Medtronic CEO: No Advantage in Spine Biz Spin-off
Medtronic, Inc., CEO Omar Ishrak reportedly sees no advantage in spinning off the company's spine business, which has come under scrutiny in recent months.
According to Reuters, Ishrak-who became the company's leader in June-expects the spine business to recover from its recent troubles, particularly given that the aging population is likely to start needing treatment for common back problems.
Earlier this year, The Spine Journal published two articles about Medtronic's Infuse-a bioengineered bone growth protein that's widely used in spinal fusion procedures. One claimed that the product may increase the risk of sterility in men and another said that some of the product's adverse effects were not reported in industry-sponsored studies.
Ishrak defended Medtronic following the articles, pointing out that they didn't raise questions about the data that Medtronic submitted to the U.S. Food and Drug Administration in the product approval process or the information that's available to physicians through instructions-for-use brochures attached to each product sold.
Around the same time that the articles were published, a U.S. Senate committee launched an investigation into whether doctors who were paid by Medtronic failed to report significant side effects of Infuse.
Controversy surrounding Infuse prompted Larry Biegelsen, a senior analyst with Wells Fargo Securities, to release a report in July, outlining what he believed 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. Biegelsen said he thought investors would generally welcome the decision to divest the spine business if the price was right.
But Ishrak told Reuters that Medtronic executives have explored whether the company's different businesses can perform better on their own. In the case of the spine unit, it benefits from other Medtronic businesses, like one that makes surgical tools and navigation systems.
Ishrak told Reuters that he'll do whatever it takes to maintain integrity and patient safety-and he said that hiding adverse side effects wouldn't be tolerated. In August, Medtronic provided a $2.5 million grant to Yale University for an independent investigation of Infuse, and it's still underway.
Although he thinks the future of Medtronic's spine business is bright, Ishrak said that he does expect U.S. demand for medical devices to remain sluggish for as long as there is a weak economy and high unemployment.
“I don't expect high growth by any means. Flat at best is what we can expect,” he told Reuters, adding that he still anticipates 1 percent to 3 percent sales growth in fiscal 2012, which will end in April.
Medtronic-the world's largest medical device company-is among Minnesota's 10 largest public companies based on revenue, which totaled $15.9 billion in the most recently completed fiscal year.
To read Reuters' full report, click here.