Trans1: October 29th Day of Reckoning

October 29th looms as a big day for Trans1. On that day, the company will release its full third quarter results. Earlier this month, the company announced that revenues were expected to fall short of previously announced guidance for the quarter. So why the concern? Like most readers, TSB is concerned that this could be perceived as the beginning of a trend for this company.

Even though this company has exhibited nice growth, they are not meeting the Streets and their own expectations. But that happens when you dance with the devil. The primary reason that this company has lost some traction can be attributed to reimbursement issues surrounding their flagship product. Most of our readers understand that when surgeons cannot get reimbursed for using product, they stop using product. Trans1's challenge is to get this device down classified from a Category III CPT Code (aka an experimental device) to a Category I, meaning that insurers will not pre-approve the procedure or pay the code. TSB is sure that this organization is working feverishly to overcome this obstacle. This company has managed their cash flow very well, considering, they have opted to build their business model with a direct sales force.

But there are other concerns, if you track their stock (TSON, NASDAQ) the share price has taken a beating over the past year, affecting the companies market cap and valuation. On October 13, 2008 the stock opened at $8.57 and closed at $9.54, jumping as high as $10.03 on October 17, 2008. As of October 13th, 2009 the stock officially closed at $4.52 per share. The question must be asked, are investors losing interest in Trans1? If this company is projected to finish '09 with an estimated revenue of $30-$35mm are they doing a great job, or, do other factors loom that our readers are unaware of . The Spine Blogger wants to know what our readers think?

Phantom Product, Phantom Company, U.S. Spine

Recently, OTW published an article on the launch of U.S. Spine's Phantom Plus interbody devices. But this blog is not about more "me too" products flooding a "zero-sum" market because there is nothing innovative about the product, and it is evident by this article, a lot of confusion exists at this company.

So the question must be asked; "Is Paul Sendro really the Messiah, or, is he the Vice-President of Sales and Marketiing, or, is he really a consultant? Can anyone at this company get their story and act together? To quote one of our sources, "how can you be in two places at once without being any place at all? The answer is, U.S. Spine.

If the confusion lies in U.S. Spine's inability to offer Sendro a palpable employment contract, what does that say about the company? How long has he been there? Many of these early-growth stage companies get themselves in trouble because they really do not possess the necessary skills to take their venture beyond a certain point. How interesting is it that the organization would tender Sendro a board seat as a consultant? I guess our industry is always setting new precedents. If Doris Blake believes that the company is primed for tremendous growth, why would she need Sendro? With his reputation and past affiliations, there are many more talented people in the industry.

Thanks to our Readers

TSB would like to thank our readers for their continued support of our blog site. We are proud to announce that in September we achieved a new milestone. We had over 5,000 readers. In addition, we have had numerous e-mails from patients, surgeons and industry professionals. Your feedback is important to our continued success. Remember, if there are any questions or concerns that you have, you can contact us at spineblogger@me.com

Let Your Voices Be Heard!

Why are We Expanding Orthopedics?

Recently, one of our readers e-mailed TSB regarding a company by the name of Expanding Orthopedics. After carefully reviewing their website, our favorite set of questions came to mind; is it new, is it true, and will it make a difference? With the commercial launch of another pedicle screw system, the industry now has 550 pedicle screws and counting. But the bigger question looms; why in God's name do we need another pedicle screw, let alone one that expands? Is this truly novel technology?

Historically, the first implant designed that had expanding capabilities (no distal locking bolts) was the Biomet Brooker-Wills Nail. For those of our readers that are not aware, EO is not the first Israeli Company that offered the industry expanding locking capabilities. Disc-O-Tech (now defunct, sold their IP to Kyphon) was the first Israeli Company that brought an expanding humeral, tibial and femoral nail to our market. They attempted to use surgeon consultants from The Hospital for Special Surgery in New York City to no avail. So why do we need an expanding pedicle screw?

I suppose the argument will be made that this will benefit the surgeon when treating a patient with osteopenic bone. Yet, TSB must ask; based on the current state-of-the art, are surgeons having trouble with pedicle screw that don't expand? I think not! TSB believes that most of the people involved with EO are probably very nice people, but the question must be asked, why now? For those investors that infused capital into this venture, if your money was burning a whole in your pocket you can always make a charitable contribution to TSB. What do our readers believe, what do our readers think?

Silicon Nitride - Is it all an Illusion?

With the upcoming NASS Meeting in San Francisco on November 10-14th, 2009, TSB was reviewing products and companies to identify any innovation and emerging technology. While reading OTW, I was fascinated by an advertisement that says; "Silicon Nitride Proven Under Such High Stress Conditions as the Space Shuttle, Jet Engines, Race Cars and now Spine!" So we decided to perform some due diligence on Amedica and their products.

First and foremost, what is Silicon Nitride (Si3N4)? It is a hard ceramic with an exceptional modulus of elasticity, it is inherently resistant to fracture and has superior wear resistance. It has been used in gas turbines, automobile engine components, and has been used in the main engine of the NASA Space Shuttle. This material has a ceramic substrate, a substance acted upon an enzyme, that produces a chemical change, acting as a catalyst, mimicking natural cancellous bone.

