Sunday Op-Ed Piece

Since most of our readers acknowledge that they follow TSB not only for the content, but primarily for the passionate discourse exhibited by many of our bloggers, we thought it would be interesting to get your take on what has made some spine companies successful and why have some companies floundered in what now seems to be eternal misery?  We all know that IP is one of the most important ingredients in developing a successful start-up. Without innovation and a targeted market, raising capital in today's economy is a moot point.  In addition to the aforementioned, assembling an "empowered" and knowledgeable management team may be the most important ingredient in defining ones success or failures.  Ever work for someone that had what TSB calls the "ADD Spine Business Plan?"  Ritalin and Lovaza would probably not help.  Getting a group of people to understand a plan/objective and remaining focused maybe the most underrated aspect of any business.  Yet, without acknowledging the market and competitive realities, any new venture may be doomed for failure.  So again, TSB asks the question, why have some companies failed while others succeed, sometimes in spite of themselves.

How do ventures that have raised millions have gone on to fail in our market?   Whether our readers agree or not, "process" may be the most important element rather than results.  Unfortunately, for the better part, many investors along with the people that steer a start-up fail to grasp that concept.  Most successful ventures, and by successful TSB means those that actually effected their strategy, reveal two important patterns.  Useful change tends to be a multistep process that creates power and motivation to overwhelm all sources of inertia, and the process is never employed effectively unless it is driven by "high quality" leadership, not just a great management team.

Regardless whether costs are high, products are mediocre, or customers are exhibiting shifting requirements, progress and process may be paralyzed by egotistical leaders, bureaucracy, parochial politics (an all-time favorite), a low-level of trust (ever work for one of these people), lack of teamwork, a lack of focus.  In our haste for the Holy Grail, many CEO's and their boards have derailed many a companies by their petty insecurities.  Do companies like Vertebron, IST or Applied Spine bring back memories?  And what does it say about the leadership and business acumen of many a CEO when one looks at the attrition rate within the industry.  Some will obviously argue that market forces are things that companies and its management team cannot control, yet, TSB differs with that opinion.  It is precisely for this reason that many of these companies have failed,  a leader is like a great conductor of a symphony being able to guide his or her orchestra through the process which usually ends in a great result.  By paying attention to the details, the whole is greater than the sum of its parts.

How many of you have worked for a company that has developed a decent product only to fail for its own inadequacies?  Their inability to respond in a timely manner, their inability to address system short-comings?  Could you think of a few?  Today's business environment demands more large-scale change whether it be vis-a-vis a new strategy, restructuring, mergers or acquisitions, and new product development.  Some of these decisions need to be made quicker in a less than economic environment requiring sacrifice.  Unfortunately, many of these companies have failed to take a conciliatory approach, nor are we a very sacrificing society, but that's what awaits many of us including the companies, hospitals, surgeons, and sales reps.  

Reality has brought many companies back down to earth.  The days of 40% commissions are over,  the days of 20% growth will be far less, unless you are buying products from one of the many companies that have been started by former distributors and/or their physician colleagues.  Realistically, TSB sees a trend in the field, whereas more and more of these small companies are surviving by utilizing every legal resource available to them.  Namely POD's, for the obvious reasons.  And if the big boys are predicting below average expectations, how do some of these smaller ventures continue to show growth, considering that we do play in a zero-sum marketplace?   How many of these ventures were originally positioned to be flipped, only to hear their CEO's now claim that their objective all along was to grow a company and organization, while they move along at a snails pace?   The people that run these companies will argue that their organizations can succeed with incremental change.  A 2% improvement here, a 3% reduction somewhere else and you are growing.  In the short-term that may be true, but how long will it take to get where some of these people claim they are going?

What we are witnessing today is change in the internal structure in many of these companies, surviving on fewer rules and employees.  So in closing TSB wants to know what our bloggers think, have many of these companies failed because of their inability to be risk tolerant, transparent, too slow to make decisions, a failure to empower and trust their employees or as TSB likes to say, were the market conditions bigger than the both of us?  

