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Orthopedic companies are evolving due to changing healthcare needs and economic pressure. While we still haven’t had a “normal” year since the pandemic, 2023 could be a turning point for five companies in the medium and small-sized revenue tiers:
- Accelus
- Conformis
- LimaCorporate
- Orthofix/SeaSpine
- Treace Medical Concepts
They made our Companies to Watch list because of consistent growth through partnership and development deals, the gathering of clinical evidence to back novel treatment solutions and active portfolios supported by numerous product launches. They also have plenty to prove and much at stake this year.
Focus on Business Development
The pending combination of Orthofix and SeaSpine will create the 9th largest company in orthopedics. On the other end of the revenue spectrum, Accelus is the result of the 2021 merger of Integrity Implants and Fusion Robotics. While orthopedic M&A activity slowed significantly over the last two years, many of the companies on our list remained active through development partnerships and distribution deals. Persistent market disruption impacted some of those deals, as well. Conformis’ personalized instrument development partnership with Stryker, for example, delivered solid milestone payments, but significant incremental revenue never materialized.
Building Evidence with Trials and Studies
Several of these companies are using trials and studies to accomplish various goals. Conformis has long used studies to make a case for fully personalized knee replacement implants. Treace Medical Concepts is building clinical evidence to improve procedures and better understand the emerging foot and ankle segment. Most recently, Orthofix’s spine business is leaning on its growing body of evidence for the M6-C artificial disc to fend off competitive challenges from NuVasive, ZimVie and others.
Brisk Product Cadence
These companies are actively building portfolios in areas of existing strength and adjacent segments. Tracking product-related public announcements from these players since 2019 shows that SeaSpine accounts for nearly half of the total announcements and has more than double the amount of Orthofix, the next closest company. LimaCorporate has focused its development efforts on bringing digital technology to shoulder replacement surgery, an area likely to see an explosion of enabling technology in the coming years.
What We’re Watching
The five orthopedic companies have engaged in recent strategic developments that will shape their future successes or slow expected growth.
Accelus’ revenue grew 40% in 2022 via its FlareHawk line of spine implants and ASC-focused Remi Robotic Navigation System. Remi is one-third the cost of systems from major competitors and could save up to 45 minutes in OR set-up time. The system currently works with Accelus implants only, but the company may consider making it implant-agnostic. We expect the company to surpass $50 million in sales in 2023.
Conformis lost about 25% of its product revenue during the pandemic and has yet to recover. Substantial royalty payments related to intellectual property rights settlements have masked the company’s scuffling knee and hip replacement product sales. Conformis is banking on the introduction of its premium Platinum Services program to bring incremental dollars, but adoption has been slower than anticipated. The company has little margin for error in the coming year.
Presence in recovering markets and fast-growing segments helped LimaCorporate grow well above the market average for the second consecutive year in 2022. The company prioritized digital planning for shoulder replacement, cementless knee replacement implants and expanded market access in the U.S. LimaCorporate anticipates a sizeable backlog of deferred procedures in 2023, a tailwind that could propel the company near $300 million in sales.
Orthofix and SeaSpine announced in late 2022 that the companies intend to combine through a “merger of equals,” which creates an organization among the 10 largest orthopedic companies by total revenue with a highly complementary portfolio and differentiated enabling technology. While the deal appears to make a great deal of sense, integrations within the spine segment are notoriously tricky. The new company will face some crucial tests in 2023.
Treace Medical Concepts has a four-year CAGR of 52%, making the bunion-focused company one of the best growth stories in orthopedics. Treace went public in 2021, one of the last companies to squeeze through the closing window as the capital markets succumbed to economic disruption. The company estimates that it has penetrated just 22% of the total surgeon population treating bunions in the U.S. We expect Treace will have another significant revenue leap in 2023.
A Small but Important Slice of the Orthopedic Market
Even with the inclusion of Orthofix and SeasSpine’s combined $700 million in sales for 2022, the companies in this list comprise only 2.1% of the $55 billion global orthopedic market. However, they are present in some settings and segments that will shape the industry in the coming years, including ASCs, digital technology and foot and ankle care. In a more stable economic environment, companies like Accelus, LimaCorporate and Treace might all be attractive acquisition targets.
Although 2023 won’t likely be the coveted return to normalcy in the orthopedic market, all five of these companies have opportunities to take meaningful steps forward this year.
