Spine Segment Outlook
BY JOHN MCCORMICK, FEBRUARY 22, 2005
HealthpointCapital, LLC research has initiated a new program of making our market forecasts of the several orthopedic medical device segments available to our subscribers. This article, the first of a series, summarizes our spine market forecast which comes from our own proprietary spine market model which we have carefully developed from population statistics, industry data, price lists, interviews, unit volume forecasts with a view toward technology developments.
Our model estimates that U.S. spine market revenues were just slightly over $3 billion in 2004 and stand to grow 17% to over $3.6 billion in 2005. The key drivers are continued growth in lumbar fusions, the introduction of motion preservation technologies and continued growth in vertebral compression fracture repair.
Spine is Fastest Growing Sector
Firstly, we view spinal implants are the fastest growing segment of the $20 billion orthopedic medical device industry. As shown in Exhibit 1 below, in 2004, the global spinal implant market was approximately $3.1 billion in revenues, which represents 19% growth over 2003. In 2005, the spinal implant segment is expected to grow to US$3.6 billion or by 17%. Principal growth drivers in spine include: favorable demographic trends, better patient outcomes, favorable pricing trends and new surgical technologies. Our long run forecast suggests that these conditions will allow for a quadrupling of industry revenues by the year 2014. In our current model by 2010, the segment is expected to reach nearly US$7.7 billion in revenues and by 2014 over $13 billion in revenues aided in large part by motion preservation and the introduction of forward thinking technologies such as facet joint arthroplasty and advanced biologics strategies in the out years.
Exhibit 1: US Spine Market Overall Revenues and Growth 2004 - 2005
Sources: HealthpointCapital, LLC Research, Orthopedic Network News, Millennium Research
The largest sub-segment of spine is the cervical and lumbar fixation and fusion sub-segments which in 2004 stood at approximately $1.8 billion in the U.S. (excluding laminectomies and disc excisions) and is expected to grow at 8% to over $1.9 billion in 2005. In our view, this growth rate will decline over the coming decade with the advent of motion preserving technologies such as disc arthroplasty and dynamic stabilization. We still view fusion as an existing treatment paradigm over the following decade and even a growing market despite these new alternatives due to the enormous growth of the percentage of the U.S. population over age 65 and increases in degenerative disc disease thanks to conditions such as obesity.
Our estimate 2004 estimate of the (thoraco) lumbar fixation device component of the fixation and fusion segment stands at well over $1.4 billion (including deformity) and is expected to grow at 7% to nearly $1.6 billion in 2005. Consistent with issues associated with population aging, degenerative disc disease is the principal driver of the (thoraco) lumbar device area.
In 2004, cervical fixation market revenues approximated $348 million according to our model. Instrumentation is increasing in cervical and revenues are expected to increase by 12% to $380 million in 2005. This market is growing faster than lumbar as surgeons are increasingly inclined to instrument single-level anterior cervical fusions to reinforce stability and secure further reimbursement.
Our forecast includes interbody fusion devices in the fusion sub-segment, and we still see steady growth in the use ALIF and PLIF cages as a "belt and suspenders" approach to fusion. We also see this market accelerating with the advent of PEEK materials which are cannibalizing metal to the point where PEEK has become a critical part of company growth strategies - particularly among smaller growth companies.
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