BoneChat # 70 - Challenges facing orthopedic startups - tariffs and selling models.

So anyway, we have open discussion today, so anything, anything anybody wants to talk about is fair game.

Well, I'm excited to be on it. It's my first phone chat, so, um, I've been, uh, traveling a bit since I signed up, so See a couple, couple people I know. I see Cope up there in the corner, so he and I have had a few discussions over the years. But, uh, yeah, I'm, I'm grateful to be a part of it just as an introduction. So I'm over in, uh, greater Philadelphia region on the Jersey side. Eagles fans on this side of Jersey.

Oh, my husband is a— we are, I guess we are, not just my husband, I am too by association of Eagles fans, so I thought you had a good nature about you.

There was a certain aura about you, Andrea, when you were—

he'll be happy to hear that.

Yeah, he's got it.

He's got—

he's tainted. He's— he should be an Eagles fan, but Copeland, he's—

we hosted you all here in New Orleans recently.

I'm a Chiefs fan, Al. I gotta listen to this nonsense.

Hey, Al, you're one of the newer members. Tell everybody what you do.

Oh, as people ask me what do, what don't I do. So we, so 30 years in the orthopedic implant business, 23 of those in a distributor, large distributor for DePuy for joint recon. So hip, knee, shoulder, arthroplasty primarily. And then about 7, 8 years ago, they had a shift away from distribution and Tried the corporate thing for about 4 months and it became, uh, impossible for me to exist. Uh, haven't been a 1099 kind of independent guy since, since almost college. And then started, um, an independent distribution group that was going to be, and still is, focused on, uh, bringing good implants, a little bit more, uh, value-based, trying to be able to be more nimble, especially in the ASC space, bringing in various technologies and things that without a corporate tether, I can kind of pick and choose and customize, right? And try and bring in from a value perspective. And then most recently, a lot of things that, you know, over the years of helping people and kind of seeing the ups and downs of the outside big corporation world, it kind of gave me the opportunity to put a group of us together and form a medtech business development company. And listening intently on Andrea's, you know, patent agent, like, I didn't know you existed. So we just went through a couple of patent searches recently. But we're primarily just, you know, an adjunct to a startup or a development project or, you know, anywhere where you need a combination of folks that have real market intel, sales intel, um, from putting together, you know, pretty much every aspect of it. So that's my, uh, you know, however, probably too long of a, of an information dump, but that's, that's pretty much everything that I'm doing. Lots of irons in the fire, lots of irons waiting for one to pull out a million dollars, you know, or $10 million.

Yeah, it'll happen. Gotta kiss a lot of frogs.

No doubt.

Yeah. Here, so here comes Patrick. Uh, anybody— what's— anybody want to talk about anything? Something that's— where's your pain right now? No, other than funding. Here comes Colleen. Funding's still tight right now. You know, it's hard out there.

Yeah, it's— we're privately funding something now, and I asked a friend of mine that I wanted involved in it, and he, you know, he's basically asking me, um, you know, do we have to go out and get money? And I said no, you know, this is something easy we can self-finance. So that, that kind of, you know, made it a little bit more attractive to get him on the phone, uh, because he wasn't interested in going to get, get money right now, but Um, yeah, it's, it's definitely, it's tight right now.

Yeah.

And stock market spooked. We're having— tariffs just spooked everybody. That's not going to help.

Yeah.

So how do you think this is going to shake out with the tariffs over the next 6 months?

I mean, it's probably pretty hard to predict, but you have any thoughts?

Personally, I think there— we're going to be living with tariffs in the future, but I think they're going to be modulated down to something more reasonable. Um, that's my opinion.

You would think it would have to, right? I mean, if you're gonna— this is just kind of, you know, the high tariffs are not sustainable. No, I don't think anybody would— I, I, I don't— I think everybody can pretty much see what what he's doing.

Right?

I mean, for the most part, we're come somewhere as negotiation.

Right?

Somewhere in the, I guess, level playing field. But, yeah, I don't know what, I don't know what it's gonna do on my side of medical device. You know, I don't, I don't know what, on the, you know, supplier side. I haven't heard anybody really talking about it on our end yet. The people who provide us with implants and, you know, obviously digital health, it doesn't matter. But on, on the implant side of things, type, you know, with that, that are raw materials. Right? I haven't heard anything. Anything yet. Tiger, you'd be probably pretty clued into that as well.

We got a weird message from, uh, anybody know, anybody know the company Nordson Micromedics? They're like world-renowned for sort of applicators. So if you see, um, if you see stuff in the OR where they mix, you know, like two different, um, like Dura-Sealant and they sort of make the things that mix them. And they moved all their manufacturing 6 or 7 years ago to Mexico. And we started getting, we sell something that, we sell one of their products in a spot, not a whole lot. I think this is gonna knock them out as a vendor for us. And they started sending me messages saying, hey, We're following this tariff stuff very closely. Here's what your company's going to end up having to do. You're going to have to pay the 25% tariff for us, which is like for your product, or we can ship it to a bonded warehouse in the United States and you'll pay the tariff directly. And I'm like, I don't even know what you're— I'm not even sure I know what you're talking about. But I mean, like within hours, of some of these things. I actually didn't get one yesterday. I was surprised, but within hours they sent it to me. And my operations guy, my operations guy is a younger dude. He's like, Cope, what's this mean? I'm like, I have no idea. I don't know. Let me read it and I'll see if I can make some sense. I've yet to make sense of it because I didn't like, he said, what's a bonded warehouse? I'm like, you're the operations guy. I should be calling you and asking you. I don't know. So Yeah, I don't know what that— I don't know what it means, but that's the first and only thing I've heard from one company, one manufacturer, and they're big, but not— I wouldn't even— like, med device is a little sliver of their business. So I've not heard anything else, but I'm kind of wondering when we're going to, right? Or if we're going to.

