New Medtronic CEO: We’re Keeping Spine

The new head of Medtronic says he’s not inclined to let go of the company’s spinal unit—a division that has been a bit of a drag on the company’s overall growth.

Rumors that Medtronic would sell of its have been brewing for a while, long before Omar Ishrak took the helm in June from previous CEO Bill Hawkins. Medtronic’s growth has slowed as a result of a decline in medical procedures, product recalls and government investigations into the use of some devices.

A split made sense for Abbott Laboratories Inc., which announced plans earlier this month to separate its drug business from medical products, Ishrak told Reuters, but he sees Medtronic’s spine business as critical to the company’s overall business.

“Abbott made the assessment that overall, there’s less value (as a whole) than in the different parts. It makes sense from their perspective,” he told the news service, “We as well have to look at our portfolio in that way at all time.”
According to Ishrak, the company’s management has looked at whether different Medtronic businesses can perform better on their own. Medtronic’s spine business benefits from other units of Medtronic, such as its business that makes surgical tools and navigation systems.

“It’s something we always examine and now we’ve done that assessment for Medtronic … that’s something we should do on a periodic basis and our assessment is that the different pieces of Medtronic actually add value,” he said.

Ishrak, previously CEO of GE Healthcare Systems, said the company’s board “fully supports” the a strategy of increasing penetration of its devices in U.S. markets, as well as increasing its presence in emerging markets.

“If you just look at our existing products … if they were the standard of care around the world, we’d have a $150 billion opportunity,” he said. “We’ve got about 10 percent of that. There are clear opportunities to increase penetration.”

He expects the spine business to eventually recover from troubles such as a Senate investigation into whether doctors who were paid by Medtronic failed to report significant side effects of Infuse spinal fusion product. The growth should return as an aging population demands treatment for common back ailments. Ishrak told Reuters he will do whatever it takes to maintain integrity and patient safety, and that hiding adverse side effects would not be tolerated.

Ishrak expects U.S. demand for medical devices to remain sluggish as long as the economy is weak and unemployment high. He said the company is still looking for acquisitions, especially in the cardiology space.

Ishrak said he is not looking to cut Medtronic’s research budget, but he wants research and development to show more direct results. He said the company’s R&D spending is “appropriate” but that the return is “inadequate.” He said the company launched 60 products last year and only grew by 2 percent.

Medtronic had total sales of $16 billion in its fiscal year ended April 2010.