Extremities Device Market—Still Undefined!

The market for extremity repair products is one of the fastest growing markets in orthopedics with double-digit revenue growth rates over the past five years, but uncertainty still lingers around the question of how companies define extremities. Which body parts actually count as “extremities?”

The category of large joints includes hips and knees. Small joints include shoulders, elbows, hands, wrists, feet, ankles and toes. But not all device companies consider all types of small joint treatment as part of the extremities category. Instead, small joint treatment constitutes four different sectors of orthopedics:

1. Joint replacement and the reconstruction market
2. Small joint trauma market
3. Small joint sports medicine market
4. Extremity biologics market

Depending on the company, the category of extremities could include all, some, or none of those four small joint categories. When the extremities device market reported sales of over $900 million in 2008, some companies included joint replacement products within their reporting for extremities, and others included both joint replacement and small joint trauma products. A few companies also included small joints sports medicine products as being within the extremities device market. The trauma product market alone represented $4.7 billion (including treatment of large joint fractures), and sports medicine products earned close to $2.8 billion in sales. Without a standardized definition of extremities products, how can one really compare market share from one company to the next?

We can at least start with clearer definitions of the four small joint categories. Here is a closer look at these markets and how the orthopedics industry differentiates them:

• Joint Replacement Market: This market represents implant devices that restore the joints of extremities such as shoulder arthroplasty, elbow arthroplasty, wrist arthroplasty and the new ankle replacement devices. These are implant devices that help restore the functionality of these small joints.
• Small Joints Trauma Market: This could be its own joint reconstruction market, but companies tend to include sales related to small joint trauma in their reports of extremity product sales. This includes items used to treat fracture-related incidents such as fixation devices, screws and plates used to treat shoulders, wrist fractures, elbows and ankles.
• Small Joints Sports Medicine Market: Sports medicine is a competitive market that includes hip and knee related sports injuries to the ACL (anterior cruciate ligament) and to the MCL (medial collateral ligament). However, a significant portion of the market is involved in arthroscopy and endoscopy procedures on small joints in the shoulder, wrist, elbow, foot and ankle. Sports medicine for small joints includes treatment of rotator cuff tears, tennis elbow, golfer’s elbow and sports-related injuries.
• Extremity Biologics Market: This sector includes all aspects of biological treatment for upper extremity, foot and ankle orthopedics. Products such as the GraftJacket from Wright Medical, the Rotator Cuff Repair Patch from Zimmer, and other biological products to treat soft tissue are reported as biologics sales. Biologics is still an evolving market, and it is too early to differentiate its market share from other extremity product categories.

Chart 1 shows the total orthopedic market for 2008 with extremity product sales of just over $900 million. Orthobiologics, the next largest market sector, more than doubled the sales figure from the extremities product market. Clearly, differences in categorization can create a large discrepancy between how extremity product companies report earnings and market share.

Chart 1: Worldwide Orthopedic Market

Source: PearlDiver Research and Estimates

How Do Companies Define Their Market?

Biomet, Inc.

Biomet represents one of the largest orthopedic product suppliers in the world with over $2 billion in sales worldwide. The company offers a full line of trauma treatment products through its Biomet trauma division, and the company has a separate division for sports medicine where it includes soft tissue repair products. The product lines that Biomet currently includes as extremities products are:

• Joint replacement and reconstruction products for shoulders, elbows, wrists and other small joints
• Products like the Comprehensive® Reverse Shoulder System (a second generation reverse shoulder prosthesis device) and the Maestro™ Wrist Reconstructive System (WRS)

Biomet is currently focused on the upper extremity area, and the company aims to provide a complete line of products for orthopedic surgeons performing upper extremity procedures. John McDaniel, Vice-President for upper extremities at Biomet Orthopedics, would like to see a universal approach that revolves around the surgeon’s pattern for treatment for upper extremity joint replacement and the associated fracture fixation devices. According to PearlDiver research, Biomet holds close to 10% market share (in the second quarter of 2009) in the worldwide extremity product market, but that would increase significantly if all companies started reporting extremity sales from only joint replacement products.

Wright Medical Technologies, Inc.

Wright Medical develops products for the upper extremities, feet and ankles, with heavy emphasis on the foot and ankle side of the business. Extremity treatment offerings range from digit and joint arthroplasty, plating and screw fixation systems, and tissue fixation products (interference screws and bone anchors). Key products include the Evolve radial head and Micronail in the upper extremity segment and the Darco and Charlotte Plating lines and INbone Ankle replacement in the foot and ankle segment. The items that Wright Medical defines and reports in its public disclosures as extremity products are:

• Plates, staples, and rods for foot, wrist and elbow applications
• Stand alone screws for foot repair and fixation
• Interference screws and anchors for foot and ankle tendon repairs
• External fixation products
• Joint arthroplasty including total shoulder, total elbow and total ankle systems.

