Medical Device Sector (July 11,...Sung Yoon Bae
Presented in the AMCHAM Healthcare Innovation Seminar, held in Seoul, Korea on July 11, 2012.
Title: Toward Better Health Policy Supporting Innovation in Korean Medical Device Sector
Date: July 11, 2012
Speaker, Sung Yoon Bae, Professor of Healthcare Management, Inje University, Busan, Korea
Medtronic Inc. is one of the largest medical device manufacturers in North America, founded in 1949 and headquartered in Minneapolis. It has two major business units: Cardiovascular and Restorative Therapies. The document analyzes Medtronic using Porter's Five Forces, a SWOT analysis, and discusses risks, technology applications, a McKinsey analysis, financial analysis, and social responsibilities. It makes recommendations, including settling lawsuits, maintaining brand reputation, pursuing emerging markets, and continuing investment in technology development.
Chris Cleary, Vice President of Corporate Development, Medtronic presented at MEDTECH 2014 on Fulfilling the Mission: Medtronic Embraces Change to Respond to an Evolving Healthcare Landscape.
Opportunity analysis of life science tools market in India - A srinivas sash...Srinivas Sashidhar
An analysis of the life science tools market in India and the market opportunity.
Please note this is a proprietary research on my views in a series of srinivas sashidhar's healthcare instinct. Your views and comments are welcome.
I am also open to individual assignments on market consulting in healthcare related markets.
You can follow my blog at https://kchsashi.blogspot.com/
The document discusses opportunities and challenges for GSK's marketing strategy due to various political, economic, social and technological factors. It analyzes GSK's strengths like focus on R&D and parent synergy, as well as weaknesses like limited liquidity position. Opportunities discussed are launch of new products and growth in healthcare markets like India. Threats include uncertain R&D outcomes and government regulations. The document also discusses trends reshaping the healthcare industry like empowered patients and use of real-world data. Major changes in digital health are driving new opportunities for pharma companies.
This document provides information about getting fully solved assignments from Stuffstudy5. Students can send their semester and specialization name to Stuffstudy5@gmail.com or call 09816280608 to obtain solved assignments. The document also includes 5 questions related to stakeholders in the healthcare sector, with each question asking to write notes on 2 out of 3 topics. Sample answers are provided for some of the topics.
The document provides an overview of the EU medical device market environment. It discusses the largest medical device markets being Germany, France, UK, Italy and Spain. It also examines differences between the US and EU markets, noting regulatory approval enables market access in the EU but reimbursement is not guaranteed in the US. Additionally, the document outlines reimbursement processes and factors affecting medical device market growth in the EU such as an aging population and demand for efficiencies.
Mercer Capital's Value Focus: Medical Device Manufacturers | Q4 2015 | Five T...Mercer Capital
Mercer Capital provides medical device manufacturers, related start-up enterprises, and private equity funds with valuation services, including purchase price allocation, 409a compliance, goodwill impairment testing, and other transaction and valuation advisory services.
The market shift toward value-based care presents unprecedented opportunities and challenges for the US health care system. Instead of rewarding volume, new
value-based payment models reward better results in terms of cost, quality, and outcome measures. These largely untested models have the potential to upend health care stakeholders’ traditional patient care and business models.
Medtronic is a global medical device company headquartered in Ireland with over 90,000 employees worldwide. It develops, manufactures and markets medical equipment and therapies for over 70 conditions. Key areas include cardiovascular, orthopedics, diabetes and more. While Medtronic dominates many markets, it faces challenges around product reliability, regulatory compliance, costs and competition. The document analyzes Medtronic's financials, markets, competitors and recommends prioritizing investments in emerging markets and developing products for mid-tier segments in those regions.
Shedding Some Light on the Insights Lurking in the PMA DatabaseRevital (Tali) Hirsch
May 28, 2016 marked forty years of modern day federal authority over medical devices in the U.S. Not only is this period brief in and of itself, but it’s also shorter by half compared to the duration of federal authority over pharmaceuticals, which began with the Food, Drug and Cosmetics Act of 1938. In the past several years the FDA has been the target of much criticism with regards to the approval of high-risk medical devices. Some of that critique is likely merited, but it is important to keep in mind that the medical device arm of the FDA is a work-in-progress that has had considerably less time to invent itself in the larger context of history.
This paper compares and contrasts different stakeholders’ perspectives and takes a deeper dive into the data. In doing so, this paper outlines practical changes and enhancements to the PMA database that can be carried out in the immediate present to increase transparency between the FDA and Industry.
The deeper dive also identifies several potential avenues for follow-on research, including PMAs that do not reach a positive conclusion and PMAs that are sponsored by early-stage and/or inexperienced filers. Insights from such research may hold the key to longer-term regulatory process improvements within the existing framework to promote high-risk medical device innovation and shorten these devices’ time-to-market without compromising the higher standards of the domestic regulatory system or the safety of patients.
This document discusses Quality Systems, Inc. and its subsidiary NextGen Healthcare Information Systems. It provides an overview of the company's business, markets served, products, growth strategy, financial performance, management team, and competitive advantages in the healthcare information technology industry. Key points include Quality Systems' focus on developing practice management and electronic health record software, its track record of strong revenue and earnings growth, experienced management team, and positioning to benefit from positive industry trends driven by government initiatives.
Global Trends in Medical Device and Diagnostic OEM Strategy and Implications ...Tony Freeman
Manning Advisors is pleased to announce the publication of its 2017 Global Trends in Medical Device and Diagnostic OEM Strategy and Implications for the Supply Chain. As in past years we looked at the major issues facing medical device OEMs and how those issues drive their relationship with their suppliers.
Our findings this year include:
Medical Device OEMs focusing on improved organic growth
2016 saw major OEMs relying heavily on acquisitions to improve revenues
OEMs see the eventual end of needle-moving acquisitions and are focusing on how to accelerate organic growth
Fee-for-value reimbursement and growing use of informatics are leading to redesign of product suites
The Supply Chain is consolidating around fewer, larger players
The supply chain is also consolidating via acquisitions
OEMs are embracing risk reduction by working with larger supply chain partners
The new threat to existing supply chain companies is the penetration of the market by giant global contract manufacturers like Flextronics and Celestica
Opportunity exists for smaller, nimble players who can assist OEMs in bring product to market more quickly
Opportunity also exists for specialized manufacturers
Feel free to contact me to discuss the issues or to arrange for an onsite presentation to your Board or management team. I look forward to an intriguing discussion.
You may reach me at tfreeman@manningadvisors.com or at (917) 868-0772 directly.
Best regards,
Tony Freeman, Managing Director
Manning Advisors LLC
90 Park Avenue, 17th Floor
New York, NY 10016
Over the next two decades, we expect that the health care sector will look a lot different than it does now. While many CEOs know they need to adapt, it’s a lot harder than it looks. Deloitte’s 2019 Health Care CEO Perspectives Study looks at what lies ahead.
Major transformation cannot happen overnight and will require visionary leadership, innovative ideas, courage in the face of uncertainty, and persistence. The Deloitte Center for Health Solutions and the Monitor Deloitte Health Care Strategy practice interviewed 25 health system and six health plan CEOs to create the Deloitte 2019 Health Care CEO Perspectives Study that articulates how CEOs are thinking about their changing responsibilities and role in effecting change. Each of the interviewed CEOs leads a large health care organization, with most earning an annual revenue of US$1 billion or more.
The document discusses several major trends in the US healthcare industry in 2014 as the Affordable Care Act continues implementation. Key points include:
1) Companies are reinventing themselves and blurring traditional lines as insurers seek to directly manage healthcare delivery to control costs, providers enter the insurance business, and retailers expand healthcare services.
2) With traditional venture capital pulling back from healthcare, corporate venture arms are investing more heavily in startups, bringing cash as well as expertise, connections, and other resources.
3) Employers are increasingly interested in private health insurance exchanges as a way to define their contribution while giving employees more choice and potentially reducing administrative costs and budget unpredictability.
2016 trends in global medical device strategy and issues for the supply chainTony Freeman
In its 2016 annual review of the global medical device supply chain Manning Advisors identifies two core trends driving both OEM and supplier strategy. The first trend, consolidation, has paused to allow integration of large acquisitions made in the last three years. The second trend, changing products to compete in a fee-for-value rather than fee-for-service reimbursement environment, drives new technologies and capabilities. These trends continue to redistribute favored firms in medical devices.
Connected health technologies have the potential to improve health outcomes and reduce costs by enabling more coordinated and preventative care that is centered around the individual patient. However, fully realizing this potential will require overcoming challenges such as entrenched healthcare structures, regulations focused on acute care, and payment systems that currently reward volume over value. New partnerships and business models may be needed to drive innovation in connected health and support wider healthcare reforms aimed at prioritizing population health.
Is your company ready to meet today’s challenges?Lidia Gasparotto
Visit us online at:
www.ibm.com/electronics/medicaldevices
Is your company ready to meet today’s challenges?
