ApiFix Ltd. (KIDS) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the OrthoPediatrics of ApiFix, and FDA-approved, Nonfusion Scoliosis Technology Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference to your speaker today, Tram Bui, The Ruth Group. Please go ahead, ma'am.

Thank you, operator. In our remarks today, we will include statements that are considered forward-looking statements within the meaning of the United States securities laws and including statements with respect to the acquisition of ApiFix Ltd. In addition, management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current assumptions and expectations of future events, which may prove to be incorrect. A detailed discussion of the risks and uncertainties that the company faces is contained in its annual report on Form 10-K that the company filed on March 5, 2020. Additionally, there are risks related to COVID-19, the impact such pandemic may have on the demand for our products and our ability to respond to the related challenges. Actual results may differ materially from those expressed in or implied by the forward-looking statements. The company undertakes no obligation to update or review any estimate, projection or forward-looking statement. With that said, I'll hand the call over to Mark Throdahl, President and CEO of OrthoPediatrics.

Good morning, everyone. And thank you for joining us this morning to discuss the press release we issued last night on our acquisition of ApiFix Limited. Our comments are structured around a PowerPoint presentation which you can pull up on your screens via the webcast or from our website at www.orthopediatrics.com. We're excited to announce our entrance into the nonfusion scoliosis market with the acquisition of ApiFix Limited and its proprietary minimally-invasive deformity correction system, or MID-C, for a nonfusion treatment of progressive adolescent idiopathic scoliosis, or AIS. We believe that ApiFix' product offerings fill a gap in the treatment for AIS that could potentially allow patients to avoid fusion surgery entirely. With this disruptive technology, we're creating a potential new market and expanding the total addressable market of our scoliosis business. ApiFix' MID-C system provides a superior alternative to failed bracing as well as irreversible spinal fusion procedures, thus meeting a profound unmet clinical need for AIS patients and their families. Turning to Slide 3. For some time, we've been following a strategy of developing a portfolio of early onset scoliosis, or EOS, and nonfusion scoliosis correction products. For EOS, we've been developing a second-generation growing rod. And last year, we acquired rights to a novel pediatric device that is the basis of a next-generation technology for treating this condition. For nonfusion surgery, we have been developing a spinal tethering system. The ApiFix acquisition supports our goal of adding a nonfusion system designed to intervene with patients earlier than one would with permanent spinal fusion, were that the only surgical option. This is a posterior dynamic deformity correction system that is FDA-approved, and it has been granted the CE mark. Turning to Slide 4. ApiFix is a leading pioneer in motion-preserving scoliosis correction technology and has developed the least invasive surgical intervention option. The MID-C system is placed posteriorly and unilaterally on the concave aspect of the curvature. It is FDA-approved for adolescent scoliosis patients with Lenke type 1 and Lenke type 5 curves of 40 to 60 degrees. It acts as an internal brace and maintains correction of the spinal deformity while preserving all mobility. It is a viable alternative to failed bracing and spinal fusion for the treatment of progressive scoliosis with patient recovery time measured in days rather than months. Turning to Slide 5. The MID-C system represents only -- represents one of only 2 FDA-approved, nonfusion scoliosis correction systems, and it is the only one approved for posterior dynamic deformity correction. Both it and the vertebral body tethering system were approved in August 2019 and represent the first humanitarian device exemption, or HDE, pediatric orthopedic approvals in the past 25 years. An HDE designation allows performing up to 8,000 surgeries annually in the United States. Turning to Slide 6. ApiFix Limited is located in Israel and Boston, Massachusetts. Its 9 employees are led by Paul Mraz, a Boston-based executive with nearly 30 years of experience leading multiple early-stage medical device companies. Paul and the entire ApiFix team have joined OrthoPediatrics post-acquisition, with Paul taking a senior executive position in OrthoPediatrics, leading our drive to gain adoption of the ApiFix technology. ApiFix has strong intellectual property protection, with 46 granted and 25 patent applications