Breaking News

Yes fellow bloggers, last week Medtronic announced at the AANS meeting that they have seen the future, and intend on increasing revenue for fiscal 2011 by launching one of the most innovative and technological medical devices the spine industry has seen in decades.  Where's Monte Hall and Jay Stewart when you need them.   RIP Jay. What's behind Door Number 3 Doug King?  What's behind that Big Box?  Do you want Door Number 3, or maybe Door Number 2?  So what is this breakthrough technology that took over twelve years of clinical history by combining not one, but two emerging technologies into one unique and innovative product?  Come on bloggers I know you're sitting on the edge of your seats, if you haven't already heard.  They are going to launch another anterior cervical plate.  If one looked in the dictionary under the word cannibalization, one would see the entire portfolio of Medtronic Anterior Cervical Plates, did they ever phase out the Orion?   Spine nation the new plate might as well have been named the Supercalifragilisticexpialidocious Plating System.  Times must be tough at the Big M marketing department when you name the plate, Atlantis Vision "Elite" Anterior Cervical Plating System.  I could hear Donovan, aka Donovan Leitch, singing in the background and let me exercise some poetic license:

"Knowing its fate, Atlantis sent out sales reps, to all corners of the spine world
On board was the manager, the sales rep, the physician, the magician and the other
so-called Gods of our industry, though the Gods they were and as the elders of our
time choose to remain blind, let us rejoice and let us sing and dance and ring in the new
HAIL ATLANTIS....................................................................................................
WAY DOWN BELOW THE OCEAN WHERE I WANNA BE, SHE WILL BE

How gullible can customers really be?  Ooh where's all the analysts' clamoring to upgrade Medtronic's stock on the launch of another cervical plate and a Chromaloy Rod, and by the way don't forget to emphasis the "Plus."  Is it TSB or is it Memorex?

Big Time

Everytime I hear one of those stories about  corporate managers interviewing prospective candidates, it makes TSB think of Peter Gabriel when he sings;

Big Time, I'm on my way I'm making it Big Time
Big Time, I've got to make it show, Yeah, Big Time
Big Time, so much larger than life
Big Time, I'm gonna watch it growing, Big Time
Big Time, my car is getting bigger, Big Time, my house is getting bigger
Big Time, my eyes are getting bigger
And my mouuth...................................................

It's been brutally quiet in the industry, of course unless one thinks that the Duck Key meeting is exciting.  It use to be called the Motion Preservation Meeting, but now that Motion Preservation is on the back burner, its called "Current Solutions in Spine."  How many of these meetings can the industry have?  When do some of these people work?  But that's a topic for a later date.   After speaking to a few of my colleagues today, it's time to start a rant on behalf of the people.  You know the real people that carry the burden of generating revenue.  Recently, an industry insider was conveying the gist of an interview that this individual had with a prospective employer for a job.  Ironically, TSB knew the interviewing manager and the history of the company quite well.  What was funny was the criteria that had been established by the company in order to be considered a viable candidate for the position.  Before, elaborating on the interview, let's preface this by saying that TSB knows what sales are all about since I have been in sales so long, that I have probably forgotten more than some people will ever know.   For those wacky investors that have no concept of the selling process in today's pernicious environment, spare us your diatribe.  So here it is, the interviewing manager wanted to know how many surgeons can this prospective candidate bring to the table in a 30, 60, and 90 day period?  I love those conversations, because every time I meet one of these people I feel like ripping off their heads and shoving it up their ass, and then asking them if they could pull their head out of their ass. That's almost as good as asking a candidate what kind of revenue will you generate in the first 30, 60 and 90 days when you are interviewing someone for an executive management position.  Granted, one wants to know whether someone has the necessary skill set to get the job done, but TSB would like to know what ever gets accomplished during that period of time?  The prospective candidate was also asked if they could take the interviewer around and introduce them to their pool of surgeon candidates.  Of course, you would oblige considering that as a candidate you haven't been tendered an offer and will do anything to compromise your contacts just to please this person.  If anything, some people in this industry need a swift boot in the ass. They are so desperate for revenue that they are going to extremes that skate boarders don't go to in the X games.  I mean Charlie Sheen isn't that desperate.  How many times have we heard of VP's from early-growth stage companies going behind the distributors back in an attempt to cut a deal with their sub rep?  Nouns like integrity and ethics no longer exist.  The more one analyzes our industry, the more one can understand why we are viewed no different than Wall Street. Adjectives like, shameless, greedy, nefarious and desperate are just a few words that rightly describe us. And then we wonder why surgeons view many of you with disdain?  Are things really that bad out there for some of these companies? Are they as desperate as they sound?  Are some of you as desperate as you come across.  And what does this say about the people they represent?

