Why Medtronic opted to go big In spine and cranial with acquisitions of Mazor and Medicrea

August 18, 2021

Jacob Paul, senior vice president and president of Medtronic's cranial and spinal technologies group, explains how the company doubled down on the spinal surgery space by committing to significant acquisitions of robotics and artificial technologies that it believes will advance the level of care for spinal surgery patients.

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Tom Salemi (00:00):

Hey everyone, this is Tom Salemi of DeviceTalks. Welcome to our newest member of the DeviceTalks podcast family. It's called MedtronicTalks. Our constant search to find new ways to bring new insights in the MedTech industry led us to the fine, fine folks at Medtronic. They've agreed to make their senior leaders available to us and to you. In each episode, we'll discuss the opportunities and challenges facing one of MedTech's clear leaders, so you'll have an inside view on what makes Medtronic go. We'll ask the questions, Medtronic will provide the answers, and our great network of sponsors makes it all possible. So sit back, hop on a treadmill, take the dog for a walk, whatever you do when you listen to a great podcast, and let's listen to how Medtronic is getting the job done. Let's go.

Tom Salemi (00:45):

Hey everyone. This is Tom Salemi of DeviceTalks. Welcome to this episode of the MedtronicTalks podcast. We're going to talk about the spine business. I had a chance to speak with Jacob Paul. Jacob is the senior vice president at Medtronic. He's also president of the Cranial and Spinal Technologies group. This was a far-reaching conversation. We talked a bit of history about Medtronic's decision early on to really double down and recommit to the spinal sector after some challenges and how that came about. This includes the acquisition of Mazor and some other very cool advances in cranial and spinal care. So, very grateful to have Jacob on the podcast. But before we begin this interview, I'd like to introduce our sponsor, Viant Medical.

Tom Salemi (01:31):

All right. I'm here with Alton Shader, the CEO of Viant Medical. Alton, tell our listeners about Viant.

Alton Shader (01:38):

At its core, Viant is a design, development, and manufacturing services provider that is focused exclusively on the medical device market. We have over 6,000 team members in 24 facilities across the globe, and are proud to work closely with the world's leading medical device innovators and manufacturers, including Medtronic. But to truly understand our company, you really need to understand our vision, and our vision is to be the medical device industry's most trusted design and manufacturing services partner. This is what motivates our team, serving our customers and truly earning their trust. And at the next break, I'll share an example of how we have partnered with a customer to bring to market an innovative, minimally-invasive device that addresses one of the most debilitating and chronic conditions faced by people around the world.

Tom Salemi (02:30):

We'll hear more from Alton Shader and Viant Medical a little later in the podcast. If you want more information, you can go to viantmedical.com. Viant is spelled V-I-A-N-T.

Tom Salemi (02:41):

Now, let's begin our conversation with Jacob Paul. Well Jacob Paul, welcome to the podcast.

Jacob Paul (02:50):

Tom, nice to be here. Thank you for having me.

Tom Salemi (02:53):

My pleasure. I love the spine space. I covered it back in a decade or so ago and it was getting a lot of venture capital investment, and it's always had sort of that Wild West feel to it. There's a lot of territory to be grabbed. There was a lot of new technology coming up, a lot of new approaches to solve what seemed to be intractable problems. So excited to sort of see where we're at later and to see all the progress you've made. But first, I'd love to find a little bit about your background. What brought you into the MedTech sector? I don't think you started out right from the start, correct?

Jacob Paul (03:21):

No, I did not. Thank you for asking, Tom. I started my career in a tire company as an engineer.

Tom Salemi (03:29):

Oh.

Jacob Paul (03:29):

And then I went to the dark side, I went to finance, and so I worked with technology. So I worked at Intel. And it was around post-Y2K when there was a lot of consolidation happening there that I started to look at other sectors. And Medtronic was a market leader and a company with a strong mission, and that's the reason I came to Medtronic. And that's how I found my way here.

Tom Salemi (03:56):

What was it that really drew you to the company? And obviously, whatever drew you here was the right call, because you're still here. But what was it really about the culture of Medtronic that drew you here?

