Medtronic at Morgan Stanley Conference: Strategic Growth Insights

On Monday, 08 September 2025, Medtronic (NYSE:MDT) presented a strategic overview at the Morgan Stanley 23rd Annual Global Healthcare Conference. The discussion highlighted Medtronic’s financial outlook, strategic priorities, and operational updates. CFO Gary Disbrow expressed optimism about growth prospects, while also addressing challenges such as margin expansion and strategic investments.

Key Takeaways

• Medtronic plans to spin off its Diabetes business with an IPO expected in early 2026.
• The company anticipates significant growth in Cardiac Ablation Solutions (CAS) and Renal Denervation (RDN).
• A focus on return on invested capital (ROIC) and strategic alignment is central to Medtronic’s investment strategy.
• Medtronic aims for high single-digit EPS growth and improved gross margins.
• Collaboration with Elliott Management is set to drive growth through R&D and M&A.

Financial Results

• Guidance: Medtronic remains confident in its current financial guidance, emphasizing a commitment to high single-digit EPS growth.
• Diabetes Business Spin-off: The IPO is targeted for the first quarter of 2026, with the spin-off approximately six months later.
• Cardiac Ablation Solutions (CAS): The business showed 30% growth in Q4 and 50% in Q1. Expectations are for even higher growth in Q2.
• Gross Margin: Medtronic aims to improve gross margins by 3.5 to 4 percentage points over time, returning to pre-COVID levels.

Operational Updates

• Diabetes Business Spin-off: Operational separation is on track, with systems separation expected by the end of the year.
• Supply Chain: Centralization efforts are improving efficiency and predictability.
• Board Committees: New committees have been established to focus on growth and operations.
• Hugo™ Robotic-Assisted Surgery System: U.S. approval is anticipated by year-end, with a focus on urology, hernia, and benign GYN.

Future Outlook

• Diabetes Business: The IPO phase is planned for late Q1 2026.
• Cardiac Ablation Solutions (CAS): Medtronic is positioning itself as a leader in an $11 billion market, with ongoing development of next-generation technology.
• Renal Denervation (RDN): Efforts include creating centers, physician training, and consumer awareness campaigns.
• Hugo™ Robotic-Assisted Surgery System: A controlled U.S. launch is expected, targeting specific medical fields.

Q&A Highlights

• Transition to Medtronic: Gary Disbrow emphasized the welcoming culture and high expectations at Medtronic.
• Capital Allocation: A data-driven approach prioritizes large franchises with high growth potential.
• Incremental M&A: Medtronic targets companies with revenue growth and synergies, leveraging its venture arm for higher-risk investments.

For more details, please refer to the full transcript below.

Full transcript - Morgan Stanley 23rd Annual Global Healthcare Conference:

Patrick Wood, US MedTech Team, Morgan Stanley: I think we’ll kick things off. Thanks so much, everybody. Day one, Morgan Stanley Global Healthcare Conference. Thanks, everybody, for coming. Patrick Wood, obviously, I’m on the US MedTech team here. Exciting, thrilling disclosures. Morganstanley.com/researchdisclosures. I’m sure you’ll all be going there right after this meeting. What is exciting is that you’re here as CFO of Medtronic, which is an exciting one.

Gary Disbrow, CFO, Medtronic: Thanks for having me.

Thanks for having me. Pleasure to be here.

Patrick Wood, US MedTech Team, Morgan Stanley: I got to start with just kind of the obvious one because, you know, you joined the business from a different industry, and I’m probably going to want to dive into this a bit. How have you found the transition? You know, what surprised you? Just everything about that.

Gary Disbrow, CFO, Medtronic: Yeah. I’ve worked for many different industries over my career with GE and with automotive, etc. I’m used to kind of changing industries pretty quickly. I would say the transition to Medtronic has been really good. It’s a very sort of welcoming culture, open to new ideas. They wanted someone with my background. There are obviously high expectations, I guess. It’s been easy to get access to everyone in the business. There are a lot of surprises on a day-to-day basis in terms of the technology, the products, etc. It’s easy to forget how amazing some of the products are and the difference that they make. The culture for me, I knew it would be sort of mission-oriented, but it really is a strong driving force in the business. It’s been great.