worldwide. More than 370 surgeries have been conducted, some with 8-year follow-up. Revenues last year were approximately $500,000, and ApiFix meets OP's recent emphasis on capital efficiency, generating extremely high sales per dollar of inventory. Turning to Slide 7. The MID-C system is a disruptive technology. It can be implanted in less than 2 hours. It is the least invasive surgical solution using the familiar posterior unilateral approach instead of an anterior thoracic approach required for tethering. And thus, it eliminates the need for the addition of a thoracic or general surgeon in the operating room. And there is no need to collapse the lung for surgical access. The post-surgery hospital stay is only 1 or 2 days, and overall recovery time is 1 or 2 weeks versus 6 months or more for spinal fusion and tethering. The system has a lower complication and revision rate than tethering. But the 2 most important advantages of this procedure are that it preserves motion with its novel polyaxial joints and self-adjusting rod while maintaining curve direction, and the implant can be removed post skeletal maturity. Slide 8 summarizes the advantage of ApiFix relative to both spinal fusion and tethering. The incision size is more than 50% smaller than with spinal fusion and surgery time is 1 to 2 hours versus 4 to 6 hours for spinal fusion and 3 to 4 hours for tethering. Blood loss is 90% less than spinal fusion and 25% to 50% lower than tethering. Hospital time is 1 or 2 days versus 4 to 7 days for spinal fusion and 3 to 5 days for tethering, which may also require an ICU stay and chest drainage, too. ApiFix' recovery time is several weeks compared to 6 months or more for fusion and 2 to 4 months for tethering. Most importantly, motion is preserved with ApiFix, whereas range of motion is permanently limited with spinal fusion. And while motion is also preserved with tethering, revision or removal is very challenging. Turning to Slide 9. ApiFix then is a viable alternative to failed bracing and spinal fusion. And we expect that it will open up a new product category, increasing surgical options for both traditional bracing and fusion patients with single-curve AIS from 40 to 60 degrees. We estimate that approximately 60,000 braces are applied each year in the United States, and some portion of those patients will eventually become MID-C customers. Turning to Slide 10. To summarize, we believe that nonfusion techniques are the Holy Grail of pediatric scoliosis surgery. Patients, families and surgeons will choose to intervene earlier and take advantage of the benefits of nonfusion treatments rather than waiting for traditional fusion. ApiFix also offers significant advantages over tethering. It is a unique technology with strong IP protection. There are only 2 players in the nonfusion market with no new market entrants on the horizon. ApiFix offers the only posterior dynamic deformity correction solution, and it is much less invasive than tethering or spinal fusion. Thirdly, it is FDA-approved, has CE mark approval and is backed by long-term clinical data on more than 370 patients with encouraging outcomes and lower complication and revision rates than tethering. Finally, it addresses a significant unmet clinical need because it is motion-preserving and removable. It is a very significant potential opportunity for OrthoPediatrics. Just a few concluding remarks. On our recent fourth quarter and full year 2019 earnings call, we stressed that acquisitions are one of our key growth initiatives. Even in these uncertain days, we are pleased to complete a major transaction with long-term impact. ApiFix poses few integration issues for us, and we anticipate minimal complexity, maintaining its staff in Israel and Boston with no disruption or management diversion. Furthermore, 95% of the initial payment has been made in KIDS' common stock, and we have the flexibility to make 75% of the minimum milestone payments in stock as well. We ended 2019 with more than $72 million of cash. And with the postponement of elective surgeries in many parts of the world, we are managing the company to preserve cash. However, this does not mean that we are putting on hold the bold and surefooted steps to build OrthoPediatrics for the long term. Discussions between OP and ApiFix have been ongoing for some time, and the terms of the transaction reflect a mutual sensitivity to these tumultuous times and the prospect of the long-term value of this partnership. ApiFix' MID-C system becomes OrthoPediatrics' 35th surgical system. We look forward to supporting its clinical introduction in the United States and expanding broader commercial adoption internationally by leveraging our industry-leading global distribution network. I'd now like to hand the call over to Fred for a description of the financial aspects of this transaction. Fred?

