BoneChat #111 - discussion of Capitan Orthopedics' novel solution for irreparable rotator cuffs

Uh, okay, this is Bone Chat 111, and today we have Chance Leonard and Dr. Sean Churchill. Uh, they're going to share their startup that just spun out of the Genesis Innovation Group called Capitan Orthopedics. Capitan's targeting irreparable rotator cuff tears, which is a really tough problem. And this is an early look at a brand new startup with a unique solution. Take it away, Chance and Sean.

All right, great. Well, everyone, good to see you again. My name is Chance Leonard, and this is my 31st year in the medical device space, all with a relatively small number of companies, but beginning with a company called Sutter Corporation and then Graduated in a sense to the big leagues of Synthes, where I was for 15 years and moved 4 different times. Spent a little bit of time being recruited from there to Zimmer, pre-acquisition of Biomet. Was there for a couple years before being recruited to a company called Stanmore Implants based out of London, England, and brought into the US and shepherded the company to an acquisition and then stayed with Stryker for a year and before politely declining a role to stay with them and then was recruited to Skeletal Dynamics in Miami, Florida, where I departed the company to join Genesis Innovation Group in June of 2024. So it's great to see you guys again today. Look forward to sharing, but most importantly, receiving your feedback as well. I also wanted to make sure to also introduce you to Sean Churchill, Dr. Sean Churchill, because it's really unique to be able to get not only his business acumen and expertise in a call like this, but also his clinical expertise, which is significant.

Yeah, thanks, Chance. Thanks, Tiger. Thanks for inviting us to participate today, and thank you for joining us. I'm Shawn Churchill, orthopedic shoulder reconstruction specialist. Was originally actually an engineer out of my undergraduate degree. My wife and I were, were married as undergraduates and didn't have money for medical school, so I was a professional engineer for 3 years before going to medical school. University of Michigan Medical School, Cleveland Clinic for my orthopedic training, then University of Washington for my shoulder reconstruction fellowship. And then I had 21-year shoulder reconstruction practice outside Milwaukee. Phenomenal practice, just did pure shoulder, loved it. Along the way, you know, the engineering mind, you know, it's always kind of looking at things and trying to see how you can improve it and such. And so I've been involved in several startups, you know. The first one, Diovalente Orthopedics, was purchased by Tornier, which was then— they asked me to stay on and continue to design for them. And then Wright Medical purchased Tornier and, and asked if I would stay on and help design, and I did so. And then You know, about 6 years ago, Stryker bought Wright Medical for $5.6 billion or whatever it was and asked if I would stay on and as part of their international team to totally redo their entire shoulder arthroplasty line. And I was happy to participate in that. So along the way, we've had— I've had several other side projects and helped with Genesis Innovation Group. And then Chance came along and I was able to give the reins over to Chance so he could run it properly. And, you know, You know, the mind's always working and so this latest Capitan Orthopedics is a problem I've been seeing, you know, for 30 years in my orthopedic practice is that irreparable rotator cuff tear and how can we solve it. And this has been brewing around in my brain for, you know, about 5 years or so and Chance and the group finally encouraged me to, you know, to work on a little bit more and Chance surrounded me with excellent engineers and some other surgeons and that's why we're here today. So, thank you for joining, thank you for allowing me to come.

Perfect.

All right, throw up some slides here.

And yeah, so I'll share a slide deck, um, and just everyone please know that we want this to be very, very conversational. Feedback, um, is really appreciated. Feel free to stop us. We'll probably kind of go back and forth and, and, you know, this especially as we get to the clinical side and letting the, the surgeon designer of the implant and the procedure, uh, talk about that, I think is really important. So I'll go ahead and get started and we'll keep this relatively brief with the slides and keep it more conversational overall.

Perfect.

Everybody see my, see the deck here? Not yet.

There we go. Okay.

All right. So, Capitan Orthopedics. We created the organization, the company to fill the gap in rotator cuff treatment. So just a little bit of some statistics you guys may know about. If you are 50 years or older, you have greater than a 50% chance that you already have a non-symptomatic partial tear of your supraspinatus in rotator cuff. That starts to actually get a little bit more impactful here as we see each year 2 million patients actually have a rotator cuff injury, or say diagnosed with a rotator cuff injury, and over 700,000 seek a primary surgical intervention to repair a rotator cuff tear. Now, these numbers are a little bit smaller. This is from 2024 claims data, but it does not include closed systems like Kaiser Permanente as well as Cleveland Clinic and Geisinger in Pennsylvania. But these are the 3 primary tears that surgeons see across the country, and they all are a little bit different. But what we start to see is if they have difficulty repairing these and these high retear rates, anywhere from 13 to 94% documented, and depending on which study that you use, we think that kind of boils down to about 30 to 35% overall of these, you know, have a secondary tear. And so companies started to try to augment their repairs with grafts. And you've seen, of course, Regenitin from Smith Nephew, and then you saw the Embodi project that came about that was purchased by Zimmer Biomet. They actually worked with our team and ended up being acquired by Zimmer Biomet. And then most recently, the BioBrace that was purchased by ConMed. The big, big problem here in this care continuum, which goes from left to right, as you can see, there is a massive space in here, especially for the patient that is 35 to 60 years old. And what we see with them is an irreparable cuff tear. And what do you do with these patients? Right now, we think the conservatives' number is somewhere between 175,000 to 200,000 patients a year that are diagnosed with this. And this is why, you know, Dr. Churchill has been ruminating over this for a number of years. How do we create you know, a solution because if you're 65 or younger, you don't want to get obviously a reverse shoulder arthroplasty. So, once again, going kind of from left to right on the care continuum, these are the current options that are available in the surgeon's armamentarium to treat these patients. You start with physical therapy, try to get your deltoid stronger. Many times that doesn't work. You may get an injection before you move to a primary you know, rotator cuff repair. Then it starts getting a little bit difficult, more difficult with the procedures and a tendon transfer, which I'm sure there are maybe less than 1% of surgeons that actually do that and reproduce it. So it's not a standard of care. And then you see the SCR, which is rather fallen out of favor over the last few years. And of course, the Stryker InSpace balloon, you know, at the end of the day, none of these are really long-term solutions that actually address the problem for these patients. And we're trying to move this and solve this and provide these surgeons with something that will be a lengthy, you know, solution for these patients. Dr. Churchill, you want to add anything there?