Ask yourself the following questions:
Are your products linked to clinical information systems? •
Is your supply chain optimized to track inventory, handle complaints and •
recalls and manage assets?
Can you comply efficiently with divergent security and privacy regula- •
tions?
Does your company get new products to market as quickly as your •
competitors?
Are your operations efficient and profitable? •
Does your company’s IT environment facilitate the formation of strategic •
alliances with insurance companies, HMOs, hospital buying groups and
supply chain logistics companies?
Can you reduce your tax liabilities through the use of commissionaires?
IBM has developed and refined the tools you need.
The document provides an analysis of Medtronic, a medical device company. It summarizes Medtronic's business strategies, including pursuing both low-cost leadership and product differentiation. It also discusses Medtronic's corporate strategy of related diversification across different medical device business units. Finally, the document analyzes Medtronic's financial performance and profitability compared to competitors, finding that Medtronic has higher profit and operating margins, indicating strong operational effectiveness.
What were they trying to achieveIn 1991, DIA attempted to rem.docxphilipnelson29183
What were they trying to achieve?
In 1991, DIA attempted to remodel and upgrade the arduous, time-consuming luggage check-in and transfer system. The idea involved bar-coded tags being fixed to each piece of luggage that went through ‘Destination Coded Vehicles’. This would fully automate all baggage transfers, integrate all three terminals, and reduce aircraft turn-around time significantly.
Why did they fail?
The main cause of failure was the scope creep of quality and cost schedule. When the company DIA was contracted to help in BAE’s project, they failed to meet the time schedule of the company. They instead stuck to their schedule of two years. The management took unnecessary risked because the project was underscored yet the management took unnecessary risks. Another item in their agenda which the company ignored: the company ignored the airline’s planning sessions and omitted the airline as a stakeholder. The project, as a result, featured oversized sports/ski equipment luggage and separate maintenance track and another track was not designed at all. The large part of the system was not done and had to be redone. This made the airport to be delayed by 16 months and has had a loss of $2 billion were incurred as a result. The project was later scrapped.
Lesson learned in the project is stakeholder engagement in project management. From the project management principles, the two companies failed to communicate to one another during the project until it was too late. Communication is one of the pillars in for project success. Another mistake which DIA committed was failing to plan and consult regularly.
References
Hartmann, T., & Spit, T. (2016). Legitimizing differentiated flood protection levels–Consequences of the European flood risk management plan. Environmental Science & Policy, 55, 361-367.
Benson, D., Lorenzoni, I., & Cook, H. (2016). Evaluating social learning in England flood risk management: An ‘individual-community interaction’perspective. Environmental Science & Policy, 55, 326-334.
Chan, M. J., Huang, Y. B., Wen, Y. H., Chuang, H. Y., Tain, Y. L., Wang, Y. C. L., & Hsu, C. N. (2015). Compliance with risk management plan recommendations on laboratory monitoring of antitumor necrosis factor-α therapy in clinical practice. Journal of the Formosan Medical Association.
Running head: BCG MATRIX COMPETITIVE ANALYSIS FOR MEDTRONIC 1
BCG MATRIX COMPETITIVE ANALYSIS FOR MEDTRONIC 2
BCG Matrix Competitive Analysis for Medtronic
Tyrell S Grant
BCG Matrix Competitive Analysis for Medtronic
BCG Matrix
Medtronic is a multinational organization that specializes in the production of different medical devices. The company has different Strategic Business Units (SBU) that are also known as departments. The departments are divided depending on the roles being played, and these are what that determines that amount of finances that will be invested in the department. The reason is that the different roles earn profits or .
Accenture Transformative Power of Healthcare Technology M&A in Life Science 2015Arda Ural, MSc, MBA, PhD
Explosive advances in healthcare technology are enabling new opportunities for technology mergers and acquisitions (M&A) that focus on improving patient outcomes. Digital technologies allow for enhanced patient services and care. Pharmaceutical companies are increasingly engaging in M&A deals and partnerships with medical device and technology companies to develop new business models and position themselves for future growth. Healthcare is undergoing a fundamental shift that is forcing new collaborations across industries to leverage technology for managing health.
Medical devices equipped for the futureBrand Acumen
The document discusses disruptive changes underway in the medical devices industry that will transform it over the next 5 years. It identifies 5 major disruptors: 1) a power shift to payers and providers who are focusing more on cost and value-based evidence, 2) heightened regulatory scrutiny that is increasing compliance costs, 3) unclear sources of innovation as R&D spending yields diminishing returns, 4) new healthcare delivery models that are shifting care settings out of hospitals, and 5) a need to serve lower socioeconomic classes in developing markets. The disruptors threaten $34 billion in industry profits by 2020 but taking appropriate measures could help maintain revenue growth and offset margin declines, preserving significant value for medical device companies.
mHealth Israel: PwC emerging mhealth paths for growthLevi Shapiro
Emerging mHealth holds great potential to improve healthcare access, costs and quality through ubiquitous mobile devices. However, widespread adoption faces challenges from healthcare's resistance to change and the need to navigate complex, fragmented systems. Expectations for mHealth are high among patients, doctors and payers, but most experts expect slower adoption as improving patient care often disrupts traditional models. Emerging markets are pioneering mHealth by leaping ahead through greater needs and fewer barriers, showing the path could be smoother where systems are less rigidly established.
White Paper - Internet Marketing Strategies For The Medical Device Industryjerryme5
This is a White Paper that I wrote, while employed at Exemplum, that talks about various marketing strategies that medical device companies can use to leverage the Internet to market their products more effectivelty.
The document analyzes the healthcare industry in the U.S. and ways IT can help small businesses insure employees. It discusses four key factors impacting the industry: the Affordable Care Act, digital/IT infrastructure, advances in omics sciences, and the rising global middle class. The recommendations suggest that IT companies can create customized solutions to help small businesses comply with the ACA's insurance mandate for employees.
The document analyzes the healthcare industry in the U.S. and how IT can help small and medium enterprises provide insurance to employees. It identifies four key factors impacting the industry: the Affordable Care Act, digital/IT infrastructure, advances in omics sciences, and the rising global middle class. Recommendations include using IT to customize insurance solutions for SMEs to help them comply with the Affordable Care Act's mandate of providing insurance to employees.
Analysis of drivers that cause restricted access to funding for smaller biotech companies.
A detailed reviewed of the steps
venture capitalists and companies are
taking — models such as fail-fast R&D, asset-centric funding and more.
Proposal of a model that
could radically change R&D by taking a
much more holistic approach to drug
development, sharing information to
learn in real time across the cycle of care
and fundamentally changing how risk
and reward are allocated.
The post-COVID Value Shift & How MedTech Companies can CapitalizeGreenlight Guru
The ongoing COVID-19 pandemic has fundamentally shifted the perception of value globally. The healthcare industry, and MedTech (Devices, Diagnostics and Digital Health) stand to benefit enormously. While the world waits for a vaccine, it has been MedTech companies and their solutions that have protected healthcare workers, kept patients alive, and been the focus of government policy and investment. The policy and funding shifts have been aligned to value-based healthcare principals, of which MedTech was already a leader. Discover how you can align your organization, and engage with key stakeholders to capitalize on this massive shift in value perception.
Takeaways:
- How the fundamental structure of healthcare is set to change
-How this fundamental change will benefit MedTech companies
-What you need to do in order to make this change sustainable within your organization
This session took place live at the Greenlight Guru True Quality Virtual Summit, a three-day event for medical device professionals to learn to get their devices to market faster, stay ahead of regulatory changes, and use quality as their multiplier to grow their device business.
Maximizing ROI The Science of Targeted Pharma Engagements.pdfOnkarWeginwar1
In the ever-evolving world of pharmaceuticals, achieving a high return on investment (ROI) is a primary goal. The pharmaceutical industry is increasingly turning to targeted engagements to attain this objective. This whitepaper delves into the science behind targeted pharmaceutical engagements, exploring the strategies, technologies, and best practices that can maximize ROI while improving patient outcomes. By understanding the intricacies of targeted engagements, pharmaceutical companies can navigate the industry's complexities, enhance their market presence, and deliver value to patients and stakeholders.
This document discusses challenges and potential solutions related to market access for medical devices. Some key challenges include creating and communicating value to stakeholders, varied decision-making criteria across countries, technological evolution outpacing regulation updates, resource constraints in healthcare systems, lack of stakeholder engagement, and lack of evidence on economic value. Potential solutions proposed are focusing on health technology assessment processes, utilizing HTA groups as knowledge resources, reforming regulatory processes, increasing stakeholder involvement, using real-world data to drive device design and adoption, and effectively communicating value to end-users. Future trends may include increased combination products that integrate drugs, devices and/or biologics.
This document discusses challenges and potential solutions related to market access for medical devices. Some key challenges include creating and communicating value to stakeholders, varied decision-making criteria across countries, technological evolution outpacing regulatory updates, resource constraints in healthcare systems, lack of stakeholder engagement, and lack of evidence on economic value. Potential solutions proposed are focusing on health technology assessment processes, utilizing HTA groups as resources, reforming regulatory processes, increasing stakeholder involvement, using real-world data to drive device design and adoption, and effectively communicating value to end-users. Future trends may include increased combination products that integrate drugs, devices and/or biologics.
