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Orthofix Builds Specialized Portfolio for the Toughest Ortho and Spine Cases · Vanguards of Healthcare by Bloomberg Intelligence

• 0:16
  Speaker 1: Welcome to another episode of the Vanguards of Healthcare series.
• 0:20
  Speaker 1: My name is Matt Hendrickson, the medical technology analyst at
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  Speaker 1: Bloomberg Intelligence, which is the in house equity research platform
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  Speaker 1: of Bloomberg LP. We're pleased to have with us today
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  Speaker 1: Massimo Calafiore, CEO of Orthopix, a medical device company with
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  Speaker 1: a comprehensive portfolio of spinal hardware, specialized orthopedic solutions, and
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  Speaker 1: advanced surgical navigation. You can dive deeper into the company
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  Speaker 1: and its financials by typing in o fix Equity go
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  Speaker 1: on your Bloomberg terminal. Massimo, thank you for joining us today.
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  Speaker 2: Thank you for having me and.
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  Speaker 1: Masimo, you're almost two years, maybe slightly over two years
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  Speaker 1: into the CEO role here at Orthofix. Why do you
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  Speaker 1: start with just the steps in your career path that
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  Speaker 1: led you to that role.
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  Speaker 3: Yeah, a little bit less than two years, just thirteen months. Look,
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  Speaker 3: I was always a mercy medicine. I am the only
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  Speaker 3: I think, the adult male that is not a doctor
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  Speaker 3: in three generations so between my grandfather, uncle, brother father
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  Speaker 3: has been always in medicine. So passion care has been
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  Speaker 3: always front and center of my history.
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  Speaker 2: I was not let's say, drawn to the.
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  Speaker 3: Operating room per se, and I decided to start a
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  Speaker 3: career on the business side of the business. So twenty
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  Speaker 3: five years in the industry, all in the United States,
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  Speaker 3: and I've been a very strategic on how built up
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  Speaker 3: my experience that led me to run Orthopix today. First
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  Speaker 3: part of working with a privately held company Valdemort Link
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  Speaker 3: at the time with the largest privately held orthopedic company
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  Speaker 3: in the world. From there moved to invasive, very steep
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  Speaker 3: and fast career. At the end that was the chief
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  Speaker 3: commercial officer there, so managing one of the largest spine
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  Speaker 3: portfolio the world. And from there, first step as a
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  Speaker 3: CEO working for a private equity group, successful exit.
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  Speaker 2: We saw the company I was leading lima to an.
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  Speaker 3: Novice for EQT as said, and now first time public
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  Speaker 3: company CEO with Orthopix. So a were rounded career that
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  Speaker 3: led me to where I am today.
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  Speaker 1: Interesting and so you know, this is your first time
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  Speaker 1: as a CEO of publicly traded company. What was it
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  Speaker 1: that you saw in the company that excited you before
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  Speaker 1: you joined?
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  Speaker 3: So a company that was clearly undervalue I saw in
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  Speaker 3: Orthopix and the opportunity kind of a canvas that I
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  Speaker 3: could start to use in order to build up a
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  Speaker 3: great story metech.
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  Speaker 2: A board of very.
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  Speaker 3: Supportive that you wanted to have a leader that was
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  Speaker 3: leading change, and of course a good technology platform that
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  Speaker 3: would allow us, you know, to grow to build something
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  Speaker 3: very meaningful. So again was I saw a few aspects
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  Speaker 3: of this company that really draw me to accept the
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  Speaker 3: job and will.
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  Speaker 1: Dive deeper into some of the portfolio aspects there. But
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  Speaker 1: what caught my attention was just talking about build change
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  Speaker 1: because over these eighteen months you've gotten on a bit
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  Speaker 1: of a hiring spree to hire new executives in the
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  Speaker 1: C suite to kind of help build out your team.
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  Speaker 1: How have you built out that team to take advantage
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  Speaker 1: of those opportunities?
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  Speaker 3: So what I learned, you know, like I said that
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  Speaker 3: was always immersive medicine, and what you learn that the
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  Speaker 3: end you're in business of people. So you can have
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  Speaker 3: a great technology, but if you're not the great people
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  Speaker 3: that care and they're expert on the deploying the technology,
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  Speaker 3: nothing really happened. So the board very supportive, and one
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  Speaker 3: things that I wanted to achieve was orthopedicspine bone grow
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  Speaker 3: therapy are very specific market. Okay, so you really need
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  Speaker 3: the expertise in the marketplace. So what they did may
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  Speaker 3: be different than many Every single member of my leadership
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  Speaker 3: team a specific expertise in the market we compete.
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  Speaker 2: We have more than two hundred.
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  Speaker 3: And fifty years of a experience in spine orthobiology, cannable
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  Speaker 3: in tech, bone growth therapy. So I have a group
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  Speaker 3: of people now that can lead as a human being,
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  Speaker 3: but also that they have a profound understanding of technology
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  Speaker 3: in the market and that one has to be the
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  Speaker 3: foundational of everything that everybody do on my seat.
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  Speaker 2: Yeah, understandable.
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  Speaker 1: And then you know another foundation for this market is
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  Speaker 1: the actual market or the current state of these markets itself.
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  Speaker 1: Orthofix is diversify between spine orthopedics, bone growth. How have
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  Speaker 1: these markets evolved over the years.
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  Speaker 3: So you have a spine market that for many years
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  Speaker 3: enjoy a very high growth rate. Now lately we're back
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  Speaker 3: to more like a market growth rate around six percent.
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  Speaker 3: But it's giving us the opportunity to play. You know,
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  Speaker 3: a market it is almost as large as large ooint
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  Speaker 3: where the opportunities for us today enable in technology is
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  Speaker 3: becoming a highly differentiator in the.
