New spine startup emerges in Chicago – Valorem Surgical |

New spine startup emerges in Chicago – Valorem Surgical

ProductsThe opportunity in boomers and their aching backs (Crain’s Chicago Business)

The Complete List of Spine Startups

After years of hawking spinal implants, Joseph Jin knows there’s lots of money to be made from baby boomers and their aching backs. But it won’t be easy for his Chicago-based startup to break in.

The demand is driven in part by people who want to remain active later in life as well as rising obesity rates. Spinal fusion is among the most common and expensive surgical procedures in the nation, costing an average of about $28,000 per hospital stay in 2012, the most recent federal data available.

But more than 50 percent of the market is controlled by a few big players, including Minneapolis-based Medtronic and Kalamazoo, Mich.-based Stryker. Doctors who have logged hours learning the intricacies of certain products don’t like change, experts say, making it tough for new competitors.

“Choosing a large company is more ideal because they have more research behind the product, more people have used it and they have more evidence to show its effectiveness, which is very important for getting reimbursed for these very expensive procedures,” says Tara Shelton, a research analyst at Frost & Sullivan, a Mountain View, Calif.-based consultancy.

The industry had consistent high-single-digit to double- digit growth early in the past decade. But it was hit hard by the 2008 recession as patients put off pricy surgeries, analysts say.

Then the 2010 Affordable Care Act began to drastically change the way hospitals and physicians get paid. Instead of being reimbursed for each procedure or service they provided, which did little to lower bills, many providers now are paid to keep people healthy and away from costly overnight stays and procedures.

While the spinal implant industry still is an estimated $7 billion to $12 billion global market opportunity, growth projections are more modest, likely in the low single digits, analysts say.

“This is the new normal,” says Debbie Wang, a senior equity analyst who follows the medical device industry at Chicago-based Morningstar. “We are not going back to 20 to 30 percent growth again.”

Another challenge: scant top-of-the-line clinical research that shows spinal fusion works, Wang says.

Despite the hurdles, there’s an opportunity for companies like Jin’s Valorem Surgical, analysts and physicians say. Cost-conscious hospitals are pushing back on pricing, giving smaller companies a chance.

Jin says he can cut prices in half for hospitals through tight cost control of his out-sourced manufacturing and by being more nimble than his competitors. “We can turn the ship on a dime, as opposed to the large freighters,” he says.

Dr. Nicholas Colyvas, an orthopedic surgeon in San Francisco who has studied implant pricing, says physicians don’t like to take risks. But in this new era when doctors are financially rewarded for cutting costs, there’s an opportunity for companies like Valorem.

“Physicians are going to take a more critical approach to their choices of implants,” Colyvas says. “It’s not going to happen overnight, but it’s definitely going to happen.”

Valorem’s product is a minimally invasive implant system using a titanium cage and screws for spinal fusion. The surgery involves removing bone and disc to free up space for the implant, then fusing vertebrae to ease patients’ chronic pain.

Jin started Valorem about four years ago while buying and selling other companies’ spinal implant products as an independent contractor in Chicago. That allowed him to build the revenue for his company, he says. He went full time about a year and a half ago, launched the first product in January and expects about $5 million in sales this year.

REHABBING HEADQUARTERS

So far he is working with surgeons at 19 health systems around the country, including Swedish Covenant Hospital on the Northwest Side and TriCity Medical Center in Oceanside, Calif.

Jin, who has four employees, is rehabbing space for his headquarters inside the former Florsheim Shoe Factory in the city’s Avondale neighborhood. The roughly 5,000-square-foot site will include a simulated operating room and a separate cadaver lab with human cadavers where surgeons and sales reps can practice using the implant system.

Michael Butler, CEO of Huntley-based Life Spine, one of the few local competitors, says he’s not worried about a new rival. His 11-year-old firm has 32 product lines and had $28 million in sales in 2013. “It’s a big marketplace,” he says.

4 responses to New spine startup emerges in Chicago – Valorem Surgical

  1. nha cai uy tin July 31st, 2015 at 9:56 pm

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  2. Lnb September 8th, 2017 at 9:38 am

    Looks like shit #lnb

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  3. Teal Flanigan September 8th, 2017 at 9:44 am

    wow. This company is criminal, would not allow these implants in my grandmother who is 6 ft under.

        Reply

  4. Jennifer Donoho September 8th, 2017 at 9:50 am

    Whistleblowing on those 19 hospitals now. Thanks for the heads up.

        Reply

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