Good morning, everybody. Thanks for your attendance. I'm Rob Ball. I'm the CEO of Shoulder Innovations, and excited to share our story with you. Just kind of broad summary, we are operating in what we call a $2.8 billion global arthroplasty market for shoulder arthroplasty. We have built a broad spectrum of products that represents about 85% of what happens in that market. We have exposure to a majority of that market. Yeah. What we're really known for is pioneering what's called the InSet Glenoid technology, which solves the main problem associated with anatomic shoulder arthroplasty, which is loosening of the component on the scapular side. I'll talk more about that in more detail. We've coupled that with the first and industry-leading AI-enabled preoperative planning platform.
That enabling technology allows the surgeon really to perform the surgery virtually before they enter the operating room, providing a significant advantage in terms of their ability to place the implant. We have also innovated a very capital-efficient ecosystem that the surgeon can operate in. This provides a significant advantage both in logistics and cost to the hospital systems and ASCs, but also, obviously, you can imagine, reduce our overall capital costs in the upper 70s with our belief in some additional improvement possible there. Of course, it starts with a team. We, as a team, have been operating in this market literally for decades. We got our start at DePuy Orthopaedics, which had a number one market share position for many, many years, and developed a number of the products there, including bringing reverse shoulder arthroplasty to the United States market through the 510(k) clearance process.
I then ran R&D, regulatory, and clinical for Tornier, who I'm sure many of you are aware of, was very successful in growing an organic business in shoulder arthroplasty, now representing the Stryker platform with a 40% market share worldwide. That included building a company called Immiscap, which created the Blueprint technology. This indeed transformed shoulder arthroplasty. We sold that to Wright Medical, actually, right before their acquisition by Stryker. About that same time, we built our InSet platform for Shoulder Innovations. We've been operating for about 10 years in that marketplace. Obviously, we bring decades of experience to this market, and our passion, that's an advantage for us as we operate in this market. There are two main types of shoulder arthroplasty devices you need to be aware of. There's anatomic and reverse. The left is anatomic.
That provides the mechanism where you replace the scapular component, more like a cup, and the humeral component, more like a ball, like it exists anatomically, as you can imagine. Reverse is just the opposite, where you'll put a ball on the scapular side and a cup on the humeral side. That allows you to have some additional mechanical stability that's helpful and supportive when you have some sort of deficiency with the rotator cuff. Obviously, there's a disease progression from rotator cuff disease, malalignment of the humeral head and the scapula progressing to arthritis. When you have that progression of disease, the reverse shoulder arthroplasty becomes very helpful. That reverse represents about 70% of procedures overall worldwide in the marketplace today. That $2.8 billion global market, about two-thirds of that, or three-quarters, is in the United States.
That grows about 10% annually. It's been a very, very high-growth market and a very substantive market in the US. Interestingly, that represented about 250,000 procedures, but there's been a significant change in the market in the last couple of years where CMS rendered a payment authorization for standalone surgery centers at the beginning of 2024. That has created an acceleration of those procedures transitioning from the hospital to the ambulatory surgery center. Of course, there's an analog for this dynamic when knee and hip arthroplasties began transitioning to that outpatient setting. When you look at the dynamic for that marketplace over about a 10-year period of time, while you had a growing market, maybe in the low single-digit %, virtually all of that procedure volume grew in the outpatient or ambulatory surgery center setting.
Of course, we believe that analog represents exactly what we can expect for our own market in the relative near future. Fortunately for us, we anticipated this trend and created a platform specifically designed to take advantage of this opportunity, which has been really an important advantage for us as we've grown recently in the marketplace. There are four main categories of problems, I'll say, that we kind of focus on solving. One is indeed that implant survivorship issue, which our InSet Glenoid resolves. We also deal with frequent postoperative complications, particularly with reverse shoulder arthroplasty. I'll share that's been in market about 20 years. As you can imagine, there's been significant learning about that device over the past 20 years. We are still working through some of those longevity issues with reverse shoulder arthroplasty. Positioning of the implant is paramount for outcomes.