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  Speaker 2: Market where we compete.
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  Speaker 3: So having access to seven D is giving us the
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  Speaker 3: opportunity to be current in a market where recently we
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  Speaker 3: saw a little bit of let's say slow down from
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  Speaker 3: the growth perspective, but the foundation, the fundamental of the
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  Speaker 3: market will compete are very strong because the introduction level
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  Speaker 3: in tech, the evolution of technologies in both in spine
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  Speaker 3: and orthopedics. It led us address disease for patients that
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  Speaker 3: much more older than before. So you have a new
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  Speaker 3: patient population that now you can address. There is a
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  Speaker 3: pull and a ask from the customer to be more active.
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  Speaker 3: So while before a certain age everybody was stepping.
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  Speaker 2: Back and just wait.
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  Speaker 3: Now they want to keep doing their own stuff. They
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  Speaker 3: want to keep play pick a ball outside, they want
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  Speaker 3: to still enjoy golf, So a good demand for patients
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  Speaker 3: to go into the r So at macro level, we
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  Speaker 3: participate in a market that foundational is very strong.
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  Speaker 2: Post COVID.
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  Speaker 3: Also we start to see a stabilization on the price
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  Speaker 3: pressure from the provider perspective. So let's say we're very
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  Speaker 3: content to be able to be present in the market
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  Speaker 3: where we participate. What is interesting also for us that
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  Speaker 3: the combination of the business that we have the hardware side,
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  Speaker 3: the biologic the enabling tech and the bone growth therapy
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  Speaker 3: let us follow the patient throughout the entire continuum of care.
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  Speaker 3: So we help on the pre planning, we help inside
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  Speaker 3: the R where we excel, and now with bone growth therapy,
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  Speaker 3: we can check the evolution of the patient. So I'm
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  Speaker 3: very excited about the opportunity. And this is why I
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  Speaker 3: said at the beginning I was excited about taking this
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  Speaker 3: position in Orthopix.
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  Speaker 1: Yeah, and so maybe you know it's a good segue
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  Speaker 1: into kind of that enabling technology, because correct me if
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  Speaker 1: I'm wrong, But it sounds like that ability for the
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  Speaker 1: surgeons to be able to use that enabling technology allows
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  Speaker 1: those surgeons to treat the patient sooner or at least
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  Speaker 1: be able to be more efficient in their treatment. You
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  Speaker 1: talked about the seventy What is the seven D system.
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  Speaker 3: So the seven D system is our navigation system. Is
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  Speaker 3: a system that the surgeons can use in the R
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  Speaker 3: to navigate them plans in the human.
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  Speaker 2: Body during the procedure.
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  Speaker 3: Okay, why seventy is highly differentiable. So we use a
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  Speaker 3: visible light flash that we call it flash technology, that
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  Speaker 3: we project into the spine if you do an open
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  Speaker 3: procedure or onto the skin with some specific marker if
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  Speaker 3: as a minimal invasive procedure, and what we do we
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  Speaker 3: map the spine and we combine a preoperative city scan
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  Speaker 3: that you have with the actually map of the spine
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  Speaker 3: in the R. Why seventy is so important to us?
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  Speaker 3: Why so highly differentiable? First of all, you can register,
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  Speaker 3: so create this this mapping of the spine in thirty seconds,
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  Speaker 3: okay to up to thirty minutes. Registration need to have
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  Speaker 3: with competitive systems.
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  Speaker 1: So this is this is at the point where you've
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  Speaker 1: done your preoperative CT scan. Yes, you're seventy right before
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  Speaker 1: you begin the procedure. It's not thirty seconds.
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  Speaker 3: Yes, So if you do an open procedure to open
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  Speaker 3: the spine and really flash the spine the open spacey
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  Speaker 3: and you combine what was the preoperative scan with was
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  Speaker 3: the current current position of the spine of the patient
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  Speaker 3: spine in the operating room.
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  Speaker 2: Okay, okay, so you.
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  Speaker 3: Kind of give is a reference for now for the
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  Speaker 3: system to guide them plans into the spine. One of
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  Speaker 3: the challenges to see in the R sometimes the spine moves.
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  Speaker 3: So if the reference change we have we can re
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  Speaker 3: register in twenty seconds. For a competitive system, you need
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  Speaker 3: to go through the entire process from scratch. Okay, and
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  Speaker 3: what we do because all our lighting is in stall
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  Speaker 3: is pretty much our the form factor our the machine
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  Speaker 3: look like. It's like lighting that we had that you
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  Speaker 3: normally have in the operating room. We don't destroy the
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  Speaker 3: workflow of a surgeon because pretty much instead of moving
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  Speaker 3: the lights that are provided in the R, they move
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  Speaker 3: our lights that come with the device. So between the
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  Speaker 3: fast use how the seventies engineered is let us be
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  Speaker 3: very accurate, create a safe environment for the surgeon, the
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  Speaker 3: patients are stuff bringing the addition inside they are to zero,
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  Speaker 3: and of course create the speed the efficiencies that everybody
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  Speaker 3: is looking for in the operating room. We need some
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  Speaker 3: study and we can save more than one hour per
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  Speaker 3: procedure utilizing the seventy more interesting, you know, there is
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  Speaker 3: a lot of now and I would say finally a
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  Speaker 3: lot of scrutiny about the amount of radiation that are
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  Speaker 3: used not set in the R but also outside with
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  Speaker 3: all of the pre imaging that you need to do
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  Speaker 3: with a patient. And now we have a relationship with
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  Speaker 3: a company that let us a synthesize a city scan
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  Speaker 3: from an MRI, so you can truly do zero diation procedure.
