HOLLAND — Backed by a new $1 million round of funding, Shoulder Innovations Inc. plans to market its implant technology more aggressively to surgeons and health systems.
The Holland-based medical device company will use the capital to increase inventory in preparation for future growth and to conduct research and development on implants used in shoulder replacement surgery.
Ann Arbor-based Michigan Angel Fund led the latest round of investment, which closed this month.
Late last year, Shoulder Innovations brought to market a new shoulder replacement implant requiring 50 percent fewer instruments and fewer steps during surgery, all of which results in lower costs, said President and CEO Matt Ahearn.
Aside from costing less, the implant also offers greater stability and lasts longer than existing implants, enabling patients to avoid subsequent replacement surgeries years later.
“Our goal is to build a world-class shoulder replacement company, and the team that we have has significant experience doing that,” Ahearn told MiBiz.
An orthopedic surgeon invented the company’s Total Shoulder System, which is now used at 10 U.S. hospitals and health systems, one of which is in Michigan, Ahearn said. To date, 50 patients have received the company’s implant.
Ahearn said the company set a target of having the system used at 25 hospitals or health systems by the end of this year and 65 by the end of 2018.
Shoulder Innovations forecasts revenues of $20 million by 2020, he said.
The medical device company closed March 1 on the capital raise that included 27 investors, according to a filing with federal securities regulators. The company expects to secure funding from additional investors that will push the latest round to a total of $1.3 million to $1.4 million, Ahearn said.
Including previous rounds, Shoulder Innovations has raised nearly $3 million in its history. That amount includes the most recent round that will go to fund R&D on the next generation of implant on the arm, or humeral, side of the shoulder, an innovation the company hopes to launch in 2018, Ahearn said.
“We’re beginning to scale the business to customer acquisition and commercialization, and it’s about continuing to expand our product portfolio,” he said. “We’ve passed the first handful of hurdles to get the company launched and now it’s about executing on a commercial strategy and executing a product development strategy.”
Shoulder Innovations sources components for the shoulder replacement system from manufacturers in Warsaw, Ind.; Portland, Ore.; and Chelsea, Mich., which is located west of Ann Arbor.
DRIVING INNOVATION
Shoulder Innovations brought to market an implant invented by Dr. Stephen Gunther, an orthopedic surgeon at Sentara Healthcare in Charlottesville, Va. who formerly practiced in northern California.
Gunther often treated loggers and other patients who needed should replacement surgery after suffering joint damage from severe arthritis. That led him to begin working in his spare time to “find a better way” for shoulder replacement, Ahearn said. Gunther did it by creating an implant that’s inset in the bone of the shoulder socket.
Shoulder Innovations introduced the implant in December. Patients 55 to 60 years old with severe arthritis but a healthy rotator cuff represent a core market for Shoulder Innovations, Ahearn said.
“Doctors around the country are putting the Shoulder Innovations implant in patients today. The design of the product is a game changer and we believe it will become the standard,” said Skip Simms, managing member of Michigan Angel Fund.
Gunther leads the company’s clinical team and connected with private investors to form Shoulder Innovations in 2009, although “the real momentum really started in early 2015,” Ahearn said. That’s when Shoulder Innovations landed an investment from Genesis Innovation Group LLC.
Founder Rob Ball launched Genesis in 2014 to cultivate and commercialize technologies. Ball serves as executive chairman of Shoulder Innovations and also leads Holland-based Magnesium Development Co. as CEO. The latter company, where Ahearn also serves as CFO, develops orthopedic surgical screws made of magnesium.
GROWING DEMAND
In announcing the launch of the implant technology, Shoulder Innovations said more than 100,000 patients in the U.S. undergo shoulder replacement annually, with demand growing at nearly 10 percent per year.
Investors and officers in Shoulder Innovations created and built the company to take an innovation to market and grow from there, Ahearn said. The company wants to remain independent, although if a prospective buyer offering a “great financial opportunity” were to come along seeking to acquire the Total Shoulder System, they’d consider it, he said.
“At the end of the day, that’s our number-one goal and objective: to build a very profitable, cash-flow positive, stand-alone organization,” Ahearn said. “We set out to build a great company and what happens from there happens.”
