08.14.19
AT A GLANCE
Rank: #5 (Last year: #5)
$2.65 Billion
Prior Fiscal: $2.67 Billion
Percentage Change: -0.7%
No. of Employees: 90,017
Global Headquarters: Dublin, Ireland
KEY EXECUTIVES:
Omar Ishrak, Chairman and CEO
Karen L. Parkhill, Exec. VP and CFO
Richard E. Kuntz, M.D., M.Sc., Sr. VP, Chief Medical and Scientific Officer
Geoffrey S. Martha, Exec. VP and President, Restorative Therapies Group
Jacob Paul, Sr. VP and President, Spine
Medtronic’s Spine division has been out of alignment for some time. It all began with the maligned Kyphon acquisition—in 2007, Medtronic bought the company for about $4.1 billion, a month before CEO Art Collins retired to be replaced by Bill Hawkins. Industry insiders believed at the time the price Medtronic paid was far too high, and Kyphon’s financial performance didn’t quite pan out as hoped.
Just after current CEO Omar Ishrak took the reins in 2011, the firm’s blockbuster InFuse bone growth biologic came under fire. InFuse was approved in 2002 to treat lumbar degenerative disc disease, but had made millions over the year in off-label procedures—which, in some cases, had deadly results. Several lawsuits ensued charging Medtronic with promoting off-label use, and the company settled many with as much as $300 million. Although Medtronic wasn’t convicted of any wrongdoing, sales suffered. Many experts speculated whether it was time for the company to sell its Spine unit. However, Geoff Martha, president of Medtronic’s Restorative Therapies Group, who followed Ishrak from GE Healthcare in 2011, set out on a journey to stabilize the business when he took over as head of the group in 2015.
His next move: Medtronic began the deal to acquire Israel’s Mazor Robotics for $1.7 billion last September, building on a prior arrangement between the two that had included Medtronic taking a stake in Mazor and serving as the sole distributor of the robotics company’s Mazor X system. By combining its spine implants, navigation, and intraoperative imaging technology with Mazor’s robotic-assisted systems, Medtronic intends to offer a fully-integrated procedural solution for surgical planning, execution, and confirmation.
ANALYST INSIGHTS: Medtronic continues to expand its business through M&A across multiple market segments. While it has placed many bets for future growth, none of its investments are greater than its commitment to robotics. CEO Omar Ishrak has made it clear 2020 will be ‘the year of the robot’ for Medtronic. It will be interesting to observe whether they can create adoption for its Mazor, SuperD, and other robotic platform investments.
“Over the past two years it’s become clear to us that enabling technology like this is the future,” Martha told Bloomberg. “It improves outcomes in spinal surgery and reduces the variability. Once we realized this is clearly the future, we knew we had to integrate all this technology.”
The deal was an effort to hasten the move toward guided, robotic procedures. Medtronic and Mazor unveiled their new Mazor X system at last year’s North American Spine Society conference. Mazor X identifies spine abnormalities and creates a patient-specific surgical implant, potentially positioning Medtronic to better compete with rival Globus Medical. The deal for Mazor was completed last December, valued at about $1.7 billion.
But a robotic system, advanced as it may be, raised questions about whether it would fit into the cost-conscious era of value-based care. In response to these concerns, Martha told MedCity News that certain surgical steps could be automated and if all the technology’s innovations occur as planned, 40 percent of operating room time could be removed from a basic degenerative procedure. Saving time in the OR is invaluable to health systems.
“You can automate some of the bone cutting, some of the tissue resection using all this technology together,” Martha told MedCity News.
Though certainly a boost for Medtronic’s spine procedure capabilities, Mazor is technically not a part of the company’s Spine franchise. Mazor is housed in the company’s Brain Therapies division, which includes neurovascular, brain modulation, and neurosurgery offerings. Medtronic’s Spine division encompasses interbody spacers, fixation systems, cervical plates, artificial discs, orthobiologics, bone grafts, and demineralized bone matrix products. Spinal products are often used in concert with the firm’s Neurosurgery solutions, meaning larger sales of Mazor products will likely correlate with rising Spine product revenue as more healthcare organizations adopt the robotic technology.
The Spine franchise accrued $2.66 billion in revenue, dropping 1 percent. Despite the slip, the segment saw incremental growth due to increased spinal impact attachment rates in conjunction with the company’s Surgical Synergy strategy, which integrates spinal implants with robotics, imaging, navigation, power instruments, and nerve monitoring. The firm’s “Speed to Scale” initiative, which relies on quicker innovation cycles and launching a steady cadence of new products at scale with sets immediately available for the market, also contributed to growth.
