Friday, September 30, 2011

NuVasive Signs Agreement to Acquire Impulse Monitoring

SAN DIEGO, CA, Sep 28, 2011 (MARKETWIRE via COMTEX) -- NuVasive, Inc. a medical device company focused on developing minimally disruptive surgical products and procedures for the spine, announced today that it has executed a definitive agreement for the purchase of Impulse Monitoring, Inc., a leading Intra-Operative Monitoring (IOM) provider in the United States.
Intra-Operative Monitoring is a long standing service which allows comprehensive procedural detection of neurological compromise and identification of functional neural structures during surgeries that involve spine, cardio, ENT, brain, and general orthopedic. The IOM model employs highly trained neurophysiologists located in the operating room who function as part of the surgical team, assisting with patient preparation, administering neuro diagnostic testing, and working in partnership with supervising physicians who provide real time interpretation of the neurophysiological data. Neuromonitoring of the spine is 80% of Impulse Monitoring's current case volume.
This acquisition will complement NuVasive's existing nerve monitoring system, NeuroVision(TM), which is designed for discreet and directional nerve avoidance and detection making lateral access to the spine during the XLIF(R) procedure more safe and reproducible. The strategic move to acquire an IOM service provider will increase XLIF penetration and further drive lateral market share by increasing the number of neurophysiologists able to setup use of NeuroVision. Impulse Monitoring employs over 150 neurophysiologists while NuVasive has over 300 spine specialists in the field. As well, Impulse Monitoring will expand NuVasive's presence into IOM services with a new revenue stream.
This strategic foray into the $800 million market for Intra-Operative Monitoring opens up a significant revenue growth opportunity for NuVasive, as the Company looks to expand Impulse Monitoring's leadership position into a nationwide footprint. Today, only 50% of spine procedures undergo IOM. Over the next several years, the market for outsourced Intra-Operative Monitoring is expected to grow approximately 15% annually, and Impulse Monitoring has a proven track record of market leading growth.
Alex Lukianov, Chairman and CEO of NuVasive, said, "We are excited to announce the acquisition of Impulse Monitoring, which will further differentiate NuVasive's surgical solutions and will add value to hospitals, surgeons, and patients by procedurally integrating products and services. Our NeuroVision technology is the gold standard for allowing safe and reproducible lateral access to the spine, and we are particularly excited about the increased XLIF penetration opportunities that will be facilitated by this transaction. This acquisition will augment our leadership position within neuromonitoring by enabling NuVasive to offer additional best in class services, including operating room clinical support of neuromonitoring and professional neuromonitoring oversight. The service will expand our relationships with our surgeon and hospital customers and foster incremental revenue opportunities. We are very familiar with this market through an acquisition of a much smaller regional IOM service provider last year. The operational experience that we gained running that business, along with its outstanding results thus far, further validated our desire to expand our presence in this rapidly growing market."

Lanx, Inc. Announces Launch of Aspen(TM) Flared 5-1 MIS Fusion System

BROOMFIELD, Colo., Sep 29, 2011 (GlobeNewswire via COMTEX) -- Lanx, Inc., a privately held medical device company focused on developing and commercializing innovative devices for spinal surgery, today announced the full commercial launch of the Aspen(TM) Flared 5-1 MIS Fusion System, the spinous process fixation device specifically designed to promote fusion at L5-S1. The Company will be showcasing Aspen Flared 5-1 along with the entire Aspen MIS Fusion System at the Congress of Neurological Surgeons (CNS) 2011 Annual Meeting, October 1-6 in Washington, DC.
Dan Gladney, Chief Executive Officer, Lanx, commented, "Our market-leading Aspen Family offers surgeons and patients a less invasive spinal fusion option, biomechanically comparable in strength and stability to pedicle screws. The Aspen Flared 5-1 device is a minimally invasive fusion solution optimized for L5-S1 and further extends Lanx's offering of spinous process fixation devices."
The Aspen Flared 5-1 device builds on the clinical success of the Aspen Family to provide rigid posterior fixation at the L5-S1 level, which is involved in over 40 percent of lumbar fusion cases. The device features a unique angle on each ventral plate for improved anatomic fit at L5-S1 by conforming to the sacral anatomy. The flared angle also allows the implant to securely fixate at the laminar junction of any level for anterior placement and optimal bony engagement.
"The L5-S1 area is especially susceptible to degeneration and can be challenging to adequately fixate due to unique anatomy. The Aspen Flared 5-1 design offers the benefits of minimally invasive Aspen spinous process fixation to patients with instability at this level, and the ability for ventral implant placement ensures optimal fixation to the thicker, stronger bone at the base of the spinous process," said Randall Porter, MD, Barrow Neurological Institute, Phoenix, AZ.
The Aspen MIS Fusion System is a family of minimally invasive spinous process fixation devices designed to promote fusion. The Aspen Family includes the standard Aspen, Aspen Flared 5-1, Aspen Medium and LPlate Low Profile implants, all designed to accommodate different patient anatomies with a variety of shapes and sizes. Aspen devices are intended for single level use in the non-cervical spine (T1-S1) for the treatment of degenerative disc disease, spondylolisthesis, spinal trauma or spinal tumor. The Aspen Family is currently being used in a wide range of surgical applications including posterior fusion and interbody fusion (Lateral, ALIF and TLIF).

Wednesday, September 28, 2011

Titan Spine Receives Regulatory Clearance to Launch Endoskeleton® TAS ALIF Interbody Fusion Device with Integrated Fixation

MEQUON, Wis.--(EON: Enhanced Online News)--Titan Spine, a medical device surface technology company focused on the development of innovative spinal interbody fusion implants, announced today that it has received FDA clearance to commercially release its Endoskeleton® TAS system, consisting of an ALIF device with integrated fixation screws. The regulatory clearance is the fifth such approval for the company and supplements its current line of TLIF, PLIF, ALIF, and cervical interbody implants.
The Endoskeleton® TAS incorporates the same macro, micro, and nano surface textures as the company’s Endo TA ALIF device, which has been shown to elicit a superior osteogenic response in comparison to other commercially available interbody materials. In addition, the TAS features three integrated grit-blasted screws that allow up to ten degrees of medial/lateral or anterior/posterior angulation.
One of the first implantations of the Endoskeleton® TAS was conducted by Dr. Robert Henderson, Orthopedic Surgeon with Dallas Spine Care in Dallas, Texas. “I felt the procedure went very well and the surgical technique was simple and straightforward,” commented Dr. Henderson. “I am pleased Titan has added the supplemental fixation feature to its ALIF device that I have been using with great success to date. It is a nice option to have for specific spinal pathologies where supplemental posterior stabilization can be avoided.”
Dr. Fred Geisler, Neurosurgeon with The Chicago Back Institute in Chicago, Illinois, was also one of the first surgeons to implant the device. “I was particularly impressed with the purchase of the screws and how the roughened surface of the implant prevented the device from moving during screw insertion,” said Dr. Geisler. “The combination of immediate stabilization and the osteoinductive properties of the implant’s micro and nano textures represent a significant advance in spine surgery. I look forward to adding the TAS to my practice.”
Kevin Gemas, President of Titan Spine, commented, “The addition of the Endoskeleton® TAS to our product line now allows us to address approximately 90% of the interbody market that is approaching $1 billion in domestic annual sales. We feel that we are well positioned to continue to increase our market share and meet the growing need of spine surgeons looking for innovative interbody implants that create a superior osteogenic environment for their patients.”

