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Warsaw firm thriving on children's orthopedics products:

April 14, 2008

Nick Deeter offered rosy predictions last summer for his start-up, OrthoPediatrics. Now, it appears, he was understating his case.

Warsaw-based OrthoPediatrics has so many products to get to market that it is trying to raise another $8 million from angel investors to help it do so.

Since opening this second round of fund raising a month ago, OrthoPediatrics already has raised $3 million. The company raised $2.2 million in an initial "friends and family" round last year.

The company has zoomed to 26 employees from 10 in August. And it expects to add 100 in the next five years, said Deeter, who is CEO. "Our pipeline is so full. Our biggest problem is trying to prioritize which products we want to commercialize first," he said.

The company found that much research already had been done. Scads of children's orthopedic surgeons have ideas or examples of customized implants they've made to fit kids. But no orthopedic implant manufacturers have made a market in kids - until now.

"We've become a bit of a commercializing engine for these orthopedic ideas," Deeter said in an interview. "These orthopedic surgeons, they've been ignored by the big companies for years."

Some of the biggest orthopedic implant makers are right in Warsaw. Zimmer Holdings Inc., Biomet Inc. and DePuy Orthopaedics Inc. all are headquartered in the northern Indiana city. Deeter used to work for DePuy, a division of New Jerseybased Johnson & Johnson.

The entire orthopedic implant market amounts to $25 billion annually, according to research by HealthpointCapital Partners, a New York investment firm. Patients under 18 account for just $1 billion of that, according to a private study commissioned by OrthoPediatrics and conducted by Ohio-based Knowledge Enterprises Inc.

But children's orthopedic surgeons have told OrthoPediatrics officials that many younger kids need implants-it's just too hard to find or customize an implant to fit them. So now Deeter thinks OrthoPediatrics' market niche is twice as big as he first thought.

OrthoPediatrics is focusing on implants for spines, trauma injuries and bones damaged by cancer. Deeter now thinks that market could total $800 million annually.

The company recently received approval from the U.S. Food and Drug Administration for a plating system to correct bone defects in children. Those plates will accompany the orthopedic screws and other small products the company launched in January.

Sales in the first quarter beat expectations by 13 percent, Deeter said. And the company is working on a total knee replacement to correct juvenile rheumatoid arthritis. Deeter said medical groups specializing in that condition estimate 50,000 children have cases severe enough to be prime candidates for replacement.

Deeter said OrthoPediatrics drew attention from economic development officials in Ohio, especially in Cleveland. The company has worked closely with the Cleveland Clinic to develop new products.

But the company announced Tuesday that it is staying in Warsaw. The Indiana Economic Development Corp. will give the company $1.8 million in tax cuts and training grants if it hits its growth goals.
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