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Orthopaedic Strategic Initiatives

A MONTHLY EXECUTIVE SUMMARY OF KEY STRATEGIC ORTHOPAEDIC EVENTS

Bare Bones®

VOLUME 16 NUMBER 6 JUNE 2007

PRIVILEGED INFORMATION FOR MEMBERS ONLY

BIOE and PHILLIPS PLASTICS entered into a collaborative agreement to develop and commercialize stem cell therapeutics for orthopaedic applications, combining BioE’s Multi-Lineage Progenitor Cell™ (MLPC™) stem cells with Phillips Plastics’ patented, proprietary growth structures.

MLPCs have shown the ability to dif-ferentiate into osteoblast and chondro-cyte progenitor cells in early development studies, and Phillips is creating custom structures to enhance such growth. BioE will hold commercialization rights any technologies developed in the collabora-tion.

(BioE, 5/21/07) BIOMET ORTHOPEDICS (BMET) formed a strategic research alliance with MASSA-CHUSETTS GENERAL HOSPITAL (MGH) to collaborate on clinical research for BMET’s Regenerex™ Ringloc®+ Acetabular System and E-Poly™ Highly Crosslinked Polyethylene acetabular liners. MGH will manage the separate global, multi-center, non-randomized clinical outcome studies, which will enroll 500 pa-tients each.

(Biomet, Inc., 5/21/07) CARDINAL HEALTH signed a definitive agreement to acquire VIASYS HEALTH-CARE for US $1.5 billion in a cash-for-stock transaction. VIASYS’ orthopaedic manufacturing business, which includes TECOMET, generates annual revenue of US $42MM.

(Cardinal Health, 5/14/07) HBD INDUSTRIES acquired PRECISION METAL PRODUCTS (PMP), a provider of net and near-net shape forgings and pre-cision-machined components to the or-thopaedic industry. HBD now offers a range of sizes, shapes, forging technolo-gies, machining and pre- and post-forging operations and services for titanium, co-balt-chrome-molybdenum, stainless steel, etc.

(GWA Communications, Inc., 5/14/07)

INTEGRA LIFESCIENCES (IART) acquired the pain management business of PHYSI-CIAN INDUSTRIES for US $4MM in cash. Physician Industries’ products will be sold under IART’s Spinal Specialties brand.

IART’s JARIT SURGICAL INSTRU-MENTS subsidiary signed a 3-year contract to supply Jarit® surgical and laparoscopic instruments to members of MEDASSETS SUPPLY CHAIN SYSTEMS, a U.S. health-care alliance partnered with >2,400 hospi-tals and 25,000 non-acute care providers. Jarit’s instruments are used across all surgi-cal disciplines, including orthopaedics. (Integra LifeSciences Holdings Corp., 5/11/07 and 5/23/07) ISOTIS (ISOT) expanded an existing pri-vate label agreement with ALLOSOURCE such that AlloSource has an exclusive li-cense to use the intellectual property (IP) necessary to manufacture products simi-lar to ISOT’s 1st-generation demineralized bone matrix (DBM) products in North America, and a non-exclusive license to market them through AlloSource’s own distribution or private label partners. ISOT’s Accell products are not affected by the expanded agreement.

(IsoTis, Inc., 4/22/07) LIFECORE BIOMEDICAL (LCBM) entered into an exclusive agreement with the CLEVELAND CLINIC regarding hyalu-ronan-based cross-linking technology for medical applications. Clinic researchers have developed a hyaluronic acid that ap-pears to resist degradation in the body.

LCBM will license the technology from the Clinic and lead product develop-ment and commercialization, while the Clinic will continue research and preclini-cal studies. LCBM will retain exclusive, worldwide rights to use the licensed tech-nology in all fields to develop, market, sublicense, etc. for the life of the patents.

(Lifecore Biomedical, 4/23/07 and PharmaBiz.com, 5/16/07)

ERNST & YOUNG has been appointed as the receiver of certain assets of MILLE-NIUM BIOLOGIX, and is authorized to sell

Millenium’s Skelite™ resorbable synthetic bone graft substitute technology.

