Okay. Hello, everyone. I'm Ryan Weispfenning, Vice President and Head of investor relations at Medtronic, and wanna thank you for joining us on a Friday in July for our Medtronic General Manager Call Series. Today marks the seventh episode since we initiated this series in late 2019. Past episodes are available on our newly redesigned website at investorrelations.medtronic.com, so I encourage you to check that out. You can get directly to these GM call series by clicking on the News and Events header on that page and then selecting General Manager Call Series. We have a full pipeline of innovative products and ongoing launches, and the purpose of these calls is really to highlight this pipeline in our businesses and give you an opportunity to hear from and interact with the presidents and general managers who are leading these businesses.
For today's event, we're pleased to feature our patient monitoring business, which is part of the medical surgical portfolio. I'm joined today by Frank Chan, who is the President of Patient Monitoring at Medtronic. Similar to prior calls, I have some prepared questions for Frank. We'll have a conversation, and then we'll make sure to leave plenty of time at the end for questions from the sell-side analysts that cover Medtronic. Turning to the Q&A session logistics, if you're a sell-side analyst that covers Medtronic and you intend to ask a live question today, please make sure you're connected to the Zoom platform via the link in the invitation you received. If you'd like to ask a question, please click the Raise Hand button in the Reactions panel.
If you're using the mobile app, press the More button and select Raise Hand. Your lines are currently on mute, and when we call on you'll receive a request to unmute your line, which you must respond to by clicking on your screen before you ask your question. Next, I wanna note that on today's call, we could make some comments that may be considered forward-looking statements, and actual results might differ materially from those projected in any forward-looking statement given risks and uncertainties. Additional information concerning factors that could cause actual results to differ is contained in our periodic reports and other filings that we make with the SEC, and we do not undertake to update any forward-looking statement. I encourage you to go back and read this slide.
Further, we might discuss certain products and indications that are in development, where safety and effectiveness has not yet been established and which has not yet been approved for sale by certain regulatory agencies. Finally, we are recording today's event, and the replay will be available on our website, investorrelations.medtronic.com, shortly following the conclusion of today's call. With that, let's get started. Frank, if you can turn your camera on, wanna thank you for joining us today. I'm excited to highlight your patient monitoring business, given this is a dynamic and competitive market that attracts a lot of investor interest. Maybe before we dive into the business, maybe you can give the listeners a little bit of an introduction to yourself.
Can you share how long you've been at Medtronic and what roles you've held prior to your current role?
Hey, good morning, Ryan. Thanks. I'm really excited to be here. I've been at Medtronic now for about 18 years, and I actually started in the spine and biologics business. Went to Covidien for a few years and then came back to Medtronic through the acquisition in 2015. By way of background, I'm bioengineer, and I spent the earlier part of life in R&D in the orthopedics and spine spaces. The later parts of my tenure have really been significantly more diverse, you know, having led business transformation to improve operating effectiveness of businesses, clinical and medical affairs to drive global market access and then general management in the respiratory and now patient monitoring spaces.
What's been central to me, having been here nearly two decades, has been our deep focus through the mission on the customers and patients that they serve.
Yeah, thanks for that background, Frank. Maybe to kick us off, with your business, could you start with a broad overview of the patient monitoring space? I know many may think of pulse oximetry when they think of patient monitoring, but it's a broader space, and maybe you can talk about the makeup of your markets and our position in those markets.
Yeah, for sure, Ryan. Fundamentally, the patient monitoring business provides technologies that enable patient safety. More specifically, Medtronic's patient monitoring solutions guide clinicians to predict and prevent serious patient complications from happening. These technologies, they range from pulse oximetry, which as many of you know, is standard of care, and that measures blood oxygen saturation as well as heart rate. We also have a portfolio of specialized monitoring technologies that we refer to as advanced parameters, so you'll hear that term throughout, that measures, for example, cerebral oxygenation, depth of anesthesia and the patient's ventilatory status, also known as patient's ability to breathe. In aggregate, our patient monitoring business represents nearly 50% of what's publicly reported as RGR division revenue in the last fiscal year.
Our brands are trusted by clinicians around the world, and in most of our categories, we're the market leader. Let me give you a couple of words about market size. In terms of that, our total market opportunity is currently around $5 billion and growing in the mid-single digits. Now, you know, keep in mind how we look at markets is through areas that, you know, that there's actionable opportunity for our technologies to enable patient safety, solve real clinical problems and reduce cost of care. This estimation of $5 billion, I would consider conservative, but, for us, it's a practical means of looking at the patient monitoring market as it exists today.
