OrthoPediatrics looks to kids to set it apart: Larger implant manufacturers focus on adults

August 13, 2007

But that's changing now, as the orthopedics juggernaut in Warsaw has spawned another company.

Formed a year ago, OrthoPediatrics in October will launch its first 10 orthopedic implants designed especially for kids. The startup hopes to do research at the offices and hospital of OrthoIndy, a group of orthopedic physicians in Indianapolis.

OrthoPediatrics' niche is one that has been shunned by the larger orthopedic implant companies based in the northern Indiana city-Zimmer Holdings Corp., Biomet Inc. and DePuy Orthopaedics Inc.

The reasons are obvious. Research by HealthpointCapital Partners estimated the total orthopedic implant market at $25 billion, thanks in large part to aging baby boomers that have orthopedics companies salivating to sell them artificial hip and knee systems.

But patients under 18 account for just $1 billion-or less than 5 percent-of the total market, according to a private study commissioned by OrthoPediatrics and conducted by Ohio-based Knowledge Enterprises Inc.

OrthoPediatrics will focus on implants for spines, trauma injuries and bones damaged by cancer. That market is about $400 million, Knowledge Enterprises said.

"It's a niche that has been ignored," said Robin Young, editor of Orthopedics This Week, an industry trade magazine. He predicted that OrthoPediatrics easily could capture $100 million in revenue. "For a small company, this could be an extremely lucrative market."

Kids already get orthopedic care, but surgeons who serve them have to use small adult implants that don't quite fit, perform crude alterations to adult implants, or request a pricey custom implant.

Some doctors even resort to using implants designed for dogs.

"There's a lot of jerry-rigging going on right now," said Dr. Mark Stevens, an orthopedic surgeon with OrthoIndy who focuses on children. "Many of the things that are available to me were the things that were available in the mid-'70s. There's been a paucity of major changes."

OrthoPediatrics has asked Stevens and several other orthopedic surgeons for kids to sit on an advisory panel to help the company create new products. The panel's first meeting will be held in early October at OrthoIndy's facility on the northwest side of Indianapolis.

OrthoIndy also will serve as a kind of research hub for OrthoPediatrics. The company can analyze three-dimensional images from some of OrthoIndy's patients, Stevens said. And OrthoIndy already has a research staff capable of coordinating significant research projects.

What research OrthoPediatrics would do with OrthoIndy hasn't been decided yet but will be by the fourth quarter, said Marjorie Albohm, director of research at the Indianapolis practice. She hopes to start a research project in the first quarter next year.

"We certainly support their goal of creating improved implants for the pediatric population and addressing that question and finally trying to meet that need," she said. "They have the product vision, and we have the patient vision and the outcome vision."

OrthoPediatrics' staff of 10 has been fanning out across the country the past three months to talk to orthopedic physicians who specialize in pediatrics. They want to hear ideas and incorporate them into new products.

They have visited physicians and tried to sign memoranda of understanding with such hospitals as the Cleveland Clinic, Rainbow Babies & Children's Hospital and the Children's Hospital of Orange County.

"It's a unique opportunity for everybody involved," said Nick Deeter, Ortho-Pediatrics' founder and CEO. Deeter's vision for the company began 15 years ago and intensified during his time at DePuy Orthopaedics, a Warsaw-based division of Johnson & Johnson.

OrthoPediatrics is working to develop relationships with distributors and train a sales force it says will be uniquely equipped to handle pediatric orthopedic issues.

OrthoPediatrics won't do any of its own manufacturing. Instead, it has contracted with area companies such as Symmetry Medical Inc. and Micropulse Inc. Such companies have extra capacity, Deeter said, because they have shifted more production overseas in the last three years.

"There's a lot of manufacturing capacity in the Warsaw area," Deeter said.

Its first products are flexible nails and plates designed to fix bone injuries sustained in childhood traumas. In June, Deeter predicted that OrthoPediatrics would bring in revenue between $3 million and $4 million this year.

The company is operating right now on $1.4 million it raised in a round of funding that closed in April.

Young, the trade magazine editor, doesn't see explosive growth in children's orthopedics-unless new technology can significantly improve the medical results.

The key possibility for kids is to come up with implants that actually grow as the child grows. If OrthoPediatrics pioneered that kind of product, Young said, its growth could really take off.

That's the kind of thing OrthoPediatrics is discussing with doctors such as Tracy Ballock, head of the pediatric orthopedic surgery department for The Children's Hospital of the Cleveland Clinic. He conducts research into growth plate biology, studying the bit of cartilage near the ends of bones that generates bone tissue.

Injured growth plates often heal in ways that create deformities. But having products that stimulate re-growth of tissue could avoid such problems in the future, Ballock said.

"We now should be able to regenerate growth plate tissue in these injuries," he said.

That's exactly the kind of solution OrthoPediatrics wants to create. To that end, it hopes to draw pediatric tissue engineering specialists to Warsaw to conduct research and develop products.

"I actually think it will grow exponentially," Deeter said.
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