No, no, I think, I think, Chance, you're hitting the nail on the head. Is, you know, the, the, when it came to me, is you've got this 35-year-old who's maybe had 2 or 3 failed cuff repairs. You put in a graft to augment it. It doesn't heal. Suddenly they're 40 years old and they've had 3 operations and there's just no tissue there. I mean, the problem is what do you do with them? And when they're sitting in the office saying, you know, Dr. Church, I just wanna throw my football with my son in the yard. I mean, that's real life situation. That's a problem. You know, I can't even change the light bulb up overhead because it just, it starts to ache so much after about 30 seconds. That's what we're really addressing here. And those patients are just too young to be getting the reverse. And if they do get a reverse, you know, when you're 35 or 40 and you're looking now to your first revision procedure, you know, 8, 10 years later, 12 years later, whatever, it's gonna be a problem down the road.

Absolutely. So we set out to create a solution that solves a lot of problems, not just for the surgeon and the patient. We'll kind of get into this a little bit deeper, but we created the Super Spacer. And so I think many of you have probably seen this X-ray plenty of times before and from the clinical side, you know, I think Sean will be able to tell you a lot more about this, but this, myself, I'm standing in operating with the surgeon, I would be able to see this as a normal glenohumeral joint, you know, has the right spacing, subacromial space looks actually good, no problems, right? But there is a degenerative process that starts to take place when you do not have your supraspinatus attached anymore and you can't repair it. And so, the humerus starts to migrate proximally the joint is completely out of alignment and these patients experience a lot of pain, especially through range of motion, and they don't have the right, you know, tensioning in a sense on the joint. And so, like I say, it'd be better for Dr. Churchill to describe this in more detail.

Yeah, Chance, this is, these are great pictures here. On the left there, that gap above the ball is where the rotator cuff lives. That top rotator cuff muscle that he's referring to is called the supraspinatus. And as that tears and retracts, then the ball over time drifts up. This is not an overnight occurrence. If it was an overnight occurrence and people came in with that X-ray in the middle, we wouldn't need an MRI. But it's a, it's a slow process that occurs. So on the left is, is when it's a normal alignment, the tendon tears, it can't be fixed. Over time, that ball migrates because the deltoid is pulling it up. And once that ball is out of the socket, That's really when the degenerative process starts to just accelerate. Just like the front end of your car, when it's out of alignment, those tires go bald real fast. Once that ball is no longer seated properly, it wears it fast. Now the ball is rubbing against that acromion, the roof of the ceiling of the shoulder, and that bone rubbing against with the humeral head is where the pain generates, along with the fact that the actual socket is out of alignment. So the solution for this that we've come up with— go ahead and click that and advance that, Chance— is the Super Spacer. So what we're— we have to understand truly what got us in this position. And what got us in this position is the biology of this area. It's a watershed area between blood supplies that there's just not a good blood supply. The tissue doesn't really grow there. So these biologics that are put in, they may or may not work. And when you've had several of these fail, you realize it's this person's just not going to get it healed. So what we wanted here, we did not want to have a, you know, a new product having to do with a new type of material or biologic. What we wanted was something that's lasting and has been used for 50 or more years. So this is made out of the same material as our humeral head replacements, cobalt chrome and molybdenum. On the undersurface, it's got the same ingrowth and ongrowth material that's been tried and just in the proximal humerus. So we know this is not going to be a materials play. We're not looking for a new material or construction. We wanted to have it the same stuff that's been tried and true. And what this will do is recreate that space to allow that humeral head to stay centered. Picture's awesome here, but we got a nice video here that Chance can run through as well to kind of show you folks.

Absolutely. And then, Shawn, what if we do that? Would you mind telling the group, you know, what you've experienced when you are dealing with the ceiling and the floor analogy?

Yeah, yeah. So, so here I can just, I can just run through right now. So, okay, what's the, what's the treatment for this? So what have we been doing? So in that middle picture, you can see the ball rubbing against the acromion there. So the surgeons go, and well-meaning surgeons say, you know, this is a pain generator, so let's just shave off some of that bone, you know, on the top. So that's what I call raising the ceiling. Let's just shave down that bone. And that's great, and that works for a while until that ball moves up more proximally again and then starts rubbing again. Other people go down and they shave off that tuberosity, that bone, bone on the, on the head, and that's what I call lowering the floor. And that And that also works for a while until the ball moves up again and they start rubbing. So those are just temporizing measures. So other people said, well, why don't we put a graft on that? Let's put a biologic graft on that and cover that bone with that. And that works for a few years because the biologic is then keeping the head from rubbing against the acromion, which is awesome. All of those, however, wear through, wear out, and that ball slips right back up in there. So you can try and raise the floor— I mean, lower the floor, raise the ceiling, combination of both. You can try and put a patch in there. But none of those are long-lasting, and that's why we're really looking at going with the metal option here. Same as we do with humeral head replacements, is something that's gonna be much longer enduring and permanent.

Excellent.

Any questions before we show you how this works?

No.

No?

Roll the tape.