ANALYST INSIGHTS: Medtronic continues to be a juggernaut with strong fundamentals. However, the company had a bit of a wobble recently with their false start in orthopedics, flagging spine revenue, and slow move into robotics.
Infuse Bone Graft was FDA approved for two new spine surgery indications last April. The second expanded indication for Infuse in just over two years, it can now be used with polyetheretherketone (PEEK) implants in oblique lateral interbody fusion (OLIF) 25 and 51 and anterior lumbar interbody fusion (ALIF) procedures at a single level.
A day later at the American Association of Neurological Surgeons (AANS) annual meeting, Medtronic launched TiONIC technology—a titanium 3D printed platform for spine surgery implants. TiONIC technology’s enhanced surface textures are created with a differentiated laser method, increasing osteoconductivity and promoting bone response. ARTiC-L, for use in transforaminal lumbar interbody fusion (TLIF) spine surgery, was the first implant to feature TiONIC technology. The implant’s 3D printed honeycomb design provides an osteoconductive scaffold for bony ingrowth and improved mechanical load distribution.
The Synergy TLIF workflow was also unveiled at last year’s AANS meeting. The spine surgery procedural workflow combines Medtronic’s O-arm System imaging and SteathStation imaging guidance technologies to create a completely navigated, minimally invasive procedure allowing for fewer intraoperative surgical steps. The new CD Horizon Solera Voyager 5.5 System has percutaneous and mini-open rod insertion options for treating both degenerative and adult deformity conditions. The system’s non-cannulated ATS screw reduces the number of screw placement steps from nine to three (vs. traditional pedicle screw placement).
Last September saw the Infinity OCT (occipitocervical-upper thoracic) Spinal System’s launch. Infinity OCT immobilizes and stabilizes the spine while it fuses. It includes a multi-axial screw with 60 degrees of angulation in any direction, a locking cap with a quick-start thread, and 3.0 and 5.5 mm screws. When paired with the company’s O-arm imaging and StealthStation navigation system, Infinity OCT can simplify complex posterior cervical procedures. It can be used in cases of degenerative disc disease, instability or deformity, tumors, and traumatic spinal fractures or traumatic dislocations.
Rank: #5 (Last year: #5)
$2.65 Billion
Prior Fiscal: $2.67 Billion
Percentage Change: -0.7%
No. of Employees: 90,017
Global Headquarters: Dublin, Ireland
KEY EXECUTIVES:
Omar Ishrak, Chairman and CEO
Karen L. Parkhill, Exec. VP and CFO
Richard E. Kuntz, M.D., M.Sc., Sr. VP, Chief Medical and Scientific Officer
Geoffrey S. Martha, Exec. VP and President, Restorative Therapies Group
Jacob Paul, Sr. VP and President, Spine
Medtronic’s Spine division has been out of alignment for some time. It all began with the maligned Kyphon acquisition—in 2007, Medtronic bought the company for about $4.1 billion, a month before CEO Art Collins retired to be replaced by Bill Hawkins. Industry insiders believed at the time the price Medtronic paid was far too high, and Kyphon’s financial performance didn’t quite pan out as hoped.
Just after current CEO Omar Ishrak took the reins in 2011, the firm’s blockbuster InFuse bone growth biologic came under fire. InFuse was approved in 2002 to treat lumbar degenerative disc disease, but had made millions over the year in off-label procedures—which, in some cases, had deadly results. Several lawsuits ensued charging Medtronic with promoting off-label use, and the company settled many with as much as $300 million. Although Medtronic wasn’t convicted of any wrongdoing, sales suffered. Many experts speculated whether it was time for the company to sell its Spine unit. However, Geoff Martha, president of Medtronic’s Restorative Therapies Group, who followed Ishrak from GE Healthcare in 2011, set out on a journey to stabilize the business when he took over as head of the group in 2015.
His next move: Medtronic began the deal to acquire Israel’s Mazor Robotics for $1.7 billion last September, building on a prior arrangement between the two that had included Medtronic taking a stake in Mazor and serving as the sole distributor of the robotics company’s Mazor X system. By combining its spine implants, navigation, and intraoperative imaging technology with Mazor’s robotic-assisted systems, Medtronic intends to offer a fully-integrated procedural solution for surgical planning, execution, and confirmation.
