Kyphon was an amazing disruptive exponential growth spine company.
Just try to wrap your head around the Kyphon sales trajectory (never to be seen again).
1996 – First funding
2000 – $6M sales
1998 – FDA approves balloon kyphoplasty, but not the bone cement filler.
2001 – $36M sales
2002 – $76M sales (IPO)
2003 – $131M sales
2004 – $306M sales (*FDA approves use of tamp with cement in the spine without any clinical data.)
2005 – $408M sales
2007 – acquired for $4.2B by Medtronic
Fast forward to startups today and we just don’t see companies taking moonshots like the startups in the 1990s.
Startups in the 2020’s are focusing on incremental improvements, not moon missions.
Why is this?
Well, there are two good reasons.
1/ The best explanation is that the FDA is blocking clearances of anything truly novel and different in orthopedics or spine. The FDA has become the major problem now. In the Kyphon case, the FDA cleared the inflatable tamp for any bone. Then the FDA cleared cement for use in the spine. Then the FDA cleared the two together. This strategy is called the “hamburger approach” – first the meat, then the bun, then the two together. The FDA would “flat out” not clear the Kyphon device today. [ Read the actual FDA clearance here – https://www.accessdata.fda.gov/cdrh_docs/pdf4/K041584.pdf ]
2/ A second explanation is the “knock-on effect” as a result #1. Investors are less willing to fund high-risk ventures that require FDA blessings. Investors are skittish of startups that require $100M+ of invested capital and 10+ long years of uncertainty with the clinical trials and IDE/PMA processes.
So, because of our FDA, it looks like orthopedic startups are stuck with incremental approaches today in order to get funded.