Medtronic plc (MDT) Earnings Call Transcript & Summary

Okay. Hello, everyone. I'm Ryan Weispfenning, Vice President and Head of Investor Relations at Medtronic, and I want to 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. And 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 and our businesses and give you an opportunity to hear from and interact with the presidents and general managers who are weighting these businesses. And for today's event, we're pleased to feature our patient monitoring business, which is part of the medical surgical portfolio. And 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. [Operator Instructions] Next, I want to 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. So with that, let's get started. And Frank, if you can turn your camera on. I want to 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?

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 & Biologics business, went to Covidien for a few years and then came back to Medtronic through the acquisition in 2015. And by way of background and bioengineering, I spent the earlier part of life in R&D in the orthopedics and spine spaces. And the later parts of my tenure have really been significantly more diverse, 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. But what's been central to me having been here nearly 2 decades has been our deep focus through the mission on the customers and patients that they serve.

Yes. Thanks for that background, Frank. And maybe to kick us off with your business. Could you start with a broad overview of the patient monitoring space? And 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.

Yes. For sure, Ryan. So fundamentally, the patient monitoring business provides technologies that enable patient safety. So more specifically, Medtronic's patient monitoring solutions guide clinicians to predict and prevent serious patient complications from happening. So 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. And 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 patients' ability to breathe. So in aggregate, our patient monitoring business represents nearly 50% of what's publicly reported as RGR division revenue in the last fiscal year. So our brands are trusted by clinicians around the world. And in most of our categories, we're the market leader. So let's -- let me give you a couple of words about market size. So in terms of that, our total market opportunity is currently around $5 billion and growing in the mid-single digits. Now keep in mind how we look at markets is through areas that there's actionable opportunity for our technologies to enable patient safety, solve real clinical problems and reduce cost of care. So 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. So if you look at the players in this space in pulse ox, we're one of 2 major players in the U.S. as well as a major player outside the U.S. and 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 is 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. And then, of course, there's opportunities to meaningfully innovate both where we play today in pulse ox as well as in advanced parameters to meet some of the unmatched challenges of our customers. So 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. And 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-plus employees.

Yes, yes. 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.

Yes, I'd be happy to. So at its core, pulse oximetry is a noninvasive tool that accurately measures both heart rate and percentage of blood saturated with oxygen. So in the U.S., there are 2 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 major players. And globally, this market is growing around mid-single digits. So historically, Nellcor pulse oximetry was the first commercially available pulse ox technology nearly 40 years ago. So today, in the patient monitoring business, pulse ox makes up a little over half of our total business. And our pulse ox portfolio consists of hardware. So both stand-alone Nellcor monitors and boards that are then integrated into multiparameter monitors that you see in the hospitals as well as a variety of sensors that meet the diverse needs of our customers' patients. So historically, we've seen growth in this part of our business in line with the market. And 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. And 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.

Thanks for framing that up, Frank. And since there are 2 major players in pulse ox, how do you say that our Nellcor product line stacks up against Masimo?

Yes. So starting with share overall, we're seeing Nellcor hold share over the past 2 years. More recently, we're seeing some strong competitive account conversions, which is a leading indicator of revenue market share. And technically, Nellcor is clinically differentiated in a number of ways. The unique element of the Nellcor algorithm is that Nellcor is pulse-based. So without saying too much about the secret sauce itself, that means that our algorithm is trained to lock on to each unique patient's pulse and so that we can accurately track moment-to-moment changes in oxygenation. And this is important because our technology posts accurate readings faster and drives life-saving actions when time is critical. So like when care teams are resuscitating infants in the delivery room or in adults and in children and in severe cardiogenic septic shock, every second matters in those cases. In fact, this is all -- this is supported by the 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. So -- and the conclusions were quicker time to a stable reading, and that's auction, saturation and heart rate as well as higher pulse rate accuracy. So like I said before, we're focused on technologies with the best performance, particularly for the sickest and most vulnerable patients. And more often than not, we win during head-to-head clinical evaluations.

Yes. That's great, Frank. And 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.

Yes, Ryan, we're really excited about this. So 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. So the Nellcor OxySoft neonatal sensor is the first SpO2 sensor using silicone adhesive, I've got one right here. It looks like this. And it's engineered with low profile and brighter LEDs on the flexible circuit. So -- and 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 sensor and then be longer lasting, more comfortable for patients. So -- so 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. So 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.