Jacob Paul (04:05):

I had heard about Medtronic from others, from people who worked there and I knew about the industry. I think the one aspect that drew me was the fact that they were a mission-driven company and the work that they did had a impact to patients. When you come into work every day and you know what you are doing is going to help the health and the outcomes of patients around the world, that's a compelling reason. We had some really great people, they are good to work with, and so that's needless to say a very easy decision for me.

Tom Salemi (04:41):

You came in on the finance side of things, as you called it, the dark side. You spent a few years there, but you eventually would move over to operations. Was that always sort of your goal coming into Medtronic, or did you after time just decide you wanted to do a little bit more?

Jacob Paul (05:02):

So finance actually is a great place to start. It gives you a good view of the overall, the entire business. I was a business partner for operations for R&D and then I was a CFO. And that set me up really well to take on a broader role. It was around the time Omar [Ishrak] took over that I started to really develop an interest for emerging markets, and so we did some really interesting projects there. And at that point, I felt like I could make a bigger impact in a general management role.

Tom Salemi (05:37):

Were you operating or leading up a business outside the US?

Jacob Paul (05:41):

I did. So I spent four years in Singapore leading Asia Pacific for the RTG group. And so that's a really exciting, diverse set of markets. It's a huge part of the world with significant healthcare needs. And so it was a really great learning opportunity and an exciting job.

Tom Salemi (06:01):

Excellent. And just going back to the transition from finance to operations, you said finance is a great place to sort of get foundation. Is it seen that way? Is it a significant transition to go from one to the other? Were there challenges involved? Would you have any advice for anyone else who was in finance, but decide they really want to someday lead a business unit?

Jacob Paul (06:19):

My advice would be, it is a fair transition. While it does give you the foundation, I think the piece that I really learned a lot going to Asia that my finance background didn't provide me is engaging with our customers, understanding what their needs are, and relating from a value from our customer standpoint. That's something that finance doesn't teach you, and that's where the real-world experience helps.

Tom Salemi (06:49):

Well, let's talk a bit about now Medtronic's history in the spine. It's been in the sector for a long time, but there have been some ups and some downs and, and Geoff Martha, a recent report even indicated that at some point people were suggesting Medtronic might pull out of spine altogether, which again, those are external people saying that, I'm not saying it was internal, but there were some interesting times there with the acquisition of Kyphon, discussion about the use of BMP. Was there an internal conversation about spine and is this an area where Medtronic wants to grow? And was there ever a decision made that this is definitely a place where we want to double down on as you've clearly done, or we want to de-emphasize?

Jacob Paul (07:30):

So I think we did go through a period where we struggled in our spine business. And you're right, it was soon after Kyphon and then the BMP struggles that the business became inwardly-focused, extremely conservative, and we stopped innovating. We stopped engaging our customers. Spine is a really complex, difficult market with a lot of tough competitors, and we weren't able to compete effectively. And so we lost share over time and at that point where, when we compete for resources with other businesses in Medtronic, spine didn't stack up because A, we were not performing, and B, we didn't have the growth or the... It wasn't an attractive part of Medtronic for long time.

Jacob Paul (08:21):

I think it started to turn when Geoff invested in Mazor and he saw the potential in changing the game in spine, and competing much more effectively against these smaller, pure-play competitors. We still hadn't raised our performance to the level that we could we stood out from the rest of Medtronic, but over the last two or three years, we've really turned that around. And that's been a really exciting story. And now we are leading the market in terms of innovation. We're growing, we're competing very effectively. Our customers see a new and exciting Medtronic, and so, now we are profitable, we are growing, we are a destination for investment and we compete very effectively. Both in our industry and across...

Tom Salemi (09:17):

Interesting. And I love the decision about acquiring Mazor in that, for a time, I think acquisitions in the spinal space were focused on sort of the implants, and ways of making a minimal impact in the human body, as opposed to the approach you seem to be having now, at least from my outsider's, really making a commitment to improving the operational space for surgeons and really making the procedures themselves much better, as opposed to just investing in a new kind of filler that's going to reinforce vertebra, or even a new kind of smaller procedure that's going to make it less invasive. You mentioned that Geoff made the decision to buy Mazor. Curious as to how that sort of affected your strategy. Is this really a commitment into, again, making the operational space as advanced as possible and making the job of the surgeons as easy as possible?

