M&A in Robotic Surgery: Medtronic Acquires Mazor Robotics
Only a few weeks ago, in our blog on Stryker’s acquisition of K2M, we wondered whether Mazor Robotics would ever make an appearance in M&A headlines. After all, the company has been one of the most innovative forces in robotic spine surgery for years, with a nearly equivalent market capitalization to K2M and much more rapid revenue growth, as well as an extensive strategic partnership with Medtronic, a global leader in spinal implants.
Failing to disappoint, on September 20th, Mazor Robotics agreed to be fully acquired by Medtronic for $1.64bn. This acquisition falls in line with recent trends in the spine field; with the increasing commoditization of spinal implants, robotics and navigation technology have become important means of differentiating companies’ offerings. This has spurred existing competitors to seek out strategic acquisitions that would complement their spine portfolios with robotic offerings.
Examples of this include Globus Medical’s acquisition of Excelsius Surgical and Zimmer Biomet’s acquisition of Medtech Rosa. However, at the time of acquisition, none of these companies had platforms that rivalled Mazor Robotics’, which is significantly ahead of the competition in terms of market penetration.
More closely resembling Medtronic’s purchase of Mazor is Stryker’s 2013 purchase of MAKO Surgical; both represent similarly-valued disruptive acquisitions of mature technologies with significant market penetration. If the aftermath of the Stryker-MAKO deal is any indication of what lies ahead for the Medtronic and Mazor arrangement, then we should surely expect to see a great deal of innovation and disruption going forward.
More specifically, the acquisition will provide Medtronic with full control over future development of Mazor’s technology. For example, the acquisition will allow Medtronic to better integrate its StealthStation navigation system with Mazor’s robotic platforms, which do not have inherent navigation capabilities. This will be particularly advantageous considering that both of its competitors - Globus Medical’s ExcelsiusGPS and Zimmer Biomet’s ROSA - already have such capabilities. In fact, the new integrated Mazor X Stealth platform has been launched at NASS 2018 and will be made available to customers at the end of the year. One other change we might witness is that Medtronic will make Mazor’s platforms compatible only with its own implants, in similar fashion to what Smith & Nephew and Stryker did with Navio and MAKO, respectively, in the large-joint implant space.
With that said, however, our analysis leads us to believe that this acquisition will not perturb the market extensively in the short term. As part of their existing partnership since 2016, Medtronic has already been utilizing its global sales team to promote Mazor’s platforms, resulting in significant revenue synergy from cross-selling its own implants. Apart from some increased integration, it will be business as usual for now. However, given Medtronic’s extensive R&D budget and market access, which Mazor does not possess, we expect this acquisition to accelerate the overall development and adoption of robotic spine technology in the foreseeable future.