Will Controversy Lead Medtronic To Sell Its Spine Business? (Forbes)
Could the controversy over Medtronic’s bone-graft product Infuse, assailed in a major medical journal last week, lead the medical device company to ditch it’s entire spine business?
Lawrence Biegelsen, a sell-side analyst at Wells Fargo Securities, makes that suggestion in a note downgrading Medtronic to market perform today. He says that last week’s report by The Spine Journal, which said that surgeons receiving millions of dollars from Medtronic failed to disclose side effects from clinical trials of Infuse, is “just the tip of the iceberg.”
Biegelsen writes:
We believe the InFuse papers published in The Spine Journal on June 28 will have broader implications for Medtronic (MDT-$39.12; Market Perform) and its spine business than the Street currently expects. We think The Spine Journal papers could lead to the following outcomes: (1) a significant reduction in the sales of MDT’s spine biologics franchise; (2) a reduction in the sales of MDT’s spinal instrumentation business; (3) a potential FDA review of InFuse, including an Advisory Committee meeting, which could lead to more limited use of InFuse; (4) potentially larger criminal penalties in the Department of Justice (DOJ) investigation of the off-label promotion of InFuse; (5) the potential emergence of class action lawsuits; and (6)the potential sale of the entire spine business.
Biegelsen writes that in the short term, competing products like NuVasive and Orthofix could benefit from Infuse’s porblems, but that the controversy is likely to result in fewer surgical procedures using any of these products to create bone growth. There has been a wave of consolidation in the spine business, with Johnson & Johnson recently purchasing spine giant Synthes.