United Orthopedic Corp. is a startup that’s not a startup, said Calvin Lin, president of the device maker’s U.S. subsidiary.
He pointed out that while the company is a relatively new player in the U.S.—it received Food and Drug Administration clearance of its knee and hip replacement products in the early 2000’s but didn’t ramp up commercialization effort till recently—“we have a long history in providing innovative orthopedic implants and instrumentation product.”
The Taipei, Taiwan-based company was established in 1993. While it started its Irvine-based U.S. subsidiary in 2012, it only recently ramped up efforts to expand its U.S. market presence following the clearance. The company “is the first Asian orthopedic company to receive FDA clearance for joint reconstruction,” according to Lin.
United Orthopedic, which reported $45 million in revenue last year, is on the small side compared to leading players in the global joint-replacement implant market. The largest players, including Zimmer Biomet in Warsaw, Ind., Johnson & Johnson in New Brunswick, N.J., Stryker in Englewood, N.J., and Smith & Nephew in Jericho, N.Y., generated revenue ranging from $700 million to several billions last year. Lin says the company doesn’t expect to compete with the “Big Four,” but that it has several advantages as a vertically integrated manufacturer to compete with midsize companies that generate revenue of $200 million to $500 million.
R&D
United Orthopedic, which has subsidiaries in China, Japan, Switzerland and France, intends to significantly grow its U.S. division.
“Our investment [in the U.S. market] is a long-term commitment,” Lin said, adding that the company boosted its U.S. team last year with eight hires. It plans to add more sales and marketing support to the 20-person team.
“We established our subsidiaries in Japan and Europe last year, [but] the U.S. is a leading market for us, not so much in terms of revenue, but technology,” he said, pointing out that Irvine is a strong medical device hub with top talent and innovation.
The company, which has over 100 surgeon affiliations and products sold in 18 states, received another FDA clearance this year. Its E-XPE polyethylene knee insert, blended with vitamin E, is designed to be more resistant to oxidation.
Lin, who noted the clearance is a major milestone for the company’s knee portfolio, said he plans to target brand recognition before making the U.S. subsidiary its research and development center.
He highlighted another key differentiator—cost savings.
“When you do a knee replacement surgery, you need to bring out multiple sizes for trials.”
A standard procedure uses nine trays. Each instrument and implant on each tray needs to be sterilized, and cost averages $100 per tray.
“We can do that in two trays—we are saving seven trays by redesigning our instrumentation with more efficient, disposable trial parts to reduce cost.”
Cost savings is a primary concern in the pursuit of quality care at reduced cost.
Vertical Integration
Lin said the company is a strong contender in a value-based healthcare system because it can better control cost and quality as a vertically integrated organization that houses design, manufacturing and distribution.
It has a manufacturing plant each in Hsinchu and Kaohsiung totaling over 186,000 square feet and housing over 75 engineers, according to Lin. He said it will expand the Kaohsiung facility next year.
“Contract manufacturing is less than 1% of our business,” Lin said. “We have very smart, dedicated people in Taiwan working very hard now to manufacture our parts, and we have no plans to set up additional manufacturing outside Taiwan now.”
Clerance
United Orthopedic plans to drive brand recognition by conducting a follow-up study of commercially available products. Its U2 knee system, which received FDA clearance in 2006, has started enrollment for a five-year study for up to 200 patients with osteoarthritis.
Osteoarthritis is a common disease among the aging population. Approximately 10% of people over 55 have disabling knee osteoarthritis, and approximately 25% of those are severely disabled, according to a company press release.
It’s also conducting a post-market study of its total hip replacement device on younger, more active patients. The implants are designed to improve hip flexion—increasing the range of motion—and reduce postoperative dislocation.
The aforementioned “Big Four” held 85% of the global market in 2015, according to a report by Transparency Market Research in Albany, N.Y. The global joint-replacement market is projected to reach $21 billion in 2024.