Well, you know, I think that's part of the problem here, right, is there's so much uncertainty and, and the supply chains are very complex. And so the effect that this version of tariffs will have, or any subsequent version that is dreamed up by the administration. It's that they're not well thought out. They're just kind of scattershot. And so the effect on the supply chain and the companies involved is just unknowable right now. And that's not helpful for capital markets, whether they're public or private.

But aren't, aren't most, aren't most implants and instruments built in the US that are consumed in the US? I mean, other— Patrick's got a different one, but there's a fair amount, not exclusively.

I mean, I know Stryker makes a lot of hip and knee implants in Ireland for sure. Now that's by choice. If they, you know, if they wanted to or if they had a little bit of time, could they reshore some of that? Probably. But most are made, most hip and most implants are made in the US. It's the downmarket stuff, tubing, you know, things of that nature. The further downmarket you get, the more likely it is to be not only made abroad, but made, you know, not in Western Europe or something like that.

You know, I think the other thing is that at Consensus Orthopedics, we used to get knee castings from Germany. You know, it was an advantageous price, better service, less lower lead times. So, you know, we also got them from a company here in the US. So, yeah, you're right. You could shift the supply chain, but there's lead times involved with that. So again, it could result in, you know, some hiccups in product availability. And then, you know, for companies that manufacture out of the— outside the US because they're based in Europe, you know, could be a bigger problem. But who knows? Nobody knows.

What about instruments? If, you know, we talked about implants, what about the instruments themselves? I would think that those would be more likely to be manufacturers outside of the US?

No, there's a lot of instrument manufacturers in the US, but, um, you know, I guess as you guys are talking, I'm wondering if it's in— what the tariff— if— where the tariffs— and I'm not educated enough on it, just other than what, what I'm seeing. I haven't dove into this, but, you know, the materials itself— we're doing a lot of 3D printing, right? So you got a company like Restore3D who is now doing all their, you know, 3D printing, or anybody doing 3D printing for that matter, you know, is that, is, is it the raw material? I think, you know, a couple years ago, or when the Ukraine, uh, war started, there was some speculation without really a lot of education that because there was a lot of metals coming out of Ukraine, how that was going to affect the metal part of our industry, right? And I don't think, I never heard another ripple about that. So I don't know if it's just a steel market or, or what, where the titanium end of, of of our implants come from. But yeah, 3D printing I think is, you know, one of those things that have been a solution for something like this, right?

Yeah, I mean, I think that's part of the thing is like, even if— you bring up a good point, Al— is like, um, tariffs can— they can bite a business in a number of different ways. Forget about like what the right percentage is, but like, you know, you can— you know, you— the way that we think of a product being manufactured here, you could definitely like think of a product being manufactured. But you also, like, I don't know that we, like, you know, are mining cobalt chrome in the United States in any sort of mass quantity. So you could, like, definitely see a situation where you're importing the cobalt chrome, and now all of a sudden that is subject to tariff, even if you're sort of, like, doing the finished product or doing the finishing steps of it in, you know, domestically. I don't know where raw materials tend to be sourced. Tiger, maybe you or somebody else who's got more of an R&D background would know where raw materials tend to be sourced from.

Yeah, cobalt chrome used to primarily come from South Africa mines, but I think it's— I think we're headed to a value— a VAT tax like Europe, right? So the raw material is, I don't know, 5% of the cost of the product, and you get taxed on that only. And then you, you turn the product into something, you machine it, and it gets taxed. That gets taxed. And so it's going to be little pieces of the pie that get taxed. I mean, all US cars are made, you know, out, you know, half the components come from outside the US except for—

yeah, and even the ones that come from within the US, there's these stats that, you know, a finished, you know, car that, that you don't have to be made entirely in the US in order to be sort of labeled made in the US. There's some percentage, and I don't know what it is, but even things that are labeled made in US cross-border sometimes numerous times in as part of the, the the production.

To that, to that point, I literally saw a TikTok video from a guy who's a Toyota distributor, and he was doing walking around, and the 8 or 9 different Toyota models, he was saying, let's look it up. And some were made in US, some weren't, Canada, Mexico. And yeah, like, I— he's, and he's literally saying, he's like, oh, the Camry's made in the US, Thank goodness, because like it was their big mover and he was describing these others and I was thinking like, I, you know, you're starting to look at everything you have right now wondering where, where is this made? But to your, like, to your point, Patrick, it was very— I don't think we would have walked on the lot and said, oh, we know either all of these are good or, or not good. And, and it was just so— it was fascinating to hear him going through it. With us looking at it. And, um, and he's got new cars, right? So yeah, I, I don't, I don't know. I didn't know cobalt chrome was from, uh, South Africa either.

Yeah, you—

it's nasty. Digging up cobalt chrome is nasty business. Yeah, it's, um— do you think hospitals would absorb, you know, price increases? I mean, typically they never have.

No, I did I wouldn't— I think they'd be some of the last to absorb. You say if you're talking about like from suppliers, like from vendors?

Yeah, yeah. Zimmer sells you a knee and now it's 10% more the next week.

I'd be amazed. That'd be great if they did, but I'd be there.

That'd be fantastic for me if they did.

Yeah, rising tide would lift all boats. Um, I'd be pretty surprised if it happened though.

We've, we've been— the three of us are sitting here going no. But if you walk, if you talk to hospitals, their supply chain people are complaining about all the price increases that they've had to eat during COVID and they're upset about them. So somebody's raising prices. I don't think it's the three of us on here, but somebody, maybe we should be.

