I'm Travis Steed, the Bank of America, U.S. medical device analyst, and we're happy to have Geoff Martha, CEO of Medtronic, here this afternoon. So thanks for joining us.
Yeah. Thank you, Travis.
Good. I'll turn it over and maybe I'll open a couple opening remarks and then ask some questions. If there are any questions in the audience, feel free to raise your hand, and we'll get a mic to you.
Sure. Well, first, thanks for having us, and thanks for the engagement today with Medtronic. I'm really excited to be here and talking about the company, 'cause given where we are, where the industry is, but also where Medtronic is right now with. The last couple of years have been, I'd say, challenging between COVID and then supply chain and just the state where our product pipeline was. It's coming, but as we sit here today, a lot of that innovation is in the market, and a lot of these supply chain issues are behind us, and you're starting to see our growth accelerate.
And, really excited to talk about some of the different areas of innovation and kinda how we're seeing and just the state of the market, too.
Great. FY 2024 is kind of a new start. You put out guidance that kinda set the company up for success. The last three or four quarters, you put up accelerating growth every single quarter. I think the question I get the most is, why is now the, the time that, you have the confidence that you can kinda continue this sustained, sustainable kind of mid-single-digit revenue growth going forward?
I'd say there's, I'd say three things and the, one is, it's been a couple of tough years for medtech with, with COVID and supply chain and, even, China VBP. I think those are, particularly COVID and supply chain are largely behind us, and even VBP is almost. I think we've got our arms around it. So the markets are much better, so they're back to pre-COVID, but levels are better. That's one, the market. Then specifically for Medtronic, I believe our underlying fundamentals are better in terms of our supply chain, in particular, global operations and supply chain.
The resiliency, we've been working on this for a couple of years now and brought in a lot of new people, made investments in new technology and automation, and I believe our global operations supply chain under Greg Smith is in a very good spot from a resiliency perspective and actually cost perspective. And that's more, I think, durable and stable. And then finally, the innovation I talked about. Like, a lot, we've been talking about some big pipeline projects for years, like our Hugo soft tissue robot, our diabetes business, TAVR and we got a new TAVR valve, diabetes business turnaround, the Hugo robots in the market. We're now becoming a bigger player in atrial fibrillation. This is a big market.
So there's various innovation that in some cases, you're seeing the impact on Medtronic right now, like TAVR, accelerated TAVR market share gains and diabetes turnaround, and others are, over the next couple of years, you're going to have a multiyear, acceleration from Hugo soft tissue robot and, our Cardiac Ablation Solutions business is where AFib and PFA. These are the three reasons.
Okay, makes sense. And when you think about pricing, though, pricing historically has been negative, a couple of hundred basis points for you guys, and more recently, it's been flattish. But what do you think the potential is for that to stabilize going forward and kind of post an inflationary environment? Because that's an automatic tailwind on your growth as well.
I do think, the pricing increases go beyond an inflationary bump. Because if you think about it, we've been holding, as you pointed out, flat pricing now for 2 years. Beyond inflation, we've also had to offset VBP within there. So China VBP has been much bigger impact than even, inflation from a pricing perspective. As well as like this year, other countries like Japan, having R- zone cuts. I mean, these are things we're offsetting. Normally, in years we have a, like a China VBP or zone, that 200 basis point price decline you talked about is more, we're more than . It just shows the pricing muscle that we've built. I think there's. It'll be durable, and I'm not committing to this yet, but I'd like to see even some upside there. So I do think it's gonna extend beyond inflation.
Great. And then when you think about the supply chain, you touched on this a little bit. You've got two things: the things that you've kinda fixed already, some of the things that needed to be turned around to get back to the level playing field, and then you've got the opportunity going forward. So maybe just start with and talk about bringing in Greg Smith and some of the opportunities, with the things that he's done over the last year to really give you confidence that the supply chain is kinda fixed at this point.
