This is the third in a series of 6-Question interviews with the Orthopaedic leaders who are challenging conventional thinking. (you can read other interviews here)
I have known John T. Treace for over 14 years and he is blessed with an uncanny ability to discover unmet clinical needs (that others miss), then deliver unique commercial solutions to those needs. He has done this repeatedly at multiple companies.
In the 1990’s he lived in Ponte Vedra Beach, Florida working as a marketing director for Xomed Surgical, an innovative ENT company that was acquired by Medtronic in 1999. In late 2000, John joined Wright Medical in Memphis spending 12 years there in various commercial lead positions with most of his efforts dedicated to helping develop the foot and ankle side of the business. After leaving Wright in early 2013, he moved back to Ponte Vedra Beach and started a consulting business planning to re-enter the ENT market. He now leads Treace Medical Concepts. I sat down with John to ask him a few questions.
1. How did Treace Medical Concepts get started and why Florida?
John T Treace: In 2014 during my consulting work, I became convinced there was greater untapped opportunity in the foot and ankle market, so I shifted gears and created a business plan for a start-up foot and ankle company. First priority was to assemble an experienced board of directors and a diverse surgeon advisor team representing both orthopedic and podiatric perspectives.
Things were moving pretty quickly and by mid-2014, we had recruited an experienced CFO and COO, held our initial surgeon advisor meetings and identified initial clinical challenges which would direct the initial product development efforts for the business.
Ponte Vedra Beach turned out to be a great location as several of our board members live in the area, there’s a good workforce in place with Medtronic, Biomet and J&J having medical device operations here, plus it definitely has some quality of life benefits!
2. What qualities did you look for in your operating team and board?
John T Treace: In a start-up, the operating team has to wear many hats, so in recruiting we had make sure each player had not only the right skillset, but also the right mindset. We needed proven high-performers that had worked in both early stage and developed companies and that were “player/coaches” just as comfortable with doing as leading.
Tom Timbie, our CFO is a serially successful med-tech executive who lives in Ponte Vedra Beach and has been involved with both public companies and start-ups. Joe Ferguson, our COO came with a strong experience base in foot and ankle product development and helped build a contract engineering division basically from scratch at his former company. Our marketing lead, Sean Scanlan, is actually a Stanford Biomedical Engineering PhD with business development experience at a major orthopedic company prior to joining us.
As for our board, this is an active working group that brings a broad range of med-tech operating experiences to the table. These are also individuals that have history working together in prior companies, so there is familiarity and established trust in each other’s areas of expertise. Jim Treace, our Chairman, is both a past start-up and two-time public med-tech company CEO. Jim brings broad “steering” guidance to the business and helps us avoid pitfalls that can create wasted time or expense in our pathway to growth and profitability. Barry Bays, past CEO of Wright Medical, is an incredibly talented engineer and actually ran R&D for us for the first six months of the business. Barry continues to be highly involved in our product development and intellectual property activities.
Rich Mott, past CEO of Kyphon, has helped hone our focus, sharing some of the key principles implemented early on at Kyphon (acquired by Medtronic) that helped pave the way to their success. John R. Treace, an expert in medical device distribution, has been active in the sales related processes, procedures and documents we need to have in place for commercialization. While we hold regular board meetings, it is really interaction between those meetings where this group really makes the biggest impact.
Obviously I think we’ve assembled an excellent operating and board team with the right mix of hands on abilities and vision to help shape the future of our business.
3. How did you obtain the capital needed to fund the company?
John T Treace: We were really fortunate in that our board was willing and able to fund the company through the development phase of the business. Our five-year business plan provided that those initial funds would fully develop the initial products we planned to commercialize in the second half of 2015.
In the fourth quarter of 2014, we started working on a “friends and family” fund raising effort to secure capital needed to commercialize our first products, develop our product pipeline, and carry the company to profitability. Based on our five-year model, we had a pretty good idea of what it would take to achieve positive cash flow. We put together a Private Placement Memo and kicked off the raise with private investor meetings at the JP Morgan Healthcare Conference this past January. Our goal was to raise the entire expected five-year cash needs with this offering marketing the raise almost exclusively to business contacts and friends and family of the board and management team. The offering went really well, and we were able to close just 60 days after initiating the offering. While it definitely consumed a lot of our time and energy, having it done in one shot was very important so that we could shift our focus completely to business execution rather than serial fund raising.
