Leading medical-device company Medtronic (MDT 1.27%) has received two Food and Drug Administration (FDA) clearances in the past month for its advanced technology in spinal surgery. These may be crucial as the company looks to jump-start growth by expanding its footprint in the robotic-assisted surgery space.

In late June, the FDA cleared Medtronic's LigaPASS 2.0 device to help correct spinal deformities. The device allows the surgeon to stabilize the spinal vertebrae to prevent them from collapsing after the surgical procedure. Mechanical failure after the operation is relatively common, but Medtronic says that its ligament augmentation system lowers the need for a follow-up surgery from 16% to only 3% of patients.

In July, the FDA gave a green light to Medtronic's UNiD Spine Analyzer v4.0 planning platform. This system adds machine learning to help surgeons prepare for a spinal surgery, and marks the first FDA clearance of a predictive model for spinal surgery.

Over the years, the company has built up a database of over 10,000 spine surgery cases. The platform uses this information to help the surgeon understand the alignment before surgery and predict spinal alignment up to six months after the operation.

This tool is particularly helpful for degenerative spine procedures, as nearly a third of patients have a hidden deformity and up to 60% of patients remain poorly aligned after the surgery. If the alignment is incorrect, the discs adjacent to the site may get damaged over time after the operation, leading to complications or even the need for another surgery. Advance planning allows the surgeon to select the best implants for the patient and get the correct alignment during the procedure.

The platform also enables the surgeon to track the recovery process and the long-term outcomes from the surgery. This additional information should help caregivers make better decisions and further improve surgeries in the future.

These FDA clearances help Medtronic stay at the forefront of the spine market, a key business segment for the company. Cranial and spinal technologies account for about half of the company's neuroscience division, which, in turn, generates 28% of total sales. The company brought in $4.5 billion during its already-finished 2022 fiscal year from the cranial and spinal technologies segment, enough to capture about 30% of the overall spine surgery market.

As another benefit, these technologies may be integrated with Medtronic's Mazor X Stealth to make the spinal surgical robot more attractive to physicians. Spinal-surgery robots are a relatively small (but high-growth) area of the spine market. For example, the spinal-implant market was about $9 billion in 2020 and is expected to grow about 3% annually for the next five years, whereas the spinal surgical robotics space is only valued at $124 million but is growing at a much more rapid rate of 16% to 20% annually over the next five years.

Medtronic is also eyeing robotic surgery for soft tissue cases with its more recent launch of the Hugo Robotic-Assisted Surgery (RAS) system. The Hugo RAS has a "CE" mark of approval in Europe but is still building its case for approval in the U.S. market.

Surgical robots for soft tissue is a far larger market than for the spine. It had a valuation of $1.6 billion in 2019 and is expected to grow by 25% over the next five years. In contrast to spinal surgical robots, where Medtronic holds a strong position against competitors Stryker, Zimmer-Biomet, and Globus Medical in the area of soft tissue, Medtronic must go up against well-established incumbent Intuitive Surgical. To gain traction in this market, Medtronic must make a compelling case for its robotic system through more effective technology, lower cost, or ease of use.

Neither the LigaPASS 2.0 device or the UNiD Spine Analyzer v4.0 is likely to be a game changer for Medtronic, but these approvals help it stay at the leading edge of the spine market and may also help the company build share in the rapidly growing field of robotic surgery. At this point, Medtronic is clearly committed to robotic surgery, and building a strong brand reputation in spinal robots may cross-pollinate into the soft-tissue area.

Medtronic offers a relatively safe valuation with a price-to-earnings ratio of only 24, falling at the low end of its five-year historical values. And with leadership positions in cardiovascular, diabetes, and neuroscience, Medtronic offers great diversification. It may be worth overlooking its sluggish five-year growth and considering the company's more promising growth opportunities ahead.

Natalie Forbes has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Globus Medical and Intuitive Surgical. The Motley Fool has a disclosure policy.

Visit link:

How Medtronic Is Strengthening Its Robotics Portfolio - The Motley Fool