TSB's advice to the prospective candidate was, "don't bother pursuing this." This isn't an opportunity, this is a death sentence, indicative of another person in a management position that has no clue as to what the dynamics are like in today's healthcare environment.  Hey, if grand slams were that easy to hit, we'd all be hitting them.  And then you have the lack of support that most of these companies exhibit.  Example:  ever attempt to go out and sell your product without some product information, or literature, to give your prospective customer?   You've got to love the response that one receives whenever there is a request for literature.  "We've run out, and, we are working on a new brochure?  WTF?  You mean, no one thought about that before you ran out of literature?  I'm I supposed to leave my iPad with them? My favorite is, we'll send you a PDF file and you can then print them yourself. WTF?  Who do you think pays for the paper?  The cartridge?  My time?  It's bad enough that we average $70-$100 per week for gas, X amount of dollars on roads that may have tolls, and buy lunch for people we would never think of ever sitting down and breaking bread with.  What many of these business oracles fail to understand is that, "this is the cost of doing business."  It's like requesting samples, it's the cost of business.  The sample costs the company barely zilch, and you make it back tenfold, and then when you leave, they have the audacity to deduct the sample from your check.  So fellow bloggers, as you continue your quest in search for your next job, one has to ask themselves, "are you ready for another throw down?"  TSB wants to know what our bloggers think?

It Might Get Loud

Amplify:  To make larger of more powerful, to exaggerate.  If only TSB was taking about the Jimmy Page, Jack White and The Edge Documentary.  In Medtronic's quest to amplify rhBMP-2, on March 9th, 2011, the FDA displayed a bit of feedback by issuing a non-approval letter.

So the million dollar a day question must be asked, what was the determining factor or factors?  Obviously, cooler heads prevailed.  Was the panel concerned with some of the papers that have been published regarding the role of BMP's in pancreatic cancer?  If there were spine surgeons on the panel, did they come to their legal and ethical senses?  So what's the buzz in the sound system?  TSB wonders what Marshall Urist would say if he was in the here and now?  Over the years there have been many papers and reports of adverse reactions in using rhBMP-2.  Let's take a look at some of these papers.

In 2008 The Department of Pharmacology and Cancer Biology, and Department of Medicine at The Duke University published a paper entitled, "BMP's Induce Pancreatic Cancer Cell Invasiveness through a small Smad1-Dependent Mechanism That Involves Matrix Metalloproteinase -2."  In addition to this paper,  a retrospective study reported in 2008 on 260 patients that underwent cervical spinal procedures with BMP resulting in acute airway obstruction due to extensive soft-tissue inflammatory response that was likely to occur 2-7 days post-op. Then there is the published paper in The Spine Journal in 2008 entitled. "Neurologic impairment from ectopic bone in the lumbar canal, a potential complication of off-label PLIF/TLIF use of BMP-2.

Yes fellow rockers, or may I say bloggers, contingent on whose data one wants to believe, it is estimated that 73-85% of BMP is used off label.  In a September 22, 2010 report, concerns were raised that there was bone formation in unwanted places.  WTF, was anyone listening to the people in the field that were being told by surgeons about their experience?    It doesn't take a spine surgeon to qualify the efficacy of BMP-2.  It takes someone that is willing to admit that BMP-2 is a pharmaceutical and not a device.  Retrospectively, flags were raised back in 2002 when Advisory Panel Members pointed out that 9 out of the doctors that authored the BMP-2 research submitted to the FDA had a financial stake in the product.

