Orthopedics M&A; Moving From Center To Extremities

Article preview from Start-Up - October 1, 2011

For the past few years, medical device VCs have slowly steered their capital away from spine start-ups and towards other opportunities in orthopedics, like extremities. Now, after years of near zero acquisition activity, strategic acquirers made not one but two significant acquisitions of extremities companies, creating a bit of a race to acquire a share of this small, but growing market.

Orthopedics M&A Moving From Center To Extremities

Article preview from Start-Up - October 1, 2011

For the past few years, medical device VCs have slowly steered their capital away from spine start-ups and towards other opportunities in orthopedics, like extremities.

The diversion of capital has been slight. Spine-based start-ups still draw roughly 40% of all venture capital dollars committed to orthopedics companies.But the once white-hot sector has been tempered by concerns over a combination of efficacy and economics. Third-party payers are increasingly unwilling to pay for procedures performed under certain circumstances, and the result – a shrinking or stagnant spinal market – can't support the number of products currently available, let alone new ones.

The spinal boom that began five years ago seems to be over, and that lack of interest is now evident in mergers and acquisitions. An analysis of Elsevier's Strategic Transactions reveals that 2011 might be the worst year for exits from spinal companies in five years when the spine boom was loudest. As of October 1, only one spinal company has been acquired: Facet Solutions Inc., a player in the total face arthroplasty device market. Privately held Globus Medical Inc. bought "substantially all the assets" of company in January for an undisclosed – and likely miniscule – price. (Facet, ironically, had been on the other end of a similar deal in 2009 when it acquired the assets of Archus Orthopedics, gaining a clinical-stage non-fusion device for treating leg and back pain associated with moderate-to-severe degenerative lumbar spinal stenosis. 

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