(Millenium Biologix Corporation, 5/9/07) OSTEOTECH (OSTE) entered into a renew-able, 3-year, single source agreement with NOVATION under which OSTE will supply allografts to Novation’s ~2,500 U.S. healthcare alliances. OSTE will de-liver products including Grafton® DBM, Xpanse™ Bone Inserts and Graftech®, as well as traditional allograft bone and PEEK-based GraftCage® Spacers.

OSTE expanded its cortical bone tis-sue supply relationship with COMMUNITY TISSUE SERVICES (CTS) such that CTS will supply OSTE with an annual mini-mum number of whole donors.

(Osteotech, Inc., 5/10/07 and 5/15/07) REABLE THERAPEUTICS (formerly ENCORE MEDICAL) signed a definitive agreement to acquire IOMED in a cash-for-shares merger. The transaction is ex-pected to close in 7/07 with a total value of ~US $22MM.

IOMED manufactures drug-delivery devices used primarily for pain manage-ment. Following the acquisition, IOMED will operate under ReAble’s EMPI division, which focuses on pain management and rehabilitation devices.

(ReAble Therapeutics, Inc., 5/18/07) REGENERATION TECHNOLOGIES entered into an exclusive 10-year distribution agreement with ZIMMER (ZMH) for a next-generation allograft paste. ZMH will receive initial shipments of the prod-uct during 4Q07.

(Regeneration Technologies, Inc., 5/16/07) SMITH & NEPHEW ORTHOPAEDIC TRAUMA & CLINICAL THERAPIES entered into an agreement to distribute, market and sell TEKNIMED’s SPINE FIX bone cement in North America, Australia and Europe. U.S. launch of SPINE FIX will occur in 3Q07.

(Smith & Nephew Orthopaedic Trauma & Clinical Therapies, 5/15/07)

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Bare Bones June 2007 2

PRIVILEGED INFORMATION FOR MEMBERS ONLY

ALPHATEC (ATEC) released CONNECT® II Cervi-cal Structural Allograft spacers, which use ATEC’s proprietary cervical fusion instrumentation. The device complements ATEC’s DELTALOC® and DELTALOC REVEAL anterior cervical plates.

(Alphatec Holdings, Inc., 5/15/07) AMEDICA filed a registration statement with the Securities and Exchange Commission for a proposed initial public offering of common stock, with a proposed maximum aggregate offering price of $74.75MM. Amedica manufactures and commercial-izes a range of spine and joint implants.

(Amedica Corp., Form S-1, SEC.gov, 5/22/07) APATECH established APATECH GMBH and formed a direct sales force to support Actifuse bone graft in Germany. Further, ApaTech expanded its direct U.K. sales team, doubling its U.K. sales territories.

(ApaTech Limited, 5/8/07) AXIOMED SPINE completed an agreement to add a 2nd manufacturing site for its spinal disc replace-ment products at the company’s Ohio facility, at which manufacturing is expected to begin by the end of 2007. POLYMER TECHNOLOGY GROUP (PTG) will provide business continuity by maintain-ing manufacturing capability at its California facil-ity. AxioMed holds an exclusive license for PTG’s polymer for lumbar and cervical spine applications.

(AxioMed Spine Corporation, 5/21/07) Effective 6/5/07, Daniel P. Florin is BMET’s Senior Vice President and Chief Financial Officer.

(Biomet, Inc., 5/14/07)

BMET received a subpoena requesting docu-ments relating to EBI products manufactured and sold from 1/99 through the present. BMET also noted that final results from the Special Committee investigation of BMET’s stock option grants deter-mined that the company engaged in “purposeful ‘opportunistic’ dating (and, therefore, pricing) of stock options.” The committee concluded that pur-suit of plaintiffs’ claims in derivative litigation is not in BMET’s best interests at this time.

(Biomet, Inc. Form 8-K, SEC.gov, 5/27/07) CEDARA introduced OrthoWorks ProPlanner, a system that can integrate with existing imaging platforms (e.g. Picture Archiving and Communica-tion systems) and help streamline common ortho-paedic procedures. ProPlanner features automated functions such as image stitching to enable “fusing” of multiple images for unified viewing and measure-ment. ProPlanner supports digital CAD-based tem-plates from all major implant manufacturers.

