Spinal surgical implant VariLift company adopts orphaned technology

A few years ago, Chad Neely’s father, a San Antonio-based spinal surgeon, told him he couldn’t believe that the technology he used successfully in clinical trials hadn’t yet made it to market.

Instead, the spinal technology, which was invented in the mid-1990s, was shelved by various companies. Called VariLift, the implant used in spinal surgery seemed destined to be an orphaned technology.

At first, the then-financier Chad Neely viewed Dr. Warren Neely’s idea with his typical amount of skepticism.

“Like I do with every physician who comes to me with a business idea, I [initially] ran in the opposite direction,” Chad Neely said.

Luckily he didn’t run too far. The Neelys have since created Wenzel Spine Inc., a spinal medical device company. After raising $4.2 million in startup capital, Wenzel Spine plans to bring VariLift to market later this year.

In 2009, Chad Neely, an experienced investment banker who has worked in mergers and acquisitions for Merrill Lynch and as a financier in Comerica’s technology and life science finance group, spotted an opportunity to buy VariLift from Encore Medical, an Austin-based manufacturer of orthopedic devices.

It happened that Encore, which had acquired the technology in a reverse merger, was looking to shed noncore assets.

“I saw an opportunity to get that patent portfolio and technology,” Neely said.

Neely, CEO of Wenzel Spine, raised $4.2 million in capital and closed on the acquisition of VariLift and other spine technologies in October 2009. Of the total capital raised, a $2.5 million equity round was led by Texo Ventures, a venture capitalist and angel investor group in Austin.

Neely did not disclose the purchase price for the technology.

Now, Neely said the company is moving at full speed to put VariLift on the market as a spinal device as early as this summer. The VariLift implant is currently sold as the OTI Bone Plug and has generated about $1.5 million in revenue.

The company, which has existing U.S. and European distributors, plans to start recruiting a vice president of sales in March, which will round out its five-person management team. It plans to hire regional salespeople in the third quarter.

In the next five years, Neely believes the company can generate about $30 million to $40 million in sales.

But first, the company is seeking Food and Drug Administration approval to label the product a spinal device, and it’s developing its marketing plan, product brochures and surgical techniques.

“Once we get the FDA approvals done in the June-July time frame, we’ll really be ready to go to market,” Neely said.

One of the biggest advantages of working with an orphaned technology is that VariLift already has the clinical trial history and proven efficacy that makes it attractive to surgeons, Neely said.

“Just in Texas, we have a database of over 1,000 patients, some with six-year follow-ups, with this procedure,” Neely said. “That is a huge clinical database to demonstrate the efficacy and the benefits of this procedure.”

Warren Neely, chief medical officer of Wenzel Spine, participated in the clinical trial of VariLift and has been using the product since 2003.

An earlier-stage medical device company may typically have a database of 200 patients with two-year patient follow-ups.

The design of the VariLift product, an implant about the size of thimble, reduces the amount of hardware and cost for the hardware typically used in spinal surgery. Surgery using the device is less invasive and requires less time in the operating room, which helps reduce recovery time, Neely said.


Josh Sandberg

Josh Sandberg is the President of Ortho Spine Partners and Partner for The De Angelis Group. He also serves as Co-Founder and Editor of OrthoSpineNews.

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