That's great insight, Frank. And thanks for opening the sensor and showing the audience one of those today. We appreciate that. No, I'm wondering if we go beyond pulse ox. And 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 the patient monitoring is not just a pulse ox business. And you mentioned before that pulse ox is a little bit more than half of your revenue. And I was wondering if we could spend some time maybe on the force it makes up almost the other half of your revenue, the advanced parameters that you talked about earlier. And many may not be as familiar with these product lines. So can you talk about these lines and our key products here?

Yes. Definitely. I'd be happy to. So when I talked about market size before, I referred to the $5 billion market opportunity for our overall business. So pulse oximetry is only around $2 billion of that. And 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. And like I said before, we are in the market here. So in fact, these -- 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 beyond the 5 cardinal vital signs that we all know. So 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. So let me walk you through some further details about this -- about our advanced perimeter technologies. There are actually 3 main product areas, the Microstream, INVOS and BIS. So Microstream first, this is capnography, and it's used to measure a patient's ability to breathe. And this is particularly important in patients who are on opioid pain management. And Microstream capnography provides an early alert to opioid-induced respiratory depression during procedures and during a patient's recovery post procedure. And this market -- this capnography market is around $1 billion in market opportunity. So that's capnography, Microstream capnography. Then there's INVOS, which is -- technically, it's a near infrared spectroscopy technology that measures cerebral oxygenation. And 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 cardiac surgeries. So 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. And so the third area is called BIS, and this is a technology that processes EEG signals that then measures a patient's level of consciousness. So why this is important is because -- so that patients don't receive either too little or too much anesthesia during procedures. And too much anesthesia in fact can cause complications like postoperative delirium, which is a very common complication for older patients getting procedures that lasts more than a couple of hours. And so surgeries guided by our BIS monitoring system can help prevent these kinds of complications. And so 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 of market opportunity. So some of you might be interested in understanding the status and where we are with these technologies. So we're confident that we can accelerate adoption of these technologies in this $3 billion market for the advanced parameters. And we've been busy even during the pandemic to invest and develop the tools needed to access these markets. So for example, in 2020 and 2021, even in the height of the pandemic, we actually completed a number of seminal studies. We published series studies on how common opioid-induced respiratory depression is. And which patients specifically are most susceptible? And this is referred to as the prodigy score. We're not going to go into the details of this, but this is all published. It's in the literature. And then we proceeded to publish the cost effectiveness of using Microstream capnography for these patients. And so 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. And then recently, we also -- 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. So just in general, we've built the muscles and tools to access our global markets for advanced parameters and this I'm very confident in and 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.

Thanks, Frank. And 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 is impacting your business? And how are you responding to these shifts?

Yes. First, Ryan, I guess I'd start by saying, look, our reaction in the patient monitoring business to the onset of COVID really put in action one of our new cultural elements that Geoff, our CEO, has been talking about. So it's moving with speed and decisiveness. So 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 patients. So just by speed, by -- for example, we set up 400 beds in 48 hours at Javits Convention Center in New York City. So we really listen to their customers' needs and responded. So you've also heard Geoff talk about finding a new gear and moving quickly. So 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. And we're operating more quickly and with more urgency than ever. And some of the trends that are related to patient safety being at the forefront of the minds of its institutions and caregivers due to sicker patients and lower acuity areas of care, needing more continuous monitoring or labor shortages needing more efficient solutions, improve workflow and not just more data because nobody needs a plethora of data, but they actually need better insights to inform clinical decisions. So what that means going forward for us is that we closely understand the challenges and needs of our customers. And 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. And then 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. So our investments, our efforts and our energy are really focused on meeting these needs and these evolving trends that we see.

Yes. Thanks. And it does seem like your business was already well positioned to address those emergent needs that were coming out of the pandemic. And 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. So 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, but 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 go to Q&A.