(Cedara Software; Merge Healthcare, 5/30/07) Study results revealed that DEPUY ORTHOPAEDICS’ POLYAX ™ Locked Plating System was as strong

as fixed-angle plates while allowing for greater fixation versatility in the treatment of routine and complex fractures. Use of the polyaxial system re-sulted in a 94% rate of union in 56 fractures (25 distal femoral and 31 proximal tibial). No evidence of varus collapse occurred as a result of polyaxial screw failure.

(DePuy Orthopaedics, Inc., 5/18/07) DEPUY SPINE launched VERTIGRAFT® VG2® TLIF (transforaminal lumbar spinal fusion) Allograft, developed in partnership with LIFENET. VG2 is a bullet-shaped, machined allograft comprising cortical and cancellous bone, designed for oblique place-ment across the disc space whether discs are parallel or lordotic.

(DePuy Spine, Inc., 5/21/07) EDEN SPINE may launch a full scale clinical study of the motion-preserving WellDisc-L lumbar disc system in 2008.

(Eden Spine, LLC, 5/10/07) GLOBUS MEDICAL introduced NuBone™ Osteoin-ductive Bone Graft, a 100% allograft tissue com-posed of DBM in a cortical bone gelatin carrier. The 1st product releases are putty and gel, developed for use in spinal fusion, trauma and reconstructive procedures. NuBone is Globus’ first product for the biomaterials market.

Globus introduced the MARS™ Minimal Access Retractor, a system complementary to the company’s PIVOT™ MIS System, for use in discec-tomies, posterior lateral fusions and interbody fusions. All of MARS’ components are fully custom-izable, allowing adaptation to the needs of individual patients and surgeons.

(Globus Medical, Inc., 5/11/07 and 5/25/07) Data from a 2-year, multi-center study of 32 pa-tients receiving the TOPS™ mobile posterior arthro-plasty device revealed a 40-point improvement in disability as well as radiographic evidence of no mechanical screw loosening or breakage, no post-op increase in spondylolisthesis, and maintenance of segmental motion.

(Impliant Ltd, 5/7/07) INION received U.S. Patent No. 7,189,409, cover- ing bone graft materials that contain N-methyl-pyrrolidone (NMP) and have application in spinal fusion and the treatment of bone loss from trauma and cancer. NMP is the key bioactive ingredient in Inion’s biodegradable OptimaPLUS™ implant mate-rial, for which proof of principle trials should be complete in the 2nd half of 2007.

(Inion Oy, 5/15/07)

(Continued on page 3)

COMPANY FINANCIALS† 1Q07 VS. 1Q06

Sales vs. Company ($MM) Prior

AAP IMPLANTATE $7.91 +35%

ARTIMPLANT $0.62 +254%

CRYOLIFE $1.8 +6%

DJO (includes Aircast) $114.9 +39% Domestic Rehab $71.7 +34% Regeneration $17.5 +10% International $25.5 +98%

HANGER $143.9 +3%

INTEGRA LIFESCIENCES $123.0 +60% Neuro/Ortho Implant $47.0 +28% Medical Surgical/Other $75.9 +88%

ISOTIS $10.0 +2% U.S. Distribution $6.4 +7% Int’l Distribution $2.1 -14% Private Label $1.1 +22%

ORTHOFIX (includes $104.9 +50% Blackstone) Spine $56.1 +101% Orthopaedics $27.6 +21% Sports Medicine $21.2 +10%

ORTHOSOFT $2.33 +6% Software $0.3 -31% Hardware $1.2 +9% Recurring Revenue $0.8 +75%

ORTHOVITA $13.1 +22% (includes Endoskeleton, Vitomatrix sales)

OSIRIS Osteocel $2.0 +82%

ÖSSUR $80.4 +34% Bracing/Support $43.7 +34% Prosthetics $30.1 +12% Compression Therapy $5.8 n/a Other $0.5 +34%

OSTEOTECH $25.2 +<1% Demineralized Bone $15.4 +3% Traditional Tissue $4.6 +23% Spinal Allograft $2.7 -31% Hybrid/Synthetic $0.2 +7% Client Services $1.9 +<1% Other $0.2 -2%

REGENERATION TECHNOLOGIES Tissue Distribution $19.5 +19% Spinal $9.5 +4% Bone Graft Substitute $4.5 +18% Sports Medicine $5.4 +69% General Orthopaedics $0.2 -23%

SMITH & NEPHEW $575.0 +18% Reconstruction $262.0 +15% Trauma $136.0 +19% Endoscopy $177.0 +12%

SYMMETRY MEDICAL $67.5 -3%

2007 VS. 2006 ENDED 4/27/07

MEDTRONIC $2,544.0 +13% Spinal Constructs $1,721.0 +10% Spinal Biologics $696.0 +22% Navigation $127.0 +18%

†Orthopaedic product sales only. Constant currency. 1 € 5.9MM 2 SEK 3.9MM 3 CAD $2.5MM.