Great. Thank you, Mark. On Slide 11, you'll see some of my comments. But as Mark previously mentioned, we are very excited to announce the purchase of ApiFix for an initial price, at closing, consisting of $2 million in cash, and 934,783 shares of KIDS' common stock. We wanted to mention that we do appreciate the flexibility provided by ApiFix' Board in agreeing to shift the vast majority of the initial payment from cash and stock to approximately 95% stock, which was converted to shares using a stock price, which is higher than the current market price and much closer to our stock price pre-COVID-19. There'll be subsequent payments based on milestone achievements, including a $13 million payment in cash and/or stock at the earlier of 150 U.S. surgeries or the second anniversary of the closing date and a 2.25x LTM revenue, which will be in cash and/or stock at the fourth anniversary of the closing date. We've agreed to minimum payments in cash and/or stock of $8 million at year 3 and $9 million at year 4, which will reduce the year for earn-outs of 2.25 LTM revenue. OrthoPediatrics is guaranteed milestone payment reductions by $15 million in the event of a loss of FDA approval, a loss of the CE mark or if the implant breakage exceeds 10%. Of further note, we anticipate benefiting from a high sale to dollar of set inventory ratio that has the ability to improve our dollar in revenue per dollar inset consigned outlook in the future. As of December 31, 2019, our cash position was $72 million, which will more than support our business in 2020 as well as 2021. Including our growth initiatives, this acquisition set deployments as well as operations, even in our most severe COVID-19 stress test. Not only do we have a strong cash balance, but we also have reconfirmed our access to $15 million line of credit should we need it in the future. Additionally, we recently filed a shelf registration statement under Form S-3 with the SEC that provides the company with the flexibility and enables us to access the public capital markets in the future, if and when determined to be appropriate. I'll now turn the call back to Mark for closing remarks.

Thanks, Fred. Following the recent launch of our small stature RESPONSE 4.5/5.0mm and BandLoc DUO systems as well as the impending launch of our recently FDA 510(k) cleared neuromuscular extension for our RESPONSE scoliosis system, the ApiFix acquisition keeps us at the forefront of scoliosis innovation and allows us to create a new market. It offers patients what we believe to be a superior technology to vertebral body tethering and fusion. These advantages include greater patient safety and faster recovery times with a reversible technology that does not fuse as trial spine permanently. This transaction also demonstrates that OrthoPediatrics continues to execute our strategic growth initiatives even during this difficult time when many hospitals are deferring elective surgeries. Before opening the call for questions, I'd like to thank everybody who contributed to closing this important deal and welcome 9 new ApiFix associates and their outstanding leader, Paul Mraz, all of whom hold value similar to our own. Together, we will positively change the lives of children suffering from spinal deformities. So this morning, we have David Bailey, our Executive Vice President with us; as well as Paul Mraz, and so I'm certain we'll be able to answer any of your questions. Operator, you can now open the line up for questions.

[Operator Instructions] Our first question comes from Rick Wise with Stifel.

Congratulations to all in what seems like an exciting acquisition and addition to the portfolio. Maybe just for starters, you touched on this, but maybe just at a high level, first, Mark, talk about the implications for your scoliosis portfolio and the potential for you to increase your opportunity to be a single source or the optimal source vendor. And is that -- I know the portfolio is not complete, you're always going to evolve. But are there any other sort of critical holes that need to be filled in internally or through M&A before you get to that sort of theoretically, always changing, evolving, but optimal state?

Wonderful question, Rick, and thank you very much for your words of congratulations. I think Dave Bailey, maybe closest to the evolution of our scoliosis franchise. And so Dave, would you want to comment on Rick's question?

Sure. Thanks, Rick. Good chatting with you. I think that -- it's a good question. We -- at this stage, I believe the nonfusion segment of our portfolio has certainly been rounded out with this acquisition. As we've talked to you and investors for a long time, this has been kind of the quest for the Holy Grail in terms of our development, both in tethering as well as now this acquisition in nonfusion. And so in addition to some development that we're continuing to do in EOS, those 2 areas will really round out our portfolio. And I think what is probably the most significant about this acquisition for us is this places us certainly at the forefront of pediatric spinal deformity correction and gives us certainly, a seat at the table in any of the major children's hospitals where we haven't gotten any penetration with our RESPONSE spine system. And so as is important as it was to round out the portfolio for nonfusion applications, it was also important to make us a more relevant player in some of these major spinal deformity correction institutes.