Being off-axis in the position of the implant at the time of surgery as little as five degrees can have a significant impact on longevity of the implant. The last point is that burdensome workflow. As we transition those procedures to the ambulatory surgery center, that standard model, top four competitors will walk into an ambulatory surgery center with 8-10 trays of instruments. That is really just physically not possible for an ambulatory surgery center to manage. That workflow issue just does need to be solved. We solve that through creating an ecosystem. Our last speaker talked about an ecosystem as well. I found that interesting. One difference here, though, is that we are creating that we control that ecosystem. I'll put it that way. One component of that ecosystem is our advanced implant systems. It does solve problems.
It is what indeed surgeons latch onto in the early times in their relationship with us. It does indeed prevent or present the idea for better outcomes for their patients. I'm not sure if you understand, but this monitor up front is flickering. The monitor up front is flickering. I don't know if that's something you guys can solve for me. The second is the introduction of our ProVoyance preoperative planning solution. That provides them that opportunity to plan those procedures prior to entering the operating room. That's a very, very compelling component of our sales process. We present those two trays, which obviously provides a much lower capital footprint for the ambulatory surgery center. We provide a very specialized support commercial structure that I will describe that's quite innovative in the market.
The third, we are highly focused on peer-to-peer, surgeon-to-surgeon interactions that indeed do the commercial advancement for us. I'll share on each one of these a little more. That first is indeed the solution or the advanced implant system, that InSet Glenoid technology. You can see up in the upper left a traditional implant where you have a cup-shaped polymer device attached to the scapula. As that humeral head both rotates and translates on that device, that translation of the humeral head on the glenoid component does lead to what's called rocking horse motion. We did not discover or prove that motion. That's been well understood for many, many years. Indeed, what we do is we actually solve that rocking horse motion.
What we do is we indeed create a pocket that our glenoid implant fits down in, providing a circular buttress of bone all the way around the periphery of the implant. What we've shown is that indeed when you create that pocket, not only is it a little bit simpler procedure for a number of reasons for the surgeon, but it creates that buttress that specifically addresses that issue of rocking horse motion. We've shown in a number of peer-reviewed publications where in the upper right you can see we've shown in JSES an 87% reduction in that rocking horse motion that indeed is the mechanism of action. That has translated for us to clinical results. We've published multiple studies, two years, five years, up to almost nine-year follow-up with 100% survivorship with that InSet Glenoid.
That's contrast that with something like 40% failures at five-year survivorship. That's been obviously a very compelling component of our story. Of course, that translates to outcomes for patients. ASES score, a broad spectrum score for performance, clinical performance of the patient, transitioning from the low 20s up into the 90s in multiple publications. Obviously, this has been a compelling component of our story. Of course, as we think about doing the anatomic shoulder arthroplasty, entry into the joint or exposure of the joint involves taking down what's called the subscapularis tendon. That's a tendon that's on the front of your humerus. In order to access the joint, you must disassociate or dissect that tendon from the humerus prior to replacing the joint. When you replace the joint and then reassemble that tissue, you have to then reattach that tendon to the humerus.
This can lead to significant postoperative complications, even if you have solved the issue with the glenoid. We think about a 15-25% failure rate of the subscapularis tendon, which has been quite an important source of complication. That brings out the issue of reverse shoulder arthroplasty, the idea being that if I have done an anatomic shoulder arthroplasty, I fail the subscap postoperatively. Indeed, I have a failed rotator cuff, a deficiency there. What I actually need is a reverse shoulder arthroplasty. Reverse has grown significantly in recent years. We transitioned when we brought the product to market, early 2000s, to the United States. It has transitioned to 70% of the marketplace by units in the United States today. We have transitioned even the type of reverse shoulder arthroplasty technology that is used in the market today.
