Orthopedics Firm Smith & Nephew Buys Blue Belt for $275M

Robots have been helping with partial knee replacements, and two companies hope to apply them to full joint replacements. Orthopedics maker Smith & Nephew PLC has acquired surgical robotics company Blue Belt Holdings Inc. for $275 million.

Plymouth, Minn.-based Blue Belt Technologies was spun out of Carnegie Mellon University’s Robotics Institute in 2003. Its Navio system is a combination of CT-scan-free navigation software and a handheld, robotically controlled bone-shaping drill.

“It will only let me remove the bone that needs to be removed,” said Jeff Headrick, an orthopedic surgeon at Grace Medical Center in Lubbock, Texas. “It uses the mechanism that moves in and out to assist me in removing the proper amount of bone in the right location. If I get outside of the line, it pulls it back.”

Since partial knee-replacement procedures are more precise, recovery times can be shortened. Navio is used in about 90 cases per month in the U.S., Australia, France, Turkey, and the U.K. Blue Belt also makes artificial knees.

In the U.S. in 2013, 446,000 cases of lower-body joint replacements cost Medicare $6.6 billion, more than any other service. That number will only rise as the Baby Boomer generation ages.

Each Navio system costs $400,000 to $450,000, and 43 units had been sold as of this past spring, said Chief Operating Officer Craig Markovitz.

Health Point Capital helped raise $90 million in 2011. The U.S. Food and Drug Administration approved Navio in 2012. Blue Belt competes with Ft. Lauderdale, Fla.-based Mako Surgical Corp. for market share, and the two companies have gone to court over patent disputes.

Going for total knee replacement

London-based Smith & Nephew is Europe’s largest provider of artificial hip and knee joints, as well as wound management and sports medicine technology. It was already a major Blue Belt sales partner.

“Our experience working with Blue Belt Technologies and our customer insight has convinced us that robotics will become increasingly mainstream across orthopaedic reconstruction in the foreseeable future,” said Oliver Bohuon, CEO of Smith & Nephew.

In 2017, Smith & Nephew plans to combine Navio and its Journey II product for total knee replacements and apply Blue Belt’s robotics assistance to complex knee surgeries that are growing in frequency and are not yet supported with robotics.

It also hopes to address total hip replacements, expand into sports medicine, and widen adoption of robot-aided surgery beyond the U.S.

“Navio has been developed as an open platform for partial knees, and Smith & Nephew will continue to support customers choosing to use implants from other manufacturers,” the company said.

Smith & Nephew said it expects a return on its capital investment in about four years. Around 120 employees around Minneapolis and Pittsburgh in the U.S. and Manchester in the U.K. will join the company.

In addition, Smith & Nephew reported global sales of $1.1 billion in the third quarter of the year, despite a decline in profits because of slowed sales in China and the strength of the U.S. dollar.

It also recently acquired the trauma and orthopedics units of DeOst LLC and DC LLC, which manufacture and distribute its products in Russia.

Medical technologies company Stryker Corp. and pharmaceutical giant Johnson & Johnson were rumored to be interested in buying Smith & Nephew, but neither has proceeded with a deal. Stryker acquired Blue Belt rival Mako Surgical for $1.65 billion in 2013.

BCC Research predicts that the global market for medical robotics and computer-assisted surgical equipment will grow from $2.7 billion in 2013 to $4.6 billion in 2019. Orthopedic applications are expected to triple.

The U.S. is currently the largest market for robotic surgery, but it is affected by cost and regulatory pressures, said market analysts. Adoption in the Asia-Pacific region is growing faster, they said.