If you look at the players in this space, in pulse ox, we're one of two major players in the U.S. As well as a major player outside the U.S. In the advanced parameters group of technologies, quite simply, we are the market. When we think of some of the drivers for this business, just in general, there's a few. One is there's an increased need for continuous monitoring. Another is that there's untapped opportunities in countries like China and other emerging markets, and this is where we can really lean in with our new Medtronic operating model to partner more closely with the regions and expand our business.
Of course, there's opportunities to meaningfully innovate, you know, both where we play today in pulse ox as well as in advanced parameters, to meet some of the unmet challenges of our customers. Overall, this business is focused on increasing patient safety, caring for the sickest and most vulnerable patients, and providing meaningful innovation that solves clinical needs. Ryan, one last thing. One of the stats that we're most proud of in this business is that we serve 100 million patients around the world each year with our technologies, and that's inspiration for our 4,000+ employees.
Yeah. That's great, Frank, and thanks for laying that foundation for us and outlining the breadth of this business. I know many people on the call today are interested in hearing about the pulse ox business, and I'm wondering if you can dive a little deeper and share some of our strategy in this important product line.
Yeah, I'd be happy to. At its core, pulse oximetry is a non-invasive tool that accurately measures both heart rate and percentage of blood saturated with oxygen. In the U.S., there are two major players in the pulse ox market. It's Medtronic, and it's Masimo. Outside the U.S., there are additional players, but we remain one of the major players. Globally, this market's growing around mid-single digits%. Historically, Nellcor pulse oximetry was the first commercially available pulse ox technology nearly 40 years ago. Today in the patient monitoring business, pulse ox makes up a little over half of our total business.
You know, our pulse ox portfolio consists of hardware, so both standalone Nellcor monitors and boards that are then integrated into multi-parameter monitors that you see in the hospitals, as well as a variety of sensors that meet the diverse needs of our customers' patients. Historically, we've seen growth in this part of our business in line with the market. More recently, we've seen growth above market during COVID, notably, with the shift from spot check to continuous monitoring, the move from reusable to disposable sensors, and then more patients being monitored in the lower acuity areas of the hospital. Just in general, for Nellcor, our design intent is always to be able to provide the highest performing technology to meet the needs of our customers and their patients.
Yeah. Thanks for framing that up, Frank. You know, since there are two major players in pulse ox, how do you say that our Nellcor product line stacks up against Masimo?
Yeah. Starting with share overall, we're seeing Nellcor hold share over the past two years. More recently, we're seeing some strong competitive account conversions, which is a leading indicator of revenue market share. Technically, Nellcor is clinically differentiated a number of ways. Unique element of the Nellcor algorithm is that Nellcor is pulse-based. So without saying too much about the secret sauce itself, it means that our algorithm is trained to lock onto each unique patient's pulse, and so that we can accurately track moment-to-moment changes in oxygenation. This is important because our technology posts accurate readings faster and drives life-saving actions when time is critical.
You know, like when care teams are resuscitating infants in the delivery room or in adults and children in severe cardiogenic septic shock, you know, every second matters in those cases. In fact, you know, this is supported by literature as well, most recently in 2020 in a head-to-head comparison showing the superiority of Nellcor in the newborn population across a number of centers. The conclusions were quicker time to a stable reading, and that's oxygen saturation and heart rate, as well as higher pulse rate accuracy. Like I said before, we're focused on technologies, you know, with the best performance, particularly for the sickest and most vulnerable patients. More often than not, we win during head-to-head clinical evaluations.
Yeah. That's great, Frank. I know your business has also been innovating in the pulse ox space, and some may have missed it. Back in May when we issued a press release announcing FDA clearance for your new pulse ox sensor, the Nellcor OxySoft. I'm wondering if you can share a little bit more color for the audience around what this OxySoft sensor is and why it's such a big deal, and what are some of the advantages of this new technology?
Yeah. Ryan, we're really excited about this. We've developed the new Nellcor OxySoft sensor to address some of the key challenges experienced by hospital administrators and clinicians every day with device performance, with clinical workflow, and patient comfort. The Nellcor OxySoft neonatal sensor is the first SpO2 sensor using silicone adhesive. I've got one right here. It looks like this. It's engineered with a low profile and brighter LEDs on the flexible circuit. This matters because our sensor can provide accurate data for even more challenging situations. For example, low perfusion or thicker tissue. It can be easier for bandwidth-limited clinicians to use due to improved workflow from ease of applying and repositioning the sensor, and then be longer lasting, more comfortable for patients.
