Requiem for Archus - Who's Next?

It was announced today that Archus has laid off 45 employees and is taking on water. After raising $63 billion dollars in eight years, where o' where does all that money go? I know that testing and IDE's are expensive but this is ridiculous. Last month the Investors put in another $2, 275,000 USD with another $17,225,000USD to be sold via Bridge Financing. The SpineBlogger speculates that by raising this capital, Archus can maintain liquidity while anticipating an infusion of the remaining Bridge. But are investors willing to bet on an implant that has been in the works since 2001 during this economy? Based on the filing, Archus is willing to give equity in the form of stock with warrants. The question remains, is the Bridge Open or Closed?

The SpineBlogger wants to know what the readers think. Is the TFAS a viable modality of treatment? The SpineBlogger has seen this implant close up, and made an interesting observation to a colleague. Initially, the SAS stated that the way to treat patients with DDD was with an artificial disc. Then the medical community identified that with secondary facet degeneration the industry needed to address facet pain. The SpineBlogger believes that if we take out enough of the structural composition of the spine where pain is emanating and replace the disc and the posterior roof with hardware, the surgeon should be able to eliminate pain, eventually!

The question remains: Is this the beginning of the end of Archus? Impliant? Facet Solutions? We want to know what you think!

Pegasus Biologics - The Usual Suspect

In Greek Mythology, Pegasus was a winged horse sired by Poseidan, and foaled (given birth to) by the Gorgon Medusa (every picture tells a story don't it). The Gorgon Medusa was a vicious monster with sharp fangs. She was so strong that just by looking at her one would turn into stone. Well guess what, with "Kaiser Soze aka Michael Will" riding Pegasus, the horse had its wings clipped today at around 11:00 a.m. PST and turned into stone. The word came down to the employees in the most professional manner that has been exhibited on numerous occasions by these start-up or early stage companies "turn off the lights the party's over! (there goes my reference to Don Meredith again). The company was declared insolvent, unable to satisfy creditors or discharge liabilities, either because its liabilities exceed assets or because of its inability to pay debts as they mature. In other words the company has been bankrupted. When the promise of a capital infusion collapsed at the eleventh hour, Verbal Kint conferenced all of his employees letting them know that they should return their samples (as per their signed agreements), and notify their customers that the company cannot sell anymore product. So who cares if these foot soldiers become collateral damage? Who cares if they have children to feed? Who cares if they have mortgages to pay? Who cares that the job market SUCKS! What a leadership team! Caveat Emptor! When you read their bios one has to laugh. The majority of these people had no experience in running a biologics company let alone setting up a successful distribution network. It goes to my argument that just because you have money or fame doesn't mean you know what you are doing or that you have people skills. But the SpineBlogger has a bigger question to ask the readers, how do some of these people continue to get hired in leadership positions? I still haven't figured out how to say the same thing over and over in twenty different ways and not say anything at all. This is truly an art. Could it be that the Emperor was finally stripped of his hypnotic abilities? Probably not! Marx and Engels once stated; "Workers of the World Unite!" It's time that the industry rid itself of these Usual Suspects. Now once and for all will the real Kaiser Soze stand up!