I don't want to make this political. It'd be a fun task though to find a VP of finance at a hospital who was like a raging Democrat and get them really worked up about tariffs and get them all mad about Trump and then pass along a price increase and see if they'll just try to pass it along because they're so furious that they're that they will, uh, um, you know, just sort of like see themselves as a pass-through, you know, that they're— they try to charge insurance companies more. I, I would be— it's interesting to hear you say that, Mark, but I'd be— I just, I can't think— when we're going to deal with it, like importing products from, from the EU, we'll deal with the tariff, and I, I can't think of a single scenario where I could just turn around and say no.

Me either. That's the thing, like, you and I have no evidence of it. Yeah. Yet I hear complaining about it, and I don't think these people are lying. It's just, I, I'll have to find out. I have to do some homework and find out who the heck's products are going up, who's doing it.

It's probably things that are lower margin and therefore not as competitive, and therefore, you know, they have less alternative options to turn, you know, there's, they have less alternative options to do. I'm just thinking, I'm gonna get at things that are downmarket of like what we're probably, like what, what we all kind of probably deal with more often is, is if you're a 'Cause we don't appreciate this, but some of these purchasing people, this is what they spend their time doing is literally trying to find a vendor. We think it's like, how crazy is it for a purchasing department at a hospital to be trying to find someone to make what it is that they're looking for? But they spend a lot of time just literally trying to find vendors. This is what their whole COVID life was like, trying to find vendors to get stuff. So if that's the environment, you can see price increases coming along, but we're at the opposite end of the prestige, spectrum where there's people salivating, standing at the door, ready to swoop in.

So I have one example. My wife works for a very large medical device company, and they're doing a lot of shifting around of things, trying, trying to get the manufacturer of record to different locations. And, you know, what defines manufacturer of record is kind of ambiguous. But they're doing all kinds of shifting and it's costing them. First attempt was about $28 million just to move stuff around such that they could, you know, without too much of a red face, say, hey, this is a manufactured record and it's in the US now.

There's Mark's bonded warehouse showing up.

But so there are some shifts like that that are costing some money and this is brand new. Brand new product. The implant's made in the US, but the rest of it is not. So they're having to deal with it.

Wow, that's interesting.

Yeah, I guess that $28 million that they're spending up front, they think is going to be far less than what they'll spend over time with having to pay the tariffs to get their product.

It's— I think Colleen summed it up nicely. It's just there's no certainty right now, and everybody's scrambling And it's amazing how quickly people are reacting to this. It may have some ripple effects, second and third order effects in the whole industry. We just don't know yet.

Interesting.

I have one little piece of good news as far as all this stuff goes. Submitted an IDE application on Monday and then yesterday got a question back from FDA, which I hadn't expected because I didn't know who was left there. I wasn't even sure they're going to be able to acknowledge, you know, that it came in because they did get rid of the entire, you know, document control, you know, the incoming document control section. So that may have been automated, but I got a response or a question from a reviewer.

So Or they could just be operating a little bit more efficiently.

Yeah, that's another effect.

Yeah, FDA trying to hold on to that job, you know.

Well, I, I was talking to a CEO this morning and they're, uh, they're fast-tracking his device because it's low risk and I think they want to put up more wins in the column at the FDA. So things that aren't scary, I think they're going to go faster just to put points on the board.

Yeah, maybe so. Yeah, so I'm working with— I don't know if you guys know Micra, but they're who I work with for a lot of my regulatory work. And they have a lot of employees that came directly from FDA, and they've been flooded with people from there wanting jobs, not ones that have been laid off, but ones that definitely want out now. Because you can imagine the, the morale is, is not super great.

Yeah, there was rumors floating around there was, there was like 50,000 houses that went on the market in the DC area within like a few months. Just crazy.

I think it's impacting the house prices though, really, because then you have a probably equal, if not larger amount of people that have to move back because of the return to office. The Patent Office is one of those where they've been remote. 94% of the staff of the USPTO has been remote for decades and had nothing to do with COVID That's just how they were hired. And so a lot of them just kind of are all over the country and, and It's still a lot of uncertainty whether they need to come back or not. They unionized, and, you know, there's been some decisions for unions as well. So we'll see. But if the majority of those have to come in, I think, again, they'll need housing.

That's— there's interesting dynamics there.

Wow.

So I've got a topic I want to throw out. So I'm no sales expert by any means. I've never sold anything. You know, I'm a technical guy, but I'm talking to more and more startups that are pre-commercial, and they are trying to figure out what the right business model is on the front end, and they have no clue. Like, do you go with a sales leader and you sign up 1099s all over the country? Do you build your own sales force? Do you do direct-to-consumer? Do you do, you know, what do you do? You got a brand new product that works, solves a problem. What do you, you know, what are the options out there and what's, and I want to put a panel together for one of these Bone Chats where we have a bunch of sales experts. I actually talked to Blake Helm this morning and he's a total startup expert in building a sales force with 1099s. He, he's, he's the man, but he doesn't know anything about direct-to-consumer. So, and I'd love to get a panel of different people to— what do you guys think about that?

The panel or the, the—

yeah, who— yeah, the topic in general. Um, I mean, if you're— if you have a startup and you've got a better mousetrap and it solves a problem. There's hands, it's, it works.

Okay.

And the price is okay and it's reimbursable and checks every box. And you, and you're going to be commercial in 12 months. What do you, how would, how would you do it? I mean, there, there's different sales channels now, the way I understand it. Um, you know, relationship selling is different than it used to be. You know, you got, you got you know, VAT committees. Sometimes patients can, you know, tell the doctor, I want this implant or this solution.