All right, we like to kid around and say if a picture's worth a thousand words, then video must be priceless, right? So, this is from our fourth cadaveric lab before we got to design freeze. And Dr. Churchill is taking this specimen through a range of motion that consisting of internal and external rotation as well as abduction with internal and external rotation. And you'll see how the kind of retentioning in a sense of the joint via the implant, you know, how it functions as a cam, especially going into abduction. And this, this specimen is devoid of a supraspinatus. It's been completely detached. You see how it starts to utilize the cam kind of mechanism there and push the humerus downward.

Hey, can I ask a question? So what, what, what are you guys doing with the cuff? I mean, you completely releasing it, you're attaching it? Where, where is it in this picture? I assume it's gone, right?

You know, great question. So, um, the rotator cuff is actually a group of 4 muscles. There's one in front called the subscap, one on top called the supraspinatus, and then 2 in back, the infraspinatus and teres minor. So in this scenario, the, the most common rotator cuff to tear is the supraspinatus, the one on top. So in this scenario, if someone has their supraspinatus, um, you know, it's recurrently torn, that tissue is gone. When you look in there surgically, you you can just put your fingers right into the joint 'cause there's nothing there. They still usually at this point still have an intact front rotator cuff and the back two rotator cuff muscles. So this implant was designed specifically for when you're missing that supraspinatus and it's void there and you go in and operate and you put this in that position. So that's a great question, but this can be used when only one or even part of one, 'cause it comes in different widths, of the rotator cuff tendons is torn and the other three are still intact.

So, but if— what if— I mean, the— we spoke about, about it last week, uh, you know, large cuff tears are, are complex, right? You can have everything, subscap, supra, infra, tears minor, you can have tears, micro tears, intraticular, you can have— I mean, it's, it's, it's like an onion, right? And it just takes— yes, so, so then, so I'm just trying to understand, um, the, the, the the action of the mode of action of this, right? So you, you have a large tear, you— so you like, you go through, like, how do you implant this? So you, you open— obviously you can't do it arthroscopically, so you would, you would, uh, like, just how does that work? And then what happens with, with that cuff? And do you, do you have to actually create and release and enlarge in the cuff tear? Just, just trying to understand that.

No, no, great questions. Thanks for asking these. So the beauty of this is, is this operation is incredibly straightforward and incredibly simple, and it doesn't burn a bridge for the future. This is literally a third-year resident case. So when you've gone in arthroscopically and you've cleaned it up and you've said, man, there's nothing left here to fix, there's no rotator cuff, you know, on the top here, I'm going to go ahead and put in the Super Spacer. One of your portals arthroscopically is, is right over here laterally on the deltoid. So the way we used to fix rotator cuffs is we did what was called the mini open, where we would do a kind of a vertical slit through here through the in, and the deltoid's right there. We don't remove any deltoid from the acromion, we just kind of spread it apart because it's a longitudinal muscle. So we kind of do a longitudinal, um, a slit through it and just kind of push it to the side so no deltoid is injured in this. Then right then you're right down on it. So it's a super quick approach, it's like a 3-centimeter— you're— you've already got the arthroscopic portal there, you expand it to 3 centimeters, divide the deltoid, and you're right down on it. So at that point You can— if you have part of the supraspinatus torn, that is just not repairable. Sometimes these are, you know, 1.5-centimeter tears, and there's— but there's nothing you can put in that 1.5 centimeter. But this comes in 4 different sizes, so you could put a more narrow spot in there. If the whole supraspinatus is gone, you could put the medium one in there. If the upper border of the infraspinatus is gone, you could put the largest one in there. So they vary by width. And if— and Chance will get to this in a minute, The implants also have 3 suture holes on the front edge and 3 on the back edge. So if you have any rotator cuff tissue that's kind of frayed or in the periphery that you want to tack down, you can actually tack it down through the implant to secure it down to the bone there to get it to heal better. This bone oftentimes, as I said, you've had 3 or 4 operations already. So trying to get it to that, trying to get it to heal to that with just a regular suture or an anchor sometimes is just not going to happen. But you can put it through the actual implant like we do with fractures, and that can tuck it down in there. So make a smooth transition to the implant. But straightforward operation you're doing, it's just a little deltoid slit here. And the beautiful thing is, is down the road 15 years or whatever it is, and this person needs to go to reverse, those reverses are done through the front. It's done through a Deltapectoral approach. So all that territory is still virgin territory. It's going to be like an index operation for the patient. And then you make your standard cut on your humeral head and this pops right off with that, and the bone looks like a primary reverse at that point. So it doesn't really burn a bridge for you, but hopefully will buy you 10 to 15 years before that patient needs to get to that reverse point.

And then the logic of— because if I look at this picture, it looks like you guys are— it's probably by design creating an additional maybe half an inch of volume on top of the lateral part of the head, right? Circumferentially. So that, that's the purpose, right? So that's the part that then pushes in abduction and rotation against the acromion, right? Is that—

that's the idea?

No, you're square on with that. So what we— what we're trying to do here is recreate the anatomy where the thickness was, where it was before the rotator cuff tore. And before that, that ball probably moved proximally. We then added a few millimeters on the outside, as you noted. So then that keeps it to length. So, so Remember, at this point, your deltoid is the only muscle you have to raise your arm. Yeah, deltoid's the only one working. So think of the deltoid as a rubber band. If you've got a rubber band, and let's just say the rubber band's resting length is, is 3 inches, if you pull that rubber band out to 5 inches, it works really nice as a rubber band. But if you only pull it from 3 to 3 and a quarter, it's still kind of floppy and doesn't work. And that's what happens when this ball approximately migrates. It shortens that rubber band to 5, to 4, to 3 and a half. And as that ball moves up, the deltoid gets shorter and shorter until suddenly the deltoid rubber band is so short it just doesn't work. This keeps that to length and adds a little bit laterally. They call that a deltoid wrap, to have that deltoid wrap around there to give it a little bit better lever arm to function.