Yeah, it's been since April of 2021, so it's been over 2 years since he came in. He spent, he's from outside the industry, so he spent a couple of months learning the company , the industry and the dynamics. He visited a lot of customers. And then he spent some time building a new team. I mean, we brought in probably 90% of the people below him are from outside the industry, let alone outside the company, from various different industries known for supply chain and operations excellence. And we've invested in new tools, software tools supply planning, demand planning, automation in our factories.
These, these are a number of things he's done and then started to consolidate our supply base. We've had way too many suppliers. So first, it's, it's putting strategy in place. Two, getting the new team, and then three, starting to implement the strategies underneath this new team. Supplier consolidation is probably the biggest one that's helping us with resiliency and cost. We had too many suppliers. Even though Medtronic's a big company, we're small when you spread it out over. We're small to these suppliers when you spread it out. So like take, I used this example in a couple of the meetings here, is take metals. we were buying metals, various types of metals from 150 companies.
Now we're going through a process of bringing that down to 10 or 12 companies, and moving that volume to those 10 or 12. We can get contracts with prioritization for us. We get better pricing. We've got significant savings coming out of that exercise, and that's just one anecdote. we're taking that across all areas of spend. So that's helping us with both resiliency and price. So these are some of the things that we're doing under the supply chain.
How much opportunity is there on the gross margin line? Gross margin's kinda like more mid60s. I think you're hoping to get back to the upper sixties.
When you think about the metals example, is that gonna be how you get to kind of the higher gross margin levels?
I think it's gonna be a combination of things. One is maintaining that mid-single-digit revenue growth, 'cause having a certain amount of revenue growth helps with the margin. But the bigger piece is the pricing, which we talked about, the cost of goods sold, and I. That is our $10 billion line item on our P&L. And we're now just getting. We haven't quantified it exactly, but I'll give you directionally, is 2-3 times the cost of goods sold productivity each year, every year, than we used to get prior to, kind of during even during COVID and prior to COVID. In the short term, some of that's being masked by the inflation sitting on our balance sheet.
We make the products at a higher wage, higher wages, higher cost of materials still 'cause inflation's still sticky. As that comes off our balance sheet, when we sell those products and inflation continues to, kind of moderate, I don't know if it's gonna come all the way back down to it for a while, but it's moderating. As that happens, you'll start to see these cost programs show up in the gross margin lines. We've got to stabilize the gross margin first by getting all this inflation off our books, and FX, and these cost programs will start to show in our balance. So that's a big piece. And then the other piece, pricing, COGS, another piece would be G&A.
We had a fairly significant reduction in G&A last year, and as we move forward, we're gonna be growing that G&A significantly lower than revenue. So all those things together are getting us to the gross margin.
There's a couple things you can do. You can let that pass, pass through to earnings growth and, and margin expansion. You can reinvest it, and probably we'll do some of both. When you think about reinvestment, though, getting your investments more focused and think about how you're prioritizing some of the investments to drive the top-line growth.
Yeah. So what we've done it's a good point. Over the last three years, we've been moving our R&D as a percentage of sales up from in that 6% range up to 8%-ish, and I think we need to be in that 8%-9%, somewhere in that percentage range. So getting the amount of R&D dialed in, and then to your point, we are focusing it much more. The capital allocation is done by a subset of the leadership team. We meet a couple of times a month on this, as we are digging. So the team, it's myself, it's our CFO, Karen, it's our head of strategy, your former colleague, Bob, and it's the people that run our different businesses.
and those are the biggest group there, and we are all allocating at the Medtronic level versus, if you're just in the Neuroscience, you're only talking about Neuroscience. You have a vote on the whole thing. And we're focusing in on the highest growth, what we call secular growth markets, that we have confidence in not only the growth, but the size of the market, AFib, diabetes, Surgical Robotics, Structural Heart, areas like this, is how we're doing it. And you're starting to see the output of that. Take diabetes, I mean, we've increased our level of R&D in there, like, double. And we've also worked with Blackstone to get some third-party money, and now we're doing acquisitions.
in the old world, it would've been, "Hey, wait, that's enough for diabetes. What about me over here in this other business?" Now, we're focusing on. Same thing with AFib. We did multiple acquisitions over the past couple of years, plus a healthy organic investment in R&D. In the past, it's like, "Hey, you do that one acquisition, now it's somebody else's turn." There's no turns.