Unlike other industry platforms that report the news, TSB must admit, if its open season on INFUSE let's not kiss the ass of two companies that pander to one's commercial needs.  This is a golden opportunity for  everyone that plays in the biologics marketplace.  In all likelihood Medtronic has the capacity to sustain another blow, but this is a great opportunity for every company that competes in this space.  TSB wants to know what our blogger think?

Medtronic: I've Got The Power

Since TSB is the people's blog spot, our editorial board decided that we should post a blog regarding Medtronic's watershed moment terminating the Novation and Premier agreements, and analyze the potential pro's and con's of this decision.  As the Rap Artist "Snap" sang in 1990, "I've Got the Power." Yes fellow bloggers, Medtronic's does have the power, considering that historically GPO's are nothing more than another layer of insanity in the hierarchy of needs.  The more one looks at this decision, it becomes evident that Medtronic was correct in terminating these contracts.  The question now becomes, how much of an upper hand will they have, and how will this affect the rest of the industry?  Historically, hospitals have never excelled at negotiating pricing.  It has always been an eleventh hour knee jerk reaction by some financial wizard that decided on going after the implant companies without analyzing the politics of hospital medicine.  For many years, hospitals failed to understand the concept of working with physicians, better known as revenue generators.   And when they did, it was from an adversarial position. An "us against them" mentality existed, and contrary to some opinions this mentality still exists without overture in many areas of the country. What hospital administrators failed to understand was the power of corporate consulting agreements.   So rather than partnering with the revenue generator, they cut off their nose to spite their face.   Today, a new model is emerging. The industry is being challenged with another shift in dynamics with the rise of physician owned distributorships. But more on that later on.

So how does this benefit Medtronic?  Most readers know that Medtronic does not only play in the spine industry, they are a major play in the cardiac arena, one that is not as proliferated with "gnat on my ass" spine companies. Historically, when it comes to working with the medical community, Medtronic has been the leader in both of these specialties.  For once, surgeons from two different specialties have the ability to form an alliance when it comes to choice, especially in many of these hospitals.  As long as there is no backlash from the DOJ or the U.S. Senate,  Medtronic will continue to leverage these relationships based on the volume and revenue that these physicians bring to their respective facilities.   In addition, most purchasing and material management people lack the necessary acumen to negotiate an equitable deal.  By terminating this agreement Medtronic can negotiate on its own terms, considering that Novation opposed pricing confidentiality.  If anything, this relationship was an advantage for Novation in that they were negotiating from a vantage point of strength, by leveraging an economy of scale.   What is even more ridiculous is that Curtis Rooney, president of THIGPA, is quoted as saying, "they're (Medtronic) in this to make money."  Considering that, "Novation and Premier receive less than $10 million annually from Medtronic," what does Mr. Rooney think Novation and Premier are in it for?  As for weakening hospitals negotiating power,  if they hired people that had knowledge, and experience from within the industry, they would understand how to deal with companies like Medtronic.  If Hawkins and his team  will be remembered for anything, it could be that he had the chutzpah to make a stand.  Our industry has way too many wannabe whores that spend their day in a bait and switch, and dropping their shorts faster than a cheap trick.  It's the hospitals responsibility to manage itself in a cost effective manner.  Let's face it, most of the spine industry is a commodity industry with a few technological advancements that allows one competitor to differentiate itself from the rest of the playing field.  The job of the purchasing director, materials manager, and CFO is to work at identifying the haves from the have nots.