Yes. I'd be happy to, Ryan. So look, as I mentioned, we understand the evolving dynamics of the market, and specifically the challenges and needs of our customers and their patients. So 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. And we see a couple of strategic elements that this is -- 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. And the third one is to really ensure that we address the workflow challenges faced by hospitals and clinicians. So all of this continues to be -- really continues to be the focus of our business. And I've talked a bit about the future, but I -- let me just end with a couple of key points. So 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 pulse ox business. And hopefully, everybody on the call has a better understanding that advanced parameter monitoring and the fact that it's a diverse and broader part of our business and we have an opportunity to drive adoption of these clinical solutions is a real opportunity as well. And then finally, we'll continue to keep hospitals, clinicians and patients at the center of our strategy as always to deliver innovations that really matters. So I'm pretty motivated, and I can speak for the 4,000 people and patient monitoring around the world that we're all motivated to lean into our strengths, whether they're patient monitoring or the Medtronic operating model, to continue to serve our patients and customer needs and deliver strong growth to Medtronic. So look, thanks for the opportunity to participate in this session. Ryan, back to you.

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.

So now I'm sure there's people online that would like to ask you some questions as well. So we'll turn to Q&A and open the lines to the sell-side analysts that cover the company. And for those analysts, a quick note that we're highlighting our patient monitoring team here today. So I ask that you please keep your questions focused on the patient monitoring business as we really want to keep the questions focused on that today. [Operator Instructions] 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.

Ryan, can you hear me okay?

I can. Yes.

Great. Interesting. I guess maybe I'll start off then with one question with sort of a bigger picture question. You highlighted the current environment, but just 2 aspects that I'd like to -- if you could just offer a little more color. I think COVID seems to have led to greater demand and need and desire for monitoring and monitored beds. As -- hard to tell where we are with COVID, but where do you see us being -- how do you see that demand particularly in, as you said, less acute settings? And 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 some more perspective there, it'd be great.

Yes, Rick. Rick, it's nice to meet you. Yes. So a couple of things and let me know if I'm getting at your question here. So just in general, 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. But you were asking about durable trends, I believe, and 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. So the -- there will be continued usage and 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. And if you think about more patients, sicker patients moving through the hospital and even outside the hospital, the need for monitoring will continue. And I think there's a recognition when we talk to our clinician customer, 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 in the lower acuity areas. So I think that's a trend that is fairly durable as well.

Next, we'll go to the line of Josh Jennings at Cowen. Josh, go ahead.

Appreciate you hosting another GM call. Wanted to just ask about 2 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? And also I just wanted to hear about the China opportunity, where maybe more details on where your business sits in China today? And where do you think that can go? Appreciate the time.

Yes. Yes, Josh. So let me tackle your first question here. As it relates to lower acuity monitoring, I referred to pulse ox, but I also believe that a wider array of vital sign monitoring is probably required in order to really be able to attach adverse outcomes for patients who are sicker and recovering in lower acuity settings. So 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. And that might entail some different solutions. So your second question, I think, Josh, was about China, was it? So we see China -- China is not currently a large part of our business. It's currently single digits in terms of the mix, but 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 2, Tier 3 cities are being created. So there's an opportunity there to participate in that. There's also an opportunity, and some people consider this a threat, the local -- the bio local policies, but we consider that actually an opportunity for us because, without going into too many details, we have partnerships with local manufacturers in China, and 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. So 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.

Next, we'll go to the line of David Rescott, Truist.

Can you hear me, Ryan?

We can, yes.

It's Dave on for Rich Newitter. A quick one, I guess, for Ryan and then one for Frank. I guess just for Ryan, there's obviously been a broader discussion around just optimizing the Medtronic portfolio, I guess, given that we're having this call, I guess. Is that -- would it safe to assume that patient monitoring is a longer-term focus for the company? And then for Frank. Just as far as the breakup between the pulse ox and the advanced parameters, appreciate kind of the sizing and the growth rate 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 more organically? Or should we be thinking about any type of inorganic growth in that segment?

Yes. Thanks, David. I'll take the first one and then turn it over to Frank. So I'm not going to 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? We've talked about our goals remain the North Star here that Geoff talks about as durable growth without taking a step back on margins and free cash flow. But I'm not just not going to get into specifics on how specific businesses fit into that overall process. I'll turn it over to you, Frank.

