Alphatec Holdings Stock

Alphatec Holdings, Inc. operates as a medical technology company.

The company is focused on the design, development, and advancement of technology for better surgical treatment of spine disorders. By applying the company’s unique, 100% spine focus and deep, collective industry know-how, the company intends to revolutionize the approach to spine surgery through clinical distinction. The sophisticated approaches that the company creates from the ground up integrate with its expanding Alpha InformatiX (‘AIX’) product platform to objectively inform surgery and achieve the goals of spine surgery more predictably and more reproducibly. The company has a comprehensive product portfolio designed to address the spine’s various pathologies, and are perpetually innovating to accomplish the company’s ultimate intention, which is to be the standard bearer in spine.

Strategy

By creating clinically distinct solutions that improve surgical outcomes, the company is positioned to continue to earn share of the U.S. spine market, becoming the partner of choice for spine surgeons, hospitals, healthcare systems, and payors.

The company has the following three key strategic initiatives:

Create Clinical Distinction

Clinical distinction is paramount to the company’s value creation strategy. The company is committed to continuing to invest in the development, launch, and promotion of approaches and technologies intended to revolutionize spine surgery. The company has developed, and continues to seek to develop, next-generation surgical approaches that advance spine care with seamlessly integrated access systems, implants, positioners, biologics and enabling technologies, each specifically designed to beget objective decision-making and to more successfully address the core spine pathologies.

During the year ended December 31, 2023, the company continued to champion adoption of its lateral franchise, including both PTP and LTP, and launched Calibrate LTX, a lateral expandable interbody implant system. The company also continued to foster development of Alpha InformatiX, a workflow-integrated informatic ecosystem being designed to automatically and objectively inform spine patient care before, during and after surgery. A foundation of that ecosystem, the EOS imaging system, drove revenue growth of over 20%, while significant progress was made on initiatives intended to materially advance the system’s capabilities. The company also acquired a robotic-enabled navigation system, branded ‘Valence’, which is being developed to integrate into the company’s lateral procedural workflow.

Compel Surgeon Adoption

An integral part of the company’s strategy is to compel surgeon adoption with the clinical distinction that the company has, and will continue to introduce. Central to inspiring surgeon interest in the company’s approaches is the ‘ATEC Experience,’ an outcomes-based educational program for visiting surgeons facilitated at the company’s headquarters in Carlsbad, California. The program provides an interactive learning environment tailored to surgeon needs through both a peer-to-peer and subject matter expert approach. The company leverages its 7-station cadaveric lab to enable visiting surgeons to gain deep practical experience with the company’s procedural solutions and educate participants on the company’s role in shaping innovation.

The surgeon relationships the company is creating through that educational program continue to fuel strong growth. Over 500 new and existing surgeons participated in the ATEC Experience in 2023, driving 27% growth in the company’s surgeon user base. Over time, the company cultivates the relationships created, partnering with each surgeon in an increasing number of surgeries and fostering training to inspire partnership in increasingly complex surgeries. The company seeks to gradually expand utilization and position the company well for sustained long-term growth.

Elevate Distribution

The company markets and sells its products through a strategic network of independent sales agents and direct sales representatives. To deliver consistent, predictable growth, the company has added, and intends to continue to add, clinically astute and exclusive independent sales agents and direct sales representatives to reach untapped surgeons, hospitals, and national accounts and better penetrate existing accounts and territories. The opportunity to expand the company’s strategic sales network is vast, with approximately one third of the U.S. territories, including many of the U.S.' most significant spine markets, still under- or completely unrepresented.

With the company’s acquisition of EOS, the company aligned EOS’ U.S.-based capital sales team with the company’s regional sales teams and leadership. The EOS sales team focuses on hospital administrators, with the benefits of leads generated by the company’s sales team and enhanced service support.

In 2023, the company continued to enhance the expertise within its Memphis distribution facility. With expedient, flexible access to nearby distribution centers, the facility will foster centralized, predictable surgical support as the company grows.

The company is also in the nascent stages of building an international footprint. Beginning in 2022, the company partnered with surgeons to treat its first patients in Australia and New Zealand. Looking forward, the company intends to focus its international investments in economically attractive markets with strong surgeon influence and reasonable regulatory pathways where the company can build a direct sales team that mirrors the sophistication of the company’s U.S. network.

