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Dynamic Devices
As back pain continues to plague the population, the spine market has plenty of room to grow.
Jennifer Whitney
David Kirschman, MD knows very well the risks and rewards of taking on the orthopedic industry as a businessman. Educated at the University of Colorado, he spent many years as a neurosurgeon in private practice overseeing the care of countless patients with spine disorders. During his tenure as a surgeon, however, Kirschman found himself growing frustrated by the poor array of choices in spinal-fixation products. It wasn’t long before he began tinkering with some ideas about improving the devices he used in surgery.
Like many other surgeons-turned-inventors, Kirschman presented his patented technologies to some of the industry’s largest corporations. To his dismay, the people he spoke with continually would confide that while the ideas were good, there was no room for them in their product portfolios.
“I found it difficult to get a company to take on a new product line because big companies get presented too many ideas from surgeons. They can only investigate a tiny fraction of those,” he explained.
Undeterred, and already experienced to some degree with running a business through his private practice, Kirschman decided to form his own company and bring his product ideas to fruition. Today, X-spine Systems, based in Miamisburg, OH, is a growing and thriving organization that has successfully launched several products in the United States and Europe. The first product, XACP Compact cervical plate, was approved by the FDA in 2004 and was followed by the Spider Cervical plate and Capless pedicle screw in late 2005. In the past year, the company introduced several new products and even received a 2008 North American Frost & Sullivan Award for Product Innovation in the field of advanced spinal implantation systems for developing the Capless LI pedicle screw system.
Given X-spine’s forward momentum, Kirschman has retired from his surgical practice but remains committed to serving the unmet needs of his former colleagues. “A lot of other companies claim to be surgeon-centric, but I’m probably one of the few spine companies that can truly say that,” he concluded.
 The Spider Cervical plate. Photo courtesy of X-spine Systems. |
The total US spine market was worth an estimated $2.2 billion in 2007 and is expected to reach $2.4 billion this year, with growth expected to hover at about 9% through 2013, according to Archana Swathy, an industry analyst for Frost & Sullivan.
That growth will be fueled by the efforts of a variety of players in the market. The spine industry is dominated by about four to six major medical device manufacturers—Medtronic, DePuy and Synthes are a few—that have been in the market for a long time, Swathy said. “These larger companies have the resources to concentrate on research and development, to guide their products through various developmental phases and to conduct large-scale clinical trials,” she explained. But she also noted that a significant number of emerging companies, such as US Spine, Disc Motion Technologies and Facet Solutions, are bringing equally innovative solutions to patients.
Of course, major strides also are being made by mid-tier companies, such as NuVasive Inc. The publicly traded company, founded in 1997 and based in San Diego, CA, is expecting total 2008 revenue to be as high as $240 million, compliments of the success with the company’s products devoted to minimally invasive surgery, such as the eXtreme Lateral Interbody Fusion (often marketed as “XLIF”) procedure, which allows surgeons to perform spine surgery from the side of the body instead of cutting through the belly or back muscle.
Keith Valentine, president and chief operating officer of NuVasive, said the company is focused on achieving $500 million “and beyond” in the future, with a target milestone of $1 billion (though he did not provide an estimated date for this achievement). “We view that the pathway to billion in sales is clear. We are laser focused and we have a core portfolio that still has room to build on. In addition, we’re in a good situation between our cash position and our stock to make thoughtful acquisitions to complement our portfolio,” he said, citing the company’s purchase of Osteocell, a bone-matrix product, from Osiris Therapeutics earlier this year as an example of NuVasive’s growth strategy.
From Valentine’s perspective, the industry is in an “interesting” period of transition. The larger companies are facing slower-growth challenges in spite of their deep portfolios, he believes, so they will have to hone their strategies wisely to maintain their market share positions. And emerging companies have an entirely different set of decisions to make, in his opinion.
“Smaller companies are facing some decision points about whether they’re going to seek further investment to grow, look to be acquired or sell their assets. It’s a time we haven’t seen in a while,” he explained. “Equity markets are tightening, and it’s causing some of these players to consider whether they want to bring in more equity, which dilutes existing investors. The market for outright acquisition is tough right now, so what’s going on is these small organizations are putting out feelers. Does it make more sense to be acquired or raise money?”
But the chance for success can be high if a company is persistent in penetrating the spine market, because opportunities for small and mid-tier companies are widespread. “If they grow that business and generate sales after bringing money in, the pain becomes less over time,” Valentine concluded.
Less Pain, More Gain
The best way these companies can relieve their own growing pains is by devising new ways to alleviate the excruciating pains plaguing an exceedingly large patient population.
