By Muphen R. Whitney
The last week of September 2006 saw significant news emanating from K2M, a Virginia-based biotechnology company known as “the Surgeon Driven Design company” that was founded in January 2004.
At the 21st Annual Meeting of the North American Spine Society, held September 26 to 30 in Seattle, Washington, K2M unveiled its new Web site and announced the launch of its MESA Spinal System, the latest product in its line of devices used during spinal surgery.
The MESA system is an entirely new screw technology that transmits no torque to the spine during implant locking. It joins K2M\’s Aleutian and Denali systems in providing spinal surgeons with solutions to treat complex spinal problems including deformities.
“Our products have been well-accepted in the market,\” says Eric Major, K2M\’s President/CEO and co-founder. “The satisfaction of the surgeons, hospitals, and patients who have used more than 3,000 of our products are ensuring our acceptability and staying power in this highly- competitive market.\”
Major also credits the products\’ success so far to the physician-driven focus, led by
co-founder and Chairman Dr. John Kostuik, retired chief of spinal surgery and chairman of the orthopedics department at Johns Hopkins Hospital.
“Dr. Kostuik is one of the ‘father\’s of spine surgery\’,\” Major explains. “He has trained well over 100 Fellows in this discipline.\”
That pool of Fellows has contributed significantly to the more than 70 patents that K2M now owns.
“One of Dr. Kostuik\’s Fellows had a large portfolio of patents that we acquired. We have also developed some and acquired others from various sources. We realize that having as much intellectual property as possible brings great value to the company.”
“We are building an entire portfolio of products so that we can provide surgeons with everything they need interoperably to treat the spinal patient,\” Major says.
Major credits Dr. Kostuik with bringing in the ideas of what the market needed, and Major is the glue that holds together the very experienced management team he has put together; but even though Major and Kostuik brought significant business and surgical experience to the new company, it is always difficult to go from an idea to a business. There are always lessons to be learned when starting up a new company, according to Major.
“All start-ups have obstacles, that\’s why the majority fail within the first two years,\” explains Major. “The obstacles are immense. You have to establish a corporate culture that attracts others, and, of course, technology is always a challenge. Your facilities and infrastructure all require capital to sustain them. Raising money is a distraction, but necessary.
“We hemmed and hawed about hiring someone to help us with this last round of funding, but in the end we did the right thing with hiring Piper Jaffray [a middle-market investment bank and institutional securities firm]. They generated lots of interest in us and arranged for 19 presentations for us in two weeks between New York City and San Francisco. They also helped us understand and evaluate the term sheets.
“Another lesson we learned along the way is not to say \’no\’ when money was offered to us. We chose not to raise more money because we didn\’t want to dilute our capital structure. This may or may not work for others, but all in all we are very pleased with how we raised money.\”
Major notes that some of the proceeds from the latest round of funding will go to sales and marketing as well as to more new product development. He says there are more than 10 products in the pipeline that will be developed over the next 12 months.
Although not yet profitable, K2M reached what Major calls \”sustainability\” in the first quarter of this year. Fiscal year 2005 saw strong sales (although Major declines to discuss specific figures) that “more than doubled” in FY 2006.
“Our destiny is in our own hands now,\” Major says. \”We do not anticipate any further funding rounds. We are now an established presence in the spine market, and we will continue to grow.\”
From the very beginning Major and Kostuik realized they had a large venture ahead of them. That is why they chose K2M for the company\’s name.
“We knew we were entering a very competitive market against very established companies such as Johnson & Johnson and Medtronics. And, of course, the being associated with the world\’s toughest mountain to climb gave us incentive and also a creative marketing theme that we are carrying out by giving our products geologic names.\”
For the company\’s 10th anniversary in 2014 Major would like to see K2M up close and personal.
“I would really like to hike into the base camp of K2,\” he says.
That has to be a walk in the park compared to entering the competitive spinal surgery devices market.
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