WEALTH CREATION
`
`ENGINEERING
`BUSINESS SUCCESS
`
`– APATECH HAS FUSED BONES AND COMMERCIAL
`VISION TO CREATE ONE OF THE WORLD’S
`FASTEST GROWING MEDICAL COMPANIES
`
`In less than ten years, UK-based ApaTech, has
`grown from a university start-up to a multi-
`million pound business supplying synthetic
`bone graft materials to surgeons worldwide.
`The founder of the company is Emeritus
`Professor of Medical Materials at the
`University of Cambridge, William Bonfield
`CBE FREng FMedSci FRS. He tells Ingenia
`how he and his colleagues developed, tested
`and then successfully exploited the idea.
`
`In March 2010, US healthcare
`giant, Baxter, bought UK-based
`developer of synthetic bone
`grafts, ApaTech for $330 million.
`Noteworthy, given the global
`recession, but remarkable
`considering ten years before,
`the company did not exist
`
`and the bone-graft material
`was only being produced in
`laboratory beakers.
`In its short, nine year history,
`ApaTech, has scooped many
`awards. Named Britain’s fastest
`growing MedTech company from
`2007 to 2009, by The Sunday Times,
`
`Bone making cells (osteoblasts) are shown after 48 hours in cell culture,
`adhering and multiplying on the surface of hydroxyapatite (HA)
`
`1 of 6
`
`MILLENIUM EXHIBIT 2001
`Baxter Healthcare Corp. et. al. v. Millenium Biologix, LLC
`IPR2013-00582,-00583,-00590,-00591
`
` INGENIA ISSUE 46 MARCH 2011
`
`19
`
`

`

`ENGINEERING BUSINESS SUCCESS
`
`and Europe’s fastest growing Life-
`Science business in the Deloitte
`2009 Technology Fast 500, the
`business also won the Frost &
`Sullivan 2009 North American
`Device Biologics Company of
`the Year award. Today, surgeons
`worldwide use ApaTech’s
`synthetic bone graft material.
`So how does a company evolve
`from beaker chemistry to a multi-
`million dollar entity in less than a
`decade?
`
`IDENTIFYING A NEED
`The story starts in 1991 at
`Queen Mary, University of
`London, where I was Director of
`the Interdisciplinary Research
`Centre (IRC) in Biomedical
`Materials. A key strategic
`research target that I set in
`the IRC programme was to
`innovate a superior bone graft
`material that could be used in
`regenerative medicine to fuse
`spines, as a bone replacement
`in revision hip surgery, or
`to reconstruct parts of the
`skeleton following trauma or
`disease.
`At the time, orthopaedic
`surgeons had two main options
`when making bone grafts. The
`first was to use bone harvested
`from cadavers and donated to
`hospital bone banks to make
`an ‘allograft’, or the second,
`to transplant bone from one
`part of a patient’s body to
`another, a process known as
`‘autografting’. Both options have
`issues. Bones from hospital
`banks are of variable quality,
`biologically inactive and do
`not promote bone growth. In
`contrast, autografts do promote
`bone growth but are limited in
`quantity, cause additional pain
`and sometimes infection from
`the second operation.
`
`Articular cartilage
`
`Periosteum
`
`Cancellous bone
`
`Compact bone
`
`Epiphyseal plate
`
`Marrow cavity
`
`Epiphysis head
`
`Diaphysis shaft
`
`Epiphysis
`
`This schematic illustrates the complex structure of bone. At the microscopic level, its basic building block is a
`composite of collagen reinforced with bone mineral, a ceramic material which approximates to hydroxyapatite(HA)
`
`We hypothesised that if we could
`engineer a synthetic bone graft
`material with a similar chemistry
`and structure to natural bone,
`then that could stimulate the
`biological repair processes,
`giving surgeons a practical, new
`option for the myriad bone graft
`applications. So the research
`commenced, with my colleagues,
`Serena Best, Karen Hing and Iain
`Gibson as well as myself focusing
`on this major scientific challenge.
`
`ENGINEERING
`A SOLUTION
`Hydroxyapatite (HA), with the
`formula Ca10 (PO4)6 (OH)2 was
`the starting point for developing
`a synthetic bone graft material.
`Produced in the laboratory by
`a ceramic processing route,
`this compound resembles
`bone mineral,which comprises
`about 50 volume % of adult
`cortical bone. Importantly,
`hydroxyapatite is also bio-active;
`put it into a skeletal site and
`bone-making cells (osteoblasts)
`adhere to the surface and start
`to make new bone.
`
`While HA was already being
`synthesised for commercial use
`as a coating for metal stems in
`joint arthroplasty, it was only
`being used in around 5 % of bone
`graft operations worldwide as the
`time taken for bone-growth to
`take place was just too slow.
`Crucially, we had noted that
`commercial hydroxyapatite
`was often non-stoichiometric
`– that is, the calcium (Ca) to
`phosphorus (P) ratio was less
`or greater than 10/6, and could
`contain traces of heavy metals
`if manufactured using ordinary,
`rather than distilled water.
`We demonstrated that these
`deviations disturbed the cellular
`reactions taking place at the
`bone graft surface, and impeded
`bone growth.
`With these issues in mind,
`we prepared stoichiometric
`hydroxyapatite (with Ca/P
`=10/6) under controlled
`laboratory conditions. We then
`performed initial biological
`screening tests with Simulated
`Body Solution (SBS), which is
`the ionic equivalent of blood
`plasma without cells, to samples
`
`of the stoichiometric HA and
`waited for new bone growth, as
`indicated by surface deposition
`of calcium phosphate, to
`take place. The results were
`incredible. Experiments
`revealed that ‘cleaning up’ the
`hydroxyapatite cut the time
`taken for bone growth from 40
`days to 28 days.
`Despite this progress,
`28 days was still too long a
`fixation time for an optimum
`bone graft; how could we make
`bone grow faster? We decided
`to mimic the chemical make-
`up of bone mineral as closely
`as possible, so systematically
`added individual traces of
`elements and ions found in
`bone mineral, such as sodium,
`magnesium and carbonate, to
`stoichiometric HA. Three years
`later, we found the element we
`were looking for; silicon.
`Experiments showed that
`a trace substitution (0.8 wt%)
`of silicon in the hydroxyapatite
`lattice, resulted in the
`replacement of phosphorus with
`silicon, which produced silicate-
`ions and elicited bone growth
`
`20
`
`INGENIA
`
`2 of 6
`
`

