MMED: MiniMed Group Inc. Baseline valuation (Graham), Fri Oct 9, 2026
Provisional call: STEER CLEAR, pending the exchange-offer results. Value is $9.79/share as an indicative best case; on reported owner earnings (which are negative) the method gives no value. Uncertainty is High (30% margin of safety), so buy_below is $6.85. Price: $19.80 at the Oct 8 close (Yahoo; the Screener lead said $19.69). Intraday Oct 9 was about $19.55 at 12:39 PM ET.
Sources:
- [P] Medtronic exchange-offer prospectus (424B3, filed Oct 5, 2026): https://www.sec.gov/Archives/edgar/data/2062583/000162828026064932/minimedgroupinc-424b3.htm
- [X] SEC XBRL companyfacts (FY26 10-K for FYE Apr 24, 2026; Q1 FY27 10-Q for quarter ended Jul 31, 2026): https://data.sec.gov/api/xbrl/companyfacts/CIK0002062583.json
- [Y] Yahoo chart: https://query1.finance.yahoo.com/v8/finance/chart/MMED
1. Standalone financials ($M; fiscal years end late April)
| FY23 | FY24 | FY25 | FY26 | Q1 FY27 | TTM Jul-26 | |
|---|---|---|---|---|---|---|
| Net sales [P] | 2,245 | 2,469 | 2,715 | 3,102 | 843 | 3,222 |
| Reported growth | +10.0% | +10.0% | +14.2% | +16.6% | ||
| Organic growth [P] | +8.6% | +11.5% | +8.0% | +15.8% | ||
| Gross margin | 58.2% | 56.3% | 54.2% | 55.2% | 53.9% | |
| Operating margin (GAAP) | -2.8% | -5.4% | -6.1% | +0.6% | -5.3% | |
| Net income to MiniMed | -112 | -213 | -333 | 0 | -314 | |
| Adj. EBITDA (adds back SBC) [P] | 147 | 253 | 202 | 83 | ||
| OCF [P] | 41 | 140 | -197 | -49 | -105 | |
| Capex [P] | 148 | 193 | 223 | 41 | 211 | |
| SBC [P] | 38 | 41 | 46 | 10 | 47 | |
| Acquired-intangible amortization [P/X] | 24 | 24 | 26 | 6 | 25 |
- The 53rd week added roughly 4–6 points to Q1 FY27 growth [P].
- US sales were $833M / $903M / $917M in FY24–26, i.e. +0.1% / +8.4% / +1.5% [P]. International drives the growth.
- Q1 FY27 sales by product: CGM $431M (+19.9%), consumables $261M (+13.8%), pumps $144M (+21.5%) [P].
Owner earnings, net of SBC (NI + 79% of amortization; FCF − SBC):
| Period | NI + after-tax amortization | FCF − SBC | Owner earnings | Per share |
|---|---|---|---|---|
| FY24 | -93 | -145 | -119 | -$0.42 |
| FY25 | -194 | -94 | -144 | -$0.51 |
| FY26 | -313 | -466 | -389 | -$1.38 |
| TTM | -294 | -363 | -329 | -$1.17 |
The per-share figures use 281.35M shares. The 21% tax rate on amortization is my assumption.
- One-offs in FY26 [P]: $142M restructuring, including a $118M Simplera automated-line write-off; $18M litigation (retainer ring); $36M separation costs.
- Pro forma FY26 [P]: $49M of transition-services and standalone costs push the net loss to -$362M (-$1.29/share). After management adjustments it is -$273M (-$0.97/share).
- Net cash [P/X]: $207M cash and no debt at Jul 31, 2026. The $500M secured revolver (matures Mar 2031) is undrawn. Medtronic pushed no debt onto MiniMed. Before the IPO, Medtronic received $229M of distributions; IPO proceeds were $538M [X].
- Agreements [P]:
- Tax Matters Agreement: MiniMed's tax indemnity to Medtronic is uncapped. MiniMed also faces two years of limits on mergers, share issuance and asset sales after the offer or clean-up. Some subsidiaries keep joint-and-several liability for the US consolidated group.
- Transition Services Agreement: service fees rise 3% a year.
- Juncos (Puerto Rico) lease and master services agreements: Medtronic leases part of the Juncos plant, which makes the majority of MiniMed's revenue, and this restricts how MiniMed runs it.
