08.15.18
$2.6 Billion
KEY EXECUTIVES:
Omar Ishrak, Chairman and CEO
Michael J. Coyle, Exec. VP and Group President, Cardiac and Vascular Group
Hooman C. Hakami, Exec. VP and Group President, Diabetes Group
Bob White, Exec. VP and Group President, Minimally
Invasive Therapies Group
Richard Kuntz, M.D., Sr. VP and Chief Scientific, Clinical and Regulatory Officer
Bradley E. Lerman, Sr. VP, General Counsel and Corporate Secretary
Geoffrey S. Martha, Exec. VP and President, Restorative Therapies Group
Karen L. Parkhill, Exec. VP and CFO
Carol A. Surface, Sr. VP and Chief Human Resources Officer
Robert ten Hoedt, Exec. VP and President, EMEA
NO. OF EMPLOYEES: 91,267 total
GLOBAL HEADQUARTERS: Dublin, Ireland
Since Medtronic made its blockbuster acquisition of Covidien several years ago (and that not-so-minor Zimmer-Biomet merger), it seems each year since, the medtech industry sees at least one (but often multiple) mega-deals. Many of these major transactions involve the absorption of one company by another, such as Abbott adding both St. Jude and Alere, BD gobbling up C.R. Bard, and Essilor merging with Luxottica.
On the other hand, some of these arrangements involve device firms divesting significant portions of their business to streamline operations to focus on key therapeutic areas. It was this type of agreement that had Medtronic in financial news headlines once again. The company divested a portion of its Patient Monitoring & Recovery Division (a segment of its Minimally Invasive Therapies Group) to Cardinal Health for $6.1 billion. Specifically, the deal involved the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses (representing 23 total product categories), as well as 17 dedicated manufacturing facilities.
Within orthopedic circles, however, that deal wasn’t the one piquing the interest of investors. Rather, Big Blue was involved in a much more intriguing financial (albeit significantly less substantial from a “dollars and cents” aspect) arrangement during the same time period.
Early in the company’s 2017 fiscal year, Medtronic announced a collaboration with Mazor Robotics. While not a full acquisition, Medtronic threw its proverbial hat into the surgical robotics ring via investments into the surgical robotics company. The Israeli-based firm had been developing a robotically-assisted spine-surgery system called Mazor X. According to a report in the Star- Tribune in July 2016, Mazor Robotics’ flagship guidance system, the Renaissance, as well as its predecessor, had been used in over 16,000 successful spinal surgeries. The Mazor X represented the next-generation solution for the company’s product portfolio.
Specifically, Medtronic had agreed to a three-tiered investment in Mazor Robotics. The first phase, announced in May 2016, was an $11.9 million purchase of 4 percent of the company’s shares. The next stage was a $20 million infusion from Medtronic tied to the commercial unveiling of the surgical solution, which cost approximately $850,000. This second leg of the agreement occurred in July 2016 when Mazor declared the Mazor X would go on sale in the fall (further, it was already approved by the U.S. Food and Drug Administration). As a result, Medtronic obtained an additional 6 percent stake in the firm. The third investment payment from Medtronic was tied to another 5 percent of shares in the company for as much as $20 million. The total agreement would result in Medtronic having a 15 percent stake in Mazor Robotics. A separate agreement announced in May 2016 would provide distribution rights to Medtronic.
“The structure of the commercial agreement features some very important points for our customers as well as our shareholders,” Ori Hadomi, Mazor Robotics’ CEO, said at the time of the Medtronic agreement. “New developments, such as synergistic implants, could generate new revenue streams for Mazor, beyond the anticipated growth in our current revenue streams from capital equipment, service agreements, and disposables. The synergy between the organizations’ teams will potentially yield operational efficiency benefits for Mazor.”
Undoubtedly, the cash infusion from Medtronic was welcomed by the fledgling surgical robotics firm, as it had not turned a profit since being founded in 2000. In fact, in 2015, the company reported a $15 million loss on $26 million in sales. By the end of 2015, it had built up a total deficit of $103 million. Since then, sales of the Mazor X have been positive and the company may be on its way to generating profit. Unless, of course, Medtronic makes yet another strategic acquisition.
