‘We ended up writing off a lot of money but no one regrets it’

With everyone looking for ventilators as Covid hit, Medtronic tore up the corporate playbook

It’s easy to forget. As countries battle a fourth wave of Covid-19, all the clamour is for booster jabs, the rights and wrongs of vaccination for children, antigen tests and Covid tablets.

But less than 20 months ago as the first wave of the pandemic was spreading across Europe and the United States, there were no vaccines. And as people fell critically ill, the clarion call was for ventilators.

Geoff Martha remembers it well. A month shy of taking over the reins formally at Medtronic, the world's largest medical device maker, Martha was catching up on some exercise in his basement when his phone started ringing. Among the callers was then taoiseach Leo Varadkar, sandwiched between the White House and various frantic governors.

They all wanted the same thing: ventilators to try to keep the patients overflowing intensive care units in hospitals alive. They wanted them now and they were asking for numbers that the industry simply could not supply.

It was great to hear how staff rallied around as our ventilator production went up five times

“I still haven’t figured how everyone got my number,” Martha said recently, “I guess when you’re the Government, that’s the sort of thing you can do.”

Ventilators were a very small part of Medtronic's' business, accounting for barely 1 per cent of sales. But it is a big player in the sector, supplying one-third of the US market and close to that worldwide. And all of that comes from a plant in Galway city.

“It was a sleepy industry,” says Martha. “It didn’t grow a lot: ventilators last a long time – 10 years in a hospital setting. And there hadn’t been a lot of innovation there.”

We’re sitting in the company’s Dublin headquarters, backing onto the Eye and Ear Hospital, where Martha has managed a half-hour pit stop in a frenetic day.

The modest suite of offices on the first floor of a modern building belies the scale of Medtronic which is Irish domiciled thanks to the tax-driven acquisition of rival Covidien – another Irish-headquartered, US-based business – in 2015 through a contentious process known as corporate inversion. It was, and remains, the largest deal ever done in the medical device sector.

Employing 90,000 people across 150 countries worldwide, including over 4,000 in Ireland, where the company has had a presence for more than 40 years, Martha concedes that the friendly tax regime – even after the current OECD reforms – "definitely helps and enables more things. But when we are looking, the tax credits do help but they are meaningless if you do not have the talent . The quality of the innovation trumps everything."

“The tax credits and things like that do make it easier as we are looking at developing a new business. We have got infrastructure here, we have talent here. We’ve also have in other places but the tax credits might be the thing that flips it over, makes it more economical to come here.”

He’s in town to accept an outstanding achievement from the Ireland-US Council on behalf of the company and the efforts of its people in the early days of the Covid crisis.

Earlier in the morning he had been down in Galway, visiting the Mervue ventilator plant. He'd had dinner with HSE executives the night before as well as dropping on Medtronic's other Galway facility, an R&D plant in Parkmore and attending an event in NUI Galway to announce the company's investment of €270,000 in a number of local community initiatives – a thank you for the city that had worked 24/7 to ramp up ventilator production in those early pandemic days.

Then it was up to Dublin for the award presentation, passing the company's specialised manufacturing and sterilisation unit in Athlone, and taking in meetings with EU Commission and Irish Government figures.

Covid crisis

There’s little rest for a global CEO on tour. But Martha was relaxed. He’d particularly enjoyed meeting the staff on the floor at the Mervue ventilator plant and hearing their personal stories from those manic days back in the middle of 2020.

The plant, which had been making 200 ventilators a week in March, had ramped that up fivefold over the next three months to churn out 1,000 a week in June. Staff numbers doubled. Many were Medtronic staffers reallocated from other plants but there was also a lot of hiring and training required.

“It was great to hear how they rallied around as our ventilator production went up five times,” Martha says. “Hearing all the stories and meeting all the people, that was good.”

But even at 1,000 units a week, Medtronic could not keep up with demand. Relatively low tech they might have been but the ventilators required 1,500 parts, many of them bespoke, from more than 100 suppliers in 14 countries. Martha and his executive team took the decision to tear up the standard corporate playbook and outsource for one of their ventilators, putting the detailed plans online.

The response was immediate and beyond anything they had expected. “We had a particular supply chain squeeze on a critical component called a proportional solenoid valve,” Martha recalls. It’s a complex part that controls the flow of air and oxygen inside a ventilator.

An engineer at Elon Musk's Space X rang one of the team he knew at Medtronic to explain that they might be able to help: spacecraft life support systems used the same valve. A call was arranged with Elon Musk and he offered to convert part of his rocket manufacturing facility in California to churning out the high spec parts for Medtronic.

Embattled hospitals were also asking for new features on the ventilators. “There weren’t enough nurses to keep an eye on all the patients. They needed a way to monitor the patients remotely and be able to change the settings remotely from the nurse station.”

