Skeptics Abound as German Surgical Screw Maker Plans Offering

(Bloomberg) -- In the 1990s, Utz Claassen rose to prominence as one of Germany’s youngest CEOs, and later for seeking $265 million in severance and damages from a company where he’d worked only 74 days. In 2008, he founded Syntellix AG, a maker of medical screws that disintegrate in the body, potentially eliminating the need for follow-up surgery to remove them.

Now, he’s planning a public offering of Syntellix — though skeptics question whether it can deliver the performance Claassen envisions.

Claassen said he has cleared most of the regulatory hurdles for a listing of his company, likely in Singapore by yearend. The Syntellix chief executive officer said he needs fresh money to accelerate expansion into new markets, and he’s only waiting for favorable timing.

“Asia is the future,” said Claassen, who was 34 when he took over lab equipment maker Sartorius AG and has since overseen businesses ranging from nuclear power generation to pro soccer. “It will soon be bigger than the rest of the world put together.”

Claassen, now 56, declined to reveal his company’s revenue, but said it broke even in 2018 after losing money from 2011 to 2017. Syntellix, based in Hanover, two hours west of Berlin by train, says it has 75 employees, has sold 64,000 pins and screws since 2013, and has approvals for its products to be marketed in 42 countries.

Syntellix says its screws – made from an alloy of about 90% magnesium blended with rare earths – will simply disintegrate after a year or two. That’s a big deal, because secondary surgeries to remove titanium-based screws typically used today are costly and in some cases can cause fatal infections. Syntellix estimates that about 170 lives and 1 billion euros ($1.08 billion) a year could be saved in Germany alone if its products were used in orthopedic surgery.

The trade group for Germany’s public health insurers says that while its members will pay claims for operations using Syntellix’s products, it doesn’t have sufficient data to determine whether they offer the advantages the company promotes.

Michael Morlock, a professor at the institute of biomechanics at Hamburg’s University of Technology, said it’s difficult to predict how magnesium-based materials degrade in the body, making them a hard sell for many surgeons. And he said they’re known to release gases during disintegration and could create bubbles under patients’ skin.

“To predict that magnesium will replace titanium on a large scale is nonsense,” Morlock said. “Today’s materials work very well.”

Norbert Hort, who runs the magnesium innovation center at the Helmholtz Center Geesthacht, part of Germany’s largest scientific organization, questions the value of the patent for Syntellix’s materials. Hort says the alloy is based on work done in the U.K. in the 1980s and had been patented by a company there. The patent expired about a decade ago, and other companies today also use modifications of that alloy, so Hort says Syntellix may find it difficult to protect any intellectual property rights.

Syntellix insists its alloy is sufficiently different from what was developed in the 1980s to warrant a separate patent, and that it has patented production processes in addition to the material itself. Regarding the question of gas release, Syntellix says it’s part of the normal degradation process and does not affect healing or patient satisfaction, and that its implants are proven to last at least twice as long as it typically takes bones to heal.

Claassen said he’s the leading shareholder in Syntellix, though he declined to say how much he controls. The company has hired DBS Group Holdings Ltd. to manage the sale, and Claassen said he expects at least 30% of the company’s stock to be traded. He declined to disclose the company’s valuation in previous fund-raising efforts.

The 12-person supervisory board of Syntellix is led by Claassen’s wife, Annette, and includes former Deutsche Bank co-CEO Juergen Fitschen and Steven Mayer, formerly a managing director at Cerberus.

While Syntellix today makes products mainly for orthopedics and trauma surgery, Claassen said he can expand into facial, aesthetic, and neurosurgery. In those areas, surgeons today use degradable polymer screws.

“Nobody has approval for anything that compares to us,” Claassen said. “I see no one who could be a competitor in magnesium.”

--With assistance from Michelle Fay Cortez.

To contact the reporters on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net;Daniel Schaefer in Frankfurt at dschaefer36@bloomberg.net

To contact the editors responsible for this story: Daniel Schaefer at dschaefer36@bloomberg.net, David Rocks, Andrew Blackman

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