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  Speaker 3: Combining the seven DY technology with our implants very interesting.
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  Speaker 1: Okay, So now basically, if I understand that correctly, you're
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  Speaker 1: able to now use an MRI as your preoperative scan
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  Speaker 1: and so basically you're cutting out essentially all city scans. Yes,
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  Speaker 1: now just available with all the seventies or is this
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  Speaker 1: a special next generation version that comes.
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  Speaker 3: No, No, this is our seventy is the time today.
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  Speaker 3: There is a lot of things that you are working on.
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  Speaker 3: I think the seven D will let us do stuff
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  Speaker 3: in the r that nobody's doing right now. So there's
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  Speaker 3: a lot of ur in the investment that we're putting there.
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  Speaker 3: We are working on the second generation of FORLA like
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  Speaker 3: of the device that is coming up in the future.
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  Speaker 3: So very excited about the opportunity that we have with
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  Speaker 3: the seven D and the results that we are seeing.
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  Speaker 3: Are speaking loudly about the efficiency that we bring and
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  Speaker 3: the quality of our implant and every ten technology together.
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  Speaker 3: We talk often during our earning calls about air and outs,
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  Speaker 3: which pretty much when we transact a seven D, we
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  Speaker 3: let the hospital pay over time with the utilization our device.
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  Speaker 3: What is very important to learn is that the contraction
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  Speaker 3: so the hospital is a contractual obligation with us about
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  Speaker 3: usage more than fifty percent of this contract. They're consuming
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  Speaker 3: more implants than what the contract is saying. Okay, And
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  Speaker 3: this talk talks very loudly about three things. One about
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  Speaker 3: the quality of our implants, because when we do this,
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  Speaker 3: earnout the vast majority of the time or a new user,
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  Speaker 3: so they like our implant, they use more. They actually
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  Speaker 3: use seventy because the usage that we're seeing is above
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  Speaker 3: of what is contractually was contractually discussed. And when we
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  Speaker 3: do a turnout in account where we already have a presence,
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  Speaker 3: we see always an increase of utilization of our implant
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  Speaker 3: because most of the time we can get new surgeon
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  Speaker 3: that are looking to our main each head in the
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  Speaker 3: account using seventy.
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  Speaker 2: Start to get.
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  Speaker 3: Curious, So a lot of opportunities that start opening up
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  Speaker 3: because the combination of our product line with enable in
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  Speaker 3: technology interesting.
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  Speaker 1: We'll talk more about that pull through opportunity, but I'm
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  Speaker 1: just very curious because you know, you're seeing a lot
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  Speaker 1: of headlines about hospitals, you know, potentially getting into the
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  Speaker 1: red because of a lot of capital equipment purchases that
• 15:27
  Speaker 1: they've made. And I've also hearing other companies talk about
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  Speaker 1: these leasing or other like real value based opportunities for
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  Speaker 1: the hospitals. Is that going to get to the point
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  Speaker 1: where we get you know, no hospitals are ever going
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  Speaker 1: to purchase these outright and it's all gonna be leasing
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  Speaker 1: or is it? Is it still going to be certain
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  Speaker 1: hospitals that it'll be like we just want to own
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  Speaker 1: it and not have to worry about anything else with
• 15:50
  Speaker 1: regards to that robot.
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  Speaker 2: Yeah, this is a great question.
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  Speaker 3: We see it depends on the expedients they had in
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  Speaker 3: the past. Uh, the ernout model is not you so
• 16:02
  Speaker 3: we see said sometimes they bought very expensive capital equipment,
• 16:07
  Speaker 3: very big commitment. They start to struggle on actually do
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  Speaker 3: the earn out, so they say, okay, now we don't
• 16:15
  Speaker 3: go through this ordeal. We want to buy out right. Ah,
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  Speaker 3: there are like hospitals that we have a strong surgeon
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  Speaker 3: advocacy inside that they are committing to the hospital. They
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  Speaker 3: actually like our product, so you make the hospital more
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  Speaker 3: at ease on doing earnout.
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  Speaker 2: So it depends.
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  Speaker 3: There are hospitals, as you said, that clearly cannot afford
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  Speaker 3: to buy outright and they actually get the enable in
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  Speaker 3: tech in house. If you can if they have a
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  Speaker 3: strong surgeon advocacy. So it changed from let's say case
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  Speaker 3: case case by case basis in our in our case.
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  Speaker 3: Another thing that's important about seven D. We are in
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  Speaker 3: a very sweet spot in terms of how much we
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  Speaker 3: are pricing the device. I think that we are very competitive.
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  Speaker 3: We have we have we are much cheaper than a
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  Speaker 3: robot for a robotic platform right now. So you have
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  Speaker 3: a competitive device in pricing with a clear place in
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  Speaker 3: the marketplace that normally gets a strong surgeon advocacy. Makes
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  Speaker 3: our conversation with the hospital little easier. And we are
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  Speaker 3: becoming kind of agnostic if another enable in tech is present,
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  Speaker 3: just because what we do is so different from how
• 17:48
  Speaker 3: the other address these issues that you see our results
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  Speaker 3: with seven D is pretty compelling.
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  Speaker 1: Yeah, and it's interesting because you know, I think a
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  Speaker 1: traditional robot X, your initial thought is always, oh, it's
• 18:02
  Speaker 1: the robotic arm is the robot. But you know, as
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  Speaker 1: you get dived deeper and deeper into this technology, it's
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  Speaker 1: a navigation system as much as anything, which is what
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  Speaker 1: seventy does. Let me go the other way that you
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  Speaker 1: have this seventy technology, which is differentiated from other technology
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  Speaker 1: out there is that something in the strategic plans to
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  Speaker 1: ever incorporate a robotic arm with that navigation system.