The document summarizes Steve Halasey's presentation at the 2010 Washington State Biomedical Device Summit on healthcare reform and the future of medical technology innovation. It provides an overview of InHealth, including its mission to fund research on the impacts of medical technology. It discusses InHealth's $11 million in research grants and $1 million+ in educational programs. It then analyzes the Patient Protection and Affordable Care Act and its potential unintended consequences for medical device manufacturers. It stresses the importance of evidence-based research and industry engagement to help shape new agencies and programs under healthcare reform.
Stc384 team phoenix scenario analysis exec summary approval from ccmClaudia Chittim
The document provides an executive summary of a scenario analysis for a cancer detection device that is in early development. It discusses the current medical device industry landscape and various factors that could impact the industry in the future. The analysis identifies key variables like FDA approval process and adoption rates. Several potential scenarios are constructed based on combinations of assumptions for each variable. Scenario 9 is identified as optimal for the cancer detection device, involving a differentiated strategy, focus on a niche market, and a proprietary technology that integrates with existing platforms.
This document discusses opportunities and challenges for medical device companies in the connected health and wearable technology markets. It notes that while wearables and data from patients could help advance personalized medicine and lower healthcare costs, medical device companies are hesitant to enter this space due to unclear business models. Wearables have primarily been consumer products so far, while medical-grade devices require FDA approval and ways to encourage long-term patient use. As healthcare shifts to value-based payment, new technologies must prove clinical value and cost savings to providers to gain adoption.
BJC HealthCare and Medtronic won awards for innovative supply chain initiatives in healthcare. BJC partnered with Cardinal Health and Cook Medical to centralize medical device inventory, providing visibility and reducing costs. Medtronic developed a program to manage hospital cath labs end-to-end, creating cost savings and improved outcomes for providers. Both winners demonstrated collaboration across the healthcare value chain can improve efficiency, lower costs and enhance patient care.
AI - The Next Frontier for Connected Pharmasambiswal
Big pharma has long been challenged with siloed data resulting from drug discovery information, clinical trial results and product marketing research stored separately in decade-old legacy systems. Thus, the pharmaceutical industry is ripe for the actionable insights offered by these advances to offset the growing costs of drug discovery while still meeting the demands of a value-based care model. It is time for a connected approach in the pharmaceutical industry.
The document provides an overview and analysis of MedcoHealth Solutions (MHS), a pharmacy benefits manager. It describes MHS's business model, growth opportunities in specialty pharmacy and generics, competitive landscape, and financial projections. The Penn State Investment Association team recommends benching MHS until after its November 1 earnings report, citing risks around contract renewals and a lawsuit.
3 BIG FINANCIAL QUESTIONS A VETERAN MUST ANSWER WHEN LEAVING THE MILITARY: V...James Groh, MBA
Should I participate in the Veterans' Group Life Insurance (VGLI)? Should I participate in the Survivor Benefit Plan (SBP)? What should I do with my Thrift Savings Plan (TSP) account when separate? These are three questions every veteran should answer? Whether you're planning to separate in a year or you've been separated for several years, I can help you determine the best answers to these questions for your individual situation.
Riverside Securities offers comprehensive financial planning and investments to help clients achieve their short-term goals and long-term aspirations. They provide products and services such as insurance, retirement plans, education funding, asset allocation programs, and financial planning to help clients get their finances under control. Interested clients can contact James Groh to discuss which products and services are appropriate for their individual needs and develop a path toward financial success.
WHAT DO I DO WITH MY THRIFT SAVINGS PLAN (TSP) WHEN I SEPARATE?James Groh, MBA
When you leave military or civilian government service you have the opportunity to rollover your TSP into an IRA/Roth IRA with a financial professional. Should you leave your money in the TSP system or move it? This article can help you decide.
WHAT IS THE VETERANS’ GROUP LIFE INSURANCE (VGLI) AND SHOULD I PARTICIPATE?James Groh, MBA
The Veterans’ Group Life Insurance (VGLI) is a program that allows veterans to continue the Servicemembers’ Group Life Insurance (SGLI) after they separate from service. If you're a veteran or will soon separate from service, should you participate? The answer is probably no. Read this article to find out why and learn how you can potentially save hundreds of thousands of dollars by buying your life insurance elsewhere.
The document discusses project portfolio management (PPM). It defines PPM as how an organization influences the direction of its project portfolio to achieve specific outcomes. Effective PPM provides benefits like better competitive positioning and lower project costs. The document then outlines 10 practical recommendations for effective PPM, including having single project managers contribute to the portfolio, using formal processes, applying strategic management theories, establishing project portfolio management offices, managing risks and uncertainties, employing negotiation and structural changes, balancing manager roles, exerting portfolio control, and using portfolio mapping and strategic methods.
Dell had lost its #1 position in the PC market and was seen primarily as a PC company. To address this, Dell expanded into business services like servers, networking and data storage. Dell acquired companies like Perot Systems to grow its healthcare and business services. It also focused on providing affordable solutions tailored for mid-sized businesses to diversify beyond PCs. These efforts helped Dell transition to being viewed as a broader IT solutions provider rather than just a PC maker.
Lone Star Consulting Firm submitted a proposal to Alamo Research Institute for an Innovative Capabilities Audit. The audit will evaluate ARI's strategic management capacity, resource availability and allocation, capacity to understand technological environments, and ability to perform competition analyses. A formal report of the results will be submitted to help ARI make informed decisions.
This document summarizes a business plan for a startup short story podcast. It will provide short stories both in print and audio formats that are available for free and for purchase on its website and through iTunes. The podcast will focus on historical fiction stories under 40 minutes. It will generate revenue through donations, e-book subscriptions and sales, and advertising. Initial funding of $1000 will be raised through Kickstarter. Critical success factors are building a customer base, inducing purchases of paid content, and converting single issue buyers to subscribers.
Abhay Bhutada, the Managing Director of Poonawalla Fincorp Limited, is an accomplished leader with over 15 years of experience in commercial and retail lending. A Qualified Chartered Accountant, he has been pivotal in leveraging technology to enhance financial services. Starting his career at Bank of India, he later founded TAB Capital Limited and co-founded Poonawalla Finance Private Limited, emphasizing digital lending. Under his leadership, Poonawalla Fincorp achieved a 'AAA' credit rating, integrating acquisitions and emphasizing corporate governance. Actively involved in industry forums and CSR initiatives, Abhay has been recognized with awards like "Young Entrepreneur of India 2017" and "40 under 40 Most Influential Leader for 2020-21." Personally, he values mindfulness, enjoys gardening, yoga, and sees every day as an opportunity for growth and improvement.
2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
Seminar: Gender Board Diversity through Ownership NetworksGRAPE
Seminar on gender diversity spillovers through ownership networks at FAME|GRAPE. Presenting novel research. Studies in economics and management using econometrics methods.
Vicinity Jobs’ data includes more than three million 2023 OJPs and thousands of skills. Most skills appear in less than 0.02% of job postings, so most postings rely on a small subset of commonly used terms, like teamwork.
