DePuy Synthes has entered into an agreement to sell its ProDisc assets to Centinel Spine, one of the companies owned by Viscogliosi Bros., LLC. The acquisition is expected to close in mid-4Q17. Terms were not disclosed.
It is worth noting that the Viscogliosi Brothers—Anthony, Marc and John—were the original investors and champions of ProDisc and sold it to Synthes in 2003 for $350 million.
Once this transaction is completed, DePuy Synthes will have transferred cervical and lumbar artificial disc systems ProDisc-C, ProDisc-L, ProDisc-C Vivo, ProDisc-C Nova, ProDisc-O and Discover to Centinel Spine – which presently markets the MIDLINE and STALIF interbody devices as well as ALTOS posterior cervical stabilization and the ACTILIF Cervical Cage.
The reaction among surgeons who were part of the original ProDisc study was immediate and enthusiastic.
“Centinel Spine’s acquisition of ProDisc is absolutely positive for ProDisc as well as for spinal arthroplasty in general”, said Jack Zigler, M.D., one of the principals at The Texas Back Institute and the first U.S. surgeon to implant ProDisc L. “The Viscogliosi Brothers were instrumental in recognizing the value of spinal arthroplasty and bringing that technology into the US. They have personal experience with several of the pivotal IDE studies for both cervical and lumbar arthroplasty, as well as with the benefits of non-fusion technologies.”
“Their involvement will re-energize the field of spine arthroplasty. Not only are they extremely knowledgeable about the field, but they also are businessmen who can be decisive in their strategic decisions and nimble in their execution. This will be good for patients who deserve the opportunity to decide whether they want a fusion or a disc replacement.”
Background
Brothers Anthony, John and Marc Viscogliosi founded the firm that bears their family name in New York City in 1999 after a decade in investment banking and securities analysis at several Wall Street firms.
The brothers were considered to be the top analysts on Wall Street covering the orthopedic industry and were profiled, notably, by Barron’s magazine in 1996.
Their vision was to create the first venture capital/private equity and merchant banking firm dedicated to orthopedics—which had been largely overlooked by institutional investors despite the huge and growing population facing arthritis and many other musculoskeletal/orthopaedics complaints.
Over the course of the last 18 years The Viscogliosi Brothers LLC. (VB) have become a leading independent investment firm because of their ability to identify innovation while also creating, building, operating and financing organizations that move these innovations through the regulatory process and in fact create new standards of care for profoundly complicated musculoskeletal problems.
The VBs have played a pivotal role in transforming the musculoskeletal industry, which was once a minor sector of the broader healthcare market, into the largest healthcare industry employing more than 300,000 people worldwide.
Of all the myriad of technologies that the brothers have championed, none have been more impactful nor associated with them than disc arthroplasty in general and ProDisc in particular.
The ProDisc Story
In 1999 the brothers and the German firm Aesculap AG & Co. KG, jointly created a new company, Spine Solutions, Inc., to bring the ProDisc total artificial disc replacement system developed by a French orthopedic surgeon, Dr. Thierry Marnay through the regulatory gauntlet and into the hands of talented surgeons around the world.
The technology was revolutionary at that time because it obviated the need to fuse the spine—then considered the gold standard treatment for treating disc degeneration.
Aesculap contributed the patents and related intellectual property rights to ProDisc to Spine Solutions, Inc. and VB undertook to raise capital for extensive clinical testing to secure FDA approval to market the technology in the U.S. and operated Spine Solutions.
The study was one of the best organized and executed studies ever in orthopedics. This pattern of strong, Level One clinical studies has become a hallmark of the VB brand—most recently exhibited with the CoFlex studies and before that with the STAR ankle studies.
In 2003, U.S.-based Swiss firm Synthes (now a division of J&J) purchased Spine Solutions and ProDisc for $350 million.
Today, ProDisc is the leading brand of disc arthroplasty implants.
Among spine and neuro surgeons, the VB are rightfully recognized and appreciated for their tenacious and pioneering work in artificial total disc technology field—including creating and funding the Spine Arthroplasty Society which today is better known as ISASS.
