This Is the Strongest Pipeline in Medtronic History

Industry analysts and institutional investors got a pretty good look into the Medtronic product pipeline at a recent three-day briefing tour held in three separate locations across the United States.

The tour began Sept. 24 in Hartford, CT where Medtronic's minimally invasive therapies group management team unveiled the company's new soft-tissue surgical robotics platform. The following day the company was at the North American Spine Society (NASS) conference in Chicago, IL where Medtronic announced a new trial for the Infuse bone graft and provided updates on the restorative therapies group (RTG). Finally, the tour ended in San Francisco, CA at the Transcatheter Cardiovascular Therapeutics (TCT) conference with the company's cardiac and vascular group leadership team.

While the first briefing focused on the company's soft-tissue robot, Mike Weinstein, senior vice president of strategy at Medtronic, kicked things off in Hartford, CT with a spotlighted the breadth of the pipeline across the entire company.

"As excited as we are about robotics ... it really is just one manifestation of the pipeline that you've heard Omar [Ishrak] talking about on the last few earnings calls," Weinstein said. "Omar has described it as the strongest pipeline in the company's history, and I really believe that."

The recent news flow coming out of the Dublin, Ireland-based company certainly seems to support that viewpoint:

In the next 12 months, Medtronic is anticipating additional product approvals and launches, including:

Also in the coming 12 months, Medtronic has a number of clinical trial readouts planned, including:

Future Leadership of Medtronic

Medtronic announced in late August that Omar Ishrak will retire as CEO on April 26, which marks the end of the company's current fiscal year. Ishrak has served as CEO of Medtronic since June 2011 and has led the company through some significant milestones, as we previously highlighted.

Geoff Martha, who currently oversees Medtronic's restorative therapies group (and previously led the company's Covidien acquisition), will succeed Ishrak as CEO on April 27. In the meantime, Martha will assume the newly created role of Medtronic president and become a member of the company's board of directors, effective Nov. 1.

Ishrak spoke with analysts about the transition during the briefing in Connecticut.

"Geoff has been involved in the strategy of the company and has been core to creating it, so I look forward to continuity but I also look forward to change," Ishrak said. "Because the company today, and in April of next year, will be in a completely different place from where it was when I first started. A completely different place. It's bigger. It's in a growth trajectory. It's got a full pipeline of products. We've got things established globally, other initiatives in value-based healthcare and other things which we're much more prudent about and sophisticated about than we were eight or nine years ago."

But that doesn't mean there's no room for opportunity, he added, because if anything there is an even greater opportunity for Medtronic going forward.

"I don't know where it will be but I know the company will go to the next level [under Martha's leadership] and I'm just thrilled about it," Ishrak said.

Speaking of opportunity, as Martha's promotion created room for advancement in the company's restorative therapies group, which will be headed by Brett Wall, current president of brain therapies division in the RTG. Wall, who came to Medtronic through the Covidien acquisition, will officially take over for Martha in November.

The Making of a Spine Ecosystem

"It's an exciting time for us and this business, particularly as we look at our spine business and the ecosystem that surrounds our spine business," Wall said during the analyst briefing during NASS.

Wall said the company's spine technology creates an entire system of materials and a system of technology that "talks together."

"We're not talking about this technology coming tomorrow or next month or next year, this technology is actually here today," he said. "So as we look at imaging, as we look at planning, as we look at robotics, if we look at navigation, if we look at all of the hardware and all the different implants and pieces that go along with this, it's a really compelling story."

A major part of that story is, of course, the Mazor robotic-assisted surgery system. Medtronic began working with Mazor Robotics back in 2016 to integrate Medtronic's spine implants, navigation, and intra-operative imaging technology with Mazor's robotic surgery system. That partnership led to Medtronic's acquisition of Mazor last year, a $1.6 billion deal that was announced just days before the NASS 2018 meeting in Los Angeles, CA.

This year, at NASS 2019, the company touted that the number of Mazor X Stealth Edition patient cases surpassed 1,000 since its commercial launch earlier this year. The system combines preoperative planning software, Stealth navigation, and robotic-guidance for pedicle screw placement during spinal procedures.

"We are learning every single day how to make this ecosystem work," Wall said.

Will Acquisition Play a Role in the Medtronic RTG Strategy?

Going forward, Wall mentioned that he is looking at opportunities in adjacent markets. "There are areas that we are not in that I think we could be in that would be interesting to take a look at," he said, using neurosurgery as an example. "We do a number of things with our neurosurgery platform where we plan and where we navigate and we open the skull and yet we stop there."

That made some analysts in the room wonder about the possibility of seeing acquisitions play a larger role in Medtronic's RTG business. Wall didn't specifically talk about potential acquisitions, but he did elaborate on some of the opportunities he sees for the business.

"When you speak with surgeons and you speak with hospital administrators, there are all these areas where there are interesting things that happen and if technology was applied to some of those problems, there's opportunity," Wall said. 

In skull-based surgery, for example, Wall said that one of the biggest problems physicians have is knowing intraoperatively how to characterize a tumor vs brain tissue so that they know when to stop resecting. 

"Right now many times in an operating room a physician will be standing there with their hands up waiting for the analysis to come back and understanding if they've gone far enough," he said. "I was talking to someone the other day and they had a procedure that lasted eight hours that could have lasted six hours if they could have shrunk that time that they were waiting every time they had resected and sent the sample out to see what they had actually removed from the brain."