Since navigating these types of financial transactions and other M&A agreements can be a challenging task, leadership sought to put someone at the helm with appropriate financial skills. In May 2016, Medtronic appointed Karen L. Parkhill as CFO to replace the retiring Gary Ellis. Ellis had played a critical role in closing a number of acquisitions, including the blockbuster Covidien deal, which also saw the company’s headquarters relocate to Dublin via an inversion. With these types of maneuvers in mind, Medtronic recruited Parkhill from Comerica, a Dallas-based financial services company. She also lists J.P. Morgan Chase & Co. as a former employer, where she was involved with its investment bank.
“I am delighted to add someone with Karen’s deep expertise and insights to the Medtronic leadership team,” Chairman and CEO Omar Ishrak said in a statement. “Given Karen’s background across all of the major disciplines within finance, and her direct experience as an investment banker, CFO at JP Morgan’s Commercial banking business, and CFO at Comerica, I am confident in her ability to lead our global finance organization and believe she will be a strong representative to our investors and Wall Street. I look forward to the ideas and perspectives she will bring to our leadership team—including from her experience as a director with the Methodist Health System—during this transformational time at Medtronic and in the healthcare industry.”
While strategic M&A and distribution agreements that leverage the efforts of companies developing complementary technologies offer a fantastic pathway to new markets and customers, Medtronic also maintains a very healthy development pipeline. In the 2017 fiscal year, a variety of fruits came to bear out of the Spine Division.
During the time period, the FDA granted clearance of Medtronic’s CD Horizon Fenestrated Screw Set, indicated for patients with advanced stage tumors involving the thoracic and lumbar spine. The company stated at the time the product was the first U.S. clearance of cement-augmented pedicle screws. The product is used with the company’s HV-R Fenestrated Screw Cement.
“Palliative care is important for people with cancer, and Medtronic’s cement-augmented screws are a meaningful innovation that are designed to restore the integrity of the spinal column in patients with debilitating spinal tumors,” said Doug King, senior vice president and president of Medtronic’s Spinal division. “The availability of our CD Horizon Fenestrated Screw Set represents an important advance for surgeons and provides them with another option for a complex procedure.”
Big Blue also launched two additional pieces of its OLIF (Oblique Lumbar Interbody Fusion) platform. At the International Meeting on Advanced Spine Techniques (IMAST) in Washington, D.C., the company noted the availability of the Pivox Oblique Lateral Spinal System with Lateral Plate for OLIF25 and the Divergence-L Anterior/Oblique Lumbar Fusion System for OLIF51. The technologies enable the use of a minimally invasive technique to minimize muscle disruption and allow for increased access to certain levels of the spine.
“In my opinion, OLIF is one of the least invasive manners in which to achieve successful fusion in the lumbar spine. OLIF minimizes disruption of the tissues surrounding the spine, particularly the psoas muscle and the embedded nerves. There is no need to use neuromonitoring, and the entire procedure can be done without repositioning the patient,” said Kamal R. Woods, M.D., FAANS, a neurosurgeon in Murrieta, Calif. “As with any anterolateral procedure, safe access to the spine is critical. The OLIF25 and OLIF51 retractor systems enhance the ease and reproducibility of the procedure.”
Internationally, in July 2016, Medtronic brought its VariLoc Locking Compression Plate System to China, Chile, Kenya, Pakistan, and other select countries around the world. According to the company, the system enables surgeons to adapt screw angulations to patient anatomy, capture fracture fragments, fine-tune screw trajectory after plate placement, and position screws precisely to avoid unnecessary penetration of the nearby joints. In addition to the implants, a comprehensive, color-coded instrument set was released simultaneously.
Addressing the specific needs that arise from the transition to a value-based healthcare model, the firm launched Medtronic Orthopedic Solutions in November. The service, according to Medtronic, is a comprehensive offering for total joint replacement episodes of care designed to drive clinical and economic outcomes. The solution is provided to hospital customers in response to the high costs associated with hip and knee replacements as well as the CJR model.