No.
It's where the growth is, and that's how we're doing, and where we feel we're well positioned, where we have a right to win here, not a right to win, but the capabilities to win and positioning to win. So those are the, that's how we're doing it, and those are the big areas. The one I didn't talk about was Neurovascular, but Structural Heart, Neurovascular, soft tissue robotics, AFib and diabetes.
So what about for M&A? Like, how are you thinking about the M&A environment overall, your appetite for M&A, and the size of M&A that you're willing to do at this point?
The environment, I don't see it being particularly worse or better than historic. I mean, it might, we might be entering a phase here where, with the interest rates being high, that some of these pure play companies that we focus on, smaller, might be more affordable. But, where we're focused is on tuck-ins. So we're focused on tuck-ins, which we define from a dollar size, mid-single-digit billions and below. If you look at the last three meaningful deals we've done over the last two years, they've all been, whether it be diabetes patch pump we just announced, the Affera PFA deal we closed, and the Intersect ENT deal, all were about $1 billion each. So somewhere in that $1 billion-$2 billion, those are the
Could go slightly higher, but those are the that's the type of size. We're focused on businesses that areas that we're in, either dead center, like ENT, where it goes right into our bag, or like a near adjacency. At least we understand you might have to build up some incremental sales people, but the less, the better. It'd be better if it fits in our bag, and we're looking for time to revenue to be short. Either there is already revenue or the like Affera, we closed and like within six months, you started getting regulatory approvals when we launched. So that's how that's, those are the priorities for, for M&A.
No, that's helpful. I feel like we have to talk about China at this point. Pretty topical a lot of things going on between t he economy and anti-corruption and geopolitical. So maybe just kind of overview, kind of the puts and takes on China. Sounds like China is still growing for you guys, despite some of the anti-corruption stuff going on.
Our last quarter, we grew 4%. I mean, that's down quite a bit from pre-COVID, where it was growing, like, 12, 15%. we used to call it an independent growth vector for the company. It was highly profitable, like, one of the top. Let me just talk about where it was, where it is now, and where we think it's going. Where it was, it's a good memory. It was, like, the, one of the highest profit regions in the world for us, and it was growing strong double digits, consistently. Independent growth vector, and it was 8% of our revenue, growing really strong. Then you had COVID, you had VBP, and that, those two things. I'll get to the other point you brought up.
Those two things, part COVID's behind us now. Procedures are back, but pricing is—our business has been, repriced by the end. It's been our fiscal 2021, sorry, 2022, 2023, and into what we're now our fiscal 2024. Those, call it 2.5, three years of our fiscal years. Over that 3 years, about 80-some%, 80% of our portfolio has been repriced through, through VBP. By the end of this year, we think that the balance of that 80 will be done, and this will be behind us. And now we're, we have a, a smaller business, and, and it'll start it'll get better. It'll get the procedures are still strong, and it'll get back to that high single-digit, double-digit growth, we believe. And you're starting to see it.
It was -6% for us last year, -6%. This last quarter was 4%. And we believe, as the VBP anniversaries and the procedures continue to be strong, it'll get back. But one thing to that high single-digit or low double-digit, somewhere in that area of growth. The one thing that's come up that I get questions on: "Okay, what about in the short term, what about this anti-corruption, and in the long term, what about geopolitics?" In the short term, the anti-corruption, we have not seen an impact. Like I said, we, as we said on our Q2 call, procedures have been strong. The growth is picking up. We have three hypotheses why the anti-corruption has not impacted us. One, is that it seems to be more tied to capital equipment.