Okay, so obviously you're removing that, so you're doing subacromial decompression standardly, I assume, right? And then, well, and it's almost like it's like a glued-on subacromial space onto the humeral head, right? It's gone reversed, right?

So yeah, I would say, um, What I'm envisioning is the vast majority of patients likely have already had a subacromial decompression because as we were talking about the treatment protocol, you know, they have this as part of the rotator cuff, then their revision, and we've really backed off from, you know, the late '90s when we were taking huge whacks at the acromion just because of this proximal migration problem to prevent the bone submitting. We backed on that. We do much softer acromioplasties now, but still likely that's been done, but it's not a requirement. You could put this in and have the standard regular anatomic chromium, and this thing, and this thing would function the same.

Interesting.

Makes sense. I love the way you explain the cam. It reminds me of the patella mechanism and knees. You know, it's like, you know, the patella is there just to be a cam, really.

That's— you're exactly right. Yeah. Improve that lever arm. You're exactly right.

All right, Stephen's got a hand raised.

Thank you. Uh, great presentation. I have one question on, on the biceps. What happens if the bicep is still there and you're going through your range of motion? Is there a type of any snapping aspect to that?

No, no, that's a great question. So in, in general, um, the biceps is usually maintained by the subscap. So as long as those are still in place, this can be used with the biceps in place, or at the same time as the, as the procedure. If you want to tenodesis the bicep, you can do that through the same incision. So it's not— you're not burning a bridge either way. If a surgeon says, man, that biceps is holding on and, and it looks great, the transverse ligament is still intact holding the biceps, I want to leave it, great. If they want to take care of that right then and tino dees it and say, I don't want to worry about this when, you know, he's throwing a football in 6 months and the biceps breaks, I just want to deal with it now, you can do it all through that same incision.

Yeah. And then concept was essentially permanent in space and then rehab the deltoid to make up for the lack of subscap— or sorry, the, the supraspinatus. Is that—

yeah. And, and what's interesting with that, um, is that some people's deltoid just by the way they're wired neurologically, automatically does it perfect, and they walk out of there. You know, same with like a reverse and other situations. Some people have rotator cuff tears and their deltoid compensates and they have no issues, none at all. Other people, it just takes some training. But again, if that rubber band is shortened because that ball moves up, you can train it all you want and the rubber band's too short and it's, it's just not going to compensate. Yeah, uh, very interesting.

I like it a lot.

Great, thank you.

Awesome.

Thank you for that. I appreciate it, Dr. Churchill. As you can imagine, all of this information coming into our team of engineers, we're basically building around his philosophy and thought process of knowing what we needed to have recreated. So there's a lot of function, you know, and focus on biomechanics. And that's why we think this is going to work extremely well, you know, for this what we call underserved group of patients for sure.

Hey, Maloney's up next.

All right.

Hi, Mark.

Hey, good presentation. How big was the market again for irreparable rotator cuffs like that would be a candidate for this procedure?

Yeah, we think that on average, you know, the numbers around 800,000 a year that have a primary rotator cuff repair surgically. We think conservatively 25% of that you know, so call it around 200,000 a year. The number could be considerably higher. We think there's a group of patients out there too that have been diagnosed for, you know, the last 3, 5, 10 years that are also, you know, potential candidates as well. But on average, we think a couple hundred thousand to 250,000 overall.

Okay, great. And where, where are you in the process of FDA and clinical trials and all that?

Yeah, great question. If you don't mind, I'll go through a couple other points here and it'll answer— I'll answer your question that way as well. So, as we move forward from this slide, one of the most important things we needed to look at— apologize for the slide deck movement there— was, you know, from Dr. Churchill's thought process, we wanted to make this, as he mentioned, a procedure that a third-year resident can do. Right, so out in the marketplace right now, the 4 primary groups of surgeons that are gonna do this procedure are first and foremost shoulder and elbow reconstruction specialists, right? Hand and upper extremity specialists, sports medicine specialists, and even the general orthopedic surgeon. What we're learning though is primarily the sports medicine surgeons are actually going to see this the most, but we wanted to create reproducible steps steps, you know, a small number of them that allows any of these groups to do this procedure successfully. So we've narrowed it to 7 surgical steps in a minimally invasive, as I mentioned, just a small mini open approach. We take about 1.5 millimeters off of the lateral aspect of the humerus, but thinking through everybody else who has a oar in the water of the care pathway of the patient. Single-use sterile packaged instruments, trial and implant. Alright, 99.9% of these procedures are going to be done in a surgery center. I'm going to tell you exactly why that's really important as thinking through this process, but I want to make sure to also tell you there's only 4 implants that we need to offer with this. Okay, and as Dr. Churchill mentioned, you see the holes in the side. This is not a left and right specific implant. It's agnostic to the side., and all 4 sizes can be utilized in a left or right indication. And the holes are on each side of the implant as well. But this is what it would look like coming into the operating room if, you know, our commercial team, if anybody that actually walked through this process of graduating from a blade plate to a DHS to a Cephalor measuring nail, you're going to really love this part because I can't tell you how many years I stood in the operating room telling surgeons, hey, You're going to spend more time setting this patient up on the fracture table than you actually are doing this procedure. Once you get the tip of the guidewire in the, in the tip of the greater trochlea, and it's right in AP and lateral, the instrumentation does everything else from here. So building on what, you know, Dr. Churchill's thought process was for the entirety of this procedure, 7 steps, placing the guidewire through a guide, utilizing a reamer and a drill bit and a keel punch and a trial and a tamp, and then placing your actual implant. And so, uh, as you mentioned, this is cobalt chrome. This is porous coated on the keel and the undersurface of the implant because it's really important when we start talking about surgical setting and what they do and don't want to do getting prepared for cases. How do we create efficiency for them as well? This is one of the best ways we think that we can do that for them.

Got it.

