Value Proposition

Value Proposition

Growing orthopedic companies share a common bond in providing solutions for physicians and patients.

Jim Stommen • Contributing Writer

While the growth curve in the so-called “big spaces” of orthopedics has been flattened by the effects of a few years of economic malaise, that doesn’t mean there isn’t growth in the sector. In fact, for a number of companies you might say the joints are jumping.

Raj Denhoy, a managing director in equity research at New York, N.Y.-based Jefferies & Company, told Orthopedic Design & Technology that gains are being seen in extremities, “things like shoulders and ankles and elbows, and also fingers and toes, so that has been a nice growth market, but still relatively small compared to some of the larger ones.”

In addition to the extremities, Denhoy cited traction in areas like robotics and custom implant guides, “ways to make the procedures better.”

Those enjoying growth in the orthopedics sector tend to share such key points as substantial existing or untapped markets, development of unique solutions, and successful treks through the twists and turns of the regulatory and reimbursement jungles. And many of them are succeeding even in the knee, hip and spine spaces where overall growth has slowed to a figurative crawl.

One such company is San Diego, Calif.-based NuVasive Inc., which has succeeded in the face of some daunting challenges, not the least of them being the breadth of competition in the spine space.
Spine has generated more interest—by companies, investors, patients and physicians—during the past decade-plus than any other sector of the overall orthopedics industry. That’s little wonder, since the world is full of people suffering from serious back problems with few choices for alleviating their conditions.

Most of those limited choices have involved very invasive, often dangerous forms of surgery, so procedures that carry with them terms such as “minimally invasive” and “motion preservation” quite naturally attract attention.

NuVasive pioneered the spine surgery technique known as lateral access—eXtreme Lateral Interbody Fusion, or XLIF in company parlance—and physician interest has grown markedly. But unlike “lateral move,” the term used to describe a job change that involves neither promotion nor demotion, this company’s lateral move is giving it a leg up in the spinal space.

NuVasive’s primary focus is the $5.1 billion U.S. spine implant market. The company also is expanding its participation in the global biologics market and is developing products for the emerging motion preservation market.

With a product portfolio now approaching 60 in number, NuVasive spans the lumbar, thoracic and cervical segments of the spine sector. Its current principal product offerings include a minimally disruptive surgical platform called Maximum Access Surgery (MAS), the NVJJB/M5 nerve avoidance monitoring system, the XLIF solution to safe and reproducible lateral access surgery, and an expanding group of biologics, cervical and motion preservation products. The MAS platform combines four categories of products that the company claims minimize soft tissue disruption during spine surgery with maximum visualization and easy reproducibility for the surgeon: NeuroVision, a software-driven nerve avoidance system; MaXcess, a unique split-blade retractor system; a wide variety of specialized implants; and several biologic fusion enhancers.

Going hand in glove with lateral surgical access is neurological monitoring. The ease of neuro monitoring, which offers safety to the procedure and confidence for the physician, is an important driver for surgeon adoption. Integration of the neuro monitoring equipment into the procedure differs by company, but NuVasive’s NeuroVision system is a clear leader there as well.

Even though lateral access accounts for only one in five spinal fusion surgeries today, it is undergoing rapid adoption by U.S. physicians, which means the space is attracting competitors like mosquitoes are attracted to human skin on summer evenings. Companies such as Medtronic Inc., Johnson & Johnson, Synthes Inc. (soon to be part of J&J when the buyout closes), Alphatec Spine Inc. and Globus Medical Inc. either are offering or moving toward offering lateral access approaches that compete with NuVasive’s segment-leading procedure, although the company has continued to show growth and market share gains even in the face of more competition and a sour economy that saw would-be spine fusion patients resign themselves to live with pain rather than deal with the costs and recovery time accompanying spinal surgery.

During a steady stream of investor conference appearances, Chairman Alexis Lukianov, President and Chief Operating

Officer Keith Valentine, and Chief Financial Officer and Executive Vice President Michael Lambert maintain that NuVasive’s goal is to be “cutting edge and innovative” in every aspect of the spinal business, from access to neuro monitoring, and biologics to motion preservation.