Two is VBP. I mean, VBP, the volume-based pricing, has made the pricing fixed, contracted, and very transparent, so I think that has an impact. And the third, that I've heard is, it, so far, a lot of the corruption is, the officials that have gotten impacted by corruption has been in smaller hospitals. The question we have is, so that we haven't seen anything as we're sitting here. We haven't seen the impact. Are we, are we protect- are we insulated from this on a perpetual basis, or is this something that will affect us down the road? We'll see, but right now, procedures are strong. And on the ultimate geopolitics, look, I clearly, the U.S. government and the U.S.-China relations are at. I don't know if they're at a low point, but they're lower than the past.
I think we've. I'd like to think we're past the low point, but I don't know. Clearly, there's certain technologies where there's gonna be a kind of de-risking, like, where they, like, high-end, latest technology semiconductors and the equipment that makes those semiconductors. But they're also looking for both governments have told me directly at the various highest levels that they're looking for places to cooperate, and healthcare is one of those places. I don't think the U.S. government's too worried about our technology. We may, we may be, but the U.S. government is open to letting us cooperate with China, and China is very active in trying to draw in a foreign direct investment and match it with their own investment.
So I’m optimistic that healthcare will be a place that we can, the two countries can collaborate on, work together on, at least not separate on. So we’ll see, but that’s what I’m being told, and that’s how we’re thinking about it.
Okay. That's a great overview of China. Skip to the AFib market. You've got Affera, so maybe talk about how Affera in the in Europe is launching, I think it launched over the summer. And then in the U.S., as the pulse ablation market gets those approvals, how you think about cryo and, as a risk factor, and also PFA, your two devices in the U.S. as an opportunity.
So we think. Look, we look at AFib as one of these secular growth markets, where as the population ages, AFib is gonna become more and more of a health need, public health need. And we believe the medical device solution for that, ablation, is becoming better and better and better, especially with PFA. And it is gonna become more of a first-line therapy over the current standard of care, which is medical management. So that's the macro. What we like about PFA is not only is it safe and it's effective, but it's easier, it's faster for physicians, and so that seems to be a good Trifecta.
when it's safe and it's effective for patients, and for physicians, it's something that isn't too complicated and doesn't take too much of their time. So that's why we think this pulsed field ablation is going to be. There's gonna be a transition from other ablation technologies to pulsed field over time and we're very well positioned, and we can get into the two products in a second.
But we get questions on cryoablation, 'cause that's one area that, RF and cryo, this will be a headwind for that. We're the leader in cryo. We don't, this will be a headwind for cryo growth, but we don't see cryo going away. Matter of fact, in the new Boston data that just came out, what's that called? The-
ADVENT.
ADVENT data. I don't want to memorize too much about it
But the data that came out, the cryo showed really well. The efficacy was very good, and the safety was very good, better than the other arm of that study. And I think, we're gonna continue to make cryo available for these physicians, and the physicians that are used to using it, we believe, and they're telling us they're gonna continue to use it. So we don't see it going away. And any headwind will be more than offset by our growth in PFA. There's two segments in PFA: the smaller segment, but faster-growing in anatomical, and then there's the bigger segment, not growing quite as fast, but still growing quite a bit in the point-to-point. And we have PFA catheters across both.
Our organic program, which we believe will be either first to market or tied for first, in the U.S. Our PulseSelect product, which is organic, is in that fast-growing anatomical segment. And then Affera, which we purchased and just launched in Europe, we're in a limited market release, gets to the other point to point, and that also comes with a very updated and an updated and easy-to-use mapping and navigation system. Which we think this will give us the ammunition to take share from, Biosense Webster, J&J's franchise, which has been, a very strong franchise. We think between the mapping and the PFA, this is gonna give us the opportunity to take some share and grow the market.