Tuesday, September 27, 2011

SpineGuard secures $6.2 million to further extend its PediGuard(R) franchise

SAN FRANCISCO & PARIS, Sep 27, 2011 (BUSINESS WIRE) -- SpineGuard announced today that it has secured $6.2 million to further extend its PediGuard platform for enhanced spinal screw placement. The company launched PediGuard Curv earlier this year and is preparing for the limited release of its highly anticipated Cannulated PediGuard, a "smart needle" to address minimally invasive spine surgery. The Company's initial breakthrough product is PediGuard Classic.
Investors included Credit Agricole Private Equity, Innoven Partenaires, A Plus Finance, and Delta Partners.
"This additional funding to support further extension of the PediGuard franchise bears strong testimony not only to the clinical need for PediGuard but also management's track record and strategy to grow the company," said Alexia Perouse, Partner at Credit Agricole Private Equity and a Director of SpineGuard.
"This new financing round recognizes the significant commercial foundation that the leadership of SpineGuard has forged, with the mission of making spine surgery safer," added Alan Olsen, Chairman of SpineGuard.
"We are grateful for the continuing support from our four investors. New-product development is a cornerstone of our strategy to entrench the PediGuard family of products as a 'must-have' solution to the well-documented and universal clinical need for safer pedicle screw placement--the number one challenge in spine surgery." said Pierre Jerome, CEO of SpineGuard.
Pedicle screws placed with conventional probes show high rates of misplacements that can lead to a number of serious complications for patients such as spinal cord damage resulting in various degrees of neurological impairment. Consequently, risks for patients and spine surgeons are high. PediGuard products have been adopted by nearly 200 spine surgeons for more than 17,000 procedures on all continents.
Co-founded in 2009 by Pierre Jerome and Stephane Bette, former executives at Medtronic Sofamor-Danek and SpineVision, SpineGuard's primary objective is to establish its FDA-cleared and CE Marked PediGuard(R) platform as the global standard of care for safer pedicle screw placement in spine surgery.

Monday, September 26, 2011

Zynex Receives FDA 510(k) Clearance for the NexWave Medical Device

LONE TREE, Colo., Sep 26, 2011 (BUSINESS WIRE) -- Zynex, Inc, a provider and developer of non-invasive medical devices for electrotherapy, stroke rehabilitation, neurological diagnosis and cardiac monitoring, announced that it received FDA 510(k) clearance on its NexWave medical device.
The NexWave device is the next generation in electrotherapy treatment and will be manufactured, marketed and sold through our Zynex Medical subsidiary. This device is capable of delivering three modalities of stimulation; traditional TENS, interferential and neuromuscular electrical stimulation. The combined modalities of the NexWave provide a wide variety of pain and muscle rehabilitation therapies through one device.
Zynex's CEO, Thomas Sandgaard, commented, "We are very excited about the market introduction of this new product. The combined modalities of our NexWave provide doctors and clinicians a more comprehensive pain therapy solution for their patients. This device was designed with the patient in mind, as it is compact and easy to use, and falls under existing medical billing codes. We believe this new product is unique in the electrotherapy industry and provides our sales force with a competitive edge to fuel revenue generation in our already rapidly growing Zynex Medical subsidiary."

Aesculap, Inc. Acquires Aragon Surgical, Inc.

CENTER VALLEY, Pa., Sep 26, 2011 (BUSINESS WIRE) -- Aesculap announced today that it has acquired the assets of Aragon Surgical, Inc. Aragon Surgical specializes in advanced radio frequency (RF) electrosurgical instruments for tissue fusion and cutting. The Caiman(R) instruments are the only RF devices on the market with an articulating jaw-technology, which allows the surgeon unparalleled maneuverability at the surgical site. The Caiman advanced energy product line complements Aesculap's already extensive line of endoscopic and open surgical instruments, positioning the company to better meet the needs of the changing medical community.
"We are very excited about the inclusion of the Caiman product line into the Aesculap family of surgical instruments. The Caiman's unique articulating jaw design and proprietary Lektrafuse(R) technology provide improved clinical benefits. This acquisition will widen the scope of our surgical instrument portfolio and enhance Aesculap's line of products to improve patient care," said Chuck DiNardo, President of Aesculap, Inc.
"This transaction will allow for increased distribution of the Caiman product line," said Roseanne Varner, President and Chief Executive Officer of Aragon, "while providing our customers with the continued high quality service they have come to expect."

Saturday, September 24, 2011

Captiva Spine Receives FDA Clearance for Pedicle Screw System

Captiva Spine, a Jupiter, Fla.-based medical device company, has received FDA 510(k) clearance to market its CapLOX II Spinal System, according to a Captiva Spine news release. The CapLOX II is a top-loading pedicle screw system for the thoracic, lumbar and sacral spine. The system is designed to provide exceptional mechanical performance and improve control through the enhanced capability of the instrumentation and a large selection of implants.The system includes screws, set screws, rods and cross connectors, and the pedicle screws are offered in cannulated and non-cannulated versions.
Source:Laura Miller.

Wednesday, September 21, 2011

Intrinsic Therapeutics names new president and CEO

Spinal medical technology firm Intrinsic Therapeutics Inc. has pulled in a new president and CEO with Cary Hagan, a 20-year veteran of the orthopedic implant industry. Company founder and board member Greg Lambrecht, who has been serving as president and CEO of Intrinsic, will continue as executive director.
The Woburn-based company makes the Barricaid spinal implant used in treatment for herniated lumbar discs.Hagan joins Intrinsic from his previous role with Wright Medical as senior vice president, commercial operations, Europe, Middle East and Africa. He had been working at Wright Medical since 1989.
Intrinsic Therapeutics last took in funding in February 2010, according to a regulatory filing, when it reported bringing in $18 million of a planned $20 million financing of equity, options or warrants.

Medtronic's big win over NuVasive

Medtronic scored a big win yesterday in its patent war with NuVasive Inc., after a California jury awards it $101.2 million in damages over spinal implant technology; NuVasive, which won a $660,000 award for Medtronic's infringement of one of its patents, vows to fight the decision.
A federal jury in San Diego issued a split verdict in a patent infringement lawsuit yesterday between Medtronic Inc. (NYSE:MDT) and NuVasive Inc. (NSDQ:NUVA), awarding $101.2 million to Medtronic and $660,000 to its smaller rival.
The case dates back to 2008, when a group of Medtronic subsidiaries sued NuVasive, accusing the San Diego-based company of infringing 9 patents relating to spinal implants. NuVasive in turn accused Medtronic of trespassing on three of its patents.
The companies' reactions to the decision fell along predictable lines, with Medtronic expressing its pleasure and NuVasive vowing to fight on.
"We are pleased by the jury’s verdict," Medtronic Spinal president Doug King said in prepared remarks. "The decision confirms our leadership in spinal implant technology, and we remain committed to vigorously defending our intellectual property."
"[T]he jury award only reflects damages through June 2010 and Medtronic will file a motion for an accounting from NuVasive to bring the damages up to date," MDT lawyer Alexander MacKinnon told Bloomberg after the trial.
"NuVasive believes the facts and the law do not support the jury's findings of infringement and validity, and will seek to overturn the verdict in post-trial motions with the district court," according to a press release. "If the district court does not grant NuVasive's motions, the company intends to vigorously challenge the verdict through an appeal to the Federal Circuit Court of Appeals. The appellate process with the federal court will likely take at least one year."
"While we are disappointed with today's legal outcome on the remaining three patents, we are mindful that this is only phase one of what will be a multi-phase process," added chairman & CEO Alex Lukianov. "We intend to vigorously defend the investments we have made to invent the lateral approach to spine fusion surgery and to become the most innovative spine technology company in the world. As such, we will aggressively challenge this verdict through the appellate process."
It's the 4th-largest jury award for patent infringement this year, according to the news service (the largest was $482 million against Johnson & Johnson's (NYSE:JNJ) Cordis Corp

