On October 20, 2008, Medtronic sent out a press release marking World Osteoporosis Day by announcing that over 500,000 vertebral compression fractures (VCF) have been treated worldwide with balloon kyphoplasty since 2000. VCF treatment, however, is evolving rapidly and ten years from now, in 2019, Medtronic’s VCF press release could look very different.  Based on PearlDiver research and a survey of new VCF products, we believe that a new era of VCF treatment is coming. This new era, we think, will be marked by preventative treatments, controlled fracture reduction, and improved control over viscosity in bone cements. Lastly, could Amgen impact the VCF market with two semi-annual injections?

Expandable Devices, Controlled Fracture Reduction, and Cement Viscosity in Treating VCFs

The future treatment of vertebral compression fractures will likely be different from today’s standard of care. The goal of reducing or eliminating pain and stabilizing the vertebral body will remain the same. However, this will be accomplished by new technologies focused on correcting drawbacks and complications associated with current treatments. Beyond this, we believe that orthopedic and pharmaceutical companies may collaborate to provide fracture repair technology and prophylactic treatments aimed at preventing additional VCFs. Finally, there will be continued focus on reducing the incidence of adjacent level factures. Table 1 displays current VCF treatments by site of care, region of the spine, and level(s) treated.

Table 1: VCF Treatment by Site of Care and Levels Treated

Site of Care	Vertebroplasty		Kyphoplasty
	Thoracic	Lumbar	Thoracic	Lumbar
Office	10.0%	9.5%	1.2%	0.7%
Inpatient Hospital	26.4%	30.1%	46.7%	46.2%
Outpatient Hospital	59.5%	56.6%	50.4%	50.8%
Ambulatory Surgical Center	4.0%	3.8%	1.6%	2.3%
Levels Treated	Vertebroplasty		Kyphoplasty
	Thoracic	Lumbar	Thoracic	Lumbar
Single Level	70.3%	78.7%	68.2%	79.8%
% Coded as Multiple Level	29.7%	21.3%	31.8%	20.2%

Source: PearlDiver Patient Records Database (2004-2007)

Spine Wave: “Stacking” Up to Treat VCFs - StaXx FX Structural Kyphoplasty System

Everyone likes PEZ candy! Why? It’s because of the cool dispensers with our favorite characters on them. Candy aside, this dispenser looks pretty sweet!

The Spine Wave, Inc. StaXx system was designed to treat VCFs in a minimally invasive fashion as an alternative to traditional vertebroplasty and kyphoplasty. The device is designed to allow for controlled fracture reduction in 1mm increments. The company cites the following benefits:

• No intra-operative reduction loss
• Controlled vertical expansion in 1mm increments
• Barrier to posterior extravasation
• Reduced bone cement volume

Figure 1: StaXx FX

Source:http://www.spinewave.com/products/fx_us.html

The device is composed of stackable, 1mm PEEK wafers, which are inserted into the vertebral body one at a time in order to provide for the appropriate height restoration. The system is designed to be used with PMMA cement. Will this technology take market share from the established players? Investors think so. Spine Wave closed a series D round of financing to the tune of $45 million in April 2007.

Regulatory Status

Outside U.S. (OUS): The device is indicated for use in the treatment of vertebral compression fractures and bears the CE mark.

U.S.: The device is indicated for use in the treatment of vertebral compression fractures and was FDA approved in April 2007.

Alphatec Spine: Innovating for the Aging Spine Patient

Alphatec Spine has reinvented itself to serve what we believe will be, perhaps, the largest market in spine in the coming two decade. This market is the aging spine, which are patients 65 years of age and older. Innovative products that effectively treat patients with spine disorders who have osteoporosis will be a key component of Alphatec’s aging spine portfolio. The strategy is working, as we believe revenues will grow to nearly $100 million in 2008, or 22% year-over-year.

Consider the OsseoFix Spinal Fracture Reduction System for use in the T1-L5 region, which is used to treat VCFs. Benefits of the technology include:

• Creation of bony channels during implant deployment and retention of bone within the implant promotes cement interdigitation
• Implant construct has potential to provide enhanced ability for vertebral height maintenance
• Controlled implant deployment delivers reproducible results
• Deployed implant is designed to maintain fracture reduction throughout cement delivery

The last point highlights an important feature of the product. In standard vertebroplasty, vertebral height restoration can decline as the cement cures. However, with Alphatec’s technology, the implant allows for the vertebral height to be maintained during the procedure.

