Medtronic’s Bold Bet: Spinning Off Diabetes IPO and Eyeing the Next Big Thing – ( $MDT $MODD )

Medtronic’s (MDT) latest earnings report delivered a blend of financial outperformance and strategic intrigue, as the medical device titan beat Wall Street’s expectations for its fiscal fourth quarter, but sent ripples through the market with a bold plan to spin off its diabetes business. Investors, ever the fans of a good plot twist, responded with a 2.27% dip in Medtronic’s shares, despite the company’s robust numbers and upbeat outlook.

Medtronic’s Financial Pulse: Stronger Than Ever

For the quarter ending April 2025, Medtronic reported adjusted earnings of $1.62 per share on revenues of $8.93 billion, comfortably outpacing analyst forecasts of $1.58 per share and $8.81 billion in revenue. This performance marked a healthy improvement over last year’s $1.46 per share and $8.59 billion in sales, demonstrating that Medtronic’s operational heart is beating stronger than ever.

Looking ahead, the company projects adjusted earnings per share in the range of $5.50 to $5.60 for fiscal 2026, with organic sales expected to grow by 5%. Notably, this guidance factors in potential headwinds from U.S.-China tariffs, reflecting a touch of cautious realism in an otherwise optimistic forecast.

The Diabetes Division Spin-Off: A Strategic Reset

The real headline-grabber, however, is Medtronic’s decision to carve out its diabetes business into a separate, publicly traded entity. The plan, expected to unfold over the next 18 months, involves an initial public offering (IPO) for up to 20% of the division, followed by a split-off for interested shareholders. This move is designed to sharpen Medtronic’s focus on high-margin growth areas and unlock shareholder value, with anticipated improvements in both gross and operating margins. The separation should also be immediately accretive to earnings per share, allowing for share repurchases without dipping into cash reserves.

The diabetes unit, which currently contributes about 8% of Medtronic’s revenue and 4% of operating profit, will take with it a global workforce, product portfolio, and manufacturing capabilities. Medtronic has reassured investors that its dividend policy will remain unchanged during this transition.

The Broader Medtech M&A Landscape

Medtronic’s strategic realignment comes amid a flurry of mergers and acquisitions in the medtech sector. Recent deals—like Boston Scientific’s acquisition of Sonivie and Stryker’s purchase of Inari Medical—underscore the industry’s appetite for innovation and portfolio optimization. Medtronic itself has a history of bold moves, including the acquisition of EOFlow, a patch pump manufacturer, for $738 million in 2023 that flamed out after EOFlow was found to be infringing patent rights .

Modular Medical: A Potential Jewel in Medtronic’s Crown?

With the diabetes spin-off and IPO plan in motion, Medtronic may soon be on the lookout for fresh opportunities to bolster its core portfolio. Enter Modular Medical (NASDAQ: MODD), a nimble upstart in the insulin delivery space. The company recently secured $12 million in private funding to support the commercial launch of its MODD1 pump and is preparing to submit a tubeless version for FDA review later this year. Modular Medical’s focus on “almost-pumpers”—patients who find traditional pumps too complex or costly (~80% of diabetes patients) —believes that it can addresses a significant unmet need in diabetes care.

Insider participation in Modular Medical’s latest funding round, combined with the founder’s pedigree (Paul DiPerna, formerly of Tandem Diabetes), adds further credibility to the company’s ambitions. As Medtronic charts a new course for its diabetes business, Modular Medical could emerge as an intriguing acquisition target, offering innovative technology and access to a broader patient base—especially as Medtronic seeks to enhance its competitive edge in the evolving insulin delivery market.

Outlook: Medtronic’s Next Chapter

Medtronic’s inflection point is as much about strategic agility as it is about financial performance. By spinning off its diabetes unit, the company is streamlining for growth, while keeping its eyes peeled for the next breakthrough—potentially from innovative players like Modular Medical. As the medtech sector continues its dance of consolidation and disruption, Medtronic’s moves are worth watching, both for investors and for anyone tracking the next wave of diabetes care innovation.