(Company press releases, 5/07)

Orthopaedic Product/Company Performance

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Bare Bones June 2007 3

PRIVILEGED INFORMATION FOR MEMBERS ONLY

KEY STRATEGIC 510(K)S MAY 2007

Posterior Cervical

Fixation System (ANATOMICA AB)

Actifuse ABX E-Z-Fil Putty Bone Graft Substitute

(APATECH)

OSStaple, OSSPlate, OSS-Force for Spinal Fixation (BIOMEDICAL ENTERPRISES)

E-Poly Acetabular Liners

(BIOMET)

Lagwire System (FXDEVICES)

IOS External Fixator (INTELLIGENT ORTHOPAEDICS)

Metasurg Subtalar Implant

(METASURG)

Metal Hemi Implant (ORTHOPRO)

Anterior Cervical

Stabilization System (SOUTHERN SPINE)

KMedic Internal/External Fixation Devices

(TELEFLEX MEDICAL)

Atoll Cervico-Thoracic System

(THEKEN SPINE)

Single Planar Multi-Axial Pedicle Screw

(TRINITY ORTHOPAEDICS)

(FDA 510(k) Releasable Database, 5/07)

A complete listing of 510(k)s issued since 1/1/00 can be found at www.orthoworld.com/members/resources/fda/2006/fda_2007_05.php, available exclusively to Members of The Institute for Orthopaedics™.

Orthopaedic Reimbursement/Regulatory News

FDA approved AASTROM BIOSCIENCES’ Investig-ational New Drug application to initiate a 120-patient, 20-site Phase III clinical trial of Bone Re-pair Cells, based on Tissue Repair Cell technology, in the treatment of avascular necrosis of the femo-ral head. Patients will be followed for 24 months.

(Aastrom Biosciences, Inc., 5/7/07) ARTHROCARE (ARTC) received FDA clearance to market the Cavity SpineWand®, used for the re-duction of malignant lesions within vertebrae. Cavity SpineWand uses ARTC’s Coblation® bipolar radiofrequency technology to remove tissue at low temperatures.

(ArthroCare Corp., 4/15/07) BMET Orthopedics received FDA clearance to mar-ket acetabular hip liners made from E-Poly Highly Crosslinked Polyethylene. The vitamin E stabilized liners will be marketed with BMET’s line of stems, including the Taperloc® Hip System. The use of vitamin E is expected to improve implant longevity.

Testing revealed that E-Poly liners demonstrated 95% to 99% less wear than BMET’s ArCom® poly liners.

(Biomet, Inc., 5/11/07) Inion received approval under the CE Mark for its CPS/OTPS FreedomPlate™ for use in fracture fixation and osteotomies in the entire skeleton, excluding the spine. The plate is made of Inion Op-tima™ biodegradable polymer.

(Inion Oy, 5/24/07) ISOT received confirmation that FDA will restart review of the pending 510(k) notice for ISOT’s Ac-cell DBM products, originally submitted in 7/06 and put on hold in 2/07. (See Bare Bones, 3/07.)

(IsoTis, Inc., 5/30/07) MDT’s Bryan® Cervical Disc will be reviewed by FDA’s Orthopedic and Rehabilitation Devices

(Continued on page 4)

INTERVENTIONAL SPINE (IS) closed a US $24MM Series C financing. Proceeds will support product launches and distribution as well as orthopaedic devices to complement the company’s percutaneous spinal franchise. IS’ products include the Perpos™ PLS System with its BONE-LOK® PLS Implant, which uses CLASP® compression fit technology to achieve facet-to-pedicle fixation. Further, IS launched the Percudyn™ percutaneous extension limiting device in Europe this month, and plans to submit an Investigation Device Exemption to FDA for the product in 2Q07.