So, we're really excited. And you asked about Europe and how's the Affera launch going? It's a limited market release, and it's the demand is super high. I've asked my team to just forward me the emails and texts from physicians, and every day I get a couple, and they're all very effusive in their praise about the ease and the effectiveness. This is a company we bought from an Israeli start-up. And so, Israeli start-ups have great innovation, but we've got to tune this for scale manufacturing, and that's what we're doing right now, but the demand is off the charts.
And we feel over the next couple of years, this is gonna be such a big growth driver that you'll feel it at the Medtronic level, too.
No, that's great overview. And skipping to diabetes, like, it's kind of been a tale of two coins where, you've got the OUS international business growing double digits.
Where you've had the products on the market, U.S., different competitive environment, but you didn't, have the warning letter then, that which has now been lifted. So the U.S. business has been declining. When should we expect the U.S. business to really start turning to positive growth and kind of the sustainability of the pipeline and diabetes, and keeping this business kind of accretive to Medtronic corporate average?
Yeah. So first of all, like, when I stepped into my prior job, running the neuroscience businesses, I had a real focus on turning our spine business around, and we've done that. When I stepped in as CEO of Medtronic, one thing that I really would focus on is diabetes, among other things. But getting this diabetes business back to being competitive and driving innovation like we've done was a big one, and we had fallen behind. But I feel like now with the in the automated insulin delivery segment and the smart dosing segment, so you got patches, pumps paired with sensors and algorithms, and then you get pen paired with a sensor and algorithm.
This is our strength, and this is what was driving the tale of two coins here, as you said, two sides of the coin. This is the 780G system with our latest algorithm is available, and our new sensor is available outside of the U.S, and it's driving a ton of growth and share gains. I think we've been growing in the high teens, and we're seeing a much higher, a significantly higher attachment rate of our sensor.
So the way the revenue model works is we sell the pump, but the real revenue impact for the company comes in with the consumables, the sensors, the infusion sets, and that's why you see our OU.S. business growing so well because we've had time to get the base of pumps in there, and now that's throwing off all this revenue. In the U.S., now that we've got the warning letter lifted and we're launching this technology in the U.S., you've seen. I think we in our last call, we talked about a 30% growth in pumps overall and you're seeing, but still the U.S. is shrinking from a revenue perspective. That's because. That'll turn around.
That's because we're now seeding the market with these systems, the razor, the razors, and now we'll be. Once we are able to start selling razor blades, the infusion sets, and the sensors, you'll see the revenue grow. So, it's in the next couple of quarters, you'll see the U.S. start to flip to growth, and we expect our diabetes business went from shrinking to, flat, to growing 3% for a couple of quarters, now last quarter, 6%, and all this is based on the OU.S. business, with nothing in the U.S. to grow, and now we have something in the U.S. to grow. So we think this will get back over the next couple of quarters to a double-digit growth.
You asked about the sustainability. Our algorithm, we keep improving. We're getting 90% time in range for patients out there, and we're, because we're checking on insulin levels every five minutes and adjusting and microdosing, this algorithm will continue to get better, and then we've got our pipeline of sensors and new form factors, new pump, patch, both inorganic that we announced and organic coming. So we feel it's very sustainable, this double-digit growth market of Type 1s. Unfortunately, these GLP-1 ones may help in the Type 2, but, look, every market check we've done with all endocrinologists, unfortunately, for patients, Type 1 is continuing to grow.
AID, automated insulin delivery, is still very under-penetrated for insulin-intensive Type 2s and Type 1s. It's still only one in five patients have this, and with the improvement in the technology that's driving this 90% time in range, you're gonna see that penetration go up.
And you're seeing-
So that's a lot of different. I hope it's not too much, but-
No, no, that's helpful. I-
Passionate about this topic.
Yeah, no, exactly. And the 30% pump growth that you had in the last quarter, you actually have two buckets. You've got new patients coming in, maybe former Medtronic customers, and you've got upgrades from your existing customers. Is there a re you seeing signs of new patients coming back, either new to Medtronic or old Medtronic patients coming in and adopting 780G?
To me, that's the proof point that this is sustainable.