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  Speaker 3: Look, I don't think that this short term is going
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  Speaker 3: to be one of our goal at the end developing
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  Speaker 3: a robotic platform for companies that are much larger than us.
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  Speaker 3: It is not an easy, let's say, an easy project
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  Speaker 3: to endure. I believe, I believe that the robotics is
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  Speaker 3: here to stay. Is there robotic today? What is going
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  Speaker 3: to be let's say, the robotic of the future.
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  Speaker 2: I don't think so.
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  Speaker 3: As you said, right now, the robotic arm is pretty
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  Speaker 3: much eye instruments holder, and I believe it. Like it's
• 19:04
  Speaker 3: happening in the orthopedic side, you will see companies that
• 19:08
  Speaker 3: are going to develop robots that are gonna be agnostic
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  Speaker 3: to manufacturer. So I think that time waiting for the
• 19:16
  Speaker 3: market to keep evolving, and if we need to have
• 19:19
  Speaker 3: access to our robotic arm, I think that we're gonna
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  Speaker 3: be ready to do so. But I don't see this
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  Speaker 3: as an organic development for us.
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  Speaker 1: Interesting and something that I mean, like I said, five
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  Speaker 1: ten years ago, we were the robots were just in
• 19:35
  Speaker 1: their infancy. There's a lot of development that could take place.
• 19:39
  Speaker 1: Let's go back to that pull through opportunity. Though you
• 19:43
  Speaker 1: know you because you sell cervical disks in our bodies,
• 19:47
  Speaker 1: other fixation systems, what in your portfolio maybe benefits the
• 19:53
  Speaker 1: most from the seventy navigation system or what procedures, particularly
• 19:57
  Speaker 1: because you know, when you think of spine, it's not
• 20:00
  Speaker 1: just one spine procedure for everyone. And you know you
• 20:02
  Speaker 1: have the cervicle, you have the lombard, the thoracic, all
• 20:05
  Speaker 1: those different areas. You have the screws, the inner bodies,
• 20:08
  Speaker 1: all those things. So one winded way of asking, what
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  Speaker 1: are the best products and what are the best procedures
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  Speaker 1: that you can use with the seventy system.
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  Speaker 3: Yeah, let me clarify one thing before. We are not
• 20:21
  Speaker 3: in the cervical this market anymore, okay, because we divested
• 20:25
  Speaker 3: them six.
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  Speaker 2: Okay, and we are divested.
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  Speaker 3: We are facing out M six since a couple in
• 20:33
  Speaker 3: the end of last year was a declining product for us.
• 20:37
  Speaker 3: We want to be really focused on reade product capital
• 20:41
  Speaker 3: in a high grow segment. So M six was part
• 20:45
  Speaker 3: of our history is not part of our history today.
• 20:48
  Speaker 3: But coming back to the portfolio that we have book seventy,
• 20:53
  Speaker 3: let us navigate back for in the entire spine from
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  Speaker 3: cervical to alnumber.
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  Speaker 2: So of course all our.
• 21:03
  Speaker 3: Fixation system benefits of having seventy. We are keep deploying
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  Speaker 3: and adding all our implant to the seven D database
• 21:16
  Speaker 3: of implants that can be navigated. Of course with the
• 21:19
  Speaker 3: inter body they are altful. So if you see seven
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  Speaker 3: D is fully is fully integrated today, is going to
• 21:28
  Speaker 3: be more fully integrated in the future with every single
• 21:32
  Speaker 3: aspect of our product portfolio. Of course, where seven D
• 21:37
  Speaker 3: shines is the most difficult cases, So the formity is
• 21:42
  Speaker 3: a clear focus of the company. Is the future differentiator
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  Speaker 3: for spine for Orthopix is an area where seven D shines,
• 21:55
  Speaker 3: where we believe that the combination of the best implant
• 22:00
  Speaker 3: with the best technology system can help to increase outcome.
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  Speaker 2: But also.
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  Speaker 3: What we're seeing is that data are becoming a very
• 22:14
  Speaker 3: very important differentiator for company in the marketplace. So the
• 22:18
  Speaker 3: ability to have access to data in the r with
• 22:21
  Speaker 3: seventy to follow the patient post top with bond ger therapy,
• 22:27
  Speaker 3: it's going to give us the opportunity to collect and
• 22:30
  Speaker 3: of information and variable information to inform surgeon in the future.
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  Speaker 3: What are the best procedure that you can have for
• 22:38
  Speaker 3: a specific patient given the commorbidity, the patient present pre
• 22:45
  Speaker 3: up age, any any other disease that may have and
• 22:53
  Speaker 3: to start to think about to start to develop this
• 22:56
  Speaker 3: idea of a patient surgeon centric UH procedure utilizing our
• 23:03
  Speaker 3: implant and our technology. So excited about the creation of
• 23:08
  Speaker 3: this ecosystem with the technologies that we have.
• 23:11
  Speaker 1: Yeah, and that's the thing now is you get more
• 23:12
  Speaker 1: and more data, and you get more and more analysis
• 23:14
  Speaker 1: that data, you can definitely be able to pinpoint a
• 23:16
  Speaker 1: better procedure or update the guidelines based off of what
• 23:20
  Speaker 1: the previous procedures have.
• 23:22
  Speaker 2: Done in the past.
• 23:25
  Speaker 1: Well, let's move on to kind of the orthopedic segment
• 23:29
  Speaker 1: because this one got was on my radar because of
• 23:33
  Speaker 1: the high growth trajectory in the US. How does this
• 23:40
  Speaker 1: orthopedic portfolio differ from some of the other traditional orthopedic
• 23:44
  Speaker 1: procedures we see with other medtech companies.