The Alphatec Solution

The company’s principal offerings include comprehensive approaches designed and developed to specifically meet the requirements of the various spine approaches that treat conditions ranging from degenerative disc disease to complex deformity and trauma. Depending on the approach, the company’s solutions may comprise pre-, intra-, and post-operative information, positioners, access systems, interbody implants, fixation systems, and various biologics offerings; all designed to more reproducibly and predictably improve patient outcomes.

The company’s flagship approach, PTP, was designed and released in 2020 by the team that created the first-generation lateral approach for spinal fusion to directly address the known challenges that limited earlier adoption of the technique. Engineered to leverage the benefits achieved by lateral spinal fusion procedures, such as reduced blood loss, shorter hospital stays, and quicker recovery times, PTP safely treats a wide range of patient pathologies.

Compared to a standard lateral procedure, the PTP approach positions the patient in a prone (face down) position, allowing simultaneous access to the spine laterally (from the side) and posteriorly (from the back), all while in a position that is more familiar to surgeons and offering a more streamlined, more orthogonal approach. Single-position lateral surgery in the prone position minimizes unnecessary patient repositioning, enhances time efficiencies, provides surgeons with increased optionality, and achieves spinal alignment objectives more reproducibly.

The PTP approach is enabled through a combination of purposefully developed technologies that address the unique challenges of approaching the spine laterally while prone. One such challenge, and probably the greatest limit to earlier adoption of lateral approaches overall, is the need to safely and predictably navigate across the lumbar plexus, an essential collection of nerves, to access the lumbar spine during surgery. Key to the company’s PTP approach is the integration of SafeOp Advanced Neuromonitoring, a proprietary technology that couples automated electromyographic (‘EMG’) and somatosensory evoked potential (‘SSEP’) monitoring. SafeOp technology, as a result, is designed to uniquely beget real-time, surgeon-directed intra-operative information about both the location and the health of the patient’s nerves, enhancing the predictability and reproducibility of lateral approach outcomes.

Technology

Alpha InformatiX

Designed to provide actionable information that controls clinical variables in spine care, the company’s AIX product platform comprises its EOS imaging system and VEA alignment mobile application, the company’s SafeOp Neural InformatiX System and Valence. While some AIX applications are commercially available, significant development is underway to integrate and interconnect these technologies and bring unprecedented functionalities to market in 2024 and beyond.

The company’s EOS imaging system is designed to provide unbiased, high-quality, and calibrated full-body imaging that enables a 3D model of patients’ skeletal systems and to provide valuable diagnostic and surgical planning capabilities. The integration of the company’s approach-specific solutions into EOS’ 3D surgical planning platform is expected to better inform surgery and enhance the predictability of outcomes. Development is expected to allow surgeons to more effectively and efficiently assess patients’ full-body alignment, assess level-specific bone quality, establish surgical objectives, bend patient-specific rods pre-operatively, reconcile to surgical objectives intra-operatively, and determine whether surgical objectives were met post-operatively. Ultimately, the standardized images uniquely made possible by EOS pre-, intra-, and post-operatively can be the foundation for predictive care in spine.

The company’s SafeOp Neural InformatiX System was the first advanced technology to launch from the AIX product platform. SafeOp is a patented technology that automates both EMG and SSEP monitoring. As a result, the system can provide surgeons with objective, real-time, and actionable information about both nerve location and nerve health intra-operatively on a small, easy-to-use tablet platform. Integration of the information with the company’s advanced access, implant, and fixation technologies equips surgeons with procedural solutions designed to enhance safety, efficiency, and reproducibility. The VEA mobile alignment application is designed to leverage EOS technology to more quickly quantify alignment parameters on a mobile device. Further development is aimed at enabling broad EOS image access for the integration of intraoperative solutions.

Valence was acquired in 2023. An intra-operative system developed by spine experts with deep navigation and robotics know-how, Valence integrates navigation and robotics into spine procedures utilizing either a 3D imaging scan or 2D fluoroscopic images of the patient. Utilizing a small, table-mounted navigation system, a robotic arm guides instrumentation and implants to a pre-determined destination during surgery. While the company achieved regulatory clearance to place Invictus screws through the system late in 2023, the company is seeking to further develop and commercialize the company’s intention for Valence, which the company expects to integrate the navigation and robotics into the company’s lateral procedures to improve surgical predictability, reduce radiation exposure, and enhance intra-operative precision.

