(FORTUNE Small Business) – WHAT IT DOES: Plans to market a new implant for spinal surgery
FOUNDERS: Thomas Abbas, 42; Henry Fabian, 42; Rick Karr, 36; Lisa Paley, 38; Jason Smith, 28
DATE FOUNDED: May 2004
STARTUP CAPITAL: $89,000 in prize money from a business plan competition
GOAL: Product licensing or acquisition by another firm
No matter how many times Dr. Henry Fabian, 42, performed pain-relieving surgery for his spinal arthritis patients, he left each session exhausted. Inserting an implant to fuse two vertebrae was nerve-racking. Before placing the implant in the spine, he had to squeeze it through a tube less than an inch wide that fits through a small incision in the body, a process he likens to " fitting an erect sailboat through the mouth of a bottle." A mistake could paralyze a patient from the waist down.
Although Fabian had a high success rate at his Cleveland private practice (which has since moved to Steamboat Springs, Colo.), he was convinced that there had to be a better approach. So two years ago he enrolled at Ohio State's Fisher College of Business to earn his MBA. He hoped to develop a product—and a business—that would give doctors better results. Teaming up with four fellow students, he created the business plan for Vertebration, the first-place winner in our Student Showdown. The Columbus-based startup is developing a titanium-alloy spinal implant called the Columna that can be inserted through the tube at one-third of its full size before expanding inside the body.
Vertebration won the $89,000 top prize in Fisher's business plan competition in June. By September it had signed a deal in which EBI Biomet, an orthopedic implant company in Parsippany, N.J., gets right of first refusal to distribute its products. Assuming Vertebration can raise $2.9 million for research and development, marketing director Rick Karr, 36, predicts that the company will sell 720 of the implants in 2006 and 4,320 in 2007, with projected sales of $2.5 million in 2006 and $15.1 million in 2007.
Vertebration counts on getting an exemption from FDA testing that is often granted to new products considered similar enough to existing ones. But will this likeness prevent Vertebration from carving out its own niche, as a competing team in the Showdown asked? Fabian says that what makes his product unique is the procedure surgeons will use to insert it. "The Columna is a paradigm shift in the thought process of placing an implant," he says.
Fabian will also have to overcome skepticism in the medical community. Old-school doctors believe minimally invasive lumbar fusions of the kind Fabian performs are a fad; they prefer larger incisions, which give the surgeon better visibility. But Thomas Gunderson, a health-care analyst at Piper & Jaffray, dismisses critics. "The procedure isn't going away," he says. He cites statistics showing that the number of lumbar fusions rose from 50,000 five years ago to more than 200,000 in 2003.
With baby-boomers reaching the prime age for fusions, Fabian is confident that Vertebration will be an attractive acquisition. He believes that demand for safer back surgery "is a big tide that's going to raise all boats." —JULIA BOORSTIN