Frontline healthcare workers were also focused on trying to avoid infection from a virus they knew little about at the time. The ability to remotely adjust the ventilators was safer for them.

"We did not have the computing power to do that," Martha recalls. The answer came from Intel. Within two weeks, staff there had redesigned the ventilator chips to deliver the required functionality.

The company also needed more physical space for manufacture but it needed to meet certain specifications – for instance, a certain type of flooring that basically did not allow electronic current to pass through it. "[US electronics group] Celestica had a site right near us which met those standards. They had that manufacturing capacity so we moved right in and took over their space."

Things are quieter again in Galway but they have not yet returned to normal production levels.

“And the plant is thinking differently now, a little more aggressive. They are taking on other Medtronic products,” Martha says. “They have built up a reputation now within the company and outside the company.”

That includes the next generation of one of the company’s products for atrial fibrillation, which is a huge growth market worldwide and for Medtronic, Martha says.

Baptism of fire

Covid was a baptism of fire for Martha. “In many ways, the pandemic accelerated my burn-in period. You had to make decisions quickly and you could not be indecisive, you could not walk gingerly. It was exciting, intimidating, all those things,” he says.

Also, in the background was the steady counsel of his predecessor Omar Ishrak. The two men knew each other well. Ishrak had hired Martha during his time at GE Healthcare when Martha had been made redundant at GE Capital. When Israk moved to Medtronic, he brought Martha with him.

“He was there to support me behind the scenes. He was very active. He wanted me to emerge as the face of the company but, behind the scenes, he was very helpful and the leadership team around me is very experienced and so I felt a lot of support.”

He also places great store in Medtronic mission statement – a set of guiding principles written back in 1960 covering issues like putting patients first, valuing the personal worth and development of the company’s employees, and the need to be good corporate citizen.

“So, for us to make the decision to open source the ventilator, I felt I had a roadmap in this mission and it gave me the conviction and the courage to make decisions like this,” Martha says. “As crazy as it sounds, I felt a lot of support.

“But you needed it ... You basically had to say no to some powerful people. We make ventilators for the world and deciding one human life versus the other, that’s not a role we want to play. So we developed a needs-based allocation system for the medical supplies that were in short supply.

“It could not be based on who would pay the most. We lowered all our prices globally to the same rate. The mission of our company made that a clear choice. There was no thinking about what happens after the pandemic is over.”

Of course, when it was over, at least for Medtronic, there was a reckoning.

Martha says the company was fortunate going into the crisis and even now to have a really healthy balance sheet. Medtronic reported sales for the fiscal year to the end of April last of $30.117 billion (€26.67 billion), up 4 per cent, with net profit of $3.6 billion.

“Yes, if the pandemic had not happened, we would have several billion more euro on our balance sheet, right. It drained the cash reserves we had. But we answered the bell on various healthcare needs and we bought as much inventory component parts as we could, thinking we do not want to run out.

“We ended up writing off a lot of money but no one regrets it. I am proud of what we did. We took the financial hit but our reputation with governments around the world and, more important, with employees and prospective employees went way up.”

Covid, for Medtronic, is now in the rear view window, Martha has said. His priority is how to capitalise on technological advancement at a time when, he says, the company has built up its strongest ever pipeline.

Miniturisation, robotics, harnessing artificial intelligence and data, and advances in battery technology are the focus. As just one example, Martha carries around with him all the time a colonoscopy “pill”. Avoiding the uncomfortable and medical resource-greedy traditional procedure, swallowing this admittedly large pill instead allows images to be sent back to doctors without the need for anaesthesia or hospital time – and it is, he says, up to 20 per cent more accurate.

Pandemic impact

Talk of the company’s performance and the choices it made brings the conversation round to the impact of the pandemic on the corporate world more generally.

“A lot of companies understand that their role, their corporate responsibility, needs to much higher than it has been historically. There needs to be more of a balance between the economic prosperity of the companies and social responsibility. I think big multinational companies have a lot to prove still in terms of whether we have that balance right.

“How we worked together during the pandemic, competitors sharing ideas ... I got calls from our competitors, these are arch rivals like and they were calling and saying you want to use this factory and how can we help. I think companies have got religion around social responsibility.

“Again it is not perfect, I don’t want to paint a picture that it is a fairy tale here but I think it has been a big change and I think it is going to continue to evolve in a positive way.

“And it will be good for business, too, not just for society, because the best people want to work at these companies. The labour force has choices. We are a tech company and tech talent is in high demand and they want to work for a company that offers them not just a career but that stands for something.”

Name: Geoff Martha

Age: 52

Position: Chief executive, Medtronic

Family: Married to Stephanie, they have two children

Something you might expect: As chief integration officer at the time, he was instrumental in the acquisition of Covidien, the biggest deal in medical device history.

Something that might surprise: His father and uncle both played American football professionally in the NFL while his first ambition was to be a professional ice hockey player.