SI-BONE (SIBN 19.29, -1.00, -4.93%) is a name worth keeping on the radar. While the recent
IPO has not done much since its debut, It traded sharply higher on Friday
(+16%) on some positive news about insurance coverage.
SI-BONE is a medical device company that pioneered the iFuse Implant System, a minimally invasive surgical system for fusion of the sacroiliac joint to treat sacroiliac joint dysfunction. The iFuse Implant, commercially available since 2009, is believed to be the only SI joint fusion device supported by multiple studies showing improved pain, patient function and quality of life resulting from treatment.
The two sacroiliac joints are the largest joints in the body and connect the sacrum, near the base of the spine, to the iliac bones, the two major bones of the pelvis. Patients with sacroiliac joint dysfunction or sacroiliac joint arthritis frequently experience significant pain simply from sitting, standing, or rolling over in bed. It gets even worse with activity such as walking or running.This pain comes from small movements of the sacroiliac joints and pressure transferred across the joints.
SIBN introduced its second generation implant, the iFuse-3D, in 2017. It was cleared for marketing by the FDA in March 2017 and the European Union in May 2017. This patented titanium implant combines the triangular cross-section of the iFuse implant with a proprietary 3D-printed porous surface and fenestrated design. This design allows the surgeon to fill the implant with ground-up bone before implanting it, which some surgeons believe accelerates bone through-growth.
SIBN believes its proprietary triangular implants stabilize the joint better and more quickly than competing technologies such as screws. Screws do not resist twisting within the bone as well as SIBN's patented triangular implants. iFuse implants have more than 6x the rotation resistance of a screw designed for sacroiliac joint fusion. Also, the iFuse procedure is much less invasive as it involves a 1-2 inch incision. For these reasons, open surgery for elective sacroiliac joint fusion has become less common in the US since SIBN introduced iFuse.
SI-BONE announced last week that Blue Cross Blue Shield of Arizona (BCBS AZ) has established a positive coverage policy for MIS SI joint fusion exclusively for the iFuse Implant System. All other SI joint fusion products are considered experimental and investigational and are not covered by the plan. The BCBS AZ policy is the 26th iFuse exclusive policy established by a commercial payer in the US, and provides access to the iFuse Implant System for more than 700,000 BCBS AZ plan members. Of note, 44 of the 65 largest private payers in the US now cover the iFuse Implant System for MIS SI joint fusion.
SI-BONE is not yet profitable and it will likely be a few years before they do make a profit. Also, the company is still quite small as management recently guided to 2018 revenue of $55.0-55.4 mln, up roughly 15% from 2017. The good news is that, unlike some other medical device names, SIBN has a product that is currently being sold in the marketplace.
What's going to help SIBN is to keep gaining insurance coverage. Specifically, they like to see exclusive payer coverage policies meaning they cover only the iFuse Implant System while other systems are not covered. The BCBS AZ coverage follows exclusive payer coverage policies from Blue Cross Blue Shield North Carolina and Neighborhood Health Plan. While not exclusive, SIBN also recently got a positive coverage policy from HealthPartners. Another positive is that the iFuse received an exclusive coverage policy recommendation from EviCore, a specialty benefits company, which supports payers covering 107 million lives.
In sum, SIBN is a recent IPO, having made its debut in October 2018. The stock has not really done much. The upsized 7.2 mln share IPO (from 6 mln shares) priced at $15 then opened at $21. However, it has pretty much stayed in the high teens and low $20 range. Part of that was the poor timing of the IPO which happened when the market was in sell-off mode. Our sense is that SIBN may have gotten overlooked as investor appetite for new IPOs waned in October. With that said, SIBN had high quality underwriters (led by Morgan Stanley and BofA/Merrill) which gives it a measure of credibility. Overall, it's a name worth keeping on the radar.
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