Yes. And separately, maybe help us understand, Fred, how we think about the implications for our models. You gave us the 2019 sales rate. How do we think about 2021? And again, it's complicated, I know by the COVID situation. But maybe talk us through what, if anything, we should be contemplating in terms of revenues, margins relative to the current corporate averages and the potential to accelerate or not the move to profitability sort of in the next several years?

Yes, it's a great question. I think, first of all, just commenting on the historical revenue and the number of cases, this business is very small, as you can imagine, with only 9 employees. They have been selling this in like 10 countries across Europe, but there's really not a commercial focus for the product. It was more of introducing it with one surgeon in a country to collect the clinical data to then submit it to the FDA and get approval. So they don't have a big network of partners like we do across the world. So we're really -- this is the first time we're going to really commercialize the product. And so we think it has a tremendous opportunity, as you can imagine. With that being said, in the U.S., we have to complete the IRB process in the hospitals, which does take time and get it approved. We have to track all of these cases and report that back to the FDA. And so this will be, I think, a slow gradual increase as opposed to some immediate boost in revenue. But we think in the long run, this has a tremendous opportunity to impact the growth rate of the company. As you can see in the statement, it says 150 surgeries or the earlier of 2 years. So I think that's one indication. These cases, I think you could assume will bill out at equal to a scoliosis-type surgery or higher. And the margins, the gross margins of this will be equal to or better than our domestic overall 85% gross margin type business. In the short term, we're absorbing the 9 employees. We are absorbing the cost of their operations, their quality regulatory team and supporting the business. So there will be a cash drag and a negative EBITDA impact on the short term. That could be roughly $3 million maybe over the next 12 months. But in the long term, this will be a very, very profitable business for us that will help us get to profitability much sooner.

That's great. And maybe just last for me. There's a lot to talk about here, but I -- but just back at a high level, Mark, this is obviously a crazy environment. I don't know whether we should wonder about whether there are other opportunities that you're seeing now or maybe people more willing to sell interesting technologies. And I don't know whether there's more accommodation or willingness to be flexible on terms or pricing, just any color on that. Should we expect to see you continue to be active? Do you have the ability to continue to be active in this environment?

Thank you, Rick. There will be nothing we would do that would be of this scale that we have in discussion at the moment or anticipate. I think that there will continue, possibly, to be some much smaller tuck-in technology acquisitions, some of which may be so small that they are not materially significant. But at any rate, with ApiFix, we sort of have expended our powder here in terms of a second major acquisition after the Orthex deal last June, which has been so successful. And I think we'll be content to fully integrate this one and get it moving certainly over the near term.

Our next question comes from Matt O'Brien with Piper Sandler.

This is Drew, on for Matt, and congrats on the deal, obviously. I wanted to just touch a little bit on the competitive environment here. If I remember correctly, Zimmer recently just launched a pediatric tethering system, and it sounds like you guys are developing one in-house as well. Obviously, it sounds like MID-C is a little more differentiated. But I guess maybe you could kind of speak to how those products stack up against what you've required here? And then sort of what patients each makes most sense in?

Paul, would you want to comment on the comparison with the Zimmer Biomet tether? And Dave, you might then comment a little bit about our own tethering product. But Paul, maybe you should start.

Sure, Mark, thanks. Drew, good talking with you. I think it's an exciting time right now in the area of nonfusion scoliosis treatment. As Mark said earlier, both the tether from Zimmer Biomet's and the MID-C system from ApiFix are the first 2 HDE products for pediatric orthopedics in about 25 years, and it is a very exciting time for these children and these families and having these options available is something that's been much overdue. Both technologies provide a viable alternative between bracing that's not working in spinal fusion. The indications are very similar, but there are differences. And I would say that the differences in the surgical approach are probably very significant, one being an anterior approach, requiring an access surgeon and the other being ApiFix with a very familiar posterior approach in the placement of pedicle screws. But I do think they will both be very viable options in this area. And it's an exciting time in the treatment of scoliosis for these patients for sure.

