Medtronic’s Analyst Day Highlights Spine, Joint Recon Strategies

In its Analyst Day presentations on June 6, Medtronic (MDT) announced the acquisition of Responsive Orthopedics, a start-up focused on sales of low-cost hip and knee replacements. A primary knee is slated for commercial U.S. availability within 1H17; a primary hip is expected to follow in 1H18.

The knee is already cleared by FDA—Responsive Orthopedics received 510(k) clearance to market its Total Knee Arthroplasty system in June 2015. The hip is not yet cleared.

Responsive Orthopedics is a Minnesota-based start-up co-founded by industry veteran Doug Kohrs to offer premium implants at up to 40% of the typical implant price, targeting hospitals engaged in bundled payment initiatives.

The acquisition supports MDT’s Orthopedic Solutions initiative, which seeks to reduce system costs for hospital customers across an entire episode of care while maintaining or improving outcomes. (No word presently on whether other orthopaedic product types will be added to the mix.)

The implant offering is described as premium products at a lower price. Aside from the knee and hip implant component, MDT’s solution includes access to the AQUAMANTYS device, used to help control bleeding in a high-risk segment of patients undergoing orthopaedic procedures, and a proprietary post-acute monitoring platform to manage co-morbidities. The primary economics of MDT’s Orthopedic Solutions rely more on the savings that will be shared with hospitals, as opposed to product sales.

ORTHOWORLD estimates placed Medtronic’s orthopaedic/spinal revenue at $2.9 billion in 2015, a 2.3% decrease vs. 2014. During Analyst Day, MDT leadership affirmed its strategies to return the company to growth. Within the Restorative Therapies Group, where spine resides, these tactics included:

• Reinvigorate therapy innovation across all businesses through changes in structure and talent: group leadership to ensure that hospital customers receive a consistent cadence of new products, with emphasis on the entire patient care continuum
• Leverage global presence, breadth of product and sheer size to drive penetration/market share gains in emerging markets (noting too the opportunities for technology sharing and cross-selling synergies among groups)
• Utilize value based healthcare episode of care bundles to innovatively enter new markets, share direct accountability for patient outcomes. To recap, the Responsive Orthopedics acquisition is a step in support of this tactic.

Specific to spine, leadership pointed up elements like expanded indications for INFUSE, investments in instrument sets, faster execution of product launches that encompass a whole procedural solution (vs. just piecemeal product releases) and taking advantage of surgical synergies, like navigation and O-arms. Further, a new investment and development agreement with Mazor Robotics shores up robotic surgical navigation for spine procedures.

Here is the proposed timetable of procedural spine solution launches for future MDT fiscal years. (Remember, MDT FYs end in April.)

Medtronic will report its next performance results in August.
Sources: Medtronic plc, Analyst Day Presentations, ORTHOWORLD Inc.