The U.S. spine market is improving, so which company is poised to win in 2016?

Arundhati Parmar

The U.S. spine market is improving with fewer lumbar procedures being delayed compared to previous years, increasing surgeon backlog of procedures and a stable implant pricing pressure, according to Glenn Novarro, an analyst with RBC Capital Markets.

So this begs the question. Who will be the winners in the market next year?

Novarro's survey of spine surgeons points squarely in the direction of LDR Holdings.

"Our spine survey results and recent management dinner give us confidence that [LDR Holdings] will remain one of the top U.S. share gainers in spine and be among one of the fastest growing companies in small cap medtech over the next several years, led by Mobi-C [cervical disc] ," Novarro wrote in a research note issued Thursday.

The Mobi-C is the only FDA-approved artificial disc for one & two level replacement.

U.S. spine surgeons expect cervical artificial disc to account for a larger share of their total cervical cases to increase to 12% in the next 12 months up from 10% in 2014 and around 17% five years from now, Novarro pointed out.

In the same RBC survey, surgeons responded that the number of cervical artificial disc cases are expected to “grow almost 20% y/y in 2015/2016, making cervical discs one of the fastest growing parts of the U.S. spine market.”

Novarro believes that the continued growth of Mobi-C along with the hiring of additional sales reps at LDR is going to drive share gains for the company in the U.S.

“Recall, LDRH management plans to hire 50-70 direct reps by year-end, and management is on track to achieve this goal. We expect LDRH to continue aggressively adding direct reps through 2016.

But the growth of the cervical artificial disc market will also benefit Medtronic. Novarro wrote that the Irish medtech company’s Prestige LP cervical disc has been available overseas since 2004 and got FDA approval for a one-level indication in July 2014.

“We have confirmed that MDT has submitted for FDA approval its two-level indication in June 2015, and potential approval could come as early as 3Q16,” he wrote.

While LDR Holding is expected to be the no. 1 share gainer in the U.S. spine market, Nuvasive is also poised to do well too.

"U.S. spine surgeons expect NUVA to be one of the top spine share gainers over the next 12 months," Novarro wrote. "Almost every single NUVA user said recent executive changes at the company have not impacted their use of NUVA products, which should put this concern to rest."

That was a reference to the abrupt departure of CEO Alex Lukianov in April when a board investigation revealed that he violated expenses reimbursement and personnel policies at the company. Nuvasive's new chief executive is Gregory Lucier.

Lucier is a well-known life sciences executive having led Life Technologies from a company with 1,500 employees into an international heavyweight with more than 20,000 employees. Thermo Fisher bought Life Technologies, which itself was born our of a merger, for $13.6 billion in February, 2014.

Arundhati Parmar is senior editor at MD+DI. Reach her at [email protected] and on Twitter @aparmarbb