Yes, Drew, this is Dave Bailey. To amplify Paul's point, just in calls of surgeons we've had so far, I think the #1 thing that strikes them is that it doesn't -- this procedure, the MID-C procedure doesn't require any ports in the chest, doesn't require dropping a lung. And so for a lot of hospitals and in a lot of locations, having an extra surgeon in the room, a thoracic surgeon, to do a relatively complicated procedure and that you have to drop a lung and then through small ports, place these implants. That's a very complicated surgery as well as involves more hands in the operating room. So the opportunity for surgeons to go through a posterior approach that's extremely similar to them, it's in fact, almost exactly the same as what they've been trained on, to do that through a posterior approach, a minimally-invasive procedure that takes less than a few hours is, we believe, and I think the surgeons who helped us in diligence here, believe, is a major competitive advantage over VBT. That said, VBT by Zimmer as well as the ApiFix device are certainly expanding the marketplace for nonfusion surgery. And with respect to our own development, we're well along the way in terms of the implant development and instrumentation. We feel like we have a really good system on an anterior tethering or VBT-like product develop -- that said, it's a very clear -- or very unclear pathway to the market, at least in terms of regulatory approvals for the device. So we felt like the acquisition of the MID-C product and ApiFix certainly accelerated that dramatically and will put us on the math in those operating rooms much sooner than our own internal development.

Got you. That's very helpful. And then I just wanted to piggyback a little bit on Rick's question, real quick here on timing. Obviously, a lot going on in the health care industry in recent weeks. I guess, have you been seeing these guys in the marketplace that you kind of felt like now was the time needed to scoop this asset up? Or I guess, what was the impetus that made you feel that now is a good time to go ahead and acquire this?

Well, Drew, that's a very good question. We have been following ApiFix and in general discussions with them for 3 years or so. And the serious discussions got underway, as I recall, last summer. So this has been a long-term project on our part. We have long identified that we needed to be the player in the nonfusion space, and we viewed ApiFix as the vehicle to let us get there. So at any rate, I'm delighted that we were able to reach an understanding with ApiFix' Board that, given the way that the whole market has changed post COVID-19, we needed to preserve cash, and we needed to do the deal largely in KIDS' common stock. That was the key change that took place. But finally, I think that my colleagues and I were very proud to stand tall and to advance our strategic initiatives even in these dark days. And I think that signals that we are bound and determined to continue building OrthoPediatrics despite what we view as an issue that will last 1 to 2 quarters.

Very helpful. Thanks and congrats.

Our next question comes from Ryan Zimmerman with BTIG.

Great. Congrats, everyone, on the transaction. Hope everyone's staying safe there. Just a few for me. Number one, the growing rod market has been under some pressure lately in terms of its clinical outcome from one of your competitors. And I'm just curious if you could speak to how those changes or those dynamics per se, have impacted or how you think they could impact the nonfusion side of the market for these patients? And love to understand also the Lenke 1 and Lenke 5 indications, what that looks like from a size perspective or a percentage of the scoliosis cases that are potentially out there to treat? And then I have some -- a follow-up.

Paul, do you want to address that first?

Sure. Ryan, good to hear your voice. I would say that there has been some pressure on the growing rod market as that technology finds its steady state. That said, I think that has been a very exciting option for patients as well. And like all technologies, it's about finding the right patients and patient selection, along with good surgical technique, are always the 2 most important things for any product's success and long-term viability. I would say that with -- working with the FDA over the past 4 to 5 years in getting the product from ApiFix as well as the tether product from Zimmer Biomet through the regulatory cycle, there's been a lot of focus on this area of making sure that patients, the clinical data that's backing these approvals all match up in line with the long-term viability of products. And we will be doing a registry in the United States to collect this data and continually keep analyzing the safety and probable benefit of these products. With respect to your question about Lenke 1 and Lenke 5 patients, for adolescent idiopathic scoliosis, I would say that it is the bulk of the patients, probably north of 75%.

That's very helpful, Paul. And to that point, if there is a lot of patients that fall in this category, the HDE exemption allows you 8,000 surgeries a year, I believe, but is there an environment or a scenario where you have a different regulatory status potentially down line that could open you up to further surgeries? And that would certainly be a good problem in some instances and that you're doing that many surgeries, but do you foresee this potentially expanding over time as you develop or iterate the product potentially?

Paul, any thoughts on that?