Yeah, we're seeing a lot of patients upgrade that are in existing base. Okay, so that would be, I guess, to be unbiased, that's the lower-hanging fruit.
But we are seeing patients that are new to going from MDI to pumps coming to us versus competition, and we are seeing, patients switch from the competition, for sure.
On the CGM side, when I think that's the next product approval in Europe for Simplera?
When do we expect that?
Any day.
Okay.
That's for the standalones.
Okay.
Then to get that on the system, we, we have to do some clinical work, and in Europe, I believe that clinical work is completed a nd in the U.S., we're done with the adult portion of that clinical work, and we've started enrollment for the peds, the children, and then we'll submit that to the FDA.
So, we believe that sensor is very competitive.
Okay. And then, Hugo, you've got progress in international markets. Maybe talk about where you're placing these in the international, and then kind of the pathway. And, I know you can't give really timing for U.S, but maybe some of the back and forth and how the trial is designed?
Sure
. and where you're at there.
So Hugo, we got CE Mark. Well, we started in non-CE Mark countries, they were pretty small, but then we got CE marked, and that's when things started really becoming real for us. And we've gotten, great feedback on the functionality of the robot. We're seeing the robot do started with urology and gynecology, now has gone to more complicated general surgery, and now it's, it's tackling 85% plus of the type of procedures that are currently done robotically. So they're showing that it's got the capabilities, and we're getting great feedback from surgeons that it's very competitive with the competition.
And now our inflection points are 2 to really see this growth be felt at the Medtronic level, and those two inflection points are number 1, getting our market-leading instruments, transition from just exclusively laparoscopic uses today to laparoscopic and robotic. So think our tri-- our stapling and energy, where we lead, getting those on the robot. And the second inflection point, and these aren't in any order, is the U.S. approval. 'Cause, today, robotic surgery is globally 4% of all procedures, but in the U.S., it's closer to 20. So the U.S. is leading in terms of robotic procedures, so getting on the market in the U.S. is where you'll see the, that, and then having these more instruments.
The U.S. trial, it's interesting, the FDA raised the bar on robotic approvals. They're using this, this. I don't know that it's a new, but it's seldom used, so it's kind of new for us, de novo 510(k) approval process. And they're having us do, they've-- they put a cap on the number of patients we need to do. I think it's 100 and what is that, Ryan? 120 or something like that? 112. So it's that's the cap, but they, they ask us to do a certain amount of procedures and a certain type of procedures, a certain mix, a certain number, and then show the clinical results. So we get that, we pause, we show them the results, and then it's kind of dynamic. do you go forward?
And if you go forward, how? What mix and number? And so, so far, it's been going well, but because of that dynamic where it's not completely. Like, we don't have the exact timing, but things are going well. And I think the FDA would like to see another technology on the market here, and obviously, there's a huge pull for it from customers.
You asked also where we're selling these today in Europe. And this is a little different. A lot of investors are asking me the question, it's a leading question they ask: "Are you going where the competition's not? Are you going where Intuitive is not, like countries where they don't have a big footprint?" And where we're getting the biggest pull is from the large robotic centers today in Europe, and they already have a Da Vinci, or two, or three, or whatever, but they want our platform as well. That's where the biggest pull is coming, and that's where we want to be, 'cause that's where a lot of the cases are and the more experienced robotic surgeons today. And so we're getting, like, feedback, from the highest bar, if you will.
That's probably indicative of the U.S. rollout, do you think? Like, I don't know if you've had conversations with customers in the U.S., but kind of the confidence that you can compete with Intuitive in the U.S. that's a kind of a different market.
Yeah, no. It's a very similar confidence level, and then these surgeons have seen it at these different society meetings, right?
So we demo it. We're allowed to demo the system at different society meetings, and, I think they're surprised. There was a pleasantly surprised in a positive way, just for the avoidance of doubt. I think, people, had seen so many robotic companies try and fail in the past to get to a certain level where surgeons are looking for an alternative today, but they're not gonna take a step back and functionality and capabilities. And I think our system is competitive, and that's the feedback we're getting. And look, Intuitive, they've got a great product.
