Medtronic Talks "Disappointing" Kyphon Acqusition and Future Growth
BY LAUREN UZDIENSKI, APRIL 15, 2009
In recent interviews, Medtronic CEO Bill Hawkins discussed some of the challenges associated with the company's $4.2 billion acquisition of Kyphon in 2007 as well as plans for future acquisitions.
Kyphon brought innovative products and an entree into new markets, but Hawkins called the acquisition a "disappointment" on the FQ3:09 call back in February on account of integration issues. From a sales and marketing perspective, Kyphon's products address older patients, where Medtronic has traditionally focused on a younger patient demographic. Last quarter, revenues for the spine business increased 3% to $832 million, with Kyphon reporting flat growth and $148 million in sales, several percentage points below our growth estimate for the spine market overall. Of course, Kyphon is not the spine unit's only concern; the business has also faced backlash from the off-label use of its Infuse product, whistleblower lawsuits and market share losses from smaller competitors.
Looking ahead, Hawkins says the company will focus on integrating its recent acquisitions rather than undertaking any "transformational" M&A activity, though smaller deals are possible. In terms of its product offering, the spine business is planning to launch a new platform in FY2010 that will serve as the "backbone" of the unit and replace a legacy product portfolio as well as continue to invest in biologics and navigation.