Tom Salemi (10:12):

We're going to take a quick break from this conversation to bring back our sponsor, Viant Medical. I'm here with Alton Shader, the CEO. Alton, I know Viant has a really unique partnership program. Tell us more.

Alton Shader (10:26):

This program is a great example of how companies can partner to get a product to market quickly, and more importantly, make a difference in people's lives. Our customer had designed a novel device to be used in minimally-invasive surgery to reduce lower back pain. And for those who are not aware of how serious chronic back pain can be, estimates are that up to 15 million people in the US and over 100 million people worldwide suffer chronic back pain that can be debilitating. Our customer chose to partner with us due to our extensive experience in the development and manufacturing of minimally-invasive devices in surgery, with a number of products focused on the spine and other orthopedic areas. When we started working together, the customer had a design and prototype, but it needed to be re-engineered to ensure it to be manufactured at scale. In fact, the program had run into some technical challenges, and our team partnered with the customer to develop the ultimate solution.

Alton Shader (11:23):

We transferred the program from a lab or clinical process to a repeatable, verifiable manufacturing process. We included magnification in vision systems at every station, utilizing digital microscopes and monitors, and instituted a number of processes to deliver this device, including the development of an end-of-line functional tester with thermocouple and impedance verification. We've built a lasting partnership with our customer with strong mutual trust, and the teams do a nice job of operating and communicating with full transparency. The customer has been incredibly successful and Viant has supported triple-digit growth of the product over each of the past two years. Most importantly, this growth is translated into thousands of people benefiting from this procedure and living pain-free, productive, and happier lives. And this is why we are in this business. Our Viant associates can truly serve our customers and allow them to support healthcare teams, which in turn treat people and allow them to live better lives. That's what it's all about. It's what defines us. And it's what we are proud of here at Viant.

Tom Salemi (12:29):

Thank you for sharing those details Alton, and thank you to Viant Medical for sponsoring this episode of MedtronicTalks. Once again, for more information you can go to viantmedical.com. That's V-I-A-N-T medical.com. Now back into our conversation with Jacob Paul of Medtronic.

Tom Salemi (12:50):

You mentioned that Geoff made the decision to buy Mazor. Curious as to how that sort of affected your strategy. Is this really a commitment into, again, making the operational space as advanced as possible and making the job of the surgeons as easy as possible?

Jacob Paul (13:07):

Absolutely. So spine is a complex space with several different disease areas from degen, to deformity, to tumor and trauma. And we need to have innovative implants across all of those segments. And there's also different approaches, open and MIS and so forth. But it's commoditized the implant itself. Anybody can make it. We make it better than most people do, but we really, where we change the game is in addition to that spinal implant and the instrumentation, we also bring an ecosystem of enabling technologies from imaging to navigation, to, with the acquisition of Mazor robotics, power and monitoring. And we put them together in a way that improves the procedure, that makes the procedure more efficient, more accurate, more reproducible.

Jacob Paul (14:05):

Now to that, we also add now our latest acquisitions, Medicrea, in the data and AI space. And everything from across the entire continuum of care makes data-driven, objective decision making around patient selection, around the kind of intervention using AI-driven algorithms to optimize the surgical plan, and using robotics and the other enabling technologies to effectively and efficiently execute that plan. And then post-surgery, then following up the patient to ensure that you've done what you set out to do. So that makes spine surgery a lot more accurate, more efficient, and more reproducible. So you know what you're going to get, versus to your point earlier, it used to be... It was a very subjective approach to decision making.

Tom Salemi (15:00):

Talk a bit about the Medicrea acquisition and maybe more specifically, what does that bring to your offering, and how does that compliment what you are already offering with Mazor?

Jacob Paul (15:13):

It does, it does in ways that have widely exceeded our expectations. So the convergence of AI and data and robotics is really going to transform spine surgery. Medicrea is a AI-driven planning system, where surgeons have a curated plan that we develop for them, that optimizes for the level of correction you want and the outcome. And so in the past, the surgeon used to look at radiographic images and estimate the amount of correction, and then they used to manually bend a rod in the theater, and then try and achieve a correction. And that is not very predictable or accurate. What this does is it builds a big data set over time, and an algorithm that will predict the outcome and optimize the plan, depending on the outcome, that level of correction and the outcome required. And as the dataset gets bigger, the algorithm gets more and more powerful, and our outcomes get better and better.

