Latest / Vanguards of Healthcare by Bloomberg Intelligence / Restor3D Combines AI with 3D Printing to Create Personalized Ortho Solutions

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Restor3D Combines AI with 3D Printing to Create Personalized Ortho Solutions · Vanguards of Healthcare by Bloomberg Intelligence

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  Speaker 1: Welcome to another episode of the Vanguards of Healthcare series.
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  Speaker 1: My name is Matt Hendrickson, the medical technology analyst at
• 0:27
  Speaker 1: Bloomberg Intelligence, which is the in house equity research platform
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  Speaker 1: of Bloomberg LPE. We are pleased to have with us today.
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  Speaker 1: Kurt jacobis CEO of Restore three D, a privately held
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  Speaker 1: medical device company developing personalized orthopedic implants. Kurt, thank you
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  Speaker 1: for joining us today.
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  Speaker 2: Thank you very much for having me. Matt. So, why
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  Speaker 2: don't we.
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  Speaker 1: Just start your path that led you to being the
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  Speaker 1: CEO of Restore three D.
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  Speaker 3: Yeah, it's I've been a particularly direct one. I've been
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  Speaker 3: over the CEO now for twenty one years and a
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  Speaker 3: couple different companies. But when I left high school, I
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  Speaker 3: wanted to build race cars, and so I went to
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  Speaker 3: university to study engineering, had some work with the big
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  Speaker 3: auto players, decided that's not who I wanted to spend
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  Speaker 3: my career with. Then decided I was going to be
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  Speaker 3: a university professor, went and got a master's in PhD
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  Speaker 3: and mechanical engineering. My dad was a university professor, so
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  Speaker 3: that seemed familiar. Learned there that I did not want
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  Speaker 3: to do that either, and then decided I want to
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  Speaker 3: be a consultant. I joined McKinsey company for four years.
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  Speaker 3: That was a great experience, learned a lot, but I
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  Speaker 3: realized I want to solve my own own problems, not
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  Speaker 3: someone else's problems. And then reconnected with one of my
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  Speaker 3: PhD lab mates. He was on the faculty of Georgia
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  Speaker 3: Tech and he and I have been building businesses together
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  Speaker 3: since then. That was two thousand and five. The three
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  Speaker 3: of the prior businesses have come to trade sales. They've
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  Speaker 3: been picked up by publicly traded Strategics and Restore three
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  Speaker 3: D as the fourth one of those.
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  Speaker 1: Interesting. I liked your quote saying that you like to
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  Speaker 1: solve your own problem versus other problems. How does that
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  Speaker 1: go about it? I mean, is it just because you
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  Speaker 1: just like to just jump right in and be able
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  Speaker 1: to say, oh, I can solve this my way versus
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  Speaker 1: having a back and forth and amlomost a bureaucracy type
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  Speaker 1: of moment.
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  Speaker 3: I think the bureaucracy was the hardest far for me
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  Speaker 3: as a consultant. So you could come up with great
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  Speaker 3: ideas for a great company right and particularly well thought
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  Speaker 3: through ones, they could be mangled in the implementation and
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  Speaker 3: so the idea by result of that could be diluted.
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  Speaker 3: And I think the more interesting part actually is the implementation,
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  Speaker 3: not the ideas. Ideas are pretty cheap, they can be produced,
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  Speaker 3: you know, in rich abundance, and many of them are.
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  Speaker 2: Not good ideas.
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  Speaker 3: But the execution against a good idea to make it
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  Speaker 3: great that part I particularly enjoy. So the things that
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  Speaker 3: make me tick. I like bringing order into chaotic situations,
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  Speaker 3: so startups are good. That's kind of an entropy reduction regime.
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  Speaker 3: And then I also very much like using technology to
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  Speaker 3: solve problems. And these are not things that I think
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  Speaker 3: are generally solved in a matter of days or weeks,
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  Speaker 3: but take years to truly bring about.
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  Speaker 1: And then how did that those steps get you to
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  Speaker 1: come to restore three D?
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  Speaker 3: In this is probably twelve years ago, we were running
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  Speaker 3: footn Ankle business that's now part of the I Novus portfolio,
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  Speaker 3: and we had Curtains approaching us and saying, I have
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  Speaker 3: pathology or anatomy that I cannot treat with those eight
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  Speaker 3: sizes of off the shelf implants. You guys are very
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  Speaker 3: technology for it. Could you create for us a patient
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  Speaker 3: specific implant? And we began dabbling in that on nights
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  Speaker 3: and weekends. I think we probably lost a lot of
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  Speaker 3: money and a lot of sleep, But we ultimately realized
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  Speaker 3: there was a huge amount of demand there and we
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  Speaker 3: were initially looking at the most divergent cases, diverged anatomy,
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  Speaker 3: divergent pathology, and believe there was efficient volume there to
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  Speaker 3: build a business. But we needed to develop the technology.
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  Speaker 3: So my co founder who's now in the fact that
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  Speaker 3: a duke took his lab, began developing expertise in three
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  Speaker 3: D printing of metals and plastics and then also software
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  Speaker 3: tools that could take medical diagnostic and automatically create a
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  Speaker 3: design for implants and instruments. Had a couple students, excellent students,
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  Speaker 3: right PhDs. Those are our co founders, and on how
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  Speaker 3: to start the business, and that work was done for
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  Speaker 3: probably four years before we founded the business, which is
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  Speaker 3: founded in twenty seventeen.
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  Speaker 1: Okay, and so you mentioned three D printing, and you
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  Speaker 1: mentioned kind of this planning, this you know, AI type
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  Speaker 1: of planning. Are those the two factors that kind of
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  Speaker 1: create you when you describe restore three D as a
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  Speaker 1: personalizing plant? Are those the two key factors that kind
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  Speaker 1: of add up to create that personalizing plant.
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  Speaker 2: No question about it.
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  Speaker 3: It would be very difficult to do it scalably and
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  Speaker 3: cost effectively in a time sensitive manner without good software
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  Speaker 3: tools and including AI, which can very quickly turn a
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  Speaker 3: medical diagnostic into a pay specific design and a plan.
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  Speaker 3: But it would also be very difficult to do it
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  Speaker 3: from a cost perspective if you were not using three
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  Speaker 3: D printing. And in fact, some of the designs we create,
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  Speaker 3: particularly ones that have porocity on them, for like a
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  Speaker 3: cementless indication, you can't make those in any other way
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  Speaker 3: of three D printing. And so the part of the
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  Speaker 3: challenge if you decided to set forth into a business
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  Speaker 3: like this fifteen years ago, you could have created something,
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  Speaker 3: but you probably would have lost a lot of money, uh,
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  Speaker 3: and not really created great products unfortunately.
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  Speaker 1: Is that just because the capabilities weren't there at the time,
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  Speaker 1: and now we're just a nice sweet spot where you know,
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  Speaker 1: I obviously every conversation I was around AI. But when
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  Speaker 1: you have that breath of opportunities and capabilities, now you
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  Speaker 1: have that available for you, and the same with three
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  Speaker 1: D printing, because I'm thinking with three D printing, I'm
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  Speaker 1: thinking about those you know, consumer based kind of you know,
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  Speaker 1: got those cubes and it's got you know, you mean,
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  Speaker 1: it kind of has a little like almost joystick moving
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  Speaker 1: around and everything. Is that my thoughts of three D
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  Speaker 1: printing for those consumer products similar to kind of how
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  Speaker 1: your implants are being three D print You.
