Are Device VCs Becoming Spineless?

Article preview from IN VIVO - May 1, 2011

Increasing concerns over the cost and efficacy of spinal procedures have chilled VC interest in spine companies, once the hot growth area in orthopedics. So, if spine is not the answer, where will VCs find investment opportunities in orthopedics, which remains one of the largest device sectors?

Are Device VCs Becoming Spineless?

Article preview from IN VIVO - May 1, 2011

The field of orthopedics dates back over a century in Europe, followed with the first implants of hips and knees occurring the 1960s and 1970s, respectively. The ensuing 20 years saw dramatic changes in orthopedics. The sophistication of implant designs and materials, along with the advent of minimally invasive procedures advanced the field significantly, providing the tools for surgeons to bring relief to an increasingly younger patient population who earlier would have been sentenced to a life of pain and limited mobility. Then the development curve in orthopedics largely hit a wall. Over the past two decades, the broader product offerings of the industry, particularly in the traditional stronghold of total joint implants, have largely remained unchanged, little influenced by innovation driven by venture-backed start-up companies.

The exception to that rule in recent years had been the spine market, which over the past decade has seen the most significant growth of any orthopedic segment. Spine also attracted the attention of the large device companies, which demonstrated their interest with a number of major acquisitions of venture-funded spine companies. Those acquisitions in turn fueled VCs burgeoning interest in this space, to the point where at one time there were as many as 300 to 400 spine start-ups on the market. But a great deal of that money has disappeared in recent years as questions over the cost and efficacy of spinal products have prevented many small companies from raising additional monies or have forced them to swallow unattractive valuations.

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