• 23:47
  Speaker 3: Yeah, Look, we are very excited about what we're doing
• 23:50
  Speaker 3: in orthopedics. You know, one of the things that we
• 23:54
  Speaker 3: did that a new management team ALASTA was really redefined
• 23:58
  Speaker 3: and rethink what orthopic seas. And so if you read
• 24:02
  Speaker 3: our vision, there are like two wars that are important
• 24:05
  Speaker 3: one this idea to be arrivaled and one to be
• 24:09
  Speaker 3: a meta company. So we talk a lot about spine,
• 24:13
  Speaker 3: but again Orthopix is not just spine. Yeah, and when
• 24:17
  Speaker 3: we think about arrivaled, we start to think, Okay, where
• 24:20
  Speaker 3: are the market segment? Okay, even if smaller, where actually
• 24:26
  Speaker 3: we can clearly win. I think that over time we
• 24:29
  Speaker 3: can participate into spine, but with few falls, smaller than
• 24:34
  Speaker 3: our competitor. Now you go into orthopedics, and you know
• 24:39
  Speaker 3: when I join, so this company that has a business
• 24:44
  Speaker 3: in the United States that was less than a third
• 24:47
  Speaker 3: of what we do overseas. So I started wondering, Okay,
• 24:52
  Speaker 3: I think that there is an opportunity there, but how
• 24:54
  Speaker 3: we can we take advantage of these opportunities? And so
• 25:01
  Speaker 3: we did. We hire a great leader like Patrick Fisher.
• 25:05
  Speaker 3: He was running foot and angle of a striker Rite
• 25:08
  Speaker 3: medical before. And what Patrick did was really start to
• 25:13
  Speaker 3: clearly think and give an identity in the United States
• 25:17
  Speaker 3: to this orthopedic franchise. So now we over time, you see,
• 25:22
  Speaker 3: we're going to stop to talk about orthopedics.
• 25:25
  Speaker 2: We start to talk about limb re construction.
• 25:28
  Speaker 3: Limber construction in a category within this universe that you
• 25:32
  Speaker 3: are redefining is pretty much the ability to address the
• 25:37
  Speaker 3: more complex trauma cases in acute format or post top
• 25:45
  Speaker 3: Sometimes you know you need to address a big bone
• 25:49
  Speaker 3: laws so lenth limb blend discrepancies that trauma can create
• 25:57
  Speaker 3: limb blend descripants that you have for bird big deformity
• 26:01
  Speaker 3: that you can have because of the trauma. Two more so,
• 26:05
  Speaker 3: and we are the only company today in the United
• 26:08
  Speaker 3: States offer a comprehensive portfolio of external and internal devices
• 26:15
  Speaker 3: to address this very complex issue. So while we were
• 26:20
  Speaker 3: exploring opportunity in the limber construction market with an opportunity
• 26:26
  Speaker 3: or address footthaulserve for diabetic patient with our new product
• 26:33
  Speaker 3: Truelock transferse bond Transport. What it does pretty much is
• 26:39
  Speaker 3: led us cure footthallser creating.
• 26:45
  Speaker 2: A fracture in your tibia.
• 26:48
  Speaker 3: So you're gonna cut a piece of little piece of
• 26:50
  Speaker 3: bond from your tibia. Okay, you will move this remove
• 26:55
  Speaker 3: from the from the tibia, this piece of bone, and
• 26:59
  Speaker 3: with what the body does, because the signal fracture is
• 27:03
  Speaker 3: start to really reform and all of the system, the
• 27:10
  Speaker 3: blood flow of the body, concentrate the blood flow the
• 27:14
  Speaker 3: body on the specific site where you created the fracture. Okay,
• 27:18
  Speaker 3: what it does because increase the blood flow near the
• 27:24
  Speaker 3: place where you have the ulcer. As a byproduct of
• 27:27
  Speaker 3: this procedure, the food start to the skin, start to
• 27:32
  Speaker 3: close the body, start to recreate skin, and close the ulster.
• 27:36
  Speaker 2: So within thirty.
• 27:37
  Speaker 3: Days you can start to see an improvement on the
• 27:41
  Speaker 3: patient foot where you have the ulster. And what you
• 27:44
  Speaker 3: do with this device you bring back the piece of
• 27:47
  Speaker 3: bond that you removed back inside to complete the procedure.
• 27:52
  Speaker 3: So some very amazing stuff. We're doing this in this
• 27:56
  Speaker 3: specific market segment.
• 27:58
  Speaker 1: As I said, this is a very kind of sub
• 28:00
  Speaker 1: segments of the extremities market overall. My initial take from
• 28:05
  Speaker 1: those comments just now is that limb lengthening has a
• 28:09
  Speaker 1: certain opportunity, but diabetic all service, which is a you
• 28:12
  Speaker 1: know you think of at all the Type two diabetics
• 28:15
  Speaker 1: in the US alone, sounds like a much larger patient
• 28:18
  Speaker 1: pool there. Yes, that's all right, observation.
• 28:21
  Speaker 3: Yeah, so now we enter to one point seven billion
• 28:24
  Speaker 3: dollar opportunity in diabetic food and a comprehensive two point
• 28:29
  Speaker 3: six billion opportunity in limber reconstruction. So all of the
• 28:33
  Speaker 3: sudden you can see that we have the building block
• 28:38
  Speaker 3: to create a rival procedure in a market. Actually very meaningful,
• 28:45
  Speaker 3: so excited about what we're doing there. Through or Elevate
• 28:50
  Speaker 3: has been one of the most successful launch, if not
• 28:54
  Speaker 3: the most successful launch in Orthovik history. On the orthopedic side,
• 28:59
  Speaker 3: the opportunity to create relevancy and market creation, and the
• 29:04
  Speaker 3: most importantly you start to see an evolution of our
• 29:08
  Speaker 3: customer base because again now we have an identity. Before
• 29:13
  Speaker 3: was very difficult for a surge in the United States
• 29:17
  Speaker 3: to understand why and why to call Ortho fix. Actually
• 29:22
  Speaker 3: everybody knew ortho Fix by name, because remember originally when
• 29:26
  Speaker 3: the company was funded, was funded around external fixation.