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  Speaker 3: Are very very close. Particularly for our instruments. Most of
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  Speaker 3: our instruments are polymer based. They're plastic, and machines would
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  Speaker 3: look like a lot like the one you may avenue
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  Speaker 3: or a garage or you know you've seen a friend
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  Speaker 3: have at their house and they use a very similar technology. Metals,
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  Speaker 3: you know, require higher heat and a little better control.
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  Speaker 3: So imagine one of those machines, but maybe ten times size.
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  Speaker 1: And yeah, commercial strength, maybe one hundred.
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  Speaker 3: Times of cost exactly. Yeah, this is not like for
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  Speaker 3: professional grade.
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  Speaker 1: Not No, I would hope that my doctors not printing
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  Speaker 1: an implant from their garage.
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  Speaker 3: This part maybe layer mind though for many of the instruments, though,
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  Speaker 3: we do use machines that obviously use as well, and
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  Speaker 3: we've qualified them to make medical devices for single use instruments.
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  Speaker 3: But the metal printers, you know, they use technology which
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  Speaker 3: is called laser centering. So the hem a powder bed
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  Speaker 3: and laser comes along and it builds a thin layer
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  Speaker 3: of an implant, and then a fresh layer of powders
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  Speaker 3: put across another thin layer of implant. Which we're doing
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  Speaker 3: is slowly growing an implant layer by layer.
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  Speaker 1: Okay, that's nice to get that kind of broad overview
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  Speaker 1: of the technology and everything. So then with the kind
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  Speaker 1: of traditional orthopedic devices that are out there, and you
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  Speaker 1: you know, it's usually you know, six or seven sizes
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  Speaker 1: and doctors to choose the best size for them. Tell
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  Speaker 1: me about how the or tell me about the orthopedic
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  Speaker 1: markets that you serve to disrupt that kind of traditional option.
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  Speaker 3: Everything head to toe. So we do craniomaxil facial which
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  Speaker 3: are surgery of the head and jaw all the way
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  Speaker 3: down to the big toe and everywhere in between. Our
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  Speaker 3: bigger market segments, mimic the larger market segments, and orthopedics
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  Speaker 3: meaning large joints ankle a, shoulder, hip, and knee. But
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  Speaker 3: we also participate in the CMF cryomaxl facial space or
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  Speaker 3: being ecology. And some trauma, not hot trauma, but you
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  Speaker 3: know trauma that's generally bone transport trauma.
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  Speaker 1: Yeah, okay, like usually like a yeah, broken bone type
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  Speaker 1: of situation yes, yeah.
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  Speaker 3: But usually one that's come to a non union, so
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  Speaker 3: it's sort of significantly a post event that needs to
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  Speaker 3: be treated. And the reason we do all those is
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  Speaker 3: not because we're trying to broadly dilute our activities, but
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  Speaker 3: the software assets and the production sets are designed to
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  Speaker 3: do all this and so it's really no different doing
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  Speaker 3: a CMF case than it is doing a total nay
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  Speaker 3: or a shoulder from a design perspective or from a
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  Speaker 3: manufacturing perspective, And so it gives us a lot of
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  Speaker 3: leverage of our capital base.
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  Speaker 1: And then how does this benefit How does this model
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  Speaker 1: benefit the hospitals beyond just you know, a better fit
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  Speaker 1: for the patient. I mean, if I'm a you know
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  Speaker 1: different and also you know, you think of clothing is
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  Speaker 1: either a medium or large, then someone could be like
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  Speaker 1: in between those two. There's obviously that benefit, but how
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  Speaker 1: does that help the hospital? How does that help the
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  Speaker 1: surge and all that that process.
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  Speaker 3: Yeah, it is the sort of thing that benefits all stakeholders.
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  Speaker 3: And what we often when people will contemplate our business,
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  Speaker 3: they think, oh, personalization, that sounds very expensive, right, and
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  Speaker 3: so we still get this often when you approach surgeon.
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  Speaker 3: You talk to me like, well, what you're doing is
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  Speaker 3: very expensive. In fact, for almost ninety percent of our
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  Speaker 3: cases we charge market clearing prices of off the shelf implants.
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  Speaker 2: And the tradition Orthrow model is kind.
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  Speaker 3: Of eight sizes fit eight billion people at eighty percent
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  Speaker 3: patient satisfaction, which is not a particularly good model.
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  Speaker 2: And you may wonder.
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  Speaker 3: Why are they not doing sixteen or twenty four sizes
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  Speaker 3: or eighty The reason is that economics of the business.
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  Speaker 3: So if you make eight sizes, you have to make
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  Speaker 3: many inventory skew and many instruments to be able to
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  Speaker 3: implant those. And so the rough numbers in ORTHO are
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  Speaker 3: for a dollar of sales. With the traditional model, you
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  Speaker 3: have to invest roughly a dollar instruments in inventory. And
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  Speaker 3: if you've made sixteen instead of eight, you might have
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  Speaker 3: to invest two dollars in instruments in inventory. It quickly
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  Speaker 3: becomes an unattractive financial prospect. And so that's the traditional model.
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  Speaker 3: And so what we do is for you, Matt, we'd
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  Speaker 3: scan your knee. We would print a knee that restores
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  Speaker 3: your healthy anatomy. We have extraordinary clinical data that demonstrates
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  Speaker 3: that that knee can last longer and has lasted longer
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  Speaker 3: than any knee ever put in the human body. And
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  Speaker 3: the patient satisfaction is the highest ever reported by for
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  Speaker 3: a need. And it makes sense, right, You're anatomy is
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  Speaker 3: constructed in a very special way for you, and why
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  Speaker 3: wouldn't we restore that with the help of the doctor.
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  Speaker 3: So that's really the model that we're undertaking. And the
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  Speaker 3: benefit for the surgeon is of course a higher patient satisfaction,
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  Speaker 3: which leads the reputation and then sort of less care
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  Speaker 3: post stop, which is important. But when you do planning,
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  Speaker 3: if you think about this, we wouldn't go to the
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  Speaker 3: moon without putting together a pretty good plan. It's no
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  Speaker 3: different than worth peak surgery. The vast majority of those
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  Speaker 3: are still done without a plan in place. Surgeon walks in, opens,
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  Speaker 3: the patient figures it out live. I'm not detegrating the
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  Speaker 3: surgeon's activities, just the way it's been done. But if
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  Speaker 3: you plan, the cases can go much more smoothly, and
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  Speaker 3: if you have papacic instrumentation, they can go much more quickly.
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  Speaker 3: So the win then for the surgeon is the capacity
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  Speaker 3: to do more cases that are patient outcomes reputationally, and
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  Speaker 3: then the wind for the facility is they can put
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  Speaker 3: another case in that.
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  Speaker 2: Operating around that period of time. Yeah, and that's very powerful.