2009 AANS - How can you not love San Diego>

The SpineBlogger had the opportunity to attend the AANS in San Diego. As per the commentary from surgeons and industry professionals alike, this meeting needs to be euthanized. The patient was on life support witnessed by what a few neuro-surgeons observed. And God only knows how to diagnose a patient. This has become another spinal implant meeting with no neuro-vascular companies. If there were a few non-hardware companies they were well hidden behind Danek, Globus, Synthes, Zimmer, DePuy etc..... So what's the skinny? As I walked down the aisle, and I'm not talking marriage here, there were companies with many of the same "me too" products. Let me count the ways. There was X-Spine, Spine Source, US Spine, Custom Spine/Hydrocision (I'll get to them later), Vertecor, aka Innovative Interbody, Ulrich, Choice Spine, Spine Wave and a whole array of biologic companies. I do not include the Seven Sisters better known as the "SS" of the industry because these companies are playing in a different market. Yet, let's look at these hardware companies. How many more Pedicle Screws does the industry need? They all seem to make the same claims, i.e. more screw head angulation, better screw thread profile, low-profile screw heads, yet, SpineBlogger continues to ask the age old question that a Middle Eastern Sage stated at the meeting; "Is it new? Is it true? Does it make a difference?" Hmmmmm! I think not! These products do not enhance fusion anymore than what's out there. Maybe if you drink enough of your own Kool-Aid (do I conjure up visions of Jim Jones) you can go to bed having fairy tale dreams of some company acquiring your technology for 5X. So what's going on? It is quite evident that the Capital Express has left the station. No more leveraging other peoples monies. It's time to suck it up, come up with some new IP and start being responsible for managing your own companies. Either you're interested in building a company or you still think the party is going on. Everyone talks a big game when they leverage someone else's capital. Many of these private companies are owned, or have surgeon investors. SpineBlogger noticed the proximity of the Hydrocision booth and Custom Spine. Rumor has it that Hydrocision is in financial distress. No coincidence that Lew (how big is this guy's ego?) Bennett is President of Custom Spine and a Board of Director for Hydrocision. Someone asked; "Is this guy still alive?" He's like a Timex, he takes a lickin' and keeps on tickin'. Spine Wave needs a Cross Connector, can anyone help? X-Spine needs lumbar interbody implants, Vertecor is looking for distributors and consultants, and Doug Daniels/Hydrocision needs an infusion of cash. The usual rumor mill had Synthes going after Globus, and Globus still in litigation with Medtronic. After all was said and done, I could only reminisce to the days when Don Meredith (former Dallas Cowboy great) use to sign off on Monday Night Football; "Turn off the lights, the parties over!" If you were at the meeting, SpineBlogger wants to hear your take on this meeting.

The Art of Selling: Long Live the King, Is the King dead?

Recently, the SpineBlogger was having a discussion with an industry professional that is employed as an Area Sales Director for an early-stage spine company. The topic of The Art of Selling was tabled for discussion. The question was: Do distributors and salespeople know how to sell anymore? Our consensus was that there are fewer salespeople than there are sales service people and that relationships play an integral role in generating sales since our industry has more surgeon consultants than K Street has lobbying groups. So, why has the art of selling died in our industry? Could it be that there are no features and benefits to sell anymore? Could it be that with over 500 Pedicle Screws, an estimated 275 Cervical Plates, hundreds of interbody devices, a motion preservation market that reminds the SpineBlogger of the early years of the automobile industry (1st Gen, 2nd Gen, 3rd Gen when does the marketing stop for TDA and the truth prevail), a Dynamic Stabilization Market that no one can agree upon its efficacy, synthetic bone grafts with more buzz words than a Stryker Total Hip commercial, is it possible that our industry has commoditized itself into a selling coma? Let's be honest, how long does our industry believe that it can continue to generate 80-92% gross margins in light of what is transpiring in the financial community along with an Administration that will eventually pass some form of a single payer system? For those of you that are managers at companies with Independent Distributors, when was the last time that you spent a day making sales calls? How many times have you heard, "I have a surgeon that would be interested in using your product but would like to be involved as a consultant?" Could it be that the commission are too high? In all likelihood, market forces will eventually force a contraction. This will result in some of the smaller companies aligning themselves with others, or these companies will eventually shut down. Of course, the only caveat is that if these companies revenues are generated by surgeon investors they will only prolong their misery until these investors realize that the tax write-off outweighs the aggravation of dealing with an inexperienced CEO's. What about Commission Rates? How long can some of the smaller players continue to exist when they offer 35-50% in commissions? In addition, if these companies have outside investors, how long is it before the investors want their ROI? Distributors have become "mini-WalMarts!" How can you focus on selling when you carry 2-3 Pedicle Screws, 2-3 Cervical Plates, 2-3 bone grafting options along with other products? There is something to be said of a "Direct Sales Model." Unfortunately it only works for the full line portfolio companies. This is not an attack on distributors, this is an observation about an industry that is out of control. Let's be honest with one another, "The genie is out of the bottle." It is only a matter of time before companies cut commissions and consider remodeling their distribution opportunities. The SpineBlogger wants to know what you think!