Look, the Nellcor OxySoft sensor will be in limited market release in the U.S. and Europe later this summer, and then with full market release in the fall, of course, depending on the individual country regulatory timing. This is just a really good example of Medtronic building on our strengths in patient monitoring technology and then expanding benefits to customers and patients in a meaningful way.
Yeah, that's great insight, Frank. Thanks for opening this, the sensor and showing the audience one of those today. We appreciate that. Now I'm wondering if we go beyond pulse ox. You know, while I get a lot of questions on pulse ox when it comes to your business, I'm hoping that you can explain to those listening that patient monitoring is not just a pulse ox business. You mentioned before that pulse ox is a little bit more than half of your revenue. I was wondering if we could spend some time maybe on the portion that makes up almost the other half of your revenue, the advanced parameters that you talked about earlier. Many may not be as familiar with these product lines.
Can you talk about these lines and our key products here?
Yeah, definitely. I'd be happy to. You know, when I talked about market size before, I referred to the $5 billion market opportunity for our overall business. Pulse oximetry is only around $2 billion of that. Now advanced parameters is actually a bigger opportunity than pulse ox, representing about $3 billion of that market opportunity. Furthermore, the advanced parameter space is growing at high single digits%, which is faster than the pulse ox market. Like I said before, we are the market here. In fact, these, you know, our Medtronic brands have pioneered the development of these advanced parameter technologies and really over time have created the path or paved the way for greater clinical insights for high-risk patients, you know, beyond the five cardinal vital signs that we all know.
For these reasons, advanced parameters is probably an area that investors should take note of when they think of the trajectory and opportunity of our business. Let me walk you through some further details about this, about our advanced parameter technologies. There are actually three main product areas, the Microstream, INVOS, and BIS. Microstream first. This is capnography, and it's used to measure a patient's ability to breathe. This is particularly important in patients who are on opioid pain management. Microstream capnography provides an early alert to opioid-induced respiratory depression during procedures and during a patient's recovery post-procedure. This market, this capnography market, is around $1 billion in market opportunity. That's capnography, Microstream capnography.
There's INVOS, which is technically a near-infrared spectroscopy technology that measures cerebral oxygenation. Where this is important is when the brain desaturates or doesn't get enough oxygen, which can happen in surgeries with high potential blood loss, which are a lot of the cardiac surgeries. Our INVOS system can also be a first alert, responding sooner than traditional vital signs to changes in oxygenation, which can then drive earlier intervention by the clinician to reduce complications like organ failure. The third area is called BIS. This is a technology that processes EEG signals that then measures a patient's level of consciousness.
Why this is important is because so that patients don't receive either too little or too much anesthesia during procedures. Too much anesthesia, in fact, can cause complications like postoperative delirium, which is a very common complication for older patients getting procedures that last more than a couple of hours. Surgeries guided by our BIS monitoring system can help prevent these kinds of complications. In aggregate, the INVOS and BIS markets, conservatively, the way that we look at our markets, which are the actionable opportunities to improve outcomes and reduce cost, represents about $2 billion in market opportunity. Some of you might be interested in understanding the status and where we are with these technologies.
We're confident that we can accelerate adoption of these technologies in this $3 billion market for the advanced parameters. We've been busy even during the pandemic to invest and develop the tools needed to access these markets. For example, in 2020 and 2021, even the height of the pandemic, we actually completed a number of seminal studies. We published a series of studies on how common opioid-induced respiratory depression is, and which patients specifically are most susceptible. This is referred to as the PRODIGY score. We're not gonna go into the details of this, but this is all published. It's in the literature. Then we proceeded to publish about the cost-effectiveness of using Microstream capnography for these patients.
We also drove a number of clinical society guidelines for the use of INVOS and BIS for elder brain health, notably in China, where we feel like we have a large opportunity. Then, you know, recently we also and you might have seen the press release, got 510(k) clearance for Microstream capnography and INVOS regional oximetry, in partnership with GE HealthCare in their new monitoring technology platform, which is one of our many important OEM relationships. Just in general, you know, we've built the muscles and tools to access our global markets for advanced parameters. This I'm very confident in.
Internally, some of you have heard about our new Medtronic operating model. I guess it's not so new, it's about 18 months, which enables better alignment between the global businesses and the regions where we can really generate heightened focus on these technologies.
Yeah, thanks. Thanks, Frank. I think that was very helpful. I think the investment community is going to at least take a look at this business. That was helpful in kind of putting it into context and talking about the size and opportunity here and really explaining what are those things that we're monitoring inside the operating rooms. You mentioned COVID, and I know the financial community is probably interested in how COVID impacted the patient monitoring business and has through the pandemic. Are there any major trends that you're seeing as a result of COVID and its impact on your business? How are you responding to these shifts?
