A Journal of Neurosurgical Anesthesiology study found that an average of 450,000 children under the age of 18 are admitted for surgery as inpatients, annually. Orthopedic surgeries are a significant portion of these inpatient stays. These pediatric orthopedic patients are still woefully underserved, according to WishBone Medical’s founder and CEO, Nick Deeter. He says that 95% of children continue to receive inappropriate, adult orthopedic products that were never intended for them nor cleared by FDA for use in children. WishBone aims to change the paradigm of pediatric orthopedics with its child-focused implants and sterile packaged disposable kits.
Pediatric Orthopedic Market Size Difficult to Assess
According to Mr. Deeter, the pediatric orthopedic market generates $3 billion in annual revenue, with a growth rate of 10%. However, improper coding and off-label product usage mask the market’s actual size. He said, “Accurately coded procedures account for the $3 billion. FDA defines pediatrics as birth to 21 years of age and, my guess is, those in the 18 to 21 age range end up in an adult code. That doesn’t get captured. Most of these products are used off label and don’t get appropriately coded. They’re using small adult products and jamming them into kids in hopes that they work. That creates challenges from a reimbursement and market research standpoint.”
WishBone Medical uses sterile packed procedure kits for its implants and instruments. In addition to the efficiency benefits, improved infection control and inventory cost reductions that come from this model, Mr. Deeter believes that this will also lead to more accurate coding of pediatric procedures. He said, “All WishBone products are in sterile packed, single-use disposable kits with a bar code. That goes right in the chart, and it’s apparent that’s a pediatric product. I think what you’ll see is massive growth over the next couple of years just by capturing more pediatric products. I think the market is closer to $5 billion, but it is hard to quantify that market right now because of the use of so many inappropriate products.”
Mr. Deeter appreciates the challenges facing the largest orthopedic players as they rely on reusable cases and trays. He recounted a story of contacting a sterile packaging manufacturer after founding WishBone Medical. “They told me they could get me a quote in six months! I wanted our products packaged in a month. That’s why the first company we bought was a sterile packaging company. We eliminated that hurdle.” Not only are the largest orthopedic players burdened with a tremendous amount of reusable inventory in the market, but the U.S. also lacks enough sterile packaging capacity to accommodate a switch.
Lack of Focus at the Top
Continuing on the topic of the largest orthopedic players, Mr. Deeter believes that a shortage of expertise in pediatrics creates a lack of focus and a technological gap in the care of children. He said, “I have some friends at a large orthopedic company. They appear to sell about $500 million a year in pediatric trauma and deformity correction. They don’t even know it. They ignore that market. They have one person who is a product director who spends half their time on pediatric orthopedic products. In these large companies, by the time the budget money trickles down to pediatrics, there’s maybe enough to do a brochure a year. My focus is on replacing a portion of the off-label products. We could take $100 million from this company, and they wouldn’t even know we’re there.”
In previous comments, Mr. Deeter identified the $50 million annual revenue threshold as a target for the sale of WishBone Medical to a strategic partner. He’s not so sure now, given WishBone’s growth potential. Mr. Deeter expects WishBone to surpass OrthoPediatrics in revenue next year, as well as achieve profitability in that same time frame. For reference, OrthoPediatrics generated $72.6 million in revenue for 2019 but has not yet reached profitability. Mr. Deeter said, “They’re on the NASDAQ and hit over a billion-dollar market cap at roughly $70 million in sales. Those multiples make the IPO market look very attractive even though that’s a brutal process. We’ve been approached by several large investment banking firms that want to get us ready for an IPO.”
A recent contract with Vizient gives WishBone Medical access to 200 of the U.S.’s 268 children’s hospitals with 34 hospitals under 100% compliance contracts, potentially setting the stage for rapid growth. Vizient expects to purchase $100 million in WishBone products in 2021, according to Mr. Deeter. “That blows my $50 million sales target out of the water. We’ll be there by the Fourth of July. It’s a big task and a fun problem to have. Can you get enough capital to drive these sales? But in a $3 billion market, $100 million should be a layup,” he said.