`

`WEALTH CREATION
`
`HOW DOES IT WORK?
`Why did the silicate-substituted hydroxyapatite work so well
`as a synthetic bone graft material? The answer lies partly in the
`material’s surface chemistry and partly in its structure.
`Substituting silicate into hydroxyapatite boosts the bioactivity
`of the material by increasing the negative surface charge on the
`synthetic graft. The negative charge attracts circulating proteins,
`essential for bone growth, in greater numbers to the graft’s
`surfaces, stimulating the production of more bone in less time.
`The material’s microstructure then ensures bone grows easily and
`quickly through the graft, with interconnected pores that provide
`a scaffold for new bone growth.
`These pores, at least 100 micrometres in diameter, allow cells
`to move throughout the graft, enabling newly forming bone and
`blood vessels to grow. Smaller pores in the struts which connect
`these larger pores, provide protein molecules with a pathway from
`one side of a strut to the other, also promoting bone growth.
`
`The chemical precipitation of hydroxyapatite can be controlled to give particles
`of different shapes. This electron micrograph shows precipitated HA with a
`similar nano scale, needle- and rod-like morphology to that of bone mineral
`
`We decided to mimic the chemical makeup
`of bone mineral as closely as possible …
`Three years later, we found the element
`we were looking for; silicon.
`
`in just seven days. This silicate-
`substituted hydroxyapatite was
`a success.
`More sophisticated screening,
`using cell cultures containing
`actual human osteoblasts –
`the cells responsible for bone
`formation – produced the same
`bone formation rates as did
`later in-vivo tests. Even better,
`longer-term studies revealed
`that the regenerated bone was
`ordered, rather than disordered,
`paving the way for a good
`quality, strong bone repair.
`We had developed a safe and
`effective bone-graft material that
`provided the optimum chemistry
`for new bone growth, (see ‘How
`does it work?’).
`One further step was crucial.
`We needed to engineer the
`structure of the bone-graft
`material so it could provide an
`optimum ‘scaffold’ for new bone
`growth. This structure would
`need to accommodate all the
`biological processes leading to
`bone growth and necessary for a
`successful bone graft.
`We went on to develop a
`novel process for producing
`
`both hydroxyapatite and silicate-
`substitued hydroxyapatite
`granules comprised of a
`network of interconnecting
`pores through which bone
`growth could take place. On
`completion of this key step,
`which was patented, we were
`able to fabricate reproducible
`structures with up to 80%
`porosity. These structures
`formed the basis for custom
`made, state-of-the-art scaffolds,
`with both the right chemistry
`and structure.
`
`PREPARING
`FOR LAUNCH
`What we did next was quite
`unusual in academe at that time.
`Instead of publishing our results
`immediately, we patented
`the key findings and became
`canny about “know how “. Every
`development or discovery, from
`how we manufactured silicate-
`substituted hydroxyapatite to
`processing its porous structure,
`was assessed for its patentability.
`Very soon, a raft of applications
`had built up so in 1996, we
`
`3 of 6
`
` INGENIA ISSUE 46 MARCH 2011
`
`21
`
`