NuVasive uses the catch-phrase “Speed of Innovation” to describe its development efforts, and Lukianov encapsulated the credo in remarks accompanying the company’s first quarter 2011 earnings report.

“We are laser-focused on maintaining the start-up mentality that is the very source of NuVasive’s success as a prolific new product innovator. With speed as our competitive edge, we expect to continue to sustain industry-leading growth.”

The company has filled a big pothole in its growth pathway by using the backing of spine surgeons and patients to get some big insurers to change their earlier “non-coverage” stance on the XLIF procedure. Earlier this year, insurance companies CIGNA and Humana both reported that they now would cover the procedure, joining Aetna, United Healthcare and Health Care Service Corp. as the major commercial insurance providers accepting XILF for coverage.

A rebounding economy and welcome clarification on insurance coverage are real beacons for NuVasive as it travels its growth path. One other potential roadblock is an ongoing patent battle with industry colossus Medtronic, which filed a patent infringement suit against its much smaller rival in 2008, followed by a countersuit by NuVasive. The first patent case is to be heard in August, which should start to clarify that ongoing question mark.

In 2010, NuVasive’s sales rose 30 percent to $478 million, and this year is targeting sales of $530 million-$540 million. First quarter 2011 revenues grew to $124.5 million from $109.1 million in the same quarter of last year, a 14.1 percent increase. Lukianov termed the first-quarter performance “excellent across all our key sectors. We generated revenue growth of over 14 percent and better than expected operating margin improvement in view of challenging spine market growth dynamics. Our performance internationally was a highlight and is well on track to double this year to approximately 8 percent of revenue.”

Cayenne Medical Ready to Shoulder the Load

Another company making news these days is Cayenne Medical Inc., a privately held player in the sports medicine segment. A major development for the Scottsdale, Ariz.-based company was the naming of a new president and CEO earlier this year.

David Springer, a device industry veteran, was named to those posts in February, replacing James Hart, who for unspecified health reasons moved to the executive chairman post. Hart had served as chairman, president and CEO since the company’s inception in 2005.

Springer has held a number of key leadership posts in healthcare, including service as president and CEO of CHF Solutions prior to its 2010 sale to Gambro AB. Prior to his four years with CHF, he served as senior vice president of St. Jude Medical Inc.

In another personnel move of note, the company reported in early June that Dev Mishra, M.D., had been named medical director. He will take the lead in the areas of medical education and clinical research activities, mainly focusing on the development of new products and the design of the clinical protocols and procedures needed to bring such products to commercialization.

While Cayenne Medical currently offers products that address knee ligament reconstruction and meniscal repair—including the AperFix II System, CrossFix II Meniscal Repair System and iFix System—it makes no bones, pardon the pun, about its plans to become a “head to toe” provider of orthopedic solutions. Company officials have indicated that the long-range plan—but not all that long, maybe in the three-to-five year range—is to be the resource for products physicians need to care for orthopedic problems throughout the body.

When it was founded six years ago, Cayenne initially envisioned developing a complete package of products for knee and soft tissue-type reconstruction. With its efforts in that area bearing fruit to the tune of implant numbers growing exponentially from the 50,000 implant milestone that was reached last November, there’s a solid foundation in place to allow a company that’s still among the “little guys” to take an aggressive stance on expanding its product reach. Cayenne’s website now includes a “shoulder products” section, and company officials have specifically cited that segment as their next big area of focus. It’s an area overflowing with potential, with rotator cuff and labral repair procedures usually eclipsing anterior cruciate ligament (ACL) repair by a wide margin for most orthopedic surgeons, so opportunity certainly is knocking. Springer indicated in a recent interview that Cayenne’s first shoulder product may make its appearance in the first quarter of 2012.

The hip and ankle segments most likely won’t be all that far behind—all would be part of positioning the company as an “all in one” provider of orthopedic implant technology.

As a part of strengthening its position in the knee-repair segment that is its initial area of focus, Cayenne has just introduced the CrossFix II Meniscal Repair System, a second-generation device for treatment of traumatic meniscal tears. CrossFix II was rolled out in time for display at the annual meeting of the American Orthopaedic Society for Sports Medicine in San Diego, Calif., in July.