Pediatric Orthopedic Market Ripe for Innovation
If WishBone does eventually sell to a strategic partner, how might the pediatric orthopedic market look? Will it remain concentrated in a few larger players? Mr. Deeter expects to see innovation flourish in pediatric orthopedics, and then a wave of acquisitions. “The pediatric orthopedic market is about ten years behind the adult market from an innovation standpoint,” he said. While WishBone has the same commoditized products as its competitors, like plates and screws, it also has introduced […] novel kits that focus on things like tenotomy procedures for kids with club foot […]”
Mr. Deeter expects many small companies with one or two innovative products to help bridge the technology gap that exists in children’s orthopedics. He pointed to OrthoPediatrics’ acquisition of ApiFix as an example of such a company. He said, “A company in Israel, ApiFix, has an innovative tethering device for kids with scoliosis. OrthoPediatrics bought them for $70 million. Purchases like that could incentivize entrepreneurs and inventors to enter the pediatric orthopedic market.”
The WishBone founder (and former OrthoPediatrics founder and CEO) sees pediatric orthopedics as the next hot niche, saying, “I think you’ll see more and more interest in the pediatric orthopedic market. It will be like the hand market 20 years ago when all the big players bought up extremity companies. Then ten years ago, it was the foot and ankle market; everybody wanted to buy up those niche companies. I think the next niche to evolve is pediatrics.”
WishBone Medical’s COVID Experience
Mr. Deeter is bullish on the prospects for WishBone as it navigates the COVID pandemic. “It’s been beneficial for us. It allowed us to take a step back. We were on such a fast track to drive sales and get products out the door. We own our supply chain, and we’re continually trying to improve our processes. It allowed us to take a two-month hiatus from driving sales so we could focus on systems and regulatory approvals,” he said.
The pandemic also accelerated the adoption of single-use disposable kits, especially as more procedures move to ASC settings. Mr. Deeter said, “The most important thing that happened during COVID for us was this movement away from cases and trays in the operating room. In pediatrics, you do not need a sales rep in the operating room. These surgeons have been MacGuyvering their way through surgeries for decades with all the wrong stuff. If you give them the right tools and implants in a sterile packed kit, they can do that. I thought sterile packed kits would be the distribution model of choice in the next two to three years. It’s here now.”
He continued, “I believe 80% of all pediatric orthopedic surgery ought to take place in the ASC, given the prevalence of sports-related injuries. Over 40% of all 14-year-old females who play soccer will tear their ACL. In that case, you don’t go into children or city hospitals where COVID is running rampant. You go to an ASC to get the same fix.”
COVID also brought unexpected efficiency and effectiveness in WishBone’s fundraising and education efforts. Mr. Deeter said it is “a lot easier and more efficient” to raise funds virtually via Zoom calls and data sharing. The same is true of surgeon access. Mr. Deeter recounted a recent virtual meeting with surgeons from the Campbell Clinic in Memphis, Tennessee, “They had almost 30 people in a conference room for me to address and talk about WishBone. The logistics of getting 30 surgeons in a room and me flying to Memphis, Tennessee, that’s often an impossible task. Even if you take them to dinner, only a third of them show up. The virtual method was so efficient and so effective, we’re lining them up one after the other now.”
Nick Deeter is an entrepreneur at heart, but he is genuinely frustrated with the lack of appropriate care available to children within orthopedics. He said, “I think it’s the last frontier in orthopedics. I don’t know what product you could invent in adult orthopedics that isn’t just an incremental increase in outcomes. Pediatrics is wide open and one of the last areas for a great improvement in orthopedics, I believe.” With its efficient model and promising Vizient contract, WishBone is in a prime position to establish a leadership role in the evolving pediatric market.
Mike Evers is ORTHOWORLD’s Digital Content Strategist.
Content republished with permission from ORTHOWORLD® Inc., www.orthoworld.com.
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