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Medtronic bags Osteotech as expansion into biologics continues apace

In a move representing a further step in Medtronic’s strategy to build a broader business in regenerative biologics, the Minneapolis, MN-based corporation has agreed to buy Osteotech for US$123 million, or US$6.50 per share, following unanimous approval from the latter’s Board of Directors.

Osteotech is a leader in the growing field of biological products for regenerative healing, and has working on a number of technology platforms. Medtronic’s acquisition of the New Jersey firm is designed to complement Medtronic’s existing bone healing portfolio and expand its current presence in the spine, orthopaedic trauma and dental markets into many additional treatment areas, including joint reconstruction, foot & ankle, and sports medicine.

In recent years, Medtronic has made attempts to enter the regenerative biologics market. In March of 2007, the company signed an agreement with OsteoGenix, an orthobiologic pharma company based in California, enabling OsteoGenix to complete preclinical work on its bone anabolic agent and advance the programme through clinical trials. The agreement gave Medtronic an additional source of bone growth therapies for surgeons whose patients require bone grafting options. As recently as April 2008, Medtronic and Scil Technologies agreed to the development of the latter’s rhGDF-5 (recombinant human growth and differentiating factor-5) dental regenerative technology.

However, Medtronic has been looking for ways to speed up its biologics presence and has moved to take advantage of a spat between directors and shareholders that has dogged Osteotech in recent times, in order to boost that strategy. Osteotech’s Board has faced growing criticism over strategy and direction from a dissident group of shareholders with a stated aim to gain majority control of the boardroom. The acquisition by Medtronic is likely to put paid to this campaign just when it appeared that the shareholder group was gaining momentum. The Osteotech Board itself had appointed Deutsche Bank Securities in 2009 to advise the company on strategic options that could enhance shareholder value after growing frustrated at the inability for its share price to reflect the value of its biologics portfolio.

Despite its corporate difficulties, Osteotech’s extensive portfolio of biologics is used in a broad range of musculoskeletal procedures, and its Grafton range of demineralised bone matrix products holds a large body of evidence that support its “best-in-class” bone-generating capabilities. The company is also currently seeking FDA clearance for the first product based on its HCT (human collagen technology) platform, an engineered human collagen biomaterial.

As regenerative medicine continues to move to the fore as a first-line treatment in orthopaedic and spinal cases, the acquisition agreement seems to be mutually beneficial for both companies. For Medtronic, Osteotech’s products and capabilities will hugely assist the former gain a more prevalent position in today’s competitive musculoskeletal biologics market; and for Osteotech, the protection and safety offered from such a large corporation was too good to pass up.

In related news, RTI Biologics has been forced to calm shareholders that its relationship with Medtronic, involving the supply of BioCleanse sterilised biologic implants to meet Medtronic’s spinal allograft needs, will not change in near-term. RTI says that Medtronic is “supportive” of the agreement, which runs until June 2014.

I hope you found this article of interest, it was written by Sophie Bracken, editor of Orthopaedics Business for Espicom Business Intelligence.

Espicom Business Intelligence

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