`

`ENGINEERING BUSINESS SUCCESS
`
`launched a virtual company -
`Abonetics - to act as a locker for
`these and later patents.
`Come the turn of the decade,
`there was a heightened interest
`in the market for enhanced
`synthetic bone graft materials.
`Surgeons, especially in the US,
`were growing reluctant to use
`allografts from hospital banks,
`while the second operation for
`autograft was being questioned.
`We now held enough
`intellectual property in
`Abonetics to launch a
`commercial venture in the
`bone graft field and decided
`to try to raise some start-up
`finance. Hence, we recruited
`an independent consultant, Dr
`Peter Lawes, with a background
`in bioengineering as well as
`orthopaedic industry experience,
`to prepare a business plan.
`Armed with this plan, we
`approached several Venture
`Capital companies to discuss
`funding. At the time, London-
`based business 3i plc, was the
`largest UK funder of start-up
`companies, so we met with
`the head of medical technology,
`Dr Nigel Pitchford, and asked
`
`for £1.8 million to set up
`the new company.
`After a rigorous due diligence,
`Nigel Pitchford endorsed the
`technology, saw orthopaedic
`surgery, particularly spinal
`surgery, as a growing market
`given the US and Europe’s
`ageing populations, and
`was convinced the MedTech
`industry needed a reliable,
`synthetic bone product. He
`also felt we had not asked for
`enough money!
`TESTING AND
`FUNDRAISING
`Our patents were valued at
`£3 million and 3i plc offered
`£3 million to launch the
`commercial venture. So in June
`2001, ApaTech was born, and
`thanks to just over a decade of
`radical research twinned with
`a strategy of patenting first,
`then publishing, the business
`was valued at £6 million from
`day one. (A cautionary note for
`would be entrepreneurs is that
`I was the principal warrantor of
`this investment if it had gone
`pear shaped).
`
`ApaTech was set up at
`Queen Mary, University of
`London, with Peter Lawes as
`Chief Executive and myself as
`a Non Executive Director, to
`develop a range of bone graft
`substitutes. The stoichiometric
`HA we had initially synthesised
`in the mid 1990s was our first
`commercial product, marketed
`as ApaPore.
`As a commercial venture,
`our first step was to submit
`Apapore for regulatory approval
`for surgical use in Europe and
`the USA. In August 2002, the
`product was awarded the
`European CE mark, with US
`Food and Drug Administration
`approval following in May 2004.
`The company now had
`a workforce of 10.
`Clinical trials of Apapore
`were also well under-way.
`In early 2003, orthopaedic
`surgeons in Aberdeen
`implanted the product in
`30 patients undergoing spinal
`fusion for degenerative disc
`disease. At the same time,
`synthetic grafts were being
`used for impaction grafting in
`joint hip revision surgery, in
`
`Exeter. These trials, as well as
`collaboration with surgeons at
`the Royal National Orthopaedic
`Hospital, London, produced
`excellent results, with the
`material behaving exactly as
`predicted and proving more
`effective than allograft alone.
`Come 2004, however, we
`wanted to grow. With the
`necessary regulatory approvals
`and successful clinical trials in
`tow, we were keen to set up
`a free-standing production
`plant. We had progressed
`from making our product in
`small beakers to big beakers,
`but now envisaged a full-scale
`fabrication process that would
`boost manufacturing capacity.
`This, of course, demanded
`more cash.
`On April 2004, we won
`£6.5 million in venture capital
`funds. UK-based venture capital
`business, MTI, led this round
`of funding with, importantly,
`continuing investment from 3i.
`At the same time, we brought
`in a new Chief Executive with
`the required commercial
`experience for the next stage of
`development, Simon Cartmell.
`
`Accurate control of interconnecting porosity in silicate substituted HA is achieved up to a maximum of 80%, as shown in the micrograph where the pores are the
`dark areas (right). The 80% level is preferred for spinal fusion, giving accelerated new bone ingrowth, while the enhanced strength of the 60% level is used for
`impaction grafting in revision hip arthroplasty (left)
`
`1 mm
`
`1 mm
`
`22
`
`INGENIA
`
`4 of 6
`
`