Strike 3 for Stryker

So where does it all lead to? On April 14th, Michael Sullivan, the US Attorney for the DOJ announced a guilty plea to felony misbranding of OP-1 by a third Stryker employee. Or should I say former employee? As usual I will spare #3 the press. The felony misbranding of OP-1 is based on off-label promotion with the use of Calstrux, a bone graft extender that is a combination of porous beta tri-calcium phosphate and carboxymethylcellulose. So why is this happening at Stryker? You know that squeaky clean organization with its Brooks Brothers suits and power ties? Could it be that after spending $200MM for the licensing rights from Creative Biomolecules in addition to countless millions to get the product to the market the company is feeling the heat from the board to generate a ROI? In all likelihood, the powers to be will announce on April 20th, that the organization is "cooperating fully" with the government and that they are taking the initiative to "cleanse" the organization of these "renegade salesmen, oops, I forgot territory managers. As usual, we will probably hear the standard "mea culpa" stating that it wasn't managements fault that these salesmen took it incumbent upon themselves to act in a criminal manner. Yet, why is this happening? Who is the Captain of the Ship? Could it be that when all you are concerned with is that 20% growth to appease the analysts and the Street, sometimes you lose your way home and start to stretch the rules? SpineBlogger wants to know what you think?

Is it New? Is it True and will it make a Difference?

Recently, the Spineblogger was able to speak with industry sources regarding the status of a few companies in the industry. Primarily our discussion centered on the viability of Hydrocision. Let's look at Hydrocision. This company has been around since its inception in 2002/2003. Why is a company that has raised $28MM seem to be having difficulty in developing traction after a six-year run? Even successful Broadway plays eventually close. In December the company fired most of its sales managers, leaving regional sales management in Texas and New Jersey. In addition, there has been rumors that the company is desperately seeking an infusion of capital (AGAIN?) and is experiencing cash-flow problems. So why is this company floundering? Could it be that an inexperienced management team and antiquated board still have not realized that a product needs a billing code so that hospitals can be reimbursed? And who are the usual suspects involved with this organization? Could it be that commissions are mediocre at best for a product that everyone asks; Is it new? Is it true? Does it really make a difference? For some of these members life has passed them by. The consensus seems to be that company leaders have missed the bus a long time ago when they failed to market the technology properly. Maybe one of the Seven Sisters will be able to buy this company for pennies on the dollar. Spineblogger wants to know what you think?

Let's Pull Back the Skin on Inion!

On March 26th, the Finish based company Inion announced that it is finished!!! Kaput! No longer to go on! Unable to secure sufficient funding, Inion is looking for an investor to provide the company with an INFUSE-ion of capital. Yet, Spineblogger wants to know who will bail them out? In all likelihood, if there is any merit to the technology, Stryker would be an ideal candidate (Spine and General Ortho Company). Danek's been there, done that! In addition, the company is not going to succeed with the current CEO and US management team! Expectations must be realistic. Here is another company that did not have enough of a strategic and tactical plan. The word on the street was that they were too conservative with their commissions and the management team was selling futures. Inion also had an Anterior Lumbar Plate and a general orthopaedic line. Spineblogger has heard that at the next AANS and NASS meeting there will be an Auction Hall where industry companies that are floundering will be looking to sell their failing companies to the lowest bidder. Do I hear $5, $5, $5 as a starting bid?