• 29:30
  Speaker 2: It's around trauma.
• 29:32
  Speaker 3: But there was a difficult to understand, Okay, when when
• 29:36
  Speaker 3: do I need to call Ortho Fix. Now they know,
• 29:39
  Speaker 3: and now it's on us and on the team working
• 29:42
  Speaker 3: on Orthopedis to take advantage of the great opportunity that
• 29:46
  Speaker 3: is ahead of us.
• 29:48
  Speaker 2: Yeah.
• 29:48
  Speaker 1: No, And actually it kind of sounds full circle where
• 29:51
  Speaker 1: you started with external textation with a spine and then
• 29:54
  Speaker 1: now you're circling back to back to the extremity market
• 29:58
  Speaker 1: opportunities there and kind of in the same way, of
• 30:00
  Speaker 1: circling back. We talked a lot about seventeen navigation is
• 30:05
  Speaker 1: enabling technology utilized in the extremities market as well the
• 30:09
  Speaker 1: plans to expand that overall.
• 30:11
  Speaker 3: So right now, I think that where we are seeing
• 30:14
  Speaker 3: that the technology to develop is mostly on the pre planning.
• 30:19
  Speaker 3: So we plan our procedure. We are our a proprietary
• 30:24
  Speaker 3: platform that is utilized, so the opportunity to plan the procedure,
• 30:30
  Speaker 3: do some data collection. There is no real navigation that
• 30:34
  Speaker 3: is used into traumine foot and ankle yet if you remember,
• 30:41
  Speaker 3: city scan is always the base for navigation is not
• 30:47
  Speaker 3: used often for these patients and a lot of cases
• 30:54
  Speaker 3: are not pre planned. But the opportunity to help the
• 30:59
  Speaker 3: surgeon to plan the case, the opportunity to collect data
• 31:03
  Speaker 3: and what we're doing with with bone growth therapy, remember
• 31:09
  Speaker 3: we also focused on trauma what we call fracture and
• 31:15
  Speaker 3: we recently launched steam Connect, which is our platform that
• 31:22
  Speaker 3: we are the first company in the trauma side that
• 31:25
  Speaker 3: connect this bone growth that this steam to actually a
• 31:30
  Speaker 3: platform that let the surgeon follow the patient journey. Okay,
• 31:35
  Speaker 3: so again, uh, we are utilizing this case enable in
• 31:40
  Speaker 3: tech to to to learn that the patients are compliance
• 31:45
  Speaker 3: with what we do with what the surgeon prescribed. And
• 31:50
  Speaker 3: you know, we collect a lot of useful data that
• 31:52
  Speaker 3: can be us in the future.
• 31:54
  Speaker 2: So uh.
• 31:55
  Speaker 3: And one of the things that we did in order
• 31:58
  Speaker 3: to leverage all this portfolio, you know before you know,
• 32:03
  Speaker 3: talking about the team both Standish that was the inventor
• 32:08
  Speaker 3: of seven year leading just the vertical now is the
• 32:11
  Speaker 3: chief enable in Technology officer. So having purview of, as
• 32:16
  Speaker 3: he said, everything that has on an office switch within
• 32:20
  Speaker 3: all of the business. Over time, I think that he
• 32:24
  Speaker 3: is going to have the opportunity for opportunity arise to
• 32:29
  Speaker 3: use technology that are used within Ortho Fix in all
• 32:33
  Speaker 3: of the different market segments.
• 32:34
  Speaker 2: Yeah.
• 32:35
  Speaker 1: Just it sounds like you're storing the path to build
• 32:37
  Speaker 1: that database to provide that access. Yeah. And then you know,
• 32:41
  Speaker 1: just kind of rounding out the portfolio. You know, bone
• 32:44
  Speaker 1: growth therapy and biologic doesn't get as much attention as
• 32:48
  Speaker 1: all these other products and developments. But how does that
• 32:52
  Speaker 1: fit into the overall Orthopics business.
• 32:55
  Speaker 2: This is a great question.
• 32:56
  Speaker 3: It's kind of the glue that connects everything together because
• 33:02
  Speaker 3: on bond growth therapy, we can use our product into
• 33:06
  Speaker 3: spine where we are the market leader and if you
• 33:10
  Speaker 3: think about despite the leadership position, especially lately, we were
• 33:15
  Speaker 3: able to beat the market constantly. Why because we're taking
• 33:20
  Speaker 3: the advantage of the database that we have as surgeons
• 33:26
  Speaker 3: for spine that didn't use bond growth therapy with our
• 33:30
  Speaker 3: commercial team and over time we're going to try to
• 33:33
  Speaker 3: do everything vice versa. So we have bond growth therapy
• 33:36
  Speaker 3: in between Spine and the.
• 33:40
  Speaker 2: Rest of the company Biologics.
• 33:42
  Speaker 3: At the end, we are the number two player in
• 33:46
  Speaker 3: the world after you know Metronic with infuse the number one,
• 33:50
  Speaker 3: but in our category, in the dBm category, we.
• 33:54
  Speaker 2: Are number one. And again all.