I’ve been spending my time learning about the customers, learning about the products, learning about how they’re made, and getting access to as much information as possible. Focusing my efforts really, one, on just delivering the short term, obviously. Two, on starting to identify how I can help with margin expansion. Three, on the growth side, how I can support acceleration of growth. It’s been an interesting few months.

Patrick Wood, US MedTech Team, Morgan Stanley: Yeah, I mean, your previous role, your more immediate previous role, automotive, you know, capital intense business, raise it in margin. It’s just a very different concept to healthcare. Like when you were doing the interview process and thinking about things, do you think the team was looking for someone who had that eye for efficiency to help drive the productive side? What was their pitch to you while you had been in the bedroom?

Gary Disbrow, CFO, Medtronic: Yeah, I think there was a combination of two things. One is, indeed, you know, automotive is very, very tough from the cost perspective, and operations have to be very, very smooth. You can’t afford any surprises. I think clearly, you know, there was an expectation that I would bring some of that discipline to the table and help continue to improve that. The second part, though, is there are similitudes in the sense that automotive is also very heavily innovation-driven. Capital allocation has become very, very important. Making sure that you’re decisive in where you’re going to be successful and how you allocate resources is a common theme between the two industries. In my previous job, I worked a lot on freeing up capital from one area to be able to capitalize on the ones where we were going to be successful.

I think that applies to Medtronic to a large extent as well.

Patrick Wood, US MedTech Team, Morgan Stanley: When you joined, I guess you would have, I mean, Medtronic is a massive company with a lot of different head markets. You both would have wanted to pick up a lot of the information of what’s going on in each of them. I suspect at the same time, those divisional heads would want to be pitching you why they should get allocated opportunities and capital. How did you find that process? Is that a challenge internally, but how does that opportunity cost, if you like, of allocation, how does that work?

Gary Disbrow, CFO, Medtronic: Yeah, look, I’m a data-driven person, right? For me, you know, going into these discussions, it’s all about understanding the numbers, the size of the opportunity, the probability that we’re going to be successful, the size of the prize, so to speak, and looking at that with data. What’s the opportunity from a growth rate perspective? What’s the opportunity from a margin standpoint? I’m pretty big on return on invested capital as well. My approach has been to just look at the data, right? You pretty quickly come to a first sort of set of conclusions on what the growth drivers, the macro-level growth drivers are going to be. We might speak about some of those with, you know, Cardiac Ablation Solutions or IDN and Hugo™ robotic-assisted surgery system, and you get comfortable with the big stones, right?

You look at the large franchises, like for us, cardiac rhythm management, spine, surgical, and you look at how you can fund those so that they remain successful and continue to have a moat around them. You get to the smaller businesses, right, and see how you allocate the businesses, the capital between them, based on, you know, what the competition is doing and how you evaluate your chances to succeed. It’s been a very, very data-intensive and very discussion-intensive discovery process, I would say. Great fun at the same time.

Patrick Wood, US MedTech Team, Morgan Stanley: I remember when we did, down actually by Wall Street with that first meeting. Yeah. And quite unusually, because you were fairly new in the role, you were very clear that the first guidance would be one that you would own. Yeah. And that was yours. I mean, I guess on the one hand, that also requires trust for you and the internal team and the information they’re giving you on our side. Maybe the flip side of it could be, you know, there’s an incentive to set a target and a structure that you feel very comfortable with, especially earlier on in the role. How, what’s the interplay there? Another way, is the guidance conservative?

Gary Disbrow, CFO, Medtronic: I want to set the business up for success and obviously myself. I wouldn’t give a guidance that I’m not comfortable with. As it happens, it was not necessarily an easy one because we had the impact of tariffs, and we had the separation of the Diabetes business to communicate at the same time. We went through a pretty deep roll-up process as we do in these cases. The team took me through risks and opportunities, and we came to the guidance that we issued. I’m comfortable with the guidance. After one quarter of performance, I think we’re encouraged, and we feel strongly that we’re going to deliver that.

Patrick Wood, US MedTech Team, Morgan Stanley: I’m sure there’s only so much you can say, but latest thoughts on the timelines of the Diabetes business spin, how progress is working on that.