`

`WEALTH CREATION
`
`TAKING OFF
`Our rate of growth from here
`on in was breath-taking. Simon
`Cartmell wanted to launch more
`products on a global scale, so
`appointed UK-and Europe-based
`sales companies to distribute
`our products. Crucially, however,
`he also set up a US subsidiary in
`Foxborough, MA, ApaTech Inc,
`to sell bone graft substitutes
`directly to the US market.
`As he highlighted at the time,
`the US held 40% of the world
`healthcare market.
`Less than a year later, we had
`launched silicate-substituted
`hydroxyapatite products, initially
`as ‘Pore Si’, but later as ‘ActiFuse’
`in a variety of formulations.
`Each product had full regulatory
`safety and efficacy requirements,
`while supporting scientific
`studies proved they promoted
`reproducible bone growth and
`importantly, surgeons, particularly
`in the US, were welcoming
`ActiFuse with open arms,
`especially for use in spinal fusion.
`Amidst the product launches,
`plans for the new manufacturing
`facility were moving quickly.
`We had already set up initial
`operations at Centennial Park in
`Elstree, while our team of project
`managers and building engineers
`coordinated the building of
`the 10,000 square feet bespoke
`ceramic processing plant.
`With the new facility we
`were planning to take ceramic
`processing to a new level and
`installed a novel materials flow
`system so we could precisely
`and reliably fabricate ActiFuse
`on a larger scale. Engineers and
`builders installed clean rooms
`with climate and humidity
`control for materials preparation
`as well as a 1,000 litre reactor
`
`for synthesising the bioceramic.
`Mills, moulds, casting equipment
`and atmosphere-controlled
`furnaces for heat-treating the final
`products were also incorporated.
`In September 2006, Lord
`Sainsbury, as Minister for Science
`opened the facility. He observed
`at the time that orthopaedics
`was one of the fastest growing
`sectors in the medical device
`industry and that he would like
`to see many more start ups like
`ApaTech. By May 2007 we had
`launched two more products,
`established a Germany-based
`subsidiary and were selling more
`than 1,000 packs of synthetic
`bone graft material a month.
`Indeed, annual sales now stood
`at £3.1 million, up from £270,000
`in 2005.
`By this time, buyout offers
`were appearing, but instead
`of cashing in, we approached
`private funders one last time.
`As always, 3i plc was our rock
`and provided funds, but this
`time US-based Healthcore
`came forward as well, and in
`the Summer of 2008 we won
`$45 million, around £30 million.
`The business plan was
`dramatic. Over the next
`eighteen months, we were
`to recruit 100 more people,
`including several at senior
`management level and build
`a second $13 million (~ £8
`million) facility at Elstree that
`would expand manufacturing
`capacity four-fold. Product
`launches continued, sales figures
`hit $60 million (approximately
`£40 million), and in November
`2009, HRH The Princess
`Royal opened the second
`manufacturing facility, which
`now had a 1600 litre reactor.
`This formal opening completed
`
`IMPLANTING THE SYNTHETIC BONE GRAFT
`Silicate-substituted
`hydroxyapatite is
`available in different
`forms, depending on
`exactly how a surgeon
`wishes to use it during
`an operation. For
`example, a pliable
`putty of the material
`can be moulded into
`shape and placed
`directly into a hole or
`void after, say, removal
`of a small bone tumour
`or following plastic surgery. This putty can also be placed directly
`into to broken bone to repair a fracture.
`The material is also manufactured as granules that can be
`mixed with blood or bone marrow and applied to the bone graft,
`either directly or using a syringe. Alternatively a slurry of granules
`can be injected, via a gun-shaped cartridge, into a void.
`
`Spinal fusion
`
`Maxillo-facial
`reconstruction
`
`Trauma
`
`Impaction
`grafting
`
`Tumour
`defect filling
`
`Clinical applications in the skeleton for bone grafts
`
`5 of 6
`
` INGENIA ISSUE 46 MARCH 2011
`
`23
`
`

