What Medtronic's Agreement with Mazor Robotics Means

The promise of robotics in surgery - this time in spinal procedures - gets a boost as the dominant force in spine - Medtronic - hitches its wagon to a small robotics spine player.

The promise of robotics in surgery - this time in spinal procedures - gets a boost as the dominant force in spine - Medtronic - hitches its wagon to a small robotics spine player.

Arundhati Parmar

Mazor Robotics, an Israeli-based spine robotics company, announced Wednesday that it has signed two agreements with Medtronic, one where the company will have a co-promotion and joint, exclusive development and distribution agreement, and a second, where Medtronic takes an equity stake in the company.

According to the terms, Medtronic will take a 4% interest worth $11.9 million in Mazor which makes the Renaissance robot-assisted spinal guidance systems. In the next stage, or tranche of investment, the Irish medtech maker will buy another 6% piece of Mazor's outstanding shares if certain operational milestones are achieved. There is a potential third tranche in which once the second tranche is completed and the global distribution agreement launches, Medtronic can get another 5% of the company, although the company has the right to cap investment in both the second and third tranches at $20 million each.

The money part, while important to the deal makers, is less interesting to industry observers. It's the agreement involving products that can lead to some conclusions about the spine market.

 

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If certain co-promotion aims are achieved -- Mazor did not provide details on what they were -- then a second phase launches when Medtronic will get exclusive rights to distribute and sell Mazor's future products. Medtronic has already committed to buying 15 next-gen systems in 2016. There are annual quotas in place which will amount to Medtronic buying and selling "hundreds" of systems over a four-year period.

Medtronic is also becoming Mazor's sole strategic partner to develop and commercialize robotic-based spine-based products and applications.

All this is significant.

At the very least, the agreement is a validation of robotic surgery in spine, wrote Daniel Antalffy, an analyst with Leerink Partners, in a research note Wednesday. Mazor's Renaissance is primarily used to place pedicle screws and the feedback on the use of robots in spine surgeries have been mixed, Antalffy wrote. That can change with this announcement. After all, Medtronic dominates the spine segment and a robotics play by the company can drive the market.  

"We do think a move like this from Medtronic could lend greater momentum to spine robotics adoption," Antalffy wrote.

Other companies in the spinal robotics space are French company Medtech that makes the Rosa robot approved in the U.S. Globus Medical bought robotics company Excelsius Surgical in 2014 and the company is developing robots for use in spine, brain and therapeutic markets, but nothing is expected to be approved and on the market until next year.

The agreement signifies that Medtronic sees value in robotics even beyond its own internal program that the company is widely known to be developing although details on it are scant. 

"Although Mazor's platform will remain open architecture, we suspect that future product development initiatives could generate a more Medtronic-implant friendly bias and gradually turn into a negotiation tactic for Medtronic around the implant/screw decision (or "bundle") for customers," Antalffy speculated. "We think this could be a natural fit given Medtronic's commanding market share position in the US spine metal/implant segment."

This is precisely what Stryker has done after buying Mako Surgical. The orthopedics player has slowly introduced Stryker's own products - a full hip and a partial knee -- on the Mako robot and the U.S. market will see a full launch of its total knee, Triathlon, on the Mako robot in 2017. Antalffy believes that the Mako platform could be leveraged for a future spine application.

Medtronic's move might also be a way to distinguish itself from smaller spine players like Nuvasive, who among others have chipped away at the company's core spine business -- screws, rods and the like -- over the years. Nuvasive doesn't have a robotics product although has deep interest in the technology, according to Antalffy.

Market dynamics and competition aside, believers in robotics, will find much to cheer about in the partnership between Mazor and Medtronic. 

Arundhati Parmar is senior editor at MD+DI. Reach her at [email protected]  and on Twitter @aparmarbb

 

 

 

 

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