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  Speaker 1: Yeah, and then let's go through that planning a little bit,
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  Speaker 1: because you know, there is those cases of you know,
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  Speaker 1: the doctor's kind of planning live on the spot, but
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  Speaker 1: there are they. I mean, it's not like I go
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  Speaker 1: to the doctor and I say I have knee pain
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  Speaker 1: and the next thing they say is, okay, let's get
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  Speaker 1: you to the operating room. Right, they have to do
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  Speaker 1: a level of scanning and things like that. So walk
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  Speaker 1: me through kind of that traditional path of a patient
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  Speaker 1: like me. You know, I feel like my right need
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  Speaker 1: is gonna be the first one to go going to
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  Speaker 1: my the orthrobedic surgeon say hey, my knees sore to
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  Speaker 1: actually me being in the operating room. And then compare
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  Speaker 1: that with then how restore three D fits in. And basically,
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  Speaker 1: I want, I'm curious about how much of a disruption
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  Speaker 1: it is adding the AI planning from Restore three D
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  Speaker 1: into that whole process.
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  Speaker 3: Yes, And the answer is, we endeavor to make it
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  Speaker 3: less disruptive and additive and I'll kind of provide some
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  Speaker 3: sound by so the traditional model, you're correct, your right
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  Speaker 3: knee hurts. I hope your right knee doesn't hurt. But
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  Speaker 3: let's just say for the sake of hard kind of
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  Speaker 3: does a surgeon's clinic. They're going to run diagnostic on you,
• 12:03
  Speaker 3: which is usually a sort of imaging. A CT scan
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  Speaker 3: has become a very common in the space because it
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  Speaker 3: provides much better data than X rays. And then you'll
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  Speaker 3: come back in with that. They'll do some test of
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  Speaker 3: you in the room and then determine that you know
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  Speaker 3: you are a candidate for total ne arthroplacty right at
• 12:22
  Speaker 3: total ME and then you'll be a facing decision. If
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  Speaker 3: you can find conservative care, they'll do that for you, right,
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  Speaker 3: just stay off at whatever your rest I is this thing.
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  Speaker 3: But let's say you consent to the surgery you are.
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  Speaker 3: It's no different for you with the off the shelf
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  Speaker 3: figured out in the o R with the thumb and
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  Speaker 3: the wind kind of approach than it is for ours
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  Speaker 3: from a process point of view. So we deliver implants
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  Speaker 3: on a time that meets the surgical cadence of patients
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  Speaker 3: and the surgeons that serve them. We've worked very hard
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  Speaker 3: to have a very quick production asset. But importantly there's
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  Speaker 3: one other benefit, So we're releasing this year. We've been
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  Speaker 3: in trial for the last eighteen months on a patient
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  Speaker 3: app that the surgeon makes available to patient. The patient
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  Speaker 3: can opt in or opt in rate's a bit about
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  Speaker 3: fifty percent, and the patient there can then see kind
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  Speaker 3: of Domino's Pizza tracker style, the development of their model
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  Speaker 3: of their anatomy, the development of their implants. They can
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  Speaker 3: download a surgical plan, they can share that with friends
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  Speaker 3: and family, which has proven to be a pretty interesting
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  Speaker 3: approach for us. But this is the best part. Surgeons
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  Speaker 3: can then provide patient reported outcomes. These are things like mobility,
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  Speaker 3: pain right, and those allow us to do something very
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  Speaker 3: different than traditional WORTHO, which is learned from a case
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  Speaker 3: that was done in a certain way, and because we
• 13:39
  Speaker 3: don't have the huge embedded instrument and inventory positions, make
• 13:44
  Speaker 3: changes on the fly. Our shoulder today is much different
• 13:47
  Speaker 3: than it was six months ago, and it's much different
• 13:49
  Speaker 3: than it was twelve months ago, and it's much different
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  Speaker 3: than it was eighteen months ago. And why is that?
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  Speaker 3: Because we've learned a ton from patient reported outcomes, from
• 13:57
  Speaker 3: our surgeon reported interoper of experiences and the like to
• 14:01
  Speaker 3: make our products better. And that is a very different
• 14:03
  Speaker 3: business model.
• 14:05
  Speaker 1: Let's jump into that because that sounds fascinating that you
• 14:09
  Speaker 1: guys able to Basically, you're accelerating the design cycle for
• 14:14
  Speaker 1: these products. If you're saying in every six months, that's
• 14:18
  Speaker 1: you know, that's compared to three or four years YEP
• 14:21
  Speaker 1: of development. So we talked about the shoulder system. I
• 14:25
  Speaker 1: know also your ankle system is kind of one of
• 14:27
  Speaker 1: your core and for the sake of the listeners, I'm
• 14:31
  Speaker 1: kind of prefacing it as legacy business and as I know,
• 14:34
  Speaker 1: we'll jump into some other new developments going on. But
• 14:38
  Speaker 1: between your shoulder and ankle system, walk through that process.
• 14:42
  Speaker 1: So you you launched a product eighteen months ago, then
• 14:45
  Speaker 1: you get the data, build that out, and you how
• 14:48
  Speaker 1: how quickly do you see that data and be able
• 14:51
  Speaker 1: to synthesize it to be able to say, okay, this
• 14:54
  Speaker 1: is what we need to do next.
• 14:55
  Speaker 3: Well as some of it can be very quick. So
• 14:57
  Speaker 3: if you have an interoperative experience that is not meeting
• 15:01
  Speaker 3: our standards, which are extremely high, meaning an instrument's not
• 15:04
  Speaker 3: working as intended or not working as well as intended,
• 15:07
  Speaker 3: that we do instantaneously, like there's no feedback loop that's long.
• 15:11
  Speaker 3: We can upgrade the instrumentation, particularly the single use disposal
• 15:15
  Speaker 3: instrumentation very quickly. This up that takes a little bit
• 15:18
  Speaker 3: more time is patient reported outcomes, right, and some of
• 15:21
  Speaker 3: that you get through surgeons surge. We'll give you feedback
• 15:23
  Speaker 3: which is the patient's doing well, and you kind of
• 15:25
  Speaker 3: credit that case with doing well. The patient reporty outcomes
• 15:29
  Speaker 3: take a little bit longer, and you really you know,
• 15:31
  Speaker 3: in the limit you'd like to know to paw patients
• 15:33
  Speaker 3: to being at five years and two years and one
• 15:36
  Speaker 3: year and six months and the like, and so the
• 15:38
  Speaker 3: feedback loop is a little longer there. But when you
• 15:41
  Speaker 3: have a product on market for six months, you begin
• 15:43
  Speaker 3: to get some feedback that can allow you to do things,
• 15:45
  Speaker 3: and that's helpful. Some of it is the surgeon's own
• 15:48
  Speaker 3: interpretation of what may work well, what may not work well,
• 15:51
  Speaker 3: the match of an implant to bone, right, the use
• 15:54
  Speaker 3: of an instrument that I described earlier to bone, and
• 15:56
  Speaker 3: so it can happen. Something can happen pretty quickly, but
• 15:58
  Speaker 3: it's happening constantly with our business, yeah, and our ankle
• 16:02
  Speaker 3: We started doing total ankles in twenty twenty one. The
• 16:05
  Speaker 3: full embodiment of the program kind of came live actually
• 16:08
  Speaker 3: in late twenty five and is going in twenty six.