Yes, thanks, Mark. Yes, the HDE allows us to do 8,000 procedures annually in the United States. One of the strategies behind the registry and collecting this data is that we'll have the ability to then follow these patients out to 5 years. And along that way, if you're familiar with FDA's typical requirements, usually around 2-year follow-up, we will have the opportunity to convert this approval from an HDE to a PMA, and that will allow for further label expansion and lift then the limitation of 8,000 patients per year. So it's a typical regulatory strategy. I would also say that if we can get to 8,000 patients per year, we'll all be very happy. So that will be a nice milestone along the way to converting that to a PMA.

8,000 patients or 8,000 surgeries would, in fact, represent a considerable multiple of our current revenues.

Yes, no question there. Just lastly for me, Fred, a housekeeping question. From a transaction standpoint, when do you expect closure just as we think about the stock, impacting your just overall stock -- your overall share count?

Yes. So we closed this deal yesterday. So the share recorded...

Oh, it's already closed.

Yes.

Yes, understood.

Thank you.

Thanks, Ryan. Great questions as always.

Our next question comes from Mike Matson with Needham & Company.

Yes. So I guess one thing that I haven't heard you really talk about is, I'm trying to understand what portion of the AIS patient base would be candidates for ApiFix, and I guess, tethering as well for that matter? I know there's some specifics on the curve and so forth in the labeling. So can you maybe talk about what portion of the market this could be used for and then, I guess, just size of the market?

Paul, do you want to touch on that?

Sure. Mike, I would say that when we look at the scoliosis market in the United States, the biggest thing to understand is staying on label and within the indications of these technologies. And part of the change here versus fusion is that typically in the United States, fusions are not performed on these children until their curves are in the neighborhood of 50 degrees or more. And with the ApiFix clearance, our clearance allows us to begin treating these Lenke 1 and Lenke 5 curves as early as when their curves are at 40 degrees. So it actually creates an expansion, if you will, to the market opportunity. And so as these children are coming out of their bracing treatments, and those bracing treatments are not working for whatever reason, whether it's compliance or whether it's the progression of their scoliosis, we will now have the ability to surgically treat these patients earlier as opposed to allowing them to wait longer. And so there actually is a market expansion opportunity here. And I think in general, these nonfusion technologies will become much more attractive to patients than having the only option until now of permanent spinal fusion. So it's an exciting opportunity.

That's helpful. So I understand the market expansion story. I guess, within -- if you look at the fusions that are being done today, how many of those do you think it could replace? Could it replace all of them theoretically? Or is there some kind of other limit there that would prevent that?

Dave, do you want to comment on that?

Yes, Mike, I would say that all would be an extreme scenario. If you remember, a number of the fusions would be outside of the indications of 40 to 60. We treat a number of patients in the neuromuscular space, for example, as -- that would not be candidates for this. A number of our patients certainly fall out of this 40 to 60. Again, Paul would have to be -- have a more exacting number and we're certainly learning that exacting number as surgeons adopt this kind of theory or this kind of technology. But I would view this as still a large percentage of the overall potential fusion market will exist and -- but the overall surgical marketplace for scoliosis will get much larger. And so amplifying Paul's point, we expect more patients that are now treated with cumbersome, very difficult to wear bracing that experiences very low compliance or poor compliance with patients, that those patients now are much more likely and are -- in fact, you can see through social media and other forms of media, those patients are aggressively seeking a surgical option, particularly a minimally invasive surgical option for treatment of scoliosis versus waiting to a potential fusion or going through the process of wearing a very cumbersome brace.

Okay. And then based on what you guys have said on the call, it sounds like you're still planning to continue to develop a tethering system to complement ApiFix. But I just wanted to make sure I'm understanding that correctly that this is kind of complementary, and it's not something that's so great that it would replace the need to even have -- to even offer a tethering system.

Yes, Mike, this is Dave. At the moment, we're still working through what the pathway to commercialization is for the tether device. So we haven't stopped development on that product. In fact, there's a number of pieces of intellectual property that we filed on that. We like our kind of ownership in that space, at least in terms of the IP and the device we have. But we're learning more and more in what is an ever-changing regulatory environment about what the pathway to market for a device like that is. So again, I think we felt that this certainly resolved any unanswered questions we would have about regulatory pathway. And again, that's why this made the most sense at the moment.

