Medtronic finalized the $1.7 billion acquisition of Mazor Robotics after making a series of investments over the past two years.
As one of the largest orthopedic deals completed in 2018, Medtronic plans to combine its spinal implants, navigation and 3D imaging technology with Mazor's robotic-assisted spine surgery system.
"In bringing the two companies together Medtronic aims to accelerate the advancement and adoption of robotic-assisted surgery in spine for the benefit of patients, providers and healthcare systems more broadly," said Executive Vice President and President of the Restorative Therapies Group at Medtronic Geoff Martha. "This is the latest example of our surgical synergy strategy, which we believe will transform spine care through procedural solutions that integrate implants, biologics and enabling technologies like navigation, 3D imaging, robotics and powered surgical tools."
Here are four key points on what the company expects for the future:
1. Medtronic predicts the transaction will be modestly dilutive to the fiscal year 2019 adjusted earnings, and expects the company to absorb the dilution. However, long term, Medtronic projects the acquisition will generate double-digit return on invested capital by year four.
2. The company is investing in robotic technology due to the potential for reduced variability and refined procedures. Mazor and Medtronic co-developed the Mazor X Stealth Edition, incorporating Medtronic's StealthStation with Mazor's robotics platform, and it received FDA clearance. The company expects to launch the Stealth Edition in January.
3. With the integration, Medtronic now offers a procedural solution with surgical planning, workflow, execution and confirmation.
4. According to a Star Tribune report, last year Mazor told investors the technology would cost $900,000, but current pricing wasn't disclosed in the acquisition announcement.
5. For the second quarter of the 2019 fiscal year, Medtronic reported flat spine sales, although the U.S. core spine business was up in the mid-single digits. During the second quarter conference call, CEO Omar Ishrak reported the company was beating expectations in robotics salesm according to the transcript from Seeking Alpha. "I think in the last quarter [we were] two times the sales of our competition, and that is before we've launched the Stealth Edition," he said. "Of our robotic sales, 70 percent were placements, meaning that the account chose to pay for them, with incremental spine share over the next three to four years. So these are great leading indicators and then utilization of the robot system is up 10 percent over the last quarter."