News Feature | June 8, 2016

Medtronic Launches Low-Cost Hip and Knee Program, Forecasts Surgical Robot Revenue By FY 2019

By Jof Enriquez,
Follow me on Twitter @jofenriq


Medtronic expects "material revenue" from its new robotic surgery business in fiscal year 2019, company executives said during Medtronic's investor day presentation held recently. They also unveiled plans to offer value-based hip and knee replacement devices, and confirmed submission for FDA approval of the first "hybrid closed loop" insulin pump.

Bryan Hanson, president of Medtronic's Minimally Invasive Therapies Group (MITG), said 150 employees are now working on the company’s surgical robots, which initially will roll out in India, reports Reuters. Medtronic is looking to compete with robotic surgery pioneer and leader Intuitive Surgical, the Verb Surgical joint venture of Johnson & Johnson and Verily, and a growing list of new players. Hanson said Medtronic's value proposition is lowered costs for surgical robots, which are generally more expensive than conventional surgical methods.

"It is costly today. We are going to be looking to eliminate that as a barrier," Hanson said during the presentation, according to Reuters.

Medtronic is utilizing the same approach for its new orthopedics venture: a low-cost knee and hip replacement portfolio tied to the new bundled payment model by the Centers for Medicare and Medicaid Services (CMS), designed to slash costs to these most common surgical procedures, which cost Medicare about $7 billion in hospital bills each year. The plan encourages hospitals to use less costly implants that result in target clinical outcomes, such as reduced readmission rates or shortened recovery duration.

“We don’t consider these to be value products at all,” said Geoffrey Martha, president of the Restorative Therapies Group, reports the Star Tribune. “These are premium products, just priced differently, priced lower. The same team that has designed many of the knees and hips that are out there in the market today sold by the big players designed these ones. So there is no impairment on the quality from our perspective.”

Medtronic said it purchased Responsive Orthopedics, a niche maker of lower-cost artificial knees and hips, to make its implants. Responsive Orthopedics’ total knee replacement system was FDA-approved in the U.S. last year, and the company is still developing its hip replacement system, according to the Star Tribune.

Last month, Medtronic signed a deal to combine its spine products with Mazor Robotics' Renaissance surgical robotic guidance systems for minimally invasive spine surgery.

Medtronic CEO Omar Ishrak last week said last week during the company's Q4 2016 earnings call that, “Regarding our pipeline, we are on-track to submit the PMA for the MiniMed 670G with the Enlite 3 CGM sensors to the FDA before the end of June. Once launched, this would be the world’s first hybrid closed-loop system." Medtronic confirmed this statement during the investor day meeting.

Ishrak said the company intends to generate $40 billion in free cash flow over the next five years, according to The Street. By allotment, $20 billion will be returned to shareholders, $10 billion will be held for M&A and debt reduction, and the remaining $10 billion will be used for financial flexibility.

"Our organization is in a unique position to drive consistent revenue growth with an unmatched pipeline in attractive, diversified healthcare markets across the globe as we execute on a broad, sustainable platform," Ishrak said in a press release. "Our three differentiated strategies – therapy innovation, globalization, and economic value - consistently allow us to generate strong, balanced growth by capitalizing on our robust innovation pipeline, geographic reach, and innovative new healthcare business models."