Michael Barbella, Managing Editor12.11.23
OssDsign AB is undertaking a strategic shift to focus its operations on the U.S. orthobiologics business, essentially transforming the firm into a pure play orthobiologics company.
Going forward, OssDsign will direct its efforts toward the nanosynthetic bone graft OssDsign Catalyst, an off-the-shelf product characterized by high scalability and high gross margins at 90% or above. All activities pertaining to the company’s patient-specific cranial implant business will be discontinued in a responsible manner by the end of the year, resulting in a substantial cost base reduction going forward. As a result, the future capital requirement ahead of becoming cash flow positive will be significantly decreased. Based on the revised strategy, OssDsign’s financial target is to reach sales of SEK 150 million-200 million in the medium-term, at which point the company also expects to become cash flow positive.
OssDsign Catalyst is a nanosynthetic bone graft that stimulates healthy bone tissue formation in spinal fusion surgeries. The product's August 2021 U.S. debut was based on preclinical results that surpass those found in other synthetic bone grafts in the most demanding preclinical model for spinal fusion (the Boden model). OssDsign Catalyst also has received U.S. Food and Drug Administration clearance for use in interbody cages in spinal surgery, allowing clinicians to use the product on-label in any interbody cage cleared for use with synthetic bone grafts. OssDsign Catalyst is the first synthetic bone graft to be cleared to market for interbody use based on bone graft data alone. In addition, OssDsign continues to accelerate a robust program of gathering clinical evidence for OssDsign Catalyst. In the first in-patient report from an ongoing clinical study, TOP FUSION, evidence of progression to fusion was observed at three months post-surgery, and complete spinal fusion was achieved at six months. A post-market safety report, published in November 2022, did not record any device-related complaints or device-related adverse events.
“The commercial performance of our nanosynthetic bone graft OssDsign Catalyst and the interbody clearance by the FDA establishes OssDsign Catalyst in the exceptional class of synthetic bone grafts and showcases that the potential of the orthobiologics business is of a magnitude which deserves our full focus. The successful entry into the orthobiologics space has transformed the company’s revenue growth and increased gross margins by 30 percentage points in less than three years. There is no doubt that the decision to deploy all resources to the orthobiologics business will boost the company’s earnings capability and at the same time significantly reduce the need for additional capital injections ahead of reaching cash flow positivity,” OssDsign CEO Morten Henneveld said.
OssDsign will now be focusing solely on the U.S. commercialization of OssDsign Catalyst, representing more than 70% of the global spinal bone graft market and is characterized by large volumes and highly attractive pricing. The targeted market segment for OssDsign Catalyst is valued at $1.8 billion, with an 8% annual growth rate. During the last two years, the United States has become OssDsign’s most important market, comprising approximately 72% of global sales in Q2 2023, a significant increase from roughly 37% in 2020.
Only two years after its launch, U.S. OssDsign Catalyst sales are now exceeding the global sales of its cranial implant product, OssDsign Cranial PSI. In the first half of 2023, OssDsign Catalyst sales skyrocketed 453% compared with the corresponding period last year. The gross margin for OssDsign Catalyst exceeds 90%, and the focus on orthobiologics is therefore expected to be highly accretive to gross profitability going forward. This has been evidenced by the strongly increasing development of the company’s gross margin from approximately 46% in 2020 to about 77% on a group level in Q2 2023, mainly driven by OssDsign Catalyst's launch.
As part of OssDsign’s new pure play orthobiologics strategy, the company will focus on four main areas: i) win in the U.S. through increased commercialization activities; ii) drive high-value innovation of the orthobiologics technology platform; iii) prove clinical performance in ongoing and future clinical programs; and iv) build scalability across company functions.
The strategic shift will potentially affect approximately 25 positions in the company and is expected to reduce annual operating expenditures by approximately SEK 30 million-40 million, leading to a 30% improvement in cash flow.1 One-off restructuring costs are estimated to have a SEK 10 million–15 million negative cash impact. In addition, there will be other, non-cash, restructuring costs related to the discontinuation of the cranial implant business.
“As an inevitable consequence of the strategic shift, colleagues who have contributed strongly to OssDsign’s successful journey will be affected by this decision. I would like to express my sincere gratitude for their hard work and commitment over the last many years,” Henneveld stated.
To avoid potential negative impact on patients and current customers, OssDsign will continue to deliver Cranial PSI for planned surgical procedures during the remainder of 2023, whereafter it will cease all activities in its cranial implant franchise. As a result of the strategic shift, OssDsign expects declining sales of Cranial PSI in the fourth quarter of 2023. OssDsign has explored the interest from third parties for Cranial PSI business and will continue its effort to seek a total or partial sale of its cranial assets.
