Tuesday, March 31, 2009

Who's Next?

No it's not the title of an 80's Who Album! It's a question that has been raised by many industry professionals regarding the companies that are not part of the exclusive "Seven Sisters of Orthopaedics." These are the companies that make up the bottom 20% of our industry. So who's next? First it was Innovative Spine (IST). Then we heard that Vertebron was on the verge of collapse or would it be called Chapter 7 Bankruptcy Protection. Then there is INION. Rumor (and I am not talking Bruce Willis' kid) has it that they are in the process of shutting down the US office in Florida. Now we hear that Disc Motion (DMT) needs an infusion of capital, and PEGASUS is laying off its direct employees. Since some of these companies are on the verge of collapse or are attempting to make one last ditch effort to salvage themselves, the looming question becomes: WHY DO SOME OF THESE VENTURES MAKE IT AND SOME OF THEM FAIL? Most of you whom read this blog know my feelings about what has happened within our industry. Too many people end up getting positions that they are either not qualified to be in, have been brought in from other industries and think they know our business, or just do not understand the commitment and sacrifice it takes to become successful. Too many people in our industry have had sugar plum fairies in their heads. The day of 5X return on a company is about as distant as the mirage that one sees while driving in Death Valley. With the markets being as unstable and unpredictable as they are, it will be a long time before we see outside speculators want to invest with the same vigor as in the past into an industry that will eventually be effected by a national healthcare plan or some type of single-payer system. In spite of these troubled economic times, this industry has rode the gravy train. Today, we have over 500 different Pedicle Screws, 300 different Cervical Plates, let alone how many different Interbody Devices, and we still believe that we will continue to stoke the engines of profitability. Would anyone invest into a nucleus replacement company after the PDN fiasco? Unless you have the cash flow and infrastructure of a Medtronic, Synthes, J&J, Zimmer, Biomet or Globus your portfolios are limited, and you are competing in a Zero-Sum Market. Zero-Sum equals a commodity market! Despite what the snake-oil salesmen of our industry predict, Spineblogger believes that we are heading into an interesting period where many of these small companies will end up being acquired in fire-sales, if there is any meat in the technology or it compliments the gaps in the Sisters portfolio. Spineblogger wants to know what you think.

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