We're transitioning away from what we call an onlay arthroplasty to what we call an inlay arthroplasty. That has to do with the biomechanics of the device that's accomplished both on the implants on the scapular side and the humeral side. What we've been able to demonstrate is that using a traditional reverse shoulder arthroplasty, you have patients that still, on the order of 40% of the time, experience issues related to particular elements of motion that support activities of daily living. Our goal has been, and what we are accomplishing is to allow the patient to experience exactly the same outcomes from a function and motion standpoint with a total shoulder arthroplasty or anatomic shoulder arthroplasty as they would achieve with a reverse shoulder arthroplasty. You can see Carolyn, this is a personal friend of mine.
She's actually received our anatomic shoulder arthroplasty on the left side, a reverse shoulder arthroplasty on the right side. You could see how she's able to achieve that same internal rotation, reaching behind the back like that, which is obviously very important for activities of daily living, for example, taking care of yourself in the toilet. That's been a very, very compelling element of our story for the surgeon community. They do indeed realize better motion for their patients very quickly postoperatively, on the order of six weeks. It's been a quite powerful component of the way we've been able to approach the market. Of course, that does also provide the opportunity that if you have performed the anatomic shoulder arthroplasty, fail that subscapularis tendon, and want to now convert that prosthesis to reverse shoulder arthroplasty, that can actually easily be done.
We have done this hundreds of times now, very, very effectively. This is something that the market has talked about literally for decades. I was part of the IPO with Tornier, that diagram in the middle where you see the humeral head coming off and the components for the reverse. We had a very, very similar diagram in our S1 for Tornier. The problem was I could do it as an engineer in the lab. You really physically could not do it in the operating room. It practically was not possible because of the design of the implants and their surrounding soft tissue. We have solved for that issue, and that has been a spectacular outcome for us. We also present with our humeral fixation products, of which we have several. I will not get into the details. They all present exactly the same inlay biomechanics that I just described.
You can use a stemless, a short stem, a long stem. All of them present exactly the same biomechanics, which is a huge benefit for surgeons as they consider optionality. Of course, planning leads for perfection. Traditional planning in total shoulder arthroplasty has been plain film X-rays and MRI. Plain film X-rays, obviously, to assess the condition of arthritis, MRI to assess soft tissue. This is still effectively standard of care in the world today. Of course, we have brought the ProVoyance preoperative planning platform to the market. Essentially, the surgeon will get a CT scan of their patient. CT scan is then processed by our AI algorithm in order to reconstruct that CT scan into three-dimensional anatomy so that the surgeon can actually perform the surgery on the patient virtually prior to entering the operating room.
The fact that our AI algorithm does this processing really brings about an automated element that means that it's actually the surgeon that does the planning. I equate that to kind of a map or a GPS system. You actually have to observe the data yourself to realize the benefit for it. It is very, very important that the surgeon actually do the planning. That's where the benefit comes from. This has been a powerful component of the way that we communicate with surgeons. I think I'll just share at this point, we shared in our Q3 earnings call that really at this point, to the limit of our ability to measure, every one of our implants now goes through the preoperative planning solution. We are sure we are exclusive in the marketplace in that respect.
It just gives you the evidence of how powerful this has been in the way that we communicate and compel surgeons to use our products. Of course, that capital footprint must be appropriate for the environment. You can see a couple of photos in the lower left. You can see a typical environment in a hospital setting with stacks and stacks of instrumentation. That just is not possible in an ambulatory surgery center setting. This is what we actually look like going into an operating room. In the photograph on the left, you can see our blue box of implants. I'll just take a step back. The model is we provide instrumentation on a loaner basis, on a non-sterile basis. That must be decontaminated and sterilized for the hospital pre and postoperatively.