(Interventional Spine, Inc., 5/31/07) ISOT received U.S. Patent No. 7,205,337, covering use of Reverse Phase Medium (RPM) technology in combination with various DBM formulations, such as those based on Accell technology. ISOT also re-ceived a notice of allowance for a patent application relating to RPM combined with a range of syn-thetic and natural bone graft substitute com-pounds.

(IsoTis, Inc., 5/3/07) MEDTRONIC (MDT) announced U.S. availability of Progenix™ DBM Putty, to be distributed through MDT’s wholly-owned SPINALGRAFT TECHNOLO-GIES subsidiary.

(Medtronic, Inc., 5/21/07) OSTE expects to introduce Grafton® A-Flex™ Acetabular Graft in 2Q07. A-Flex is based on OSTE’s proprietary fiber technology and is de-signed to fill defects in the acetabular wall during revision surgery.

(Osteotech, Inc., 5/9/07)

PEGASUS BIOLOGICS closed a $20MM Series C financing that will help support expansion of prod-uct development and markets served by the com-pany as well as increased use of current products. The company has ~ $32MM in private equity invest-ment to date. Pegasus’ products include the OrthA-DAPT™ Bioimplant and Unite™ Biomatrix.

(Pegasus Biologics, Inc., 5/10/07) SMITH & NEPHEW announced the retirement of Sir Christopher O’Donnell as Chief Executive, effec-tive 6/30/07. David Illingworth is appointed as his successor.

(Smith & Nephew plc, 5/3/07) Two-year results from an ex-U.S. study of SPINAL-MOTION’s Kineflex® lumbar disc revealed that, in the 1st 100 patients, 95% of implants were ra-diologically in the correct position, hospital stays averaged 2.8 days and all subjects who were em-ployed before surgery returned to work at an aver-age of 31 days post-op. Further, patient enrollment is 95% complete for SpinalMotion’s Investigational Device Exemption trial of the Kineflex/C cervical implant.

(SpinalMotion, Inc., 5/2/07) THEKEN SPINE announced implantation of the 1st Vu Mesh™ PEEK-OPTIMA® Vertebral Body Re-placement System. The device is slated for product launch in mid-summer 2007.

(Theken Spine, 5/16/07) ZMH has appointed David C. Dvorak as President and Chief Executive Officer and James T. Crines as Executive Vice President, Finance and Chief Financial Officer.

(Zimmer Holdings, Inc., 5/1/07)

(Continued from page 2)

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Bare Bones June 2007 4

STOCK WATCH (Based on close of business, 5/31/07)

Company Ticker Symbol

52-Wk High

52-Wk Low Close Chg vs.

Prior Mo. Chg vs.

Prior Yr. aap † AAQ 4.58 2.77 4.17 18.5% 50.0% Alphatec Holdings ATEC 8.80 2.77 3.69 3.1% N/A ArthroCare ARTC 48.40 33.89 44.07 6.8% 3.5% Biomet BMET 43.75 30.22 43.62 1.0% 24.0% BioMimetic Therapeutics BMTI 19.13 6.20 18.26 -2.6% 128.3% co.don AG † CNW 4.32 2.29 2.29 -15.8% -36.7% ConMed CNMD 34.65 18.58 31.31 3.3% 61.6% Corin Group †† CRG.L 10.06 3.88 10.12 20.0% 68.4% curasan † CUR 4.00 2.05 3.11 -16.8% 8.4% Cytori Therapeutics † XMPA 8.52 4.27 6.09 5.4% -25.8% DJO Incorporated DJO 45.50 31.07 39.01 -0.1% 1.4% Exactech EXAC 16.84 12.10 16.19 -2.9% 21.6% Hanger Ortho Group HGR 12.40 6.30 11.44 -4.0% 45.9% Inion †† IIN 1.08 0.38 0.76 13.4% -27.6% IsoTis ISOT 11.75 5.39 7.90 7.5% N/A Japan MDM§ 7600 3.28 2.30 2.43 -5.8% -66.7%

