Several medical device companies gathered at the North American Spine Society annual conference this past month to display new innovations for a variety of spinal procedures. Even through tough economic times, companies displayed an impressive array of innovation, which could lead to exciting developments in the field of spine surgery. Here, six leaders of five spine device companies discuss their successes over the past few years and how they are planning to tackle the market in the future.
Steve Deitsch, CFO, Lanx: We try to find strategies for spinal surgery that are beneficial for patients, physicians and the healthcare system. The Aspen is a true minimally invasive solution: you insert the device through a small incision that saves patient anatomy and reduces OR time and length of stay. The Aspen is an alternative therapy for patients with degenerative disc disease. The standard today for posterior fusion is using pedicle screws, and we sell pedicle screws as well. However, instead of using four pedicle screws for a single level fusion, our Aspen system uses two plates positioned posterially and a barrel for insertion of bone graft. The procedure causes minimal damage to soft tissue and we are seeing great fusion rates and many patient benefits, including less blood loss.
Ori Hadomi, CEO, Mazor Robotics: Mazor Robotics has been successful by working closely with leading spine surgeons to develop truly differentiated products. For example, Mazor has developed the world's only robotic system that provides surgical guidance for spine surgeries. Published data shows that Mazor Robotics' technology increases the accuracy of spinal implants and significantly lowers the rate of misplaced screws and neurological deficits. (Among other studies, Dennis P. Devito, MD, a scoliosis specialist from Atlanta, Georgia, recently reported clinical accuracy of 99.7 percent for 1,815 implants placed with Mazor Robotics' system in 120 scoliotic adolescents. According to current scientific literature, the average accuracy is approximately 85-90 percent for free-hand surgical techniques.) For patients, this means fewer complications and revisions.
Mazor Robotics' next generation Renaissance system is FDA cleared and CE marked. Renaissance is transforming spine surgery, from facilitating and shortening freehand procedures as well as highly complex procedures with less radiation — even for minimally invasive surgery, scoliosis, and other complex spinal deformity cases.
Alexis V. Lukianov, CEO, NuVasive: NuVasive, even within an extremely challenging spine market, has delivered industry-leading growth because we pioneered the lateral approach to spine fusion with our XLIF solution. Our patented approach is highly differentiated and years ahead of the competition because it seamlessly integrates neuromonitoring into the lateral approach, providing surgeons with information about the directionality and relative proximity of nerves, which leads to safer, more reproducible procedures.
Our sales force is another driving factor of NuVasive's success. Our team of over 300 sales representatives is highly focused on providing best-in-class customer service and driving penetration of our innovative technologies deeper. As well, our surgeon training is considered to be best in class, and the recent opening of a training facility on the East Coast is facilitating an increase in the number of surgeon training sessions that we can offer and enhancing surgeon adoption. We also recently executed a strategic transaction, acquiring Impulse Monitoring, which will further enhance the penetration of XLIF and NeuroVision in the years to come.
Eric Major, CEO, K2M: Our company started in 2004 and we had a vision of being a leader, the best in class for difficult spinal pathology. We decided to start tackling solutions for one of the most difficult spinal cases — minimally invasive surgery for complex spinal deformity — and then built our complete degenerative portfolio. Most companies start with a few products and then launch instrumentation for the most difficult procedures. We decided to take on the most complex procedures first, which has strategically inspired everything we do.
We've taken a very methodical approach to developing and releasing our products. This year is our 8th year at NASS and we are displaying several new products. We could have grown even faster in the past eight years, but we wanted to make sure everything was as safe and effective as it could be before introducing it to the market. We envision patients who will be treated with our devices as though they were our family members, and this psychological return for our employees contributes to the drive and passion of our company's culture.
Chris Zorn, Vice President, Spine Surgical Innovation: We have always focused on delivering cost-effective and easy to learn solutions, and we always use minimal invasive retractor systems and instruments. We have been able to design and manufacture our products here in Boston and serve a global market, both end-users — surgeons, OEM clients — and those in the middle — distributors and smaller spine vendors. We believe we are well-positioned globally for ever constraining reimbursement and margins in the evolving spine market by keeping all things we do simple and straightforward. We don't have to drastically adjust or re-direct our mission and goals. We strongly believe the best days are ahead.