Additionally, Alphatec offers OsseoFix+ Radiopaque Bone Cement for use with the OsseoFix technology. According to the company, OsseoFix is a self-hardening, ready to use, medium-viscosity bone cement. OsseoFix+ contains a high percentage of radiopaque agent (45%) for maximum visibility and radiological control during a percutaneous vertebroplasty procedure.

Regulatory Status

OUS: On October 13, 2008, the company announced it had received a European CE mark for the device, allowing it to market the device in the European Union to treat vertebral compression fractures. On December 17, the company announced it was beginning its European commercial training program for OsseoFix.

U.S.: OsseoFix is currently not available for sale in the U.S. The company is beginning a clinical study to support its 510k application.

Figure 2: Lumbar Vertebra

Source: http://commons.wikimedia.org/wiki/File:Gray92.png

Amgen: Attacking the “Silent Epidemic” by Stopping VCF’s Before They Occur

Consider these facts from the International Osteoporosis Foundation:

• A woman 65 years of age with one vertebral fracture has a one in four chance of another fracture within five years, which can be reduced to a one in eight chance by treatment
• After hospitalization for a vertebral fracture, there is a greatly increased risk of requiring hospitalization for an additional fracture in the years following initial hospitalization
• Vertebral fractures are associated with an increased risk of both further vertebral and non-vertebral fractures
• Women who develop a vertebral fracture are at substantial risk for additional fracture within the next one to two years

Most VCF treatments are reactive in nature and are aimed at restoring height in the collapsed vertebral body. Based on the facts above, an effective prophylactic treatment aimed at preventing subsequent VCFs would be a monumental achievement, and quite possibly a major threat to the VCF market.

Denosumab is potentially a blockbuster drug for Amgen. Amgen describes denosumab as a “fully monoclonal antibody that specifically targets the receptor activator of nuclear factor kappa B lingand (RANKL), a key mediator of the cells responsible for bone breakdown.” Amgen believes that the drug has application across a number of conditions including osteoporosis, treatment-induced bone loss, bone metastases, rheumatoid arthritis, and multiple myeloma. denosumab inhibits RANKL, and because of this is considered a potential game changer in the way osteoporosis is treated. The drug is administered by subcutaneous injection (60 mg) twice yearly.

A key market for denosumab is postmenopausal women. There is a marked decline in bone mineral density (BMD) in women over 50 and senile osteoporosis accelerates after menopause. According to the United States Department of Health and Human Services, over 80% of VCFs are seen in patients 65 and older, with women being diagnosed 77% of the time. VCFs affect about 25% of all postmenopausal women. The condition is prevalent in 40% of women over 80 years of age. Furthermore, osteoporosis is associated with 85% of vertebral compression fractures.

In April, Amgen released Pivital Phase 3 data regarding the effects of denosumab on bone mineral density and biomechanical markers of bone turnover in postmenopausal woman with low bone mass. According to www.clinicaltrials.gov the primary outcome measures were “Reduction in the number of new vertebral fractures in post menopausal osteoporotic women treated with denosumab compared to placebo and to characterize safety and tolerability profile of denosumab.” Part of the data released dealt with the effect denosumab had on BMD in the lumbar spine. The study stated that “denosumab treatment significantly increased lumbar spine BMD compared with a placebo at 24 months (6.5 percent vs. -0.6 percent).”

In Amgen’s second quarter conference call the company further commented on the results of its Pivital Phase 3 study, noting “denosumab treatment resulted in a statistically significant reduction in the incidence of new vertebral fractures as compared with placebo treatment.”

If it can be shown that denosumab reduces the incidence of vertebral fractures, this could significantly impact the VCF market.

Vexim: The SpineJack

Vexim SAS is based in France that is seeking to create a comprehensive portfolio focused on treating the symptoms, causes, and consequences of vertebral compression fractures. Vexim was set up in 2006 as a spin-off of Teknimed SA. The Vexim SpineJack allows for controlled fracture reduction. The device is left in the facture site while the cement is injected to maintain height restoration. According the company’s website the technology allows for “the possibility of placing one or two implants and adjusting the plane and height of expansion.”

The expansion of the device in the fractured vertebral body enables more controlled cement flow and lower pressure injection. This reduces the risk of extravasation.

Regulatory Status

OUS: In May 2008 the company received the CE mark for the SpineJack system.