So as a new precedent is being establish by the leader in our industry, it will be interesting to monitor how hospitals react to this across the country, and whether they are willing to be better partners with their revenue generators? Legally, if a company can partner with a surgeon in a business venture, why can't a hospital partner with a surgeon?  Some have even raised the possibility of the hospital and surgeon inventor collaborating to bring new technology to the marketplace.  Another example of partnerships has been gainsharing, and with the advent of POD's, aren't these models similar in their objective?  One still shares in the discount and profitability that is passed on to the hospital and the physician?  If anything, a precedent must be established so that there is some balance in how business is conducted. Unfortunately, the problem lies in how much of the pie do you divide in order to keep everyone happy?  A cost efficient system benefits everyone, regardless whether people challenge the belief that quality of care will become a major issue.  But then definition has never been a formidable trait in our industry.   TSB wants to know what our bloggers think?  Is this the start of something beautiful or are we taking two steps forward to go three steps back?

That Was The Week That Was

Good Morning Fellow Bloggers:

TSB took a little time off from the spine world to help a friend with his addiction to a certain drug and young women.  You know what Dirty Harry once said, "a man's got to know his limitations."   So, we're glad to be back on the beat, nothing is more refreshing than the exciting world of market makers, consulting agreements, physician owned distributorships and crazy people.  Sherman Oaks is a nice town, but it was time to get out of Dodge.

Last week was an interesting week in spine.  It started off with The Stem Cell Summit in the Big Apple.  The meeting was a Stem Cell extravaganza, led by no other than self-proclaimed stem cell guru and investor Robin Young. What we learned from this meeting is that there has been tremendous advancement in the field of stem cells, especially in aiding in bone growth and fusion.  As a sidebar to our readers, is there anything that a spine surgeon wouldn't try, to achieve fusion?  Despite these advancements, there is still much work to be done in understand the efficacy of stem cells.  But if you attended the meeting, well,  it was another meeting, and at those prices it made NYC look affordable.  Robin continues his quest to be acknowledged as a pioneer in stem cells, all that was missing was the covered wagons.  But let's get serious, stem cells buzz like neon, but will they ever burn away?   There were about twenty companies.  Considering that stem cells are cheaper than BMP, yet more expensive than DBM, they must be a bargin? At least BMP's have some retrospective papers on its efficacy in spine.   So where's the beef?  Special kudos must go out to the Mod Squad, those are Robin's minions whom without their hard work, these meeting would never take place,  hopefully y'all will get a raise this year.

Other news last week: we received multiple e-mails from the Street with word that Amedica might have raised some capital, if so, TSB would like to know who was crazy enough to invest into another company that is riding the future on silicon nitride?  $30 million?  That 's crazy money.  If so, could hookers, limos and Grey Goose be in the picture?  If there is truth to the rumor, it would behoove investors to keep a tight reign on their money. Considering the sales management team was given unrealistic revenue objectives for fiscal 2011, something could be brewing.  But then again, what do the people running this operation know about selling spine products?  If Globus has had trouble going public, does anyone really believe that Amedica has the legs to do it?  Everyone in the investment community knows that Shappley's goal is to take the company public.

It was also announced that as of March 7th, hmmmmm that must be today, Bacterin will begin trading shares of common stock under the symbol "BONE," very original,  on the NYSE Amex.  For those of you not familiar with Bacterin, they are "the creators and developers of revolutionary bone grafting material," taking the market by storm.  It will be interesting in continuing our watch of this revolutionary company, let's see what the investors believe, will they be desperate or will they exhibit prudence in their choices?

In other news, the state of Ohio provided AxioMed with a $500,000 loan to help the company in its quest to bring a cervical disc to the marketplace vis-a-vis the Ohio Third Frontier, a government sponsored organization (I thought the government was bad) that seeks new technologies through innovation that could result in creating new jobs for the state.  TSB thought that Ohio was having budgetary problems? So the pressure is on AxioMed to give back something of substance in the near future to the hard working people of the  Buckeye State.  Jobs are where its at, so let's give a hand to at least one spine company that's not looking to send development and manufacturing overseas.

So remember fellow readers keep those post cards and memo's coming.  Have a great week!