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  Speaker 3: And that is a series of learnings from thousands of
• 16:14
  Speaker 3: cases right that have made for a much better ankle.
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  Speaker 3: And now we can do the most pedestrian ankle, you know,
• 16:21
  Speaker 3: and every day ankle in a very advantaged way, which
• 16:23
  Speaker 3: is more of the traditional Worthow model, all the way
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  Speaker 3: to the most divergent anatomy and pathology in a very
• 16:28
  Speaker 3: special way, and everything in between. And the surgeon doesn't
• 16:32
  Speaker 3: care who comes into clinic. This one coming to clinic,
• 16:34
  Speaker 3: that's an everyday case, Fine, they can handle it. Someone
• 16:37
  Speaker 3: come to clinic that's actually a lower extremity hambutation candidate.
• 16:40
  Speaker 3: They're going to try to salvage the limb. They can
• 16:42
  Speaker 3: handle that as well. And that's really the approach that
• 16:45
  Speaker 3: we're building best embodied and ankle nearly fully embodied in shoulder.
• 16:49
  Speaker 3: We just got a clearance last month and I said
• 16:52
  Speaker 3: maya last month. That will help us do that for
• 16:55
  Speaker 3: a release in twenty twenty seven.
• 16:57
  Speaker 1: Okay, well, let's talk about those type of launches and
• 16:59
  Speaker 1: products a second. But one question I have, and you
• 17:02
  Speaker 1: know I always think about with any customized implants, is
• 17:08
  Speaker 1: how's the FDA approval in that process because you know
• 17:10
  Speaker 1: we're talking about you know, you have this set of
• 17:13
  Speaker 1: eight implants and you have to fit within one of
• 17:15
  Speaker 1: those eight those those get approved as one unit and
• 17:20
  Speaker 1: then it goes out in the market. It doesn't get
• 17:23
  Speaker 1: customized or personalized. Let's start with how do personalized implants
• 17:26
  Speaker 1: get FDA approved?
• 17:28
  Speaker 3: M Yeah, that the answer is very slowly. So it
• 17:31
  Speaker 3: does take some time. And this isn't a knock upon
• 17:34
  Speaker 3: FDA have been a very good regulator, very good partner
• 17:37
  Speaker 3: to companies that are doing what we're doing. They're just
• 17:39
  Speaker 3: not set up well to do that. That means they
• 17:42
  Speaker 3: don't know which questions to ask. And for many orthopedic devices,
• 17:46
  Speaker 3: there are guidance documents that tell the manufacturer and the
• 17:49
  Speaker 3: regulator the rules of the road, if you will, and
• 17:52
  Speaker 3: there are none of these there and so it requires
• 17:55
  Speaker 3: a very large submission. It requires a submission with a
• 17:58
  Speaker 3: very large amount of testing can compared to the eight
• 18:00
  Speaker 3: sizes fit all.
• 18:02
  Speaker 2: It requires a lot.
• 18:03
  Speaker 3: Of time allowance because the regulator is often kind of
• 18:07
  Speaker 3: confused about the questions they should be asking. Again, they're
• 18:10
  Speaker 3: doing a very good job, but that is sort of
• 18:13
  Speaker 3: the approach. So it is instead of a very quick
• 18:16
  Speaker 3: campaign a very slow campaign, but it's one that's very
• 18:19
  Speaker 3: empowering when you ultimately get it.
• 18:21
  Speaker 1: So what's like the key question do you wish they
• 18:23
  Speaker 1: ask right away? That helps speed the process.
• 18:27
  Speaker 3: We get entangled a lot in the capability of three
• 18:30
  Speaker 3: D printing, right, and we would that a challenge is
• 18:36
  Speaker 3: not one you get. So imagine we made a total KNAE.
• 18:38
  Speaker 3: We decided to leave the studio, we go make a
• 18:40
  Speaker 3: total NAE. It would be fun. Maybe you should considered
• 18:43
  Speaker 3: as some day and we use traditional manufacturing, meaning we
• 18:47
  Speaker 3: were casting or forging it, we're machining it and polishing
• 18:50
  Speaker 3: it and things of that nature. After it doesn't tend
• 18:53
  Speaker 3: to ask any questions about that. And it's not because
• 18:55
  Speaker 3: they don't have a perview to do it, but they
• 18:57
  Speaker 3: just tend to believe, okay, you're using these traditional manufacturing techniques.
• 19:01
  Speaker 3: Everything's fine. Three D printing gets like a special consideration.
• 19:04
  Speaker 3: It probably should, right, New and new things generally are
• 19:07
  Speaker 3: not as capable and stable as they should be. But
• 19:11
  Speaker 3: there's great data that's emerged, Like we've been printing, We
• 19:14
  Speaker 3: as a society have been printing global chrome and titanium
• 19:17
  Speaker 3: and rich abundance for the last decade, and there's very
• 19:19
  Speaker 3: good publications in peer reviewed media that show that the
• 19:24
  Speaker 3: product is every bit is capable of three D printing,
• 19:27
  Speaker 3: and so.
• 19:28
  Speaker 2: That there questions there.
• 19:30
  Speaker 3: I wish they would accept that three D printing is
• 19:32
  Speaker 3: as capable as forging and machining and casting, but they're
• 19:36
  Speaker 3: not quite there yet, and you burn some time on that.
• 19:39
  Speaker 1: Yeah, it's it's a new process. But likely though, there's
• 19:42
  Speaker 1: enough companies doing three D type printing that you know,
• 19:46
  Speaker 1: we should be able to create some sort of kind
• 19:48
  Speaker 1: of consensus about the process and be able to have
• 19:53
  Speaker 1: I never like to say lobbying, but you know, enough
• 19:55
  Speaker 1: people representing these type of cases to the FBA, they
• 19:59
  Speaker 1: kind of moved forward.
• 20:00
  Speaker 3: Yeah, I mean they're used in higher use, higher acuity
• 20:03
  Speaker 3: use case aerospace parts. Yeah, right, if we had a
• 20:06
  Speaker 3: knee that went bad, it would be a very bad thing,
• 20:08
  Speaker 3: obviously when we do everything to avoid that. But if
• 20:11
  Speaker 3: you have a part fail and a plane a passing
• 20:14
  Speaker 3: your aircraft, that's probably a much more serious matter than
• 20:18
  Speaker 3: a knee issue. And so a lot of those components
• 20:21
  Speaker 3: serious and uh, you know, high sensivity components are being
• 20:25
  Speaker 3: three D printed, so you know, folks would not be
• 20:28
  Speaker 3: using them if they did not meet very good standards
• 20:29
  Speaker 3: of performance.
• 20:30
  Speaker 1: Right, and that you know just you know be able
• 20:32
  Speaker 1: to Yeah, that success rate and everything you need kind
• 20:36
  Speaker 1: of have one hundred percent success rate for both ideally.
• 20:38
  Speaker 2: Yeah.