Amedica's claim to fame is developing Si3N4 for a Spinal Spacer that is 20% stronger than PEEK, it is radiolucent, and does not produce MRI or CT artifact. But the question must be asked; Has anyone in the industry had a problem with PEEK? If anything, INVIBIO needs competition to drive down the cost of their license, which is an estimated $225k over a three year period and material? Up until this point, they have had a monopoly. So what challenges does a company like Amedica face?

First of all, their product portfolio is made up of "me-too" products. Does the industry need another pedicle screw and cervical plate? Probably not! Though their interbody devices are manufactured with Silicon Nitride, to our knowledge, no one has complained about the performance of PEEK interbody spacers. There could be a potential financial advantage that this product could offer if this material is cheaper than PEEK. The TSB would be interested in knowing what the comparative cost is between these materials.

In closing, the rumor on the street, and that is strictly a rumor, is that this company has been challenged in developing traction in the marketplace. TSB is not sure that the newest addition to this company, Ben Shappley has the firepower to get the job done. The TSB wants to know what its readers know about this product and what they think?

Disclosures Reported by The New England Journal of Medicine

On October 8th, the New England Journal of Medicine published an abstract entitled; "Accuracy of Conflict-of-Interest Disclosures Reported by Physicians" based on a survey taken at the AAOS Meeting in San Francisco.

As Americans' become more aware of "payments made to physicians," a by product of the DOJ's settlement with Stryker, DePuy, Smith and Nephew, Biomet, and Zimmer, the authors of this special article believed that this provided them with an opportunity to assess the accuracy of physicians' conflict-of-interest disclosures. The authors posed an excellent analysis as to their concerns. These included that the investigator/physician may have a financial conflict of interest in their observations, potentially suppressing negative results so that a company can commercially benefit from a biased study design, and they questioned the ethical behavior of the investigators.

The most notable finding of this abstract was the high rate of non-disclosure. During 2007, the fact remains that 1347 payments were made to 1162 physicians, in which 166 physicians received multiple payments from multiple companies. 147 physicians received payment form at least two companies, 18 physicians received payment from at least 3 companies, and 1 physicians received payment from at least 4 companies. The overall disclosure rate was 79.3%, while the non-disclosure rate was 20.7%. 282 physicians received payment that exceeded $100,000, and 47 physicians received compensation in excess of $1 million.

TSB wonders what these figures would look like if NASS did an analysis of all the surgeons that are on the payroll of various spine companies? We had the opportunity to review 2007 and 2008 NASS programs for the last few years, only to determine that we could have a field day. TSB realizes that some of our readers are compelled to question our intentions. But let's face facts, even if you have a great product, how do you sell in a market when everyone is on the take (a nice commentator on the ethical behavior of surgeons and distributors). Recently, one of our readers told us of attempting to sell a product to a group of surgeons', only to find out that the surgeons' had invested into a competitor's company. What if the product is not as good? Is the patient getting the best product? Possibly? And, then the bigger question must be posed; "Is the surgeon the gatekeeper and advocate for his patient, or, is he or she a slave to their master, the company or distributor that pays them?"

The unethical actions of a few, will come back to haunt the industry, it's inevitable. TSB wants to know what our readers believe?

Hydrocision - Does it Really Produce Fusion Rates Similar to BMP?

Hydrocision reported a 43% increase in revenue for QII of 2009. Yet, as any good observer, TSB must ask, "43% of what?"

Last year, Doug Daniels downsized the company's sales management team, leaving two regional managers in place, and demoting Steve Van Tyle, then the VP of Sales, to a Regional Manager looking to minimize its operating expenditures. Since Hydrocision is a privately held company, one can only speculate what existing sales are on a six-year old company that has raised $28 million in investment capital. Yet, if I were a betting man, I would estimate that the company will finish 2009 at roughly $2-$4 million in U.S. revenues. If correct, not a stellar performance for a company that touts its product as being innovative.

Basically, the company's growth is plodding along at a snail's pace. So why does anyone think that there is a problem? Could it be that there is no billing code for the product? Could it be that their "burn rate" far exceeds their revenue stream? Could it be that distributors are more interested in products that generate large commissions versus measly dollars? Industry sources reported that the company was having trouble meeting its payroll when the downsizing occurred.

If our readers believe Larry Khoo, M.D., the PT Barnum of Spine Surgeons, "Minimally Invasive TLIF using hydrosurgical tools reduces post-op complications to conventional methods while producing SIMILAR FUSION RATES TO BMP." Similar fusion rates to BMP? Are you kidding? Obviously, when the company agreed to this press release, it did not notify the public that Dr. Khoo is a medical advisor and in all likelihood a consultant for the company, but whose company isn't Larry a consultant to?

Round n' round we go, and where this company ends up nobody knows. One common denominator is that there is a connection between Custom Spine and Hydrocision based on the fact that "Demolition" Lew Bennet, an Octogenarian is actively involve in both companies. Could Lew (I forgot what I said) Bennett be attempting to package these two companies in a deal? But who would want to buy a "me too company" and a company that cannot gain real traction after six years? TSB wants to know?