Medtronic and DaVita Inc. are teaming up to create a new, independent company focused on kidney care. The new company will be owned equally by the two and led by an independent management team.
Medtronic, DaVita to create new kidney care company
The business will be led by a Medtronic executive and equally owned by the two firms.
May 26, 2022 at 1:18PM
According to a joint statement from Medtronic and DaVita, the company will focus on "developing a broad suite of novel kidney care products and solutions, including future home-based products, to make different dialysis treatments more accessible to patients."
DaVita and Medtronic each are contributing $200 million in cash to launch the new company. The two companies did not say where the new company will be headquartered.
Medtronic's renal care business will be spun off as a part of the new company. This includes its product portfolio, product pipeline and global manufacturing R&D teams and sites. The renal business had revenue of $325 million in fiscal year 2022, just 1% of the company's overall sales.
Ven Manda, currently president of Medtronic's renal care solutions business, will become the new company's CEO. Manda has worked for the med-tech giant for more than 23 years.
DaVita, an outpatient dialysis operator, is based in Denver.
The deal is expected to close in 2023. A new name for the company still is under consideration. According to a regulatory filing, Medtronic does not expect the new venture to have any material impact on its earnings-per-share in fiscal 2023 or beyond.
The announcement piggybacked off Medtronic's fourth quarter and full year earnings report. The company, which has its operational headquarters in Fridley, delivered EPS of $1.52, missing Wall Street expectations of $1.56.
The company's stock closed down 5.8% on Wednesday.
Market uncertainty has been a challenge in recent years for medical technology firms. The pandemic delayed many elective surgeries, which cut into sales. The industry's rebound has happened in fits and starts, closely mirroring the waves of the pandemic recovery.
Medtronic's revenue for the fourth quarter was down 1% to $8.1 billion, missing the consensus estimate of $8.44 billion.
"This past year has been choppier than I would have liked," said Geoff Martha, Medtronic's CEO, in a call Wednesday with analysts.
Martha said global supply chain challenges were the primary reason for the disappointing financial results. He also mentioned other factors, including the lockdown in China and currency exchange rates.
Looking to its fiscal year ahead, the company is forecasting a conservative 4% to 5% in organic growth.
"We expect improvement each quarter as we move through the year," said Karen Parkhill, Medtronic's CFO, referring to the fiscal year ahead.
For its full fiscal year of 2022, ended April 29, Medtronic saw sales of $31.7 billion, up 5% from the previous year. DaVita reported revenue of $11.6 billion for 2021.
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