There are technological solutions to that problem out there, he said, but it's an area that Medtronic hasn't addressed yet within its portfolio.

"You start thinking boy that's a technological answer we could probably provide," Wall said. "It's in our workflow, it's in the things we actually provide, our teams are there right now with those physicians in the operating room."

Other thoughts Wall has about the opportunities in restorative therapies include things like leveraging the ability to push out software and firmware updates to improve efficiency for physicians using Medtronic devices.

"If any of you own a Tesla automobile it's actually fascinating, you come downstairs in the morning and you have a new car because they've downloaded new applications and I think we have the same opportunity here with things that will allow our ecosystem to do more."

Medtronic Spine Business: A Turn-Around Story

"Several years ago our spine business was declining and we were losing share," Jacob Paul, senior vice president and president of Medtronic’s Spine division told analysts during the briefing at NASS. "Over the last couple of years we've stabilized it and we are growing at the market. Now we are getting into an exciting new phase of accelerated growth, we are growing above the market.

Paul attributed the turn-around story to the company's surgical synergy strategy in spine, a rapid cadence of meaningful innovation (which he defined as innovation that adds value at scale), and a focused commercial team led by general managers that drive that innovation.

He also touched on the company's recently-closed Titan Spine acquisition, which he said is another big part of the growth strategy in spine.

"This is one acquisition where I have no buyers remorse," Paul said. "It's a platform technology in a space, titanium interbody, that's growing significantly faster than the interbody market, but it's more than just that. It's a platform technology with deep science, backed by peer-reviewed literature."

MD+DI met with key members of Medtronic's spine business at NASS to learn more about how the company is building out its "spine ecosystem," and to get an up-close look at the Titan technology. Stay tuned for our takeaways from that meeting.

What About the Medtronic CVG Softness?

During the final leg of Medtronic's U.S. tour, Michael Coyle, president of the company's cardiac and vascular group (CVG), fielded a hardball question from Vijay Kumar, a medtech analyst at Evercore.

"A couple of years ago you guys were crushing it and now it's well below corporate," Kumar said during the briefing at TCT. "Given that you have this big-picture view of all these products coming through, when do you think CVG will come back in line with corporate or above corporate [in terms of growth rate]?"

Coyle acknowledged that there are a lot of headwinds that will soon be annualized, which should help in terms of year-over-year comparisons, including the company's LVAD challenges, and issues associated with paclitaxel devices that impacted the broader drug-coated balloon and drug-eluting stent markets.

"Even if you went into Q1 and wipe out those headwinds ... we would have been growing at 4%," he said in response to Kumar's question.

Now, with this clear view of the overlay of new products, Coyle said he would estimate the market growth rate for cardiovascular to be somewhere between 4% and 5%, and he said he expects Medtronic's CVG business to get back to where it once was to be at least in that range.

"And then we're obviously targeting – with some of these very disruptive technologies – to actually take share ... so we have a lot of confidence about the pipeline," Coyle said. "It's a little lumpier in cardiovascular because of the very long development timeline, we've also skewed our timelines to highly-disruptive and market-creating opportunities – we haven't even talked about renal denervation getting overlaid on top of that, or mitral [valve technologies] for that matter – so from my perspective I have a lot of confidence for cardiovascular to be at the targeted growth rates for the corporation."

Hello Low-Risk TAVR!

As mentioned above, FDA approved Medtronic's Evolut PRO+ TAVR System just a few days before TCT, which launched during the conference with the recently-approved low-risk indication.

Data presented at the American College of Cardiology 2019 meeting in New Orleans, LA  on Medtronic's Evolut in low-risk patients was "obviously amazing," as Stifel Nicolaus' Rick Wise put it. The analyst also noted, however, that the acceleration in the low-risk TAVR population has not been as dramatic as some industry observers had thought possible.

"But I really feel like I'm starting to hear anecdotally from physicians that are really starting to see that acceleration happen," Wise said, and he asked Medtronic's CVG management team if they are seeing that shift as well.

Nina Goodheart, VP/general manager of Medtronic's structural heart business, pointed out that as Medtronic has talked about the low-risk TAVR opportunity, management kept saying that the ramp would not be quite so fast as some people had predicted, but there would be continued education about these patients over time.

"So I think the market is moving the way we anticipated it would be moving," Goodheart said. "But we are hearing from physicians that they are seeing now more and more of those patients and they expect to keep seeing them, so I think that's positive."

Goodheart also mentioned a couple of conversations she had that morning at TCT with physicians who said that all of the discussion and visibility around the low-risk population in TAVR has brought more patients into that funnel.

"I think we're going to continue to see it," Goodheart said. "I don't think we ever expected the ramp would be quite as steep as we saw with extreme risk and high risk and even intermediate, but we know that the list of patients is there, we believe that it's still underpenetrated in terms of [aortic stenosis] and we're going to continue to see it grow."

In terms of the competitive landscape of TAVR, particularly with the low-risk indication, Goodheart said the CoreValve Evolut R and CoreValve Evolut PRO+ puts the company in "a really good position" to address those younger, more active patients.

That said, the company is keeping tabs on the competition and taking note of emerging data from competitors in the space including Boston Scientific, and Abbott.