The CrossFix II platform offers a minimally invasive, all-suture meniscal repair that reduces the risk of chondral injury associated with other implantable meniscal devices. Its “all-inside” technique uses suture delivery needles, available in both curved and straight designs, inserted through a single incision to gain access to multiple tear sites from the inside surface of the meniscus. The simple procedure, which can be performed in minutes using the company’s proprietary instantaneous mattress stitch and pre-tied, sliding Hot Knot, replicates the repair of standard open suturing techniques.

Earlier this year, Cayenne introduced the second-generation AperFix II System during the annual meeting of the American Academy of Orthopaedic Surgeons in San Diego. The AperFix II system for multi-ligament repairs of the knee improves upon the AperFix ligament reconstruction technology, the company’sinitial product launched in 2007. The AperFix II introduces a Cannulated Tibial System to the original AperFix technique, providing surgeons with an easier insertion method and standardized positioning of the implant.

The launch of the CrossFix meniscal repair device in 2009 enabled the treatment of both the ligament and the meniscus inside the knee, and the new CrossFix II builds on that success. The enhanced CrossFix II now includes sharper, stiffer suture delivery needles, which have inspired a simpler technique for needle insertion into the joint space and the meniscus. CrossFix II alsofeatures an improvement in suture strength resulting in a high-strength biomechanical repair.

The iFix system, launched in 2008, was developed for surgeons who practice the bone-tendon-bone ACL reconstruction technique, as opposed to the soft tissue technique used with AperFix. iFix is the first U.S. Food and Drug Administration (FDA)-approved interference screw manufactured using PEEK.

In another complementary area of business, Cayenne Medical has entered into a co-marketing partnership with Parametrics Medical Inc., a provider of high-quality bone and tissue allografts, to provide surgeons with tailored knee ligament reconstruction options. Surgeons use allografts in knee ligament reconstruction procedures approximately 40 percent of the time due to preference or specific anatomical requirements. Cayenne said the alliance would allow its sales representatives to cater to the specific graft needs of the surgeon.

Ascension Turns Attention to Shoulders

Also making a move toward the shoulder segment is Austin, Texas.-based Ascension Orthopedics Inc., which seeks to build on its experience in the small-bone implant space with a line of shoulder replacement systems made of its PyroCarbon biomaterial. Pyrolitic carbon has a lengthy record of use in medical devices, especially in heart valves, where it is valued for its clot-free properties. It has some of the same structural qualities of natural bone, making it a natural for orthopedic use.

Ascension’s first product was a pyrolytic carbon implant for the metacarpophalangeal joints of the hand. Its joint replacement product line has since expanded to include implants for the shoulder, elbow, wrist, hand, foot and ankle. Its products are sold in the United States and more than 20 countries worldwide.

The company has seen more than 40,000 PyroCarbon extremity joints implanted for the hand, wrist, elbow, shoulder and foot.

As was noted earlier by market analyst Denhoy, things are happening in the extremities market, and the potential in the shoulders segment is nothing to shrug at.

Ascension is led by President and CEO Guy Mayer, an industry veteran who previously was CEO of biological implant firm

Tutogen Medical Inc., which he led to a $247 million acquisition by RTI Biologics Inc. Earlier, he was president of orthopedic implant division of Zimmer Holdings Inc. Mayer was matched with Ascension by Frazier Healthcare Ventures, which in 2008 bought out earlier investors in a $21 million Series D financing and became the company’s majority shareholder.

Company founder Jerry Klawitter, Ph.D., now serves as Ascension’s chief scientific officer. Klawitter pioneered efforts using PyroCarbon in the manufacture of mechanical heart valves, turning his focus in the 1970s toward the design of PyroCarbon implants for the orthopedic market. His work with the Mayo Clinic led to the founding of Ascension Orthopedics in 1992. Ascension was one of the first companies to bring pyrolitic carbon technology to orthopedics. It has a solid record of growth in the extremities space, and now is aiming to apply its PyroCarbon technology to shoulder replacement. The shoulder joint offers opportunities to apply many of the design features found in hips and knees, and for Ascension there is the added plus of having the surgeons who perform shoulder procedures often also being the ones working on elbows, hands and wrists.