It's Time To Pick on The FDA............Again

It was reported on February 21st, that the House Energy and Commerce Committee planned on scrutinizing the FDA's device approval process, so that the regulatory process does not force U.S. jobs overseas.  Joe Pitts (R) PA, aka as "the Pittstop," recently blogged on "The Hills," that he and his panel want to explore why Europe has gained an advantage over the U.S. TSB must ask Congressman Pitts, where have you been for the last twenty years?  No one ever accused Mr. Pitts of being a medical device expert, considering that he was a math and science teacher before venturing into public service.  Pitts believes that medical device jobs are great.  If he truly believe this, maybe after he is done investigating the FDA, he could start on POD's.  His goal is to make America safer and stronger.  As medical device manufacturing continues its exodus off shore, the question must be asked, is medical innovation truly being destroyed by bureaucracy, or is this just part of a larger problem?

What has provoked this inquiry was CDRH's Director Jeffrey Shuren's comments on February 17th in front of the House Subcommittee that "the (medical device) industry should take more blame for review delays." Obviously, this comment along with his comment that "the U.S. does not use its people as guinea pigs," has raised the ire of many a CEO and entrepreneurs.  As stated in previous blogs, the FDA has plenty of its own challenges.  These challenges run the gamut, from being nothing more than a training ground (attrition) for corporate America, to being overworked and inundated with submissions, to offering a paltry salary, to inexperienced reviewers.  But what about the industry?  Accountability is a two way street, whenever two parties are involved, and that's where the problem lies, and that's why we are at an impasse.  Dealing with the FDA is black and white in terms of transparency, and please spare TSB the rationale that corporations never ever do anything wrong. If we want the FDA to exhibit more speed and transparency, maybe its time that the FDA scrutinize and report back to the Captains of Industry how inefficient some of their employees really are.  It's always interesting to read another websites position on this, considering it is always slanted toward the industry.  God forbid questioning some of our practices.  The efficiency of some 510(k)s is questionable at best.  Lack of clinical knowledge, not knowing predicate devices, and at times comparing it to the wrong devices.  In addition, how many companies have attempted to massage testing data only to have to go back and do it all over again?

Maybe Josh Makower should spend some time analyzing why some of the companies that he surveyed took 2-3 years to get their products to the market.  Considering that time to commercial market is of tantamount importance to any investor, how much of his position is influenced by his investments?  But let's discuss the truth.  The truth is that at times, bringing an emerging technology to market is more art than science.  There are multiple variables going on simultaneously during each project with a unique DNA or blueprint depending on the product or drug.  Most entrepreneurs are focused on one thing and one thing only, time to market and ROI, and anyone that denies that is an outright BS artist.  It's acceptable to deprive a physician and patient a product, if it means safety comes first.  I wouldn't expect anything less than an entrepreneur complaining that time delays innovation, because time is money.

Considering that the government is looking to cut funding across the board, how much leaner can agencies like the FDA get?  Who will determine what a breakthrough device really is, if we ask people to work longer hours, with less experience, with less resources?  Some Congressman who is being greased by special interests?  Privatizing the FDA?  In deference to Jeffrey Shuren, how many of us have sat at meeting in the past and viewed surgeons doing three or four level artificial disc replacements only to have to revise the procedure because the disc spit out or retropulsed, only to find out that this was done south of the border?  How many times have we sat and listened to some surgeon discuss dynamic stabilization only to shake our heads in amazement because the talk was so esoteric that even the surgeon himself did not know what he was looking to achieve?   It has become in vogue to kick and scream at the government, regardless whether you are a democrat or republican.  But what about our own accountability when it comes to doing the right thing?  Remember, as long as it isn't your mother or father, sister or brother, son or daughter or best friend, the reality is that most of us only care about the benjamins, until its your turn, and then it becomes a different story. So, in the spirit of debate, what are the solutions?  We know the challenges, and contrary to industry and investor cheerleaders like Makower, what are the legitimate solutions?  TSB wants to know what you think?