When it comes to the use of robots in spine surgery, Mazor Robotics (NASDAQ:MZOR) clearly has the early-mover advantage. The Israel-based company claims more than 170 surgical robot systems implemented across the world, and recently reported purchase orders for 22 new systems in the third quarter.
But Mazor Robotics now faces stiffer competition than ever before. No, robotic surgical systems giant Intuitive Surgical (NASDAQ:ISRG) hasn't yet entered the spine market. Instead, Mazor's biggest threat could come from a smaller new rival -- Globus Medical (NYSE:GMED).
New to the scene -- sort of
Globus Medical received clearance from the U.S. Food and Drug Administration (FDA) for its Excelsius GPS robotic guidance and navigation system in August. That clearance came after the company experienced a minor setback due to the FDA asking more questions earlier in 2017.
The company originally planned to launch Excelsius GPS system even sooner. In 2014, Globus Medical acquired Excelsius Surgical, the original developer of the Excelsius GPS system. At that time, Globus stated that it expected to obtain FDA clearance in 2015 and launch the system commercially in 2016.
But while Globus Medical is new to the robotic surgery area, the company has been a key player in the spinal surgery market since 2003. Globus also has a sizable international presence, thanks in large part to its acquisition last year of Alphatec Holdings.
A viable threat?
Globus Medical won't be the first competitive threat for Mazor. Zimmer Biomet (NYSE:ZBH) bought French surgical robot maker Medtech last year, picking up the ROSA surgical robot system. So far, though, Mazor hasn't had much reason to worry about Zimmer Biomet's system.
Does Globus Medical present a viable threat to Mazor? Probably so. Although the Excelsius GPS system is only now reaching the market, Globus CEO Dave Demski stated in his comments about the company's third-quarter results that the company is "thrilled about the unprecedented level of interest we have received so far from surgeons and hospital systems."
This optimism isn't surprising, based on the buzz generated by the Excelsius GPS prototype demonstrated at last year's North American Spine Society (NASS) meeting. Leerink analyst Richard Newitter wrote after the NASS meeting about surgeons' high interest level in Globus Medical's new surgical robot system.
The key for Globus to succeed head-to-head against Mazor could hinge largely on how much spine surgeon prefer some of the unique features offered by Excelsius GPS. One of the first surgeons to use Excelsius GPS, orthopedic spine surgeon Dr. Kade Huntsman at St. Mark's Hospital in Salt Lake City, Utah, specifically mentioned how the system fit into the typical surgical workflow. If more surgeons like Excelsius' unique combination of surgical navigation and robotic guidance for spinal surgery, Globus could have a winner on its hands.
I wouldn't be too hasty in discounting several advantages claimed by Mazor Robotics, though. High on that list is the install base and volume of clinical data supporting the Mazor X and Renaissance systems. It will take Globus Medical a while to build up enough momentum to minimize Mazor's edge resulting from being first to market.
Probably the biggest ace in the hole for Mazor, however, is its relationship with medical device giant Medtronic (NYSE:MDT). In the third quarter, Mazor and Medtronic advanced to the next phase of their partnership, which included making a third investment of $40 million in Mazor. This next phase also involved Medtronic assuming worldwide distribution rights to the Mazor X system. As a result of this, 29 former Mazor employees moved over to Medtronic's sales team.
Globus Medical won't have the feet on the street that Medtronic has. That will probably put the company at a disadvantage in positioning Excelsius GPS against Maxor X. Still, Globus does have plenty of solid relationships with hospitals and healthcare professionals in the spine market.
Who will win?
My view is that Mazor will continue to grow significantly, even in the face of new competition from Globus Medical. However, the possibility exists that customers could prefer the Exelsius GPS system. Globus could potentially out-innovate Mazor down the road, particularly with its recent acquisition of Swiss robotic developer KB Medical. And if Intuitive Surgical decided to enter the spine market, perhaps by acquiring Globus Medical, then the tables would really be turned upside down.
I think, however, that there's plenty of room for all of these companies to be winners. Market research firm ResearchMoz projects that the global spinal surgical robotics market will grow to $2.77 billion by 2022. Even if that estimate is way too optimistic, the market should expand rapidly enough to allow Mazor, Medtronic, Globus Medical, and Zimmer Biomet to be successful. Mazor Robotics might need to worry a little about competition from Globus -- but probably only a little.