Cool. Alright, so at the end of the day, you know, creating a long-term solution and filling the clinical gap for these patients and for the surgeons who are treating them is ultimately what we wanted to set out to achieve. And so everybody kind of wants to know, to your point, you know, Mark, what's, what's the numbers on this? Like I say, this data comes from 2024 claims data and doesn't include some pretty, you know, high-profile institutions, but, you know, call it 700,000+ conservatively. 25% are irreparable. That's, we think, a very conservative side. And for a company that is going to acquire this technology from Capitan Orthopedics, just capturing a portion of the market share at a very, um, you know, researched ASP. It generates, you know, half a billion dollars for them as an organization. And so to your point, where are we at right now? Well, first, as we started this out, you know, you got to create a win-win situation in today's environment. There's only really 8 companies out there. They control 68% of the global market share, and those are the potential acquirers of big co. There's midco companies that can do it as well. But the, the, the, the, you know, items that we need to make sure that we cover and make it easy to say yes is first and foremost, you solve a clinical problem. Second, you create a better patient outcome that's documentable from the podium and from the journal publications. Thirdly, you create a better surgeon user experience may have the adoption of surgeon utilization become a standard of care because it fits into their current workflow. This does that now, but we also set out to understand that surgeons who now become owners in their ASCs, guess what? They're gonna be evaluated on how much revenue do I generate for the facility and how much cost do I generate for the facility? So what do they want? They want better patient outcomes, They want it to be easier and a very, you know, quick procedure. They want efficiency, so we make it sterile packaged, and also low cost, high margin. But they also want a code for their surgery center so that it makes it easy for them to get VAC approval, right? They can do the procedures inside their facility, and so we have existing code that's already ready. They want to know that we fit with our ASP into the financial dynamics that allows them to say yes, and even helping the payer say yes and reimburse quickly because they have a code, they get these patients back to work and active daily living quickly. And so we think we've kind of covered all of those bases overall. So where are we at in the regulatory pathway, you're asking, Mark? Well, this is it. I think this is what really demonstrates, you know, we didn't really kind of talk earlier about Genesis Innovation Group, but this is what the capability of our team actually is. And so we started a discussion that, that Sean had with our team, um, in March of 2023. It really didn't go too far until a conversation came about with my team in August of 24. And I said, you know what, I just had this procedure. This is very near and dear to me. And my surgeon never told me any of the statistics that we've spoken about today. And so we're going all in on this. And so we already created a concept by November. We started laying out the procedure in December of 2024, did 4 cadaveric labs, founded the company, and then did 3 very important things. First and foremost, we converted our provisional patent to patent pending status, both U.S., international, and method. We also filed for trademark protection, and we filed our first QSUB to ensure our regulatory pathway is confirmed. We even went out and we hired one of the specialists that had run this portion of the FDA for almost 20 years. To validate that we were choosing the right predicate. Got to design freeze, and now we are doing verification and validation testing to try to receive regulatory clearance and start doing our limited market release cases in Q4 of this year. So we're really talking about 2 years, and I think everybody knows, you know, midco to bigco companies are 36 to 48 months on a process like this.

That's, that's really fast, especially for a new category like this. That's incredible.

Kyle.

Kyle, and then Steven.

Yeah, so a couple questions for you guys. Nice work so far, and thank you for presenting here. So I'm guessing that since you already have a code and you had a predicate mapped out that it's some sort of, you know, CAP CTA style resurfacing device, that's your predicate. And you don't have to answer that, but is it a safe assumption that because you have a code even though you're positioning this as it fills a gap. It's, it's, it's close enough to fall into a category of something that's out there. That's my, that's my first question for you. And then another question I have for you is related to post-op protocols for this, because if you're talking about a patient that has gotten to this point and they've had 1 or 2 shoulder surgeries, well, those patients have been miserable for multiple 6 to 9 month stretches of trying to recover from a, you know, arthroscopic rotator cuff tear. And now you're going to tell them that there's another surgery, I would assume that the post-op protocol is a quick return to daily living.

So, I'll tell you what, Chance, why don't you handle the front end of that one? I'll handle the second act.

Yeah, absolutely. So, you are correct. We do believe that we, you know, did a lot of research and study on what our predicate should be. And then we also got feedback from a gentleman that, like I say, previously worked at FDA. And with the early meetings with them, we do believe we have a predicate device that, you know, is substantially equivalent for our, our Super Spacer.

And with regards to post-op protocol, I think you hit the nail on the head. I will tell you, rotator cuff surgery is not only painful for the patient to go through, it's painful for the surgeon who cares about that patient because it's a lot. Really what you're doing with the shoulder here is you're fighting two battles. The shoulder has more motion than any joint in the human body. Shoulder's the most mobile joint. However, if you just seal it up in order to get that tendon to heal, you will then end up with post-surgical stiffness because of the scar tissue. Because you've got three planes of tissue that glide nice and smooth on one another. And after you've operated, if you just put that person in a sling for the entire time, those will become very adherent and it will be a scar ball. So it's a fine line between allowing the tendon to heal and getting motion. And patients hate that because they've, they've set up for a few weeks to get it to, to heal up, and now they're in therapy trying to get those planes of motion to go, and it's incredibly painful. This, as you correctly surmised, could be run immediately. The deltoid split is literally— it's fine to work with the day you finish it. You can start working with it immediately because you haven't detached any deltoid. There's no rotator cuff tear that you have to heal up at that point unless you've done a repair to the sides of it. But we're just talking about the index procedure of the super, super spacer. You could immediately start these patients on a range of motion program. And I'm envisioning at 6 weeks allowing them unrestricted activity. Because you don't have those, those 3 different planes of tissue that are gliding on one another, the rehab will be incredibly easy as far as range of motion. You just start the range of motion right away and they're not worried about tearing anything, again, assuming that you haven't had to do a repair while you did this. So I think the, the rehab will be dramatically simpler for these patients.