Reference
1 On a like for like basis based on reported H1 2023 financials.
Going forward, OssDsign will direct its efforts toward the nanosynthetic bone graft OssDsign Catalyst, an off-the-shelf product characterized by high scalability and high gross margins at 90% or above. All activities pertaining to the company’s patient-specific cranial implant business will be discontinued in a responsible manner by the end of the year, resulting in a substantial cost base reduction going forward. As a result, the future capital requirement ahead of becoming cash flow positive will be significantly decreased. Based on the revised strategy, OssDsign’s financial target is to reach sales of SEK 150 million-200 million in the medium-term, at which point the company also expects to become cash flow positive.
OssDsign Catalyst is a nanosynthetic bone graft that stimulates healthy bone tissue formation in spinal fusion surgeries. The product's August 2021 U.S. debut was based on preclinical results that surpass those found in other synthetic bone grafts in the most demanding preclinical model for spinal fusion (the Boden model). OssDsign Catalyst also has received U.S. Food and Drug Administration clearance for use in interbody cages in spinal surgery, allowing clinicians to use the product on-label in any interbody cage cleared for use with synthetic bone grafts. OssDsign Catalyst is the first synthetic bone graft to be cleared to market for interbody use based on bone graft data alone. In addition, OssDsign continues to accelerate a robust program of gathering clinical evidence for OssDsign Catalyst. In the first in-patient report from an ongoing clinical study, TOP FUSION, evidence of progression to fusion was observed at three months post-surgery, and complete spinal fusion was achieved at six months. A post-market safety report, published in November 2022, did not record any device-related complaints or device-related adverse events.
“The commercial performance of our nanosynthetic bone graft OssDsign Catalyst and the interbody clearance by the FDA establishes OssDsign Catalyst in the exceptional class of synthetic bone grafts and showcases that the potential of the orthobiologics business is of a magnitude which deserves our full focus. The successful entry into the orthobiologics space has transformed the company’s revenue growth and increased gross margins by 30 percentage points in less than three years. There is no doubt that the decision to deploy all resources to the orthobiologics business will boost the company’s earnings capability and at the same time significantly reduce the need for additional capital injections ahead of reaching cash flow positivity,” OssDsign CEO Morten Henneveld said.
OssDsign will now be focusing solely on the U.S. commercialization of OssDsign Catalyst, representing more than 70% of the global spinal bone graft market and is characterized by large volumes and highly attractive pricing. The targeted market segment for OssDsign Catalyst is valued at $1.8 billion, with an 8% annual growth rate. During the last two years, the United States has become OssDsign’s most important market, comprising approximately 72% of global sales in Q2 2023, a significant increase from roughly 37% in 2020.
Only two years after its launch, U.S. OssDsign Catalyst sales are now exceeding the global sales of its cranial implant product, OssDsign Cranial PSI. In the first half of 2023, OssDsign Catalyst sales skyrocketed 453% compared with the corresponding period last year. The gross margin for OssDsign Catalyst exceeds 90%, and the focus on orthobiologics is therefore expected to be highly accretive to gross profitability going forward. This has been evidenced by the strongly increasing development of the company’s gross margin from approximately 46% in 2020 to about 77% on a group level in Q2 2023, mainly driven by OssDsign Catalyst's launch.
As part of OssDsign’s new pure play orthobiologics strategy, the company will focus on four main areas: i) win in the U.S. through increased commercialization activities; ii) drive high-value innovation of the orthobiologics technology platform; iii) prove clinical performance in ongoing and future clinical programs; and iv) build scalability across company functions.
The strategic shift will potentially affect approximately 25 positions in the company and is expected to reduce annual operating expenditures by approximately SEK 30 million-40 million, leading to a 30% improvement in cash flow.1 One-off restructuring costs are estimated to have a SEK 10 million–15 million negative cash impact. In addition, there will be other, non-cash, restructuring costs related to the discontinuation of the cranial implant business.
“As an inevitable consequence of the strategic shift, colleagues who have contributed strongly to OssDsign’s successful journey will be affected by this decision. I would like to express my sincere gratitude for their hard work and commitment over the last many years,” Henneveld stated.
To avoid potential negative impact on patients and current customers, OssDsign will continue to deliver Cranial PSI for planned surgical procedures during the remainder of 2023, whereafter it will cease all activities in its cranial implant franchise. As a result of the strategic shift, OssDsign expects declining sales of Cranial PSI in the fourth quarter of 2023. OssDsign has explored the interest from third parties for Cranial PSI business and will continue its effort to seek a total or partial sale of its cranial assets.
Reference
1 On a like for like basis based on reported H1 2023 financials.