Medtronic Awarded $101 Million in Patent Trial Against NuVasive

Medtronic Inc. (MDT) was awarded $101.2 million by a jury in a patent-infringement trial against NuVasive Inc. over claims related to medical devices used in spinal surgery.
The federal jury in San Diego also found yesterday that Medtronic owes NuVasive $660,000 in damages for infringing one of its patents.
In a two-week trial, Warsaw Orthopedic Inc., a unit of Minneapolis-based Medtronic, accused San Diego-based NuVasive of infringing three patents for implants capable of being inserted translaterally between adjacent vertebrae, a plate and screw system used to stabilize vertebrae in the cervical spine and a tissue retractor, according to court filings.
“We are pleased by the jury’s verdict,” Doug King, senior vice-president and president of Medtronic Spinal, said in a statement. “The decision confirms our leadership in spinal implant technology, and we remain committed to vigorously defending our intellectual property.”
The verdict is the 14th-largest jury award in the U.S. so far in 2011 and the fourth-largest for a patent-infringement claim, according to data compiled by Bloomberg News. The largest patent jury verdict in 2011 was for $482 million in a lawsuit over stents against a Johnson & Johnson unit.
NuVasive lawyers and officials declined to comment, saying the company would issue a statement later.
Royalty Rates
Medtronic hasn’t filed a request for a court injunction blocking the use of products found to have infringed its patents.
In computing damages, the eight-member jury decided upon patent royalty rates of 3 percent, 6 percent and 10 percent in awarding “lost profits damages (with royalty remainder)” for the three Medtronic patents, and a 5.5 percent “patent royalty rate” for the NuVasive patent, according to the verdict form.
Alexander MacKinnon, a lawyer for Medtronic, said in an interview after the verdict that “the jury award only reflects damages through June 2010 and Medtronic will file a motion for an accounting from NuVasive to bring the damages up to date.”
Another Medtronic attorney, Luke Dauchot, told jurors in his closing argument that they could award as much as $375.2 million for lost profits and royalties.
NuVasive alleged that another Medtronic unit, Medtronic Sofamor Danek USA, infringed its patent for a nerve monitoring system for lateral spinal surgery, according to court filings.
A NuVasive financial expert testified during the trial that NuVasive could be awarded as much as $752,000 over the company’s infringement claim against Medtronic.
‘Changed the Face’
NuVasive lawyer Frank Scherkenbach told jurors that NuVasive didn’t infringe the Medtronic patents. He said NuVasive’s technology at issue is the product of independent development, was first put on the market in 2003 and soon “changed the face of spinal surgery.” He said that Medtronic possessed no such technology in 2003.
“We didn’t copy,” he said. “NuVasive copied nothing.”
He said that NuVasive’s devices became so successful that the small company that originated in an orthopedic surgeon’s garage became a target for the much larger Medtronic.
“They wanted in on this product,” he said.
Dauchot said today that Medtronic stands by its claim that it didn’t infringe the NuVasive patent.
“Although we respect the jury’s finding of infringement on NuVasive’s patent we differ and are considering our options in that regard,” he said.
U.S. District Judge Michael M. Anello presided over the trial.
The case is Medtronic Sofamor Danek USA v. NuVasive Inc. (NUVA), 3:08-cv-1512, U.S. District Court, Southern District of California (San Diego).
Source: Bill Callahan.Michael Hytha.

NuVasive Announces Jury Verdict in Patent Case

SAN DIEGO, CA, Sep 20, 2011 (MARKETWIRE via COMTEX) -- NuVasive, a medical device company focused on developing minimally disruptive surgical products and procedures for the spine, announced today that a jury in the U.S. District Court for the Southern District of California has reached a verdict in the company's ongoing patent lawsuit with Medtronic Sofamor Danek USA, Inc. and its related entities (Medtronic).
The lawsuit was initially filed in 2008 and Medtronic is asserting a total of nine patents against NuVasive. NuVasive countersued and is asserting three patents against Medtronic. The court has broken the trial into phases, and the first phase included three Medtronic patents and one NuVasive patent. In this phase of the case, NuVasive accused Medtronic's NIM-Eclipse product of infringing NuVasive's patent involving the use of neuromonitoring in a lateral approach to spine fusion surgery. The patents asserted by Medtronic accuse the following NuVasive products of infringing Medtronic patents: NuVasive's CoRoent(R) XL implants, MaXcess(R) Retractor, and Helix ACP(R) Cervical Plate.
Although a formal judgment has not yet been entered and there are numerous motions and hearings to be determined, the following are the findings of the jury related to the four patents involved in the first phase of the trial:
-- Regarding NuVasive's assertion that Medtronic NIM-Eclipse System infringes upon patent #7,470,236, the jury found that Medtronic does infringe the patent and awarded monetary damages which includes back
royalty payments to NuVasive based on a 5.5% rate.

-- Regarding Medtronic assertion that NuVasive's CoRoent XL implantsinfringe upon patent #5,860,973, the jury found the patent to be valid and awarded monetary damages which included lost profits and back
royalty payments to Medtronic based on a 10.0% rate.
-- Regarding Medtronic assertion that NuVasive's MaXcess Retractor infringes upon patent #6,945,933, the jury found that NuVasive does infringe the patent and awarded monetary damages which included lost profits and back royalty payments to Medtronic based on a 3.0% rate.
-- Regarding Medtronic assertion that NuVasive's Helix ACP Cervical Plate infringes upon patent #6,592,586, the jury found that NuVasive does infringe the patent and awarded monetary damages which included lost profits and back royalty payments to Medtronic based on a 2.0% rate.
Based on these findings, the jury awarded total monetary damages of $660 thousand to NuVasive which includes back royalty payments. Additionally, the jury awarded total monetary damages of $101 million to Medtronic which includes lost profits and back royalties.
Any future royalty amounts will not be determined until a final judgment is issued, which is expected in the coming months. At this time, the Company is using the royalty percents utilized by the jury for the basis of on-going accruals. The incremental impact to cost of goods sold of ongoing royalty accruals is expected to be approximately $5 million for the second half of 2011 and approximately $11 million for the full year 2012. As previously guided, the Company will continue to spend approximately $6 million in legal expenses for full year 2011 associated with this trial. The Company will provide more detailed financial guidance as it becomes available and will make further comments at its upcoming Q3 2011 earnings call in October.
NuVasive expects it will be required to secure the amount of judgment while the appeals process runs. The amount to be secured will be determined in post-trial motions over the next few months. The Company believes it has ample cash reserves to meet any requirement the Court determines is necessary.
NuVasive believes the facts and the law do not support the jury's findings of infringement and validity, and will seek to overturn the verdict in post-trial motions with the District Court. If the District Court does not grant NuVasive's motions, the Company intends to vigorously challenge the verdict through an appeal to the Federal Circuit Court of Appeals. The appellate process with the Federal Court will likely take at least one year.
Alex Lukianov, Chairman and CEO of NuVasive, said, "As you all know, we at NuVasive take immense pride in our unique technology and the intellectual property that surrounds it. We are proud that our intellectual property surrounding our NeuroVision nerve monitoring platform has been validated in this case. While we are disappointed with today's legal outcome on the remaining three patents, we are mindful that this is only phase one of what will be a multi phase process. This outcome has in no way impacted the daily operations of our business and our sales force will continue to deliver outstanding service levels to our surgeon customers. We intend to vigorously defend the investments we have made to invent the lateral approach to spine fusion surgery and to become the most innovative spine technology company in the world. As such, we will aggressively challenge this verdict through the appellate process."

