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Medtronic to Acquire Titan Spine for Spine Portfolio Boost

Zacks Equity Research

Medtronic, plc MDT recently entered into a definitive agreement to acquire titanium spine interbody implant and surface technology company, Titan Spine. This development is part of the company’s efforts to expand its Spine portfolio.

Financial terms of the deal have been kept under wraps. However, the company expects this transaction to be completed during Medtronic's first-quarter fiscal 2020 (ending Jul 26, 2019), subject to fulfilment of certain closing conditions.

Per the terms of the contract, Medtronic will buy Titan Spine's full portfolio comprising a comprehensive line of titanium, surface-enhanced interbody fusion devices.

In this regard, interbody implants are parts that can be inserted between the vertebrae during spinal fusion surgery. This helps relieving pressure on the nerves and holding the vertebrae in place while fusion occurs.

Is the Deal a Strategic Fit?

According to Medtronic, interbody implants material and shape play an important role in the bone growth process during fusions and nowadays, titanium interbody devices are fast gaining ground on rising demand among surgeons. Medtronic expects this purchase to be strategic as Titan Spine’ssurface-enhanced titanium implants when combined with Medtronic’s comprehensive biologics portfolio can improve patient outcomes in spinal procedures.

Financial Impact of the Pact

The buyout is expected to be inconsequential to Medtronic's fiscal 2020 adjusted earnings per share. However, it is estimated to meet Medtronic's long-term financial metrics for acquisitions.

Market Potential in Spine Space

Per a Mordor Intelligence report, the global market for Spinal Surgery Devices is estimated to reach a value worth $16.6 billion by 2021 at a 5% CAGR from 2016 onward.  Taking such abundant prospects into account, we believe, the company’s latest development is a strategic fit.

Medtronic’s Progress in Spine Arm

In a bid to grow in the field of robotics spine surgery, Medtronic earlier acquired Mazor Robotics, an Israel-based robotic surgical guidance systems company, for a consideration of $1.64 billion. Per Medtronic, this consolidation is a calculated move for the company's growing spine surgery business.

The buyout has combined Medtronic's market-leading spine implants, navigation and intra-operative imaging technology with the acquired company's robotic-assisted surgery (RAS) systems. Following the closure of this takeover, Medtronic launched the Mazor X Stealth Edition robotics guidance platform in January and already received a positive feedback for this integration of best-in-class robotics and navigation capability.

Share Price Performance

Over the past year, shares of Medtronic have outperformed its industry. The stock has gained 3.5% compared with the industry’s 2.2% rise. 

Zacks Rank & Key Picks

Medtronic currently carries a Zacks Rank #3. (Hold). Some better-ranked stocks in the broader medical space are Stryker Corporation SYK, CONMED CNMD and DENTSPLY SIRONA Inc XRAY, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker’s long-term earnings growth rate is projected to be 10.1%

CONMED’s long-term earnings growth rate is expected at 13.3%.

DENTSPLY SIRONA’s long-term earnings growth rate is predicted to be 11.5%.

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Medtronic PLC (MDT) : Free Stock Analysis Report
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