Diversifying the Product Line
Broadening the Business
Building on Success

Diversifying the Product Line

The SynchroMed implantable drug delivery system was the world's first programmable pump to deliver medication to the spinal cord for the treatment of spasticity and malignant and non-malignant pain.

The new decade got off to a bright start with the 1981 introduction of Versatrax - the first pacemaker to sense and pace in both chambers of the heart. Two years later, Medtronic introduced Itrel, the world's first fully implantable and programmable neurological stimulation device for the treatment of chronic pain.

The health care environment in the United States, however, had begun to change. Following Medicare's lead, private insurers began paying a fixed fee for medical devices and surgeries, which contributed to a decline in pacemaker implants. After potential problems with one model's lead wires were identified in 1985, Medtronic reported its first decline in sales and earnings in 23 years.

The resulting cost-cutting measures included a reduction in workforce and the closing of two divisions, one that manufactured nuclear imaging diagnostic equipment and another that produced equipment for stress tests and heart monitoring. The company also sold its St. Anthony facility and moved its corporate headquarters to the Rice Creek facility to join sales, marketing, and engineering.

In 1985 Medtronic made headlines when it unveiled the Activitrax, the world's first single-chamber pacemaker to feature rate responsive pacing. Previously, single-chamber pacemakers functioned at a fixed rate - generally about 70 beats per minute - regardless of the wearer's activity level and blood-pumping requirements. The Activitrax contained a tiny sensor that detected pressure waves caused by a patient's muscle movement or body motion; the pacemaker's circuitry translated those waves into electrical signals, which in turn triggered the appropriate rate response from the pacemaker. This feature provided patients with a level of stamina not possible with fixed-rate pacing therapy.

Broadening the Business

The year 1985 also saw the arrival of Winston R. (Win) Wallin as Medtronic's president and chief executive officer. A Medtronic board member and former vice chairman of the Pillsbury Company, Wallin emphasized diversification of the company's products as one of his main goals.

For the remainder of the decade, Medtronic sought to strengthen its position as a leader in medical technology. Research spending doubled between 1985 and 1988, going from $37 million to $75 million. Internal development of such products as implantable cardioverter-defibrillators and the SynchroMed Drug Delivery System - the world's first implantable, programmable pump for delivering potent drugs to the central nervous system - expanded the product line into new areas.

Advances continued in the pacing business as well, notably with the 1987 introduction of Medtronic CapSure leads. They were tipped with a minute amount of a steroid drug that helped reduce tissue inflammation upon insertion into the heart muscle.

With the 1987 purchase of the Johnson & Johnson Cardiovascular Division, Medtronic acquired the Hancock porcine valve.

In addition, nearly a dozen acquisitions of other medical technology companies were completed, enabling Medtronic to gain entry to new markets. The acquisitions included the Johnson & Johnson Cardiovascular Division (tissue heart valves and cardiopulmonary equipment); Versaflex Delivery Systems, Inc. (coronary angioplasty catheters and guiding catheters); and Bio-Medicus, Inc. (centrifugal blood pumps).

The 1986 acquisition of Vitatron, N.V., a Dutch pacemaker manufacturer, and the 1987 opening of the Bakken Research Center in Maastricht, The Netherlands, signaled Medtronic's continued emphasis on international markets. The company also opened Bakken Education Centers to serve both physicians and Medtronic's sales organizations in India and Japan; another Bakken Education Center was established at Medtronic's world headquarters in Minneapolis.

By 1990, through a combination of internal developments and strategic acquisitions, Medtronic had successfully made the transition from a company with a limited product line to an international, diversified, medical technology corporation.

Building On Success

When William W. (Bill) George joined Medtronic in 1989 as its president and chief operating officer, annual sales topped $755 million. When George - formerly president of Honeywell's space and aviation systems business - was named president and chief executive officer two years later, Medtronic's revenues had surpassed the $1 billion mark. Moreover, Medtronic products two years old or newer accounted for 40 percent of those revenues, up from 14 percent just six years earlier.

Continuing the diversification strategy begun by Win Wallin, who had become chairman of the board, Medtronic soon acquired TUR, a pacemaker company in Germany; CardioRhythm, a manufacturer of products for diagnosing and treating cardiac arrhythmias; and DLP, a firm specializing in cardiac cannulae used during open-heart surgery. During the 1990s, Medtronic acquired or made minority investments in numerous medical technology companies, expanding its reach to customers and patients in many markets worldwide. By acquiring market leaders in strategic mergers, Medtronic built on its strong, historic base of cardiac rhythm management and neurological therapy to maintain its leadership in the medical technology industry.