Monday, September 19, 2011

Depuy spine announces global launch of first minimally invasive system for 3D spine correction

LOUISVILLE, KY – Sept. 14, 2011 – DePuy Spine, Inc. today announced the worldwide launch of the award-winning VIPER® 3D MIS Correction Set, the first surgical instrumentation system designed specifically for the minimally invasive three-dimensional correction of complex spinal deformities. The announcement was made here at the Scoliosis Research Society (SRS) 46th Annual Meeting, where the company is featuring its broad portfolio of minimally invasive and traditional solutions for degenerative disc disease, deformity, scoliosis and other complex spinal pathologies.
“The VIPER 3D Set makes performing complex corrections through small incisions less challenging and should help surgeons offer the minimally invasive option to more patients,” said Praveen Mummaneni, MD,* of the University of California, San Francisco and a member of the VIPER 3D surgeon design team.
The three-dimensional correction of the spine for complex pathologies, such as adult degenerative scoliosis (ADS) or adolescent idiopathic scoliosis (AIS), involves aligning an abnormal spinal curvature in three directions – front to back, left to right and top to bottom. The majority of these pathologies are currently treated through traditional open surgery.
The VIPER 3D Set , used with either the VIPER MIS Spine System or EXPEDIUM® Spine System, is designed to facilitate a minimally invasive approach, which typically results in smaller incisions, less pain, lower infection rates, less blood loss and quicker recovery than traditional open surgery.1.
The VIPER 3D Set consists of instrumentation and devices for a variety of correction maneuvers and techniques. The Set includes the MIS Rod Inserter/Rotator for 360 degree correction, a spondy reduction lever to control sagittal alignment, derotation and correction frames, a multi-level compression and distraction device to control orientation at individual levels and approximation tools for seamless rod reduction.
"DePuy Spine continues to work to develop minimally invasive surgical devices and instruments that are intuitive and versatile to better help surgeons adopt the technique for appropriate spinal pathologies," said Namal Nawana, Worldwide President, DePuy Spine.
VIPER 3D was recently recognized for innovation with two prestigious awards. The System received a 2011 Edison Best New Product Award™ for innovation in the science and medical category and the Johnson Medal, a Johnson & Johnson award given for outstanding science and technology for contributions to a product through innovation, patient impact, and perseverance to success.
Other recent additions to the VIPER line of products include cobalt chrome rods and a variety of screw options. The VIPER System and VIPER 3D Set can accommodate any combination of polyaxial, uniplanar, monoaxial, iliac fixation, or extended tab reduction (X-Tabs) screws in either an MIS or open setting. This enables surgeons to customize technique based on patient needs and surgical preferences.

Saturday, September 17, 2011

Medtronic's scoliosis screw gets a green light from the FDA

Medtronic Inc. (NYSE:MDT) won 510(k) clearance from the FDA for a pedicle screw designed to treat adolescent idiopathic scoliosis.
The Twin Cities medical device colossus said the FDA's Center for Devices & Radiological Health gave the nod to its TSRH Spiral system pedicle screw. It's the second Medtronic AIS treatment to land FDA clearance.
AIS is the most common pediatric spine condition, affecting nearly one million U.S. adolescents, according to the company.This additional AIS clearance will further afford Medtronic the ability to provide training and education to spine surgeons treating patients diagnosed with AIS,” Doug King, president of Medtronic Spinal said in a prepared statement. “This clearance also provides an opportunity to further research and study these patients allowing us to move forward with our commitment and investment in pediatric innovation.”
This FDA approval comes less than a month after a second class I recall on Medtronic's SynchroMed II drug infusion pumps.

Thursday, September 15, 2011

Zimmer Receives Pediatric Clearance for Universal Clamp™ Spinal Fixation System

WARSAW, Ind., Sept. 14, 2011 /PRNewswire/ -- Zimmer Holdings, Inc. (NYSE: ZMH; SIX: ZMH) announced today that it has received an additional clearance for its proprietary Universal Clamp Spinal Fixation System.  A first for the United States, the system is now indicated for treatment of idiopathic and neuromuscular scoliosis in patients eight years of age or older.  The Universal Clamp Spinal Fixation System is used in conjunction with spinal fusion surgeries.
Scoliosis is a debilitating condition characterized by spine curvature and back pain. In the United States, scoliosis affects approximately two to three percent of the population with more than 27,000 cases a year determined to be serious enough to require surgery.  Scoliosis is commonly diagnosed in childhood and early adolescence, with between three and five of every 1,000 children developing spinal curves that are considered large enough for treatment.  The most common surgical intervention performed to correct severe scoliosis is spinal fusion.  
Zimmer's Universal Clamp System was designed for use in conjunction with spinal deformity procedures.  Introduced in Europe in 2006 and in the United States in 2008, the Universal Clamp Implant offers a pedicle-sparing approach for malformed or small thoracic pedicles while still providing similar stability to pedicle screw constructs. The Universal Clamp band spreads contact forces over a greater surface area, thereby reducing the risk of pulling through the lamina compared to wires and hooks.  The system's reduction instrumentation allows surgeons to sequentially reduce deformity and spread the reduction forces over multiple levels.
"Scoliosis affects a significant number of young patients in the United States each year," said Steve Healy, President of Zimmer Spine.  "We are excited to make the Universal Clamp System available as an advanced solution for surgeons treating young patients."
Since its introduction, the Universal Clamp System has been successfully used in more than 24,000 procedures worldwide.  Following the latest clearance, Zimmer can now provide training and education for surgeons to treat child and adolescent patients in the United States with the technology.

Study Shows Use of PediGuard(R) Reduced the Incidence of Clinically Relevant Misplaced Pedicle Screws in Spine Surgery

SAN FRANCISCO & PARIS, Sep 15, 2011 (BUSINESS WIRE) -- SpineGuard(R) announced today that the third published clinical study of its FDA-cleared and CE-marked PediGuard(R) platform for enhanced pedicle screw placement has concluded that "the use of PediGuard significantly reduced the incidence of clinically relevant misplaced screws, thereby increasing the safety of pedicle screw implantation*." Principal investigator for the study was Dr. Dror Ovadia, Department of Pediatric Orthopaedics, Dana Children's Hospital, Tel Aviv, Israel. The study has been published in the September 15 issue of the peer-reviewed medical journal Spine.
The high incidence of misplaced pedicle screws is well-documented in the scientific literature. Indeed, misplaced pedicle screws occur in about 20% of cases, according to numerous studies published in peer-reviewed medical journals during the 1987-2009 time period. Clearly, this error rate is undeniable and unacceptable given the potentially dire consequences of misplaced pedicle screws--such as spinal cord damage resulting in various degrees of neurological impairment.
"The scientific literature is rife with clinical evidence that the conventional modalities for implanting pedicle screws are potentially dangerous not only to spine surgery patients but also OR staff," said Stephane Bette, Chief Technology Officer and General Manager of U.S. Operations for SpineGuard. "The PediGuard technology platform is designed to be a safe and effective alternative to conventional modalities for implanting pedicle screws. There are now more than 200 spine surgeons who have performed nearly 17,000 procedures using PediGuard."
"The published clinical evidence that spine surgery can be made safer for patients is becoming incontestable," added Pierre Jerome, CEO of SpineGuard. "This latest clinical evidence supporting the use of PediGuard as standard of care for placing pedicle screws should spawn widespread adoption of PediGuard by the spine surgery community. It is a 'must-have' solution to the well-documented clinical need for safer pedicle screw placement--the number one challenge in spine surgery."
Co-founded in 2009 by Pierre Jerome and Stephane Bette, former executives at Medtronic Sofamor-Danek and SpineVision, SpineGuard's primary objective is to establish its FDA-cleared and CE Marked PediGuard(R) platform as the global standard of care for pedicle screw placement in spine surgery.