“Medtronic is here to help speed the adoption of value-based healthcare in orthopedics by helping hospitals drive down costs while keeping outcomes top of mind,” said Geoff Martha, executive vice president and president of Medtronic Restorative Therapies Group. “Our technological and operational efficiency know-how—along with our insight into the various points along the care continuum—helps us develop solutions tailored to client needs. And we back this up by sharing potential savings with our customer, which means we get paid if our program is successful in reducing episode costs for customers. This is about more than just offering implants or individual technologies and services; it’s about partnering with all stakeholders throughout the entire episode of care to enable patient-centered care at the best value.”
These new product and service offerings will perhaps help to bolster the company’s flat performance within the Spine Division in fiscal 2017. Overall, Medtronic inched closer to the elusive $30 billion sales figure, up from its 2016 $28.8 billion—an increase of 3 percent. In fact, the elevation was markedly diminished when compared to the prior year’s meteoric rise, in which sales jumped from $20.3 billion in 2015 (a number that represents company sales prior to full integration of Covidien into its report, which is now represented as the majority of the Minimally Invasive Therapies Group).
The 2 percent rise experienced by the Restorative Therapies Group, home to the Spine Division, over the prior year’s $7.2 billion could be attributed to solid gains in the Brain and Specialty Therapies group, which made up for the losses experienced by Pain Therapies. In Brain, progression was seen from sales of the Axium Prime Extra Soft detachable coil; growth in flow diversion from the Pipeline Flex embolization device; increases in stents due to the Solitaire revascularization device (which was slightly offset by a voluntary recall of certain product lines); and strong sales of neurosurgery capital equipment, disposables, and the O-arm O2 surgical imaging system. Specialty Therapies’ sales were bolstered by the performance of Advanced Energy (Aquamantys Transcollation and PEAK PlasmaBlade products), Pelvic Health (InterStim implant), and ENT (NuVent balloons and Fusion Compact navigation).
KEY EXECUTIVES:
Omar Ishrak, Chairman and CEO
Michael J. Coyle, Exec. VP and Group President, Cardiac and Vascular Group
Hooman C. Hakami, Exec. VP and Group President, Diabetes Group
Bob White, Exec. VP and Group President, Minimally
Invasive Therapies Group
Richard Kuntz, M.D., Sr. VP and Chief Scientific, Clinical and Regulatory Officer
Bradley E. Lerman, Sr. VP, General Counsel and Corporate Secretary
Geoffrey S. Martha, Exec. VP and President, Restorative Therapies Group
Karen L. Parkhill, Exec. VP and CFO
Carol A. Surface, Sr. VP and Chief Human Resources Officer
Robert ten Hoedt, Exec. VP and President, EMEA
NO. OF EMPLOYEES: 91,267 total
GLOBAL HEADQUARTERS: Dublin, Ireland
Since Medtronic made its blockbuster acquisition of Covidien several years ago (and that not-so-minor Zimmer-Biomet merger), it seems each year since, the medtech industry sees at least one (but often multiple) mega-deals. Many of these major transactions involve the absorption of one company by another, such as Abbott adding both St. Jude and Alere, BD gobbling up C.R. Bard, and Essilor merging with Luxottica.
On the other hand, some of these arrangements involve device firms divesting significant portions of their business to streamline operations to focus on key therapeutic areas. It was this type of agreement that had Medtronic in financial news headlines once again. The company divested a portion of its Patient Monitoring & Recovery Division (a segment of its Minimally Invasive Therapies Group) to Cardinal Health for $6.1 billion. Specifically, the deal involved the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses (representing 23 total product categories), as well as 17 dedicated manufacturing facilities.
Within orthopedic circles, however, that deal wasn’t the one piquing the interest of investors. Rather, Big Blue was involved in a much more intriguing financial (albeit significantly less substantial from a “dollars and cents” aspect) arrangement during the same time period.