Yeah. First, Ryan, I guess I'd start by saying, look, our reaction in the patient monitoring business to the onset of COVID really put into action one of our new cultural elements that Geoff, our CEO, has been talking about. It's moving with speed and decisiveness. Early in the pandemic, we were able to really quickly implement not just remote monitoring technologies, but also the ability to remotely control technologies away from the patient. Just by speed, you know, for example, we set up 400 beds in 48 hours at the Javits Convention Center in New York City. We really listened to their customers' needs and responded. You've also heard Geoff talk about finding a new gear, you know, and moving quickly.
Look, again, we're trying to play to our strengths with quick, clinically meaningful innovations even now. We continue to listen closely to the challenges and needs of our customers. We're operating more quickly and with more urgency than ever. Some of the trends that are related to patient safety being at the forefront of the minds of institutions and caregivers due to sicker patients and lower acuity areas of care needing more continuous monitoring or labor shortages needing more efficient solutions, improved workflow, and not just more data, because nobody needs a plethora of data, but they actually need better insights to inform clinical decisions. What that means going forward for us is that we closely understand the challenges and needs of our customers.
You know, we do this with our very close partnerships with clinicians and clinical societies. We are focused on developing technologies that ultimately alleviate pain, restore health and extend life as part of our mission. We're focused on exercising our strengths to meaningfully keep patients safe through monitoring technologies, improve outcomes, and many of our technologies result in reducing avoidable costs, which is an important value proposition for this business, and ultimately also to improve clinical workflow and operating efficiencies in hospitals and for clinicians. Our investments, our efforts, and our energy are really focused on meeting these needs and these evolving trends that we see.
Yeah, thanks. It does seem like your business was already well positioned to address those emergent needs that were coming out of the pandemic. It's exciting to hear that your business is continuing to improve patient outcomes and the clinician experience in the environment that we're going through today. Maybe before we turn it over to Q&A, because I know the analysts online here would like to ask you some questions as well. Wondering if you could share some thoughts on the future of the business and anything else that you'd like to leave the audience with before we do the Q&A.
Yeah. Be happy to, Ryan. Look, you know, as I mentioned, we understand the evolving dynamics of the market and specifically, the challenge and challenges and needs of our customers and their patients. I'd love to, but I'm not going to be able to share specific details of our pipeline for competitive reasons, but our investments are absolutely geared towards expanding our total addressable market, you know. We see a couple of, you know, strategic elements to this. One is to meet the patients where they are. That's one. The second is getting the right insights into the right hands at the right time to improve clinical decision-making. The third one is to really ensure that we address the workflow challenges faced by hospitals and clinicians.
You know, all of this continues to be really continues to be the focus of our business. I've talked a bit about the future, but let me just end with a couple of key points. Our pulse ox business is highly competitive and it's differentiated with opportunity for expansion, particularly in lower acuity settings. And as we touched on before as well, we're not just a pulse ox business, and hopefully everybody on the call has a better understanding that you know that advanced parameter monitoring and the fact that it's a diverse and you know broader part of our business, and we have an opportunity to drive adoption of these clinical solutions is a real opportunity as well.
You know, finally, we'll continue to keep hospitals, clinicians and patients at the center of our strategy as always to deliver innovations that really matter. I'm pretty motivated, and you know, I can speak for the 4,000 people in patient monitoring around the world that we're all motivated to lean into our strengths, whether they're patient monitoring or you know, Medtronic operating model to continue to serve our patients and customer needs and deliver strong growth to Medtronic. Look, thanks for the opportunity to participate in this session. Ryan, back to you.
Yeah. Thanks, Frank. Gaining share and accelerating growth is a key focus, as investors know across Medtronic, and it's clear from today's call that your business is really no exception when it comes to those opportunities here at the company. Now I'm sure there's people online that would like to ask you some questions as well. We'll turn to Q&A and open the lines to the sell-side analysts that cover the company. For those analysts, a quick note that we're highlighting our patient monitoring team here today. I ask that you please keep your questions focused on the patient monitoring business as we really wanna keep the questions focused on that today.
For the sell-side analysts that would like to raise or ask a question, please select the Reactions button within Zoom and click Raise Hand. If you're using the mobile app, press the More button and select Raise Hand. Your lines are currently on mute. When called upon, you'll receive a request to unmute your line, which you must respond to before asking a question. We're going to try to get to as many questions as possible. In order to do that, we ask that you limit yourself to just one question and only if necessary, a related follow-up. If you have additional questions, just get back in the queue and raise your hand again. Lastly, please be advised that this Q&A session is being recorded. With that, we'll pause a moment here to assemble the queue. Okay.