We provide a number of implants that are sterile packed in a box that the surgeon then can choose from. We provide both of those for the operating procedure. Our implants are in that blue tote. You can see that there. Our instruments are in that lower left. This is us going into an ambulatory surgery center with one of our competitors. You can see there are a couple of totes of implants, the two red boxes, and there are nine trays of instruments. When you consider the marketplace, Stryker, Zimmer Biomet, DJO, and Arthrex represent about 80% of share in the United States. All four of those competitors walk into an operating room with 8-10 trays of instrumentation. It is a significant challenge. You can see to the lower right here, this is our package.
This is what we enter the ambulatory surgery center with. That two-tray package of instrumentation makes for a much more simple logistical process of handling. Of course, that's been important for us from a financial consideration as well. One fact that's interesting is that in December of 2023, we did about 10% of our procedures in ambulatory surgery centers. In January of 2024, CMS rendered an authorization for payment in standalone surgery centers for shoulder arthroplasty. We transitioned, actually kind of, we're still over 30% of our procedures now in ambulatory surgery centers. Over a 12-month period of time, actually, we transitioned to a very significant portion in ASCs. Most surgeons now will communicate they see that going to 50% in the relative near term. We think that will remain a very compelling advantage for us in the marketplace.
A number of new products coming to market. We did just release our i70 product that kind of establishes the shortest reverse shoulder arthroplasty stem available on the market or possible, quite frankly, from a regulatory perspective on the market. We will be releasing our i135, i185 products that transition into that I mentioned earlier. We cover about 85%, transition to those other parts of the market, fracture and revision that we do not currently operate in. That will allow us to have that full spectrum of products all with exactly the same biomechanics for us to be able to treat the entire portion of the market, particularly United States. We also have about 10-15% of the population that struggles with metal hypersensitivity. This has become a much more known and understood issue recently.
We will be introducing a device with an alternative material to deal with that metal hypersensitivity. We know this is a significant demand from our current surgeons as well. When we think about the marketplace, we focus on about 1,800 shoulder specialists. That is who our target market is. When you think about those specialists, shoulder arthroplasty actually represents less than half of their business, half of their practice. When you think about adjacent markets like sports medicine or trauma, those are obviously very interesting to us as we scale our commercial organization. We do sell through an independent distributor network. We are focused and passionate on that. We are in every operating room that our products are used in. Every single one of our products is sold through an independent distributor network.
We overlay that independent distributor network with a very robust W-2 direct employee leadership team that's enabled by what we think is a best-in-class business intelligence platform. Data is key for the way we operate our commercial organization. It has been an important part of our investments in the commercial organization. That W-2 organization stands on top of that distributor organization that really does the main identification of targets and conversion of one of those 1,800 surgeons into a Shoulder Innovations advocate. We then leverage that surgeon advocate through our CEME organization. That CEME organization, customer experience and medical education, leverages those advocates that we've made those conversions with to be sellers for us, quite frankly. We are 100% focused on surgeon-to-surgeon interactions for understanding and training around our products.
That's been a those three legs of the stool, so to speak, are important elements of the way we manage our commercial operation. It's been very, very powerful for us as we've entered the market. Of course, on a trailing 12-month basis, just under $42 million in revenue at a 5-55% CAGR. Third quarter, we grew about 58%. That's been a bit of an acceleration for us this year. We're obviously excited about the effectiveness that we're showing with our commercial organization as that has scaled over the last 18-24 months. As we think about compelling vectors for growth, obviously, our addition of additional surgeons is key to us. At this point, we seek to continue to bring surgeons into the ecosystem. Beyond those surgeons, we have additional indications that we'll be treating here in the first quarter.
We obviously will bring those products to our existing customer base. Fortunately for us, those new products are at more compelling average selling prices than our current products. We expect that to also be constructive from a gross margin perspective. We also then obviously consider international markets and those adjacent markets that I already mentioned. All that is on top of a baseline 10% growth of market. We see that growth in procedures in our existing customer base. We enjoy that stable base as well. That is the overview today. I appreciate your attention. I'm happy to take any questions that you may have.