Gary Disbrow, CFO, Medtronic: Sure. There are really two things, right, in diabetes. One is the operational separation of that business, so it needs to become standalone so that, you know, when we do the IPO, it can run itself, so to speak. Then there’s the transaction work itself. On both fronts, the work is progressing very well. The business, the management team is in place. We’re doing the separation from the systems perspective towards the end of this calendar year, so it’ll be ready. It’ll be ready by end of this calendar year to be run as a separate business. I can tell you, the team there is fully engaged and can’t wait to, you know, control their destiny and run their own business. There’s the transaction side, and it’s progressing nicely. We’re in the process of forming the bank syndicate that’s going to help us with the IPO process.

When we announced the separation, we said it would take 18 months, right? That was back in May. Now, three or four months later, we’re looking at 14 to 15 months. We’re right on track. We’re talking the first phase, the IPO phase of the transaction, towards the end of the first quarter calendar year of 2026. The split parts to happen roughly six months after that. All on track. Positive reaction from stakeholders, from investors that we’ve been meeting so far.

Patrick Wood, US MedTech Team, Morgan Stanley: Yeah, it’s a fast innovation area, so being independent of them.

Gary Disbrow, CFO, Medtronic: Yeah. It’s a fully scaled business. It has its own manufacturing, its own logistics. It’s got an exciting pipeline of products. We have two sensors now between the Instinct sensor that comes from Abbott that got approved last week and Simplera, which is our own sensor that’s ramping up. We’ve got a patch pump coming up. We’ve got a pen coming up in the pipeline as well. It’s an exciting business in a market that’s growing. From a transaction perspective, it’s going to have scarcity, right? It’s going to be a large transaction that it’s going to be hard for investors not to look into. We’re excited about that. Excited about launching that business into its own future. Candidly, to be able to focus the rest of the business on the other three franchises, where we have a lot of things, a lot of positive things going on.

Patrick Wood, US MedTech Team, Morgan Stanley: From your perspective, you know, diabetes, assuming that will go successfully, you know, RemainCo is still a very large business. Do you feel it’s the right kind of size? A bit of a loaded question, but is it manageable about size? Would there be further things that you think from a slimming down or a focusing perspective, or do you think it’s probably nicely situated as how you would view it?

Gary Disbrow, CFO, Medtronic: Look, I think it’s not a size question as much as it is, you know, what processes do you have in place to control it and make sure that you’re on top of things. I think, you know, eliminating or taking Diabetes out of the portfolio will give 20 to 25% more time to some of the senior leadership, whereas it was only sort of 7% of revenue and 1-2% of profit. That’s good. It will give us more time to take a look at the rest of the portfolio. I think coming from the outside, there are significant synergies between the different franchises. You know, if you take tibial and in Pelvic Health, Neuromodulation, Cardiac Rhythm Management, it’s all the same basic technology. If you look at some of the software that we’re developing with AiBLE™ and Spine and in Hugo™ , there are lots of consistencies, etc.

I think, you know, there are synergies between the different parts of the business, number one. Number two, I think the operating framework that Geoff put in place with the operating units, but having centralized function for the non-negotiables such as supply chain, quality, etc., is working well. It’s driving a lot of benefits for the organization that we’re starting to see from an execution standpoint and from a margin standpoint. I think size is not an issue.

Patrick Wood, US MedTech Team, Morgan Stanley: You mentioned the supply chain. I know Greg’s in town. I don’t think anyone who hasn’t worked in industry knows how critical that component is internally in a business.

Gary Disbrow, CFO, Medtronic: Yes.

Patrick Wood, US MedTech Team, Morgan Stanley: How do you feel that is at the moment? I know that the number of supply chain companies have been brought down and the whole thing has been rationalized. Does it feel to you now like we’re in a good spot from a forecasting and a management side of income supply chain end?

Gary Disbrow, CFO, Medtronic: I think so. I think, you know, Greg did a ton of work from a consolidation perspective. As you said, we went from four manufacturing teams to only one. We went from nine, you know, purchasing teams to only one. It’s all centralized. That makes the data much more forthcoming. It makes all the forecasting a lot easier to do. Predictability is actually good now. Execution is strong, and we’re starting to gain efficiency from that sort of centralization of things. You know, between technology, commercial, and cost, those are the three areas where we benefit from the size of Medtronic. I think what Greg and the team have put in place is really starting to pay off. I do think that there’s still a lot of opportunity ahead of us, though, that, you know, I’m happy to discuss. Yeah.

