A Little Help from a Big Friend

Olympus Corporation is making a big investment in small bones.

The worldwide manufacturer of precision machinery and instruments for the healthcare, imaging and information industries has invested $12 million in Small Bone Innovations Inc. to help the company train more surgeons and fund new product developments and clinical trials. Small Bone’s Asia-Pacific operations also agreed to allow Olympus Terumo Biochemicals Corporation, a joint venture between Terumo and Olympus, to exclusively distribute its products in Japan and China.

Olympus Terumo Biomaterials conducts research and development, manufactures and sells products in the biomaterials and regenerative medicine sectors. Its products include bone void fillers and tissue-engineered items for deep wound healing. Hitoshi Mizuno, Olympus Terumo Biomaterials Corporation president, said the agreement will enable Small Bone Innovations to market its signature product—the S.T.A.R. total ankle replacement system—in Asia. Pacific Bridge Medical, a Bethesda, Md.-based medical consulting firm, estimated the medical device market in the Asia Pacific region to be worth more than $25 billion.

“These agreements will leverage our position in biomaterials to introduce Small Bone Innovations’ orthopedic implants to surgeons in Japan and China,” Mizuno said in a news release.

The $12 million investment from Olympus Corporation came in the form of Series E Preferred Stock. According to terms of the deal, the investment does not give Olympus special privileges and will not impact Small Bone’s operating independence. The investment by Olympus is the largest Small Bones has received in 2010. Over the last two years, the company raised $144 million in Series C and Series D funding from investors such as Goldman Sachs & Co.; Khazanah Nasional Berhad (the investment firm for the Malaysian government); Malaysian Technology Development Corporation; The Family Office of Bahrain, Viscogliosi Brothers LLC; Trevi Health Ventures LP; NGN Capital; 3i Group plc; TGap Ventures LLC; and Axiom Venture Partners.

Small Bone Innovations used the part of the proceeds from those stock sales to complete the acquisition of the Scandinavian Total Ankle Replacement (S.T.A.R.) system from Waldemar Link GmbH & Co. KG of Hamburg, Germany, according to Small Bone Innovations executives. The money also was used to fund operations to support the launch of the S.T.A.R. ankle in the United States and to retire a $20 million credit arranged in 2007 by Fortress Investment Group.

Small Bone Innovations executives most likely will use part of the proceeds from the latest stock sale to fund the rollout of the S.T.A.R. ankle system in Asia.

“This investment [from Olympus] will accelerate the worldwide rollout of SBi’s S.T.A.R. total ankle replacement system by providing capital for inventory and expanding surgeon education and training,” Anthony G. Viscogliosi, Small Bone chairman and CEO, said in a news release. “It will also support new and expanded product offerings for both the upper and lower limb anatomies and related clinical studies. This investment further enhances the implementation of our global business strategy.”

Approved last May by the U.S. Food and Drug Administration for ankle joint replacement due to osteoarthritis, post-traumatic arthritis or rheumatoid arthritis, Small Bone Innovations’ S.T.A.R. system is a three-piece mobile bearing uncemented, non-constrained total ankle replacement. Executives claim the design of the S.T.A.R. system is the first of its kind because it relies on movable bearings that glide across the surface of polyethylene. The bearings give the joint some natural movement, a characteristic that is missing in traditional fusion surgeries where the tibia (shinbone) is joined to the talus (the bone that fits into the socket formed by the tibia and fibula, the small bone of the lower leg). Fusing the tibia to the talus strengthens the ankle but severely limits motion.

Small Bone Innovations has facilities in New York, N.Y.; Morrisville, Pa.; Bourg-en-Bresse, France; and Donaueschingen, Germany.