• 33:56
  Speaker 3: Our products are used in the r with spine. But
• 34:01
  Speaker 3: Patrick and Esteem in the past that they were leading
• 34:05
  Speaker 3: a pretty large biologic market opportunity. So what we're seeing
• 34:11
  Speaker 3: the opportunity now for Biologic also to prediferate in orthopedics
• 34:17
  Speaker 3: and bone growth therapy. We participate in fracture, so again
• 34:22
  Speaker 3: a lot of connection with orthopedics. So you have this
• 34:27
  Speaker 3: is why I said the bigity and biology is kind
• 34:30
  Speaker 3: of the glue because you can leverage opportunities on both
• 34:34
  Speaker 3: sides in spine and in ortho with the product that we.
• 34:37
  Speaker 1: Have very interesting and so then you know you're you're
• 34:41
  Speaker 1: talking about a lot of these growth opportunities. Also as
• 34:45
  Speaker 1: a Smithcap company, though, there's that fine balance between spending
• 34:49
  Speaker 1: money on that growth but also a path of profitability.
• 34:53
  Speaker 1: And so I always ask my Smithcap guests who come
• 34:57
  Speaker 1: in is what is your decision making process for those investments?
• 35:01
  Speaker 1: How do you choose which ones are your favorite children?
• 35:03
  Speaker 1: And how do you choose which ones are like Okay,
• 35:05
  Speaker 1: we can wait on those as we maintain a certain
• 35:09
  Speaker 1: level of path profitability.
• 35:11
  Speaker 2: Yes.
• 35:11
  Speaker 3: Look, since we started, our north startup has been a
• 35:16
  Speaker 3: profitable growth. So we want to change and improve, passionalized
• 35:23
  Speaker 3: with the lives with great technology that we have, but
• 35:27
  Speaker 3: without forgetting that at the end we need to create
• 35:29
  Speaker 3: value with our shareholders.
• 35:32
  Speaker 2: I think that you can achieve.
• 35:33
  Speaker 3: That just with the relentless prioritization.
• 35:37
  Speaker 2: I think that what we.
• 35:38
  Speaker 3: Are keep working within the company is this concept of
• 35:44
  Speaker 3: a vital fuse. Every year we pick six seven opportunities
• 35:52
  Speaker 3: that we believe that we're going to move the needle
• 35:54
  Speaker 3: to support all our main stakeholders you know, patient the surgeon,
• 36:00
  Speaker 3: our employees, and our shareholders. And we are learning how
• 36:05
  Speaker 3: to stay focused on just what we decide.
• 36:10
  Speaker 2: Collectively what really matter.
• 36:13
  Speaker 3: I think that is the only way that you can
• 36:17
  Speaker 3: that you that you can achieve what you just said,
• 36:21
  Speaker 3: create profitability. Given given our size, we we we take
• 36:27
  Speaker 3: a tough decision if you see, even controversial time. For instance,
• 36:33
  Speaker 3: we went through a big reorg into the distribution network
• 36:37
  Speaker 3: that created some temporary headwind for us. But again we're
• 36:43
  Speaker 3: whatever we are doing is just to create a sustainable
• 36:47
  Speaker 3: business that create value. And you can do that if
• 36:52
  Speaker 3: you are like very focused on what the priorities that
• 36:56
  Speaker 3: you said during the year, if you take decision that
• 37:01
  Speaker 3: that their long term and just then I think that
• 37:04
  Speaker 3: over time you create the balance sheet of the P
• 37:09
  Speaker 3: and L that's gonna make you also do the fun
• 37:12
  Speaker 3: stuff when gonna be larger.
• 37:13
  Speaker 1: Yeah, actually, I'd love to dive into that decision about
• 37:16
  Speaker 1: the distribution network because I've heard that multiple times, especially
• 37:21
  Speaker 1: with international markets transition from you know, not in some
• 37:26
  Speaker 1: cases you know, a distributor to direct sales, things like that.
• 37:31
  Speaker 1: You know, and this is maybe a case study for
• 37:34
  Speaker 1: some of the NBA students are listening into this episode,
• 37:36
  Speaker 1: But how did you decide that this was an issue
• 37:41
  Speaker 1: to take a look at, and what were your experiences
• 37:44
  Speaker 1: in the past that you use to kind of make
• 37:47
  Speaker 1: that tough choice because as a publicly traded company, you're
• 37:50
  Speaker 1: gonna get grilled during the earnings calls, and you know
• 37:53
  Speaker 1: you always try to say please be patient, be please
• 37:55
  Speaker 1: be patient, but you know investors have a very short memory.
• 37:59
  Speaker 2: So how did you.
• 38:00
  Speaker 1: Go about and what were your experiences that allowed you
• 38:03
  Speaker 1: to say, okay, I feel comfortable making this decision.
• 38:06
  Speaker 2: So what we did.
• 38:09
  Speaker 3: We got the vast majority that our network is indirect,
• 38:13
  Speaker 3: so we have just a small direct presence in bond growth.
• 38:17
  Speaker 2: Therapy to spine and a fracture.
• 38:20
  Speaker 3: So what we found when we start to run Orthopix
• 38:25
  Speaker 3: was a lot of big a big amount of very
• 38:32
  Speaker 3: small distributors. What's happening in this case is that for
• 38:40
  Speaker 3: a small volume of dollars you create a lot of
• 38:43
  Speaker 3: effort within the company in order to support from the
• 38:47
  Speaker 3: Kapex perspective, instruments at you know, for the time perspective,
• 38:53
  Speaker 3: the management of thistude, multitude of contract.
• 38:58
  Speaker 2: And so on. So there was a moment.