It's nuanced. It's, it's definitely a, uh, Patrick and I speak about this often, but it's, it's gathering the relevant information first, you know, what's, what's, um, you know, what the market interest is going to be. What's the space look like already? If it is truly like a differentiator, then what's going to be your, what's your runway, right? Are you establishing your, say your strategic, we'll use a, you know, like an implant product. Are you going to use your strategic surgeons that are involved in that product first? And then, you know, do you just start with those markets, right? You find, you know, like Patrick does, you know, find key distri— a distributor, or not even a distributor, right? Like, we've recommended where it's like, don't even bother, you know, we'll find you a contracted sales rep where you don't even have to enlist a distributor because your capacity and your runway is still not ready for that. And then if you can create enough buzz, and especially with the LinkedIn dynamic that we have if you're, you know, that we're kind of blessed with at this point, that it's low cost, right? You create the buzz and then it kind of attracts for you, and then it's just a matter of vetting. So like, and Patrick has tremendous experience at this now. It's like, you're not— it's, it's costly and it's frustrating and chasing distributors and trying to drive numbers, and you start adding people and you add people too soon. So it, it definitely is something that has almost like a scoring sheet to it, um, where you just kind of going down that checklist and, and, and weighing those variables, you know, that, that you have to make those decisions. Patrick, you, you probably prefer—

Yeah, there's, there's a million different variables at play here, and it's— there's like an 8-hour answer here, but it, it really is like, like all, all options could work. Or all options couldn't work based on like the specifics of the, the product and the, the company. I mean, most things— and this is my own opinion, not everything— but most things still have to be sold. Like, there's very, very few, at least orthopedic products that like— or at least surgeon products that surgeons buy. I should maybe just preface that there's very few things that orthopedic surgeons buy that they're just like sitting around on the internet and they're like, I gotta figure out where to get this thing and how to get this thing. It just— things, most things in orthopedics work well enough that even though you can improve things and you can offer a better option, you still gotta like get in front of that person and talk to them about the, like, their, their option. There's very few things that like were so, so awful that the doctors like are willing to just like start Googling better, looking for better answers. Doesn't mean there's not better answers out there. And that puts you in a situation where you— most things have to still be sold. Now the selling can be done differently, it can be done with a lighter touch, um, than, than even 5 years ago, let alone 10, 15, 20, um, years ago. But my experience is that like something still has to be sold, and therefore someone has to do the selling, whether it's the company or— if the company can do it, great. But you better— to get real coverage, part of it is investors too. I'm going to ramble because there's so many different tentacles to the answer here. Part of it is your investors too. If you have investors that are willing to be really patient, then you can start with one area and figure something out. Most often investors are like, great, you've got a regulatory approval, go sell as many as you can to whomever you can under any circumstance you can. For, you know, as much as you can. And therefore it's sort of like the investors through the board, through the CEO that are putting this downward pressure to just go generate as much revenue as possible. So there becomes this urge to like hire people because people can get you like above zero sales even though if it's not the right like plan or it's not the right like, you know, approach, you can waste so much money hiring your own sales force if you're not ready, if you don't understand the product, if the customers aren't ready for the product. All those types of things. Most small companies tend to be in a situation, ours is one of a million, where you like have enough money to put some sales leadership in place, but you definitely don't have enough money to like hire your own reps. If you needed to like start hiring your own reps, their territories would have to be so unrealistically large 'cause you don't have enough money to like hire 100, 200, 300 reps that to do it. They do that in the cardiovascular business because they raise money in like $100 million, in the hundreds of millions of dollars increments that are very infrequent in orthopedics. And in other therapeutic areas, people switch over like instantly. Like in cardiovascular, they spend 10 years building up a study and then once the study happens, all the doctors just switch over unapologetically based on the data. And then 3 years later they switch unapologetically to something else, you can get away with raising $100 million and building these like elaborate sales forces where you have the entire map colored in. In orthopedics, it's just, they just don't do it like that. The data, the clinical evidence is not as good typically, and therefore like you're, you're like, you're in hand-to-hand combat for a lot longer in orthopedics than you are in other therapeutic areas. So like, I know I'm rambling here and I'll sort of stop and let somebody else talk, but like all of those things could work. Like any approach could work, but it really does depend on the company, the product, the investor base, the expected return, the market you're going after, how quickly you want to reach X amount of revenues, what the competition is like, all of those types of things. You know, they all make a difference. There's no one clean answer.

Good ramble.

Thank you.

It's—

I know it was— as I'm talking, I'm like, okay, it was nowhere near— I'm nowhere near where I started.

It was really informative, dude. I thought— I was like, that was great. Uh, and I'll just add my bias because I don't— I don't think there is— I don't know that there's a right answer. Orthopedics is weird, Patrick. Like, your example about cardiovascular is great. I remember going in, I was doing an open heart case and with a sternal repair And like the valve reps weren't there. Mm-hmm. But I would also say the valve reps didn't have 6 or 7 instrument trays that had to be pulled in healthcare and operating rooms right now is such that if you don't have onsite people in those things that have those multiple trays or multiple instruments, it's hard to, to get any kind of change without having people onsite all the time. And that's a heavy, burden for a company to carry. But I would say my bias is we're in a foxhole together. We're a small med device company. I want everybody in this room, everybody that thinks about my— I want people getting up in the morning going, how can I sell more of Patrick's product? And going to bed at night going, did I sell more? And who am I going to see tomorrow to sell more? Right? Like, I like people being in my foxhole. I'm biased. To having direct salespeople. But like you said, there's, it's hard to do. And then it's hard to do economically and it's hard to do financially or when your investors are saying, who's covering Oregon? Who's got Arizona? Who's doing Florida? And you're like, you know, we're based out of Connecticut. I'm trying to get business in Connecticut first. I don't, I don't think it's an easy question, Tiger. And I think it'd be a great 8-hour call.

Yeah, there's probably a way to assemble a panel and, and, and stage it over a series of, of conversations. Because if you just let everybody go, especially people who are used to talking for a living, uh, you know, you've got yourself a weekend summit.

