3 Important Trends in Spine Today

Spine trends and treatment

Due to the more elective nature of most spine surgeries, the pandemic took a heavy toll on spine relative to some other orthopedic segments. We’ve selected three notable takeaways from recent earnings commentary from public spine players as they begin to reach normal procedure volume again. First, there is unlikely to be a growth bounce from backlogged procedures in 2021. Next, some large players continue to be market share donors. Finally, the entire orthopedic industry is evolving toward digital technology, but spine may be the tip of the spear.

Backlog Will Be a Trickle Instead of Torrent

The third quarter of 2020 brought a sharp recovery of backlogged procedures deferred during the market’s pandemic low point. However, this year companies don’t foresee a similar bounce. Leadership at Zimmer Biomet estimates an 18-month turnaround for its backlog consisting of a gradual but steady return of patients. Like all things related to the pandemic, the backlog issue is a fragmented one. Contrary to Zimmer Biomet’s expected slow burn, SeaSpine said it had already mostly worked through its backlog by the end of the second quarter.

Seasonality is another factor weighing on the third quarter. Last year, with travel and vacations severely limited, surgeons seemed to churn through backlogged procedures. In 2021, however, more normalized seasonality returned as overall travel increased. Additionally, August and September 2021 held several major surgeon conferences. Globus Medical CEO Dave Demski said, “There’s a pent-up demand in our society for travel. We’re seeing the surgeons take that, but I fully expect that they’ll be back in once school starts again in September. But I think we’re going to dip a little bit here in the third quarter.”

Market Share is Up for Grabs

Some of the largest orthopedic players in the market have wounded spine businesses being picked apart by smaller companies. For a time, Medtronic played the sleeping giant in the market but has largely reasserted itself in areas it should win. DePuy Synthes, the market’s number two player, saw its spine presence deflate by about -20% from 2014 to 2019. Zimmer Biomet decided to spin off its underperforming spine segment while NuVasive works to regain its pre-pandemic momentum amid the delayed launch of its Pulse platform. Diversified players, in general, have had a rough ride in the spine market, as Stryker did during its rocky K2M integration.

Of the companies consistently taking market share in spine, Globus Medical and ATEC are the most noteworthy. One of the very few large companies to grow in 2020, Globus is at the cusp of entering the $1 billion revenue tier with expected 2021 revenue of $950 million, or +20% growth. Globus’ ExcelsiusGPS system broke its own revenue records twice in the last three quarters. Globus is also one of the few major players currently positioned to make a sizeable acquisition. Among mid-tier companies, ATEC has been on a tear and, by the end of 2021, will likely have averaged nearly +30% annual growth over the last three years. Company CEO Pat Miles said ATEC’s technology and dedication to spine has attracted “big company” competitive hires who infused a mixture of NuVasive’s clinical attitude with Stryker’s sales discipline.

Spine at the Forefront of the Digital Evolution

Capital sales of spinal robotics were pressured for much of 2020 but compared favorably to general capital sales. Starting in the fourth quarter of 2020, though, orthopedic robotics have enjoyed record-setting sales that have continued through 2021. Companies with robots outside of spine, like Stryker, are actively developing new entries into the market. As utilization increases, companies can enter what Globus described as “virtuous cycles” of portfolio-wide pull-through from the robotic system. Medtronic often extolls the benefits of surrounding the procedure – before, during and after– with enabling technology.

Beyond large and costly robotic systems, nearly every public spine company has embraced the evolution toward digital technology. Medtronic CEO Geoffrey Martha said, “We want to put the tech in medtech. We’re very device-centric. We want to shift to some of these digital technologies to change our offerings.” Variations of this refrain are now common across the industry. Surgical planning driven by artificial intelligence (e.g., Medtronic’s Adaptive Spine Intelligence system from Medicrea) and navigation that harnesses augmented reality (e.g., Surgalign’s ARAI from Holo Surgical) are the next frontiers of surgery and will provide new revenue streams. Some players, like Surgalign, appear ready to pivot to software-only. The company estimates its Holo system will initially generate $1.5 million annually per unit with applicability that eventually extends far beyond orthopedics.

In sum, we expect COVID and backlogged procedures will simmer within the market for several quarters to come. Though, we expect the spine market to return to growth in 2021. Some larger players, like DePuy Synthes, are losing share and have no easy route back to competitiveness. All the while, the spine market’s transition toward digital technology moves apace and could significantly alter the landscape of the segment.

ME

Mike Evers is a Senior Market Analyst and writer with over 15 years of experience in the medical industry, spanning cardiac rhythm management, ER coding and billing, and orthopedics. He joined ORTHOWORLD in 2018, where he provides market analysis and editorial coverage.

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