Kyphon KYPH 50.66 29.95 47.49 1.9% 19.4% NuVasive NUVA 28.76 15.21 25.96 0.7% 57.6% Orthofix OFIX 53.43 35.00 47.29 -10.3% 24.8% OrthoLogic OLGC 2.16 1.25 1.42 -7.8% -8.4% ORTHOsoft ‡‡ OSH 0.79 0.31 0.60 0.0% 66.7% Orthovita VITA 5.05 2.74 2.80 -6.7% -27.8% Osiris Therapeutics OSIR 29.29 9.84 11.38 -19.8% N/A Osteotech OSTE 8.44 3.40 7.32 -3.7% 66.4% ReGen Biologics RGBI 0.79 0.23 0.43 -14.0% -44.2% Regeneration Technologies RTIX 10.94 4.87 10.05 18.7% 41.7% Smith & Nephew SNN 64.35 36.70 61.33 -1.6% 50.1% Stryker SYK 70.26 39.77 67.31 3.6% 53.2% Symmetry Medical SMA 19.39 10.82 15.33 -9.8% -17.4%

Synthes ‡ SYST 135.50 105.20 124.83 -4.7% 0.2% Wright Medical Group WMGI 25.79 19.83 24.36 3.1% 7.8% Zimmer Holdings ZMH 94.38 52.20 88.06 -2.7% 45.4% Bare Bones Index1 -1.2% 26.0% Biologicals Index2 -4.2% 104.2% Devices Index3 -0.7% 23.4% Supplier Index4 -9.8% -17.4%

1Bare Bones Index = average of all STOCK WATCH stocks.

2Biologicals Index = average of BMTI, CNW, CUR, ISOT, OLGC, OSIR, OSTE, RTIX and VITA. 3Devices Index = average of 7600, AAQ, ATEC, ARTC, BMET, CRG.L, CNMD, DJO, EXAC, HGR, IIN, KYPH, NUVA, OFIX, OSH, RGBI.OB,

SNN, SYK, SYST, WMGI, XMPA and ZMH. We are pleased to add Japan MDM to the Bare Bones Stock Watch. 4Supplier Index = SMA.

†Converted from Euro to USD; 1€ = 1.3525 USD. ††Converted from British Pound to USD; 1£ = 1.9925 USD. ‡Converted from Swiss Franc to USD, 1CHF = 0.8213 USD. ‡‡Converted from Canadian to USD; 1CDN = 0.9454 USD. §Converted from Yen to USD, 1¥ = 0.0082 USD.

In order for a company to qualify for inclusion in the Bare Bones Stock Watch, orthopaedics must represent at least 60% of its revenues.

PRIVILEGED INFORMATION FOR MEMBERS ONLY

U.S. OPN September/October 2007

Editorial Focus: Spinal Surgery/Cement Systems

Call Joanne Montz, 440-247-9051 for advertising opportunities.

is published monthly by Knowledge Enterprises, Inc. and is available only to Members of The Institute for Orthopaedics™.

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KNOWLEDGE ENTERPRISES The OrthoPeople

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Bare Bones®

advisory panel on 7/17/07. The company’s Pres-tige® Cervical Disc is undergoing FDA evaluation, with clearance expected later this summer.

(Medtronic, Inc., 5/23/07) The Centers for Medicare and Medicaid Services (CMS) has proposed that Lumbar Artificial Disc Replacement (LADR) is not reasonable and neces-sary for the Medicare population over 60 years of age, and is recommending that Medicare’s National Coverage Determination Manual be amended to reflect a change from non-coverage for a specific LADR implant to non-coverage for the LADR procedure.

Devices potentially affected by the change include DePuy’s Charité and SYNTHES’ Pro-Disc®-L. A final CMS decision is expected in 8/07.

(Proposed Decision Memo for Lumbar Artificial Disc Replacement - CAG-00292R, CMS.gov, 5/28/07)

(Continued from page 3)

Orthopaedic Research/Technology News

Results from the U.S. Spine Patient Outcomes Research Trial (SPORT), which followed Medicare patients diagnosed with degenerative spondylolis-thesis and spinal stenosis, revealed that at 2 years, patients who received surgery reported signifi-cantly reduced pain and improved function and noticed major improvements as early as 6 weeks post-op. A 3rd set of SPORT study results will be re-leased later this year, addressing the efficacy of surgery vs. non-surgical options for spinal steno-sis without spondylolisthesis.

(Dartmouth Medical School, 5/30/07; Medtronic, Inc., 5/31/07)