Dive Brief:

• Stryker struck a deal with Conformis to access technology for creating knee arthroplasty instruments tailored to individual patients, the companies said Tuesday.

• The deal gives Stryker a copy of the software code and manufacturing documents behind the technology, plus a 50% stake in the relevant copyrights and know-how.

• Stryker plans to use the assets to develop and gain FDA 510(k) clearance for patient-specific instruments for use with Triathlon Total Knee System and other off-the-shelf knee implants.

Dive Insight:

Conformis makes custom knee implants based on CT scans. As part of the process, Conformis creates custom, single-use instruments for use in the procedure. Stryker has acquired the right to develop such custom single-use instruments with its off-the-shelf knee implants, giving it a technology to rival those used by Johnson & Johnson, Smith & Nephew and Zimmer Biomet.

Stryker is paying Conformis $14 million upfront and committing to up to $16 million in milestones to secure rights to the patient-specific instrumentation technology. The $16 million is linked to several events. 

An aggregate of $5 million in milestone payments is tied to when Stryker receives the first prototype from Conformis and when the design of the device is finalized. Stryker will pay the remaining $11 million shortly after it receives 510(k) clearance for the patient-specific instrumentation.

Once FDA clears the device, Stryker will join the ranks of companies that can offer instruments tailored to patients. In theory, customized instruments can improve alignment and, by extension, patient outcomes while shortening procedure times. However, research, notably a meta-analysis of 21 randomized controlled trials, has raised doubts about the value of customization.

"Patient-specific instrumentation does not result in clinically meaningful improvement in alignment, fewer outliers or better early patient-reported outcome measures," the authors of the meta-analysis wrote.

That conclusion has caused problems for Conformis. Aetna, a major insurer, referenced the analysis in its coverage policy on customized total knee implants. Conformis argues that its approach, which entails customizing the knee implant, not just the instruments, is different but the Aetna policy led to an uptick in denials of coverage that forced it to lower it outlook for 2019 earlier this year.

Analysts think Conformis can work through the reimbursement problem. BTIG wrote that "Aetna may be confusing patient-specific instrumentation and cutting guides with knee implants" in a note to investors earlier this year but downgraded Conformis from "buy" to "neutral" nonetheless.