Naturally, much like other orthopedic sectors, aging baby boomers are the chief demographic accounting for growth in the spine market. But alongside the natural progression of disc degeneration this group experiences is another potent factor playing into the growth of surgeries among these sufferers, according to Kirschman.
“In the United States, part of our Social Security net is that at age 65, people are eligible for Medicare. Once they get Medicare, they can essentially get these operations,” he explained. “There’s a certain cost associated to them, and a lot of the population is underinsured or lacking insurance. A lot of people are waiting until they’re 65 to get these operations—that magic number really drives a lot of procedures. I saw that a lot in practice.”
Related to this phenomenon, of course, are the advances seen in medicine, particularly cardiology and anesthesia. Kirschman said that as recently as a decade ago, it was still “unheard of” to perform a complex spine fusion procedure in a person older than 85 unless absolutely necessary, due to the morbidity (and mortality) risks. Today, however, improvements in those other medical segments have made it feasible to perform larger operations in elderly patients.
Younger patients also have more options than ever before. That’s good news for the more than 26 million people in the United States between 20 and 65 years of age who are suffering from some type of back pain, Swathy said. “Demographics for this market are currently seeing a shift from the aging patients towards younger patients—between 40 and 55—who are having back problems and want to remain mobile,” she noted.
And that, she added, is precisely the reason behind what she termed the “mushrooming” of one of the most-discussed newer segments of the spine market: motion-preservation devices.
Technology Evolves
Disc degeneration typically leads to a weakening disc that can collapse and cause both pain and disability. Spinal fusion procedures (which involve removing a disc and fusing the adjacent vertebral bodies together) have been used widely to treat this disease since the 1970s. Although the technologies and procedures have improved over time, these procedures still only have a success rate of about 75%, according to Eric Smith, director of clinical marketing for AxioMed Spine Corp., a Cleveland, OH-based entrepreneurial company focused on developing solutions to this common disease.
Given the rigidity spine fusions can present in a patient, product developers long have been working on alternatives. In the 1990s, first-generation total disc replacement (TDR) products, whose designs were based on ball-and-socket articulate bearings (similar to hip and knee replacement joints), were introduced in Europe—the first artificial disc wasn’t introduced in the United States until 2004 by DePuy Orthopedics—and were useful in terms of allowing the treated spinal segment to move more freely than fused vertebrae. However, the initial products on the market also offered what Smith described as “abnormal” motion, and they couldn’t absorb the compressive loads (ie, shock) normally absorbed by the spinal disc.
 Surgeons have an array of minimally invasive options for spine surgery today, such as the XLIF procedure by NuVasive. Photo courtesy of NuVasive. |
With a little foresight (and a lot of innovation), AxioMed was formed in 2001 with the goal of launching new advanced technologies that will restore function to patients without undergoing fusion procedures or using first-generation artificial discs. “The market is only just opening up in the US, but patients are much more aware of the limitation of the current treatment modalities and are demanding improved treatments,” Smith said. “The opportunities in this market are large, as there is significant potential to treat a much larger share of the spine market than is currently being treated with TDR. The first-generation technologies have only shown equivalence to fusion, not superiority, [and] the clinical need still remains unmet by today’s technologies. As a result, patient satisfaction can still improve.”
As such, AxioMed currently is focused on the development of its polymer-based Freedom Lumbar Disc, which was designed to provide three-dimensional motion that mimics the natural biomechanics of the spine. At present, the product is being used in a pilot clinical study in Europe and is anticipated to receive a CE Mark there by the end of the year. The FDA also has granted AxioMed an investigational device exemption for the pivotal study of the device; the study is expected to be underway by the end of this year.
Although the strides being made in the TDR market are impressive, Swathy said that the spinal fusion market will continue to thrive as well, because motion-preservation technology currently is not designed for use in patients older than 60.
For all the talk about these two categories of spine products, there are two other large segments in the spine market that are showing no slowdown. According to data from Frost & Sullivan, the US spinal fixation market was valued at $1.3 billion in 2007 and is expected to reach $1.4 billion by the end of this year. In addition, the market for devices that treat vertebral compression fractures is projected to grow from $404 million last year to $470 million this year.
With all these categories, a large array of materials and product designs will come into play and open up new options to spine product developers. In terms of material selection, the spine market is one segment that arguably uses one of the widest ranges of materials. (For more information on material selection in orthopedics, see “Material Marvels” on page 42.) On the metal side, product developers use everything from stainless steel to titanium and cobalt chromium. Elastomers such as polycarbonate are being incorporated into more of the dynamic (ie, motion-preservation) technologies, as is PEEK polymer.
