Sector News

Medtronic cuts deals to boost less-invasive surgical business

May 20, 2016
Life sciences

Medtronic Inc, the world’s largest standalone medical device maker, wants to slice deeper into the minimally invasive surgical products market and is buying its way in.

The company said on Wednesday it bought a stake in tiny Israeli robotics company Mazor Robotics Ltd and signed an agreement to use Mazor’s robotic guidance systems that assist surgeons in spine and brain operations.

Separately, Medtronic also bought Smith & Nephew Plc’s gynecology unit for $350 million to gain access to a surgical platform that helps remove abnormal uterine tissue such as polyps and fibroids.

The two deals underscore Medtronic’s push to broaden its offerings in the minimally invasive surgical products market, which the company entered with its acquisition of Covidien Plc last year.

“There is a general trend in medicine for less-invasive procedures and these companies are all looking for tuck in acquisitions to bring in new products in the field,” Needham and Co analyst Michael Matson told Reuters.

Other companies that have done similar deals include Stryker Corp, which bought Mako Surgical in late 2013, and Smith & Nephew, which bought Blue Belt Technologies earlier this year.

Medtronic said on Wednesday it will initially take a 4 percent stake in Mazor for nearly $12 million, and has the option to increase its stake to 15 percent.

Medtronic will also buy 15 of Mazor’s Renaissance spine surgical systems, promote and market Mazor’s products, and collaborate with the company to make robot-based spinal systems.

Medtronic, which redomiciled to Ireland through the Covidien deal, currently relies on its core business of developing and selling heart devices, spinal implants, insulin pumps among other things.

ROBOTIC FUTURE

While Medtronic’s investment in Mazor is a small one, it could go a long way to augment its spinal surgery toolkit.

The company’s spine business has been losing market share to smaller companies for years and analysts said the deal with Mazor could be a small step toward reversing the trend.

“There has been a lot of investor skepticism toward Medtronic’s turnaround in its spine segment, and we expect the company to announce further deals as it attempts to bolster its offerings,” Evercore ISI analyst Vijay Kumar said in a research note.

Robotics in spinal surgery is still in its nascent stages and has faced a lot of skepticism.

However, it has managed to attract investments from the likes of Globus Medical Inc and MedTech SA.

“(The deal) gives Medtronic a pathway to be a player in the game should robotics take off …,” Leerink analyst Richard Newitter said.

“It is an interesting move that at a minimum would seem to give Medtronic a foothold within a potentially new and faster-growing spine market development area.”

By Amrutha Penumudi and Ankur Banerjee

Source: Reuters

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