• 20:39
  Speaker 1: So then just you talked about some of the new
• 20:42
  Speaker 1: products that are coming out for the ankle system. We
• 20:45
  Speaker 1: talked about them approval in May. How do you ramp
• 20:48
  Speaker 1: up that launch and going through going into twenty twenty seven.
• 20:52
  Speaker 3: Yeah, so right now we're pushing very aggressively on ankle
• 20:55
  Speaker 3: and pretty aggressively on shoulder. Is that product kind of
• 20:59
  Speaker 3: comes into full and by member the next six to
• 21:01
  Speaker 3: twelve months will push a wrestler on shoulder. And it's
• 21:04
  Speaker 3: really about a surgeon education, right, more than anything. And
• 21:08
  Speaker 3: the work that we do is often peer to peer
• 21:12
  Speaker 3: because we do some of the most difficult cases, cases
• 21:15
  Speaker 3: that other manufacturers won't touch. We have a very big
• 21:18
  Speaker 3: presence at the various society meetings because it's surgeon. If
• 21:22
  Speaker 3: you're a surgeon, you don't want to talk about an
• 21:24
  Speaker 3: everyday shoulder you've done. You want to talk about the
• 21:27
  Speaker 3: one that maybe no one else would do that you
• 21:29
  Speaker 3: did in a very special way, and that gives us
• 21:31
  Speaker 3: a very outsized presence there that drives a huge amount
• 21:34
  Speaker 3: of trial. So we have enormous inbound trial that comes
• 21:37
  Speaker 3: as fairly and expensively, which is good news, and that's
• 21:40
  Speaker 3: part of the benefit of doing difficult cases. They provide
• 21:44
  Speaker 3: a very good foothold to get into a surgeon's practice.
• 21:47
  Speaker 3: And if you can do that end stage case very
• 21:50
  Speaker 3: elegantly and a short amount of operative time and the
• 21:53
  Speaker 3: patient does well, the surgeon begins thinking, why wouldn't I
• 21:56
  Speaker 3: do semi difficult case with you? And why wouldn't I
• 21:58
  Speaker 3: do a difficult case with you? And why wouldn't I
• 22:01
  Speaker 3: give you my full book of business? And so that's
• 22:04
  Speaker 3: been the approach. So a lot of the for growth
• 22:06
  Speaker 3: is going to be taking those newly active accounts and
• 22:10
  Speaker 3: penetrating them more fully by moving from more complex cases
• 22:13
  Speaker 3: to morerow everyday cases. That'll be a piece of it,
• 22:15
  Speaker 3: but we're seeing great trial as well from the society meetings.
• 22:18
  Speaker 1: I'd also have to imagine that that helps with the
• 22:21
  Speaker 1: scale of your sales and clinical specialists as well, because
• 22:25
  Speaker 1: I mean, they definitely have the more hands on for
• 22:27
  Speaker 1: the complex cases. But as the surgeons get more comfortable
• 22:30
  Speaker 1: with those complex cases, they can start doing the standard
• 22:34
  Speaker 1: cases on their own without having the clinical specialists there
• 22:37
  Speaker 1: is that the right way to think about it.
• 22:39
  Speaker 2: That is the right way to think about it.
• 22:40
  Speaker 3: And we do have you know, it's still standard in
• 22:42
  Speaker 3: ORTHO and the US two have reps in the room.
• 22:44
  Speaker 2: We have res room like everyone does.
• 22:46
  Speaker 3: But our reps, I think are better position to help
• 22:50
  Speaker 3: out because they've also read the plan right, they know
• 22:53
  Speaker 3: what's going to be in the OAR and they get
• 22:55
  Speaker 3: in there. And I thought very carefully and the plan
• 22:56
  Speaker 3: is very interesting. If I ask you to come to
• 23:00
  Speaker 3: Durham and you joined me there and we open up
• 23:02
  Speaker 3: our kidaver lab and we put a shoulder in there
• 23:04
  Speaker 3: for you, it's kid aver. So yeah, you can do that.
• 23:07
  Speaker 3: If we're not violating any laws. You could do a shoulder.
• 23:11
  Speaker 3: You could follow the steps. It's not unlike building ikea
• 23:15
  Speaker 3: furniture in some respects or a lego.
• 23:18
  Speaker 2: Build out. If you do that sort of thing, and
• 23:21
  Speaker 2: you could do it.
• 23:22
  Speaker 3: You have to be comfortable messing with human anatomy, but
• 23:26
  Speaker 3: that you'd be able to do it, and that's very
• 23:29
  Speaker 3: very powerful.
• 23:30
  Speaker 2: So that makes the rep better. And of course can't
• 23:33
  Speaker 2: make the surgeon better as.
• 23:34
  Speaker 1: Well interesting, and so all that then leads to then
• 23:40
  Speaker 1: you are well, not so recent anymore. Twenty twenty three
• 23:42
  Speaker 1: is already three years ago. But your acquisition of conformists
• 23:48
  Speaker 1: similar thought process by conformists, but just never was able
• 23:55
  Speaker 1: to get off the ground. So let's start with what
• 24:00
  Speaker 1: was your decision when you saw conform us and said
• 24:03
  Speaker 1: we can do this.
• 24:04
  Speaker 3: Yeah, well, it was publicly traded, right, so we had
• 24:07
  Speaker 3: been following it very carefully, and we had stayed out
• 24:10
  Speaker 3: of hips and knees because there was a participant Conformists
• 24:14
  Speaker 3: in there that had built a reasonably good revenue line
• 24:17
  Speaker 3: but was contracting. But importantly they were producing really unattractive
• 24:22
  Speaker 3: gross margin a sub forty percent. And so when it
• 24:25
  Speaker 3: became clear that they were going to run strategic process,
• 24:29
  Speaker 3: we decided to go up there. And we had only
• 24:31
  Speaker 3: one thing in mind. Will it is the product elite?
• 24:35
  Speaker 3: And can it really stand out? And so if we'd
• 24:39
  Speaker 3: walked into those rooms and discovered the knee, was it
• 24:41
  Speaker 3: just a knee to knee or even a poor knee,
• 24:44
  Speaker 3: we would not have actually moved forward the transaction. But
• 24:47
  Speaker 3: the knee has extraordinary data, so it's revision rate and
• 24:51
  Speaker 3: ten years is the lowest revision rate of any knee
• 24:54
  Speaker 3: ever put in the human body for the UK study
• 24:56
  Speaker 3: in the NHS at one point two percent of ten
• 24:59
  Speaker 3: years exceptional the market averages three points and the patient's
• 25:03
  Speaker 3: satisfaction at ninety four percent against satisfaction metrics on off
• 25:08
  Speaker 3: the shelf between sixty and eighty five points, and most
• 25:11
  Speaker 3: searches would tell you eighty points is the measure knee.
• 25:13
  Speaker 3: So we knew it was the extraordinary knee. The question
• 25:16
  Speaker 3: was could we fix the gross margin on it? And
• 25:18
  Speaker 3: they had some difficulty delivering on time as well, and
• 25:22
  Speaker 3: what we realized is that they're not three D printing
• 25:25
  Speaker 3: those knees. They were casting and forging those knees. That
• 25:28
  Speaker 3: made for a very expensive knee that was also took
• 25:31
  Speaker 3: a long time to produce. And so over the course
• 25:34
  Speaker 3: of our diligence the summer of twenty three, we took
• 25:36
  Speaker 3: a bunch of their designs and demonstrated to ourselves that
• 25:39
  Speaker 3: we could print them before the end of the year
• 25:43
  Speaker 3: in twenty three.