I just like— I like knowing everybody's on the— I work for a small biotech startup, and it— that's completely different. But everybody got up, we sold one drug every day. Now sometimes it got a little boring, but that's what we did. And so I don't know what the right answer is, but I come from with a slightly different background on this. But yeah, Tiger, it's hard. And I think it, I hate to say it, it is, it depends. And it is case by case, company by company. And we can tell you all the mistakes and some of the good things, you know, like But it's hard. I'm sure Maloney's got some good insights too, but I don't mean to, I mean, he just always, every time he talks, I like listening to him.

So, so I've been writing them down. So I have a unique experience in that I own a distributorship and I hire distributors and I have built several sales forces. I firmly believe that to me, my distributorship is my lab. And you said something at the very beginning, which I have said for a long time. Many of— much of what I do in this business, I learned in the Army and in Vietnam. The farther you are from the foxhole and the more stars on your shoulder, it easy— the easier it is to pull the trigger. If you want to know how hard it is to pull the trigger, get in the foxhole with that guy. You know, and get scared, and then you'll learn. My next, next one was— I echoed what Patrick said, I put it in the chat— nothing sells itself. Uh, number 3, doctors sell doctors. Your advisory board should be 100 guys if you can get it. Uh, number 3. Number 4, out of sight is out of mind. Dealers got other products. They got families, they got problems, they get all kinds of shit every day. And if they don't hear from you every week on the phone by ear, and if they don't see you once a month, it's like you don't live. Um, if you don't show it— in other words, if somebody doesn't show it— they'll never sell it. The number one competition in the business and on the ground in the foxhole is That doctor has not seen your product because it's hard to get in front of doctors. Um, if I know the IQ of every salesperson on your force, I tell you who sells the most. Smart people sell 10 times what dumb people do. Uh, product knowledge and higher-end experience are highly overrated. Most companies hire the same morons over and over again, and they make Tiger a lot of money doing it. That's all I had time to write while you were talking.

Well, well, Maloney's definitely on the panel.

Fantastic. So anyway, but yeah, Patrick, I feel for you.

I don't think a lot of— yeah, I, I don't know of many orthopedic implants that sell Like, I mean, we would all do it if you could just like put your stuff on a website and then just like watch the orders come in. Everybody would just do that. Yet I don't know that that's ever worked for at least any implant, you know, sales. Likewise, if you didn't have to have distributors, nobody would have them. If you didn't have to have a sales force, nobody would have it. It's like the most expensive part of your kind of like HR apparatus and the people in-house sometimes are, or the engineers are resentful. I developed the product. What does this guy know? All that sort of stuff. Out, you know, those are common tensions within any organization, you know, after the sale is made, what the level of support is matters a lot. Huge. And there's different kinds of tiers, you know, you have, you build a sales force of one that looks one way, if the product needs to have a body, whether it's a company employed body or a third party distributor, if you need a body at every procedure every time the product's in use, that's one type of sales force you would build. I, you know, the sweet spot probably is if the body is optional but always welcome, that's probably a sweet spot where like, you know, people could be around if they wanted to be but don't have to be around. That gives you enormous amounts of flexibility with like how you can structure territories. If you have something that like, you know, and then That's really for implants. If capital equipment's a little bit different where you, you know, they buy it, you in-service them and, and, you know, check in periodically. But the orthopedics is a number of different sort of structures of businesses at the same time. There's implants, there's capital equipment, there's disposables, there's a variety of, you know, those, those sales forces can all be structured different, differently as well.

I love it. I, it's, I think it's the greatest if you're gonna be in the industry, it's a great place to be. Your patients don't die. They come back over and over again. You know, that's a good thing. And you know, I'm having dinner tonight with a company that's hiring one of my reps. One of the— I'm unique in my orthopedic distributorship in that I've never made anybody sign non-competes. Half the sales force in Atlanta used to work for me, and I, and I love it. It's great. It's like, it's more of a sales school than anything else. So anyway, and that's the fun part, I think.

Oh, this has been, this is great. But let me, let me talk a, let me talk a couple specifics now. This is kind of warm you guys up. So, um, I, a couple BoneChat members, I talked to Emanoli today. You guys, I don't know if you remember Emanoli. He's the CEO of, um, uh, Xplant Lab. So he has got a killer product or service that's gonna be on the market this year. He's got a, a genomics test. You, you take a simple blood sample and it tells, it tells you if you're one of the 15% of the population that's allergic to chromium or titanium or aluminum or something. And he, he's gonna be cleared in the US later this year. And he's trying to figure out what, how do you build a sales force? You know, you've got every— everybody that gets a joint implant in the United States should be screened. And, and he's also another low-hanging fruit is revision implants. So every time there's a revision, there's a revision for a reason. And a lot of times there's a hidden alloy allergy that nobody even knows about. He's got a simple blood test that'll show that. It's incredible. He presented last summer, I think. So if you go back and look at it, but he's, he's, he asked me today, how do you know what kind of sales force should I build? I'm not a sales guy, but maybe I can put a panel together and help you.

Mark.

So I asked a similar question once to Tony Russell, Russell Taylor Nail Designer in Memphis, Tennessee. And he told me, he said, find doctors that recognize the wisdom of your solution first. So first he needs to canvas, he needs to become a member advisory panel of the Academy. It cost him 5 grand and use them to canvas the members to find out who believes in that stuff.

Wow.

That's so great.

And who wants to know? Because I was an Esculap dealer once, and the only product from Esculap still being sold in the United States is their Gold Knee.

Hmm.

Their hypoallergenic knee. Everything else went away back to Germany.

Not anymore.

Are they back?

No. Their Gold Knee's gone.

Oh, they even, their Gold Knee's gone.

Yeah. They pulled out.

Yeah.

Link's, Link's enjoying the uptick in business from any Esculap. So you could take that test and you could— you can build out a sales force. But if I— my— if I had that technology, I might go right to the companies that have the implants that are completely metal allergy and, and bundle it into your service, right?

