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Our strategy is focused on significantly transforming our company and designed to position us to compete more effectively in the marketplace, accelerate growth and continue to improve profitability. We refer to this internally as our “Management Agenda” and this drives our day-to-day decisions and alignment on priorities across our entire organization. We know we will likely face challenges along the way, but we are confident that we have the right people, the right strategy and the resources to make our long-term future brighter than ever before.
The key elements of our strategy are:
We estimate that the core stabilization and fixation business, including pedicle screw platforms and interbody systems, represents approximately $5.5 billion, or two-thirds, of the worldwide spinal fusion market. To capture a greater portion of this opportunity, we are focused on innovating and launching differentiated products in these large market segments of spine. In early 2015, we initiated the full commercial launch of the Arsenal Degenerative System, our newest and innovative pedicle screw platform. We further extended this platform with the introduction of Arsenal CBX, a less-invasive midline approach for cortical bone fixation. And, we introduced Battalion, our new titanium-coated PEEK interbody system.
Looking to the future, we are focusing our R&D resources on two other large markets of spine: Lateral and Deformity. We anticipate launching our lateral and Arsenal Deformity systems in 2016.
Combining the flow of products of today that were launching this year and the programs we have planned through next year, we have a rich product pipeline that we believe is one of the strongest in spine.
The second key element of our strategy is focused on improving our overall balance sheet. First, we have an objective to reduce instrument costs by half over the next couple of years. To date we have been able to deliver a 50% reduction in instrument costs for Arsenal. We will be working to apply this cost reduction expertise across our portfolio. We have also made significant strides to move to an outsourced manufacturing model and we are well underway on that initiative. To improve return on invested capital, we are implementing initiatives designed to transform our distribution model for instrument sets and increase our set turns. Over time, we believe that achieving these goals will reduce the amount of fixed assets on our balance sheet, improve our margins and our free cash flow.
As we transform Alphatec, we are actively increasing our commercial presence globally with the goal of gaining new surgeon users for our rich product pipeline. We are rapidly expanding our sales force to strengthen our coverage in the U.S., E.U., Japan, China and Brazil.
We believe that our global expansion combined with our planned product launches in target geographies will allow us to compete more effectively and gain greater market share.