Orthopedic Industry Insights and Reflections

It seemed a bit odd, to be quite honest. It was the wrong time of year for an American Academy of Orthopaedic Surgeons (AAOS) Annual Meeting (it’s usually held in early spring) but the right venue (sunny San Diego). And while it was nice to attend a show as large as AAOS in person, greetings and first introductions were awkward and the sight of fellow attendees in masks was still a little unsettling.

We’ve attended the AAOS Annual Meeting many times over the years to gain insights into this $50 billion market (estimated). The meeting has provided valuable data about orthopedic industry trends and its impacts on other healthcare market segments. Clearly, orthopedics is a sector that cannot and should not be ignored.

Some of the key considerations associated with this sector include:

• Why is it growing and what is driving growth?

• What are the key trends?

• Who are the major industry strategics?

• How important is contract manufacturing to the industry?

• What role do robotics and enabling technologies play in this sector?

Growth Drivers
The AAOS estimates there are 5 million to 10 million U.S. patients annually who suffer from orthopedic and musculoskeletal issues (injuries, diseases, etc.). As the global population ages (and our bones get weaker), this segment is likely to remain a high growth sector for many years to come.

Key Trends
There are a number of subsections within orthopedics that are impactful: arthroscopy; joint implants/reconstruction; spine solutions; trauma, and orthobiologics. It is virtually impossible to understand the forces shaping the orthopedic market without a basic knowledge of each subsection.

Arthroscopy: There is a market-level race to own the ambulatory surgical center (ASC) segment. With surgeries increasingly moving outside the hospital setting, the major strategics are targeting ASC-related products and procedures very aggressively. On the arthroscopic side of the equation, there are trends toward integration, visualization, single use, and digitization. Each company is creating its own strategy to gain market share.

With joint implants also becoming same-day procedures, major implant manufacturers are bolstering their offerings for both product lines to offer ASC customers incentives to use the two kinds of devices from the same company.

Joint implants/reconstruction: Going forward, there is little differentiation in “plastics and metals” for the joint implant market. Thus, the major players are competing through anatomy expansion (targeting more joints to replace) and enabling technologies (mentioned below). It used to be somewhat extreme to replace and/or reconstruct a foot or ankle. Now, those surgeries are becoming more commonplace and large investments are being made in this area, as evidenced by Stryker Corp.’s acquisition of Wright Medical and Smith+Nephew’s acquisition of Integra Lifesciences’ lower extremities portfolio. The newest battleground for body part replacement appears to be the shoulder. Many large players have either announced solutions or are developing them for this area.

Spine solutions: The spine market is exciting as it has an interesting mix of large industry conglomerates (i.e., J&J, Stryker, Zimmer Biomet) competing with some very focused market leaders like Nuvasive Inc. and Orthofix in this sector. The good news for patients is that the “basic hardware” needed for spine fixation, fusion, and adjustments is constantly improving. At the same time, enabling technologies (mentioned below) are enabling more precision. Both of these factors are facilitating the growth of spine surgeries by allowing more types of procedures and also ensuring better performance during the surgery itself.

Trauma: While the trauma device market isn’t very sexy at the moment, it continues to benefit from overall industry trends such as 3D printing and micro-devices.

Orthobiologics: This is where new fortunes are being made. On a high level, this market could be described as where “pharma meets orthopedic devices.” The combination of orthobiologic materials (lifescience chemistry) being delivered through innovative medical device solutions is creating tremendous growth in this sector. The key benefits are the potential for bone growth, stability, and infection prevention. Watch for this sector to explode in the coming decade.

Major Industry Strategics
The current strategic players include the usual suspects. Companies like Arthrex, Smith+Nephew, Stryker, DePuy Synthes (a J&J company) are commercialization powerhouses but not all of them excel in R&D. Yet what they lack in innovation they compensate for in inorganic growth through acquisition. It’s often interesting to watch the continuous innovation “chess match” through both R&D and M&A strategies. There are also some focused market leaders in certain segments such as Nuvasive and Medtronic plc in spine. While the latter firm is mainly focused in spine in the orthopedic sector, the company plays hard in every segment in which it participates and cannot be ignored. Not to be left out are “up and comers” like Globus Medical, which is finding new ways to innovate (organically or inorganically) and grab their share of the market one piece at a time.

The Role of Contract Manufacturing
Contract manufacturers continue to play a major role in the orthopedics industry. Companies like Orchid Orthopedic Solutions LLC and Viant Technology are chasing OEM customers with promises of one-stop shop manufacturing service; close at their heels are hundreds of smaller players vying for market share either through innovation or logistics/service (or all of the former). Outsourcing continues to grow as the major OEMs focus internally on their core strengths and seek manufacturing help from parties that can keep product costs down via technology, innovation, and/or logistics.

Enabling Technologies
Innovations in robotics, surgical planning, navigation, and other digital solutions (patient engagement) are rapidly finding their place in the orthopedic sector.

Many of the largest implant manufacturers are making significant investments in robotics. Stryker has led the way with its Mako platform for knees and hips while Medtronic has taken a leadership position in spine with its Mazor X platform. Zimmer Biomet is striving to give both rivals a run for their money with its ROSA Robotics portfolio for knee, hip, neurosurgical, and spine procedures, and other competitors like DePuy Synthes are working to develop digital surgery solutions that feature a variety of connected technologies. The robotics battles have only recently begun, so it will be interesting to see how this competition evolves over the next few years. There is still much to be decided.

While it certainly is an attention-getter, robotics is unlikely to capture the entire market anytime in the next decade, according to most industry pundits. In the meantime, there are excellent technologies to improve surgical precision across various musculoskeletal procedures. For example, Smith+Nephew acquired Brainlab’s surgical hip navigation technology in 2019, thereby gaining a tool to help surgeons maximize accuracy and reproducibility in total hip arthroplasty cases through patient-specific component alignment. RI.HIP NAVIGATION helps surgeons take control of individual patient pelvic tilt, leg length and offset measurement.

Patient engagement solutions like Zimmer Biomet’s mymobility and Corin Connect, meanwhile, are giving surgeons an opportunity to communicate directly with patients during their pre-op and post-op activities; and to collect data about the patient’s performance, which can be used to improve outcomes. These platforms are designed to keep patients engaged in their surgical journey, allow them to better understand their condition, and take an active role in their care.

Summary
Orthopedics continues to be an exciting industry. Not only are key trends continuing to improve the segment overall, but new enabling technologies are also becoming key differentiators for patient outcomes. That should be encouraging for us all.

Florence Joffroy-Black, CM&AA, is a longtime marketing and M&A expert with significant experience in the medical technology industry, including working for multi-national corporations based in the United States, Germany, and Israel. She currently is CEO at MedWorld Advisors and can be reached at florencejblack@medworldadvisors.com or at www.medworldadvisors.com.

Dave Sheppard, CM&AA, is a former medical technology Fortune 500 executive and is now focused on M&A as a managing director at MedWorld Advisors. He can be reached at davesheppard@medworldadvisors

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