• 25:43
  Speaker 2: We close the transaction.
• 25:44
  Speaker 3: On the fifth of September twenty three, we did our
• 25:46
  Speaker 3: first three D printed knee and so that's improved the
• 25:49
  Speaker 3: gross margin to the lower end of industry as standards,
• 25:53
  Speaker 3: and we staw have some room to go there, But
• 25:55
  Speaker 3: that was the thesis. But there are other beautiful parts
• 25:58
  Speaker 3: of that business. They have a software coding asset, and
• 26:01
  Speaker 3: an engineering asset and hydrobout India that's owned that's filled
• 26:06
  Speaker 3: with extraordinary people doing extraordinary work. Every day we buy
• 26:09
  Speaker 3: half a day by working with them, which is exceptional.
• 26:12
  Speaker 3: And then also a production asset that had about a
• 26:16
  Speaker 3: thirty million dollars installed base of production equipment that we
• 26:18
  Speaker 3: could use not just for knees but also for shoulders
• 26:22
  Speaker 3: and ankles as well, which is very very powerful.
• 26:25
  Speaker 1: Okay, so what exactly is that software division that you
• 26:30
  Speaker 1: have out there? So what is that something that helps
• 26:34
  Speaker 1: with your AI planning as well? How does that get
• 26:37
  Speaker 1: combined together?
• 26:38
  Speaker 3: They write traditional non AI software and then they also
• 26:42
  Speaker 3: write and use some AI software to take a medical
• 26:45
  Speaker 3: image like a CT scan and turn that into a
• 26:49
  Speaker 3: papecific design for implants instruments as well as the written
• 26:54
  Speaker 3: surgical plan that goes with it. And that's what that
• 26:56
  Speaker 3: team does. So they write the software to automate those things.
• 26:59
  Speaker 3: And we you know, when we took on conformists, they
• 27:01
  Speaker 3: were only doing knees over there. They have an nascent
• 27:04
  Speaker 3: hip business side. Note hip's not given all that welder
• 27:08
  Speaker 3: personalization for the reasons that they work very well. About
• 27:11
  Speaker 3: ninety five percent of hip patients are satisfied. So who's
• 27:13
  Speaker 3: not as much scope for improvement there? See, But we
• 27:16
  Speaker 3: took those software a specialist and the software tools. Now
• 27:20
  Speaker 3: we run our ankle and hyder about India, and we
• 27:23
  Speaker 3: run our shoulder and hyder about India, and we continue
• 27:26
  Speaker 3: to move with each passing day more of a surgical
• 27:28
  Speaker 3: volume to that asset in India.
• 27:31
  Speaker 1: Very interesting and then so walk through you talked about
• 27:34
  Speaker 1: hips be not as much of an opportunity just because
• 27:37
  Speaker 1: of you know, the traditionals actually has a good rate.
• 27:41
  Speaker 1: But the knees itself. What nees technology do you have
• 27:46
  Speaker 1: out there? Because we know we talked about traditional needs,
• 27:50
  Speaker 1: We talked about a little bit about cement lists with
• 27:52
  Speaker 1: the three D printing. What's out there and what's kind
• 27:55
  Speaker 1: of the next products that will be out there.
• 27:58
  Speaker 3: Most every knee that's on the market is symmetric, and
• 28:01
  Speaker 3: what that means is the shape of the medial and
• 28:04
  Speaker 3: lateral compartments, which are these curved compartments that are on
• 28:07
  Speaker 3: the bottom end of the long bone of your upper leg,
• 28:10
  Speaker 3: which is your femur, are the same, and so the
• 28:13
  Speaker 3: surgeon has to figure out a way to align those
• 28:16
  Speaker 3: so the knee feels normal and natural, is not too
• 28:20
  Speaker 3: tight and not too loose for the patient. That's the
• 28:22
  Speaker 3: surgeons amongst their jobs, that's one of their jobs. And
• 28:26
  Speaker 3: the challenge with the symmetric knee is almost no humans
• 28:30
  Speaker 3: have a symmetric knee, right. Your knee is very different
• 28:33
  Speaker 3: on the medial compartment. There's a lot of compartments, same
• 28:35
  Speaker 3: as true of mind, and so we do is restore
• 28:37
  Speaker 3: the exact shape of the femeral condyle of the patient.
• 28:40
  Speaker 3: And that's a very powerful tool to making a knee
• 28:43
  Speaker 3: feel natural inflection and extension and internal and external rotation,
• 28:47
  Speaker 3: any position in between. And that's why the knee has
• 28:50
  Speaker 3: done so well from a longevity perspective. You're not asking
• 28:52
  Speaker 3: the need to do things that it wasn't natively designed
• 28:55
  Speaker 3: to do. But it also feels normal and natural to
• 28:58
  Speaker 3: the patient once they've had the done.
• 29:00
  Speaker 1: Gotcha. And then so then with the cementless Yeah, I
• 29:04
  Speaker 1: was reading about the first cases have come out. Ye,
• 29:08
  Speaker 1: why is that launch so important. Why is the cementless
• 29:11
  Speaker 1: knee market so important for the overall industry?
• 29:14
  Speaker 3: It smentless had a bad moment early in our industry's history.
• 29:18
  Speaker 3: People released the cementless knee. It did not bind to
• 29:22
  Speaker 3: bone very well. That's not a good thing for Earth
• 29:25
  Speaker 3: Week implant. I think you hear that degree in medicine
• 29:27
  Speaker 3: to know that. And so there was some negative headwins
• 29:31
  Speaker 3: against that that endured. But several manufacturers released c smentless
• 29:36
  Speaker 3: knee and showed good uptake, and so the market has
• 29:39
  Speaker 3: been shifting in the direction of cementless from cemented And
• 29:43
  Speaker 3: so this may surprise you and some of your listeners.
• 29:46
  Speaker 3: They use glue to attach the bone a knee to
• 29:50
  Speaker 3: one's bone, right, it's called bone cement. It's pretty crazy
• 29:53
  Speaker 3: that's done, but that's the way it is. The challenge
• 29:56
  Speaker 3: with that is it takes between and twelve minutes in
• 29:58
  Speaker 3: the operating room and it's not really fun interesting work, right,
• 30:03
  Speaker 3: You kind of mix this stuff, you're waiting for it
• 30:05
  Speaker 3: to get cured appropriately. Then you have to slather it
• 30:08
  Speaker 3: on things and you have to seat them, and so
• 30:10
  Speaker 3: it saves a fair amount of time. You think the
• 30:12
  Speaker 3: average knee in the US probably takes forty to forty
• 30:15
  Speaker 3: eight minutes. You carbate twelve minutes off of that. That
• 30:18
  Speaker 3: benefits the patient. They're not under anesthige as long it
• 30:21
  Speaker 3: benefits the surgeon because they might build it to another
• 30:23
  Speaker 3: case or play another round of golf is a case
• 30:25
  Speaker 3: maybe or at least another hole. And it benefits the
• 30:29
  Speaker 3: hospital right because they can put more volume through the
• 30:30
  Speaker 3: operating room. And so that's been the direction with the casting,
• 30:35
  Speaker 3: which was in forging, which is the original conformist knee embodiment.
