Medtronic is hastening its entry into the competitive surgical robotics market through a partnership agreement and an investment deal with Israeli startup Mazor Robotics, developer of the Renaissance surgical robotic guidance systems for minimally-invasive spine surgery.
The first deal is a two-stage, multi-faceted, commercial agreement for co-promotion, co-development and – upon meeting certain milestones – global distribution of Mazor's spine products. If milestones are met by the end of 2017, then Medtronic gains exclusive global sales and distribution rights for Mazor’s products.
Further, the deal includes annual quotas with a cumulative potential of hundreds of next-generation systems over a four-year period. Also, Medtronic commits to buying 15 of Mazor's future systems in 2016. In exchange, Medtronic becomes Mazor's exclusive partner for development and commercialization of robotic-based spine systems and applications, which the two companies have begun to co-develop.
“New developments, such as synergistic implants, could generate new revenue streams for Mazor, beyond the anticipated growth in our current revenue streams from capital equipment, service agreements and disposables. The synergy between the organizations’ teams will potentially yield operational efficiency benefits for Mazor,” said Mazor CEO Ori Hadomi in the announcement.
The second deal is a three-step equity investment by Medtronic in Mazor. In the first tranche, Medtronic will purchase 4 percent of Mazor for $11.9 million. In the second tranche, Medtronic will increase its stake to 10 percent after buying 6 percent of Mazor’s issued and outstanding securities. Medtronic has the option to cap the two tranches at $20 million apiece. In a potential third tranche, Mazor will have the right to consummate the issuance to Medtronic of securities representing up to 5 percent of Mazor’s outstanding ordinary shares on a fully diluted basis, but only if the second tranche is successful, and upon the start of the global distribution agreement.
The majority of the spine market belongs to Medtronic and Johnson & Johnson's DePuy Synthes. Medtronic has remained the leader in both the traditional and minimally-invasive surgery (MIS) markets, as the company’s large portfolio of spine products and massive sales force prove to be too much for any competitor to break, according to an iData Research column published in MDO.
Partnering with Medtronic extends the reach of Mazor's products significantly.
“Medtronic has the biggest and widest sales organization in spine surgery,” Hadomi said in an interview with Bloomberg. “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.”
According to Bloomberg, Mazor has sold more than 110 of its original Renaissance systems, which can cost close to $1 million and use a mount that is affixed to the spine and 3-D images to plot the location of each vertebra so screws and implants are precisely placed. Mazor’s website claims that its flagship surgical robotics system offers higher accuracy, lower radiation dose, and a fast learning curve to surgeons. Hadomi told Bloomberg the company has plans to develop the system for use outside the spine, as it retains the right to develop the technology on its own.
The deals with Mazor allow Medtronic to drive its market dominance in the spine segment further. Medtronic could pair its wide portfolio of spinal implants with Mazor's surgical robotics technology, similar to how Stryker is integrating MAKO robots with its reconstructive products. Medtronic previously announced plans to integrate Covidien's surgical instruments into its own surgical robotics platform that is currently under development. There are few details but the company said previously that it will launch this year.
Medtronic's increased foray into robotics will keep it toe-to-toe with J&J — which signed a robotics joint venture with Verily last year — with pioneer Intuitive Surgical and its da Vinci system, and with a growing number of new entrants in this market space.