SD: Surgeons and hospitals today are more focused on the cost of a device and procedure than they have in the past. A benefit of our Aspen device is that it reduces per patient cost and total hospital cost when you compare it to performing a traditional pedicle-based fusion. There is an opportunity here for hospitals, and they are finding out about that.
Dan Gladney, CEO, Lanx: We recognize that payors are pushing back on single level fusions. We hired and are working with reimbursement specialists to help physician customers and patients access appropriate therapies. I think it's fair to say that the spine market is somewhat flat to slightly declining. We think there is a great opportunity for innovation and to reduce cost of care through innovation.
OH: The global macroeconomic environment has tightened capital budgets, shrinking reimbursement shrinks margins. Together, these trends can slow the adoption of new technologies that can be expensive.
But these trends also create greater competition among medical centers, which drives them to differentiate their offering. Surgeons and hospital executives alike understand how the Renaissance system can positively affect patient outcomes, which can distinguish their center and their spine surgery practice as patients search out technology and self-refer for procedures. So the investment is worthwhile, even in a challenging environment.
AL: In the United States, insurance payor pushback on spine fusion is the most substantial challenge, which continues to limit market growth rates. We are leading the charge to improve patient access to the care that they need by working with the spine societies to draft clinically supported, consistent guidelines for spine fusion, which we hope will ultimately replace insurance payor reliance on consulting firm-constructed guidelines. As well, we are educating surgeon offices on document preparation and manning a hotline for our sales representatives and surgeons that are experiencing denials. Surgeons are learning to navigate this more difficult environment, affording some stability in the market. Outside of our efforts to improve patient access to care, it is business as usual at NuVasive. Our approach is the same as it has always been: outwork the competition and outgrow the market. Our innovative products are driving success.
The lateral approach has drawn competitive interest and limitations, which is further addressed in the other questions.
EM: We are privately held by Welsh, Carson, Anderson & Stowe and the investment in our business has allowed K2M to dramatically scale the business. One of our important challenges is to maintain our unique culture when we expand so quickly. We have tried to encourage entrepreneurial innovation, excitement and energy among our partners and employees. It's a real collaborative effort among design teams that bring innovation for the spine. That collective effort focused on spinal innovation is where the success is coming from.
We are also looking to re-examine our plan and adjust it to market pressures coming from case volume and declining reimbursement. There is a lot of disruption in the market right now and we are seeing a lot of management changes among the big companies. We are in the right place at the right time and positioned well to focus on strategic growth.
CZ: Our biggest challenge is the same it has always been. As a relatively small, privately held enterprise that entered into the global market about five years ago, recognition as a prominent spine instrument vendor, driven by simple, effective product designs and dedication to keeping our pricing at the lowest fair ROI for us and our customers is our constant challenge. We try to be the no-hype, keep it simple market player and recognize the global market is constantly squeezing costs out of the various delivery systems worldwide.
DG: We are most excited about the opportunity we have with our ongoing Aspen clinical trials that will demonstrate the efficacy of the product as well as economic benefits. With the Aspen product we have seen very high fusion rates, less blood loss, and decreased hospital time and cost, so we're excited about the upcoming clinical results. Lanx is committed to minimally invasive surgery and our plan is to continue to innovate through the minimally invasive approaches.
The second major opportunity we see is that the company is entering the lateral business in 2012 with our Timberline Lateral Fusion System. It features a radiolucent retractor system and many other innovative features. Andy Cappuccino, MD, recently joined Lanx as Surgeon Advisory Board Chairman and will help Lanx introduce the benefits of Timberline to surgeons and patients. We expect that business to be a significant part of our focus in 2012, complemented by Aspen, to create a true MIS fusion solution. A large number of lateral fusion procedures are currently backed up with posterior fixation, and a Timberline and Aspen combined procedural solution is truly minimally invasive.
OH: Across the practice of medicine, savvy patients will continue to shop online for the medical centers that offer the best care and the safest, most successful procedures, and will self refer to these centers. In spine surgery, like most surgical fields, this will drive a consolidation process. Centers of excellence will emerge that have the patient volumes to recruit the best surgical talent, use the best technologies and offer the best outcomes.
Mazor Robotics provides a solution that differentiates these centers. It aligns everyone's needs by focusing on improving patient outcomes, facilitating the surgical work, and lowering radiation levels. It creates a win-win-win situation.
