Titan Spine Eyes Bigger Slice of Tricky Spinal Fusion Market

[Corrected 1/13/15, 3:45 p.m. See below.] It’s hard enough for a small company to jostle for position in a crowded, but booming, industry. It can be even tougher when the sector’s growth slows down, and a company isn’t fighting just against competitors—but also to win over critics who are skeptical that anyone in the industry can deliver a product or service that consistently works.

That’s the challenge that Titan Spine, a Mequon, WI-based manufacturer of metal implants used in spinal fusion surgeries, is up against.

The company, co-founded a decade ago by Wisconsin spinal surgeon Peter Ullrich, makes titanium cages of various shapes and sizes for use in procedures that fuse together vertebrae in the lower back or neck of patients who have degenerative disc disease, an often-painful deterioration of the soft, elastic tissue located between vertebrae.

In these procedures, the surgeon removes the diseased disc and inserts the device between the vertebrae, often securing it with metal screws or rods. The implant acts as a spacer between the vertebrae, and bone taken from another part of the patient’s body can be inserted in the cage’s cavity, in the hopes that it helps secure the titanium device by growing through it and melding with the vertebrae above and below.

The goal is to relieve pain by stabilizing the spine and restricting its motion. But this type of surgery isn’t guaranteed to eliminate the pain, and it carries risks, including the potential for an incomplete fusion with the vertebrae, which could warrant additional surgery.

Titan SpineTitan aims to improve those outcomes by developing titanium cages with a textured surface intended to spur bone formation and coax the new bone to latch onto the implant. The company uses an acid etching process to roughen the outer surface of its devices and provide microscopic spikes and cavities onto which bone cells can take hold. In lab tests, Ullrich says, the surfaces do indeed seem to trigger the production of proteins associated with bone formation better than smooth titanium and polyetheretherketone (PEEK), a plastic material that is also used to make spinal fusion implants.

Now the company is embarking on a clinical trial that it hopes will prove that its surface technology translates into positive outcomes for spinal fusion patients. And the company intends to work with the U.S. Food & Drug Administration to help build a patient database that compares the results of fusions involving Titan’s acid-etched titanium and those that used plastic and other competing implants, Ullrich says.

“We feel the primary advantage of a cage that can participate in the fusion process, compared to cages that act as simple spacers, is that there is the potential for patients to heal quicker,” Ullrich says. “Hopefully, the clinical data that we are trying to develop, in particular the data with the FDA, will bear this out.”

This theory of a rougher surface potentially leading to a better merger of an implant and the body isn’t a new concept. It has been used in dental and joint surgeries, and it’s becoming more prevalent in the spinal industry as well. Some companies, like Pennsylvania-based Aesculap Implant Systems, apply a titanium-based coating on a plastic implant to achieve the desired effect. Other approaches include the 3D-printed implants made by Texas-based 4Web Medical, which feature a roughened surface and a truss-like structure.

Ullrich co-invented Titan’s initial technology in the early 2000s with his friend, Charanpreet Bagga, who at the time was vice president of product development for Pennsylvania-based Orthovita, a spine surgery biologics company later acquired by Stryker (NYSE: SYK). Orthovita developed the implant device and secured FDA clearance to sell it in 2004. Ullrich began using the devices in surgeries, and after a couple of years, he assembled a group of business partners to purchase the rights to the technology from Orthovita.

They formed Titan, and launched the business with seed capital from themselves, friends, and family. Bagga was among the early employees, but later left the company to form another business, Ullrich says.

Titan has since raised an undisclosed amount of additional cash from individuals, plus $2.6 million in debt funding, SEC documents show. The company has not taken any money from institutional investors, co-founder and president Kevin Gemas says, instead opting to move at its own pace to grow staff, develop the surface technology, and sell its devices.

Titan’s sales grew nearly 25 percent last year, and its fourth quarter results put it on pace for $25 million in annual sales, Ullrich says. Today, the company employs nearly 50 people, with offices in Mequon, Germany, and Spain. Its devices are used in about 200 U.S. hospitals, and in about 25 European hospitals. The company has also registered to do business in Australia, New Zealand, and South Africa, Gemas says.

Titan recently received FDA clearance to market titanium implants featuring a more advanced version of its surface technology. “Our next goal is to become a marketing and sales juggernaut and really push into the industry that way and leverage off of what we’ve already done,” Ullrich says.

But while Titan is trying to carve out a bigger piece of the roughly $9 billion per year spinal device market, the pace of industry growth has slowed significantly, says Debbie Wang, a Chicago-based financial analyst with Morningstar. Wang covers Medtronic (NYSE: MDT), the … Next Page »

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