Deal Radar last discussed the use of medical technology to treat a specific problem with VeraLight, which has developed a test to detect diabetes early. Today we look at SpineMatrix, an innovative medical technology company specializing in advanced spinal diagnostics. The company has developed the Lumbar Matrix Scan, a diagnostic procedure which can produce an all-inclusive physiological image of the lower back. The system uses an array of non-invasive, deep-penetrating electrodes and generates an image to measure paraspinal neuromuscular activity. With the results of the scan, a physician can diagnose the reason behind low back pain and tell the patient if the source of the pain is a disc, a facet or a muscle.
President and CEO Ben Shappley has over 25 years of orthopedic and neurosurgical implant experience. He was previously founder and CEO of Orthomatrix and SVP at Wright Medical Technology. He was also VP at four other companies – Applied Osteo Systems, Medtronic Sofamor Danek, American Medical Electronics and Smith & Nephew. Before joining SpineMatrix, he was president of Theken Spine, a Princeton-based osteobiologics company. Around that time he was introduced to the technology that is now SpineMatrix.
The Akron, Ohio-based company raised a $9.5 million Series A from Nationwide Insurance, ABL Group, Z2 Ventures, X-Gen, Ohio Innovation Fund and Dan Kellogg in 2002 and an $8 million Series B from the Psilos Group, Ohio Department of Development and ABL Group in 2007.
According to the CEO, low back pain (LBP) is the most common and costly non-life threatening disease affecting the industrialized world. Estimated costs in the United States exceed $170 billion annually, with approximately $60 billion as medical expenditures and $110 billion related to indemnity costs. Over half of patients with LBP have pain in the lumbar region. It is reported that with conservative care measures including rest, non-steroidal anti-inflammatory drugs and physical therapy, 80% of occurrences of LBP resolve themselves within 6-10 weeks. The 10 million LBP patients who fail to respond to conservative care and continue to have LBP are considered chronic. Chronic LBP patients consume 80% of the total costs related to LBP.
Over 85% of patients with LBP aren’t accurately diagnosed using traditional tools like an X-ray, MRI, CT scan or other invasive diagnostic procedures. Facet joint injections and discograms are often used to aid the physician with the diagnosis, but these invasive procedures are often painful and costly and involve risk with associated side effects; they are documented to be ineffective up to 50% of the time. To accurately determine the source of low back pain and recommend treatment, physicians need information on physiology as well as anatomy, which is provided with the Lumbar Matrix Scan. According to the company, it is the only physiological diagnostic procedure to produce an all-inclusive image of the lower back.
SpineMatrix targets physician practices like ortho and neuro spine surgeons, pain management, physical medicine & rehab as well as hospitals. The company says that since its official entry, SpineMatrix has received a phenomenal response to its technology. This does not mean that there have not been challenges: since the technology is new, reimbursement is an issue as physicians are sometimes reluctant to integrate something into their practice if they aren’t sure about immediate payment. Reimbursement problems have slowed the company’s plans. But SpineMatrix is generating revenue even though the Lumbar Matrix Scan was introduced just a year ago.
There are already 20 centers using this technology. Each center is expected to be capable of initially doing 50 scans a month. The price of an array is $90, resulting in $4,500 in monthly revenue per site. The company uses a simple business model with the intention of covering the cost of its hardware while generating substantial revenue with the sales of its single-use arrays.
SpineMatrix is focused on countering resistance to achieving reimbursement from traditional health plans. It intends to work directly with large, self-insured employers who are familiar with the costs of ongoing treatment for low back pain.
As the company is on the way to profitability, CEO Ben Shappley feels that SpineMatrix is a good acquisition target for larger orthopedic companies, who he says are already keeping a close eye on it for the future.
This segment is a part in the series : Deal Radar 2009