- Also: IP cross-licenses, a transitional trademark license, and registration rights for Medtronic.
- Shares [P]:
- 281,349,931 outstanding at Sep 3, 2026, of which Medtronic holds 252,813,348 (89.86%). Public float is about 28.5M (the 28.0M IPO shares plus vesting).
- The offer covers up to 225,361,295 shares (80.1%), plus up to 27,452,053 more at Medtronic's option if oversubscribed. Medtronic's shares are redeemed and new ones issued, so the total stays about 281.35M; only the float changes, to as much as about 281M.
- Any Medtronic remainder goes out through a later spin, split-off or debt-for-equity exchange.
- Medtronic is locked up for 60 days after Oct 9, unless Goldman Sachs/BofA release it.
2. Value
- On reported numbers: owner earnings are negative, so the house method yields no positive value.
- Best-case run-rate (my estimate):
- Q1 FY27 GAAP operating income $5M + amortization $6M + separation costs $27M + restructuring $2M − litigation credit $2M = $38M per quarter.
- Annualized and taxed: $38M × 4 × 79% = $120M, or $0.43/share.
- This includes the 53rd week and ignores working-capital drag, which has made operating cash flow far lower than EBITDA every year.
- Valuation:
- DCF at 10% (growth 10% in years 1–5, 7% in years 6–10, 3% terminal) gives $9.57. 20x owner earnings gives $8.54.
- The 50/50 blend is $9.05. Adding net cash of $0.74/share gives $9.79.
- High uncertainty (30% margin of safety) gives buy_below $6.85.
- Market view: at $19.80 the market value is $5.57B and enterprise value $5.36B, or 1.66x TTM sales. The price is about 2.0x the best-case value and 2.9x buy_below.
Competitive read [P, risk factors and business sections]:
- MiniMed's 780G/Flex automated insulin delivery (AID) pumps compete with Tandem (Control-IQ), Insulet (Omnipod, tubeless), Beta Bionics and Sequel. US pump growth is weak (US sales +1.5% in FY26).
- In sensors (CGM), Dexcom and Abbott dominate the pharmacy channel with rebates. MiniMed's own CGM (Simplera) carries lower margins and has had supply and high-volume manufacturing problems.
- Growth increasingly runs through Abbott's Instinct sensor: European launch Jul 2026, US with MiniMed Flex from Aug 2026, and a dual glucose-ketone sensor coming. That is a dependence on a competitor-supplier.
- MiniMed itself says sensor prices are falling. CMS competitive bidding for CGMs and pumps from Jan 1, 2028 is expected to cut Medicare rates.
- Strengths: the installed base of pump users buying consumables (~31% of sales), and strong international share for the 780G.
3. Call
STEER CLEAR (provisional). The business fails the quality bar: GAAP losses every year, negative FCF after SBC, US share pressure, and dependence on a competitor-supplier for sensors.
Forced selling alone would not make this a buy. It would take a price ≤ $6.85 (about 0.53x TTM sales in enterprise value) and evidence that FCF minus SBC has turned positive for two quarters. On today's numbers, no forced-selling level justifies a buy.
There is a possible exit for buyers: once the two-year Tax Matters Agreement window ends (~Oct 2028), MiniMed is a takeout candidate. That is not a margin of safety.
4. Quick Take draft (fill the brackets after the results)
- Shares/float: 281.35M outstanding (424B3, Sep 3, 2026); [FINAL # MMED shares exchanged] exchanged, [Medtronic remainder] left with Medtronic (Medtronic results release, [date]).
- Price: [POST-OFFER CLOSE] on [DATE] vs $19.80 (Oct 8, 2026) and $22.50 (Sep 11, 2026) (Yahoo / 424B3).
- Business: TTM sales $3,222M, gross margin 53.9%, operating margin -5.3%; FY26 organic growth +8.0% (424B3/XBRL, quarter ended Jul 31, 2026).
- Cash: TTM owner earnings -$1.17/share; FCF − SBC -$363M; net cash $207M, no debt (424B3/XBRL, Jul 31, 2026).
- Value: $9.79 best case, buy_below $6.85, call STEER CLEAR (Graham, Oct 9, 2026); at [POST-OFFER CLOSE], [x]% above buy_below.