First, we'll go to the line of Rick Wise at Stifel. Hi, Rick.
Hi, Ryan. Can you hear me okay?
I can, yes.
Great. Thanks for doing this. Thanks, Frank. Interesting. I guess maybe I'll start off then with one question with sort of a bigger picture question. You highlighted you know the current environment, but just two aspects of it. If you could just offer a little more color. I think COVID seems to have led to you know greater demand and need and desire for monitoring and monitored beds. It you know it's hard to tell where we are with COVID, but where do you see us? You know how do you see that demand, particularly in, as you said, less acute settings? You know, how do you expect the business to perform in the near to medium term after that huge swell of demand over the last couple of years?
If you could offer us some more perspective there, it'd be great. Thank you again.
Yeah, Rick. Rick, it's nice to meet you. Yeah, so a couple of things, and let me know if I'm getting at your question here. Just in general, you know, as we sort of ebb and flow through the pandemic, what we're seeing is our business trends to be tending towards pre-COVID levels, in terms of usage. You were asking about durable trends, I believe. I'd say that what we're also seeing is that while we believe that some of the trends that we saw during COVID for the utilization, for example, of pulse ox sensors, will remain, it will not remain at the level that we saw. There will be continued usage, increased usage of disposable sensors for sure.
Probably not at the level that we saw during and at the height of COVID. There is an increased recognition of the need to monitor. If you think about more patients, sicker patients moving through the hospital and even outside the hospital, the need for monitoring will continue. I think there's a recognition when we talk to our clinician customers, and we're very close to them, like I said, that there's a recognition that more of the right monitoring is required in order to be able to adequately assess these patients, you know, in the lower acuity areas. I think that's a trend that is fairly durable as well.
Thank you very much.
Thanks, Rick. Next, we'll go to the line of Josh Jennings at Cowen. Josh, go ahead.
Hi. Thanks, Ryan. Appreciate you hosting another GM call. Thanks, Frank. Wanted to just ask about two of the opportunities you called out, earlier. The first, just as you said, on the low acuity area. Anything you can share just in terms of or how should we be thinking about the evolution of that opportunity? Is it just hospitals adopting current technologies, or do you think you need to develop a platform that is more suitable or lower cost for lower acuity settings? Also, just wanted to hear about the China opportunity, you know, where maybe more details on where your business sits in China today, and where do you think that could go? Appreciate the time.
Yeah. Yeah, Josh. Let me tackle your first question here. You know, I as it relates to lower acuity monitoring, I refer to pulse ox, but I also believe that You know, a wider array of vital sign monitoring is probably required in order to really be able to catch adverse outcomes for patients who are sicker and recovering in lower acuity settings. That would be kind of the need there. I think the current technology is very important, and I also think that ensuring that we understand the very needs and the potential complications that we could solve for would be important as well. That might entail some different solutions. Your second question, I think, Josh, was about China, was it?
We see China. China's not currently a large part of our business. It's currently single digits in terms of the mix. We see a huge opportunity in China and for a couple of reasons. One is that there's an opportunity for unaccessed care right now, particularly as more infrastructure in the tier two, tier three cities are being created. There's an opportunity there to participate in that. There's also an opportunity, and some people consider this a threat, you know, the local buy local policies. We consider that actually an opportunity for us because without going into too many details, we have partnerships with local manufacturers in China.
These are products that we have on the market, and these allow us to participate more significantly, and it drives part of our growth in the China market as well. We're keenly aware of the trends in China. It is very dynamic, but we feel really excited actually about our opportunity there, and we have quite a good footprint there as a business and as a corporation. Thanks, Josh.
Yeah. Thanks, Josh. Next we'll go to the line of David Rescott at Truist. David, please go ahead.
Can you hear me, Ryan?
We can, yes.
Oh, great. Hey, it's Dave on for Rich Newitter. A quick one, I guess, for Ryan, then one for Frank. I guess just for Ryan, you know, there's obviously been broader discussion around just optimizing the Medtronic portfolio. I guess, given that we're having this call, would it be safe to assume that patient monitoring is a longer term focus for the company? Then, for Frank, just as far as the breakup between the pulse ox and the advanced parameters, just appreciate kind of the sizing and the growth rates in each of those, but how do you drive a greater shift, maybe more toward that larger advanced parameters, higher single digit growth market?
