August 04, 2016      

Medtronic PLC has made a multifaceted deal with surgical robotics provider Mazor Robotics Ltd. In May, Medtronic said it would buy 15 Mazor X systems by year’s end. Assuming that joint development and sales are successful, the company plans to become the exclusive distributor of Mazor Robotics’s products in 2017.

Medtronic, which has offices in Dublin and Minneapolis, is the world’s largest pure-play medical device maker.

In the U.S. alone, there than 500,000 spinal implant surgeries per year, according to The Motely Fool.

“We do think a move like this from Medtronic could lend greater momentum to spine robotics adoption,” said Daniel Antalffy, an analyst at Leerink Partners LLC.

Medtronic also plans to take a 15 percent stake in Caesarea, Israel-based Mazor Robotics in three tranches. The first installment was $11.9 million for 4 percent of Mazor’s shares, and Medtronic has the option to cap the next two at $20 million each, for a total of more than $50 million.

Medtronic to sell Mazor X

Caesarea, Israel-based Mazor has sold more than 110 of its Renaissance Guidance Systems. It said they have been used in more than 16,000 successful operations to date. The company has also reported strong international orders so far this year.

Mazor Robotics plans to launch its Mazor X guidance system for spinal surgery in October.

“The Mazor X platform expands the field of spine surgery from trajectory guidance to assisting surgeons with a total patient treatment strategy,” said Ori Hadomi, CEO of Mazor.

The Mazor X has been partially cleared by the U.S. Food and Drug Administration (FDA) and is expected to be sold for $850,000. It uses preoperative analytics software, real-time 3D modeling, and a bone-mounted arm to provide stable guidance to surgeons.

Mazor Robotics' Mazor X robotic system is intended to help surgeons and patients.

Minimally invasive and robotic-assisted surgeries typically lead to less pain and scarring and shorter recovery times.

Mazor Robotics, which was founded in 2000, has yet to make a profit, but its stock price has increased since the announcement of its deal with Medtronic. Spinal products account for about 10 percent of Medtronic’s sales.

“Medtronic has the biggest and widest sales organization in spine surgery,” Hadomi said. “I do believe that working with Medtronic and the marketing capabilities they have will make Mazor surgical robotic technologies the standard of care in spinal surgery.”

Is Mazor Robotics a better buy?

Shares in Mazor Robotics are a better bet than those of TransEnterix Inc., asserted The Motley Fool. Morrisville, N.C.-based TransEnterix this week sold its first ALF-X surgical robot to Humanitas Hospital in Italy, but it must reapply for FDA approval in the U.S.

Medtronic is among the upstarts competing with Intuitive Surgical Inc., whose da Vinci system is used for multiple types of surgery, and Verb Surgical, a joint venture between Johnson & Johnson and Google Inc.

Auris Surgical Robotics Inc., which is working on robots for eye surgery, this spring acquired Hansen Medical Inc., whose Magellan and Sensei systems use 3D controls for cardiac procedures.

Medtronic grafts multiple acquisitions

Medtronic is willing to spend a lot of money to beef up its portfolio. Last year, Medtronic acquired Covidien PLC for $49.9 billion. Dublin-based Covidien makes medical devices and supplies.

In May, Medtronic agreed to acquire the gynecology business of Smith & Nephew PLC for $350 million. Smith & Nephew earned $56 million in revenue from that unit in 2015, including from its Truclear system for minimally invasive removal of abnormal uterine tissue.

“We believe gynecology is one of the most underserved specialty procedure areas,” said Chris Barry, president of surgical innovations in Medtronic’s minimally invasive therapies group.

Smith & Nephew has also been working to diversify as it tries to move beyond orthopedic surgery.

In addition, Medtronic purchased Minneapolis-based Responsive Orthopedics, which is working on lower-cost replacement joints, for an undisclosed amount. The U.S. federal government is trying to encourage greater “value” in healthcare spending by bundling payment for standardized medical devices such as artificial knees.

“It’s not just about the implants; it’s about partnering with all the stakeholders throughout the entire episode of care to ensure the best outcomes at the best value,” said Doug Kohrs, managing director at Responsive Orthopedics.

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By contrast, Stryker is focusing on more efficient procedures enabled by robots, but such devices are still expensive.

In late June, Medtronic said it would buy HeartWare International Inc. for $1.1 billion.

Framingham, Mass.-based HeartWare said its HVAD system is “the world’s smallest full-support ventricular assist device and is designed to reduce surgical invasiveness.”

Medtronic is working on a surgical robot for 2018 that it claims would be able to perform all the procedures that currently involve robotics.