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Novadaq Idea Proposal

Novadaq Idea Proposal

Will Novadaq successfully grow DermACELL sales to $50 million or more by 2018?

Report Available: June 23, 2016


Blueshift’s initial research shows sales of NVDQ’s DermACELL, its acellular dermal matrix (ADM) product used primarily in breast reconstruction, increasing as it becomes part of the company’s fastest growing segment. Management expects it to reach about $10 million in sales in 2016, and research points to significant growth in the use of biologic material for reconstructive surgeries. DermACELL faces competition from AlloDerm, a tissue that has been on the market longer, and must overcome the long-term contracts hospitals have with other solutions.



  1. NVDQ beat expectations with its Q1 earnings, while revenues were in line. Recurring revenue, which includes imaging kits, equipment service, and DermACELL, was the fastest growing segment, experiencing an increase of 41% year to year. Management estimated 2016 sales expectations of DermACELL in the $8.5 million to $11 million range. NVDQ also installed 50 devices in Q1, of which 40% were the SPY Elite product, which could bode well for the adoption and growth of DermACELL in breast reconstruction given how the two products complement one another.
  2. Evidence supporting NVDQ’s optimism for the growth of DermACELL sales includes a May 2016 article published in the World Journal of Plastic Surgery citing market data indicating that 87% of surgeons who perform at least 25 breast reconstructions per year have used a biologic material such as DermACELL or competitor AlloDerm in their implant-based reconstructions. Furthermore, over 56% of all tissue expander/implant-based reconstructions are now done using biologic mesh. Each of these trends and enhancements favor the increased use of prosthetic breast reconstruction and as such may contribute to an increase in use of DermACELL and others. Over the 15-year period lasting from 1999 to 2013, a total of 256 articles and studies regarding the use of acellular dermal matrix (ADM) were published in the 9 journals, showing its proliferation.
  3. The wound care market is NVDQ’s secondary market for DermACELL. Industry reports differ on the amount of anticipated growth but several market research companies have projected a range of $11.3 billion by 2018 to a high of $17.7 billion in 2020.  The rapid growth is driven by the aging population, the increasing incidence of diabetes, increases in government support, and emerging device and biological technologies.
  4. One hurdle to widespread growth for DermACELL is the long-term contracts hospitals have with other solutions requiring them to purchase a set percentage of competitors’ breast tissue. AlloDerm is DermACELL’s biggest competitor. When NVDQ dissolved its partnership with LifeCell in 2014 and created its own salesforce for its SPY Elite product, it lost distribution rights of AlloDerm, but picked up distribution rights to DermACELL. A comparison of outcomes of the two different ADMs for breast reconstruction showed no difference between the two, though DermACELL was said to be more convenient because it could be provided at room temperature and used directly.
  5. Blueshift’s Dec. 3, 2015, report focused on the SPY Elite showed that the medical community considers NVDQ to have innovative and interesting tissue perfusion assessment technology in its product line. Fifteen of 25 sources think the SPY Elite product, in particular, will experience moderate adoption next year but largely will be limited to academic/teaching and large regional hospitals.


What will DermACELL sales look like in two to three years? How much can DermACELL sales grow? How do surgeons perceive the benefits of DermACELL vs. AlloDerm? How are hospitals allocating their tissue purchases? Is there evidence that DermACELL is equal to or better than AlloDerm? How are hospitals purchasing tissue and how does that relate to NVDQ’s Spy Elite? To answer these and other questions, Blueshift will issue a market research report by gathering data from independent sources in the following areas: Plastic surgeons, Hospital purchasing administrators, Sales professionals, and Industry specialists.


Companies: Novadaq (NVDQ), Integra Lifesciences Holdings Corp. (IART), Smith & Nephew plc (LON:SN), Wright Medical Group N.V. (WMGI)


Research Begins: June 6, 2016