Jacob Paul (16:23):

So this is a learning system that we develop now, so that when we integrate it with our robotic planning software, then we have a fully-indicated system that does from start to finish. And we are building around that. We're adding a whole suite of data-driven algorithms that do everything from patient-reported outcomes, from predicting outcomes based on the radiographic images, things that will add value, not just to the surgeon, but to the practice and will customize the therapy for the patient. So the patient gets a solution that's customized to them, rather than a generalized approach. So depending on their health, their frailty, their bone density, and things like that, variables that are taken into account, that optimize for them. So this is revolutionizing spine care in ways that we never thought possible.

Tom Salemi (17:30):

So I'm joking about the Wild West aspect again, but I mean, I think one of the parts of spinal surgeons, I think were always perhaps one of the more autonomous specialties out there that they were able to make a lot of decisions, and call their shots. I'm wondering if the solution you're providing, how is it being received by surgeons and by the market? Is it something that you're having convince people to the value of, is it something that they've been clamoring for and they're lapping it up? What's been the reception from surgeons?

Jacob Paul (18:04):

Tremendous excitement and acceptance. We are really rapidly scaling it up to meet the demand. We've met so many new surgeons that have never used this before that are really excited by what it can do to their practice. So, this is something that is an easy sell because they see the value right away. So the spine surgeons are really good. They're really good at their craft, and this is something they've been clamoring for. And so it's an easy sell. Level of the barrier to entry or the level of investment that they need to start to use it is not very high, and it automates the whole thing for them. It takes the stress out of surgery for them. It's competitive advantage for their practice as well.

Tom Salemi (18:55):

You read my mind with that addition, I was curious as to who is buying the Mazor system? Is it hospitals or is it practices? I don't know what the status of ambulatory surgical centers for spinal is, if that's an area that you're seeing as well. But what sort of financial commitment slash price tag are people looking at with Mazor, and how do you help it make that as affordable option as possible?

Jacob Paul (19:23):

So we do a whole range of options to make it affordable, to get it to as many surgeons as possible. We do financial bundles, we do leasing. We make it easy for them to acquire, because we want them to use it, we want them to learn and improve their workflow, and then to start to reap the benefit of the technology. So, we are very flexible when it comes to getting surgeons to use the technology.

Tom Salemi (19:55):

And do you have any competition in this space, as far as robotic systems are involved? I know Mazor was certainly one of the first to work in the spine. I don't know if anyone else is adapting their surgicals to robotic surgical systems to perform spinal surgeries. What's the competitive field like?

Jacob Paul (20:10):

We do have, Globus has a robot as well, and there's ROSA, which is Zimmer's robot. So, there's a couple out. There's others that are developing. So I expect that there'll be more, but we are innovating at a very rapid pace around the platform, the technology itself, as well as the applications, and to increase the clinical utility of the robot. We just launched a big application that made our Midas our robotically-enabled, as well as the interbody, which is a spacer that goes into the spine, also robotically-assisted. But this is really a big step up in increasing the clinical utility of the robot. And we are continuing to innovate at a rapid pace so that it increases the clinical value, the level of automation, and also we integrate data-enabled technology into the robot as well.

Tom Salemi (21:16):

Do you have any interaction at all with patients? Do they come to know that their procedures going to be performed by Mazor? Is there any sort of understanding or information they're given about that? Is this a way for you to market the device by reaching out to patients? What's your patient engagement like?

Jacob Paul (21:33):

So we usually work through the clinician, the surgeon, and the practice. So they're the ones who interact directly, but we help them, the marketing programs so that they can do that. And it's a combination. So the patient-specific planning and implants is in with the Medicrea system, and then you have robotics, and both together really help the practice. And so the surgeon will often use the fact that their practice does robotically-assisted surgery as a competitive messaging to attract patients. And then when the patient comes to the clinic, they will share alternate plans based on our Medicrea system with the patient. And then they'll explain the approach, and then they'll pick the most optimal plan for that patient. So the patient is also part of that journey.