Early in the company’s 2017 fiscal year, Medtronic announced a collaboration with Mazor Robotics. While not a full acquisition, Medtronic threw its proverbial hat into the surgical robotics ring via investments into the surgical robotics company. The Israeli-based firm had been developing a robotically-assisted spine-surgery system called Mazor X. According to a report in the Star- Tribune in July 2016, Mazor Robotics’ flagship guidance system, the Renaissance, as well as its predecessor, had been used in over 16,000 successful spinal surgeries. The Mazor X represented the next-generation solution for the company’s product portfolio.
Specifically, Medtronic had agreed to a three-tiered investment in Mazor Robotics. The first phase, announced in May 2016, was an $11.9 million purchase of 4 percent of the company’s shares. The next stage was a $20 million infusion from Medtronic tied to the commercial unveiling of the surgical solution, which cost approximately $850,000. This second leg of the agreement occurred in July 2016 when Mazor declared the Mazor X would go on sale in the fall (further, it was already approved by the U.S. Food and Drug Administration). As a result, Medtronic obtained an additional 6 percent stake in the firm. The third investment payment from Medtronic was tied to another 5 percent of shares in the company for as much as $20 million. The total agreement would result in Medtronic having a 15 percent stake in Mazor Robotics. A separate agreement announced in May 2016 would provide distribution rights to Medtronic.
“The structure of the commercial agreement features some very important points for our customers as well as our shareholders,” Ori Hadomi, Mazor Robotics’ CEO, said at the time of the Medtronic agreement. “New developments, such as synergistic implants, could generate new revenue streams for Mazor, beyond the anticipated growth in our current revenue streams from capital equipment, service agreements, and disposables. The synergy between the organizations’ teams will potentially yield operational efficiency benefits for Mazor.”
Undoubtedly, the cash infusion from Medtronic was welcomed by the fledgling surgical robotics firm, as it had not turned a profit since being founded in 2000. In fact, in 2015, the company reported a $15 million loss on $26 million in sales. By the end of 2015, it had built up a total deficit of $103 million. Since then, sales of the Mazor X have been positive and the company may be on its way to generating profit. Unless, of course, Medtronic makes yet another strategic acquisition.
Since navigating these types of financial transactions and other M&A agreements can be a challenging task, leadership sought to put someone at the helm with appropriate financial skills. In May 2016, Medtronic appointed Karen L. Parkhill as CFO to replace the retiring Gary Ellis. Ellis had played a critical role in closing a number of acquisitions, including the blockbuster Covidien deal, which also saw the company’s headquarters relocate to Dublin via an inversion. With these types of maneuvers in mind, Medtronic recruited Parkhill from Comerica, a Dallas-based financial services company. She also lists J.P. Morgan Chase & Co. as a former employer, where she was involved with its investment bank.
“I am delighted to add someone with Karen’s deep expertise and insights to the Medtronic leadership team,” Chairman and CEO Omar Ishrak said in a statement. “Given Karen’s background across all of the major disciplines within finance, and her direct experience as an investment banker, CFO at JP Morgan’s Commercial banking business, and CFO at Comerica, I am confident in her ability to lead our global finance organization and believe she will be a strong representative to our investors and Wall Street. I look forward to the ideas and perspectives she will bring to our leadership team—including from her experience as a director with the Methodist Health System—during this transformational time at Medtronic and in the healthcare industry.”
While strategic M&A and distribution agreements that leverage the efforts of companies developing complementary technologies offer a fantastic pathway to new markets and customers, Medtronic also maintains a very healthy development pipeline. In the 2017 fiscal year, a variety of fruits came to bear out of the Spine Division.
During the time period, the FDA granted clearance of Medtronic’s CD Horizon Fenestrated Screw Set, indicated for patients with advanced stage tumors involving the thoracic and lumbar spine. The company stated at the time the product was the first U.S. clearance of cement-augmented pedicle screws. The product is used with the company’s HV-R Fenestrated Screw Cement.