Yeah, he's gone— he's gone that route. But, um, the only one really is, is Smith Nephew with Oxinium. And I I, I may be biased, but I don't think the manufacturers really want to know.

They don't want to know.

Yeah, I don't think they want patients taking tests.

There you go. Those middle managers, no big deal.

There's a legal piece to this.

Yeah, yeah, it's true. Yeah, they probably don't. I'm just wondering if those who do have the solution on both sides have regular and gold if you've got it. It's interesting. I guess it is something to dive deeper into the legal ramifications and if it's a false positive or whatever. I mean, you know, testing is something I only know on the periphery about, but—

I guess part of it is the hypothesis. And I don't know what the answer is, but is the hypothesis from the company that there's lots of people with metal allergies that they don't know about it? Or is the hypothesis that fewer people have metal allergies than they think?

Yeah, I think it's 15%.

They, they, I mean, the, the science behind, 'cause I promise you more than not 15% of knees that go in, uh, are, yeah, yeah. There's no way that, that the percentage of knees that go in are out, are, you know, colo chrome free.

The way, the way Eminoli explained it to me is, um, it's like smokers. Some people can chain smoke all day long and never get sick. Yeah.

Other, yeah.

So he, but it, it's a, there, he has an algorithm that looks at certain genetic markers and it tells you exactly if you're gonna have a problem or not.

So if you're Smith and Nephew, I can see why Smith and Nephew would want something like that. I could see why Zimmer without a product would not want something like that on the market for sure. But, but I could see why, you know, 'cause if you take that, you get everyone to take those tests, if that patient comes back with the allergy, they're getting the cobalt chrome-free knee. I don't care whether or not they would've reacted to it, they're getting it because it's a lawsuit waiting to happen if they take that test.

Don't ask.

And then receive a cobalt chrome knee, that's a lawsuit waiting to happen on the surgeon, on the hospital, on a whole bunch of people. Who buys it? Do you know who would buy it? The clinic? That seems like a clinic thing rather than like a hospital thing.

That's another thing. I don't think they have the sales channel figured out yet, but they will. I don't know.

Great question.

It's only a few hundred dollars. It's kind of a no-brainer. You know, I mean, if I'm a patient and I'm gonna get a total hip, I'm gonna pay for that test. Myself, you know.

It costs who? It costs— it costs the company a few hundred dollars, or it costs—

that's the sales price. I think it cost him $100, $200, and they sell for $500 or $600.

But so there's like 80%. So it's like implant-level gross margins, because that matters in all of it too, right? If you have 95% gross margins, you can afford to do some dumb things and kind of like, you know, overhire and try to— try a bunch of stuff and see what works.

That's a really good point.

Can I ask the Cause I think Patrick was asking an interesting question. It's not who's gonna sell this. The question is who buys this? Like who actually pays for this? Is it the hospital? Is the patient insurance? Is it— I, I, I'm unclear on this as opposed, cause sometimes that tells you who should sell it is who buys it. And I don't, I, I didn't—

is it a pharmacy? I mean, is it a pharmacy? That's a different call point that most implant reps don't— they couldn't figure it out, but they don't make pharmacy calls typically, um, to say nothing of like the PBMs and that whole kind of infrastructure that exists.

Yeah, I'm trying to think, is there, is there another similar test people take preoperative on elective surgeries just to rule something out that you would roll that into? Because I, I don't know of anything. That's interesting. I'm just trying to think who would pay, who actually buys it.

I'd go B2C. I'd skip everything traditional. The people that are going to care are the people getting the total joints.

Mark, I think people dismiss that and I think I would not. I actually think there's something. You're right. The DTC market on other things is insanity. Why would we not think this could be the same way?

I, I'd look at it. I mean, social media is all the rage, but whoever said the only thing social media is good for is getting laid.

What about the label though? I suspect that that label might have the, it might be a prescription only label.

Jesus. Well, if it's a point of care test, I mean, is it just instant?

Like there's those, it's those, I think it's a, takes a day, 24 hours and it could be, it's local lab.

Sorry, ladies. Yep, that changes some— that changes it a bit because there's— there are those instant doing, you know, infection testing and things like that that they're trying to do right on the spot, right?

With just—

yeah, right.

How excited are you, Al, to have like 5 cases scheduled for Tuesday and 2 of them come back, oh hey, listen, uh, they didn't get their allergy test done yet, so we're gonna cancel the case?

That's why Al's original—

Al's ready to just go nuts.

Yeah, back to his original point. If you're a company with, with a cobalt chrome free or nickel, you know, nickel free option, you want as many people taking this test as possible. Yeah, that's, that's what I would try to do is first I try to license it to Smith Nephew. But beyond that, assuming they're not interested or whatever.

Yeah.

My, my initial thought was a, was a blood, like a, an instant. So if we're going to the lab-based, now you're, now you're getting a little bit more like, all right, we gotta dive into the, this, this process, right? Is, and, and I do think the patient would, would contribute as we've talked about different things, whether it's robotic technology that requires imaging and whether patients are gonna have to start to kick in for that. But I, my original thought, guys, when I was saying about a company like Link or somebody who has those both options would be, Man, if this is, if this is just like a, a finger stick or, you know, urine or based or whatever that they can do quickly.

Yeah, it's a DNA test, so it's got a little more complicated than that.

Yeah. Yeah. So that's, that's gonna add complexity to it.