Laura Adkins-Hackett, Economist, LMIC, and Sukriti Trehan, Data Scientist, LMIC, presented their research exploring trends in the skills listed in OJPs to develop a deeper understanding of in-demand skills. This research project uses pointwise mutual information and other methods to extract more information about common skills from the relationships between skills, occupations and regions.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
^%$Zone1:+971)581248768’][* Legit & Safe #Abortion #Pills #For #Sale In #Duba...mayaclinic18
Whatsapp (+971581248768) Buy Abortion Pills In Dubai/ Qatar/Kuwait/Doha/Abu Dhabi/Alain/RAK City/Satwa/Al Ain/Abortion Pills For Sale In Qatar, Doha. Abu az Zuluf. Abu Thaylah. Ad Dawhah al Jadidah. Al Arish, Al Bida ash Sharqiyah, Al Ghanim, Al Ghuwariyah, Qatari, Abu Dhabi, Dubai.. WHATSAPP +971)581248768 Abortion Pills / Cytotec Tablets Available in Dubai, Sharjah, Abudhabi, Ajman, Alain, Fujeira, Ras Al Khaima, Umm Al Quwain., UAE, buy cytotec in Dubai– Where I can buy abortion pills in Dubai,+971582071918where I can buy abortion pills in Abudhabi +971)581248768 , where I can buy abortion pills in Sharjah,+97158207191 8where I can buy abortion pills in Ajman, +971)581248768 where I can buy abortion pills in Umm al Quwain +971)581248768 , where I can buy abortion pills in Fujairah +971)581248768 , where I can buy abortion pills in Ras al Khaimah +971)581248768 , where I can buy abortion pills in Alain+971)581248768 , where I can buy abortion pills in UAE +971)581248768 we are providing cytotec 200mg abortion pill in dubai, uae.Medication abortion offers an alternative to Surgical Abortion for women in the early weeks of pregnancy. Zone1:+971)581248768’][* Legit & Safe #Abortion #Pills #For #Sale In #Dubai Abu Dhabi Sharjah Deira Ajman Fujairah Ras Al Khaimah%^^%$Zone1:+971)581248768’][* Legit & Safe #Abortion #Pills #For #Sale In #Dubai Abu Dhabi Sharjah Deira Ajman Fujairah Ras Al Khaimah%^^%$Zone1:+971)581248768’][* Legit & Safe #Abortion #Pills #For #Sale In #Dubai Abu Dhabi Sharjah Deira Ajman Fujairah Ras Al Khaimah%^^%$Zone1:+971)581248768’][* Legit & Safe #Abortion #Pills #For #Sale In #Dubai Abu Dhabi Sharjah Deira Ajman Fujairah Ras Al Khaimah%^^%$Zone1:+971)581248768’][* Legit & Safe #Abortion #Pills #For #Sale In #Dubai Abu Dhabi Sharjah Deira Ajman Fujairah Ras Al Khaimah%^^%$Zone1:+971)581248768’][* Legit & Safe #Abortion #Pills #For #Sale In #Dubai Abu Dhabi Sharjah Deira Ajman Fujairah Ras Al Khaimah%^^%$Zone1:+971)581248768’][* Legit & Safe #Abortion #Pills #For #Sale In #Dubai Abu Dhabi Sharjah Deira Ajman Fujairah Ras Al Khaimah%^^%$Zone1:+971)581248768’][* Legit & Safe #Abortion #Pills #For #Sale In #Dubai Abu Dhabi Sharjah Deira Ajman Fujairah Ras Al Khaimah%^^%$Zone1:+971)581248768’][* Legit & Safe #Abortion #Pills #For #Sale In #Dubai Abu Dhabi Sharjah Deira Ajman Fujairah Ras Al Khaimah%^^%$Zone1:+971)581248768’][* Legit & Safe #Abortion #Pills #For #Sale In #Dubai Abu Dhabi Sharjah Deira Ajman Fujairah Ras Al Khaimah%^^%$Zone1:+971)581248768’][* Legit & Safe #Abortion #Pills #For #Sale In #Dubai Abu Dhabi Sharjah Deira Ajman Fujairah Ras Al Khaimah%^^%$Zone1:+971)581248768’][* Legit & Safe #Abortion #Pills #For #Sale In #Dubai Abu Dhabi Sharjah Deira Ajman Fujairah Ras Al Khaimah%^^%$Zone1:+971)581248768’][* Legit & Safe #Abortion #Pills #For #Sale In #Dubai Abu Dhabi Sharjah Deira Ajman Fujairah Ras Al Khaimah%^^%$Zone1:+971)581248768’][* Legit & Safe #Abortion #Pills #For #Sale In #Dubai Abu Dhabi Sharjah Deira Ajman
Lecture slide titled Fraud Risk Mitigation, Webinar Lecture Delivered at the Society for West African Internal Audit Practitioners (SWAIAP) on Wednesday, November 8, 2023.
1. Elemental Economics - Introduction to mining.pdfNeal Brewster
After this first you should: Understand the nature of mining; have an awareness of the industry’s boundaries, corporate structure and size; appreciation the complex motivations and objectives of the industries’ various participants; know how mineral reserves are defined and estimated, and how they evolve over time.
1. Elemental Economics - Introduction to mining.pdf
Medtronic valuation
1. James Groh and Dan Wisner
1
MGT 5903
Management Strategy and Policy
Fall 2012
Company Valuation
Medtronic
By
James Groh
Dan Wisner
Submitted to
Dana Wang, Ph.D.
November 13, 2012
2. James Groh and Dan Wisner
2
General Environment: Medtronic takes advantage of several factors external to the medical
device industry in which it operates.
Demographic: The incidence of type 1 diabetes, which is ultimately fatal unless treated with
insulin, is increasing by about 3% per year (Aanstoot, 2007). Although injection is the most
common method of administering insulin, the insulin pump shown in Figure 1 in the Appendix is
a convenient replacement.
Social cultural: Although the incidence of chronic diseases like type 1 diabetes has increased,
patient lifestyle has become more active. Active diabetics prefer insulin pumps to traditional
injections because once they have attached the insulin pump they do not need to replenish it with
insulin for three days (Insulin, 2012).
Political/Legal: The 2010 Patient Protection and Affordable Care Act requires medical device
companies to pay 2.3% excise tax, potentially preventing them from funding additional research
(Health, 2012).
Technological: Bluetooth and other wireless technologies enable medical device companies to
design insulin pumps that patients control remotely, allowing them to be discrete in public
places.
Economic: The high US unemployment rate has increased the number of uninsured, and without
insurance coverage, many people are unable to purchase needed medical devices (Landsbaum
2011). Medicare’s “competitive bidding” program requires patients to purchase their insulin
pumps from specific companies and to pay 20% of the Medicare-approved amount and the
Original Medicare Part B deductible (Medicare, 2012).
3. James Groh and Dan Wisner
3
Global: In 2010, global medical device sales totaled $164 billion and it is estimated that by
2015, sales will reach $228 billion (King, 2011). Demand in developing countries such as China
and India is growing at a higher rate than in developed countries.
Porter’s 5 Forces: There is a high level of competition, regulation, and capital investment
needed in order to succeed in the medical device industry. An innovative first-mover like
Medtronic benefits from the high barriers to entry that make the medical device industry
unattractive to potential entrants.
Potential Entrants- The threat of new entrants is low because patent protection results in a first-
mover advantage (Mehta, 2008). Furthermore, first-movers control significant market share
even after patent expiration due to brand recognition.
Suppliers: The power of suppliers is low because companies transform relatively common parts
into complex products. A device’s value is derived from its design and assemblage by skilled
knowledge workers.
Buyers: “Buyer power tends to be medium, since large purchases by hospitals or group
purchasing organizations can be offset by individual physician preferences at a hospital (Mehta,
2008).”
Competitors: Competition is high and a firm’s primary source of competitive advantage
depends on R&D investment and the ability to obtain regulatory approvals in a timely manner.
4. James Groh and Dan Wisner
4
Substitutes- Substitutes include alternative medical therapies such as pharmaceutical and
biotechnology products. The threat of substitutes is low for most products, e.g. there is no
current replacement for a pacemaker.
Value Chain Analysis: The value chain diagram is depicted in Figure 2 in the Appendix.
In order for Medtronic to deliver products efficiently, Medtronic uses Lean Sigma operations and
manages all parts of its value chain.
Resource Based View: Medtronic’s strategic resources include its patents, researchers, strong
R&D and product development, goodwill, and use of cross-functional teams.
Business-Level Strategy: Medtronic pursues a combination low-cost and differentiation
business-level strategy. Key to Medtronic’s achievement of low-cost leadership is its experience
curve. Medtronic was founded in approximately 30 years before its major competitors entered
the medical device industry, allowing it to gain experience with production processes.
Medtronic has maintained its position through tight cost control of all activities in its value chain.
In early 2011 citing expected cost savings, Medtronic canceled five contracts with the GPO
Novation LLC. (Kamp, 2011). By forward integrating to negotiate directly with physicians and
hospital administrators Medtronic has eliminated a layer of cost to the consumer. Medtronic’s
low-cost strategy protects it from a potential price war with competitors and from powerful
buyers such as large hospitals who may demand price concessions.
5. James Groh and Dan Wisner
5
While some of the more established product lines in the medical device industry, such as
pacemakers, may experience price compression in the near future, because a hospital can
purchase a similar device from multiple companies, each company has established relationships
with its customers, and while competitive, the products are not commodities. The learning curve
with each product and the perception that one product is safer and more effective creates
customer loyalty.
Corporate-Level Strategy: Medtronic’s corporate level strategy centers on related
diversification to achieve economies of scope. The medical device industry contains a diverse
range of products and each of Medtronic’s business units competes in a distinct sector of the
industry. Table 1 in the Appendix shows that Medtronic’s revenue is distributed across its
business units, and thus, the firm is protected against a downturn in one of its businesses. The
company has achieved synergy by sharing value-creating activities across its business units
including manufacturing facilities, distribution channels, and sales forces.
Medtronic initially sold only pacemakers, and thus, its initial core competencies were the
utilization of technologies used in pacemakers: sensors and electrical stimulation. Medtronic
applied its sensing and stimulation competencies to treat many conditions besides irregular
heartbeat, including Parkinson’s disease, chronic pain, and urinary incontinence. The company
has attempted to expand its core competencies to include tissue engineering, implantable
materials, drug delivery, catheter technology, batteries, navigation, biologics and information
technology. However, some of these ventures have diverged too far from Medtronic’s primary
expertise. Infuse, which was intended to stimulate the body to regrow bone was approved by the
6. James Groh and Dan Wisner
6
FDA in 2002, and was Medtronic’s attempt to diversify its businesses to include biotechnology,
thereby protecting itself against this substitute product. “Allegations later surfaced, though, that
Medtronic was coaxing doctors to use it in ways regulators hadn't approved—such as in neck
surgery (Walsh, 2012).” In 2006, Medtronic paid $40 million to the Justice Department without
admitting any wrongdoing and in 2011 a review of the 13 original studies of Infuse found that
authors with financial ties to the company reported 10 to 50 times fewer complications with
Infuse than were found in FDA reports (Walsh, 2012).