One of the most important innovations—thanks to improved understanding of molecular biology—may be the development of materials that promote bone growth while avoiding the need for grafting in spinal surgeries. “Bone morphogenetic proteins have been found to stimulate spinal fusion to an extent that it is considered superior to autogenous bone graft,” Swathy said. “These products circumvent the necessity to harvest bone graft from the iliac crest and thereby avoid the morbidity associated with it. Further research in the BMP domain is likely to enhance the osteoconductive process and thereby aid surgeons with advanced biological tools to provide better procedural outcomes.”
Big Solutions in Tiny Spaces
Surely, biologic aids will be a trend to watch in the future, but these products are still in their infancy. Right now, what excites patients, surgeons and manufacturers alike is how quickly minimally invasive surgery has evolved in the spine sector.
“What technology is doing now is increasing the potential number of candidates for the surgery. Now you have procedures due to minimally invasive surgery that can be done with an overnight stay or even as an outpatient. Before, it required a week in the hospital and a lot of blood lost; surgeons were very selective about the patients chosen to undergo procedures,” Kirschman said. Today, with smaller incisions and less morbidity, “patients are more accepting of the surgery, and physicians are more accepting as the risks get lower. It opens a lot of the medium-level pathologies to spinal surgery, rather than only the most severe diseases being treated surgically,” he concluded.
That certainly has been the impetus for NuVasive’s growth in its Maximum Access Surgery product platform. These minimally invasive products and techniques offer a surgical corridor that preserves soft tissue while offering surgeons traditional access to the spine. “Octogenarians often have deformities that surgeons had great difficulty treating because [these individuals] don't respond well to large, open procedures. One clinician said it’s his best referral base—the older population that no one would treat now has a less-invasive option,” Valentine said.
Minimally invasive surgery has other benefits, too. Kirschman pointed out that these procedures often are performed at smaller, outpatient surgical centers, which are proliferating in the United States. In his experience, many surgeons are opting to work in these centers because hospitals can present a number of disadvantages: more reimbursement and expense issues, the need to take emergency calls and longer wait times as surgeons wait for others to finish up in the operating room, among other issues.
“The Holy Grail for the device industry is, if you can supply a product for a surgery center, then you’re really onto something,” he said. “Patients like it because they’re not in the hospital for a week, the surgeon likes it because he can have more control and not have problems working in the hospital, and the payer is happy because it’s not paying for a long hospital stay. I think for a device company to move into a market like that is a great opportunity that exists for the industry, and that’s something X-spine is working on aggressively.”
What’s Ahead
If there is anything that will temper all the growth opportunities in the spine market, it’s the one issue that affects all areas of orthopedics: reimbursement.
“Developments in diagnosis and treatments for spine surgery have broadened the scope for treating spine-related conditions. This, however, represents a situation where hospitals struggle to strike a balance between providing quality care whilst maintaining cost viability,” Swathy noted.
Valentine agreed, noting that many of the new motion-sparring technologies available on the market still are being watched closely by payers, who are awaiting long-term outcomes data to be sure the treatments trump what’s already been proven safe and effective, even if not ideal for patients clamoring for relief from their aching backs.
“There’s a lot of technology out there that we say, ‘We love the technology,’ but then you switch it and say, ‘What needs to be accomplished to get reimbursed?’ It used to be an easier equation—you do your trial, finish enrollment, complete two-year follow-up, then submit to the FDA. That may have changed when you deal with reimbursement issues,” he said. Any company evaluating the profit potential of a new product has to consider the surgeon’s viewpoint in terms of widespread adoption, because while a surgeon may love a new product, he or she may not be willing to take on the extra time and paperwork involved if reimbursement is a challenge, he added.
Another challenge facing new innovations is the pace of adoption due to the end-user pool that companies target. Kirschman said that for all of the new technologies on the market, a lot of surgeons still haven’t been trained to use them. However, while it’s a challenge at present, down the line that means there’s a large group of users left to reach in this market—furthermore, the rates of adoption should improve as younger surgeons come on board with interest in using the latest advanced technology.
One procedure these younger professionals may embrace in five years is annulus repair and nucleus repair/replacement products. According to new research from Intelligent Life Sciences, a research firm based in Huntington, CA, annulus repair, which can be used as a simple adjunct to discectomy, will see rapid adoption through 2013, particularly among newer surgeons. And the market for nucleus replacement products should grow substantially in the next decade after the introduction of biological repair products, which could occur as early as 2012, according to the firm.
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Ultimately, it’s probably safe to say that nearly every adult has experienced an aching back at some point, so spine innovators surely are aware that their new product today just may be what the doctor orders for themselves someday—thereby securing their own relief.