Here, let me, let's go, let me go to example number 2. So everybody knows Mauricio, right? He, they've got a killer business. I'm learning more about it all the time. They, they basically print specialized or patient-specific implants for mostly jaw, up above the neck, you know, cancer, trauma. And they've got an incredible software that the surgeon can go to a tablet and basically any up— they upload the MRI or CAT scan and they can literally design the implant in 5 minutes and then say, send that to me. It's incredible. And they've got a whole team of people that make it happen. But the problem is And they're growing nicely, but the problem is they, they don't, they have a tiny, tiny percentage of the US market and they don't even know about the cases. So some kid has a motorcycle wreck, messes up their jaw, and they get it. We gotta re, we gotta rebuild this kid's jaw in, you know, 12 weeks. There's no, there's nobody in the hospital. They don't have any reps. So there's nobody in the hospital even know about that case and say that is a Tekfit case. How would you guys build a sales force for Techfit?

At the risk of being too off the cuff, that sounds like a distributor-based sales force to me. You need awareness that you can't, seemingly can't do on yourself. So the distributors can certainly help you with awareness. But there's an infrequency to the pathology, or, you know, there's an infrequency to the clinical condition such that hiring your own, at least day-to-day reps, you can hire a sort of management layer perhaps, but at least hiring day-to-day reps is probably financially unrealistic for something like, at first glance without, you know, asking 500 follow-up questions, that seems like a distributorship-based What about a hospital-based, Patrick?

So I, I was thinking we pitched to a level 1 trauma center, God, 6 years ago. We thought we had a company outta Israel that was actually gonna be placing 3D printers. This was before some, the same hospital has now gone to their own. But what about partnering directly with the hospital as a service for something like that where you go level 1, you know, like this, this hospital near me has a huge maxillofacial trauma department, right? And you, it's kind of like an innovation marketable and clinical benefit, right? Patient out, you know, for sure. Might be a thought because hospitals are creating their own innovation centers and actively, I mean, every, I think 3 different health systems around me right now are, Penn of course has their own, but, you know, there's, there's multiple other hospitals doing that. So might be an avenue, you know, once you dive in a bit and see, you know, learn all the other variables.

Yeah, I would test that out for sure. You could find an appropriate facility. Some of it might depend on Mauricio's capabilities beyond just the design and the raw manufacturer. There's usually manufacturing steps that go, people don't think as much about polishing, sterilization, all of these types of things. I know. You know, would the facility— does the facility have the right type of infrastructure? Because all of a sudden, you know, the quality system exists now at that location. It doesn't exist in a factory that has been, you know, that's been audited and all of these types of things.

I was just thinking the direct service, right? In something like that.

Oh, I see what you mean.

Okay. I'm saying just a direct service that they would be, you know, that would be a hospital cell system where you can go in and pitch something like that because they're looking, you know, put the plant the flag of innovation, you know, but it's just that.

Yeah, that's a good, that's a good idea. Assuming it's not insanely competitive that you're, you're there. They're happy with what they're doing, but that's a good idea. Yeah.

Yeah.

Cope. Yeah. I, I actually thought that was a, that was a really good concept. I would want, I would want to go down and try to figure that one out fast. Cause that, that's not something that was obvious to me until you said it. I'm like, that's not. That's not a bad idea at all. I was thinking like, and I don't know, there's, there's people here in roles that would understand this better than me. I've never understood why, um, in that situation, why wouldn't, why couldn't you license that, um, to some big CMF company in the United States and say, you got 2 years. You have, I mean, Hunter talked about this. It's kind of what he did, right? With, uh, Zimmer with the PIQ, it's to sort of say like, I'm gonna license it to you. We're gonna train your people. You have 2 years, there's benchmarks here, or you gotta get to certain levels, but they could at least be offering it because they're involved with that case that you, the one you described. I don't, I don't know. I just, I'm not saying I, people should do it. I always wonder like, why would we not do something like that? What's the, what's the. Rationale not doing it?

I can give one reason, which is that the— this is personal experience, at least— the business development company, the business development functions at bigger companies have like almost lost that muscle memory on like how to do licensing arrangements, at least on a grand scale. There's always these one-off deals that you'll hear about or something like that. This would be an interesting topic, Tiger, if you could ever get like, like a retired BD person on is like, what the hell happened to licensing arrangements in orthopedics? Because there are too far too few that exist, and there is so much wasted money that goes on because these big companies insist on something that is a really good product, and they know it's a really good product from inception. They insist on the smaller companies going out and wasting so much money to get it to $10 or $15 or $20 million in sales for them to just go buy it afterwards when they could have just licensed it from the beginning. So that's one you know, nothing specific to CMF, and they might be more adept at something like this than bread and butter orthopedics. But, but I, I think the BD functions at the big companies that are losing muscle memory when it comes to like how to effectively put licensing arrangements together.

Yeah.

And I, I would— I think I can answer your question. I— the, the BD people are— have become more and more risk-averse. And I, I think I think that it's driven by career risk. So if you're high up at Stryker or Zimmer or Smith Nephew or something and you're looking at 30 deals at the same time, you're just, all you're doing is processing deal flow, you know, and you've got to check if you make a mistake, your career is over there, you know, if you buy a dog. So you have to check every box, IP, regulatory, sales adoption. Pricing, reimbursement. Oh, can they— they got $10 million. Can they get to $20 million? I mean, by the— they have to check every box nowadays to pull the trigger. And 20 years ago, they would just try things, license it, you know, buy products before they're even commercialized. And it's driven by career risk. The companies have gotten so big that they can't take chances anymore. My opinion.

Yeah.

And the middle market is like gone in a way that like that would be your next logical sort of grouping of, yeah, yeah. The exact techs are higher risk appetite.

Yeah.

Right.

Medicals are gone. Yeah.

Yeah.

Tiger, I got to leave early.

I got to leave early, but this is a great one today. I really, sorry I was late and I will only close one thing. When we were, when I was director of sales at Orthologic and then, uh, VP of sales at eTrauma, we used to, I used to do something I called a, a sales blitz, which is another old Army thing. And then I basically would fly like 5 good salespeople into a city and I would give them 2 days to come back with solid leads. And because they're from outta town, They don't have the relationship handicap of being nice. They can walk into your office and they say, well, the doctor's seeing patients. Lady, I'm only here for one day, one day, and this is probably something that's going to change his career. You got to give me— you know, they could be stupid jerks like that. And they got paid on leads, and they would canvas a town, and they would see people that your distributor won't see for 6 months. And that became like gold to follow up on, much better than spending money on LinkedIn.