`

`ENGINEERING BUSINESS SUCCESS
`
`a circle, as in 1992 Princess Anne
`had also opened the IRC where
`the concept started.
`Then as quickly as our start-
`up had entered the MedTech
`industry, it exited. In March
`2010, global healthcare business,
`Baxter, acquired ApaTech for
`$330 million, about £220 million.
`Baxter wanted to expand their
`position in the rapidly growing
`orthobiologics market and
`ActiFuse gave them a key
`plank in the bone fusion and
`regeneration category. While
`
`US-based, the greater global out
`reach of Baxter will enhance the
`market penetration of this UK
`technology.
`
`SECRETS OF SUCCESS
`So how did we turn a university
`spin-off into a multi-million
`pound business considered
`critical to the future success of
`an US healthcare conglomerate?
`First and foremost, we produced
`world leading science. From
`the outset, our research was
`
`The finished result. This micrograph shows the complete infilling of a 5 mm
`bone defect with new bone. The porous hydroxyapatite scaffold (black)
`has allowed cellular ingrowth of osteoblasts along the surfaces of the
`interconnecting pores
`
`first round funder is essential
`to attract other funders on
`subsequent rounds. We were
`extremely well supported by
`3i plc and Nigel Pitchford from
`start to finish.
`People were the overall
`factor contributing to our
`success. While ApaTech required
`exceptional researchers to
`produce innovative science, we
`also needed talented individuals
`with commercial experience
`to market our products. In our
`case, personal contacts with a
`network of surgeons interested
`in the science underpinning
`medicine also proved pivotal
`when launching the synthetic
`bone graft materials. Importantly,
`the people we recruited to build
`ApaTech were all willing to take
`a big leap of faith.
`
`distinctive and the clinical results
`have been outstanding, which
`has driven the commercialisation
`of our products.
`Second, we were developing
`materials for a growing market.
`When we launched our first
`product, orthopaedics was one
`of healthcare’s fastest growing
`sectors and today it is a major
`global market. Our focus on the
`spine was a major contributor to
`this success.
`Third, patenting proved
`crucial. From day one, our
`researchers not only took a
`strategy of patenting first and
`then publishing, but also ensured
`that the applications stood up
`against the competition.
`Fourth, the ability to raise
`money was vital - no money,
`no company. Technology
`companies need funds to
`manufacture products before
`sales can even start, which
`requires a good rapport with
`the Venture Capital community.
`Continuity of funding from the
`
`BIOGRAPHY
`Professor William Bonfield is internationally recognised for his
`pioneering research on biomaterials, with awards including
`The Royal Academy of Engineering Prince Philip Gold Medal.
`He was also the inventor of a bone analogue, HAPEX, which
`is used globally for middle ear implants to treat conductive
`hearing loss, as well as a co-Founder of Orthomimetics Ltd
`(now TiGenix ), which innovated a cartilage repair scaffold
`and was a finalist in the 2009 MacRobert Award.
`
`The author would like to acknowledge the distinctive contributions of
`all the members of the Board and Senior Management Team to the
`commercial success of ApaTech. He would also like to thank Dr Rebecca
`Pool for her help in compiling this article.
`
`24
`
`INGENIA
`
`6 of 6
`
`