Today's successful medical device gets patients out of hospitals sooner, but the next step is to find more products that bypass hospitals entirely.
One good example is bone-growth stimulators, which heal tough bone fractures with electromagnetic energy.
About 6 million people in the United States fracture bones each year, and an estimated 3% to 5% of those injuries don't heal. Surgeons often insert plates, screws or rods to spur healing, a $7,500 to $20,000 hospital procedure. Many patients endure multiple operations.
In contrast, bone-growth stimulators sell for about $3,000 each. Patients obtain the devices with a physician's prescription and apply them to their nonhealing fractures at home.
Analysts expect use of the devices to boom. Investment banking firm Volpe, Welty & Co. of San Francisco sees 65% sales growth to $159 million in 1998, from $96 million in 1995. Investment banking firm Hambrecht & Quist of New York expects the percentage of nonhealing fractures treated with bone-growth stimulators to more than double by the year 2000-to 30% of the total from 14% in 1995.
Although such products are 15 years old, sales grew slowly. Physicians didn't understand what the devices did, and the leading product required 10 hours of daily use.
In 1994, regulators approved a bone-growth stimulator requiring only 30 minutes of daily use, and its maker marketed the product with a good explanation of its function and studies of its effectiveness. In the past few months, several analysts have given favorable reviews to the company, Phoenix-based OrthoLogic. Both Volpe, Welty and Hambrecht & Quist trade OrthoLogic stock.
Bone-growth stimulators work on osteoblasts, a type of bone cell, to increase the presence of growth factor and, eventually, connective tissue.
Unlike competitors', the OrthoLogic product uses low-energy static and alternating magnetic fields, which affect the bone long after the device is removed. According to its patient registry, 78% of patients reported healing in an average of 4.1 months.
The device is approved for use with "nonunion" fractures, which haven't healed in nine months. But physicians sometimes prescribe it for fractures that haven't healed in six months, analysts said.
OrthoLogic lost $1.4 million, or 17 cents per share, in 1995, compared with a loss of $4.5 million, or 65 cents per share, in 1994. Sales rose 194% to $14.7 million. Volpe, Welty expects OrthoLogic sales to soar 83% to $26.7 million this year and to hit $75 million by 1998.