Tom Salemi (22:40):

Interesting. And we've talked a great deal about the spine, that your business is spine and cranial. Are there products in the cranial space that we should be talking about? I guess I fault myself for not preparing for those questions, I'm too spine-centric. But what else are you developing above the spine?

Jacob Paul (22:59):

Absolutely. So in the cranial space, our navigation really is at standard of care in cranial applications. And it's extensively used by neurosurgeons. And we also have a cranial robot that is used in cranial procedures. We have a CSF-management business, a hydrocephalus-management business, that's a market leader. And then we also are on this concept of an ecosystem of enabling technologies, applies to cranial procedures as well. And so, for example, with some of our partners in neuromodulation with DBS, we also have some of the enabling technologies for that. So, we have the same kind of strategy, and neuro oncology is also is a focus for us. So we have the same strategies in the cranial space. We have a really strong, attractive business there as well.

Tom Salemi (23:55):

So how do you work with the neuro business on DBS? I guess I hadn't made that connection, that makes sense that you'd be involved with that as well.

Jacob Paul (24:01):

So we are working with them to enable the procedure, the DBS procedure, and make the DBS procedure more efficient. We are working on a robotic solution there, but that's not launched yet. So I can't really say much about that, but beyond that, we also have the same approach that we use in spine, we are starting to develop DBS as well.

Tom Salemi (24:26):

And just organizationally, how has reorganization of Medtronic impacted cranial and spine?

Jacob Paul (24:33):

I think it's really driven a lot focus in the space, and it's allowed us to move with speed and make big bets. So for example in the area of robotics and data and AI, we have really prioritized and we are investing at speed there, because that I think is going to transform spine surgery. And so the fact that we have created these independent operating units allows us to make these decisions with speed, and these decisions are taken by people that are closest to the market. So we've also, for example, our R&D is very customer-centric. So our R&D engineers work with our surgeons. So the solutions that we develop are based on a deeper understanding of the market. So it allows us to be move with speed, and it allows us to be customer-centric as well.

Tom Salemi (25:29):

Where do you see innovation and new ideas for your business coming from? Is it going to be a mix of internal development and acquisitions of outside companies?

Jacob Paul (25:38):

It is going to be a mix, Tom. We have really revamped how we innovate to innovate with speed. So we launch products much faster, and we spot trends early, and we get in on those trends early. So our organic innovation engine is really moving very effectively. But we always see the need to make some targeted acquisitions, especially in areas that compliment our internal skill set. We also expect to do partnerships. We want to innovate at a pace that far exceeds the rest of the industry. And in order to do that, there are going to be areas that we are not the experts at, or there are going to be areas that like Medicrea, which is a new area, but really changed the game for us that we will continue to look for and invest in.

Tom Salemi (26:34):

Excellent. Well it's been great to catch up and to see where the spine business is going. And thank you for joining us on the podcast, Jacob.

Jacob Paul (26:43):

Thanks Tom.

Tom Salemi (26:45):

Well that is a wrap. Thanks so much to Jacob Paul for joining us on the MedtronicTalks podcast. Thanks again to Viant Medical for sponsoring this episode. You can find out more information at Viantmedical.com. And thanks of course to you for tuning in. If you'd like to hear future episodes of the MedtronicTalks podcast, please do subscribe. We're on all the major podcast channels, including Amazon, Apple, Google, Spotify. Just push "follow" and "subscribe". And while you're there, please do leave us a ranking, and please do leave a comment as to how we can do a better job providing Medtronic's stories to you. You can also find our Device Talks weekly podcast on those same podcast channels, and you can find both of these podcasts on our website Devicetalks.com.

Tom Salemi (27:34):

Please do us a favor and share this episode on social media. And when you do, tag me, I'd love to be part of that conversation. I am on LinkedIn, Tom S-A-L-E-M-I, I'm also on Twitter @MedTechTom. It'd be great to follow your conversations. And once again, it would be great to be able to bring future episodes of the MedtronicTalks podcast to you. So please do subscribe, please do review, and of course, please do tune in next time however you do for another great episode of the MedtronicTalks podcast.