Medtronic Looks to Strengthen Spine with Osteotech Purchase

Article preview from In-Vivo - September, 2010

Medtronic, struggling to hold onto its sizable share of the shrinking spinal market, made a bid for publicly traded Osteotech, a maker of a demineralized bone matrix agent that will broaden the company's regenerative product portfolio.

Medtronic Looks to Strengthen Spine with Osteotech Purchase

Our monthly overview of dealmaking in the biopharmaceutical, medical device and in vitro diagnostics industries.

by Tom Salemi

Medtronic Inc., struggling hold onto its sizable share of the shrinking spinal market, once again turned to an acquisition strategy, to grow its spinal business. The company is looking to bolster one of the four pillars of its $3.5 billion spinal division by making a bid for publicly traded Osteotech Inc., a maker of a demineralized bone matrix agent that will broaden the company's regenerative product portfolio. (Thoracolumbar, cervical, and minimal access spinal technologies are the other three areas of Medtronic Spine.) The Osteotech portfolio should expand the reach of Medtronic's existing biologics portfolio which includes its Infuse bone graft, Progenix DBM putty, Osteofil allograft paste and its MasterGraft products.

In a recent report of the orthopedics and spine sector, BMO Capital Markets put Medtronic's second quarter market share at 35.9%, a far fall from the 48% share it held a few years ago. (See Exhibit 1.) "They have been losing market share in the spine division," says Joanne K. Wuensch, managing director of medical technology equity research at BMO. "They've had a slowdown in each of their spine segments, whether in biologics or hardware. Some of it is simply the cadence of new product flow. Some of it is associated with a crackdown on the off-label marketing of its Infuse BMP biologic and some of it is probably a poor integration of the Kyphon acquisition. It's all rolled up into disappointing spine revenues and market share losses."

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