AL: Where the market is heading: When the insurance payor pushback situation is resolved with broad adoption of a consistent set of guidelines, we envision the spine market returning to mid single digit rates of growth. In the meantime, we expect global market growth to be about flat.
Today, roughly 80 percent of spine patients are still being treated via traditional, invasive procedures, whereas only 20 percent are treated through minimally invasive procedures. MIS techniques are growing much more rapidly than the overall spine market and we believe that over the next 10 years, these percentages are going to flip as better outcomes continue to drive the adoption and proliferation of MIS techniques. NuVasive's market share taking strategy has afforded us a leadership position in the MIS market so we expect to continue to outpace market growth.
How NuVasive is positioned for growth: We continue to drive adoption of the XLIF procedure and with only ~7 percent global market share; we believe our runway for growth is exceptionally long. We are continually acting on surgeon feedback to improve the XLIF procedure. We launched the next generation of our MaXcess retractor this year to exceptionally strong surgeon reception and at NASS this month, we featured improvements to our NeuroVision software.
Recently, we saw an accelerated opportunity to leverage our leadership position in neuromonitoring through the Impulse acquisition, allowing the Company to offer surgeons and hospitals complete procedural integration in all areas of spine. The market for intraoperative monitoring is an $800 million market, and the portion of the market that is outsourced to providers like Impulse is growing at 15 percent. With the acquisition, we are well positioned to take a leadership position in a very attractive market. With our expanded platform, surgeons now have the benefit of a dedicated neurophysiologist in the OR that can properly set up the patient, saving the surgeon time and reducing risk while generating incremental service revenues for NuVasive and freeing up our sales representatives to focus on what they do best, which is sell the vast number of solutions that NuVasive offers. The strategic move to bring NeuroVision platform and IOM under the same umbrella will increase the penetration of NeuroVision and XLIF through 150 neurophysiologists and will expand NUVA's neuromonitoring stronghold within the hospital.
We are expanding internationally and look forward to entering Japan in 2012, which is the second largest market for spine. We continue to add innovative solutions to our portfolio to stay ahead of the competition. We hope to commercialize both AttraX, a synthetic biologic with a novel microstructure, and our PCM motion preserving device for the cervical spine in 2012. We have excellent opportunity to improve operating profit margins as our sales force matures and productivity improves.
EM: When we think about our business strategy, we remember the core of what we are doing for spinal innovation. In terms of unique management, our CEO is a business guy and our chief medical officer is a retired spine surgeon. Every day, our CMO reminds us to focus on what is best for the patients and our customers — spine surgeons — so we can do the right things to be responsive. It's an exciting time for K2M because our business is growing rapidly. We have been able to expand to offices in London, Hamburg, Australia and Spain, and we were recently approved to sell in Japan.
In the future, we will continue to grow by taking the same methodical approach to collaborative innovation, comprehensive testing and product introduction as we have in the past, addressing the problems of both surgeons and patients.
CZ: The global spine market is under accelerating and intensifying "never seen before" pressure from payors — whether they are private or government systems — to reduce the price of spinal surgeries. This doesn't bode well for marginally profitable or break-even spine vendors.
Those distributors in the middle are feeling it even worse. They have to really provide intense service and value to stay in the OR. Distributors are realizing their vendors don't have the margins to provide retractors or instrument sets their surgeons need anymore, and the hospitals don't have the money to buy, so they are increasing their investments to remain 'in the room' and serve the relationships they have developed over time.
Hospitals in the U.S. are in essence setting pricing for a rapidly commoditized product. Developing new and novel, albeit pricier spinal systems, which have significant learning curves for surgeons and higher prices to the payors are going to be increasingly difficult to sell without steep discounts.
Observing this globally, we are confident our 'keep it simple' approach, easy to learn and use spinal product designs and relatively low cost appeals to the mature and mid-career surgeons as well as those just entering practice. We plan on keeping to our plan and keep a diligent focus on designing simple and cost-effective, high quality systems and learning to constantly improve what we do in the toughest reimbursement regions and markets worldwide.
Related Articles on Spine Device Companies:
InVivo Therapeutics Reports $3M Net Income in 3Q
Alphatec Spine Names Frances Harrison to Vice President Position
Global Spine Surgery Market to Reach $9.3B by 2017
Q: How has your company been able to succeed in the competitive and volatile spine care market over the past several years?