Big growth in biomaterials market

NEW YORK – Advances in gene therapy and stem cell research are leading to double-digit annual sales growth in the orthopedic biomaterials market, according to the healthcare market research firm Kalorama Information.
In its recently published report, “Orthopedic Biomaterials, the World Market,” New York City-based Kalorama said biomaterials represent 14 percent of the global orthopedics market, or about $5.8 billion in 2010.
“Advances in gene therapy and stem cell research may offer new solutions for state-of-the-art treatments for musculoskeletal conditions,” said Bruce Carlson, publisher of Kalorama Information. “Many researchers believe that genetically engineered stem cells will have a significant impact on the fields of regenerative medicine and tissue engineering as a powerful cell source that will work, in conjunction with biomaterials, to treat tissue and bone loss.”
Musculoskeletal conditions are the most common cause of chronic disability. These conditions comprise over 150 diseases and syndromes, which are usually progressive and associated with pain. They can broadly be categorized as joint diseases, physical disabilities, spinal disorders and conditions resulting from trauma. Those conditions with the greatest impact on society include rheumatoid arthritis, osteoarthritis, osteoporosis, lower back pain and limb trauma.
Biomaterials that the major orthopedic device companies have taken on to boost profits and earn a better growth rate include:
• Allografts: These grafts, usually produced from bone material from a tissue bank, are used to replace tendon and ligament tissue.
• Polymer-based bone substitutes: Polymer materials are used when temporary repair of tissue is required.
• Viscosupplementation: Elastoviscous fluid is injected to treat pain of osteoarthritis of the knee.
“Many of the companies that are getting into the biomaterials market are the same companies that sell traditional products commonly used in knee, hip and spine replacement surgeries,” said Carlson. “These companies are developing products or buying companies that make successful products. This is a way for them to diversify.”
Among these companies are Zimmer, Johnson & Johnson (through its DePuy Division), Medtronic and Stryker – all are aggressively competing in the hip, knee and spine implant markets, as well as other areas, said Carlson.
Garry Clark, Zimmer’s director of public relations, confirmed that the company is developing “orthobiologic products due to a desire to expand across all areas of care.”
“We will continue looking toward engineered tissues that fulfill the same function as more invasive procedures,” said Clark. “The goal is to provide early intervention (with treatments such as) cartilage allografts and injectables that temporarily relieve joint pain.”
Stryker, which recently acquired orthobiologics company Orthovita, also confirmed their desire to grow their presence in the biomaterials market.
“With this acquisition, Stryker is meaningfully expanding our orthobiologics product portfolio and strengthening our position in key segments of the spine, orthopedics and biosurgery markets,” said Eric Teutsch, vice president, orthobiologics.
“For the near future, we will focus on building on the success of Orthovita’s product lines, which include synthetic bone graft, vertebral augmentation and hemostasis products,” Teutsch said.
The financial opportunities are undeniable.
“While the conventional market may only see growth rates of two to four percent due to the recession, insurance procedure denials and delays and competitive effects on pricing growth rates for the biomaterials market are almost triple that at eight to 11 percent,” said Carlson.
An important factor driving revenue growth for biomaterials is that insurance companies are more likely to approve reimbursement for biomaterials than for standard materials. “Their efficacy in reducing healing time and increasing the chance that an implant surgery will be successful has lead to acceptance among physicians and insurance bodies,” confirmed Carlson.

Monday, September 12, 2011

Integra LifeSciences Announces Agreement to Acquire Ascension Orthopedics

PLAINSBORO, N.J. and AUSTIN, Texas, Sept. 12, 2011 (GLOBE NEWSWIRE) -- Integra LifeSciences Holdings Corporation (Nasdaq:IART) and Ascension Orthopedics, Inc. ("Ascension") today announced an agreement for Integra to acquire Ascension, a provider of high quality, innovative products for the foot, hand and shoulder markets, for approximately $65 million in cash, subject to adjustments. When combined with Integra's legacy business, the products will represent approximately 45% of Integra's Orthopedics revenues.
Ascension, based in Austin, Texas, develops and distributes a range of implants for the shoulder, elbow, wrist, hand, foot and ankle. In particular, Ascension will add a significant upper extremity and shoulder portfolio, which complements Integra's strength in lower extremity.
"Ascension is an ideal strategic fit for Integra, as it reinforces our commitment to and presence in the fast-growing extremities space," said Stuart Essig, Integra's Chief Executive Officer.
Ascension will also bring to Integra its differentiated pyrolytic carbon technology. PyroCarbon is a specific form of carbon with specially manufactured crystalline structures that give it excellent strength and wear characteristics. Ascension's PyroCarbon has decades of clinical support defining its durability, wear resistance, and biocompatibility.
"We are very excited to become a part of Integra," said Guy Mayer, President and CEO of Ascension. "Integra's dedicated sales force and strong balance sheet provide the stability and infrastructure necessary for us to fuel growth and emerge as a leader in the important extremities market."
The combination of Ascension and Integra will bring numerous potential benefits, including:
•Complementary Product Portfolio. Ascension will bring to Integra a strong position in upper extremity products, including shoulder. Ascension's lower extremity offerings significantly enhance Integra's leading line of foot and ankle products.
•New Entry Into Shoulder Market. Ascension will provide to Integra currently-marketed leading-edge shoulder products, opening the largest component of the extremities market, estimated at $600 million.
•PyroCarbon Technology. Ascension's proprietary PyroCarbon material has years of clinical evidence that define its biocompatibility, elasticity, strength and safety. Integra is excited about the potential of this technology in its product development program.
•Industry Experience. The Ascension management and development teams will bring additional extremities industry experience to Integra's organization.
"We are delighted to welcome the Ascension organization, distributors and customers to Integra," said Robert Paltridge, Integra's President, Extremity Reconstruction. "Through this combination, Integra will be able to provide a broader array of solutions that limit uncertainty for the busiest extremity surgeons."
Ascension generated approximately $19 million in revenue in the twelve months ended June 2011. Although Ascension has grown its revenues each year since its inception in 1996, it has not operated profitably.
The transaction is subject to customary closing conditions and is expected to close by the end of this month.