• 39:02
  Speaker 3: Where you know, we we we're doing pretty well, but
• 39:05
  Speaker 3: there was a moment where I'm thinking long term, I said,
• 39:08
  Speaker 3: can I build Can we build a successful company with
• 39:11
  Speaker 3: this infrastructure, and the answer was clearly no. You build
• 39:18
  Speaker 3: up a successful company if you have loyal partners. So
• 39:22
  Speaker 3: in order to create loyalty, you need to consolidate in
• 39:26
  Speaker 3: distributorship and shop that actually can scale and that can
• 39:30
  Speaker 3: scale with you. In order to create efficiencies you need
• 39:35
  Speaker 3: to create you need to have an outlet of distributor
• 39:39
  Speaker 3: that actually with a smaller amount of instrument set because
• 39:43
  Speaker 3: remember in our in our industry in the United States.
• 39:46
  Speaker 2: We don't sell the instruments.
• 39:48
  Speaker 3: It's your instruments that you that you use in the R,
• 39:52
  Speaker 3: that the surgeon and the distributor used in the R
• 39:55
  Speaker 3: to make the procedure. So with size, you can use
• 40:00
  Speaker 3: less system and set to a more procedure. And this
• 40:03
  Speaker 3: one brings less capex requests, a better utilization of cash,
• 40:10
  Speaker 3: a better utilization or your balance sheet. So for us
• 40:14
  Speaker 3: was a choice of on the spine side to create
• 40:19
  Speaker 3: a more sustainable, a more sustainable salesforce in order to
• 40:26
  Speaker 3: give us the growth, the future growth that we see
• 40:29
  Speaker 3: that you want to see with much more loyalties and
• 40:34
  Speaker 3: as a byproduct, some headwind on the biologic side, because
• 40:40
  Speaker 3: in order to create loyalty, we try to consolidate also
• 40:44
  Speaker 3: biologic distribution on our most loyal partners. And then when
• 40:49
  Speaker 3: it takes what we learn, it takes a couple of
• 40:51
  Speaker 3: quarters for them to be more efficient, but over time
• 40:57
  Speaker 3: is a much easier business to run, much more efficient
• 41:00
  Speaker 3: business to run.
• 41:02
  Speaker 2: And so this is why we drove this decision.
• 41:07
  Speaker 3: You know, if we can summarize, we don't want to
• 41:10
  Speaker 3: be opportunistic anymore. We go to market, We're going to
• 41:14
  Speaker 3: be very strategical.
• 41:16
  Speaker 1: We go to market very interesting and so you know,
• 41:19
  Speaker 1: I'll close out the episode with you know, we talked
• 41:22
  Speaker 1: about this path, the profitability, sustainable positive free cash flow.
• 41:28
  Speaker 1: How do your capital allegation strategy change now and in
• 41:33
  Speaker 1: the next few years. And what's interesting is that the
• 41:37
  Speaker 1: c Spine merger closed before you arrived. So what were
• 41:41
  Speaker 1: your takeaways of that, M and A and how does
• 41:43
  Speaker 1: that impact your thoughts for your own future M and A.
• 41:47
  Speaker 1: Potentially I want.
• 41:49
  Speaker 2: To be.
• 41:51
  Speaker 3: A company that in the market we can compete, we
• 41:55
  Speaker 3: can really start to inspire to be arrival, we start
• 41:59
  Speaker 3: to be inspire to be actually a winner. So from
• 42:03
  Speaker 3: the capital location perspective, I'm thinking how we're going to
• 42:08
  Speaker 3: invest in market orthopedics in limb reconstruction where we can
• 42:14
  Speaker 3: actually win. How can we keep working in with our
• 42:19
  Speaker 3: team in BONND growth therapy to take advantage of the
• 42:24
  Speaker 3: back office that we have that let a scale without
• 42:28
  Speaker 3: increasing the cost to do business. And when we talk
• 42:31
  Speaker 3: about Spine having seven D which is a highly differentiable
• 42:37
  Speaker 3: product for the formities, I think that's giving us the
• 42:42
  Speaker 3: basis to become a real player and help to solve
• 42:46
  Speaker 3: the most complex issues into Spine. So the overarching team
• 42:52
  Speaker 3: that you're going to see from us is a capital
• 42:55
  Speaker 3: location in market where we believe that we can win
• 42:59
  Speaker 3: and of course without losing sight of profitability for our shareholders.
• 43:07
  Speaker 3: Everything that we do and everything we think about is
• 43:11
  Speaker 3: always all of the different stakeholders of our organization. As
• 43:16
  Speaker 3: you know, as you asked me before you know, how
• 43:20
  Speaker 3: we are running our company. Our company runs thinking about
• 43:26
  Speaker 3: the caring to all of the stakeholders, our employee, our
• 43:30
  Speaker 3: surgeon and patient, and our shareholders. If you combine and
• 43:34
  Speaker 3: create and you connect the dots among them, I think
• 43:38
  Speaker 3: that you can instruct a very wise capital or location
• 43:43
  Speaker 3: in order to create value.
• 43:45
  Speaker 1: Fascinating. I'll be looking forward to watching the story over
• 43:47
  Speaker 1: the next few years. But Massimo, thank you for joining
• 43:50
  Speaker 1: us today.
• 43:50
  Speaker 2: Thank you, I had a lot of fun.
• 43:52
  Speaker 1: And thank you to our producer did as Money for
• 43:55
  Speaker 1: all his behind the scene efforts, and to our listeners
• 43:58
  Speaker 1: for tuning in today. We hope you join us for
• 44:00
  Speaker 1: future episodes, and if you'd like to stay up to date,
• 44:02
  Speaker 1: you can click the subscribe button on Spotify or your
• 44:05
  Speaker 1: favorite streaming platform. Take care,