V-Bros to Become Major Shareholders of RTI Surgical
Paradigm Spine is a company founded by the Viscogliosi Brothers (VB), a New York-based family investment firm that focuses exclusively on developing musculoskeletal technologies and companies. The company is run by three brothers, Anthony, Marc and John.
By any measure, the V-Bros firm has been the single most impactful firm on the modern musculoskeletal industry. The companies and technologies they nurtured and fought for pioneered the spine motion preservation, ankle arthroplasty, knee subchondroplasty and minimally invasive non-fusion lumbar stenosis industries among others. In the process, these brothers have generated more than $3 billion in financial return for their investment partners and themselves.
Paradigm Spine’s coflex is a typical VB project. Difficult. More than a decade’s worth of effort required. Expensive. And level 1 clinical study centric.
Explained V-Bros partner Anthony Viscogliosi to OTW; “Viscogliosi brothers believe very strongly in the potential for the coflex technology to transform patient care in the field of spinal stenosis. We have invested a tremendous amount of time and capital in developing the technology to be supported by long term clinical data that demonstrates safety and efficacy and superiority to the standard of care in spinal stenosis surgery today. That standard of care is either the alternative of decompression alone or fusion. Importantly the technology has demonstrated superior outcomes on a long-term basis versus fusion and decompression alone.”
When we asked Tony why he decided to entrust Paradigm to RTI, he said this:
“During the course of this transaction we learned a great deal about the business strategy of RTI and really felt confident that they can build on the Paradigm foundation in a very substantial manner. And we felt that Paradigm packaged with RTI’s portfolio would have the greatest impact and ability to produce revenue growth and gross margin contribution.”
RTI has a strong established spine portfolio and continues to augment that with the addition of novel therapies, like SImmetry and coflex, that benefit from a shared focus on demand generation, clinical data and expanding insurance coverage.
“We believe that RTI is extremely undervalued on a relative basis. Therefore, we want to own as much of the company as shareholders as we can. We understand what coflex can do. And we understand the importance of focus of long-term clinical superiority and the value of the differentiation of a PMA technology.”
“It was a de-risking strategy to us. We both bring something to the table that neither party had. They bring a bigger distribution platform—but not too big to not pay attention. And because of the PMA, because of its revenue, because of the transformation underway in payor reimbursement, because of long-term clinical evidence and because of the established base of 160,000 implants benefitting patients, we believe RTI’s distribution platform can significantly accelerate Paradigm’s growth and profitability.”
Further, Farhat has proven experience in other industries taking a novel therapy from treatment of choice to standard of care. This, combined with the scale of RTI’s network and the market opportunity in lumbar spinal stenosis (LSS), it’s clear RTI will give coflex the attention it deserves in driving growth and enhanced market adoption.
When we asked about taking so much of the transaction’s value in both RTI common stock and milestone payments, Tony explained:
“With the stock at the price that it’s at today, we felt this was the best way for us to maximize our value as shareholders of Paradigm Spine. It was because of the long-term support of our equity and debt partners that we were able to create a very successful Paradigm business and financial dynamic. Specifically, HealthCor LP is a great institutional capital partner for us as were the individual investors who joined with us in the early days and who joined with us to grow this business.”
“We really are grateful to our debt and equity partners for working together to create such a great opportunity for the shareholders and employees.”
“So, for all these reasons I’d rather be a shareholder in RTI than have cash. I think our value is going to grow.”
RTI’s Future
Farhat’s goals for RTI, in his own words, are…“to continue to have an economically viable and sustainably growing business, that generates more than 20% EBITDA, and 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’s goals may be ambitious, but more importantly, he is making disciplined, strategic moves, including partnering with the V-Bros and acquiring fast growing, innovative companies like Paradigm and Zyga to transform RTI into one of the most interesting emerging growth companies in orthopedics today.