Is that something that can be done, you know, more organically, or should we be thinking about any type of inorganic growth in that segment? Thank you.
Yeah. Thanks, David. I'll take the first one, then turn it over to Frank. I'm not gonna get into specifics today on how a particular business fits into our overall portfolio management process. Obviously we're undergoing that process, and we're evaluating all of our businesses across Medtronic for how they fit into our portfolio and into our overall strategy here as we go forward and asking ourselves are we the right owners for those assets, and how can Medtronic add value to these businesses, and how do these businesses add value to Medtronic, and ultimately drive growth. You know, we've talked about our goals remain the North Star here that Jeff talks about is durable growth, without taking a step back on margins and free cash flow.
you know, I'm just not gonna get into specifics on how specific businesses fit into that overall process. I'll turn over to you, Frank.
Okay. Thanks, Ryan. Dave, I think your question was about the mix between pulse ox and advanced parameters. Like I said before, it makes up about just slightly more than half of our total business, with advanced parameters being the balance of that. Our business size currently is around $1.25 billion-$1.5 billion. We're slightly larger than our closest competitor, or at least their pure play medical technology part of their business. You can do the math.
In terms of growth rates, you know, the way that we size these markets, and we look at these markets, the pulse ox market is growing at mid-single digits, and the advanced parameter is growing at high single digits. I think you had a question about how to access the advanced parameter market data. Is that correct?
Yeah. Yeah, that's right.
Okay, good. Good. Yeah. Look, I said that before that, you know, we have an opportunity, particularly now as hopefully and as we see the pandemic generally decrease in most of the major markets, with access into hospitals, and more, you know, the return of elective procedures, you know. That's one of the drivers. The other driver is what I mentioned before is that we have actually built a market development, market adoption muscle in this business over the years, particularly with our Microstream capnography business. You know, we're sort of using the same understanding of knocking down the barriers. These barriers are clinical evidence. They're advocacy. It's just a clear.
The clarity of clinical and economic value propositions that is supported by data in the literature that shows how specifically these technologies can help customers and the patients, you know. This eventually drives guideline development, which as I said before, we have for all our categories in the advanced parameters as well as the evidence base for them. This is part of how we're gonna knock down those barriers, and we've been doing that, and now, like I said, with more access, we have the opportunity to really accelerate this. David, hope that answers your question.
Yes. Thank you.
Yeah. Thanks, Dave. Next we'll go to the line of Mike Polark at Wolfe Research. Mike, please go ahead.
Hey, good morning. Thanks for taking the question. Can you hear me?
We can.
Thank you. Great. Frank, I'm curious on your perspective on the home and consumers. Your close competitor has for a handful of years talked about, you know, following the patient out of the hospital and into the home. The heart failure discharge is a classic example. The COPD discharge is a classic example. You know, what's the view on that? Is that an opportunity, and what's the development pathway that you might have to go down to execute on that? Maybe if I can sneak in just the corollary is the consumer, and you know, sensors walk this fine line between, you know, medical and consumer marketplaces these days. Wearables is a huge business.
What's the vision, if any, for Medtronic in the more traditional consumer wearables marketplace? Thank you so much.
Yeah. Yeah. I'm happy to comment on that, Mike. You know, I think what I'd say is we're, like I said before, really close to our customers, the clinicians, and understand their challenges and the patient challenges as well. We continue to pursue, you know, valuable and meaningful innovations with clear clinical and economic value, knowing what the customers and the patients need. You know, our major competitor, you know, is moving into the direct-to-consumer space, and that's certainly interesting. It really doesn't have an influence on how we're moving forward ourselves to execute on our strategy.
Like I said, you know, if there's a need there, then we're considering investments in, you know, in both, you know, out as well as, you know, continue to invest inside the hospital. I wish I can share more about our pipeline, but for competitive reasons, I won't. Like I said before, we're very close to the trends and what's needed out there. I guess that's where I should leave it. Thanks, Mike.
Yeah. Thanks, Mike. Next we'll go to the line of Jayson Bedford from Raymond James. Jayson, please go ahead.
Morning, guys. Can you hear me okay?
We can.
Okay. Thanks. Just two questions. The first requires a pretty quick answer, but just how much of the revenue stream is capital versus one-time use sensors? Second, Frank, you've been at Medtronic for 18 years. You've seen a lot over these years. Just wondering on the capital side, how do hospitals act with respect to capital spending in a recessionary environment?
Yeah. Let me answer your first question first, Jayson. Our capital is comprised of significantly less than half of our total revenue, with the rest of it, you know, being consumables. I think that answers your first question, right?
