Medtronic Eyeing U.S.-Based, Early-Stage Technologies

By Jof Enriquez,
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Medtronic is on the lookout for early-stage technologies developed by medical device firms in the United States, as well as larger acquisitions that can help the company implement a three-pronged strategy, in the wake of its $43 billion merger with Covidien. The tax inversion deal allowed Medtronic to relocate to Ireland, where taxes are lighter, and it freed up billions in overseas cash that the company may soon leverage into potential deals.

Omar Ishrak, CEO of Medtronic, told analysts during a conference call that the company will use the additional cash from the Covidien deal "to look at early technologies, in the U.S. primarily, where there may be opportunities which we haven't been able to participate in to the degree that we’d like to, to create a long-term technology pipeline of early stage technologies that we think can make a difference."

"So the M&A activity from us, certainly from a technology perspective, is very sort of close to what we’re focusing on. Bigger deals, obviously opportunistically, we’ll look at it, but that’s a matter of our overall financial bandwidth and our management bandwidth," Ishrak said during the call, during which he discussed Medtronic's latest quarterly fiscal results, the first such update since the company closed its merger with Covidien.

Medtronic’s leadership believes that acquiring and developing new technologies will help the company achieve therapy innovation – one of its three long-term strategies. Globalization, with a focus on emerging markets, and providing value-based healthcare products are Medtronic’s other two long-term goals, the company has stated.

In March, Medtronic acquired Sophono, Inc. of Boulder, Colo., a privately held developer of hearing implants, for an undisclosed sum. Sophono makes minimally invasive magnetic bone conduction hearing implants. Also in March, Medtronic participated in a $16.5 million round of financing for Glooko, a diabetes management startup based in Palo Alto, Calif., reported the Phoenix Business Journal.

In February, Medtronic bought Advanced Uro-Solutions, based in Elizabethton, Tenn., a privately held developer of neurostimulation products for the treatment of bladder control issues.

According to the Wall Street Journal, Medtronic reported a net loss of $1 million for the fourth quarter, down from a profit of $448 million a year ago. The slide was largely as a result of one-time charges, namely $880 million related to the merger with Covidien, and a $329 million settlement with the IRS regarding Medtronic's acquisition of Kyphon. A strong dollar continued to affect earnings growth, wiping out as much as $1.5 billion in sales, Medtronic reported.