Medtronic makes $40M third tranche investment in Mazor earlier than expected: 10 things to know

Spinal Tech

Medtronic will enter into the next phase of its strategic partnership with Mazor Robotics, making a third investment in the company.

Here are five things to know:


1. Initially announced in 2016, Medtronic decided to move forward with the third tranche investment in Mazor totaling $40 million. The two companies decided to move forward with the third tranche earlier than planned and amended existing agreements accordingly.


2. Over the past year, Medtronic has made $72 million in total investment in Mazor, representing 11.9 percent of the outstanding shares post-investment. Mazor plans to issue Medtronic warrants to purchase 1.21 million additional Mazor American Depository Shares at $44.23 per ADS, a 15 percent premium over the per share price for the $40 million equity investment.


3. Medtronic now holds exclusive worldwide distribution rights to Mazor X, a robotic spine surgery system. The two companies were able to move forward with their partnership based on the early sales goals and marketing milestones achievement.


4. The two companies report higher than expected acceptance and demand for Mazor X. Since October 2016, Mazor and Medtronic received 59 Mazor X orders. "Now, as commercial responsibilities for the Mazor X in the spine market shifts to Medtronic, the annual minimums for sale of Mazor X systems agreed to by the two companies are expected to drive substantial improvement in Mazor's financial results during the next several years," said Mazor CEO Ori Hadomi.


5. Post partnership, about 30 members of the current Mazor sales organizations will join Medtronic to continue current momentum. Mazor will continue to provide services to Mazor X customers around the world.


6. The two companies could co-develop future products combining Mazor's expertise in surgical planning and precision-guided surgical systems with Medtronic's navigation capabilities and implant systems. The companies expect to demonstrate the first results of their combined efforts this fall.


7. The final investment is expected to close on or around Sept. 12.


8. Post transaction, Mazor will continue to manufacture and recognize Mazor X system revenues, and service fees will be sold at contractual pricing the company agreed upon with Medtronic. The direct sales and strategic distribution model is expected to lower Mazor's annual operating expense by $13 million.


9. Mazor will use proceeds from the investment to strengthen its balance sheet and fund continued collaboration with Medtronic on new innovations for the spine and other markets.


10. Mazor plans to independently continue development of the Renaissance Surgical Guidance System.


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