Steve Deitsch, CFO, Lanx: We try to find strategies for spinal surgery that are beneficial for patients, physicians and the healthcare system. The Aspen is a true minimally invasive solution: you insert the device through a small incision that saves patient anatomy and reduces OR time and length of stay. The Aspen is an alternative therapy for patients with degenerative disc disease. The standard today for posterior fusion is using pedicle screws, and we sell pedicle screws as well. However, instead of using four pedicle screws for a single level fusion, our Aspen system uses two plates positioned posterially and a barrel for insertion of bone graft. The procedure causes minimal damage to soft tissue and we are seeing great fusion rates and many patient benefits, including less blood loss.
Ori Hadomi, CEO, Mazor Robotics: Mazor Robotics has been successful by working closely with leading spine surgeons to develop truly differentiated products. For example, Mazor has developed the world's only robotic system that provides surgical guidance for spine surgeries. Published data shows that Mazor Robotics' technology increases the accuracy of spinal implants and significantly lowers the rate of misplaced screws and neurological deficits. (Among other studies, Dennis P. Devito, MD, a scoliosis specialist from Atlanta, Georgia, recently reported clinical accuracy of 99.7 percent for 1,815 implants placed with Mazor Robotics' system in 120 scoliotic adolescents. According to current scientific literature, the average accuracy is approximately 85-90 percent for free-hand surgical techniques.) For patients, this means fewer complications and revisions.
Mazor Robotics' next generation Renaissance system is FDA cleared and CE marked. Renaissance is transforming spine surgery, from facilitating and shortening freehand procedures as well as highly complex procedures with less radiation — even for minimally invasive surgery, scoliosis, and other complex spinal deformity cases.
Alexis V. Lukianov, CEO, NuVasive: NuVasive, even within an extremely challenging spine market, has delivered industry-leading growth because we pioneered the lateral approach to spine fusion with our XLIF solution. Our patented approach is highly differentiated and years ahead of the competition because it seamlessly integrates neuromonitoring into the lateral approach, providing surgeons with information about the directionality and relative proximity of nerves, which leads to safer, more reproducible procedures.
Our sales force is another driving factor of NuVasive's success. Our team of over 300 sales representatives is highly focused on providing best-in-class customer service and driving penetration of our innovative technologies deeper. As well, our surgeon training is considered to be best in class, and the recent opening of a training facility on the East Coast is facilitating an increase in the number of surgeon training sessions that we can offer and enhancing surgeon adoption. We also recently executed a strategic transaction, acquiring Impulse Monitoring, which will further enhance the penetration of XLIF and NeuroVision in the years to come.
Eric Major, CEO, K2M: Our company started in 2004 and we had a vision of being a leader, the best in class for difficult spinal pathology. We decided to start tackling solutions for one of the most difficult spinal cases — minimally invasive surgery for complex spinal deformity — and then built our complete degenerative portfolio. Most companies start with a few products and then launch instrumentation for the most difficult procedures. We decided to take on the most complex procedures first, which has strategically inspired everything we do.
We've taken a very methodical approach to developing and releasing our products. This year is our 8th year at NASS and we are displaying several new products. We could have grown even faster in the past eight years, but we wanted to make sure everything was as safe and effective as it could be before introducing it to the market. We envision patients who will be treated with our devices as though they were our family members, and this psychological return for our employees contributes to the drive and passion of our company's culture.
Chris Zorn, Vice President, Spine Surgical Innovation: We have always focused on delivering cost-effective and easy to learn solutions, and we always use minimal invasive retractor systems and instruments. We have been able to design and manufacture our products here in Boston and serve a global market, both end-users — surgeons, OEM clients — and those in the middle — distributors and smaller spine vendors. We believe we are well-positioned globally for ever constraining reimbursement and margins in the evolving spine market by keeping all things we do simple and straightforward. We don't have to drastically adjust or re-direct our mission and goals. We strongly believe the best days are ahead.
Q: What are the biggest challenges you're facing right now and how are you overcoming them?
SD: Surgeons and hospitals today are more focused on the cost of a device and procedure than they have in the past. A benefit of our Aspen device is that it reduces per patient cost and total hospital cost when you compare it to performing a traditional pedicle-based fusion. There is an opportunity here for hospitals, and they are finding out about that.