Thanks, Ryan. So Dave, I think your question was about the mix between pulse ox and advanced parameters. So like I said before, pulse ox is comprised of and makes up about just slightly more than half of our total business, with advanced parameters being the balance of that. And so our business size currently is around -- it's between $1.25 billion to $1.5 billion. We're slightly larger than our closest competitor or at least their pure-play -- part of pure-play medical technology part of their business. So you can do the math. In terms of growth rates, 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 parameters is growing at high single digits. And I think you had a question about how to access the advanced parameter market, Dave, is that correct?

Yes. Yes, that's right.

Okay. Good. Yes. So look, I said that before that 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 -- the return of elective procedures. So 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. And we're sort of using the same understanding of knocking down the barriers. So these barriers are clinical evidence, their advocacy. And it's just a clear -- the clarity of clinical and economic value propositions that have supported by data in the literature that shows how specifically these technologies can help customers and the patients. And this eventually drives guideline development, which, as I said before, we have for all our categories and the advanced parameters as well as the evidence space for them. So this is part of how we're going to 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. Dave, I hope that answers your question.

Next, we'll go to the line of Mike Polark at Wolfe Research.

Can you hear me?

We can.

Great. So Frank, I'm curious on your perspective on the home and consumer. So your close competitor has, for a handful of years, talked about 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. So 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? And maybe if I can sneak in just -- the corollary is the consumer. And so sensors walk this fine line between medical and consumer marketplaces. These days, wearables is a huge business. What is the -- what's the vision, if any, for Medtronic in the more traditional consumer wearables marketplace?

Yes, yes. I'm happy to comment on that, Mike. So I think what I'd say is we're -- like I said before, we're really close to our customers, the clinicians and understand their challenges and the patient challenges as well. So we continue to pursue valuable and meaningful innovations with clear clinical and economic value, knowing what the customers and the patients need. Our major competitor 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. But like I said, if there's a need there, then that we're considering investments in both out as well as continue to invest inside hospitals. So I wish I can share more about our pipeline, but for competitive reasons, I won't. But like I said before, we're very close to the trends and what's needed out there. So I guess that's where I should leave it. Thanks, Mike.

Next, we'll go to the line of Jayson Bedford from Raymond James.

Can you hear me okay?

We can.

Okay. Just 2 questions. The first requires a pretty quick answer. But just how much of the revenue stream is this capital versus onetime new sensors? And then 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?

Yes. So 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 being consumables. So I think that answers your first question, right?

If you have numbers, great. I don't know what significantly less than half is, but.

Yes. Yes. Well, yes, I'm not going to share the exact -- yes, it's significantly less than half. And what we're seeing with capital expenses and hospitals is obviously, during COVID, we saw a very, very large uptick in capital purchases. And we saw that throughout the patient monitoring space in general. And these capital purchases are really focused on pulse oximetry and capnography products during the pandemic. And as COVID starts to wane, and we're starting to see the hardware purchases return to their prepandemic 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?

Yes. I've got an opinion on that, and let me just offer that, and then I'll defer sort of the macro picture to Ryan. So my opinion is that health care largely is insulated 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. So I think we can -- it's not going to materially impact the patient monitoring business, and we don't see that currently at this point because, like I said, we -- 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 -- well, one, total capital as a mix of total Medtronic is a small portion of our revenue, so we don't have high capital exposure. But where we do have capital exposure, it's typically tied to profitable procedures for hospitals. And 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 health care where certain capital isn't tied to -- specifically to procedures. Okay. Thanks, Jayson. Next, we'll go to the line of Mike Matson at Needham.

I want to ask about what Medtronic is doing in kind of the area of hospital automation. You talked about making data more accessible and more usable for the clinicians and customers, but -- so maybe you're kind of getting at that, and you just weren't using the phrase hospital automation, but I know your primary competitor is developing hardware and software to kind of enable the collection of data across a lot of electronic devices in the hospital setting and kind of display that, consolidated, et cetera? And then just 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 with the hospital kind of collecting the data.