Patrick Wood, US MedTech Team, Morgan Stanley: A couple of unanswerable questions, so I apologize. How have the discussions with Elliott been? That was obviously relative to your new news. They added a little bit of infrastructure. It might be worth flagging to the group what’s going on there. They added a little bit of infrastructure in terms of the board composition. How are you finding things there and how’s the discussion been?

Gary Disbrow, CFO, Medtronic: Look, you know, Elliott contacted us in a very constructive fashion. They, you know, contrary to some other engagements that they’ve had where there’s a public letter, etc., it was a private discussion. First, through email with Jeff, and then they came and exposed to us their thesis on Medtronic. The first thing they said is, look, we think you’re in a great place. We’ve analyzed the company for a decade, and we think you’ve never been in such a good position from a portfolio perspective. You’re about to have an inflection in performance. We want you to do two things. We want you to capitalize on that opportunity. Make sure that you capture Cardiac Ablation Solutions, Renal Denervation, Hugo™ in the optimum fashion, I would say, number one. Number two, we want you to take those opportunities and use them as an opportunity to accelerate growth, right?

Go back on offense in funding organic R&D and also maybe going a little bit more on offense on the M&A side, right? One of the things that they said as to how to make that happen is, first, they said we feel that you would benefit from more MedTech representation on the board, which we fully agree with. We used to have that on the board and, through just retirement, etc., that was no longer the case. We were already looking at bringing some board members from the MedTech industry onto the board, so we were happy with that recommendation. They said, you know, one is good, maybe consider two. We swapped lists and we converged on the choice of the two new board members, one of whom we were already speaking to in the past. I think that worked out well.

The second thing is, they said, you know, we think you should have a committee to oversee growth and operations. Ultimately, we decided on two committees. One on growth that is going to be focused on capturing those opportunities, continuing to sharpen the portfolio to make it evolve towards higher WAMGA, through M&A and potentially through further pruning of the portfolio. The second one is around operations. It’s all about margin improvement, right? How do we create the fuel to be able to reinvest in R&D internally to create the next generation of products and to build a flywheel? We looked at the committees that we’ve got at the board level today or that we had at the board level. We decided to simplify a little bit the committees that we had. We merged two financially oriented committees into one.

We eliminated one that was focused on science and technology that we thought was maybe less impactful. We removed two and built two new ones. The two new ones are growth and operations. In fact, it works well because they’re well aligned to the way we run the company from an executive perspective, right? If we look at the operating mechanisms that we’ve got internally, we’ve got an M&A committee, a business development committee, so that fits well with the growth committee. We’ve got the monthly business reviews and the margin improvement committee, etc., which fit well with operations. In a way, it creates a good interface between the way the business is run on a day-to-day basis and the way the board is going to be organized. I think it’s a good thing.

Patrick Wood, US MedTech Team, Morgan Stanley: Yeah. That’s really interesting. I mean, it’s interesting, the idea of incremental M&A. That’s been a big topic, obviously, within the medtech industry in general, helping to drive growth. You’re also a return on capital guy. Yeah, and medtech M&A sometimes requires a bit of a leap of faith because it’s often a stage for the biggest payoffs. Like maybe an unanswerable question again, but how do you think about that interplay? Do you just kind of probability risk adjust it? How do you think?

Gary Disbrow, CFO, Medtronic: Yeah. There are multiple parts to that answer. First, when we look at the targets, there have to be a few characteristics. First, the market the target needs to be in needs to be attractive from a revenue growth perspective and ultimately from a profit pool standpoint. Two, Medtronic has to have the right to win in those sectors. There have to be synergies either from a tech perspective where we can bring things to the table in, I don’t know, battery technology or materials technology or things like that. There needs to be commercial synergies. For example, if it’s a product that one of our existing sales forces can carry in their portfolio in addition to existing products, then we get benefits from a commercial standpoint. We will look at those two things. We will assess, sort of, the financial profile.