Cool, good stuff.

Stephen, you talked about it a little earlier on the profiling of the physicians. Just curious a little bit on, on, on the commercialization aspect of who you're really profiling and going after. Sports med, but is there anything more specific to that, like, you know, ASIS-type doctors, um, docs that looked at InSpace most and then what the sales force might look like.

How about I do the front on this one, Chance, and then you can talk about sales? Okay, so for— I will tell you, for surgeons, that the thing that was really the key in doing this, um, from one of the aspects from my standpoint, is, is to make it so straightforward, have the instrumentation do the work as Chance talked about, to make it so straightforward. As I said, a third-year resident can do it. I want this to be something that the general orthopedic surgeon in the middle of South Dakota or wherever who might be the state specialist, but they're a general orthopedic surgeon. They want— they can do it, and they can do it reliably, safely, and have a great outcome. So I wanted to shoot for that. When we launch, however, we're not going to be launching for that person because that person might see 3 of these a year depending upon their practice. We want to launch to someone who's going to see high volumes of these so they can give us feedback right away and see the patients and see how they recover. And then, as Chance mentioned, do the paper. We want to have a patient registry, so every patient initially is getting in this. So they're up on the podium, they're doing the posters, they're doing the presentations, so they can really give us feedback and give the community feedback to how it works. I think we're going to probably split it. We're going to have definitely the sports folks do it, but we're also then going to go to the hyper-specialist, the shoulder reconstruction specialist, because it's really good to get a few different points of view on this.. And it'll be interesting to see because those are different patients in their care continuum that each one of those surgeons are seeing. When I was, you know, functioning hard as a shoulder reconstruction specialist, I was the bottom of the funnel, and I saw a lot different than a primary sports doc would see who's just doing regular sports medicine. So I think when we're launching this initially, we're going to look at both of those so we can get feedback from both of those very important groups.

How do you target them before the commercial question? Sorry, how do you target those those specific ones.

Yeah, so I think, um, again, looking at that, you can break that down into a couple different categories. One is the academic situation center. So you want to get the people who are interested in education, interested in research, interested in biomechanics learning and teaching. And that way then they're also training their fellows, they're training their residents. So then you can get feedback on the simplicity of it. Does this instrumentation actually work as smooth as we feel it works. And that's an important component. The faculty at these teaching institutions also predominantly are the ones who are publishing. They're the ones who are leading, you know, the key opinion leaders across the country who are leading the discussions at the American Shoulder and Elbow Society, the AAOS, you know, all of the big important groups. They're the ones leading it, writing the papers and the posters. However, it's also important to get, you know, a huge group who are in the community with a big orthopedic practice. You know, 20 years ago, an orthopedic practice of 6 was big. Now an orthopedic practice of 60 or 100 is big. So getting in some of those groups, I think it's going to be very important because then they could feed the numbers to their 3 or 4 sports docs who might be doing this and be able to get us feedback fairly promptly. So I think it's going to be a combination of academic as well as private practice in a big group setting. And that's how we're going to go. We have a huge network. You know, I'm very active with the shoulder group. I have a lot of surgeons who've already come up and said, Sean, the day this is approved, I want to have it in my operating room. So it's certainly not just going to be the people we— that I know, but our entire community and our network knows so we can pick the right group.

Cool. Awesome.

Thank you.

Hey, Stephen, to answer your— I'm sorry, Tiger, just to make sure I answer his question too about the commercialization side. You know, we're going to tie that to, you know, the industry consultants and professionals that are independent that are working with the established criteria of limited market release surgeons first. I think we look at things and say, okay, well, this first group of surgeons, they're definitely going to be tied to the project. And as Sean mentioned, you know, the sports medicine surgeons are definitely vying, saying, look, we see all of these procedures. And I had a surgeon text message me this morning and said, I did 4 cases yesterday. And I literally thought previously, I really didn't need this as an option. I could have used this in at least 2 of my cases yesterday. And so the interesting part about it is, is that this is a backstop for the sports medicine surgeons where they get in and say, my gosh, you know, there's not a tendon I can't fix. And then they get in there like, whoa, I can't fix this. And what do you do? Well, they've normally been sending it to the specialist in their group that is shoulder and elbow. Right. So, well, they get to actually keep that patient. And then, of course, the benefit for the shoulder reconstruction specialist is, well, I've got an option for you that I don't need to potentially go to a reverse now. So it does lend itself to all of the subspecialties and even the general orthopedic surgeon that we've spoken about.

Yeah, that sounds great. Thank you so much.

You bet.

Hey, Chance, you can take your slides down so we can see each other better. And then Maloney.

Yeah.

And then, Sean and Chance, ask questions of the group after Maloney's questions. We need to— if you have any open questions, I appreciate it.

Yeah.

Yeah.

Do you mind if I just say one thing though about our capital raise? You know, we kind of had spoken about what in a sense would be an ask. Well, we started a capital raise on December 1st. Right? And most people look at you and go, "Oh, good luck with that right around the holidays. That must be really smart." But actually, in thinking about it, it's turned out to be one of the most informative things that we have done. And in and amongst everything else that we've done, we have a very, very viable project that people have looked at this, they've heard this presentation, they've heard the clinical side, they've heard the business rationale, they've heard actually what's going to take place and bringing it to market. And they said, wait a minute, you know, this is something I need to be a part of. And so we were raising $2 million to get to, you know, the foundational FDA clearance for the regulatory side of this, but we're also raising in this round enough to do our first 100 cases. So the instruments and implants that are required to do these first 100 cases and get this information so we can follow these patients for an extended period of time and report on that. That's really unique. Genesis basically did the seed round and brought it to this point. So we've invested about a half a mil, a little over half a million dollars into the project so far. Of the $2 million, we're at $1.275 million and already have had 2 closes since December 1st.

