Medical Device Daily Associate Managing Editor

SAN FRANCISCO — A significant portion of the medtech companies represented at the annual JP Morgan Healthcare Conference this year are involved in some way with the orthopedics sector.

Among those presenting from that sector at this week's conference at the Westin St. Francis Hotel have been Zimmer Holdings (Warsaw, Indiana), Wright Medical (Arlington, Tennessee) and Kyphon (Sunnyvale, California).

Zimmer is the poster child for dramatic expansion and has risen in recent years to become the largest orthopedics company in the world.

The company, which was spun off from Bristol-Myers Squibb (New York) in 2001, has consistently delivered 30% or better results and has garnered the No. 1 pure-play orthopedics position since its $3.25 billion-plus acquisition of Europe's largest orthopedics company, Centerpulse (Zurich, Switzerland) in 2003 (Medical Device Daily, Oct. 3, 2003).

Because of its integration with Centerpulse, the new Zimmer now has more than 6,500 employees, operations in more than 24 countries around the world and sells products in more than 80 countries.

The Centerpulse buy also added spine and dental franchises, though the company still remains heavily weighted toward hip and knee implants.

Ray Elliott, president and CEO of Zimmer, said the company is focusing on broadening its minimally invasive (MIS) surgical offerings across the spectrum of markets in which it is involved. He cited the December additions of the University of Nebraska and University of Alabama as new Zimmer Institute teaching facilities, designed to train orthopedic surgeons to use the company's minimally invasive technologies and participate in MIS product refinement.

One interesting new product that the company is developing is an allogenic tissue cartilage. “If there is a 'Holy Grail' in our industry, it is probably the re-creation of the cartilage in a natural way,“ Elliott said.

Commenting on the dental business that the company acquired with the Centerpulse purchase, he said that while some people thought the company would sell that line, it actually has good technology correlations with Zimmer's orthopedic offerings, such as inter-body implants, next-generation surfaces and image-guided.

The spine sector is another area that the company will focus on, with the areas of exploration including enhanced MIS spine procedures, nucleus replacement and cervical disc replacement.

Concerning the Centerpulse deal, Elliott said Zimmer has been “very, very pleased“ with how the integration process is going. He said the company has met 1,905 out of a total of 3,341 milestones from the merger in the 15 months since it closed. He said the company has also met a 500-person headcount reduction and all the sales forces of the two companies are now integrated.

A company that has enjoyed a dramatic turnaround since the new millennium began is Wright Medical, a more than 50-year-old global orthopedic medical device company specializing in the manufacture of reconstructive joint devices and biologics products.

Reconstructive joint devices are used to replace knee, hip and other joints that have deteriorated through disease or injury. Biologics are used to replace damaged or diseased bone, to stimulate bone growth and to provide other biological solutions for surgeons and their patients. Within these markets, the company focuses on the higher-growth sectors of advanced knee implants, bone-conserving hip implants, revision replacement implants and extremity implants, as well as on the integration of its biologics products into reconstructive joint procedures and other orthopedic applications.

“When you think about Wright Medical,“ said Barry Bays, company chairman, “you really need to really focus in on three segments of the orthopedic surgery business. The lion's share of the company's business falls into the first area, the large-joint reconstruction market, primarily hip and knee replacements.“ He said the company growth rate in that sector has been about 13% over the past three to four years, just about at the market rates.

The second sector the company is involved in is what he termed the “extremities“ market, which includes digits and foot and ankle products and other areas where small joints are reconstructed. Bays said Wright is currently growing this market at roughly two times the market rate of 10% a year.

The third area, biologics, has been one of the fastest-growing segments within the marketplace with an average growth rate of between 15% and 20%, with Wright doing significantly better. “We've had an outstanding growth of 30% to 45%, averaging 36% over the last 3-1/2 years,“ he said.

