MDDI_Medical Device & Diagnostic Industry

MDDI, July 2016

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MD + DI MEDICAL DEVICE AND DIAGNOSTIC INDUSTRY JULY 2016 | 11 Image courtesy of oKo_swaNoMURPHY/istocKPHoto.coM Medtronic's robotics development pro- gram has been whispered about for months, but little about the work has been divulged. In early June, the company got onlookers buzzing by revealing information about its platform, which has been under develop- ment for a little more than three years and is already on its tenth prototype. In commentary at the company's annual analyst day, executive Bryan Hanson said he expects the robotics platform to contribute "material revenue growth" by its fiscal year 2019 (the company started its 2017 fiscal year at the end of April) and to launch be- fore then. While the technology has been reviewed by thousands of users, one more prototype may potentially be developed before a design freeze. The platform is a flexible system that will be used, at least initially, in bariatric, thorac- ic, and colorectal procedures, as well as other areas, like general and urology procedures. "Right out of the gate, [we'll] be able to do every surgery that's done with robotics today, and probably more," said Hanson, who is executive vice president and group president of the Minimally Invasive Thera- pies Group (MITG). Medtronic has been discussing its time- line with FDA, but the United States won't be the first region to see the robotics plat- form. The company is planning to launch the system first in India. "We will roll this out first in India be- cause of the regulatory restrictions there, and we'll learn quite a bit on that first initial launch . . . We're going to make sure that we take this slow and steady. We don't want any mistakes," Hanson said. At the analyst day, attendees saw a photo of the first prototype, as well as a video of a more recent iteration, including draped ro- botic arms, a surgeon controlling the console in a lab, and the corresponding surgical tools. The details are a departure from the tight- lipped approach Medtronic has taken with regard to its robotics program in the past. A company spokesperson declined comment for an April MD+DI article on companies entering the surgical robotics arena. Executives didn't elaborate on the an- ticipated price of the system but did say the "enhanced utilization" allowed with the plat- form will bring down the average procedure cost versus today's commercial systems. "There is a barrier to robotic adoption. It is costly today," Hanson said. "We're going to be looking to eliminate that as a barrier." The robotics platform, Medtronic's big- gest R&D investment in the MITG division, is forecasted to contribute 50–150 basis points of sales growth to the segment by fis- cal year 2019. That's an estimated $50–$150 million in annual sales, according to Wells Fargo analyst Larry Biegelsen. Development has included an initial partnership with the Germany Aerospace Center DLR as well as collaborations with other groups. "We want those technical partnerships because we want to take as many things off the shelf as we can . . . You get to market faster if it's off the shelf because you don't have to create it, it doesn't have to be pro- prietary. The fact is, it's lower cost if you can take things off the shelf, and ultimately more easily upgradeable," Hanson said. There are 150 employees in three locales dedicated to the project. Robotic arms are the focus in Germany; software is being developed in Cambridge, MA; and instru- mentation is handled mainly in North Haven, CT. Interest in the surgical robotics market, estimated by Medtronic executives to be an approximately $2 billion opportunity with a low-teens growth rate, is at an all-time high. There are several companies vying for a spot in the field. Medtronic's robotic revelations follow the announcement last month of its agree- ments with Mazor Robotics, a spine robot- ics company based in Israel, that include an equity stake as well as copromotion, code- velopment, and potentially exclusive global distribution rights for Medtronic. Verb Surgical, the joint venture between Johnson & Johnson and Google's Verily, is another of the growing number of compa- nies converging on the robotic-assisted sur- gery market. Verb expects to have a working prototype by the end of 2016, according to commentary at Johnson & Johnson's May analyst meeting. Though TransEnterix faced a setback earlier this year when FDA did not grant 510(k) clearance for it SurgiBot System, the company has turned its attentions to its ALF-X System. A 510(k) submission for that robotic system is expected to be filed in the fourth quarter of this year. At this point, market trailblazer Intuitive Surgical has had fair warning of the com- ing competition, but RBC analyst Brandon Henry wrote in a June 7 research note that these "competitive threats [are] still at least ~18–36 months away." "Additionally, [Intuitive Surgical] is not sitting idly and is using its strong balance sheet to accelerate investments in areas such as advanced imaging, advanced in- strumentation, less invasive access, train- ing technologies, next-generation robotic platforms, international expansion, and clinical/economic validation," Henry added. We have yet to see a clear "shot across the bow" from Intuitive Surgical. Still, given the robotics behemoth's monopoly on the market, competition likely won't find the coming battle for market share easy. —Marie Thibault Finally, Details on Medtronic's Robotics Platform "There is a barrier to robotic adoption. It is costly today. We're going to be looking to eliminate that as a barrier." Bryan Hanson, Medtronic

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