They've done a great job building out this market, but there is, there is, I think, not just room, but a real demand for an alternative. Our robot has very unique features. It's different. It's got the open console, which has a lot of benefits in terms of training and in terms of physician engagement with the OR and ergonomics. It's got the modularity where, you can wheel in all four arms, one arm, two arms, three arms. It's compatible. It's compatible with our current generator. So that generator can be used in laparoscopic surgery and then used in robotic surgery, so there's efficiencies for the health system.
So there's a lot of unique benefits to it, even though we are going up against a really well-established, and respected, competitor.
Well, that's, that's great. I guess we can move to ask about GLP-1. I wasn't gonna ask, but you brought it up earlier, so.
Yeah. Yeah. So yeah, look, I. First of all, it's an exciting class of drugs, for patients that have real benefits. And I think a lot of those benefits are just being, starting to be understood beyond weight loss. So the questions we get around diabetes and bariatric surgery in particular, and on diabetes, what we keep hearing from endocrinologists and others, that are familiar with the space and understand GLP-1 is that this will not impact our business. We're mainly Type 1s, and unfortunately, these drugs, aren't a cure for Type 1, and, Type 1 is still growing. These autoimmune, causes of Type 1 are unfortunately growing, and this will not affect our business.
And I know there was a New England Journal article that came out, a couple of days ago that caused me to circle back with my team and a number of endocrinologists. They held firm. They had a number of, I think, context around that article that I think wasn't clear. And I've been here at your conference, pretty focused on investor conversations, but I understand there was a call yesterday.
where he actually said, the author of the study said that he doesn't think this will be. You probably know better than me. It's not gonna impact pump sales. Is that what you said?
Yeah, very basically. It's like-
Yeah, one small impact to pump sales, if any at all.
Yeah. So we don't expect it, and that's not based on my optimism, that's based on conversations with physicians.
Yeah. Yeah. I think he said, like, 1% at most or something like that.
Oh, funny.
I, I
Zero.
My team's telling me it's not, there won't be.
Right. And then, I guess, a lot of interest in AI, and you guys, initially, you kind of think about, oh, AI, it's not gonna matter in healthcare, but I think the way you put it makes a lot of sense. It's like AI is not gonna replace doctors, but doctors who use AI will replace doctors who don't.
And so I think it's another area that you've invested in and putting money behind. So maybe just tell everybody what you're doing in AI and kind of some of the early evidence you're seeing of how it's gonna help your business and help healthcare.
So a couple of years ago, I think 3 years ago, even right before I became CEO, I was in the president role. I was given control of the budgeting process for the company, and we held back some R&D just for AI. And then we had, like, a Shark Tank kind of competition around a couple businesses. And we funded some AI projects, and these are now FDA-approved products in spine, in a couple of our cardiac businesses, in our endoscopy business, our GI business for colonoscopies. And we've learned a lot, and we're seeing a tremendous impact. I think this, the intersection of AI with biomedical engineering is pretty powerful.
So for example, take the GI one is, easy. The colonoscopy one's easy to understand, and it's easy to explain, where we've. basically, what we learned is, physicians and the analysis we've done of, after a full day of doing colonoscopies, they start to miss polyps. And our AI is basically just imagine, like, a green box on the screen surrounding everything that's a potential polyp. we're finding that the AI is picking up 50% more polyps than the physicians. They're missing a lot. And we have clinical data to back this up, and the polyps, as are very correlated to cancer. And once you're in there doing the colonoscopy, it's easy to pull them out.
So this is a win-win for everybody. Healthcare systems actually make more money pulling out more polyps. And clearly, it's good for patients, and we're able to sell that as a, as a service on top of the equipment, and we're getting, annual fees, a, a subscription model. And it's better for. So this is the kind of power. Now, it takes, you have to have the data, you have to label that data, and that takes a lot of work and investment to take all the video from these colonoscopies and manually hire, hire folks to our own people or other docs to go in there and identify the polyps and build the algorithm.