ANALYST INSIGHTS: Medtronic continues to expand its business through M&A across multiple market segments. While it has placed many bets for future growth, none of its investments are greater than its commitment to robotics. CEO Omar Ishrak has made it clear 2020 will be ‘the year of the robot’ for Medtronic. It will be interesting to observe whether they can create adoption for its Mazor, SuperD, and other robotic platform investments.
—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors
“Over the past two years it’s become clear to us that enabling technology like this is the future,” Martha told Bloomberg. “It improves outcomes in spinal surgery and reduces the variability. Once we realized this is clearly the future, we knew we had to integrate all this technology.”
The deal was an effort to hasten the move toward guided, robotic procedures. Medtronic and Mazor unveiled their new Mazor X system at last year’s North American Spine Society conference. Mazor X identifies spine abnormalities and creates a patient-specific surgical implant, potentially positioning Medtronic to better compete with rival Globus Medical. The deal for Mazor was completed last December, valued at about $1.7 billion.
But a robotic system, advanced as it may be, raised questions about whether it would fit into the cost-conscious era of value-based care. In response to these concerns, Martha told MedCity News that certain surgical steps could be automated and if all the technology’s innovations occur as planned, 40 percent of operating room time could be removed from a basic degenerative procedure. Saving time in the OR is invaluable to health systems.
“You can automate some of the bone cutting, some of the tissue resection using all this technology together,” Martha told MedCity News.
Though certainly a boost for Medtronic’s spine procedure capabilities, Mazor is technically not a part of the company’s Spine franchise. Mazor is housed in the company’s Brain Therapies division, which includes neurovascular, brain modulation, and neurosurgery offerings. Medtronic’s Spine division encompasses interbody spacers, fixation systems, cervical plates, artificial discs, orthobiologics, bone grafts, and demineralized bone matrix products. Spinal products are often used in concert with the firm’s Neurosurgery solutions, meaning larger sales of Mazor products will likely correlate with rising Spine product revenue as more healthcare organizations adopt the robotic technology.
The Spine franchise accrued $2.66 billion in revenue, dropping 1 percent. Despite the slip, the segment saw incremental growth due to increased spinal impact attachment rates in conjunction with the company’s Surgical Synergy strategy, which integrates spinal implants with robotics, imaging, navigation, power instruments, and nerve monitoring. The firm’s “Speed to Scale” initiative, which relies on quicker innovation cycles and launching a steady cadence of new products at scale with sets immediately available for the market, also contributed to growth.
ANALYST INSIGHTS: Medtronic continues to be a juggernaut with strong fundamentals. However, the company had a bit of a wobble recently with their false start in orthopedics, flagging spine revenue, and slow move into robotics.
—Patrick West, Partner, Mirus Capital Advisors
Infuse Bone Graft was FDA approved for two new spine surgery indications last April. The second expanded indication for Infuse in just over two years, it can now be used with polyetheretherketone (PEEK) implants in oblique lateral interbody fusion (OLIF) 25 and 51 and anterior lumbar interbody fusion (ALIF) procedures at a single level.
A day later at the American Association of Neurological Surgeons (AANS) annual meeting, Medtronic launched TiONIC technology—a titanium 3D printed platform for spine surgery implants. TiONIC technology’s enhanced surface textures are created with a differentiated laser method, increasing osteoconductivity and promoting bone response. ARTiC-L, for use in transforaminal lumbar interbody fusion (TLIF) spine surgery, was the first implant to feature TiONIC technology. The implant’s 3D printed honeycomb design provides an osteoconductive scaffold for bony ingrowth and improved mechanical load distribution.
The Synergy TLIF workflow was also unveiled at last year’s AANS meeting. The spine surgery procedural workflow combines Medtronic’s O-arm System imaging and SteathStation imaging guidance technologies to create a completely navigated, minimally invasive procedure allowing for fewer intraoperative surgical steps. The new CD Horizon Solera Voyager 5.5 System has percutaneous and mini-open rod insertion options for treating both degenerative and adult deformity conditions. The system’s non-cannulated ATS screw reduces the number of screw placement steps from nine to three (vs. traditional pedicle screw placement).
Last September saw the Infinity OCT (occipitocervical-upper thoracic) Spinal System’s launch. Infinity OCT immobilizes and stabilizes the spine while it fuses. It includes a multi-axial screw with 60 degrees of angulation in any direction, a locking cap with a quick-start thread, and 3.0 and 5.5 mm screws. When paired with the company’s O-arm imaging and StealthStation navigation system, Infinity OCT can simplify complex posterior cervical procedures. It can be used in cases of degenerative disc disease, instability or deformity, tumors, and traumatic spinal fractures or traumatic dislocations.