• 30:40
  Speaker 3: You can't do a surface that will bring bone and
• 30:43
  Speaker 3: you have to three D print it. There's some things
• 30:45
  Speaker 3: you can do, but really really to three D print.
• 30:46
  Speaker 3: So three D printing it allows not only to improve
• 30:48
  Speaker 3: the cost position dramactically, but to set the stage for
• 30:51
  Speaker 3: some entlessennake.
• 30:52
  Speaker 2: Yeah.
• 30:53
  Speaker 1: And you know the other thing too is I've seen
• 30:55
  Speaker 1: the rise in cementless knees after the kind of the
• 30:57
  Speaker 1: year set the false start. One of the things that
• 31:01
  Speaker 1: some of the companies have said helped be able to
• 31:04
  Speaker 1: improve that adoption rate has just been the case of
• 31:07
  Speaker 1: robotics and being able to cut the bone in a
• 31:10
  Speaker 1: way that allows the cement list need to fit better.
• 31:14
  Speaker 1: Kind of a segue is you know, we're talking here
• 31:17
  Speaker 1: about implants, but a lot of the developments in the
• 31:21
  Speaker 1: orthopedic side is robotics. Some companies like to have a
• 31:27
  Speaker 1: one size or not one size, but you know, a
• 31:30
  Speaker 1: single source, you know, use my implants with my robots.
• 31:34
  Speaker 1: Some are more agnostic about who which robots they can
• 31:37
  Speaker 1: use or which implants could be used with those robots.
• 31:40
  Speaker 1: How does restore three D and your implants, your three DAL,
• 31:45
  Speaker 1: your personalizing plants fit in with just that robotic landscape.
• 31:49
  Speaker 3: Yeah, And I'll start comment by saying, I think the
• 31:54
  Speaker 3: long term best outcomes in me are going to be
• 31:58
  Speaker 3: a precisely placed implant aided by some form of robotics,
• 32:04
  Speaker 3: with a personalized implant itself. Right, See the accuracy of
• 32:07
  Speaker 3: a personalized implant very precisely placed with some sort of
• 32:11
  Speaker 3: robotic assistance. So I think that's that holy grail. We're
• 32:14
  Speaker 3: delivering on the personalized part.
• 32:16
  Speaker 2: First.
• 32:17
  Speaker 3: We have a development program in the back that's looking
• 32:19
  Speaker 3: at some very creative ways to do robotics later, and
• 32:22
  Speaker 3: that's gonna be several years out, but that's where I
• 32:24
  Speaker 3: think it will come. It's not clear to me that
• 32:26
  Speaker 3: in shoulder or hip there's any benefit, and these cases
• 32:30
  Speaker 3: are pretty straightforward. The bone cuts are much more limited,
• 32:33
  Speaker 3: and there are many more bone cuts on the knee
• 32:36
  Speaker 3: that are far more important. The kinematics in the alignment
• 32:38
  Speaker 3: of it ankles hard to say. We're trying to figure
• 32:40
  Speaker 3: that out. So the development work we're doing in around
• 32:43
  Speaker 3: robotics is really directed both at ankle and knee, and
• 32:46
  Speaker 3: so we think that is that the important consideration. But
• 32:51
  Speaker 3: you're correct, the rise and cementless has enlarged been driven
• 32:55
  Speaker 3: by the rise in robotic procedures which are in the knee.
• 32:58
  Speaker 3: Probably twenty five thirty percent of the US and ees
• 33:01
  Speaker 3: are done robotically, but if you look at the large
• 33:04
  Speaker 3: joint procedures including shoulder and ankle, that number is more
• 33:07
  Speaker 3: like eight to seven to eight percent. So there's still
• 33:10
  Speaker 3: many many procedures that are not yet converted into robotics.
• 33:13
  Speaker 1: Yeah, and you know, while we're here too, I mean
• 33:15
  Speaker 1: another always key topic of the orthopedia market is the
• 33:18
  Speaker 1: ASC setting. Just the thought of you know, those especially
• 33:22
  Speaker 1: those low acuity cases, those patients can go in and
• 33:25
  Speaker 1: out at the same day. It's just crazy to think
• 33:27
  Speaker 1: about it. You go in and then you're able to
• 33:29
  Speaker 1: walk out with a Randow knee. But how how does
• 33:33
  Speaker 1: restore three D fit into that ASC setting?
• 33:37
  Speaker 3: Yeah, we're extremely competitive there, right, and part of it
• 33:40
  Speaker 3: is because we have less instrument and inventory burden for cases.
• 33:44
  Speaker 3: So our knee is an example. It's a knee in
• 33:47
  Speaker 3: a box. You get all the instruments in the box,
• 33:49
  Speaker 3: they're disposable, and you get the knee in a box.
• 33:52
  Speaker 3: So there's no sterilization activities, which is actually very very
• 33:56
  Speaker 3: powerful in an ASC setting, and then we can be
• 33:58
  Speaker 3: very competitive on pricing, as one would need to be
• 34:01
  Speaker 3: in that environment. But I think that this industry haven't
• 34:04
  Speaker 3: been in twenty one years. I think it's given to
• 34:07
  Speaker 3: all or nothing thinking and maybe hyperbole. You probably heard
• 34:11
  Speaker 3: it in robotics. Everything will forever and always be done
• 34:13
  Speaker 3: in robotics, and it just gave the number seventy eight percent
• 34:15
  Speaker 3: procedures of the other So we're not quite there, right.
• 34:18
  Speaker 3: I'm a robotics believer, but I think a different version
• 34:21
  Speaker 3: of robotics. I think the all or nothing thinking of
• 34:25
  Speaker 3: the day right now as ASCs. But consider this hospital's
• 34:30
  Speaker 3: number one or number two profit center is orthpedic surgery,
• 34:35
  Speaker 3: and you think they're going to willingly and forever and
• 34:37
  Speaker 3: always let that walk out the door to a SCS
• 34:39
  Speaker 3: and not have a competitive response.
• 34:40
  Speaker 2: Of course, not right.
• 34:42
  Speaker 3: And our case is because we start with very difficult cases.
• 34:46
  Speaker 3: That means we're doing generally very high volume surgeons that
• 34:49
  Speaker 3: are often doing cases in around academic medical center are
• 34:52
  Speaker 3: very highly skilled community hospital and so we have a
• 34:58
  Speaker 3: bit more hospital exposure than a SEE exposure anyway, by
• 35:01
  Speaker 3: virtue of the difficult cases we do. But I think
• 35:04
  Speaker 3: the ASC thing's a bit over sold. The volume is
• 35:08
  Speaker 3: moving in that direction. But I don't think when we
• 35:10
  Speaker 3: sit here in twenty years that every case for everyone
• 35:13
  Speaker 3: always will be done in SC.
• 35:15
  Speaker 2: Yeah.
