Spine Culture Shock
“There’s plenty of art in spine surgery—to an extent I didn’t see in cardiology, neurology, urology or critical care,” said Farhat.
He also noted, “The spine industry doesn’t do much marketing to generate demand for treatment. The list of strong marketers in spine is pretty short.”
“Titan Spine, SI BONE and NuVasive are noted exceptions for what they’ve done.”
Can a Tissue Company With Hardware Succeed?
OTW: Looking at the resources you’ve got in RTI, how do you get RTI flying again?
Farhat: First, tissue is central to our business today and going forward. The reliability and cash generated by tissue is what funds spine. In terms of spine revenues generated, smaller companies like us have a difficult time making money, being cash flow positive. So, we decided to focus on the tissue part of the business first. We’ve taken a hard look at our operations and how we manage costs. This included taking $25 million of expenses out and monetizing $14 million this year. It has also meant collaborating with our partners, including organ procurement organizations (OPOs), to control costs.
Our profit margins have improved. Our OEM contracts now have predictable cash flow coming in making the OEM franchise a stable source of cash.
We want to take that cash flow and plow it into high growth, high margin, differentiated Spine M&A and R&D. The Zyga acquisition and expansion of Fortilink series with TETRAfuse 3D Technology are great examples.
Past Is Not Prologue
Farhat continues: “We feel that the way to win in spine is through channel management, relevant and disciplined innovation and patient access. In doing so, we intend to get better at reimbursement, clinical evidence, and demand generation.”
“At RTI we’re going to prove our competence in things that enable our strategy.”
“Our strategy is to continue to have an economically viable and sustainably growing business, that generates more than 20% EBITDA, and our goal is by 2022 to have treated 1 million patients and generate $500 million in sales. In my mind, it is clear what we need to do to reach those goals.”
Camille Farhat is certainly not afraid of ambitious goals.
But, more importantly, he thinks innovatively about RTI’s challenges and appears to be systematically shedding the limitations that kept RTI’s value so low for so long.
