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Medtronic

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Black and white photograph of Medtronic Founder Earl Bakken and Medtronic CEO Winston Wallin with an early pacemaker model, 1986. Photographed by Jeffrey Grosscup.

Medtronic Founder Earl Bakken and Medtronic CEO Winston Wallin with an early pacemaker model, 1986. Photographed by Jeffrey Grosscup.

The Medtronic medical device company was founded in 1949 by Earl Bakken and Palmer Hermundslie. From its beginnings in a converted garage, it has grown into a multi-billion-dollar enterprise and one of Minnesota’s leading businesses.

In the late 1940s, electrical engineer Earl Bakken saw an opportunity for starting a business that specialized in repairing medical equipment. He discussed this idea with his brother-in-law, Palmer Hermundslie, and in 1949 they founded Medtronic.

Medtronic’s first office was a converted boxcar garage in Minneapolis. In their first month, Bakken and Hermundslie made eight dollars for repairing one centrifuge. To make more money, they took side jobs selling medical equipment for the Sanborn Company. They also started taking contracts to build custom-ordered devices for local physicians.

In 1954, Bakken began to assist with equipment during surgeries performed at the University of Minnesota. There, he met open-heart surgery pioneer Dr. C. Walton Lillehei, who in 1957 asked Bakken to create a portable, battery-powered pacemaker. Bakken created a prototype by adapting a metronome circuit from Popular Electronics and altering its voltage to match the human heart’s. After this prototype was tested, Lillehei began using Medtronic pacemakers the next day. The devices became a key part of Medtronic’s business.

After it introduced a line of new, implantable pacemakers, Medtronic saw its sales grow rapidly—from $180,000 in 1960 to $518,000 in 1962. The company moved into a fifteen-thousand-square-foot building and increased its staff to fifty-four people. It also expanded its product line by adding a new heart monitor and other devices.

This rapid expansion, however, caused problems. New devices were expensive to research and manufacture. Bakken saw himself as an engineer, not a businessman. He was more interested in making useful devices than in profit. Sales had increased, but Medtronic still nearly went bankrupt.

In response, Bakken shifted his attention to Medtronic’s business side. He reduced the product line, attempted to limit costs, and focused the company on pacemakers and other profitable products. The move was a success, and Medtronic grew throughout the late 1960s. By 1968, it brought in almost 10 million dollars in sales per year. The company’s pacemakers made up 65 percent of the worldwide market by 1970.

Bakken’s approach up to this point had been to offer simple and reliable products. He believed doctors were wary of innovation and preferred medical devices they knew they could trust. This trust suffered a blow in 1975 when some of Medtronic’s Xytron-model pacemakers began to short out early. These pacemakers featured older mercury batteries rather than the latest lithium ones, which promised longer battery life. Although the several hundred Xytrons that failed did not cause any deaths, they seriously damaged Medtronic’s reputation.

By 1980, Medtronic’s earnings were on the decline. The company needed to develop more innovative and diverse products to restore their reputation and compete with newer firms. They launched a line of programmable pacemakers but were no longer the technology leaders. When Winston Wallin took over as CEO in 1985, he doubled the company’s research spending to push innovation.

As Medtronic entered the 1990s, acquisition became the key strategy for growth. By this time, it had acquired Johnson & Johnson’s cardiovascular division, as well as several European pacemaker producers. In 1998, Medtronic began the process of buying in succession five companies that manufactured leading medical products.

In 1999, fifty years after Medtronic’s founding, the company was serving customers in more than 120 countries. It projected sales of $5 billion for the next year, coming from not only their heart-rhythm business but from the neuro-, vascular-, and cardiac-surgery markets as well.

In the twenty-first century, Medtronic faced criticism from the animal rights group PETA for testing its medical devices on animals. After talks with PETA in 2005, 2008, and 2010, Medtronic agreed to improve the lives of its test animals and to avoid unnecessary testing when possible.

Medtronic continued its aggressive acquisition plan in the 2010s. In January of 2015, it closed a $49.9 billion deal to acquire the Irish hospital supplier Covidien PLC. This merger renamed the company Medtronic PLC and moved its corporate headquarters to Ireland for tax purposes. Minnesota was no longer its official home, but Medtronic kept its operational headquarters in Minneapolis.

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About Medtronic. Medtronic, Inc.
http://www.medtronic.com/us-en/about-3.html

Bakken, Earl. One Man’s Full Life. Minneapolis: Medtronic, 1999.
http://www.earlbakken.com/content/publications/One.Mans.Full.Life.Book.pdf

Carlson, Joe. “Medtronic's Buying Spree Continues With Calif. Company.” Star Tribune, June 22, 2015.
http://www.startribune.com/medtronic-buys-california-s-aptus-endosystems-a-maker-of-device-to-treat-aneurysms/309176741/

George, Stephen. Enterprising Minnesotans: 150 Years of Business Pioneers. Minneapolis: University of Minnesota Press, 2003.