• 35:15
  Speaker 1: It's interesting because you're right though, because it's you're exactly right.
• 35:18
  Speaker 1: The hospitals are not going to be empty in the
• 35:19
  Speaker 1: OLR rooms. No, that just wasted infrastructure right there.
• 35:22
  Speaker 2: Yeah.
• 35:23
  Speaker 3: Absolutely, And and now ORTHO is in some cases it
• 35:26
  Speaker 3: absolutely cleared away the most profitable service find that they have.
• 35:30
  Speaker 1: Yeah, So that'd be interested is how that plays out.
• 35:32
  Speaker 1: I was going to ask kind of the the you know,
• 35:34
  Speaker 1: you envision the orthopedic world five years out from now,
• 35:37
  Speaker 1: but you kind of explained that with the combination of
• 35:39
  Speaker 1: robotics and you know the the three D AI implants.
• 35:43
  Speaker 1: But so let's kind of just close out with how
• 35:46
  Speaker 1: do you ce restore three D playing a part in
• 35:50
  Speaker 1: this market overall? Because you know, as a privately held
• 35:52
  Speaker 1: company you're going through that process of generating revenue. But
• 35:56
  Speaker 1: you also have to think with your CEO hat you have,
• 35:59
  Speaker 1: you know, think about the at the profitability, finance and
• 36:02
  Speaker 1: all that stuff. How are you playing with that? You
• 36:05
  Speaker 1: know almost at McKinsey side and you know, one of
• 36:08
  Speaker 1: the things you started off with is you know, when
• 36:10
  Speaker 1: you were working with other groups it was mangled in implementation.
• 36:15
  Speaker 1: You kind of showed clearly with conformists that you were
• 36:18
  Speaker 1: able to take that technology and implement it to a
• 36:20
  Speaker 1: point where you know it's becoming a viable business for you.
• 36:24
  Speaker 1: So how do you maintain that implementation of the overall
• 36:27
  Speaker 1: company over the next few years.
• 36:30
  Speaker 3: I think it requires two very different skill sets to
• 36:32
  Speaker 3: be in evidence at the same time at any size
• 36:35
  Speaker 3: or scale, and one of those is capacity to innovate, right,
• 36:38
  Speaker 3: and that's to create new products and create them with
• 36:41
  Speaker 3: regularity that had some element of distinctiveness. They may embody
• 36:44
  Speaker 3: a new technology or not. And if we were creating
• 36:48
  Speaker 3: neat METO products, I would not be sitting in the
• 36:50
  Speaker 3: chair I'm in, you know, I'm the things that made
• 36:53
  Speaker 3: me tick at one of those I mentioned, I like
• 36:54
  Speaker 3: using technology to improved the human condition, and we need
• 36:59
  Speaker 3: to do that. That's hard to do. Many startups are
• 37:02
  Speaker 3: very good at doing that, and that alone, I will
• 37:04
  Speaker 3: innovate and create a new product or a small set
• 37:06
  Speaker 3: of new products, and I will take some share. The
• 37:09
  Speaker 3: second part of that is being operationally excellent. So how
• 37:12
  Speaker 3: do I actually build a scalable enterprise that can grow
• 37:15
  Speaker 3: cost effectively, that can produce implants cost effectively, that can
• 37:19
  Speaker 3: produce cash flows cost effectively. And some of the companies
• 37:22
  Speaker 3: that we model our operating life after look at that
• 37:25
  Speaker 3: look that way. They release new products forever and always
• 37:28
  Speaker 3: never stopped. And if you ask them what they're doing
• 37:30
  Speaker 3: tomorrow they release a new product today, they're going to say,
• 37:32
  Speaker 3: we're going to release a new product r YEA. And
• 37:34
  Speaker 3: I think that's how you win in ORTHO. But the
• 37:36
  Speaker 3: capacity to have scalable, excellent operations is essential, and that's.
• 37:39
  Speaker 2: What we've been endeavoring to do. Both of those.
• 37:41
  Speaker 3: So some sound bites on the operating side right, we
• 37:44
  Speaker 3: have a business that we're working very much to get
• 37:47
  Speaker 3: to cash flow positivity, and we do that in a
• 37:51
  Speaker 3: few ways. One, we continue to be excellent at producing
• 37:53
  Speaker 3: things and produce good gross margins. We have moved the
• 37:57
  Speaker 3: gross margin on the business almost seventeen points since twenty
• 38:01
  Speaker 3: four and they're approaching industry averages now, which may blow
• 38:05
  Speaker 3: your mind.
• 38:06
  Speaker 1: Right a privately held company.
• 38:07
  Speaker 3: Yeah, so that's great, you know, news from a cash
• 38:10
  Speaker 3: flow point of view. But we also are very disciplined
• 38:13
  Speaker 3: from selling a marketing perspective. So we have kind of
• 38:15
  Speaker 3: a fifty percent rule inside of the business, and that
• 38:19
  Speaker 3: means we're going to endeavor not spend more than fifty
• 38:21
  Speaker 3: cents of every revenue dollar in selling in marketing. And
• 38:24
  Speaker 3: why wouldn't we do that, Well, we are very much
• 38:27
  Speaker 3: convinced based on all the new entrants public or private
• 38:30
  Speaker 3: in the century in medtech but especially in north though,
• 38:34
  Speaker 3: that that's a game that does often end well. Right, So,
• 38:37
  Speaker 3: you can drive an overheated sales line, but you're losing
• 38:40
  Speaker 3: money when that When those funds are exhausted, your capacity
• 38:44
  Speaker 3: to buy the unsustainable sale falls falls away, and your
• 38:48
  Speaker 3: sales growth does as well. So we're committed to doing that,
• 38:51
  Speaker 3: and we believe we'll continue to grow at north to
• 38:53
  Speaker 3: twenty percent to make that happen. I think some of
• 38:55
  Speaker 3: the better participants in the market have run a very
• 38:57
  Speaker 3: similar model.
• 38:58
  Speaker 1: Yeah, I mean it comes to mind as like a
• 38:59
  Speaker 1: globe this medical.
• 39:01
  Speaker 3: It's funny you should mention that we look very very
• 39:05
  Speaker 3: carefully them. I spent Memorial Day weekend reading through all
• 39:07
  Speaker 3: their earnings transcripts from twenty twelve to today.
• 39:10
  Speaker 2: It was an enjoyable read. Yeah, very a very enjoyable reading. Yeah.
• 39:14
  Speaker 1: Well, Kurt, thank you so much for joining us today.
• 39:16
  Speaker 1: I look forward to following this story throughout the years.
• 39:18
  Speaker 3: Thank you very much, Matt. You guys are very kind
• 39:21
  Speaker 3: to have us in, and thank you for being excited
• 39:24
  Speaker 3: about our business and being very well prepared for a
• 39:26
  Speaker 3: discussion here today.
• 39:27
  Speaker 1: Thank you, Luly, and thank you to our producers at
• 39:29
  Speaker 1: did Simani and Marriam Wail for all the behind the
• 39:33
  Speaker 1: scenes works. And thank you to our listeners for tuning
• 39:35
  Speaker 1: in today. We hope you join us for future episodes,
• 39:38
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• 39:40
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• 39:42
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