Article preview reprinted from IN VIVO - September/October, 2009
SpinalMotion is one of a small number of second-generation companies that hope to follow in the path of the first artificial disc companies, with novel technologies and a more measured assessment of the market, especially the lumbar disc segment. The ultimate challenge for SpinalMotion may not be gaining market share, but finding an appropriate exit for its investors. Read more...
SpinalMotion: Chapter 2 in Artificial Discs
Article preview reprinted from IN VIVO - September/October, 2009
The fairy tales in the artificial disc market seem to be over. But who says there can't be a happy ending?
** Just five years ago, the approval of the first lumbar disc promised to herald a blockbuster new device in spine, but reimbursement and technical problems have dulled the commercial success of artificial discs.
** SpinalMotion is one of a small number of second-generation companies that hope to follow in the path of the first artificial disc companies, with novel technologies and a more measured assessment of the market, especially the lumbar disc segment.
** The cooling of enthusiasm for artificial discs seems to parallel a concurrent cooling in spine as clinical challenges, crowded market places, and uncertain returns trouble investors. The recent downturn in the economy, more broadly, has only made things worse.
** That's not to say disc replacement won't be a viable market; recent developments in spine's competitive landscape suggest a window of opportunity for aggressive companies with novel technologies. But the ultimate challenge for SpinalMotion may not be gaining market share, but finding an appropriate exit for its investors.
Five years ago, the promise of artificial disc replacement in spine seemed emblematic of the enormous enthusiasm about spine more broadly. Dozens of new companies with novel technologies addressing unmet clinical needs were matched with venture investors and corporate buyers eager to pay well to tap what seemed to be an exploding clinical space.
Today, how different things seem. While the clinical opportunity and unmet needs remain in spine, broadly speaking, uncertainty and caution have replaced the enthusiasm of a couple of years ago. And here, too, the fate of artificial discs mirrors and magnifies the larger issues faced by spine companies. The disappointing commercial in-roads made by the first discs to come to market have raised questions about what was once seen as the blockbuster potential of this novel technology. While few surgeons or patients would deny the value of motion preservation, conceptually, in choosing a therapy, adoption of discs has lagged—the result of delayed reimbursement, ambiguous clinical studies, and basic clinical conservatism. Compounding the woes: a marketplace in which exits for venture-backed companies seem less than certain, with a closed IPO window and real concerns about who among corporate buyers has the will and appetite to make the kinds of plays that the first discs saw.
For start-up disc companies, coming on the heels of the first discs with what might be called the next, if not next-generation, discs, the ride has been rocky—add to all of the challenges that a typical start-up faces the ups-and-downs of what had once been one of the device industry's most promising segments. Still, if artificial discs may never be the blockbuster category some had hoped, it remains a promising therapy. Indeed, many industry executives believe cervical disc replacement will eventually become the standard of care and a huge opportunity; lumbar disc replacement, if still challenged by fusion, will remain an important therapeutic option for the right cohort of patients. For the next generation of artificial disc players, like SpinalMotion Inc., and their investors, a more modest artificial disc market still holds tremendous promise.
A South Africa Connection
Launched in 2003, SpinalMotion was the brainchild of a South African biomedical engineer named Malan De Villiers. Earlier in his career, De Villiers had worked on everything from weaponry for the military to building construction in Europe before teaming up with another engineer, Graham Blackbeard, who had worked on early designs for an artificial heart. Over the course of several years, De Villiers and Blackbeard would start a number of medical device companies in South Africa, in areas from dental implants and tissue heart valves to aesthetics and wound care. (Their dental implant business, Southern Implants, is one of the largest dental implant companies in the world, with sales not just in South Africa, but also in Europe and the US.)
One of the companies they started was Southern Medical Pty. Ltd., which was developing a line of spine implants, including an artificial disc. By 2002, De Villiers not only had a working prototype of his disc, but also had actually done a couple of implants and was making presentations at clinical meetings. At the Spine Arthroplasty Society meeting in May of 2003 in Phoenix, De Villiers caught the attention of Jim Shapiro, a venture capitalist with Thomas Weisel Venture Partners.
Spine was a roiling space at the time, with enormous amounts of venture capital chasing dozens of companies with innovative technology. Shapiro himself had looked at a number of other spine companies but liked De Villiers' technology. But if SpinalMotion had an innovative disc and a willing investor, it didn't have much else. The company had one employee, Joyce Maga--a regulatory and clinical consultant who had run the clinical trial for the Charite disc and had moved on to do clinical studies for Southern Medical after Charite was acquired by Johnson & Johnson's DePuy Spine Inc.—and no CEO. By February of 2004, soon after the new company's $4 million Series A round had closed, provided exclusively by Thomas Weisel Venture Partners, David Hovda, a former ArthroCare Inc. executive, would become the company's second employee and first—and only--CEO.
by David Cassak
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Companies mentioned in this article:
Abbott Laboratories Inc.
Alphatec Holdings Inc.
Globus Medical Inc.
Integra LifeSciences Holdings Corp.
Johnson & Johnson
DePuy Spine Inc.
LDR Holding Corp.
Medtronic Inc.
Kyphon Inc.
Medtronic Sofamor Danek
New York University
Northwestern University
NuVasive Inc.
SpinalMotion Inc.
Stryker Corp.
Synthes Inc.
University of California
Zimmer Holdings Inc.
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