Well, if you have numbers, great. I don't know what significantly less than half is, but.
Yeah. Well, I'm not gonna share the exact mix.
Okay. That's fine.
It's significantly less than half. You know, what we're seeing with capital expenses in hospitals is obviously during COVID, we saw a very large uptick, you know, in capital purchases. We saw that, you know, throughout, you know, the patient monitoring space in general, you know. These capital purchases have really focused on, you know, pulse oximetry and capnography products during the pandemic, you know. As COVID starts to wane, we're starting to see the hardware purchases return to their pre-pandemic levels, and we continue to see strong consumable uptick in growth.
Okay. Frank, do you expect to see a bit of a slowdown if the U.S. economy goes into a recession?
You know, I've got an opinion on that, and let me just offer that and then I'll defer, you know, sort of the macro picture to Ryan. You know, my opinion is that healthcare largely is insulated, you know, from a lot of this. It's a durable sector, and historically in some of the last recessions, majority of med tech companies still were able to grow. You know, I think it's not gonna materially impact the patient monitoring business. We don't see that currently at this point, because like I said, most of our business is recurring revenue in terms of consumables.
I'd add from a total company perspective, and we've shared this in the past that one, total capital as a mix of total Medtronic is a small portion of our revenue, so we don't have high capital exposure. Where we do have capital exposure, it's typically tied to profitable procedures for hospitals. We've seen that that can hold up even in recessions as they are looking to invest in places where they're able to do these procedures, unlike some other areas of broader healthcare where certain capital isn't tied specifically to procedures. Okay. Thanks, Jayson. Next, we'll go to the line of Mike Matson at Needham. Good morning, Mike.
Yeah. Good morning. Thanks for taking my question. You know, I wanna ask about, you know, what Medtronic's doing in kind of the area of hospital automation. You talked about, you know, making data more accessible and, more usable for the clinicians and customers. So maybe you were kind of getting at that, and you just weren't using the phrase hospital automation. I know your primary competitor is developing hardware and software to kind of enable the, you know, collection of data across a lot of electronic devices in the hospital setting and kind of display that, consolidate it, et cetera.
Just the second part would be on a similar question on home monitoring, and I know Mike Polark asked the question on consumer products, but I'm not talking about like consumer necessarily just home monitoring, you know, with a hospital kind of, you know, collecting the data.
Yeah, Mike, thanks for your question. I would love to comment and provide details, so but I'm gonna keep this at sort of a high level, just for by necessity here. Look, hospital automation is a term that our competitor coined, so you know, I'll go with the flow of the question here. The way that we look at hospital automation is actually our remote monitoring technologies. So as I said before, we learned a ton over the last few years in terms of how to move quickly. Our hospital automation, if you will, technologies really focus in two areas.
You know, one is the ability to remotely monitor patients, and so we have those capabilities, as well as the ability to remotely control technologies. This is particularly important, you know, during COVID, early on when there was a necessity to separate caregiver from patient, but also allow them to maintain their standard of care for their patients. That's how we think of hospital automation, if you will. The other way we think about that is with insights. You know, insights start as data. Data become insights, and then that becomes intelligence.
For example, we have features of our products, and we didn't go into this, and one, for example, is the Integrated Pulmonary Index, which is a very easy to understand aggregation of a number of vital signs and physiologic signals that tells a clinician how the patient's doing. There's a score from one to 10, and it's easy, particularly if you're, you know, a nurse on a general care floor, to be able to very quickly assess patient status. That's how we're thinking about automation as well, is moving from data to insights to intelligence that help clinicians better manage their patients. Hope that helps, Mike.
Yeah, it does. Thank you.
Thanks, Mike. For the sell-side analysts that are online, if you'd like to ask a question, I'll remind you to just select the Reactions button within Zoom and click Raise Hand. If you're using a mobile app, you can press the More button and select Raise Hand. We'll go next to the line of Ed Ridley-Day. Good afternoon, Ed.
Good afternoon. Good morning, Ryan, and thank you, Frank. Firstly, just something I've always been interested in is the relationship between yourselves and the sort of multi-parameter companies like GE and Philips. Can you give us some color on how much of your business is that relationship, that OEM supply of boards to those businesses? Related to that, the $5 billion addressable market, presumably that's your addressable market. That does not include sort of first order multi-parameter part of monitoring market.
Yeah. Let me answer your second question first, Ed, 'cause that's freshest on my mind. No, the $5 billion does not include the multi-parameter market. This is essentially our technologies that are sold, our consumables, our sensors that are sold either into our monitors or into the monitors of the multi-parameter monitors, but it's not the actual monitor itself, the multi-parameter monitor. It doesn't include the capital for our partners.