Positioners

The company has developed approach-specific patient positioning systems that integrate with the company’s other access systems, providing for a more rigid construct and enhanced reproducibility. The PTP Patient Positioning System, for example, was developed specifically for the PTP procedure as an adjunct to the Sigma-PTP Access System. Designed to maximize the positional effects of having the patient in a prone position while streamlining operating room setup, PTP enables a single-position surgery. Key features include bi-lateral structural support to minimize patient movement, adjustable side paddle position to accommodate varying patient habitus, an integrated bed-rail system and compatibility with the Jackson frame. In addition, the system’s ultra-radiolucent carbon fiber frame is designed to help enhance fluoroscopic visibility and its coronal bending mechanism is designed to create reproducible access to L4-5 and upper lumbar regions.

Access Systems

The company has differentiated surgical access instruments that are designed to maximize patient outcomes through enhanced visibility and rigidity, intuitive orthogonality, and approach-specific exposure. The company offers several split-blade retractors which allow for direct, illuminated visualization and freedom of maneuverability within the operative corridor. The company’s retractors also provide for stable positioning by attaching directly to the surgical table. The company also offers procedure-specific access systems, including the company’s Sigma-ALIF Access System which allows for custom anterior abdominal exposure through freehand placement of dissecting blades and connection to a ringed frame. The Sigma-ALIF Access System provides an unobstructed working corridor with custom features to enable an ALIF approach in either supine or lateral decubitus.

Implants and Fixation Systems

The company’s portfolio of specialized spinal implants and fixation systems are designed to specifically meet the requirements of each approach. Available in varying shapes, sizes, and lordosis options, the company’s spinal implants include implants made from allograft, PEEK, and porous titanium. The company offers NanoTec surface modifications to its interbody systems to increase the surface area for cell adhesion and proliferation. Customization can be enhanced with the company’s lordotic expandable intervertebral body fusion system, Calibrate PSX, which was released in 2022. The company also offers several standalone implants designed to provide for height restoration and stabilization in one integrated solution.

Invictus is the company’s next-generation comprehensive spinal fixation solution, designed to treat the range of pathologies, with intraoperative adaptability and surgical predictability through an open, minimally invasive, or hybrid approach. The sophistication of the Invictus Posterior Fixation System continues to expand. The commercial release of Invictus OCT in early 2021 extended the system’s proficiencies to include the occiput and cervical spine, creating a single system capable of addressing the entire spine from occiput to ilium with familiar and consistent instrument design, simplified screw insertion, and intraoperative adaptability. The launch of Invictus OsseoScrew later in 2021 advanced the system with the first and only expandable screw commercially available in the U.S. OsseoScrew has been designed to optimize fixation and address fixation failure in compromised bone.

Biologics

The company has a variety of biologics designed to facilitate the process of spinal fusion. The company’s biologics offerings consist of several allograft (donated human tissue) options, including 3D ProFuse Osteoconductive Bioscaffold, and a family of AlphaGRAFT products. 3D ProFuse Osteoconductive Bioscaffold is highly compressible when hydrated, allowing for ease of handling and better endplate-to-endplate contact. The company’s AlphaGRAFT Demineralized Bone Matrix (‘DBM’) consists of demineralized human tissue that is available in gel, putty, and fiber forms. AlphaGRAFT DBM Fibers combine the regenerative capacity of interconnected fibers with the maximum availability of growth factors endogenous to bone. Composed of 100% demineralized fibers, AlphaGRAFT DBM Fibers offer moldable, cohesive handling characteristics. AlphaGRAFT Cellular Bone Matrix (‘CBM’) is a growth factor-enriched cellular bone matrix that exhibits the angiogenic, osteoinductive, and mitogenic growth factors necessary for bone growth. AlphaGRAFT CBM may be delivered in granular, fiber, or structural form. The company also offers BioCORE Moldable Bioactive Graft which is a synthetic mineral-collagen composite matrix that can be molded to fit the bone defect. The company’s Amnioshield Amniotic Tissue Barrier is an allograft for spinal surgical barrier applications. The composite amniotic membrane is intended to act as a biological barrier and provide an excellent dissection plane.

Products and Technologies Under Development

Internally Developed Products and Technologies

The company is expanding its portfolio of products and technologies to enhance clinical outcomes across multiple pathologies, regardless of a surgeon’s preferred surgical approach. The company expects to launch 8-10 new products during 2024.

Sales and Marketing

The company markets and sells its products through a sales force consisting of dedicated and non-dedicated independent sales agents and dedicated employee direct sales representatives. The company employs a team of area vice presidents, sales directors, and regional business managers, who are responsible for overseeing the sales channel process in their territories. Although surgeons in the U.S. typically make the ultimate decision to use the company’s products, the company generally invoices the hospital for the products that are used and pay commissions to the sales representative, or the sales agent based on payment received from the hospital.