Hey, Rob, thanks for that. I was asking about the pipeline. You touched on it here a couple of times.
Maybe talk about the timeline for fracture and revision and the metal sensitivity and what that'll sort of bring in from both a volume and a pricing opportunity.
Yeah, sure. From a fracture, we actually received a 510(k) just within about the last month. That gets us a portion of the fracture indications that we're asking for. We are in the final stages of manufacturing those products for distribution. We are really speaking about a number of weeks at this point before we can begin, at least what we characterize as our limited user release phase of the introduction of that product. That would lead into a broader commercialization, I'd say, in the first half of 2026 for sure. That is in a very good position for us to enter there.
Specifically, as it relates to what we call the N22, the metal hypersensitivity heads, we actually have product in the warehouse today. We're finalizing the regulatory process for that then to be available for the marketplace. Again, that one we perceive is in the coming weeks, even not months or quarters at this point. We think both of those are compelling components of our growth story in 2026 and 2027 and would expect to have those in the very early stages of 2026. Feeling great about that.
What about revision?
Revision will follow, so the 135 is fracture, 185 is revision. That will follow by about three months, the 135. Yeah.
Thanks. Sir, question over there.
Thank you. Thank you. What percentage of procedures or the surgeons use your preoperative software?
How can you use that to segue into some of those adjacent markets by using it as a tool for showing what you can do?
Yeah, a great question. The way we measure the % of use is we look at the number of cases that are planned in a quarter and compare that to the number of cases we surgically participate in. Actually, we've reached a point where there are more cases planned than we actually perform, meaning that because we're a growing company, you may plan something before you operate. You just look at that quarter cutoff. There are some growth dynamics in there. You also have some patients that may elect not to get procedures as well. That's why we say within our ability to measure effectively all of our procedures go through our preoperative planning process at this point.
The question about the impact on adjacent markets is interesting. I'd consider two main technological areas that are interesting. One is in the fracture indication. Typically, what you're dealing with is what we call either three-part or four-part fractures, which is the way the bone fractures. What you're seeking to do is reintroduce that tissue back to one contiguous kind of basis. The pieces that detach are indeed where the soft tissue, the rotator cuff attaches or inserts, if that makes sense. It's critical to get those back in the right location. Preoperative planning can and likely will play a role in that process. Where do you position the implant in order to get those tuberosities back to the right location? As you look at the other adjacency, you could just call it soft tissue broadly.
For sure, there's a meaningful opportunity to have more metric assessment, assign a number to fatty infiltration, for example, of the rotator cuff. That can be impactful, we believe, over the long term. Likely, artificial intelligence will play an important role for surgeons' ability to make that assessment of the rotator cuff. Yeah, good question. Any other questions? Please.
Maybe just a quick one on how you view competition from upcoming Mako launch into shoulder and how you plan to differentiate.
Yeah, sure. I mean, I think I obviously paid close attention to Stryker's analyst day last week, shared some numbers that were really pretty interesting, kind of of the robots installed in the United States. I think about 10% are in the ambulatory surgery center.
For us, we see the motive of most of our surgeon customers to do procedures more quickly in a more convenient environment, which is not the hospital setting. It is the ambulatory surgery center setting. That has been kind of a component for us that has encouraged us that robotics will play a role long term, but it has to be oriented around that ambulatory surgery center environment. That is where the procedures are going. Some of the larger mainframe-style robots may not be the best technology for that environment, but time will tell. Having said that, will enabling technology or robotics, for example, play a role in shoulder surgery? I think so for sure. I mean, there are a number of problems that we still deal with from a complication standpoint that are directly associated with positioning of the implant. Positioning of the implant well is important.
Exposure in the shoulder looks more like a hip, if that makes sense, as compared to a knee. It is a little more complicated procedure that enabling tech can play a role for.