Despite some failures Medtronic has mostly successful in using of a combination of authors with
financial ties to the company reported 10 to 50 times fewer complications to diversify into
businesses aligned with its core competencies. In 1977, Medtronic moved into cardiovascular
therapies when it established its Heart Valves Division and introduced the Medtronic-Hall
mechanical heart valve (Medtronic, 2010). The company has made numerous acquisitions
including Ardian, Inc., Jolife, PEAK Surgical, Inc. and Salient Surgical Technologies, Inc. in
2011.
Medtronic’s corporate-level groups include Medtronic International, Quality and Operations,
Strategy and Innovation, and Healthcare Policy and Regulatory. Each group helps to leverage
best practices, knowledge, and technologies across the company. For example, Strategy and
Innovation coordinates research and development capabilities across the entire company, and
evaluates growth opportunities to strategically allocate investment dollars.
Medtronic Financial Analysis
7. James Groh and Dan Wisner
7
We used company financial statements, shown in Tables 2 and 3 in the Appendix, to compare
Medtronic and its major competitors. We examined ratios measuring profitability, management
effectiveness, and the balance sheet.
We examined Medtronic’s profitability by looking at profit margin and operating margin.
Medtronic’s profit margin is 22.53%, while its closest competitor, St. Jude Medical Inc., has a
profit margin of 13.67%. Medtronic’s operating margin is 28.48%, while its closest competitor,
Johnson and Johnson, has an operating margin of 25.58%. Medtronic’s high operating margin
indicates that a major contributor to its profitability is due to its operational effectiveness.
Managerial effectiveness was inferred by examining Medtronic’s return on assets (ROA), and
return on equity (ROE). Medtronic’s ROA of 8.99% is slightly lower than its leading
competitor, St. Jude Medical, which has an ROA of 9.31%. Medtronic has a ROE of 20.60%
while its closest competitor, St. Jude Medical, has an ROE of 16.48% showing that Medtronic’s
management provides a solid return on both assets and equity.
Other financial ratios were calculated using the companies’ balance sheets. Medtronic has the
lowest current ratio, 1.58, among its competitors but still maintains a healthy current ratio for its
industry. Its current ratio shows Medtronic has the ability to pay back its short term obligations,
and provides a positive financial outlook. Medtronic has a P/E ratio of 11.86 while St. Jude
Medical has a P/E ratio of 15.54 and Johnson & Johnson has a P/E ratio of 22.89. Medtronic’s
lower P/E and overall positive financial state indicates its stock may be undervalued.
8. James Groh and Dan Wisner
8
Forecasting Medtronic’s Financial Statements
The medical device industry faces a 2.3% excise tax on medical devices. This tax will be
implemented starting in 2013. The tax will be levied on the total revenue of the company
whether it shows a profit or loss (MDMA, 2012). The tax will likely have a greater effect on
smaller companies within the industry due to economies of scope, and companies with lower
profit margins than Medtronic’s. The tax may reduce the creation of new jobs and stunt the
growth of the industry in the long run. Medical device companies do not generally have power
to pass a tax onto their customers as consolidation among healthcare providers and declining
reimbursement rates has led to increased competition on the basis of price (MDT 10-K, 2009).
An attempt to pass on the tax to customers may reduce Medtronic’s market share.
5 year prediction: In 2013 Medtronic will see a spurt of growth as it takes market share from
smaller companies unable to cope with the excise tax. Medtronic’s operating costs will increase
due to increased production, but they will be offset by sales growth. In 2014 Medtronic will
reduce its operating costs as its Quality and Operations group finds ways to improve efficiency.
Sales will increase less than in the previous year and the company will increase its long-term
investments and property, plant, and equipment as it acquires smaller companies and their
patents. In 2015 to 2017 the industry will stabilize after the excise tax leading to smaller but
stable growth for Medtronic. A more detailed forecast is shown in Tables 4 and 5 in the
Appendix.
Comparisons to other analysts: Yahoo.com estimates sales in 2013 to reach 16.45B, with a
high of 16.71B, and low of 16.29B. 2014 estimates of sales are 16.99B, with a high of 17.48B
9. James Groh and Dan Wisner
9
and a low of 16.70B. Yahoo’s 2014 high level is our 2013 sales level. We expect Medtronic to
continue its current success in 2013 and turn the threat of the newly implemented excise tax into
an opportunity. Although our estimated sales levels are high compared to Yahoo.com,
Medtronic is in a solid financial position to capitalize on the changes affecting the medical
device industry.
Valuation: The discounted cash flow model indicates the intrinsic value of Medtronic’s stock is
$49.87, which is more than $41.16, the current share price as of 9/10/12, and suggests the stock
is undervalued. Our analysis of the company’s strategy and financial performance supports this
finding. Tables 6 through 10 explain the valuation in detail.
Medtronic is effectively positioned to continue its strategy of related diversification by
purchasing smaller companies experiencing losses as a result of the excise tax. Medtronic will
continue its own internal R&D, which it will support through improved cost control. This
combination approach will result in solid growth for the company over the next few years.
10. James Groh and Dan Wisner
10
References
Aanstoot, HJ; Anderson, BJ, Daneman, D, Danne, T, Donaghue, K, Kaufman, F, Réa, RR,
Uchigata, Y (2007 Oct). “The global burden of youth diabetes: perspectives and potential”.
Pediatric diabetes. 8 Suppl 8 (s8): 1–44.
Health Care Reform, Device Tax.
http://www.medicaldevices.org/issues/Health-Care-Reform,-Device-Tax
Insulin Pumps. http://www.diabetes.org/living-with-diabetes/treatment-and-
care/medication/insulin/insulin-pumps.html
Kamp, Jon. "Medtronic Makes Pact-Ending Move ." Wall Street Journal 25 02 2011, n. pag.
Web. 12 Nov. 2012.
http://online.wsj.com/article/SB10001424052748703409304576166903268690560.html.
King, Mike. “$164 bn Medical Devices Market Dominated by US Companies”. October
18,2011. http://www.companiesandmarkets.com/News/Healthcare-and-Medical/164-bn-
Medical-Devices-Market-Dominated-by-US-Companies/NI2332
Landsbaum, Mark. “Health care coverage tied to unemployment rate.” The Orange County
Register, September 26, 2011. http://orangepunch.ocregister.com/2011/09/26/health-care-
coverage-tied-to-unemployment-rate/50963/
11. James Groh and Dan Wisner
11
Mehta, Shreefal. Commercializing Successful Biomedical Technologies: Basic Principles for
the Development of Drugs, Diagnostics and Devices. 2008.
Medicare. Diabetic Insulin Pumps. 2012. http://www.medicare.com/equipment-and-
supplies/diabetic-supplies/diabetic-insulin-pumps.html
Medtronic. A Legacy of Innovation The Medtronic Story. 09 2010.
http://www.medtronic.com/wcm/groups/mdtcom_sg/@mdt/@corp/documents/documents/medtr
onic-history-pdf.pdf.
Medtronic. Form 10-K for the fiscal year ended June 23, 2009. www.sec.gov/edgar.shtml
MDMA. (2012). Health care reform, device tax. Retrieved from
http://www.medicaldevices.org/issues/Health-Care-Reform,-Device-Tax/up
Walsh, James. "Medtronic's pull influenced Infuse articles, report finds." StarTribune 25 08
2012, n. pag. Web. 12 Nov. 2012. http://www.startribune.com/lifestyle/health/175804281.html.
12. James Groh and Dan Wisner
Appendix
Figure 1: Insulin Pump. Medtronic offers the only FDA-approved integrated diabetes
management system consisting of an insulin pump, continuous glucose monitoring (CGM) and
therapy management software. An insulin pump is a small device about the size of a small cell
phone that is worn externally and can be discreetly clipped to your belt, slipped into a pocket, or
hidden under your clothes. It delivers precise doses of rapid-acting insulin to closely match your
body’s needs:
• Small amounts of insulin delivered continuously (24/7) for normal functions of the body
(not including food). This replaces your long-acting insulin.
• Additional insulin you program “on demand” to match the food you are going to eat or to
correct a high blood sugar.