The company evaluates and selects its independent sales agent partners and sales employees based upon their expertise in selling spinal devices, reputation within the surgeon community, geographical coverage, and established sales network.

The company markets its products at various industry conferences, organized surgical training courses, and in industry trade journals and periodicals.

Manufacture and Supply

With respect to biologics products, the company is FDA-registered and licensed in the states of California, New York, and Florida, the only states that require licenses. The company’s facility and the facilities of the third-party suppliers the company uses are subject to periodic unannounced inspections by regulatory authorities and may undergo compliance inspections conducted by the FDA and corresponding state and foreign agencies.

Intellectual Property

Patents. As of December 31, 2023, the company and its affiliates owned, or the company exclusively owned 156 issued U.S. patents, 42 pending U.S. patent applications and 257 issued or pending foreign patents. The company owns multiple patents relating to unique aspects and improvements for several of the company’s products. Patents for individual products extend for varying periods according to the date of filing or grant and legal term of patents in various countries where a patent is issued.

Trademarks. As of December 31, 2023, the company and its affiliates owned 30 registered U.S. trademarks and 26 registered trademarks outside of the U.S.

Government Regulation

The company’s products are subject to extensive regulation by the FDA and other U.S. federal and state regulatory bodies and comparable authorities in other countries. The company’s products are subject to regulation under the Federal Food, Drug and Cosmetic Act (‘FDCA’), and in the case of the company’s tissue products, also under the Public Health Service Act (‘PHSA’).

The company’s products on the market in the U.S. include Class II spinal implants, instruments, neuromonitoring systems, robotic navigation systems, x-ray imaging systems and software as a medical device (SaMD) marketed under 510(k) premarket clearance, as well as Class I 510(k) exempt spinal instruments and devices.

To obtain 510(k) clearance, the company must submit a premarket notification demonstrating that the proposed device is substantially equivalent to a device legally marketed in the U.S.

The company’s facilities, records and manufacturing processes are subject to periodic announced and unannounced inspections by the FDA to evaluate compliance with applicable regulatory requirements.

Compliance with Certain Applicable Statutes

The company is subject to various federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback laws, false claims laws, criminal health care fraud laws, physician payment transparency laws, data privacy and security laws, and foreign corrupt practice laws. Violations of these laws are punishable by criminal and/or civil sanctions, including, in some instances, fines, imprisonment and, within the U.S., exclusion from participation in government healthcare programs, including Medicare, Medicaid and Veterans Administration health programs. These laws are administered by, among others, the U.S. Department of Justice, the Office of Inspector General of the Department of Health and Human Services and state attorneys general. Many of these agencies have increased their enforcement activities with respect to medical device manufacturers in recent years.

ACA also includes various provisions designed to significantly strengthen fraud and abuse enforcement in addition to those changes discussed above. Among these additional provisions include increased funding for enforcement efforts and new ‘sunshine’ provisions to require the company to report and disclose to the Centers for Medicare and Medicaid Services (‘CMS’), any payment or ‘transfer of value’ made or distributed to physicians or teaching hospitals. These sunshine provisions also require certain group purchasing organizations, including physician-owned distributors, to disclose physician ownership information to CMS. The company and other device manufacturers are required to collect and annually report specific data on payments and other transfers of value to physicians and teaching hospitals.

The company is not directly regulated by the Health Insurance Portability and Accountability Act (HIPAA), but the company’s ability to access PHI (protected health information) for purposes, such as marketing, product development, clinical research or other uses is controlled by HIPAA and restrictions placed on health care providers and other covered entities. HIPAA was amended in 2009 by the Health Information Technology for Economic and Clinical Health Act (‘HITECH’) which strengthened the rule, increased penalties for violations, and added a requirement for the disclosure of breaches to affected individuals, the government, and in some cases the media. The company must carefully structure any transaction involving PHI to avoid violation of HIPAA and HITECH requirements.

Competition

The company’s competitors include numerous large and well-capitalized companies, such as Medtronic Sofamor Danek, a subsidiary of Medtronic; Depuy Spine, a subsidiary of Johnson & Johnson; Stryker; Zimmer Biomet; and Globus Medical.

History

Alphatec Holdings, Inc., a Delaware corporation, was founded in 1990. The company was incorporated in 2005.