Saturday, September 10, 2011

Bringing J&J Back to Health

Last year could rightly be called the year from hell for Johnson & Johnson (ticker: JNJ). The company's McNeil Consumer Healthcare unit was forced to recall Children's Tylenol, Motrin and more than a dozen other products after contamination was found in one of its plants and serious problems were discovered in two others. By some estimates, the recalls have cost the diversified heath-care company more than $1 billion in lost sales -- and far more in terms of the damage to its once spotless reputation.
William Weldon, a 40-year J&J veteran who became CEO in 2002, is under no illusion that customers will automatically migrate back to Children's Tylenol, which has been off store shelves for 16 months. In years past, parents have been willing to pay more for the branded product. Now, he says, "we have to earn it."
A husky 62-year-old with a shock of white hair, Weldon met with Barron's last month in a corner office overlooking the Raritan River at J&J's campus headquarters in New Brunswick, N.J. Dressed in dark slacks and a white button-down shirt and loafers, the chief of this $178 billion company seemed almost avuncular at times. An avid sportsman, he is quick to talk about how he had to give up running and tennis in favor of golf after his legs went bad, adding that he has had a knee replacement and three laminectomies to relieve pressure on the spinal cord.
But beneath a mild-mannered surface is a tough competitor and leader who learned from the best. While playing high-school basketball in North Jersey in the 1960s, he attended clinics with Bob Knight, then an up-and-coming coach at Army -- and now the winningest NCAA Division I men's roundball coach in history. "Everybody knows about his intensity, but he has an extraordinary ability to connect with people," says the J&J chief, who brightens at the memory.
When not talking about sports, Weldon is all business. And McNeil isn't his only challenge. Like all big pharma companies, J&J has faced patent expirations. Unlike its peers, the loss of its biggest drugs -- Risperdal, an antipsychotic, and Topamax, an epilepsy treatment -- are already behind it. Pharmaceuticals accounted for 36% of J&J's $61.6 billion in revenue last year.
Medical devices and diagnostics, 40% of revenue, have also slowed, in part due to the commoditization of drug-eluting stents, which J&J pioneered in the 2003. Hurt by increased competition and weak pricing, the company intends to exit from the drug-eluting coronary stent business by the end of the year.
"We look at our portfolio of products and companies and ask which ones are the ones that we need to be investing in and which ones are the ones where the returns aren't going to be as great. And we got to a point where we saw that stents in general were declining and the price of stents was declining greatly," says Weldon.
Having dramatically expanded J&J's Ethicon Endo-Surgery unit in the 1990s, Weldon thinks the returns from medical devices will remain strong. In April the company agreed to acquire Synthes, a device maker, for $21.3 billion, the biggest deal in J&J's history. The deal establishes Johnson & Johnson as the world leader in traumatology and strengthens its position in spinal devices.
"If you get into an automobile accident where you have trauma, you have to be treated," Weldon says. "So, it is not as dependent on the economy and other things as the rest of the business."
Mike Weinstein, who covers J&J for JPMorgan and has known Weldon since 1995, says, "strategically, the deal makes sense." But the jury is still out on the rich price that J&J is paying. Still, he gives Weldon kudos for running J&J with a "longer-term view" and "being [more] receptive to ideas and technological innovation outside of J&J" than some of his peers.
Over the long term, Weldon's tenure is indeed impressive. Since he took over in 2002, J&J's revenue has grown 80%, to a forecast $65.3 billion this year; earnings have more than doubled, to an expected $13.6 billion; and earnings per share are up 126%, to a projected $4.97 this year.
J&J's shares, which recently traded at 63.64, have fared less well, returning 28%, including reinvested dividends, over the 9½ years that Weldon has been chief, compared with the broad market's 31% gain.
WELDON GREW UP IN RIDGEWOOD, N.J., the son of a stagehand and a seamstress for the New York City Ballet. "My parents just taught me the value of hard work," he says, matter-of-factly. But Weldon, who played football and basketball in high school, never considered a career behind the scenes. After earning a biology degree from Quinnipiac College in 1971, he took a job as a sales rep in upstate New York for J&J's McNeil division, calling on doctors, hospitals and pharmacies.
Though he originally wanted to go on to medical school, Weldon, who married in college and had a child on the way, took a more pragmatic route. He credits Barbara, his wife of 42 years, for that decision -- and much more. "She really made me understand my responsibilities and brought discipline into my life," he says.
His ascent at McNeil was rapid. Two years in, he was calling on hospitals in New York City, and two years after that he was a division manager in Pittsburgh. Yet, says Weldon, he never had a prescription for getting to the top. "I did my job," he says, "And I focused on doing it really well."
Nor did he ever consider jumping to another company to speed his way. "Too many people get too enamored of wanting to go to the next job for a few more bucks or a better title," he says.
For all his success, Weldon allows that the last few years have been "by far and away the most hurtful and difficult" of his career. Some industry watchers called for his resignation as the events at McNeil unfolded, and recriminations have flown.
Asked how the problems occurred in the first place, he says, "It all boils down to making sure you stay focused on basics. We have [standard operating procedures], and we didn't necessarily follow SOPs." He insists that he wants to get McNeil back on the right path before he steps down, possibly in a year or two.
"I don't plan on being here forever," he says.
In planning for his succession, Weldon has set up a so-called bake-off between two J&J veterans, Sheri McCoy, 52, and Alex Gorsky, 51, who both were elevated to the office of the chairman in January. McCoy, who has spent her career at J&J, heads the global pharmaceuticals and consumer businesses. Gorsky, who joined the company from the Army and now is on his second tour of duty at J&J, oversees medical devices and diagnostics. He is also in charge of the company's vast supply chain, which has been overhauled to insure that no more defective products emerge for the J&J's manufacturing plants.
"One person will get the job," Weldon says, "But the other person will still have an extraordinary job. When you look at the job that either of these people would have as a No. 2, it is broader than that of most CEOs. And the two of them work as a great team."
FOUNDED 125 YEARS AGO, J&J is a sprawling enterprise with more than 250 operating companies in 60 countries and 114,000 employees. Its products touch hundreds of millions of lives every day. For Weldon, some of the company's efforts are also quite personal. In 2009, J&J paid about $1 billion to the Irish drug company Elan to acquire all of the rights to its Alzheimer's Immunotherapy Program, notably the drug bapineuzumab, which is now in Phase III of clinical trials in the U.S. If successful, it could slow the progression of the disease. It could also become a multibillion-dollar success story for J&J.
Weldon says that Alzheimer's claimed the lives of his mother and one of his grandmothers. "I actually had to put my grandmother into an institution when I was 22 years old," he recalls. "If we can have an impact on Alzheimer's, it would just be unbelievable."
A non-U.S. licensing deal with Vertex Pharmaceuticals, meanwhile, brought the company Telaprevir, for hepatitis C. Although the drug is not yet cleared for sale in Europe, it eventually could become a $1 billion-plus product.
"We look at what is best in class, and also at what is going to bring significant change in the marketplace," says Weldon. "It is not the 'not invented here' syndrome."
On the consumer side, J&J's broad range of products, including Band-Aids, baby oil, Visine, Listerine, Neutrogena and Neosporin, has been hurt by the weak economy, not to mention the recalls. Last year sales slipped nearly 9%, to $14.6 billion, but the business remains very profitable. And unlike, say, Pfizer (PFE), which sold its consumer-products division for $16.6 billion in cash in 2006 -- J&J was the buyer -- J&J remains committed to expanding its consumer franchise.
Johnson & Johnson's reputation has been tarnished, but there is at least one place where it is unsullied. It is one of only four publicly traded companies with a triple-A credit rating -- higher than that of the U.S. government. With $11 billion in net cash on its balance sheet as of July 3, the pharma giant has earned that honor, and has ample liquidity for the Synthes deal and more. This year, it is expected to generate $13.7 billion in free cash flow, according to FactSet Research.
J&J has long been generous in sharing its cash with investors. The company has raised its dividend for 49 straight years, and at an impressive annual clip of 10.6% in the past decade. It currently pays a yearly dividend of $2.28 a share, and the stock yields 3.5%.
As Johnson & Johnson's leader through some of its best and darkest days, Weldon has understood his responsibilities well -- to employees, shareholders and, above all, customers, many of whom have entrusted their health and well-being to J&J. Perhaps it is no accident that he bears more than a passing resemblance to his old pal Bobby Knight. Under his firm and no-nonsense coaching, J&J is likely to emerge from its troubles as a better and stronger company, and reclaim its reputation as one of America's winningest corporations.
Source: C.Strauss.

Kolean named chief accounting officer for Pioneer Surgical Technology Inc.

Pioneer Surgical Technology Inc. has announced that Chad Kolean was named the company’s new chief accounting officer.
Kolean comes to Pioneer with 20 years of experience. He last served as corporate controller for TomoTherapy Inc. in Madison, Wisc. He previously spent 8 years in various controllership and analysis roles at Metavante Corporation.
“Chad’s previous experiences at TomoTherapy Inc. and Metavante Corporation, as well as Snap-on and Herman Miller, will add significantly to the breadth and depth of the Pioneer Financial Team,” a company press release noted.

