From Hips to Knees: An Analyst’s Takeaway from AAOS 2013

The big takeaway from this year’s annual meeting of the America Academy of Orthopaedic Surgeons (AAOS) was knees, knees and more knees. All the big orthopedic players had offerings on the table—Johnson & Johnson had its Attune knee system (marketed by JNJ’s DePuy Synthes Companies); Zimmer introduced its Persona knee; Smith and Nephew showcased its Journey II bi-cruciate stabilized knee replacement; and, according to Leerink Swann analyst Richard Newitter, Stryker “continues to see a positive contribution from its direct-to-consumer marketing initiative for its Get Around knee.”

“[Companies] seem to be stressing certain characteristics that both physicians and patients are drawn to, including customization, more efficiency in the operating room for physicians, more implant sizing options, and more simplified instrumentation in the OR (operating room),” Newitter said. Every stage of the game in knee procedures is getting attention, from the pre-operative planning process, the instrumentation, and the actual shaping and production of the implant.

This year, why knees? Newitter explained that in the past several years, hips have been a big focus. Innovation comes in waves—and because orthopedic products take years to really mature on the market, and direct competition is a healthy market driver, companies tend to shift together when it comes to which technology they focus on.

“We haven’t seen new knees from those companies in several years,” Newitter said. But during those years, the knee technology debuted at AAOS has been incubating in the development stage. “The biggest innovations in knees have largely been around the instrumentation. We saw patient-specific instruments launching in the last several years, but that was the most that we saw in manufacturers’ product launch initiatives in knees. This year we have more full products launches—more complete packages and new designs in implant.”

Newitter pointed to Warsaw, Ind.-based Zimmer’s Persona knee, which is an entirely new, comprehensive knee solution. The platform focuses on pre-operative planning, better and improved instrumentation, implants customizable to patients’ anatomies, and offers add-ons such as the iAssist user guide for total knee arthroplasty, a patient-specific software/smart instrumentation product that is aimed at improving alignment.

An important issue to physicians during knee surgery, noted Newitter, is balancing the tension in the soft tissue surrounding the knee during a procedure. Zimmer offers the eLibra dynamic knee balancing system, and Stryker, Biomet, Mako Surgical and CareCloud have partnered with OrthoSensor to develop its platform of intelligent implants and monitoring systems for joint balance in surgery.

Outside of knees, robotics continues to be a focus area in orthopedics as it has been for the last several years. Newitter pointed to Mako Surgical being one of the major players on the market with its Rio system for knee and hip surgery. While Mako is the furthest along in the robotics market, having solid footing in unicompartmental knee procedures and gaining fast in hips, Newitter said it may get ousted by newer robotic platforms that could beat them on price (the Rio system costs about $1 million).

“The [new robotics platform] that received the most attention at this year’s conference was Blue Belt’s,” said Newitter. Pittsburgh, Pa.-based Blue Belt Technologies makes the Navio PFS UKR surgical system and software. “The company recently got U.S. Food and Drug Administration approval for its unicompartmental knee system, but they’re still much earlier in the adoption phases. However, it’s on a much smaller scale than Mako. Arguably, Mako has more of a ‘platform’ technology, as it can do both hips and knees. Currently, Blue Belt is only marketing [its system] for unicompartmental knees.”

Newitter’s predictions for 2013-2014 are conservative, considering, as mentioned above, that new orthopedic products take time to gain traction. “It’s important to note that new knee products take a long time to launch,” he said. “Any new orthopedic product launch takes several years to really move into its full stride. While these products do have the potential to have an impact, it’s going to be gradual and over time; and market share tends to be pretty sticky. I don’t know that there’s necessarily going to be giant swings in market share facilitated by these new product launches.”

However, the analyst does see potential for companies to start charging higher premiums for devices, “if they can prove or convince institutions and physicians that there’s an incremental benefit.”

“From a macro standpoint, it’s clear that the pricing pressure in the industry remains,” Newitter continued. He noted that in a post-healthcare reform era, hospitals and physicians are testing out new economic models. “The ultimate impact of that is unknown, but it’s clear that pricing pressure is here to stay, and that is likely, at best, to remain stable—maybe deteriorate to the extent that these newer economic models take hold.”

Finally, noteworthy in an environment tense from pricing pressure and the medical device tax was the significant presence of the investment community at AAOS. Companies also seemed to be funneling lots of dollars towards marketing: Zimmer in particular made a big splash at its booth to promote the Persona knee.