Analyst: Medtronic May Sell Spinal Unit Amid Scrutiny

A senior analyst with Wells Fargo Securities reported that Medtronic may potentially sell its entire spine business amid scrutiny of its Infuse spinal product.

Controversy surrounding Medtronic, Inc.'s Infuse spinal product may force the medical device giant to sell its spine business, according to an industry analyst.

Larry Biegelsen, a senior analyst with Wells Fargo Securities, on Tuesday released a report outlining what he believes could be several outcomes for Medtronic's spine division-including criminal penalties, class-action lawsuits, decreased sales, and even the potential sale of the division.

In his analysis, Biegelsen reduced his revenue and earnings outlook for Medtronic's 2012 fiscal year because of “the increasing negative publicity for Infuse and the likely negative spillover to [Medtronic's] larger spinal instrumentation business.”

According to Biegelsen, Medtronic's spine business accounted for 21 percent of its total sales in the company's 2011 fiscal year, which ended April 29. Biegelsen said that he thinks investors would generally welcome the decision to divest the spine business if the price is right.

The Infuse product has made headlines recently following reports that scrutinized the product and the studies conducted to ensure its safety.

The Spine Journal recently published two articles about the product-one that claims the product may increase the risk of sterility in men and another that claims that the product's adverse effects were not reported in industry-sponsored studies.

In addition, two members of the Senate Finance Committee sent a letter to Medtronic last month, requesting information about the Infuse product and the financial ties between the company and doctors who conducted clinical trials involving the product.

The letter said that senators are “extremely troubled” by recent media reports suggesting that doctors conducting trials examining the safety and effectiveness of Infuse were aware that the product may cause medical complications but didn't report it in medical documentation.

Omar Ishrak, who assumed the role of CEO at Medtronic last month, issued a statement last week defending the company.

“Integrity and patient safety are my highest priorities,” he wrote. “While The Spine Journal articles raise questions about researchers' conclusions in their published peer-reviewed literature, the articles do not raise questions about the data Medtronic submitted to the FDA in the approval process or the information available to physicians today through the instructions-for-use brochure attached to each product sold.”

When asked about the possible sale of its spine business, a Medtronic spokesman reached by phone Wednesday said that the company does not comment on speculation.

Fridley-based Medtronic is the world's largest medical device company and Minnesota's seventh-largest public company based on revenue, which totaled $15.93 billion in its most recent fiscal year.