Mazor Robotics (MZOR) entered Phase II of its strategic partnership with Medtronic (MDT), which will now take on exclusive global distribution of the Mazor X surgical assistance platform. MDT will also make its US $40MM third tranche investment in MZOR.
The companies established Phase I of their relationship in 2Q16. The move to Phase II occurred ahead of the planned 1Q18 timeline, as Mazor alluded to in its 2Q17 call. The timeline was accelerated in light of higher than expected global market acceptance and demand for the Mazor X system, and early achievement of certain sales and marketing milestones by both companies.
Under terms of Phase II:
- Medtronic assumes exclusive global spine market commercial responsibility for Mazor X
- MDT will implement annual minimums for purchase of Mazor X systems (with a cumulative potential of hundreds of systems over 4.5 years)
- ~30 MZOR sales staff will join MDT
- The companies will co-develop spine products that capitalize on MZOR's surgical planning and MDT's navigation/implants; initial results should be showcased at NASS 2017
- MDT will invest $40MM in MZOR, yielding a total current investment of $72MM
Mazor will recognize revenues for Mazor X at contracted pricing that is lower than what was realized through its direct sales channel. Further, MZOR will receive synergy fees for use of Medtronic implants. Moving from direct sales to this new distribution model is expected to reduce MZOR's annual operating expenses by ~$13MM, immediately.
Mazor will still market the Renaissance surgical guidance system in certain market segments–not specified today–where Renaissance is able to provide customers with added value.
Sources: Mazor Robotics Ltd.; ORTHOWORLD Inc.