Medtronic (NYSE:MDT) CEO Omar Ishrak said the "disappointing" failure of Symplicity-3 clinical trial and a blockbuster settlement with heart valve rival Edwards Lifesciences (NYSE:EW) hasn’t shaken his confidence in Medtronic’s ability to execute successful acquisitions.
Medtronic paid $800 million for Ardian and its Symplicity renal denervation device for hypertension in 2010. It acquired CoreValve and its eponymous transcatheter aortic valve implant for $700 million plus milestones in 2009.
Early this year, a widely anticipated slam dunk for the Symplicity device got caught on the rim when the Symplicity-3 trial failed to meet its efficacy endpoint (Medtronic took a $236 million writedown on its Ardian assets as a result). And just yesterday, the Fridley, Minn.-based medical device company agreed to settle all pending and future litigation with Edwards via a $750 million cash payment and a royalties deal worth a minimum of $40 million annually until 2022.
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Asked yesterday if either result had shaken his confidence in Medtronic’s M&A process, Ishrak told analysts during a conference call that he’s "very confident" in the system.
"Look, I’m very confident in Medtronic’s process. And over the past 3 years, the acquisitions that we’ve done have delivered, and we’ve executed on them," he said. "I have complete confidence in our ability to follow up on what we say we will do. We got to accept in our modeling that some of these acquisitions may not turn out the way we want it to because of the inherent risk involved. And we have to model that in our overall mapping of opportunities."
Regarding Ardian, Ishrak said a clinical trial failure "comes with the territory" in the medtech game.
"You do clinical trials for a reason, and every so often, you are going to get negative results. And we don’t give up on strategic opportunities based on that. We continue to strive on them, because we believe in the long-term need for that kind of therapy," he said. "We would have done that acquisition over again, based on the data that we had at that time, and I think our team is highly qualified for that."
The Symplicity-3 study was unusually rigorous for a medical device trial, because it included a sham procedure comparator. Ishrak credited the Ardian team for "executing to the clinical trial probably better than anyone else."
With CoreValve, he added, the overall rate of return even including the surprise cost of settling with Edwards is "still in the double digits – in the teens, actually," the CEO said.
"I would do [the CoreValve acquisition] over and over again. We’re extremely excited about truly groundbreaking clinical results that we are getting with this. And in terms of our mission, what it does to extend life of people, what it means to us, I think that’s 1 that we will do over again," Ishrak said.