These products include devices and treatment from the categories of sports medicine, trauma and joint implants, all gathered under the extremities category. According to John Treace, Vice-President for Extremities and Biologics at Wright Medical, for reporting purposes, the company’s definition of extremity products includes all the hardware surgeons use to repair small joints. This includes arthroplasty, sports medicine and reconstructive or trauma plating products. Biologics dealing with soft tissue repair or extremities are reported separately in their biologics division. Currently, Wright Medical holds 10.6% of the market share for extremities worldwide according to PearlDiver research. However, Wright stands to lose quite a bit of market share if other companies started reporting fixation and instrumentation numbers in their extremities reporting.

DePuy Orthopaedics, Inc.

DePuy Orthopaedics, as a subsidiary of Johnson and Johnson, is the leading extremity supplier in the world. Unlike Wright Medical, DePuy defines its extremity product market as joint replacement or the arthroplasty market for shoulders, feet, ankles and digits. DePuy has its own sports medicine division called DePuy Mitek, its own trauma division, and a separate biologics division serving the trauma and spine treatment businesses.

The product lines that DePuy defines as extremity products are:

• Joint replacement and reconstruction products that include shoulders, ankles and digits.
• Hemi-arthroplasty shoulder fracture products, such as the Global FX Shoulder System
• Major products such as the Agility Ankle System, the Global Shoulder System, Delta XTEND Reverse Shoulder System and the Neuflex MCP/ICP Finger Implant System.

The product lines that DePuy defines as trauma and sports medicine in extremities are:

• External fixation products, staples, screw instrumentation, nails, rods and plates for trauma treatment
• General arthroscopic and endoscopic instruments, suture anchor products and cuff repair products to treat small joints are reported in the DePuy Mitek Sports Medicine division.

Dennis Cassell, U.S. Extremities Director at DePuy Orthopaedics, says that extremity means different things to different companies. DePuy defines extremity products only as joint replacement and arthroplasty products. Even with this limited reporting, DePuy remains the number one extremity supplier in the world with over $200 million in product sales worldwide. Taking into consideration the variation in companies’ definitions of extremities, DePuy holds close to 21% market share (from the second quarter of 2009). This could change dramatically if other companies reported extremity products as just the implant and arthroplasty market.

Other Companies

Under the category of extremities, Zimmer Holdings and Exactech, Inc. distribute products only for upper extremity treatment. Zimmer’s fracture products sales (part of its trauma division) represents close to 5% of the total trauma market worldwide. Zimmer’s upper extremity line of products represents 14% (in the second quarter of 2009) of the total $900 million extremity device market. Exactech Inc., an emerging extremity company, has a similar product portfolio as Zimmer with just over 2% of the extremities product market share worldwide. Tornier includes sales of fracture treatment products within its extremity division, and Ascension Orthopedics reports all small joint products as extremity treatment. Integra Life Sciences includes endoscopic instruments for small joints, staples, screws, plates and fixation devices as extremities, and Orthofix International reports fixation devices and instruments for feet and ankle as extremities.

Summary

How we define extremities could have huge effects on how companies and customers view this market’s share of the orthopedics industry. If we limit our definition to implant products, we estimate the value of the extremity device market to be over $700 million. However, if we include trauma products and sports medicine products in our definition of extremities, we estimate the total market to be over $3 billion in sales world wide.

A change in categorization would also dramatically impact the market share for each company. For example, Synthes, with close to 50% market share worldwide in the trauma treatment market, would stand to make substantial gain in the extremities device market with a more inclusive definition of extremities. Smith and Nephew, ArthroCare, Arthrex and DePuy also play major roles in the sports medicine market which could add to their share of the extremities device market. Wright Medical might lead the foot and ankle device market in sales, but that could change if companies like DePuy start to report plating, screws and other fixation products as extremity devices. Based on how the extremities device market has been defined by each company, chart 2 shows the market shares for the second quarter of 2009.

So is there a solution to these discrepancies? In order to give companies (and customers) a true measure of market share, the leaders of the extremities device companies could meet to devise a standard definition of the small joint extremity device market in orthopedics. It might sound like a long shot, but it also might be in the best interest of these companies to work together to find a standard definition before one company defines extremities for everyone.  

Chart 2: Extremities Market Share (2Q09)

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