4. How did you decide upon the company’s initial product direction?
John T Treace: While the foot and ankle market is still a comparatively young one, when you look at all the companies and products participating in this once neglected space you would be hard pressed to call it “underserved.” As such, we knew we’d need to create sub-markets within the established market to be successful. To help us in this effort, we were really fortunate have the support and insight provided by our excellent surgeon advisory board. We held our first meeting with this group in May 2014 asking each advisor to present on surgical areas they believed were in greatest need of innovation based on challenges faced in their practices. By the end of the meeting, there was a pretty solid consensus on a few clinical areas we wanted to target with innovation. One such area the team identified to be in need of outcome improvement was bunion surgery. We sort of had this “aha moment” where this diverse group MD’s, DO’s, and Podiatrists all came together relating to the significance of a clinical problem, and realizing that a particular product concept discussed in that room, on that day, could make a substantial progress towards this goal if we did it right.
5. Can you tell us a little about the bunion problem and your solution?
John T Treace: Sure, a bunion is a bump on the inside of the foot caused by an outward deviation of the metatarsal bone of the big toe. In some patients this bump can eventually develop into a painful, activity-limiting deformity. Bunions are quite prevalent, affecting roughly 30% of US adult population, the majority of which are female. It is believed they are driven by hereditary factors that can be aggravated by unnatural forces placed on the joints of the foot by constrained footwear.
While most bunion sufferers will choose to “live with” the problem, several hundred thousand undergo surgery (called a bunionectomy) each year in the US alone. Today, most bunionectomies are performed by an “osteotomy” procedure where the surgeon cuts (or breaks) the misaligned metatarsal bone and shifts a portion of it back to proper alignment. While this approach can be quite successful in the short term, long term published outcomes are mixed, with many demonstrating high rates of recurrence of the bunion.
An alternative to the osteotomy technique is a surgical procedure known as a “Lapidus fusion.” During a Lapidus fusion the surgeon adjusts the entire metatarsal bone and fuses it in proper alignment. Lapidus fusions have demonstrated a lower long-term recurrence rate than osteotomies. That said, only a small percentage of bunions are being treated with this technique because today it is a more complex operation for the surgeon (so only a minority of surgeons are comfortable and confident performing it), and patient recovery times are typically longer compared to osteotomies. Even so, Lapidus has increased in popularity over the past several years as more surgeons re-evaluate the origin of the bunion problem and seek a more predictable and permanent correction for their patients.
One of our initial products, the “Lapidus Control™ System,” is designed to make Lapidus fusion more approachable and reproducible for the surgeon while providing a faster recovery rate for the patient. By enabling more surgeons to perform Lapidus with confidence and control, we believe we can increase the percentage of patients treated with this technique. As this occurs over time, the long-term success and satisfaction rates for patients should increase as well.
6. Where are you today and what are your plans for the future?
John T Treace: To date, most of our resources have been directed at developing our product pipeline and our patent portfolio. While many of the things we are working on seem straightforward on paper, they are actually very challenging from an engineering standpoint. Over the past 12 months we’ve trialed multiple iterations of our designs in over 100 cadaveric specimens. During this process we’ve filed for or licensed 14 patents, with more in the works. As a startup we believe it is in the best interest of the company, its investors, and our sales force to protect our intellectual property as much as possible.
We are about to shift from pure development into commercial mode. Over the coming months, we will initiate a controlled release of our first few products to our surgeon advisors and some of their peers to obtain initial clinical experience and test our business model assumptions. Next, we will commercialize these products nationally through independent sales agents with a track record of success in promoting and servicing innovative foot and ankle products. We believe this type of staged approach is prudent to ensure a successful product launch and helps balance our launch risks with market opportunities.
As for our future, we’re 100% focused on building a profitable, high growth, foot and ankle company known as the recognized leader in our chosen segments of the market. Obviously we will have our challenges along the way, but with the team we have in place and our product concepts in development, I am quite confident in our ability to deliver.
Click here for more information about Treace Medical Concepts, Inc. see: http://www.treace.com/
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