Ascension’s biggest competitor in shoulders is Tornier Inc., which already has a substantial niche in the sector thanks to its 2007 acquisition of Nexa Orthopedics, another maker of PolyCarbon implants. Throw in the aforementioned big guys—Biomet Inc., Smith & Nephew plc, Stryker Corp., Wright Medical Technology Inc. and Zimmer—and it’s clear that Ascension will have to differentiate itself from the pack. The peg will be that PyroCarbon will eliminate much of the wear and tear associated with orthopedic implants.

In the near term, Ascension’s focus for PyroCarbon shoulders will be in international markets. The implantation of the first PyroTitan humeral resurfacing implant in the United Kingdom took place in August 2010. PyroTitan offers a bone-sparing option for patients in need of shoulder joint replacement.
It is available in 12 sizes, which are based on published anthropomorphic data of more than 300 human humeri to provide an improved anatomic fit.

Ascension reported the first implantation of the PyroTitan humeral resurfacing implant in Nice, France, last December— making it a surgical first in continental Europe. The PyroTitan was implanted in a 68-year-old patient suffering from painful primary arthritis with synovial osteochondromotosis.

Offering a Barrier to Postoperative Pain

FzioMed Inc., based in the central California coastal community of San Luis Obispo, is a privately held device company operating within an interesting niche. The company developsabsorbable surgical biomaterials based on its patented polymer technology, with applications in a variety of surgical specialties, including an emphasis on orthopedics and spine procedures.

FzioMed’s lead product, Oxiplex, is an absorbable gel that is applied in the epidural space during lumbar laminectomy, laminotomy and discectomy procedures, creating a temporary protective barrier against the effects of excessive fibrosis, inflammation and other irritants that can lead to recurrent postoperative pain. Application of the flowable gel during surgery is simple and takes only seconds. The gel coats and isolates nerve fibers and dura.

At a time when demonstrable positive outcomes of healthcare procedures are more important than ever before, FzioMed execs say that Oxiplex has been shown to improve spine surgery outcomes by significantly reducing postoperative leg pain, back pain and neurological symptoms.

The company is led by John Krelle, president and CEO. A former executive at Zimmer, Krelle joined FzioMed in July 2005 as president and chief operating officer.

The company’s science is based on the combination of two biocompatible medical polymers, carboxymethylcellulose and polyethylene oxide. It formulates those materials—what the company calls “exclusive compositions of safe and well-known biopolymers” into bioabsorbable products for surgical use.

The company notes that its biomaterials contain no materials of human, animal or bacterial origin, and are naturally absorbed and cleared by the body over time, so they do not need to be removed after application. Those ready-to-use products have the added advantage of being stored at room temperature, eliminating the need for refrigeration.

According to FzioMed, preclinical and clinical data from a variety of studies and procedures, along with a lengthy history of commercial experience, have demonstrated the safety and biocompatibility of its products.

The company hit a noteworthy milestone last November with the shipment of the 200,000th unit of Oxiplex from its California manufacturing facility. Oxiplex—which is known as MediShield in some markets—is approved for sale in 63 countries, among them Australia, Brazil, Canada, South Korea, and the entire European Union. It is not yet approved for sale in the United States.

Noting the substantial size of its potential market, with more than 800,000 discectomies performed every year, Krelle said, “We remain hopeful that the United States will join the list of countries that have already approved the device, so that American patients will be able to benefit from the clinically proven reduction in pain and symptoms that Oxiplex provides.”

Despite an admirable safety record from its use in Europe since 2001, Oxiplex got the thumbs-down from an FDA advisory panel in 2008. During that panel meeting, Reginald Davis, M.D , a neurosurgeon in private practice in the Baltimore, Md., area, told the panel that Oxiplex covers an unmet need. “A significant number of these patients, even those with successful outcomes, report residual pain,” he said. “Any reduction in this pain would be significant improvement, [and] Oxiplex is an intuitive and logical solution to an unmet need.”

But that wasn’t enough to win panel backing, so for now, FzioMed remains hopeful of eventually obtaining U.S. approval of its lead product.

Jim Stommen, retired editor of industry publication Medical Device Daily, is a freelance writer focusing on the medical product sector.