Taken from Medtronic website:
http://www.medtronicdiabetes.com/treatmentoptions/insulinpumptherapy
13. James Groh and Dan Wisner
Appendix
General Administration: Leadership communicates with employees, giving frequent updates on industry and firm; employees feel part of the
team; drives commitment and production
Human Resources: recruits, hires, and retains best within industry; benefits package – 401K, tuition assistance, training, promotion from within. Involved
in charity work – Juvenile Diabetes Research Foundation; employees are involved in the community and take pride being a part of Medtronic
Technology Development: Medtronic puts high emphasis on Research and Development; has entire R&D division in Northridge, CA. FDA approval is
essential on all developed products. Company must meet constant regulation changes while meeting patient demands
Procurement: 38 manufacturing facilities throughout the world; raw materials purchased from numerous suppliers globally. Works closely with carefully selected
suppliers; trains suppliers in Lean Sigma to improve operational efficiency.
Inbound Logistics:
raw materials
purchased globally
from carefully
selected suppliers.
Suppliers are trained
in Lean Sigma
operations. Must
remain flexible to
meet changing
global demands.
Medtronic maintains
strict oversight of
supplier relations
Operations: close
communication
between R&D,
manufacturing, and
distribution. R&D
division in CA.
Production facilities
located throughout
the globe to meet
changes in patient
needs quickly and
efficiently.
Outbound Logistics:
Distribution facilities
located globally; helps
meet patient demands.
Works closely with
UPS to meet shipping
demands.
Marketing and Sales:
“Manage Markets” manages
relationship with insurance
companies. contracts with
insurance agencies is vital to
make products affordable.
Sales team work regionally
with doctors to recommend
Medtronic products.
Marketing team publishes ads
and articles in medical
journals to gain exposure to
doctors. Utilization of social
media, iPhone apps, and
Lenny the Lion – an
ambassador to young children
with diabetes. Agreement with
Skin-It so patients can design
custom covers for medical
equipment.
Service: 24/7 support system to
troubleshoot and provide
equipment assistance, handle
equipment return, and answer
general billing questions.
Company contacts patient
directly to discuss
equipment/expectations.
Provides financial assistance to
patients; payment plans.
Coordinates payment from
insurance company and delivery
to doctor.
SupportPrimaryActivities
Figure 2: The Value Chain
14. James Groh and Dan Wisner
Appendix
Business unit
%
Revenue
FY2011 Example product Treatment
Cardiac Rhythm Disease
Management (CRDM) 31 Implantable pacemakers regulate heartbeat
Spinal and Biologics
Business 21
Artificial Cervical Discs (Spinal);
INFUSE Bone Graft (Biologics)
replace damaged or degenerated discs in the
neck; stimulates the body to regrow bone
Cardiovascular 20 Stent grafts aortic aneurysms
Neuromodulation 10
Medtronic Deep Brain Stimulation
Therapy Parkinson's disease
Diabetes 8 Insulin pump Diabetes
Surgical Technologies 7 O-arm 2D/3D Imaging System intraoperative imaging
Table 1: List of Medtronic’s business units. Only the major business units are listed so the total %Revenue is slightly less than 100.
Information taken from Medtronic’s website: http://www.medtronic.com/about-medtronic/business-overview/index.htm.
15. James Groh and Dan Wisner
Appendix
MDT = Medtronic
BSX = Boston
Scientific Corporation JNJ = Johnson & Johnson STJ = St. Jude Medical Inc.
Market Cap: 41.99B 7.07B 192.63B 11.70B
Employees: 44944 24000 129000 16000
Qtrly Rev Growth (yoy): 0.02 -0.07 0.07 -0.04
Revenue (ttm): 16.25B 7.28B 65.92B 5.54B
Gross Margin (ttm): 0.76 0.65 0.68 0.73
EBITDA (ttm): 5.45B 1.66B 20.26B 1.63B
Operating Margin (ttm): 0.28 0.13 0.26 0.24
Net Income (ttm): 3.46B -4.02B 8.50B 756.79M
EPS (ttm): 3.47 -2.81 3.05 2.38
P/E (ttm): 11.86 N/A 22.89 15.54
PEG (5 yr expected): 2.01 1.73 2.22 1.12
P/S (ttm): 2.58 0.96 2.91 2.1
Profit Margin = Net income/ Revenues
Operating margin = Operating Income/ Net Sales
Return on Assets = Net Income/ Total Assets
Return on Equity = Net Income / Total Equity
Current Ratio = Current Assets / Current Liabilities
Earnings Per Share = Net Income – Dividends on preferred Stock/ Average Number of Shares Outstanding
Price-Earnings Ratio = Market Value per Share / Earnings
Table 2: Direct Competitor Comparison - Medical Device Industry. Ratios inherent to the balance sheet. From Medtronic competitors (2012, 11 10).
http://finance.yahoo.com/q/co?s=MDT+Competitors.
16. James Groh and Dan Wisner
Appendix
MDT = Medtronic
BSX = Boston Scientific
Corporation JNJ = Johnson & Johnson STJ = St. Jude Medical Inc.
Fiscal Year Fiscal Year Fiscal Year Fiscal Year
Fiscal Year Ends: 26-Apr Fiscal Year Ends: 30-Dec Fiscal Year Ends: 1-Jan Fiscal Year Ends: 30-Dec
Most Recent Quarter (mrq): 27-Jul-12 Most Recent Quarter (mrq):
30-Sep-
12 Most Recent Quarter (mrq):
30-Sep-
12 Most Recent Quarter (mrq):
29-Sep-
12
Profitability Profitability Profitability Profitability
Profit Margin (ttm): 22.53% Profit Margin (ttm): -55.28% Profit Margin (ttm): 12.90% Profit Margin (ttm): 13.67%
Operating Margin (ttm): 28.48% Operating Margin (ttm): 13.48% Operating Margin (ttm): 25.58% Operating Margin (ttm): 24.37%
Management Effectiveness Management Effectiveness Management Effectiveness Management Effectiveness
Return on Assets (ttm): 8.99% Return on Assets (ttm): 3.19% Return on Assets (ttm): N/A Return on Assets (ttm): 9.31%
Return on Equity (ttm): 20.60% Return on Equity (ttm): -43.84% Return on Equity (ttm): N/A Return on Equity (ttm): 16.48%
Income Statement Income Statement Income Statement Income Statement
Revenue (ttm): 16.25B Revenue (ttm): 7.28B Revenue (ttm): 65.92B Revenue (ttm): 5.54B
Revenue Per Share (ttm): 15.54 Revenue Per Share (ttm): 5.08 Revenue Per Share (ttm): 23.91 Revenue Per Share (ttm): 17.61
Qtrly Revenue Growth (yoy): 1.60% Qtrly Revenue Growth (yoy): -7.40% Qtrly Revenue Growth (yoy): 6.50% Qtrly Revenue Growth (yoy): -4.10%
Gross Profit (ttm): 12.30B Gross Profit (ttm): 4.96B Gross Profit (ttm): 44.67B Gross Profit (ttm): 4.08B
EBITDA (ttm)6
: 5.45B EBITDA (ttm)6
: 1.66B EBITDA (ttm)6
: 20.26B EBITDA (ttm)6
: 1.63B
Diluted EPS (ttm): 3.47 Diluted EPS (ttm): -2.81 Diluted EPS (ttm): 3.05 Diluted EPS (ttm): 2.38
Qtrly Earnings Growth (yoy): 5.20% Qtrly Earnings Growth (yoy): N/A Qtrly Earnings Growth (yoy): -7.30% Qtrly Earnings Growth (yoy): -22.30%
Balance Sheet Balance Sheet Balance Sheet Balance Sheet
Total Cash (mrq): 2.49B Total Cash (mrq): 352.00M Total Cash (mrq): 16.92B Total Cash (mrq): 1.05B
Total Cash Per Share (mrq): 2.44 Total Cash Per Share (mrq): 0.26 Total Cash Per Share (mrq): 6.14 Total Cash Per Share (mrq): 3.33
Total Debt (mrq): 10.87B Total Debt (mrq): 4.26B Total Debt (mrq): 17.56B Total Debt (mrq): 2.52B
Total Debt/Equity (mrq): 63 Total Debt/Equity (mrq): 62.32 Total Debt/Equity (mrq): 29.07 Total Debt/Equity (mrq): 53.15
Current Ratio (mrq): 1.58 Current Ratio (mrq): 1.75 Current Ratio (mrq): N/A Current Ratio (mrq): 2.26
Book Value Per Share (mrq): 16.91 Book Value Per Share (mrq): 4.97 Book Value Per Share (mrq): 21.97 Book Value Per Share (mrq): 15.02
Cash Flow Statement Cash Flow Statement Cash Flow Statement Cash Flow Statement
Operating Cash Flow (ttm): 4.63B Operating Cash Flow (ttm): 1.24B Operating Cash Flow (ttm): N/A Operating Cash Flow (ttm): N/A
Levered Free Cash Flow (ttm): 2.80B Levered Free Cash Flow (ttm): 1.04B Levered Free Cash Flow (ttm): N/A Levered Free Cash Flow (ttm): N/A
Table 3: Direct Competitor Comparison - Medical Device Industry. Profitability and managerial effectiveness. From Medtronic competitors (2012, 11
10). http://finance.yahoo.com/q/co?s=MDT+Competitors.
