The Business of Supplying Spine Surgeons – 2023

Globus Medical, Inc.’s merger with NuVasive, Inc. while delayed by regulators, is expected to close later in 2023, Surgalign, who made a big bet on artificial intelligence and augmented reality for spine surgeons under the leadership of Terry Rich, declares bankruptcy, PEEK is the latest additive manufacturing material and BMP2 suppliers seem to be emerging from multiple directions.

The state of supplying spine surgeons is changing. At Frank Phillips’ meeting, co-hosted by Alex Vaccaro (Richard H. Rothman Professor and Chairman, Department of Orthopaedic Surgery and Professor of Neurosurgery at Thomas Jefferson University in Philadelphia, Pennsylvania) and Todd Albert (Surgeon-in-Chief Emeritus at Hospital for Special Surgery), in Los Cabos, these and many more significant issues and trends were vetted and debated.

Here are the highlights the 18th Annual State of Spine Surgery Think Tank in Cabo, Mexico:

Innovations and Their Financing

Gary Stevenson’s Investment and Innovation Summit opened up the Cabo meeting and, for me, it was the highlight. Kicking it off was a blue ribbon panel of medical technology investors—Kaila Krum (Partner, Braidwell L.P.), Mike Mogul (Managing Partner, Healthpoint Capital), Kyle Rose (Managing Director, Medical Technology, Canaccord Genuity) and representing the surgeon-investor community, Frank Phillips and Todd Albert.

Their principal message was that money is available, but the investment requirements—investment term, expected rates of return, type of investment (debt, equity, or hybrid), and business maturity—varied significantly by type of investor. One area in common—basically no pre-commercialization start-ups.

Stevenson, himself an investor and former banker, moderated the panel, at times challenging and then encouraging, but always pulling important insights for both surgeons in and the young entrepreneurs looking for capital from the panelists.

Following the investor panel, Stevenson brought to the podium the following young and promising companies:

1. A more principled approach to SI fusion: SAIL Fusion—David Jansen, CEO. A bow-tie design implant delivering stronger fixation. Creative and thought provoking.
2. Portable, smart phone based, non-invasive electrical stimulation which ALSO collects ongoing patient data: Theragen—Chris McAuliff, CEO. Clear benefits and improvement over standard of care, using software and the power of the smart phone.
3. Allogeneic disc injection for pain relief and restoring spine disc health: DiscGenics—Flagg Flanagan, CEO. With Mesoblast now out of the running, DiscGenics is lead dog in this very important regenerative medicine application.
4. Better patient monitoring, communicating, and feedback for more successful spine practices: MICare Path—Scott Laster, CEO. Software for engaging, tracking, and responding and…best of all…meeting both the patient’s goals and your practice’s business objectives.
5. Using advances in biotechnology to revolutionize spine fusion: Theradaptive—David Stewart, VP Operations. Innovative protein engineering which transforms proteins into material binding variants. Mind blowing with crystal clear benefits for spine surgery.
6. Simple solutions for complex spine cases: Spinal Simplicity—Tim McCown, COO. Minimally invasive, non-pedicle fusion for single level T1-S-1. Lumbar stenosis, degenerative disc disease or spondylolisthesis. Truly a simple solution for complex spine care.
7. Combining artificial intelligence with off-the-shelf patient specific implants: Adcura Spine—Eric Blossey, CEO. Can adjust the anterior axis of the interbody device for any desired degree of lordosis up to 30^o.
8. An interbody implant that generates its own stimulative energy: Direct Sync—Zygmunt Porada, CEO. Smart implants promise to transform spine care. This implant stabilizes the spine segment while also using the body’s motion to generate bone healing electrical stimulation. Redefining what a spinal implant is capable of.

Industry Panel

Stevenson wrapped up the Innovation and Innovation Summit with a spectacular industry panel featuring Carlton Weatherby, Medtronic Spine’s Vice President and General Manager; Dan Scavilla, Globus Medical President and CEO; Jon Serbousek, Orthofix/SeaSpine Director, President and CEO; and Chris Barry, NuVasive’s Chief Executive Officer.

Takeaways:

1. Medtronic is hiring more software engineers than traditional biomechanical engineers
2. NuVasive, Medtronic and Orthofix are actively interested in engaging with young, innovative companies and entrepreneurs. Globus is also interested, but in a more structured way. Most innovation at Globus is internally developed.
3. Both NuVasive’s Barry and Globus’s Scavilla expressed confidence and optimism regarding their prospective merger.
4. Jon Serbousek gave a Master Class on common sense strategic business development born of decades in the orthopedic and spine industries.
5. Carlton Weatherby was notably insightful about the challenges of innovating while also defending market share—in his case, the #1 position.
6. As a group, the four top executives were substantive, engaging, open and surprisingly, perhaps, complimentary—while still differentiating their respective companies.

By the Numbers: Market Share 2022

Globus Medical gained the most market share in 2022, followed by Alphatec, NuVasive and SeaSpine. The companies that lost the most market share were JNJ’s DePuy Synthes and ZimVie. The “Other” category refers to about three dozen small spine surgery suppliers.

By the Numbers: Expected Market Share EOY 2023

Assuming the merger of Globus and NuVasive is completed this year, then the two largest suppliers of spine surgery products, Medtronic and Globus, would account for approximately 53% of all global shipments. The next two suppliers, JNJ’s DePuy Synthes and Stryker Spine, combined, would comprise 23% of spine product shipments. And the next three major suppliers, Alphatec, ZimVie and Orthofix/SeaSpine would combine for 11% of all shipments.

Added together, these seven companies would account for approximately 87% of annual sales. The “Other” category, which represents about three dozen smaller suppliers, would make up the remaining 13% of shipments.

As measured in sales, the 80/20 rule favors these seven companies. Measured in innovation, the reverse is true. Approximately 80% of innovation is in the “other” category and 20%, at best, resides in Medtronic, Globus/NuVasive, DePuy/Synthes, Stryker Spine, Alphatec, ZimVie and Orthofix/SeaSpine.

And that sets up an interesting symbiotic relationship between the top seven firms and everyone else.

By the Numbers: Sales Forecast 2020-2025 Estimated

By 2025, I think Medtronic Spine will still be the #1 supplier of spinal products to surgeons with sales of $3.2 billion.  Globus, I think, will be closely behind at $2.9 billion. The two next largest suppliers, DePuy Synthes and Stryker Spine will both be at, I think, $1.2 billion in annual sales.  At #4 will be, I think, Alphatec with $630 million, then ZimVie at $366 million and Orthofix/SeaSpine at nearly $300 million.

Driving to Better Spine Care for Patients

Frank Phillips’ Cabo meeting, now entering its 19th year, has grown ever more authoritative, and therefore essential for top surgeons and senior executives alike. While we can only provide a retrospective overview, the overall message of this article is, attend next year if you can. In Cabo. Late June. When it’s hot.