How were they— they were incentivized, they were paid by the lead?

And, uh, actually, yeah, they were already being— they were on salary. So I just— basically, they were, they were my regional managers. And instead of going buying dinners and getting fatter, I would fly them into town And they would become like hunter killers, a SWAT team or a SEAL team. It was fun.

What did you call, what did you call that group?

Uh, I called it a hunter killer team, but that was too military. They didn't like that. Uh, so I called it Blitz, Sales Blitz.

I like it. Did you get any pushback from the distributors on that approach?

If I did, uh, they weren't right for the job.

Please, please, please.

I'm giving him leads.

Give him a podcast. Can somebody please give Mark Maloney a podcast? Please, I'm begging you.

I guess who I'm having dinner with tonight. Gary.

Yeah.

Yeah. I'll tell you about it some other time.

All right. Yeah. One of the, Mark, one of these days, Mark Maloney, we're going to have just the Maloney hour and just pick a, pick a Thursday.

Yeah, it'll be the most pretentious hour you've ever had. Take care.

I'd put it behind a paywall.

Oh, he's amazing. His experience is amazing.

Hey Tiger, if that, if that company, I was just thinking the, the, the hospital group that I was talking about around here that's forming, uh, an innovation kind of center, um, if, if an introduction would be needed, um, I, I could do that because I know one of the board members and he's spoken to me about what they're trying to do.

Oh cool, yeah, I'll introduce you to Mauricio.

Yeah, yeah, I might be able to, I might be able to set up a, a conversation, um, because they're, they're the innovation center for that massive maxillofacial cranial, um, level 1 trauma center. Level 1, yeah, but they're I mean, they're, they're known for all their trauma, but they have a, a very robust EMF. Yeah. You know, that, that space. But yeah, they're, they're trying to think out because they're trying to compete with Panda and some other stuff going on.

So, you know, what my first startup was a trauma startup in 2008 and, and I used to, I was in Memphis. I would go down to the level 1 trauma center in Memphis, 6 o'clock Monday and they'd go over, they would just flash through cases, you know, 2 minutes. You know, every— this case, this case, this case. And the reps are standing in the back of the room and they go, okay, that one is— that one belongs to this company. That one belongs to— they would just sit there, take notes. It was like shooting fish in a barrel, you know, but you had to— you couldn't be in that room. You had to— you needed a lot of respect to be in the back of that room. And in fact, Tony Russell— oh, Mark's gone. Yeah, Tony Russell was, uh, grilling the fellows of residence in there while they were going through the cases. Um, but if you don't know about a case and it's oncology or trauma, I mean, how would you ever— how would anybody call the company? Yeah, it's, it's interesting. Well, this, this has been great. Anything else before we close up?

No, I, I had a conversation, um, before we got on, and I'd really like the opinions here if we can, 'cause it's pretty, pretty specific, so we should be able to nail it. But I was telling one of the surgeons on the phone, he had just tried a MAKO knee and for the, well, he, he'd done 'em before, but he just saw their, their, their software update on the knee, which gave feedback on the laxity through range of motion, right? But it was static. It wasn't dynamic, which, you know, there's only one company out there right now in the robotic space who, small company who actually gives you the dynamic feedback. And he was like, you know, I, you know, I can't believe, you know, they kind of have it figured out. I'm like, well, do they? Because it's not dynamic. And he's like, yeah, I guess not. You know, and I said, you know, one of the things everybody's trying to do is go off of, you know, with, you know, eliminate the imaging part of it, the CT scan, the MR scan, you know, from, from a wide-scale perspective like a Stryker or anybody else. And he said, well, I don't think it's gonna be a problem because I think patients will just pay for that scan. And I said, well, I think you're oversimplifying that dynamic because I have been involved with those patient charge things and even set up portals and there's nobody chasing bills or anything like that, but they've greased the skids to have certain technology reports or whatever done by through patient, direct patient pay. I mean, I think that, he was, as a surgeon who talks to patients, he seemed just so convinced that his patients wouldn't mind going and paying, you know, $300, $400 for their scan prior to their knee replacement. And I said, well, I think you're, I don't think you're right. I think that you're talking about a massive sample size. So I'd be curious what you guys think, but I just said there's a reason why everybody's trying to go to vision-based technology like Vizzy, uh, what they're trying to do. And that's why Stryker's talking to them, right? Is because— so curious what you guys think.

Agree. It's as simple as that. I agree with you.

Same.

Um, it's, it's very easy to picture 50% and then like every percent after that gets really hard. Um, that like some will for sure. Um, but first of all, the imaging facilities, they're fine with cash payments on an occasional basis because, you know, they don't have to chase the payment. It's right, it's right away. But I don't think they would be content with all of a sudden, you know, 1,000 or 2,000 CT scans a year that they build through insurance. Those are profitable for a reason. I don't know that they would choose to just voluntarily reduce those by two-thirds, like the cost that they're bringing in.

The system that's in place, right? They built their companies around them.

Yeah. They can't just like, even if it is a lesser administrative burden for them on a wide scale, they can't just accept, I don't think, a two-thirds reduction in what they're charging. They charge insurance $1,000.

They charge—

if it's cash pay, it's $350. They'll charge insurance $1,000 for it. And so I don't think— I have a hard time seeing like everyone doing, you know, doing that. Some will, of course, but I have a hard time seeing everybody do that.

Yeah, good question.

All right, that's a wrap.

Thanks, guys. All right, guys, thanks a lot. This was awesome.