17. James Groh and Dan Wisner
Appendix
Period Ending 30-Apr-10 29-Apr-11 27-Apr-12 2013 2014 2015 2016 2017
Total Revenue 15,392,000 15,508,000 16,184,000 17,478,720 18,352,656 19,270,289 19,848,397 20,443,849
Excise Tax 174,787 367,053 385,406 394,983 404,788
Cost of Revenue 3,582,000 3,700,000 3,889,000 4,369,680 4,496,401 4,721,221 4,862,857 5,008,743
Gross Profit 11,810,000 11,808,000 12,295,000 12,934,253 13,489,202 14,163,662 14,590,557 15,030,318
Operating Expenses
Research Development 1,424,000 1,472,000 1,490,000 1,112,346 1,214,028 1,274,730 1,313,150 1,352,729
Selling General and Administrative 5,432,000 5,537,000 5,987,000 6,117,552 6,423,430 6,648,250 6,748,455 6,950,909
Non Recurring 447,000 518,000 189,000 300,000 300,000 300,000 300,000 300,000
Others 317,000 339,000 335,000 358,314 376,229 395,041 406,892 419,099
Total Operating Expenses 7,620,000 7,866,000 8,001,000 7,888,212 8,313,687 8,618,020 8,768,497 9,022,736
Operating Income or Loss 4,190,000 3,942,000 4,294,000 5,046,041 5,175,515 5,545,642 5,822,060 6,007,582
Income from Continuing Operations
Total Other Income/Expenses Net - - - -
Earnings Before Interest And Taxes 4,190,000 3,942,000 4,294,000 5,046,041 5,175,515 5,545,642 5,822,060 6,007,582
Interest Expense 246,000 278,000 149,000 125,000 120,000 115,000 110,000 105,000
Income Before Tax 3,944,000 3,664,000 4,145,000 4,921,041 5,055,515 5,430,642 5,712,060 5,902,582
Income Tax Expense 861,000 609,000 730,000 826,735 849,327 912,348 959,626 991,634
Minority Interest - - -
Net Income From Continuing Ops 3,083,000 3,055,000 3,415,000 4,094,306 4,206,188 4,518,294 4,752,434 4,910,948
Non-recurring Events
Discontinued Operations 16,000 41,000 202,000 50,000 50,000 50,000 50,000 50,000
Extraordinary Items - - -
Effect Of Accounting Changes - - -
Other Items - - -
Net Income 3,099,000 3,096,000 3,617,000 4,044,306 4,156,188 4,468,294 4,702,434 4,860,948
Table 4: Income Statement forecast. From Medtronic income statement. (2012, 11 10). Retrieved from http://finance.yahoo.com/q/is?s=MDT.
18. James Groh and Dan Wisner
Appendix
Table 4 (Cont.):
2013 - Revenue and Costs of Goods Sold: Based on the current industry environment, revenue is projected to increase 8%. Given the addition of an excise tax implemented in 2013, it is
estimated the tax will affect total revenue roughly 1% for 2013. The cost of revenue has typically been around 24% of total revenue. Given the effect on smaller companies and the
increased amount of sales, the percentage is estimated to increase to 25% of sales.
Operating Expenses: Research and Development typically ranges at 9% of total revenue. In 2013, this number is expected to decrease as a percentage to 8.6%, given the increase in
revenue. Selling and general admin is normally between 34-35% of total revenue, and is estimated to be 35% in 2013. Non recurring expenses are likely to occur in 2013, as the excise
tax goes into effect. Non recurring expenses are often unpredictable, so it is estimated $300,000,000 will occur in this year and is used every year thereafter. Other expenses range
around 2.05% of total revenue. Total operating expenses equal $788,212,000 and leave a total Operating Income of $5,046,041,000.
Medtronic’s interest expense is estimated to decline due to the company using increase cash flows to pay back company debt.
In 2013, the company finishes with a net income of $4,044,306,000. This is an 11.8% increase from 2012.
2014 - Revenue and Costs of Goods Sold: For 2014 Revenue is projected to increase 5%. This year, the excise tax is predicted to affect total revenue roughly 2% for 2014, due to the
expansion of international sales where no excise tax is implemented. The cost of revenue is estimated to be 24.5% of total revenue.
Operating Expenses: Research and Development typically ranges at 9% of total revenue. In 2014, this number is expected to increase to 9%, as the sales levels balance out. Selling and
general admin is estimated to be 35% in 2014. Non recurring expenses estimated the same again at $300,000,000. Total operating expenses equal $8,313,687,000 and leave a Operating
Income of $5,175,515,000.
Medtronic’s interest expense is estimated to decline again due to the company using increase cash flows to pay back company debt.
In 2014, the company finishes with a net income of $4,156,188,000. This is a 2.7% increase from 2013. This is consistent with the slowed growth of sales after a large burst in 2013.
2015 - Revenue and Costs of Goods Sold: For 2015 Revenue is projected to increase 5%. This year, the excise tax is predicted to affect total revenue roughly 2% for 2015, due to the
expansion of international sales where no excise tax is implemented. The cost of revenue is estimated to be 24.5% of total revenue.
Operating Expenses: Research and Development is expected to remain at 9% of total revenue. Selling and general admin is estimated to drop to 34.5% in 2015. Medtronic’s interest
expense is estimated to decline due to the company using increase cash flows to pay back company debt.
In 2015, the company finishes with a net income of $4,468,293,000. This is a 7.4% increase from 2014.
2016 – 2017 - Revenue and Costs of Goods Sold: Both years are estimated to increase sales by 3%. The excise tax will decline as a result of increased international revenue.
Operating Expenses: Research and development continues to be factored at a rate of 9% of total revenue, while selling and admin decline to 34%, as management finds more effective
ways to offset the excise tax.
In 2016, the company finishes with a net income of $4,702,434,000. This is a 5.2% increase from 2015.
In 2017, the company finishes with a net income of $4,860,948,000. This is a 3.4% increase from 2016.
19. James Groh and Dan Wisner
Appendix
Period Ending 30-Apr-10 29-Apr-11 27-Apr-12 2013 2014 2015 2016 2017
Assets
Current Assets
Cash And Cash Equivalents 1,400,000 1,382,000 1,248,000 1,435,200 1,449,350 1,463,844 1,471,163 1,478,519
Short Term Investments 2,375,000 1,046,000 1,344,000 1,008,000 1,100,000 1,105,500 1,111,028 1,116,583
Net Receivables 3,879,000 4,284,000 4,448,000 5,115,200 4,750,000 4,845,000 4,893,450 4,942,385
Inventory 1,481,000 1,619,000 1,800,000 1,480,000 1,850,000 1,887,000 1,905,870 1,924,929
Other Current Assets 704,000 819,000 675,000 650,000 650,000 650,000 650,000 650,001
Total Current Assets 9,839,000 9,150,000 9,515,000 9,688,400 9,799,350 9,951,344 10,031,510 10,112,415
Long Term Investments 4,632,000 6,116,000 7,705,000 8,244,350 8,574,124 9,002,830 9,182,887 9,366,545
Property Plant and Equipment 2,421,000 2,488,000 2,473,000 2,596,650 2,700,516 2,808,537 2,864,707 2,922,002
Goodwill 8,391,000 9,520,000 9,934,000 10,420,000 10,836,800 11,270,272 11,495,677 11,725,591
Intangible Assets 2,559,000 2,725,000 2,647,000 2,752,880 2,752,880 2,752,880 2,752,880 2,752,880
Accumulated Amortization - - -
Other Assets 248,000 362,000 305,000 305,000 305,000 305,000 305,000 305,000
Deferred Long Term Asset Charges - 314,000 504,000 -
Total Assets 28,090,000 30,675,000 33,083,000 34,007,280 34,968,670 36,090,862 36,632,662 37,184,432
Liabilities
Current Liabilities
Accounts Payable 2,546,000 2,915,000 2,583,000 2,455,000 2,553,200 2,655,328 2,708,435 2,762,603
Short/Current Long Term Debt 2,575,000 1,723,000 3,274,000 3,100,000 3,255,000 3,417,750 3,588,638 3,768,069
Other Current Liabilities - 88,000 -
Total Current Liabilities 5,121,000 4,726,000 5,857,000 5,555,000 5,808,200 6,073,078 6,297,072 6,530,673
Long Term Debt 6,944,000 8,112,000 7,359,000 7,015,000 7,225,450 7,442,214 7,665,480 7,895,444
Other Liabilities 1,307,000 1,408,000 2,143,000 2,143,000 2,143,000 2,143,000 2,143,000 2,143,000
Deferred Long Term Liability Charges 89,000 461,000 611,000 387,000 387,000 387,000 387,000 387,000
Minority Interest - - -
Negative Goodwill - - -
Total Liabilities 13,461,000 14,707,000 15,970,000 15,100,000 15,563,650 16,045,292 16,492,552 16,956,117
Stockholders' Equity
Common Stock 110,000 107,000 104,000 104,000 104,000 104,000 104,000 104,000
Retained Earnings 14,826,000 16,085,000 17,482,000 18,907,280 19,405,020 20,045,571 20,140,110 20,228,315
Other Stockholder Equity -307000 (224,000) (473,000) (334,670) (334,670) (334,669) (334,668) (334,667)
Total Stockholder Equity 14,629,000 15,968,000 17,113,000 18,572,610 19,070,350 19,710,902 19,805,442 19,893,648
Table 5: Balance Sheet forecast. From Medtronic balance sheet. (2012, 11 10). Retrieved from http://finance.yahoo.com/q/bs?s=MDT.