Thursday, September 8, 2011

Ascendx VCF Repair System and Ascendx Acu-Cut VCF Augmentation System receive CE marking

WINTER PARK, Fla., Sep 07, 2011 (BUSINESS WIRE) -- --Julian M. Mackenzie, CEO
AOI Medical, Inc. (now Ascendx Spine(TM) ) has received ISO 13485 Certification and CE marking approval for its Ascendx VCF Repair System and its Ascendx Acu-Cut Vertebral Augmentation System to treat vertebral compression fractures (VCF).
A vertebral compression fracture forces a vertebra to collapse, and the spinal column above it to assume an abnormal forward curve, resulting in considerable back pain and a hunchbacked appearance. Current standard procedures for treating VCFs are 'vertebroplasty' and 'kyphoplasty.'
"The Ascendx VCF Repair System and the Ascendx Acu-Cut Augmentation System are designed for the treatment of spinal fractures by spine surgeons and interventional radiologists," said Julian M. Mackenzie, CEO of Ascendx Spine(TM).
Mr. Mackenzie added that the Company also has a 510(k) submission pending FDA clearance for its Ascendx VCF Repair System in 2011. A 60-patient, multicenter U.S. clinical trial has been successfully completed.
About Ascendx Spine(TM)
Based in Winter Park, Florida, Ascendx Spine(TM) is a medical device company focused on the development and commercialization of innovative orthopedic devices for the spine and trauma markets. Its initial focus is the Ascendx VCF Repair System for the treatment of a vertebral compression fracture (VCF). A VCF forces a vertebra to collapse and the spinal column above it to assume an abnormal forward curve, resulting in considerable back pain and a hunchbacked appearance.
Warning: 510(k) for Ascendx VCF Repair System is pending. Neither product--Ascendx VCF Repair System or Ascendx VCF Augmentation System--is available for sale in the United States.

Wednesday, September 7, 2011

Osseon announces release of Osseoflex steerable needle

Osseon Therapeutics Inc. has launched the Osseoflex SN (steerable needle. Osseoflex SN is the newest in Osseon’s suite of minimally invasive products for treatment of spinal compression fractures.
According to a company press release, the Osseoflex SN allows direct unipedicular access to the entire vertebral body. The Osseoplasty procedure offers flexibility and control for percutaneous vertebral augmentation, cement delivery, and fracture stabilization, resulting in significant pain relief for most patients within the same day.
“Osseoflex SN is the next generation of steerable, minimally invasive cement delivery devices for the treatment of osteoporosis and related bone diseases and injuries,” John Stalcup, PhD, Osseon chief executive officer and president, stated in the release. “Our technology for vertebral compression fracture treatment offers increased precision, less operating time for physicians and decreased risk for patients.”

Tuesday, September 6, 2011

The SPINE market group 2nd Anniversary

The SPINE market group is 2 years old!!

Since it started, we’ve addressed the most important issues, trends and product developments related to the Spinal market, publishing more than 700 articles.
Thanks to the more of 80.000 visits that has found this blog useful, and that has made this effort worthwhile.Now, you can also follow us in
Please, suggestions and comments are welcome! Make sure you don’t miss the everyday postings — Follow us and keep track on our next posts. Thank you!

Stryker Corporation: Strong Company With Compelling Valuation

A diverse product portfolio, innovative pipeline, geographic diversity, high-switching costs, and an inorganic growth strategy are crucial components of a durable competitive advantage in the medical device industry.

Risks And Opportunities
Stryker faces the industry-wide challenges of increased scrutiny by third party payers, regulatory headwinds, and intense competition from large players in the medical device market. For Stryker, the ongoing initiatives by government agencies, hospitals and third party payers to limit the growth of healthcare costs, particularly the efforts towards reducing price increases on orthopedic implants, poses a threat for the company’s future operating results as 59% of the company’s total sales comes from its orthopedic implants segment.
It has been reported that the roughly $3 billion spent on orthopedic devices represents ~3% of U.S. “overspend” on drugs and devices and 0.45% of total healthcare overspend. The cost of hip and knee implants make up about 40% of the total cost of the hip and knee surgical procedure. These devices will no doubt be the subject of continued cost-containment efforts.
In addition to pricing pressure from third-parties, the 2010 Patient Protection and Affordable Care Act (PPACA) contains provisions that mandate manufacturers, producers, and importers of taxable medical devices to pay an excise tax of 2.3% of device sales; this will substantially impact Stryker’s core segments as it is unlikely that Stryker will be able to pass all of these costs on to customers through price increases.
Stryker competes with Zimmer Holdings (ZMH), Biomet Inc, DePuy (a subsidiary of Johnson & Johnson (JNJ)), and Smith & Nephew PLC (SNN) in this segment. While Zimmer is the market leader in the Hip & Knee sub segments worldwide with 26.4% market share, Stryker has a market share of 21.3% and DePuy has 23.7%. Stryker also holds a 9.1% market share in the worldwide sales of the Spine sub segment.
The economic downturn has led to hospitals delaying capital expenditures, impacting the MedSurg segment. This has been partially offset by increase in capital spending by hospitals helped by government stimulus. The increased capital budgets for hospitals, along with the need to replace aging equipment, will benefit the MedSurg equipment segment of the company.
Working in their favor to protect device manufacturers from these pressures are product innovation, patent protection and high switching costs involved with changing orthopedic medical devices. For example, during surgical procedures, a sales representative from the device manufacturer is often present in the operating room to assist the surgeon with product selection and usage.
This dynamic allows manufacturers to maintain premium pricing by developing brand and rep loyalty from surgeons. When hospitals try to negotiate implant prices by threatening to switch to another implant manufacturer, they risk opposition from surgeons. estimates that the hourly rate paid to an orthopedic surgeon with more than 10 years of experience to be $90- $290. Taking the midpoint of the range ($190), and assuming the surgeon would require 100 hours of training on a new device in case the hospital decides to change the device that it is willing to purchase, it would cost the surgeon $19,000 in opportunity costs to switch vendors due to the need to train on new devices.
For hospitals, switching devices can lead to cost-savings; for surgeons, switching manufacturers means switching reps and having to train on new implants, equipment, and procedures, which will reduce their billable hours and thereby, revenue.
How a company develops and leverages its intellectual property is critical for a device manufacturer's long-term competitive advantage. Patent protection creates a barrier to entry for new entrants who must to develop their own technology, obtain patents, and obtain approval through regulatory channels to access the market. This factor does not act as a complete protection against threat of new entrants, as the cost of new product development is estimated to be only $60 million, compared to $1.2 billion for developing a new drug and, as mentioned before, Stryker competes against large and well-capitalized multi-national companies. Similarly, the typical duration of a new product from the development phase to the market launch is only 3 years, whereas in the drug industry it can be 10 years or more due to longer development cycles.
The increasing obesity and aging of the US and Western populations present long-term opportunities for orthopedic implant manufacturers as the population is more prone to arthritis and other orthopedic related problems. However, with a persistently high unemployment rate, delays in orthopedic procedures have pressured growth in this segment in recent years.
Stryker’s product portfolio is well diversified with orthopedic implants and MedSurg products. Recent acquisitions have broadened the portfolio with Neurotechnology and Spine products adding to the product roster.
Stryker has seven new products in different stages of clinical development in its pipeline featuring various equipment types- joint reconstruction, spinal surgery, surgical devices and orthobiologics. Stryker Joint Preservation, a business unit of Stryker's orthopedics group, launched the VersiTomic G-Lok on July 7th, 2011. VersiTomic G-Lok is designed to provide suspension fixation of soft tissue to bone during orthopedic reconstruction procedures and has good growth prospects.
Though sales growth in the orthopedic implant market is expected to remain sluggish in the near term, Stryker is expected to gain market share through new product launches, product acquisitions and from future products from the R&D portfolio.
Results of the last few quarters demonstrate the diversification of Stryker’s business model across segments. The company is also geographically diversified, with international sales contributing ~35% of total sales and room for improved contribution from international sales in the future. Increasingly cost conscious third-party payers, both public and private, and the weak economy pose challenges for Stryker but erect tremendous barriers to entry for smaller players and large players with benefits of scales are better equipped to survive in this environment.
The company continually invests in R&D. In 2010, the R&D expenses were 5.4% of total sales or $395 million, while in 2009 and 2008 it was 5.0% ($336 million) and 5.5% ($369 million) of total sales, respectively. The strong product pipeline indicates that the company is leveraging the continuous investments in R&D towards the development of innovative devices.
In addition, the company has leveraged its strong balance sheet to pursue inorganic growth opportunities such as acquiring the Neurovascular division of Boston Scientific and Gaymar Industries in 2010, with both these acquisitions valued at $1.65 billion. So far in 2011, the company has acquired Orthovita and Memometal Technologies S.A, with both these deals valued at $516 million. On August 31, the company announced the acquisition of Concentric Medical for 135 million in cash, further bolstering its Neurovascular division.
In sum, despite numerous headwinds, Stryker has secured a wide economic moat in the medical device industry and will likely continue its track record of achieving returns in excess of its cost of capital. It is likely that Stryker will achieve its sales and earnings growth guidance of 11-13% and 10-12% respectively.

