Speaking today at the J.P. Morgan Healthcare conference in San Francisco, Ishrak cast Medtronic’s $43 billion mega-merger with Covidien (NYSE:COV) in that light, saying it will help expand the mission to capitalize on value-based healthcare.
The deal, expected to close Jan. 29, will help Medtronic on several fronts, Ishrak told investors today, getting it into the hospitals much earlier in the sales process due to the nature of the products produced by Covidien. That Mansfield, Mass.-based company has 1 of the largest suites of general surgery products in the medical device industry.
That will help Medtronic lengthen 1of the key planks in Ishrak’s platform: Inking supply-and-service deals with hospitals. In those arrangements, Medtronic finances the construction of new cath labs or hybrid operating rooms and manages their operation and workflow, in return for a 7-year commitment to a fixed per-patient fee that includes the cost of any Medtronic devices used in procedures.
Ishrak told investors today that these deals are already slated to bring in about $900 million over the next 7 years. With the Covidien deal in place, he said, Medtronic could expand the cath lab model into operating rooms.
"We will have more assets than anyone else in the space, and that’s what Covidien has for us in a long run," he said. "We’re in the driver’s seat to truly transform healthcare."
Ishrak also pointed out that the New Medtronic will have continued strength in critical emerging markets, lowering Medtronic’s exposure to China. The combined entity, which will do nearly $4 billion annually in emerging markets alone, should continue to grow robustly and offset any potential slowdown in the Chinese market, he explained.
Emerging markets represent about 13% of Medtronic’s $17 billion in total sales and are expected to grow about 12% per quarter, Ishrak said in the company’s most recent earnings call.