Yes. Mike, thanks for your question. I would love to comment and provide details. So I'm going to keep this at sort of a high level just for -- by necessity here. But look, hospital automation is a term that our competitor coined. So I'll go with the flow of the question here. The way that we look at hospital automation is actually our remote monitoring technologies. And so as I said before, we've learned a ton over the last few years in terms of how to move quickly. And our hospital automation, if you will, technology is really focused in 2 areas. One is the ability to remotely monitor patients. And so we have those capabilities as well, as well as the ability to only control technologies. And this is particularly important during COVID early on when there was a necessity to separate caregiver from patients, but also allow them to maintain their standard of care for their patients. And so that's how we think of hospital automation, if you will. The other way we think about that is with insights. And insights start as data. Data become insights, and then that becomes intelligence. And so 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 the number of vital signs and physiologic signals that tells a clinician how the patient is doing. And so there's a score from 1 to 10. And it's easy, particularly if you're a nurse on a general care floor, to be able to very quickly assess patient status. So 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. So I hope that helps, Mike.

[Operator Instructions] So we'll go next to the line of Ed Ridley-Day.

So firstly, just -- I've always been interested in is the relationship between yourselves and the sort of the multiparameter companies like GE and Philips. And can you give us some color on how much of your business is that relationship, the OEM supply of boards, to those businesses? And related to that, the $5 billion address market, presuming that's your addressable market, so that does not include sort of first order multiparameter part of monetary market?

Yes. Let me answer your second question first, Ed, that's freshest on my mind. So the $5 billion does not include the multiparameter market. This is essentially our technologies that are sold -- our consumables or sensors that are sold either into our monitors or into the monitors of the multiparameter monitors, but it's not the actual monitor itself, the multiparameter monitor. So it doesn't include the capital for our partners. So hopefully, that's clear.

That's clear.

Okay. Perfect. Perfect. So 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 multiparameter partners. So it's an important part of our channel, for sure, and we have to acknowledge that. And I'm not going to 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 into that channel. So essentially, there are more what we call sockets that are -- that belong in multiparameter monitors than in our own hardware. So it becomes -- it continues to be a strong partnership for us. And in terms of how well we work with our multiparameter partner companies is we've worked with some of them for nearly 40 years. And so we have really strong partnerships with them, and you saw the press release that we had with GE Healthcare or you might have last month. And those partnerships exist with other multiparameter monitor partners as well. So a very important part of our channel.

No, that's very helpful. And 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 neuromod. And 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, like I say, the cardiac and neuro teams are doing.

Yes. I think I'll make a general comment about that. And Ryan, if you want to jump in afterwards. We have an opportunity at Medtronic to play big, and I think you've probably heard our CEO, Geoff, talk about the concept of paying big. And the concept playing big is -- includes things like sharing our technology between our operating units. It includes sharing channel. And so 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 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. So Ryan, I don't know if you want to add anything to that.

No. I think that's well said. I really don't have more to add beyond that, Frank.

We'll watch this space.

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.

I think it's a 2-parter. Just curious in the mid-single-digit pulse ox category growth rate. What's the split of that big picture volume versus price? The question really is, how does price behave in this market these days, especially on the sensor side? And 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, and I'm curious what you think is driving that. It feels like a category that 2 large players, innovating. Leading growth space hasn't struck me as the space with a lot of churn. So I'm curious for a little more detail on that comment.

Yes. Yes. So I think -- first of all, thanks for your question. And your first question was about price, I believe. So I guess the comment I'd make there is, like all med tech companies, we're seeing pricing pressures, particularly in raw materials. And so really, due to the fact that we have some long-term contract in this business. So it's a mix of shorter and long term. It can be challenging in the past these added costs in the short term. But look, that said, we're looking at -- 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. So that's my comment on price. And then the -- Ryan, your second question was about...

It's about account conversion.

Yes. Yes. That's right. That's right. Yes. Thank you. Thank you. So I think you asked how that happens. Yes, you're right, it is a share shift. This is a standard of care technology, in the United States is a duopoly. In other regions, there are other players as well. But it often comes down to our ability to demonstrate clinical value and our ability to partner with the institutions. And so we have seen a -- we've held share over the last couple of years, and we've seen conversions to Medtronic in a lot of those instances, and 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 a general patient population, but also the needs of really sick and really vulnerable patients. So that's sort of how that happens.

So with that, we'll conclude the call today. I want to thank Frank for his participation in the call today and 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. And 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. And I want to thank everyone for your continued support and interest in Medtronic. Have a great weekend, everyone. Goodbye.