2Q 2011 Result Highlights
Stryker has announced its second quarter results for the period ended June 30, 2011. Net sales were $2.05 billion for the second quarter of 2011, representing a 16.3% increase over net sales of $1.76 billion for the second quarter of 2010. The growth in sales of orthopedic implants segment continued to lag growth in Medical Surgical (MedSurg) segment as it has been since the start of 2010 registering a growth of 7.4%, while MedSurg product sales surged 15.0% on YoY basis. In constant currency terms, sales of orthopedic implants increased 1.8% and MedSurg product sales increased by 11.9%.
While MedSurg product sales declined in 2009, due to weak macroeconomic conditions, it was the orthopedic implants that came to the rescue. Since the start of 2010, the lag in growth in orthopedic segment has been offset by the growth in MedSurg segment. The addition of the newly formed Neurotechnology and Spine division adds further diversification to the product portfolio. The Neurotechnology and Spine product sales constituted 17.4% of total sales registering $356 million.

Key Growth And Profitability Metrics
The company has generated an average ROIC of 18.2% in the last 5 years which is much higher than its closest competitors Medtronic Inc (MDT) (13.3%), Zimmer Holdings (12.2%) and Biomet (ROIC is negative). This indicates that the company possesses durable long-term competitive advantage over its competitors. A breakdown of the ROE components based on the DuPont analysis is shown below.
The company has been able to sustain its ROE in the range of 18-20% in the last 10 years and the last 5 year average is 18.6% helped by a net profit margin of 16.5% which is slightly lower than its peers. It can be noted that though the company’s net profit margin is lower compared to Zimmer, it has generated a much higher ROE than Zimmer with the help of a higher asset turnover.
While Medtronic and Johnson & Johnson have generated an higher ROE, this is mainly because of higher leverage in their balance sheets. Moreover, though Johnson & Johnson competes with Stryker in the orthopedic implant and medical devices segment, it also operates in the pharmaceutical and FMCG industries, so comparisons with Stryker should be viewed with caution.
Overall, the analysis indicates that the company has been able to generate high ROE with a lean asset structure and less leverage compared to competitors.
Stryker has been able to achieve increasing margins in addition to revenue growth in double digits in every year in the last 10 years except for 2009 and 2010. Revenue growth was stable at 11-12% in the three years preceding 2009. In 2010, the company’s revenues increased by 8.9%.
While domestic revenues increased by 11.0%, international revenues increased by a mere 5.0%. While the company’s orthopedic implants segment, which contributes nearly 60% of revenues, grew by only 5.0%, the medical surgical equipment segment revenues increased by 16.0%. The earnings growth trend has been fluctuating and it peaked at 45.0% in 2005 and it seems to have stabled in the 12-15% range.
While the company has been able to generate FCF growth above 20% since 2005, in 2010 it grew by only 2.7%. The company has the ability to continue generating double digit FCF growth at least for the next 5 years. While Stryker has demonstrated stability in margins, returns has shown a slightly declining trend. The revival of returns will largely depend on the successful integration of various recently acquired businesses.

Thursday, September 1, 2011

Medtronic Completes Acquisitions of PEAK Surgical, Inc. and Salient Surgical Technologies, Inc

MINNEAPOLIS, Aug 31, 2011 (BUSINESS WIRE) -- Medtronic, Inc. today announced that it has completed the acquisition of two privately-held companies, PEAK Surgical, Inc. and Salient Surgical Technologies, Inc. Both of the companies are focused on advanced energy surgical technologies and will broaden Medtronic Surgical Technologies' portfolio of innovative surgical products to meet customer and patient needs worldwide.
PEAK Surgical is a recognized leader in the emerging field of advanced energy surgical incision technology, including its patented PlasmaBlade(R) cutting technology that is cleared for use in a variety of settings, including Ear, Nose and Throat (ENT), plastic reconstructive and general surgical applications. Under the terms of the agreement announced on July 7, 2011, the total value of the transaction is $120 million. Medtronic had previously invested in PEAK and held an ownership stake in the company prior to completion of the acquisition. Net of this ownership stake, the transaction value is approximately $105 million. PEAK's revenue is annualizing at approximately $20 million and has shown consistent rapid growth.
Salient Surgical Technologies is a recognized leader in the advanced energy category for haemostatic sealing of soft tissue and bone, including its patented TRANSCOLLATION(R) technology that is cleared for use in a variety of surgical procedures including orthopaedic surgery, spine, open abdominal and thoracic procedures. Under the terms of the agreement announced on July 7, 2011, the total value of the transaction is $525 million. Medtronic had previously invested in Salient and held an ownership stake in the company prior to completion of the acquisition. Net of this ownership stake, the transaction value is approximately $480 million. Salient's revenue is annualizing at approximately $100 million and has shown consistent rapid growth.
"We are pleased to have reached the milestone of completing the acquisitions of PEAK Surgical and Salient Surgical Technologies so we can focus on offering a more broad portfolio of innovative surgical products to meet our global customer and patient needs," said Chris O'Connell, EVP and President of Medtronic's Restorative Therapies Group. "Together, these acquisitions represent Medtronic's commitment to innovation across the entire surgical continuum from incision to closing, and represent entries into new areas such as plastic/reconstruction, electrophysiology, oncology and large bone orthopedics."
About PEAK Surgical, Inc. PEAK Surgical, Inc. is a medical device company that has developed the PEAK PlasmaBlade(R), a new tissue dissection device based on a proprietary technology that represents an important advance in advanced energy surgical technologies. The PlasmaBlades are a family of disposable cutting devices that offer the exacting control of a scalpel and the bleeding control of traditional electrosurgery without extensive collateral damage. These surgical devices come together with the PULSAR(R) Generator, which supplies pulsed plasma radiofrequency energy to the PlasmaBlades, to form the PEAK(R) Surgery System. The PEAK Surgery System is cleared for use in general, plastic and reconstructive, ENT, gynecologic, orthopedic, arthroscopic, spinal and neurological surgical procedures in the United States, and for use in general surgery in the EU. In the United States, the PEAK Surgery System was launched in July 2008 and has been used by U.S. surgeons on more than 25,000 patients. For more information, please visit .
About Salient Surgical Technologies Salient Surgical Technologies, Inc. ( ) is a medical technology company that develops and markets advanced energy devices for use in surgical procedures. The company's AQUAMANTYS(R) System uses patented TRANSCOLLATION(R) technology, which provides hemostatic sealing of soft tissue and bone at the surgical site. This technology has been used to optimize care for more than 650,000 patients undergoing orthopaedic reconstruction, spine, orthopaedic trauma and surgical oncology procedures.