SmartTRAK reviews hot topics from the fall Spine meetings and identifies bright spots in an otherwise soft Spine market.
As we look forward to Q4 and year-end results, a busy fall meeting season comes to a close. This year, industry and analysts alike looked eagerly to the Congress of Neurological Surgeons (CNS) and North American Spine Society (NASS) meetings in the hopes of nailing down some of the new, softer dynamics emerging in the Spine market. Q3 results seem to uphold the theory that the market is challenged, but bright spots remain as companies showcased myriad new interbody platforms and materials, and a few new robotics systems.
Hot Topic #1: What’s Driving the Softness?
Based on conversations at and around the meetings, surgeons and executives concede that the market has slowed, but few agree on the factors driving the softness. BMO’s Joanne Wuensch reported several potential scenarios, including: 1) smaller companies are taking share, which wouldn’t show up in public company market models – but she notes that even the smaller companies she spoke with are experiencing similar pressures; 2) higher deductible insurance plans that have impacted procedural timing; 3) payer pushback. However, analyst Jonathan Demchick notes that Morgan Stanley’s diligence has found little support for a material change in payer pushback of late. Beyond procedural volume pressure, Morgan Stanley also hypothesizes that price may be becoming an increased headwind as Medtronic and J&J both focus on using scale and potentially price discounts to drive committed volume. It will be interesting to see how this plays out through Q4 and end-of-year.
Hot Topic #2: Innovation in Interbody
What the Spine market lacks in remarkable new technologies (thanks to a challenging and expensive PMA process and subsequent reimbursement hurdles), it makes up for in incremental innovation within tried-and-true procedures. Consistent with the past couple years, that attention was focused around the Interbody market at this fall’s meetings. We continue to track two key areas of innovation: 1) new materials, and 2) expandable devices.
At the fall meetings, we noted that nearly every Spine company – certainly the public ones – now offer an alternative to PEEK IBD devices. Stryker’s Tritanium C Anterior Cervical Cage officially debuted at NASS. Tritanium C is a 3D-printed cervical interbody fusion cage constructed from the Company’s proprietary Tritanium, a highly porous titanium material designed to foster bone in-growth and biological fixation. Likewise, RTI introduced its TETRAfuse 3D Technology, reportedly the first 3D-printed polymer implant material designed to encourage trabecular bone ingrowth with the radiolucency and bone-like mechanical properties of a polymer. Other key products at NASS included NuVasive’s Modulus XLIF 3D printed cage, which was launched in October.
These products are part of a new wave of 3D-printed IBDs that join the plethora of non-PEEK materials: porous PEEK, Ti-coated PEEK, solid titanium, porous titanium, and ceramics. K2M is capitalizing on this movement and showcased the CASCADIA Interbody System at NASS, including its Lamellar 3D Titanium technology; Ti with a surface roughness of 3-5µm enabling direct bony ingrowth and 500µm longitudinal channels throughout the implant, which along with transverse windows, allows for bony integration. The technology also mitigates the devices’ radiographic signature.
Companies also continue to highlight a growing offering of expandable cages. Globus is known for its innovation in expandable cages, but multiple other companies have competitive expandable offerings, including Medtronic( ELEVATE), NuVasive( TLX), K2M( MOJAVE), Life Spine( TiBOW) and others. In an effort to fill a key portfolio gap, DePuy Synthes recently purchased an expandable offering from Interventional Spine. Morgan Stanley analyst Jonathan Demchick speculates on what the increased competition in expandable cages could mean to Globus. While it will certainly put the pressure on Globus to a certain extent, it is more likely that new entrants upsell their own existing customers or focus on capturing the more sizable static interbody market.
Hot Topic #3: Robotics and Navigation
Robotics remained an area of focus at the fall meetings due to the ongoing Medtronic/ Mazor agreement and the recent launch of Globus’s Excelsius GPS robotic system. Mazor became the first company to deliver prospective data at NASS, where researchers presented results from its MIS ReFRESH study. The research indicated that surgeries performed using Mazor’s earlier-generation Renaissance system showed a five-fold reduction in surgical complications and a seven-fold reduction in revision surgeries vs fluoro-guided, freehand MIS lumbar fusions. Additionally, one of the primary investigators measured fluoroscopy time and reported a 78% reduction in radiation in the robotic arm (four seconds of fluoro per pedicle screw vs 17 seconds). While we expect these results to help drive adoption, conversations with surgeons reveal that barriers remain: cost, potentially longer OR time, staffing and space constraints, and of course, the “pain in the neck” quotient.
Mazor X (Mazor and Medtronic), Excelsius (Globus), and Rosa (Zimmer Biomet) were all showcased at the conferences. Mazor X and Excelsius seemed to spark the most interest, with the integration of navigation and robotics emerging as a key differentiator for ExcelsiusGPS. Currently, Mazor X is not compatible with navigation systems and still requires K-wires for MIS - which Zimmer and Globus platforms do not require. The system is pending FDA approval to be compatible with Medtronic’s StealthStation in 2018E. As Mazor and Medtronic integrate StealthStation navigation into the Mazor X platform, the two platforms will be well-matched competitors.
Mazor X features a unique pre-op planning anatomy recognition that creates a surgical blueprint as well as a patient connection platform designed to ensure accurate trajectory in the event of patient movement.
Globus’ ExcelsiusGPS was well-received as perhaps the most robust in the field with a rigid robotic arm and tower, with a somewhat standard pre-operative planning software, and its own navigation system allowing the physician to view the instrument and screw placement in real-time for intra-operative adjustments.
We also are watching with interest as Globus leverages its August 2017 acquisition of Swiss robotics company KB Medical, and expect Globus to incorporate KB Medical’s IP portfolio and assets in the next-gen Excelsius, which is already under development.
Currently, Zimmer is focused on selling its Rosa Brain system but is working on integrating the Brain and Spine robots onto the same platform. MedTech initially received FDA clearance for the spine indication in January 2016 but Zimmer has since made improvements and plans to submit a 510(k) before the end of the year for a mid-2018E US launch. Rosa will also incorporate its own navigation system and “dynamic guidance” feature that enables the robotic arm to move in real time to accommodate movement of the patient or operating table.
Leerink’s Richard Newitter learned at NASS that JNJ is "closely monitoring" the spine robotics space" and "is working on something."
Based on physician and management feedback at NASS, BMO analyst Joanne Wuensch estimates the cost for the following robots at 1) Mazor X, $1MM; 2) Globus Exclesius, $1.0-1.3MM (management expects it to be priced at a premium); and 3) Zimmer’s Rosa $700K (although it is not launched in the US and management anticipates it will be competitively priced).To be certain, as we move forward, the onus will be on the manufacturers to prove an economic benefit . Interestingly, as CNS President Dr. Ash Sharan hints in his interview with BioMedGPS, we predict that we’ll see an element of risk sharing as this market matures.