What’s the horizon for the deal to be accretive from a growth perspective and from a profit perspective? We have to get comfortable that it’s not going to get in the way of delivering what our commitment is, which is high single-digit EPS growth. To be clear, it’s not M&A or high single-digit EPS. Both have to go together, right? We assess against that angle. We look at where the company stands in its development process. The sweet spot for us is basically companies that are either just before commercialization or just after so that the risk level is more acceptable and the path to financial return is better, right? That’s for, I would say, core M&A, and that’s the typical approach.

For things that are more risky or sort of more upstream of the development stage, we have a very good venture arm that is based out of Boston with a dedicated team. What they do there is they talk to companies that are earlier stage, but never with a view of making money on the venture, always with a view of at one point, is that going to bring something to the portfolio of Medtronic? Sometimes we will just take a position. Sometimes we will do a structured deal where we have a call option if the company hits certain milestones, for example. We try to enter at an early stage if we perceive that the risk is too high. That’s kind of how we approach it.

I guess the focus now is the sweet spot, which is kind of, I would say, deals like Efera right now for us, which has been, you know, obviously, a long journey, but a great venture for us in terms of the payback that it brings to the table today.

Patrick Wood, US MedTech Team, Morgan Stanley: You mentioned CAS a few times, and I can understand why. You did these internal meetings. You had all the different division heads sort of pitch you. I’m guessing, tell me if I’m wrong, but CAS, RDN, and Hugo™ were the ones that stood out to you. Maybe if that’s correct, maybe if you could sort of start out with CAS, like how you felt about it, how the discussions have gone, how you feel about the opportunity and so on.

Gary Disbrow, CFO, Medtronic: Yeah. Hey, look, I mean, I think CAS is, we’re in a fantastic position. I think we’re the only company with the full set of catheters today. We’ve got, you know, this is one case where we took two shots on goal and both paid off with PulseSelect on one side and Sphere 9 on the other. Both are in high demand. I think Sphere 9 is even more in high demand than the others. You know, the numbers are already very attractive, and we can tell that it’s going to continue. Growth was in the 30% range in Q4. It was 50% in Q1. It’ll be higher than that in Q2, and it will continue to ramp up. It requires capital from, first, building the capacity, secondly, hiring the mappers’ perspective. For me, it quickly became a non-negotiable, right?

That was a pot of funds that we kind of segregated and said, it has to happen. In the past, there have been opportunities where Medtronic has been in a good position and hasn’t fully captured that opportunity. This is not going to happen for CAS. We’re putting the resources that are required, and the ramp-up is working well. Capital equipment is increasing. We’re creating the install base that’s going to pay off with the catheters going forward. We’re hiring mappers at a rapid rate. Yeah, I’m very excited about that opportunity. We passed the $1 billion milestone at the end of last year. We’re relatively shortly past the $2 billion milestone, but that’s only a step in a market where we think we have a clear path to being the leading player. It’s an $11 billion market today, growing 20% a year.

It’s an exciting opportunity, and we’re working on the next generation, right? We’re working on Sphere 360, and we’ll start pivotal trials soon. The future is really positive for that franchise. Very excited about it.

Patrick Wood, US MedTech Team, Morgan Stanley: Interesting to hear the tonality of how they’re talking about non-negotiable. Would you say Medtronic’s become a little more aggressive in terms of selecting which areas it’s going to invest in and then just aggressively doubling down on that? Is that a fad?

Gary Disbrow, CFO, Medtronic: I think the company’s become more decisive. There have been some changes in the way we approach it. It’s more data-driven, a little bit more top-down from an investment perspective. We’re making our plan changes in the way we do the strat plan to be more decisive, etc. I think that’s helped. I think another thing that’s helping is that the execution is more consistent, right? We’ve done 11 quarters of mid-single-digit growth, which means that it’s easier to get comfortable with the funding of projects like that.

Patrick Wood, US MedTech Team, Morgan Stanley: Maybe also touching on RDN, which has been a hilarious topic because the buy side went from thinking it’s terrible and a zero to now really quite excited about it. It’s been quite a journey. You know, again, how did you think about the discussion and the size of the market?