Wow.

So that's really fast. And another element of this we think is really, really strong on the financial side. We only think we're going to have to do 2 raises, you know, the next one after we get these first 100 cases done. And then it becomes commercialization where we are really putting gasoline on the fire and getting out to those, you know, initial group of surgeons that are outside They've heard from a peer of theirs, this is something that's very viable and they're getting good results. And now we have this group that is further out from our original LMR group of surgeons that are saying the same thing. This is really helping our patients.

Cool, cool.

Kyle, Andrea, and Mark.

Mark's first.

So, um, congratulations. Um, I can tell you as a, uh, As a startup junkie veteran, there is no faster market than one that starts with a conversation. Doctor, I'm gonna show you something you've never seen before. Well said. And, uh, that is, speaking of rocket fuel, that's rocket fuel. And there's at least a couple of guys on this call. I know myself and Dennis McLaughlin for sure. That if you find yourself at a point where you're looking for younger, not ruined, ambitious surgeons that do high volume, uh, let us know. We could— it's like putting together the, the perfect advisory group or early adopter group. They're out because they're out there. And when I say younger, not ruined, ambitious, I mean I mean, not ambitious that you pay me. I mean, ambitious because I want the recognition of being part of this team.

Yeah.

Yeah.

Mark, well said. We, you know, I'll allow Chance to follow up on this, but we'd love to get those names and bring that into the fold because, you know, we want people who want to be here and who want to drive this to success because this was one of the most frustrating segments of my entire shoulder practice was these patients and, and, you know, I felt, I felt bad for them and, and you wanna do everything you can to help 'em.

So that's great.

We'd love to help people who would help, you know, move the train along.

The best advice I ever got at this phase was a long time ago at the Camel Clinic with Dr. Tony Russell. Well, I was on a startup and he said, if you can find 10 doctors that will, that want, that wanna be part of the team and you don't pay 'em, but they have their own reasons or ambitions, get 10. If you can get 100, get 100. That's your sales force. Doctors sell doctors.

Yeah.

I, I couldn't agree. Well said.

Well said, Kyle.

So if this is a gap-filling device, we've got irreparable cuff tear for a 50-year-old and eventually they're gonna need and they're gonna get a reverse shoulder. Is there any concern that with this device in place for 5 or 10 years that it'll cause some damage to the acromion that will mess with the deltoid lever arm when you do need to go replace this one with the reverse one day?

Yeah, Kyle, great question. I love when I get this question because I can— I know that someone who truly is understanding the mechanics and understanding how this works. So I don't know how many of you remember back in the late '90s, early 2000s, there was the what we call the cuff tear arthropathy head, the CTA head. And that was for patients who were in this very situation. They had their, you know, supraspinatus out, and so you replace, you know, put a stem down the humerus, you put a metal ball replacing all the cartilage, even though the cartilage may have been perfect, you replace the ball. And what they did differently though was that radius of curvature of the ball was maintained all the way over the other side. There wasn't any buildup or any replacement of where the tuberosity already wore down. So it was like a round cue ball the entire way around, 270 around the entire thing. So that clearly migrated up to the top, just like we'd all expected to, because the humerus was already there. And then that metal ball rubbed on that constantly. So a great study was out. It was a study over 11 years looking at cuff tear arthropathy patients who had their implants put in, these CTA heads put in, and minimum follow-up was 2 years. And what they found was that 80% of the patients had no contour change of the acromion. There was nowhere of the acromion— the acromion looked fine. In the 20% that did have a change, in the 20% that did have a change, 75% of those occurred in the first 3 months and then never changed. So we all know Wolff's Law with orthopedics, that bone responds to stimulus. So you can envision this metal ball rubbing against that acromion. In these— in this subset 20%, and the acromion suddenly realizes, oh, hold on, I've got another job to do here. I'd better start bumping up the bone here and make it a little bit stronger and such. So the surgeon would see the patient's back at 3 months, they'd see a little scalloping of that. And then in 75% of these— of this 20% subset, um, when they came back for a year and took x-ray, there was no change in it. So it was there. So as a surgeon— this is a great question, by the way, Kyle— as a surgeon, what the way I would handle it is I always saw my patients back for 3 months, got the X-ray. 80% of those showed no change. I'd say, you know, Mrs. Jones, I'll see you in a year and then at 5 years. For the ones that did show a change, I'd say, you know what, let me see you in 6 months. Then when you saw that group back at 6 months, 75% of those would be unchanged. And I say, you know what, why don't we go on a year and 5-year basis? The 5% that actually did change from the original cohort, I would follow up on radiographs every 6 months or so just to see how it went.. And if it ever got to a concerning point, I flip them to a reverse. But this is an 11-year study, minimum follow-up 2 years, a profoundly different situation where that ball was constantly rubbing up against there, where here it's going to stay centered and only that rubbing is going to occur in the abduction maneuver. So I think we're safe on it, but that's a great question, Kyle.

Excellent.

Andrea.

So it sounds like this is a new category, and you did say that you filed for a patent application and it's now in multiple countries, which is a great strategy. What are you going to do now that you're, you're moving into commercializing and more and more people are going to start seeing it and, and thinking maybe that it's a great idea?

Yeah, I'll do it. As, as a physician, I'll step aside here.