Great.
Hopefully that's clear.
That's clear.
Okay, perfect. Perfect. I think your first question was related to how large what we call the OEM channel is, and I'm sure we all use different words, but these are our multi-parameter partners. It's an important part of our channel for sure, you know, and we have to acknowledge that. I'm not gonna get into details in terms of the actual revenue, but I can tell you that a significant portion of our sensor revenue actually is sold and used, you know, into that channel. Essentially there are more, what we call sockets, that belong in multi-parameter monitors than in our own hardware. It continues to be a strong partnership for us.
In terms of how well we work with our multi-parameter partner companies is, you know, we've worked with some of them for nearly 40 years, and so we have really strong partnerships with them. You saw the press release that we had with GE HealthCare, or you might have last month. Those partnerships exist with other multi-parameter monitor partners as well, so a very important part of our channel.
No, thank you for that. No, that's very helpful. Just a quick follow-up related to sort of the broader question about how your technology and how your business fits into wider continuous monitoring. As you've highlighted, we are moving to continuous monitoring, some exciting technology, indeed including within Medtronic, over at Cardiovascular, and in Neuromodulation. I was just maybe helpful to speak about how much you are working with those businesses because there are clearly synergies and overlaps as we move forward between what you do, on what, say, the cardiac and neuro teams are doing.
Yeah. I think I'll make a general comment about that, and, Ryan, if you wanna jump in afterwards. You know, we have an opportunity at Medtronic to play big, and I think you've probably heard our CEO, Geoff, talk about the concept of playing big. The concept of playing big includes things like sharing our technology between our operating units. It includes sharing channel. You know, I for my business, for patient monitoring, we've started those discussions, but that's also a potential significant upside if we can do that significantly better, you know, as an enterprise because there are clear synergies between patient monitoring and not just the cardiac, the cardiovascular businesses, but other businesses at Medtronic as well. Ryan, I don't know if you wanna add anything to that.
No. I think that's well said. I really don't have more to add beyond that, Frank.
I will watch this space. Thank you.
Thanks, Ed. We've got time. Let's see. We can do one more question here, and I see Mike Polark from Wolfe is back in queue. Mike, please go ahead.
Thank you so much. I think it's a two-parter. Just curious in the mid-single digit pulse ox category growth rate, what's the split of that, you know, big picture, volume versus price? The question really is how does price behave in this market these days, especially on the sensor side. Then the other one, Frank, I heard you call out in your opening remark, recent strong account conversions, which felt like a comment on share shift. I'm curious, you know, what you think is driving that. It feels like a category that, you know, two large players innovating, leading growth space, hasn't struck me as the space with a lot of churn. I'm curious for a little more detail on that comment.
I think, first of all, thanks for your question. Your first question was about price, I believe. I guess the comment I'd make there is, you know, like all med tech companies, we're seeing pricing pressures, particularly in raw materials. Really due to the fact that we have some long-term contracts in this business, so it's a mix of shorter and long-term, it can be challenging to pass these added costs in the short term. Look, that said, we're reviewing contracts as they come up for renewal and exploring options, and we're looking at different areas that we have various levers to pull across our P&L in order to protect our pretty attractive margins in this business. That's my comment on price.
Remind me, your second question was about.
It's about account conversions.
Your comment on
Yeah.
Yeah. That's right. Thank you. I think you asked how that happens. Yeah, you're right. It is a share shift, you know. This is a standard of care technology in the United States. It is a duopoly in other regions. There are other players as well. It often comes down to our ability to demonstrate clinical value, you know, and our ability to partner with the institutions. We have held share over the last couple of years, and we've seen conversions to Medtronic, you know, in a lot of those instances. It really comes down to opportunities that we have for head-to-head comparisons.
Because even though these technologies are good technologies, there are nuances and there are differentiating features of these technologies. Particularly for us, our focus on meeting the needs of the general patient population, but also the needs of really sick and really vulnerable patients. That's sort of how that happens.
Okay. Thanks, Mike. With that, we'll conclude the call today. I wanna thank Frank for his participation in the call today. Thanks to the audience for joining us today. If you have any follow-up questions, please reach out to myself or anyone on my team in Medtronic Investor Relations. As a reminder, a replay of this call will be available on our website, investorrelations.medtronic.com, later today. We hope you'll join us for our next episode, which we're working on. We hope to announce it in the coming months. Wanna thank everyone for your continued support and interest in Medtronic. Have a great weekend, everyone. Goodbye.