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Are Bioresorbable Implants Worth the Risk for Synthes? Case Study Example

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Case Study

Bioresorbable implants are not worth the risk for Synthes for three reasons: 1) the market for bioresorbables is not as robust as predicted; 2) Synthes is not the best company to take advantage of this opportunity; 3) The opportunity presents more risks than benefits for Synthes.

Synthes is looking for business opportunities. The (main) business case for Synthes lies on the following concept: Orthopedic implants traditionally made of stainless steel or titanium.  Although the materials are strong and cost-effective, they need to be taken out by the surgeon leading to escalated costs. Looking at the data provided in Table A, roughly 20% of adults and 40% of children needed to have titanium implants removed.  Although we don’t have stratified numbers, the rough number of individuals that need to have further medical attention is 350,000 (this is based on taking roughly 50% of the total population- a rough estimate based on the total of adults and children needing attention).

Although the potential market size is large, the dangers of the bioresorbable market are also palpable.  The main benefit of  bioresorbable implants is that they do not need to be removed from the patient; thus, they obviate the cost of surgeon removal.  There are, however, also side effects to the use of bioresorbables: They do not always preform as predicted and can lead to insufficient healing or inflammation. The risk emanating from “getting it right” on bioresorbables is enough to keep Syntheout of the market.  Indeed, several market competitors have tried and failed before Synthe: the production of PDS and PGA proved that the bioresorbable dream was not as easy to achieve as the products broke down and did not obviate the need for surgeon removal.  Not only did the first-generation of products lead to less than optimal results, but Synthes essentially sat out of their development.  Second generation efforts were able to improve upon initial efforts; however, numerous competitors entereted the space including Johnson and Johnson, Biomet, with specialist producer Bionx and Macropore also a threat.  Synthes, without a robust product, would have a difficult time entering the already tight bioresorbable market.

The second apposite question is: Is Synthes the right company to take advantage of this opportunity.  The answer to this question is likely no; the financial and operational risks are too great, especially in this competitive market.  According to Harvard Business School team estimates, they believed that Synthes could match or surpass the quality of bioresorbable devices currently on the market in three to five years; the estimated cost of investment was$20 million that included a team of 20 to 30 engineers and other personnel.  The risk for further investment is too high: the current market size is only $10 million, and with other competitors, it doesn’t make sense for Synthes to enter such a risky market.  The capital can be deployed better elsewhere.

Overall, Sythes should not develop this potential opportunity.  Not only has the market failed to develop up to its potential in the past, there are also numerous large competitors already in the space.  Finally, Synthes only has marginal capabilities to compete in the field.  They should let this opportunity pass in order to pursue others.

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