I know I have my thoughts on it, but Chance, you're the CEO, why don't you take this Well, I think, you know, one of the most important things that we are trying to do as a team is get to the point where you're just doing execution excellence, right? And as I mentioned, one of the things that we want to do is not Gen 2 and not Gen 3. Our goal is to bring this to market, basically create the type of proof points that allow an acquirer to make a very educated decision and a decision to bring this into their portfolio. We believe that most of these acquirers really wanna do a couple of things. And that is, you know, have the most beautiful gift that's underneath the Christmas tree that was opened up. You know, it is, that's everything I could have asked for. And we are gonna basically, you know, do all of the front end of this where we have the right surgeons that are part of this process. And we do the right number of cases and we commercialize, you know, the company. And then we get to a point where we scale the actual manufacturing process along the same way so that any acquirer could come along to us and say, you know what, we have all of these attributes and we want to give this to our 2,000 people in the field. And on top of that, you know, we want you to not have to have us bring manufacturing in-house. Can you just scale with us? So we want to give them, you know, that gift. But at the end of the day, we want to create a true, you know, standard of care for these specific patients.

So in terms of IP, what are you— beyond filing that one patent application, what— how are you going to— what is your IP strategy?

Yeah, I think I'll jump on this. Our IP strategy at this point is truly to create a family off of this. We don't know right now the full extent of this. We filed our IP to protect where we're at, and then as this progresses, we can go ahead and increase that family to include other things as we see more markets. I mean, going back to, you know, Dr. Neer, who did the original shoulder replacement, was for fractures, and then they decided, well, not everybody has the same size ball, so let's make it modular, and they extended it. So I'm We do not believe we have split the atom here and this is perfect one and done as it will, and it will never evolve. You know, I've been designing for 25 years. I know there will be a next gen of this. And so the idea is to grow that patent family with that. Um, but as Chance was saying, we are not the commercialization giants here. Okay. What we want to do is we want to get everything sealed up and done. So all the sets are done. The surgeons are using them. We've created demand. We've got it through the regulatory process. We've got surgeons clamoring for it. And then one of the, one of the big 8 companies can say, this is exactly what I need in my portfolio, this fills a gap, and then they'll take it from there. Because we can't— we're not commercialization giants, they are.

Yeah, yeah. And I think that that's smart to, to increase the family as you go, because even the commercialization giants, they will look at what IP you have, and that will be a plus for you going forward if you can show that you have a portfolio, right? Because you're showing this to surgeons and they're all going to go, this is such a great idea. And if they file improvements on it, it doesn't matter that you have that one patent. You're, you know, the product itself is going to be then sort of limited to whatever else other people have filed. So, so don't give up on that IP thinking just because you, you, you know, don't leave it for whoever will acquire it down the road.

Great point, Andrea. I couldn't agree more. It's got to grow with the product. There's no question. And we are constantly working on, you know, a a little deviation here, and what can we do to kind of spread the net? Great.

Sounds good.

Great advice from Andrea. All right, Steven, bring us home. We're at the end of the hour.

Yeah, I was just gonna ask, how is this comparative to Reach Orthopedics? Similar concept, other side of the, you know, the joint.

Yeah, I'll tell you, I'm not a big fan of that. It doesn't, it doesn't make a lot of sense for me. I understand their idea is to keep the humeral head down just as ours is, that's a pretty big product that goes in and attaches on the scapular spine, you know, the spine of the scapula, and it's a pretty long lever arm. I'm not convinced that it's gonna not have a little bit of toggle at the end. And one of the biggest things, as someone brought up in the call earlier, that you worry about with the acromion is down the road when you go to reverse is a scapular spine fracture. And I think by putting, you know, 3 or 4 holes through the spine to order anchor the reach product. I think that will create incredible stress risers there, and I think that's going to be a big problem for that. That's not a minimally invasive procedure to put in, no matter what I believe that they say or on their website. It looks pretty invasive to me. I'm not certain it's going to stay centered, and even as that ball moves through that, I could envision the cuff on the front and the back getting trapped on the edge of that implant. I just don't know very well, but it's not the way I would like to solve this problem in keeping the humeral head depressed. We both are going after the same end goal. I just don't think that that's the smartest way to do it, and I think it'll cause problems down the road when they go to reverse.

Got it. Appreciate it.

Yeah. Yeah, the light bulb moment for me was this is not a spacer, it's a cam.

Correct.

As you, you know, as you lever, it starts to push the humeral head down farther. I wish you guys would call the product a cam instead of a spacer, because I think, I think that's the secret sauce. But anyway, that's me. Any, any last comments? This has been terrific.

I, I just want to say I heard what Andrea said about the IP, and one thing I've learned about talking with her is you should listen. Not only is she smart, but she's Swiss.

Oh, thank you. It's very, very nice of you.

Yes, thank you all. I appreciate that. Thanks for having us on. This has been great. I appreciate it.

Yeah, good luck.

You guys may have seen it. Okay, so real quick before we wrap, uh, you guys may have seen it, but J&J Depuce Synthese did have a bunch of IP for some sort of subacromial spacer. It was kind of like the Reach device, but it attached underneath the acromion. Idea was similar, um, but functioned different. But if you haven't looked at it yet, you're going to want to take a look at what they did in their IP there. That probably goes back at least 15 years, but one of the things that J&J historically has always really done is even if they think they'll never make it, they patent the hell out of stuff, uh, utility, method, everything, trying to create a moat in case they make it one day. Uh, Jack Long was the primary inventor on that one.

That's really good. Yeah, and that's the other thing I was gonna say. Getting a patent is one thing and having freedom to operate is another, especially with smart big players like that. Well, they'll— they could have method claims out there where it's like you put something You know, you put a CAM device in and it might look completely different, but the claims might read on it. So just, you need to start sort of like looking at things and getting to the IP little by little. It doesn't have to be a $50,000 sort of engagement right away. You just kind of start stepwise and like knowing the inventor, knowing the company, those are small things that you can do to kind of have an eye out there.

Really, really helpful.

Thank you. Thank you very much. I appreciate that, both of you.

Thank you. All right.

Thank you all for having us. Tiger, really appreciate it. Great seeing everyone.

We'll be— we'll get you guys back on when you start doing clinicals. This will— that'll be fun.

Love it.

Yeah.

All right.

All right.