Dan Gladney, CEO, Lanx: We recognize that payors are pushing back on single level fusions. We hired and are working with reimbursement specialists to help physician customers and patients access appropriate therapies. I think it's fair to say that the spine market is somewhat flat to slightly declining. We think there is a great opportunity for innovation and to reduce cost of care through innovation.
OH: The global macroeconomic environment has tightened capital budgets, shrinking reimbursement shrinks margins. Together, these trends can slow the adoption of new technologies that can be expensive.
But these trends also create greater competition among medical centers, which drives them to differentiate their offering. Surgeons and hospital executives alike understand how the Renaissance system can positively affect patient outcomes, which can distinguish their center and their spine surgery practice as patients search out technology and self-refer for procedures. So the investment is worthwhile, even in a challenging environment.
AL: In the United States, insurance payor pushback on spine fusion is the most substantial challenge, which continues to limit market growth rates. We are leading the charge to improve patient access to the care that they need by working with the spine societies to draft clinically supported, consistent guidelines for spine fusion, which we hope will ultimately replace insurance payor reliance on consulting firm-constructed guidelines. As well, we are educating surgeon offices on document preparation and manning a hotline for our sales representatives and surgeons that are experiencing denials. Surgeons are learning to navigate this more difficult environment, affording some stability in the market. Outside of our efforts to improve patient access to care, it is business as usual at NuVasive. Our approach is the same as it has always been: outwork the competition and outgrow the market. Our innovative products are driving success.
The lateral approach has drawn competitive interest and limitations, which is further addressed in the other questions.
EM: We are privately held by Welsh, Carson, Anderson & Stowe and the investment in our business has allowed K2M to dramatically scale the business. One of our important challenges is to maintain our unique culture when we expand so quickly. We have tried to encourage entrepreneurial innovation, excitement and energy among our partners and employees. It's a real collaborative effort among design teams that bring innovation for the spine. That collective effort focused on spinal innovation is where the success is coming from.
We are also looking to re-examine our plan and adjust it to market pressures coming from case volume and declining reimbursement. There is a lot of disruption in the market right now and we are seeing a lot of management changes among the big companies. We are in the right place at the right time and positioned well to focus on strategic growth.
CZ: Our biggest challenge is the same it has always been. As a relatively small, privately held enterprise that entered into the global market about five years ago, recognition as a prominent spine instrument vendor, driven by simple, effective product designs and dedication to keeping our pricing at the lowest fair ROI for us and our customers is our constant challenge. We try to be the no-hype, keep it simple market player and recognize the global market is constantly squeezing costs out of the various delivery systems worldwide.
Q: Where do you see the spine market heading and how has your company positioned itself for growth?
DG: We are most excited about the opportunity we have with our ongoing Aspen clinical trials that will demonstrate the efficacy of the product as well as economic benefits. With the Aspen product we have seen very high fusion rates, less blood loss, and decreased hospital time and cost, so we're excited about the upcoming clinical results. Lanx is committed to minimally invasive surgery and our plan is to continue to innovate through the minimally invasive approaches.
The second major opportunity we see is that the company is entering the lateral business in 2012 with our Timberline Lateral Fusion System. It features a radiolucent retractor system and many other innovative features. Andy Cappuccino, MD, recently joined Lanx as Surgeon Advisory Board Chairman and will help Lanx introduce the benefits of Timberline to surgeons and patients. We expect that business to be a significant part of our focus in 2012, complemented by Aspen, to create a true MIS fusion solution. A large number of lateral fusion procedures are currently backed up with posterior fixation, and a Timberline and Aspen combined procedural solution is truly minimally invasive.
OH: Across the practice of medicine, savvy patients will continue to shop online for the medical centers that offer the best care and the safest, most successful procedures, and will self refer to these centers. In spine surgery, like most surgical fields, this will drive a consolidation process. Centers of excellence will emerge that have the patient volumes to recruit the best surgical talent, use the best technologies and offer the best outcomes.
Mazor Robotics provides a solution that differentiates these centers. It aligns everyone's needs by focusing on improving patient outcomes, facilitating the surgical work, and lowering radiation levels. It creates a win-win-win situation.