Gary Disbrow, CFO, Medtronic: First, the size of the market, right? You’re talking 18 million potential patients in the U.S. with a catheter that will be priced at $16,000. You do the math. 1% of 18 million times $16,000. The size of the price is massive, number one. Number two, from a margin perspective, it’s a great product for us. Financially speaking, it’s very attractive. Most importantly, from a therapy standpoint, it’s just a game changer for the patients. You’re talking people who are sometimes on four or five meds that have uncontrolled hypertension. Their life is impacted on a day-to-day basis. Instead of struggling with the meds and potential side effects, etc., they go to an outpatient procedure in and out. In one shot, they get an improvement in their hypertension. Our clinical data indicates that it actually continues to get better over time.

You’re talking a product that makes a material, really tangible difference to the life of patients. When we did the clinical trials, 80% of the people that were in the clinical trials were self-applied, right? There’s a real demand from the market. On one side, you put a big population, great therapy, and natural demand. It’s probably one of, if not the biggest opportunity we’ve had in the portfolio for a long time. It’s a long time coming. It’s been 15 years. The advantage of the 15 years is that we’re significantly ahead of the competition today from the amount of data that we’ve got at our disposal. We’ve got an opportunity to capture this very, very large market. Today, we’re focused on three things: making sure that we create the centers that are going to do the procedure at the physicians’ locations, right?

Training the physicians and helping them with the coding of the reimbursement, etc. On the other side, raising awareness of the consumers. We’ll probably do some direct-to-consumer marketing to continue to raise awareness. Then building the referral pathway to put the two together, right? Building a process so that the consumers that want to undergo the procedure know where to go and that there’s a process in place to get them in touch with the centers that are going to carry out the procedure. That’s what we’re working on today. It requires some investment, but not to the same extent as Cardiac Ablation Solutions, but still some direct marketing investment, etc., for a really, really transformational growth opportunity.

Patrick Wood, US MedTech Team, Morgan Stanley: I guess one of the differences for us is CAS. It’s here you’re building a completely new market.

Gary Disbrow, CFO, Medtronic: Yeah.

Patrick Wood, US MedTech Team, Morgan Stanley: How much do you have the teams coming to you and saying, "Can we ring-fence this much spend?" How would you characterize the amount of time, energy, and money that’s going behind RDN relative to, I don’t know, CAS, just even qualitatively?

Gary Disbrow, CFO, Medtronic: Yeah, look, I think it’s, you know, they come with a demand, right? We look at it together. Again, it’s data-driven, you know. What are you going to do with the spend? In Cardiac Ablation Solutions, you know, it’s the mappers and it’s things like that, and it’s the capital equipment. In Renal Denervation, it’s some of the direct-to-consumer stuff. It’s investing in some of the clinical specialists that are going to help with the development. We ask them for sort of, you know, forward-looking KPIs that we can track to make sure that it’s on track and that we’re comfortable that we’re going to get the payback that we expect. We have reviews on a weekly basis with those businesses today to make sure that they’re delivering on the path that’s going to make us successful. So far, it’s the case. We keep funding them.

The work is, you know, where can we go and squeeze costs in other places to make sure that we have the capacity to fund those businesses in the way that they require?

Patrick Wood, US MedTech Team, Morgan Stanley: Maybe we could also just talk a little bit about Hugo™ because that’s another large pillar here. You know, that’s a remarkable market. It’s still growing very quickly. One very entrenched competitor. You know, how are you thinking about the investment and the energy behind competing in the U.S. with Hugo™ as the number of indications expand?

Gary Disbrow, CFO, Medtronic: Yeah. First, again, you know, it’s a massive opportunity. I mean, in the U.S. now, 30% of surgeries are done with robotic assistance, right? When you’re a big medical surgical franchise like us, you have to look at it. It’s a big opportunity going forward. First, you know, we’re committed to Hugo™ and moving forward. For us, you know, we feel like we’ve got a product that is differentiated from a form factor perspective because of its modularity. We think the visualization attributes that we’ve got are good. The physicians like the end factors, so the instruments that we’ve got that we could put at the end of the arm because they trust those instruments. An instrument like LigaSure™ for vessel sealing, for example, is being used in 35 million procedures. They like the fact that they’re comfortable with the instrumentation.