Interview with Earl Bakken and C. Walton Lillehei
Pioneers of the Medical Device Industry in Minnesota Oral History Project, 1995–2001
http://collections.mnhs.org/cms/display.php?irn=10445338
Description: Interviews with Earl H. Bakken, cofounder of Medtronic, and open heart surgery pioneer, C. Walton Lillehei.

Interviews with Earl Bakken
Pioneers of the Medical Device Industry in Minnesota Oral History Project, 1995–2001
Oral History Collection, Minnesota Historical Society, St. Paul
http://www.mnhs.org/collections/medTech/
Description: Interviews with Earl H. Bakken, cofounder of Medtronic.

Kirk, Jeffrey. Machines in Our Hearts: The Cardiac Pacemaker, the Implantable Defibrillator, and American Health Care. Baltimore: Johns Hopkins University Press, 2001.

Medtronic PLC. “Medtronic Completes Acquisition of Covidien.” Press Release, January 26, 2015.
http://newsroom.medtronic.com/phoenix.zhtml?c=251324&p=irol-newsArticle&ID=2010595

Moore, Janet. “Medtronic, PETA Agree on Care of Test Animals.” Star Tribune, July 9, 2008.
http://www.startribune.com/medtronic-peta-agree-on-care-of-test-animals/24094604/

Pine, Caroline, and Susan Mundale. Self-Made: The Stories of 12 Minnesota Entrepreneurs. Minneapolis: Dorn Books, 1982.

Sarvestani, Arezu. “Animals in Labs: PETA’s Long History with the Medtech Industry.” Mass Device, May 19, 2014.
http://www.massdevice.com/animals-labs-petas-long-history-with-medtech-industry/3/

Related Images

Black and white photograph of Medtronic Founder Earl Bakken and Medtronic CEO Winston Wallin with an early pacemaker model, 1986. Photographed by Jeffrey Grosscup.
Black and white photograph of Medtronic Founder Earl Bakken and Medtronic CEO Winston Wallin with an early pacemaker model, 1986. Photographed by Jeffrey Grosscup.
Color image of Medtronic’s headquarters in Fridley. Photographed on September 7, 2012.
Color image of Medtronic’s headquarters in Fridley. Photographed on September 7, 2012.
Color image of a Lifepak 12 defibrillator manufactured by Medtronic. Photographed on June 12, 2006.
Color image of a Lifepak 12 defibrillator manufactured by Medtronic. Photographed on June 12, 2006.

Turning Point

In 1960, Medtronic receives exclusive rights to manufacture and sell implantable pacemakers based on the design of Wilson Greatbatch and Dr. William Chardack. These implantable pacemakers become Medtronic’s most important product and lead to its rapid growth into a leading biotechnology company.

Chronology

1949

Bakken approaches his brother-in-law Palmer Hermundslie with the idea of starting a new business specializing in repairing medical equipment, which they name Medtronic (from “medical” and “electronic”).

1957

In January, Bakken and Dr. C. Walton Lillehei begin using an improved externally powered pacemaker, adapted from a Grass physiological stimulator, on a young patient with post-surgical heart block.

1958

Medtronic’s first pacemaker (the 5800) becomes commercially available and begins to be used in post-surgical patients as well as elderly patients with chronic heart block.

1960

In October, Medtronic signs a ten-year contract for exclusive rights to produce and market Greatbatch and Chardack’s implantable pacemaker. Production begins one month later.

1962

At the urging of the board and new financiers, Bakken cuts down on Medtronic’s staff and product line and creates the list of objectives that becomes Medtronic’s official mission statement.

1967

Earl Bakken steps down as president of Medtronic but remains as chairman of the board until his retirement in 1989.

1972

Four former Medtronic employees (Manny Villafana, Anthony Adducci, Arthur Schwalm, and James Baustert) form Cardiac Pacemakers, Inc. produce a new, lithium-battery-powered pacemaker in competition with Medtronic.

1975

Earl Bakken founds the Bakken Museum and Library in Minneapolis, a space to house his collection of artifacts and books acquired during personal research. The project expands to host a wide range of scientific, educational, and cultural programs.

1976

Some of Medtronic’s implantable mercury-zinc battery-powered pacemakers (the Xytron model) short out after implantation due to leaks. The pacemaker’s subsequent recall leads to a 40 percent decline in Medtronic’s market share.

1980

Medtronic introduces a new generation of programmable pacemaker (the Spectrax SX). Medtronic’s market share climbs again to over 40 percent and sales begin to steadily increase.

1985

Winston Wallin takes over as the company’s CEO.

1998

Medtronic acquires the medical device companies Physio-Control and Midas Rex.

1999

Medtronic acquires three more companies: Arterial Vascular Engineering, Sofamor Danek, and Xomed.

2010

Medtronic studies the effects of eliminating live-animal testing after talks with the animal rights organization PETA. It determines that such testing ensures device safety before medical trials on humans but pledges to search for alternatives.

2015

Medtronic acquires the Irish hospital supplier Covidien PLC for $49.9 billion. The historic merger changes the company’s name to Medtronic PLC and moves its corporate headquarters to Ireland.