AL: Where the market is heading: When the insurance payor pushback situation is resolved with broad adoption of a consistent set of guidelines, we envision the spine market returning to mid single digit rates of growth. In the meantime, we expect global market growth to be about flat.
Today, roughly 80 percent of spine patients are still being treated via traditional, invasive procedures, whereas only 20 percent are treated through minimally invasive procedures. MIS techniques are growing much more rapidly than the overall spine market and we believe that over the next 10 years, these percentages are going to flip as better outcomes continue to drive the adoption and proliferation of MIS techniques. NuVasive's market share taking strategy has afforded us a leadership position in the MIS market so we expect to continue to outpace market growth.
How NuVasive is positioned for growth: We continue to drive adoption of the XLIF procedure and with only ~7 percent global market share; we believe our runway for growth is exceptionally long. We are continually acting on surgeon feedback to improve the XLIF procedure. We launched the next generation of our MaXcess retractor this year to exceptionally strong surgeon reception and at NASS this month, we featured improvements to our NeuroVision software.
Recently, we saw an accelerated opportunity to leverage our leadership position in neuromonitoring through the Impulse acquisition, allowing the Company to offer surgeons and hospitals complete procedural integration in all areas of spine. The market for intraoperative monitoring is an $800 million market, and the portion of the market that is outsourced to providers like Impulse is growing at 15 percent. With the acquisition, we are well positioned to take a leadership position in a very attractive market. With our expanded platform, surgeons now have the benefit of a dedicated neurophysiologist in the OR that can properly set up the patient, saving the surgeon time and reducing risk while generating incremental service revenues for NuVasive and freeing up our sales representatives to focus on what they do best, which is sell the vast number of solutions that NuVasive offers. The strategic move to bring NeuroVision platform and IOM under the same umbrella will increase the penetration of NeuroVision and XLIF through 150 neurophysiologists and will expand NUVA's neuromonitoring stronghold within the hospital.
We are expanding internationally and look forward to entering Japan in 2012, which is the second largest market for spine. We continue to add innovative solutions to our portfolio to stay ahead of the competition. We hope to commercialize both AttraX, a synthetic biologic with a novel microstructure, and our PCM motion preserving device for the cervical spine in 2012. We have excellent opportunity to improve operating profit margins as our sales force matures and productivity improves.
EM: When we think about our business strategy, we remember the core of what we are doing for spinal innovation. In terms of unique management, our CEO is a business guy and our chief medical officer is a retired spine surgeon. Every day, our CMO reminds us to focus on what is best for the patients and our customers — spine surgeons — so we can do the right things to be responsive. It's an exciting time for K2M because our business is growing rapidly. We have been able to expand to offices in London, Hamburg, Australia and Spain, and we were recently approved to sell in Japan.
In the future, we will continue to grow by taking the same methodical approach to collaborative innovation, comprehensive testing and product introduction as we have in the past, addressing the problems of both surgeons and patients.
CZ: The global spine market is under accelerating and intensifying "never seen before" pressure from payors — whether they are private or government systems — to reduce the price of spinal surgeries. This doesn't bode well for marginally profitable or break-even spine vendors.
Those distributors in the middle are feeling it even worse. They have to really provide intense service and value to stay in the OR. Distributors are realizing their vendors don't have the margins to provide retractors or instrument sets their surgeons need anymore, and the hospitals don't have the money to buy, so they are increasing their investments to remain 'in the room' and serve the relationships they have developed over time.
Hospitals in the U.S. are in essence setting pricing for a rapidly commoditized product. Developing new and novel, albeit pricier spinal systems, which have significant learning curves for surgeons and higher prices to the payors are going to be increasingly difficult to sell without steep discounts.
Observing this globally, we are confident our 'keep it simple' approach, easy to learn and use spinal product designs and relatively low cost appeals to the mature and mid-career surgeons as well as those just entering practice. We plan on keeping to our plan and keep a diligent focus on designing simple and cost-effective, high quality systems and learning to constantly improve what we do in the toughest reimbursement regions and markets worldwide.
Related Articles on Spine Device Companies:
InVivo Therapeutics Reports $3M Net Income in 3Q
Alphatec Spine Names Frances Harrison to Vice President Position
Global Spine Surgery Market to Reach $9.3B by 2017