There are areas where Hugo™ is really differentiated where we think we have a large opportunity. Candidly, I think there is just room for two players. A lot of our clients actually like the idea of being able to have two different players to speak to. We’re in that phase now. Hugo™ is going to be approved in the U.S. towards the end of this year. It’ll be first urology and then, following that, hernia and benign GYN. As we do those different approvals, we will do the instruments that go with them. We’ll take it in a controlled launch, right? For us, the most important thing is to have successful customers and customers that get from Hugo™ the service that they expect, right? We’ve started selling Hugo™ outside of the U.S. for the last four years.

We’ve taken that approach and we’ve learned a lot in terms of where Hugo™ is going to be successful. We’ve made changes in the software and the arm, etc., as we were moving forward. We’re ready to start taking that to the U.S. market, which is by far the biggest opportunity.

Patrick Wood, US MedTech Team, Morgan Stanley: On the one hand, you’ve got Renal Denervation, Hugo™ robotic-assisted surgery system, Cardiac Ablation Solutions, Inceptiv™ spinal cord stimulator, AiBLE™ spine surgery ecosystem, all the things happening over here. On the other side, I imagine bariatrics is still a little tough, but looking forward, it doesn’t feel like there’s something particularly negative. To your point, you’ve been growing mid-singles already fairly consistently. I guess the question is, if you’re us, what is the blue sky situation in terms of growth? If the organic growth ends up inflecting up a fair bit, what are you going to do with the extra money? Because there’s a margin versus reinvestment interplay.

Gary Disbrow, CFO, Medtronic: I think it’s all about creating a flywheel, right? On one side, we feel comfortable that the growth is going to pick up for the opportunities that you just mentioned, and that alone will give us an opportunity to invest more in R&D and in M&A. There’s a second part of the flywheel, which is around margin expansion, right? It can’t be just growth. It has to come with margin expansion. I talked about some of the improvements that have been made by Greg and by Scott Cundy in R&D more recently, etc., to become more efficient from a supply chain perspective and an R&D standpoint. I feel like we still, you know, coming from a different industry, I feel like we still have opportunities in front of us. To name a couple of things, I think manufacturing footprint is still an opportunity for us.

It’s harder to do in medtech than it is from where I come from because of the regulatory approvals and all that, but I think it’s an opportunity for us, and we’re looking at it aggressively. It’ll take a while, but it will drive significant benefits. The other thing is design-to-cost, so it’s working on engineering for cost upstream in the development cycle of the product, which is a transformation I’ve seen in my previous industry that is starting in medtech as well. Today, we’re working on products like Sphere 360 to launch it at a much better cost position than the product it replaces. I think very meaningful benefits will come from that. That will help gross margin go up, and we’ll use a portion of that improvement to reinvest in R&D.

Long story short, I think the objective for us is to get back to gross margin levels that are closer to where we were prior to COVID, right? We’re talking three and a half to four points of gross margin incrementally over time. This is not next quarter or by the end of the year, but it’s opportunities that we’re building for the years to come to continue to fund innovation. I think the path is there, and I’m excited about it.

Patrick Wood, US MedTech Team, Morgan Stanley: Last one. We’re at a global healthcare conference. There is a correct answer. What’s more fun, autos or medtech?

Gary Disbrow, CFO, Medtronic: I’ll tell you, financially speaking, medtech is a lot more fun than auto. Auto will always be a sector close to my heart, but I continue to enjoy the products without having to work in that sector. Having the financials of medtech and being able to enjoy automotive on the side is probably a better choice. Look, I think I come in at Medtronic at a moment where there’s very significant growth opportunities that are right there, right? It’s one of the reasons I joined it because they were pretty clear to me when I met the management team. I’m excited to see that they’re even better and more transformative than what I expected. At the same time, I feel like we still have opportunity for significant margin improvements. I think the combination of those two things will generate leverage EPS growth and shareholder value.

I’m excited about the journey ahead of us.

Patrick Wood, US MedTech Team, Morgan Stanley: Love to hear it. Gary, thanks so much. Thanks, everyone.

Gary Disbrow, CFO, Medtronic: Thank you. Thanks for having me.

Patrick Wood, US MedTech Team, Morgan Stanley: Thank you.

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