A New Day in Orthopedic Devices. Proven Products + Highest Quality Manufacturing + Lowest Cost = WE WIN!

Transcription

1 A New Day in Orthopedic Devices Proven Products + Highest Quality Manufacturing + Lowest Cost = WE WIN!

2 August 26, 2016 THE PROBLEM: UNSUSTAINABLE ORTHOPEDIC SURGERY AND DEVICE COSTS Aging, active population: 7% annual growth in knee/spine, 3% hip. Joint replacement and spinal fusion are highest surgical costs Legacy device cost is 33-40% of surgery cost. Tech impact? INNOVATION OPPORTUNITY: Bundled payment reimbursement, outpatient surgery, generic devices, post-acute care

3 GENERIC DRUG TRENDS SINCE 1999: COULD DEVICES FOLLOW? Off-patent Hip: J&J Corail, Stryker Accolade I, Biomet Taperloc, Smith & Nephew Synergy Off-patent Knee: J&J Sigma, Smith & Nephew Gen2, Zimmer Nexgen, Biomet Vanguard, Stryker Scorpio Generic Rx is 88% of US Rx volume in 2015 according to GPhA

4 VARIOUS GENERIC COMPETITIVE TRACKS 30% limit price reduction Rep-less service You buy inventory/ instruments Offer consulting services to avoid implant price reductions Current Majors Generic Start-ups Require proven products and access to highly competent manufacturer Lots of upfront working and development capital US majors will not challenge their existing OEM customer book of business Contract Manufacturer Medical Supply Distributors Have national customer base but not in-house company build teams, culture, or surgeon relationships. Possible scale partners

5 FINANCIAL ANATOMY OF TOTAL JOINT REPLACEMENT: UNLOCKING VALUE $4, $4, $3, $3, $2, $2, $1, $1, $ $0.00 $4,200 Construct $2,500 Construct $0.00 $1, $1, $ $ $ $ $0.00 $ $50.00 $1, $ $ $ Legacy Companies Generic Innovators How is this possible? Ground-up operation, no R&D, direct sales, & efficient plant to patient distribution Your Savings Corp Profit Special Items Sales & Distribution R&D Corp S,G,&A Cost of Goods * Surgeons can earn 50% more compensation per procedure ($ )

6 SHARING MODELS WITH ORTHOPEDIC SURGEONS Commercial payers are following CMS bundled reimbursement within gain-sharing framework CMS CCJR program: Mandatory in 67 MSAs for Medicare FFS patients April, 2016 launch for 5 years Payment 98% of regional cost per episode of care Surgeons can earn 50% of professional fee, comparable quality at lower cost Readmit, complication, and patient satisfaction are measures Surgeon potential above CMS BPCI program: Voluntary: 1,522 hospitals for Medicare FFS patients Runs to September, 2018 Surgeons can earn 50% of professional fee + 50% of additional savings back to group to cover overhead, capital equipment Same quality measures to qualify Depending on hospital arrangement, surgeon gain above fee: $1,400 - $1,800/surgery Outpatient Surgery model Commercial payers are approving outpatient joint replacement and fusion v $40,000 commercial Medicare has approved single level fusion and is close to approve total joint replacement for certain cases Depending on ASC ownership, surgeons can earn professional fee + ASC ownership distribution Surgeon gain above fee: $3,000+/surgery

7 BUILDING A COMPANY THE RIGHT WAY Mission Highest quality manufacturing at lowest price to providers Manufacturer FDA and ISO-certified contract manufacturer willing to produce generics while producing for US majors at same time Manufacturing Excellence Same plant, production line, quality controls, materials, coatings, and packaging so zero compromise for surgeons. Product Line Only proven products with excellent 20+ year results. No untested or off indication use of technology. Business model Efficient plant to patient supply chain + on-site service rep using implant tracking and patient engagement software Transparency Committed to publish health outcomes and pricing online Gain-Sharing Turn-key gainsharing program for BPCI/CJR

8 THREE KEYS TO GENERIC DEVICE SUCCESS Proven Products 20+ years of clinical excellence on products you use today Highest Quality Manufacturing + On-Site Service Same manufacturing standards On-site surgery support & inventory management Lowest Cost with Surgeon Sharing Plant to patient operating model sharing 100% of benefits with customers, always