Okay. And then just my final question would be, I saw the comment around the implant breakage rate being below 10% for some of the earn-outs or milestones. So can you maybe comment on what sort of breakage rate you've seen to date if you've seen any break at all, I guess? And what's the longest time that this has been implanted in any of these patients so far?

Yes, Mike, this is Paul. We did our first implantation, April 2012. So that patient is actually at her 8-year follow-up right now. And in about the 370-plus patients that we've treated in the last 8 years, we've had less than a 2% implant breakage rate. And that's all part of our FDA filing.

[Operator Instructions] Our next question comes from Kaila Krum with SunTrust.

Congrats on the deal. So just a follow-up on Rick's earlier question on revenue. So in a normal environment, how do -- how would you think that ApiFix would have contributed to revenue this year? And perhaps more importantly, what do you think it will do to the long-term growth profile of your business?

Fred?

Yes. So if you just use that 150 cases, which we mentioned is the next milestone payment, and if you were to use a scoliosis-type average selling price, that's roughly $3 million of revenue. So that may be a safe assumption. This, as I mentioned, is not going to be an overnight huge boost to the revenue to the business in the short term. But in the long term, we think it has a very, very significant impact to the business. If you look at that 8,000 cases per year that's allowed under the HDE times an average scoliosis, that's like $160 million. And I'm not saying we're going to get there in the next couple of years, but it does try to size the overall opportunity we're talking about here.

Yes, that's super helpful, Fred. And so you guys mentioned -- you mentioned that the procedurals bill out similarly to a fusion. That makes sense to me. I'm curious, do you guys have a sense for pricing around tethering and how ApiFix compares there?

Dave, do you want to speak to that?

Yes. So we do. I think you could assume that the tethering device currently, is substantially more than an AIS fusion procedure. And I think that some surgeons -- that's come under pressure. Let's just put it that way. It's come under pressure over the last year or so. And so I would expect that this would be a less expensive procedure with the ApiFix device than the VBT as well as just overall for the system because it requires less surgery, less hands and less surgeons in the operating room that we expect the procedure to be more economically favorable to the hospital and to the patient.

Justifying my comment from my impression, Kaila, there has been such demand for tethering since its approval that the pricing has gotten out of hand. And one of the posture of our company has always been never to take advantage of a situation like that and to constantly have our eye on the value that we're offering our customers and the confidence they can have that we're not trying to rape and pillage the market. So I think that, that just amplifies Dave's comments that this will be priced in a way that is responsible rather than opportunistic.

Perfect. Okay. That makes a lot of sense. And then just last one for me. On the surgeon feedback, how extensive is the training process here? Do you think that the 8 years of clinical work is enough to start influence? How important is the continued sort of clinical work in this area? Just curious about sort of how you -- or what you're hearing from your -- the docs today.

Paul?

Thanks, Kaila. Yes, from a training perspective, it's very straightforward. It is a posterior approach to the spine, which every pediatric surgeon is familiar with. It is the placement of 3 pedicle screws. These are the same types of pedicle screws that are used for OrthoPediatrics' RESPONSE system and any commercially available posterior pedicle-based system, these pediatric surgeons are put in thousands of these screws in their careers. So it's a very familiar technology to teach. I would say that our focus really is on patient selection. So this area of nonfusion brings a new thought process that we need to translate to them. And so our focus will be really more on patient selection than surgical technique because the technique is something that they're already familiar with. So it should be a very straightforward process.

I'm not showing any further questions at this time. I would now like to turn the call back over to Mark Throdahl for any further remarks.

Well, just a few sort of takeaways I'd like to suggest that you make here. The first is we view this as a game changer. We view this acquisition as potential giving us a technology that potentially allows kids to avoid being fused. This is only one of 2 FDA-approved, nonfusion technologies. It is less complex and risky than the other nonfusion technology, tethering. And I think finally, this opportunity demonstrates that the company continues to stand tall and to advance its strategic initiatives in a bold but very surefooted manner. And without trying to sound arrogant, I think this is the behavior that our customers expect of an industry leader. So with that, we'd like to thank you very much for your interest and for joining us today. And as always, Fred, myself, Dave, Paul, are available anytime to answer questions with just a phone call. Thanks so much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.