U.S.: Vexim is pursuing the 510k path to FDA approval. In June 2008, the company announced the completion of enrollment in the 1a clinical trial. In July 2008, the company began enrolling in a multicentric post-market clinical study. Patients from France, Spain, Portugal, Italy, and Turkey are being enrolled in the study.

European investors have warmed up to the idea. In June 2006, Vexim received an investment of €3 million from Truffle Venture (Paris) in Series A financing.

DFine: Controlling Cement Viscosity

Currently, most VCF treatments consist of injecting relatively low viscosity, rapidly curing bone cement into the vertebral body. One potential complication with traditional vertebroplasty or kyphoplasty procedures is cement leakage or extravasation. DFine is focusing on solving this potential complication.

According to the company, “The StabiliT Vertebral Augmentation System enables the cement viscosity to be controlled by warming it with the application of energy in the delivery system, thereby accelerating the polymerization process.” DFine’s technology is centered at enabling cement viscosity to be controlled by warming it with the application of energy in the delivery system, thereby accelerating the polymerization process. The device utilizes the companies proprietary StabiliT ER Bone Cement, which is a PMMA-based bone cement that can increase viscosity on demand by applying energy.

Regulatory Status

OUS: The StabiliT is available exclusively for Clinical Investigation in the European Union.

U.S.: The system is commercially available.

This new technology continues to attract capital. On October 28, 2008, the company secured $30 million in Series D financing.

BioMimetic Therapeutics, Inc.

BioMimetics is focused on developing two primary orthopedic products, which are GEM OS 1 (now Augment Bone Graft) and GEM OS 2, (now Augment Injectable Bone Graft). According to the company’s 2007 annual report, “GEM OS1 (bone graft) and GEM OS2 (injectable bone graft), use recombinant human Platelet-Derived Growth Factor (rhPDGF-BB), which is one of the principal naturally occurring wound healing stimulators in the body to kick start the tissue regeneration process.”

GEM OS2 has the potential to impact the VCF repair market by reducing the risk of adjacent level fracture. Again, the basic thesis is that products which are proven clinically successful at reducing the incidence of vertebral fractures will negatively impact revenue growth of technologies centered at fracture repair.

According the company’s 2007 annual report, indications for GEM-OS2 will be bone augmentation for osteoporosis and injected as a prophylactic treatment. After kyphoplasty or vertebroplasty, GEM-OS2 is a candidate for percutaneous injection into the adjacent level vertebrae.

Regulatory Status

Augment Injectable Bone Graft as indicated for the spine is currently in pre-clinical studies.

Sintea Biotech’s SPIDER

Leave the cannoli, bring the spine implant. We are traveling to Milano, Italy, where Sintea Biotech is located. Sintea operates in both the spine and trauma areas of orthopedics. The company’s spine portfolio includes anterior cervical plates, cages, lumbar fusion instrumentation, and occipital-cervical fixation devices.

However, for our purposes, we are concerned with Sintea’s Spider as it is related to treating vertebral compression fractures. This device allows for controlled expansion/distraction inside the vertebra. The device is intended for use in the thoracic and lumbar spine for vertebral compression fractures caused by osteoporosis and metastatic tumors.

Regulatory Status

OUS: The device has received the European Union’s CE mark.

U.S.: In June 2008, the device was FDA approved via the 510k pathway.

VCF Treatment Moving Forward

We hear about potentially disruptive technologies and how they are going to be game changers. Often, they either take a decade longer than anticipated to make an impact, or make no impact at all. What makes the technologies above so interesting is that they are going to hit the market soon or are already approved. So the question is not if, but when. In our assessment, we were careful to look at the regulatory status of the technologies mentioned.

Here are potential trends in these devices.

• A movement toward devices that allow for controlled/adjustable height restoration
• A focus on devices that decrease the potential for cement leakage
• A trend toward adopting technologies that can be offered at a discount to kyphoplasty
• Devices that allow for increased control over cement viscosity and lower-pressure injection
• Devices that maintain vertebral height while cement cures preventing further damage to the vertebral body

Here are potential trends we see involving prophylactic treatments focused on preventing subsequent or initial osteoporotic fractures.

• Orthopedic companies may collaborate with pharmaceutical companies that have prophylactic treatments, decreasing the risk of subsequent or adjacent level fractures
• Products such as Amgen’s denosumab could literally decrease the incidence of osteoporosis related fractures
• A focus on preventative medicine and prophylactic treatments could shift former fracture repair related revenues to pharma/biotech companies

Our thesis remains: companies developing innovative treatments to treat compression fractures should know that VCF still stands for Very Compelling Future!