The Viscogliosi Brothers developed new opportunities for surgeons, patients and investors in “non-fusion” technologies that treat various degenerative disc conditions. For example, this work with ProDisc was the precursor to the Coflex interlaminar stabilization device currently marketed by Paradigm Spine, LLC, founded by VB in 2004. The Coflex technology has been approved by the U.S. FDA and has accumulated more than 20 years of clinical data from patients in 40 countries.
The Future
Once this transaction between DePuy and Centinel is wrapped up (Q4 2017), Centinel Spine intends to invest in the ProDisc brand and technology in the form of people and additional clinical studies—in true VB fashion.
For Centinel Spine, the acquisition of ProDisc will vault it into the top ranks of emerging spinal implant growth companies. Among the spine and neuro surgeon community, this transaction is being applauded universally.
The Challenge Facing Centinel
ProDisc L received FDA approval in 2006. The first cervical artificial disc replacement (Prestige) was approved in July 2007.
In August 2007 CMS (Centers for Medicare and Medicaid Services) issued a national non-coverage decision for lumbar artificial disc replacement (LADR), saying the surgery was not reasonable and necessary for the Medicare population over 60 years of age.
Non-coverage means, of course, no reimbursement. Private insurers quickly adopted that same general approach to patients under 60 years of age.
Since then, getting payers to support disc arthroplasty has been a long running battle for surgeons and DePuy Synthes.
What makes this especially frustrating is that the data for ProDisc and other disc arthroplasty implants continues to be consistently superior to fusion in terms of patient outcomes, adverse events and, yes, cost.
In 2010, Rick Delamarter, M.D., looked at the cost of ProDisc L versus circumferential fusion and found that it cut hospital service costs 49% (54% when instrumentation was included). What Delamarter did NOT take into account was the surgeon fee.
The Spine Journal tackled the issue of lumbar fusion costs in 2013 and again in 2016. In the 2013 study, the authors concluded that the mean cost of anterior-posterior circumferential fusion was $25,165[1]. In the 2016 study, authors concluded that the mean cost of a lumbar laminectomy plus fusion was $27,800.[2]
Taking the mid-point of those two studies as the cost of lumbar spine fusion ($26,500) and assuming that ADR can cut that roughly in half—reduced OR time, blood loss, days in the hospital and a 60% cut in the surgeon’s fee—then the theoretical savings available per case are somewhere north of $10,000.
Reimburser Animus to Lumbar TDR Has Cost U.S. Healthcare $11 Billion
Every year approximately 720,000 of the estimated 31 million Americans who experience back pain have spine surgery.
Total disc replacement (TDR), whether cervical or lumbar, represents 2% of spine surgery. Before CMS’ non-coverage decision, most analysts expected TDR’s to eventually capture 15-25% of the spine surgery market (depending on the analyst).
Had TDR, in fact, captured 15% of the spine surgery market, the number of procedures would be around 108,000 per year.
In terms of savings, that would have theoretically lowered spine surgery costs by $1.08 billion annually or $11 billion cumulatively since 2007.
Final Thoughts
DePuy’s decision to sell the ProDisc assets to Centinel Spine is a good decision for ProDisc, patients and, we hope, DePuy as well. Moving this asset from a multi-billion company where its revenues do not materially change the value of J&J to a much smaller firm that has the passion, commitment and unique qualifications to build this brand is absolutely the right move.
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[1] Cost analysis of anterior-posterior circumferential fusion and transforaminal lumbar interbody fusion Tate M. Andres, BS*, Justin J. Park, MD, Pedro A. Ricart Hoffiz, MD, Brian J. McHugh, MD, Daniel T. Warren, MD, Thomas J. Errico, MD Division of Spine Surgery, Department of Orthopaedic Surgery, NYU Hospital for Joint Diseases, 301 East 17th St, New York, NY 10003, USA Received 17 January 2012; revised 25 September 2012; accepted 17 November 2012
[2] Determining the Drivers of Cost for Elective Laminectomy and Fusion for Lumbar Degenerative Disease Chotai, Silky et al. The Spine Journal , Volume 16 , Issue 10 , S141