Once you get the algorithm built, it builds on itself, but then the FDA asks us to—they have to walk through all this logic with the FDA, then you have to train it. You have to compare it to real-world data. So there's a lot of work and expertise in this, so it's not like a tech company can just fly in and do this. We're building the data science capabilities. We will be partnering with—We are partnering with some tech companies like NVIDIA. We've announced that partnership to accelerate this. But that's kind of what's happening, and it's good for patients, and it's definitely good—it's good for the healthcare system, and we're getting a premium for this. I can go into the other examples, like spine, it's-.
As the spine market is shifting from, kind of implants and rep relationships to a technology business, so robotics, intraoperative imaging, navigation, but on top of all the powered tools, and it's all being integrated. But on top of all this, we've built a surgical planning software that's AI-driven, that factors in, it personalizes the spine surgical plan per patient based on gender, height, weight, bone density, all the clinical literature that goes into this particular, whether it be a complex case for scoliosis or a two-level fusion. What's the literature say you should do, given this diagnosis? And it builds that plan, and then it helps basically gives a driver-assist technology to the surgeon during the procedure.
And so you're gonna take spine, which I think is a more of an art form historically to a science, backed by data. So it's super exciting what's happening. And so now we're looking, we hired a tech, a chief technology officer, and one of the big assignments, and the reason for doing that, is to drive a, an AI platform across the company for us. I do think this is a technology that scales across virtually everything we do.
And a pretty good protective moat around your AI capabilities because of the data that you've had to build yourself.
Yeah. I would say the data is the cap on innovation today. I mean, the more data you have, the more innovative you can be.
Data is the currency of innovation if you ask me going forward.
Okay. And then, Ardian, and it's not been a lot of expectations, post the data, the panel, but just kind of curious, like, what, what you, how are you thinking about the panel and kind of the opportunity, if, if the FDA approves that or not?
Yeah, well, obviously disappointed a bit in the panel. We definitely expected, because we had the one trial, not our pivotal trial, pivotal trial passed.
The off-med trial. The on-med trial was a supplementary trial the FDA asked us to do, and it was a sham control trial. It's very hard to do in hypertension world, and unfortunately, 80% of the enrollment took place during COVID. It wasn't designed for that dynamic where people aren't leaving their home. And that, in our opinion, all right, contributed to the not hitting the endpoint. However, when you pierce through the data, it's very compelling that Ardian is obviously safe, which the panel unanimously said, but also effective, and effective compared to the standard of care. When you pierce through the data, there's a 10 times medical burden difference between the patients in our on-med study that had Ardian and patients that didn't.
That 10x burden, I don't know, is fully understood. I think the FDA is, despite the panel, even though some of the ones that, the vote was tied on risk benefit, we won 13-0 on the safety, but we had a majority on the efficacy, and then the risk efficacy versus risk benefit, vote was where it was split even, and then the chairman split the tie negative. So it was very close, but even on the ones that said no, they said no but or no. Yes, if.
No, but yes, if. So I think the FDA has latitude to approve it if they want. I do think, I really do. I've been working closely with the FDA since becoming CEO. I've got a view, and I really do believe they wanna do what's right for patients, but they're not gonna. They want innovation in the market, but they're not gonna sacrifice safety or efficacy. But they do wanna see innovation in the market. This is a breakthrough device. They have a lot of data. They're investing the time to really look at it. I think they're gonna make an informed decision. We are, we believe that this should be approved, and, uh.
But I don't wanna get ahead of the FDA and handicap that, but I do think they're gonna make an informed decision and look at this in a very deep way, maybe deeper than the panel even had a chance to do.
Good. Great. No, I think we're out of time, but helpful conversation. Thanks, Jeff.
Yeah. Thank you, Travis.