20. James Groh and Dan Wisner
Appendix
Table 5 (Cont.):
2013 - Medtronic is expected to increase sales in 2013 given the excise tax negatively affecting smaller medical device suppliers. Medtronic will capitalize on the shift in the industry,
and will have increased cash and cash equivalents by 15% of 2012 levels. Medtronic will also reduce its short term investments by 25%, as the company focuses on increasing
production and focuses efforts internally. Net receivables will increase by 15%, as the sales are expected to increase. Inventory levels will drop as the company capitalizes on increased
sales due to the economic condition on smaller companies. Other current assets continue to drop. Total current assets for the end of the year total $9,688,400,000.
Long term investments begin to increase towards the end of 2013 as Medtronic begins to expand operations. This includes the purchase of smaller companies being negatively impacted
by the excise tax. An estimated 7% increase in long term investments, as the company uses internal funding to expand. Property plant and equipment will increase in 2013 by an
estimated 5%, as the company begins purchasing smaller companies. Goodwill and intangible assets increases as well with the purchase of existing companies.
Current Liabilities decrease as a result of increased cash flow, and the reduction of accounts payable and long term debt, while stockholders equity increases due to the increase in total
assets.
2014 - In 2014, sales levels increase at a smaller rate. Medtronic’s activities include the increase in purchases of smaller companies, resulting in an increase in total assets. Net
receivables drop as a result of sales leveling off, and inventory levels increase. In 2014, total current assets reach a level of $9,799,350,000.
In order to continue the purchase of smaller companies in 2014, Medtronic will have to borrow money in the form of debt. It is estimated short/current long term debt increases by 5% in
2014. Long term debt increases by 3% and other liabilities remain at the 3 year average.
2015 - Growth in sales levels continue, leading to an increase in cash and cash equivalents. Net receivables increase, as well as inventory. This leaves a total for current assets in 2015 to
be $9,951,344,000.
Long term investments continue to increase by 5% in 2015 with the continued purchasing of smaller companies and the expansion of overseas production. We estimate continued
growth of property plant and equipment and goodwill.
2016-2017 - Sales growth continues, but at a smaller rate as shown on the income statement. Investment activities also slow as a result of other large companies purchasing the ailing
small companies, reducing the options for further expansion domestically. By 2016, it is estimated most of the smaller companies affected by the excise tax will have been purchased, or
positively rebounding into turning a profit.
Medtronic is likely to continue increasing its short and long term debt as a result of expansion into foreign soil. Expanding overseas reduces the impact of the excise tax, and is the next
move in Medtronic’s strategy.
21. James Groh and Dan Wisner
Appendix
Year Value
FCFF(t) or
TV(t)
Present
value
at
9.94%
0 FCFF(0) 4,274
1 FCFF(1) 4,647 = 4,274 × (1 + 8.73%) 4,227
2 FCFF(2) 4,972 = 4,647 × (1 + 7.00%) 4,114
3 FCFF(3) 5,235 = 4,972 × (1 + 5.28%) 3,940
4 FCFF(4) 5,421 = 5,235 × (1 + 3.55%) 3,711
5 FCFF(5) 5,520 = 5,421 × (1 + 1.83%) 3,437
5 TV(5) 69,289 = 5,520 × (1 + 1.83%) ÷ (9.94% – 1.83%) 43,146
Intrinsic value of capital 62,575
Less: Short-term borrowings (fair value) 3,274
Less: Long-term debt (fair value) 8,186
Intrinsic value of common stock 51,115
Intrinsic value of common stock (per share) $49.87
Current share price as of 9/10/12 $41.16
Table 6: Intrinsic Stock Value. The discounted cash flow model was used to valuate the stock. All data in USD $ in millions, except
per share data. FCFF is the free cash flow to the firm, explained in Table 7, and TV is the total value of the cash flows to the firm.
The cash flows are discounted at the WACC of 9.94% as shown in Table 8. The growth rates for all years are explained in Tables 9
and 10. Data obtained from http://www.stock-analysis-on.net/NYSE/Company/Medtronic-Inc/Profile.
22. James Groh and Dan Wisner
Appendix
Net earnings 3,617
Add: Net noncash charges 835
Less: Change in operating assets and liabilities, net
of effect of acquisitions 18
Net cash provided by operating activities 4,470
Add: Cash paid for interest, net of tax 288
Less: Additions to property, plant and equipment -484
FCFF 4,274
Table 7: Medtronic’s free cash flow to the firm (FCFF) for year 0, i.e. fiscal year 2011 which ended on 4/29/2012. FCFF is described
as the cash flows after direct costs and before any payments to capital suppliers. It is distinguished from free cash flow to equity
(FCFE) which is described as the cash flows available to the equity holder after payments to debt holders and after allowing for
expenditures to maintain the company's asset base.
Value Weight
Required rate
of return
Calculation
Equity (fair value) 42,191 0.79 11.73%
Short-term borrowings (fair value) 3,274 0.06 3.27% = 4.05% × (1 – 19.15%)
Long-term debt (fair value) 8,186 0.15 3.38% = 4.18% × (1 – 19.15%)
Table 8: WACC calculation. All Values are in USD $ in millions. The required rate of return on debt is after tax and the estimated
effective tax rate is 19.15%. WACC=(Weight Equity)(Required rate of return Equity)+(Weight Short-term borrowings)(Required rate
of return Short-term borrowings)+(Weight Long-term debt)(Required rate of return Long-term debt). WACC = 9.94%
23. James Groh and Dan Wisner
Appendix
Average
Apr 27,
2012
Apr 29,
2011
Apr 30,
2010
Apr 24,
2009
Apr 25,
2008
Apr 27,
2007
Provision for income taxes 730 627 870 425 654 713
Net earnings 3,617 3,096 3,099 2,169 2,231 2,802
Tax rate1
16.79% 16.84% 21.92% 16.38% 22.67% 20.28%
Interest expense 349 450 402 217 255 228
Interest expense, after tax2
290 374 314 181 197 182
Dividends to shareholders 1,021 969 907 843 565 504
Interest expense (after tax) and dividends 1,311 1,343 1,221 1,024 762 686
EBIT(1 – Tax Rate)3
3,907 3,470 3,413 2,350 2,428 2,984
Short-term borrowings 3,274 1,723 2,575 522 1,154 509
Long-term debt 7,359 8,112 6,944 6,772 5,802 5,578
Shareholders’ equity 17,113 15,968 14,629 12,851 11,536 10,977
Total capital 27,746 25,803 24,148 20,145 18,492 17,064
Ratios
Retention rate (RR)4
0.66 0.61 0.64 0.56 0.69 0.77
Return on invested capital (ROIC)5
14.08% 13.45% 14.13% 11.67% 13.13% 17.49%
Averages
RR 0.66
ROIC 13.29%
Growth rate of FCFF (g)6
8.73%
Table 9: The year 1 growth rate is determined using the Sustainable Growth Rate model. Data is in USD $ in millions.
1. Tax rate = 100 × Provision for income taxes ÷ (Net earnings + Provision for income taxes) = 100 × 730 ÷ (3,617 + 730) =
16.79%
2. Interest expense, after tax = Interest expense × (1 – Tax rate) = 349 × (1 – 16.79%) = 290
3. EBIT(1 – Tax Rate) = Net earnings + Interest expense, after tax = 3,617 + 290 = 3,907
24. James Groh and Dan Wisner
Appendix
4. RR = [EBIT(1 – Tax Rate) – Interest expense (after tax) and dividends] ÷ EBIT(1 – Tax Rate) = [3,907 – 1,311] ÷ 3,907 =
0.66
5. ROIC = 100 × EBIT(1 – Tax Rate) ÷ Total capital = 100 × 3,907 ÷ 27,746 = 14.08%
6. g = RR × ROIC = 0.66 × 13.29% = 8.73%
Year Value g(t)
1 g(1) 8.73%
2 g(2) 7.00%
3 g(3) 5.28%
4 g(4) 3.55%
5 and thereafter g(5) 1.83%
Table 10: The growth rate for years 2 through 4 are obtained by decreasing by the same rate from year 1 until the growth rate of year
5 and thereafter is obtained. That decrease is approximately 1.73% per year. The growth rate for year 5 and thereafter is
calculated using the single-stage model.
g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (53,651 × 9.94% – 4,274) ÷ (53,651 + 4,274) = 1.83%
where:
Total capital, fair value0 = year 0 fair value of debt and equity (USD $ in millions)
FCFF0 = year 0 free cash flow to the firm (USD $ in millions)