“Palliative care is important for people with cancer, and Medtronic’s cement-augmented screws are a meaningful innovation that are designed to restore the integrity of the spinal column in patients with debilitating spinal tumors,” said Doug King, senior vice president and president of Medtronic’s Spinal division. “The availability of our CD Horizon Fenestrated Screw Set represents an important advance for surgeons and provides them with another option for a complex procedure.”
Big Blue also launched two additional pieces of its OLIF (Oblique Lumbar Interbody Fusion) platform. At the International Meeting on Advanced Spine Techniques (IMAST) in Washington, D.C., the company noted the availability of the Pivox Oblique Lateral Spinal System with Lateral Plate for OLIF25 and the Divergence-L Anterior/Oblique Lumbar Fusion System for OLIF51. The technologies enable the use of a minimally invasive technique to minimize muscle disruption and allow for increased access to certain levels of the spine.
“In my opinion, OLIF is one of the least invasive manners in which to achieve successful fusion in the lumbar spine. OLIF minimizes disruption of the tissues surrounding the spine, particularly the psoas muscle and the embedded nerves. There is no need to use neuromonitoring, and the entire procedure can be done without repositioning the patient,” said Kamal R. Woods, M.D., FAANS, a neurosurgeon in Murrieta, Calif. “As with any anterolateral procedure, safe access to the spine is critical. The OLIF25 and OLIF51 retractor systems enhance the ease and reproducibility of the procedure.”
Internationally, in July 2016, Medtronic brought its VariLoc Locking Compression Plate System to China, Chile, Kenya, Pakistan, and other select countries around the world. According to the company, the system enables surgeons to adapt screw angulations to patient anatomy, capture fracture fragments, fine-tune screw trajectory after plate placement, and position screws precisely to avoid unnecessary penetration of the nearby joints. In addition to the implants, a comprehensive, color-coded instrument set was released simultaneously.
Addressing the specific needs that arise from the transition to a value-based healthcare model, the firm launched Medtronic Orthopedic Solutions in November. The service, according to Medtronic, is a comprehensive offering for total joint replacement episodes of care designed to drive clinical and economic outcomes. The solution is provided to hospital customers in response to the high costs associated with hip and knee replacements as well as the CJR model.
“Medtronic is here to help speed the adoption of value-based healthcare in orthopedics by helping hospitals drive down costs while keeping outcomes top of mind,” said Geoff Martha, executive vice president and president of Medtronic Restorative Therapies Group. “Our technological and operational efficiency know-how—along with our insight into the various points along the care continuum—helps us develop solutions tailored to client needs. And we back this up by sharing potential savings with our customer, which means we get paid if our program is successful in reducing episode costs for customers. This is about more than just offering implants or individual technologies and services; it’s about partnering with all stakeholders throughout the entire episode of care to enable patient-centered care at the best value.”
These new product and service offerings will perhaps help to bolster the company’s flat performance within the Spine Division in fiscal 2017. Overall, Medtronic inched closer to the elusive $30 billion sales figure, up from its 2016 $28.8 billion—an increase of 3 percent. In fact, the elevation was markedly diminished when compared to the prior year’s meteoric rise, in which sales jumped from $20.3 billion in 2015 (a number that represents company sales prior to full integration of Covidien into its report, which is now represented as the majority of the Minimally Invasive Therapies Group).
The 2 percent rise experienced by the Restorative Therapies Group, home to the Spine Division, over the prior year’s $7.2 billion could be attributed to solid gains in the Brain and Specialty Therapies group, which made up for the losses experienced by Pain Therapies. In Brain, progression was seen from sales of the Axium Prime Extra Soft detachable coil; growth in flow diversion from the Pipeline Flex embolization device; increases in stents due to the Solitaire revascularization device (which was slightly offset by a voluntary recall of certain product lines); and strong sales of neurosurgery capital equipment, disposables, and the O-arm O2 surgical imaging system. Specialty Therapies’ sales were bolstered by the performance of Advanced Energy (Aquamantys Transcollation and PEAK PlasmaBlade products), Pelvic Health (InterStim implant), and ENT (NuVent balloons and Fusion Compact navigation).