The primary focus of the company's biologics group, is in the spine area, which accounts for 43% of that division's business. According to Bays, since Wright Medical is not primarily in the spine business, “we have to think about expansion in the biologics marketplace a little differently than our competitors.“ To do that, he said the company has looked a little deeper into the areas where bone-grafting is occurring. It also layers in soft-tissue augmentation, which often is used in conjunction with bone grafting.

That biologics market is further broken down into four major platforms. These include bone repair; protection treatments; soft tissue repair; and the longer-term anti-adhesion platform, which includes the Adcon Gel that the company acquired via bankruptcy proceedings involving Gliatech (Cleveland) just over two years ago (MDD, Jan. 7, 2003).

On the research and development side, Bays said that between 6% to 6-1/2% of sales are going to R&D. “Each year, we have about 20% to 25% of our revenues that come from products that we did not have in the product line 18 to 24 months prior. So I think that's a strong indication of our commitment. It also gives us a lot of confidence that our new pipeline of new products will continue to flow out year after year.“

Kyphon is another interesting company in the orthopedics space. The company treats vertebral compression fractures caused by osteoprosis, cancer and trauma.

The spinal column contains 24 bones called vertebrae, each consisting of a large block of bone, called the vertebral body that helps maintain upright posture. The soft tissue between each vertebra is generally referred to as a spinal disc. The vertebral body consists of soft inner, or cancellous, bone surrounded by a thin outer shell of hard bone. Each vertebra also has bone segments that extend out from the vertebral body, called the posterior elements that surround and protect the spinal cord.

When the spine is structurally weakened, routine downward pressure can cause a vertebral body to collapse and fracture.

Kyphon's KyphX family of instruments is designed to help repair these fractures during minimally invasive spine surgery. Minimally invasive spine fracture surgeries using the company's current KyphX instruments involve the insertion of two disposable balloon devices into the fractured bone. During a procedure known as kyphoplasty, a surgeon inflates the balloons to compact and move the deteriorated bone. As a result of the inflation of the balloons, the collapse caused by the fracture may be reversed. The balloons are then removed, and the newly created cavity is stabilized by filling it with the surgeon's choice of bone filler material.

“Our mission over the next three to five years is to become the recognized global leader in restoring spinal function through minimally invasive therapies,“ said Richard Mott, the company's president and CEO.

He said that Kyphon already has enjoyed a great deal of success since its inception and first commercial revenues in 2000, with 19 quarters of consecutive revenue growth.

Mott said that 2004 was a very important year for the company, since it finally received FDA clearance to promote and sell its proprietary bone cement (MDD, April 6, 2004), thereby expanding use of this bone cement, which had already been used frequently off-label in conjunction with the procedure. The clearance was the first in the U.S. for a spinal bone compression cement.

With the launch of the company's KyphX HV-R bone cement in the U.S., Mott said Kyphon would be able to provide and promote a complete procedural solution for surgeons who treat patients with vertebral fractures. In addition, the company can now train spine specialists on appropriate techniques for delivering bone cement during balloon kyphoplasty.

In an ironic twist, Kyphon had to wait nearly four years to gain a specific spinal application for the cement, even though it had received clearance for the instruments used in the procedure in the late 1990s, without ever performing a single procedure on a patient.

The studies used to generate the bone cement approval also have served to show the long-term benefits of kyphoplasty. Participants in the 100-patient prospective study had lost an average of 38% of their vertebral body height pre-surgery. One week after the surgery, an average of 88% of that vertebral height had been restored. “The important point here is that two years out, that height has been maintained,“ said Mott. “There was no further [vertebral] collapse in these patients and we believe this represents a significant outcome for these patients.“

Kyphon estimates that there are 700,000 spinal compression fractures annually in the U.S. caused by osteoporosis alone. And of that number, only a third of these are diagnosed. The cancer market represents roughly 50,000 people in both the U.S. and Europe. The company said the trauma market represents about 100,000 patients a year in both the U.S. and Europe.

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