October 9, 2025 • 45 mins
“When we talk about spine, having 7D, which is a highly differentiable product for deformities, I think it’s giving us the basis to become a real player and help to solve the most complex issues into spine,” Orthofix’s CEO Massimo Calafiore says as he explains the future of spine navigation. In this Vanguards of Health Care episode, Calafiore sits down with Bloomberg Intelligence analyst Matt Henriksson for an in-depth interview about the benefits of its 7D navigation in spine procedures that utilizes camera-based technology combined with machine-vision algorithms, the growth opportunities in specialized orthopedics, including limb preservation and extremity deformity correction, and how he built a new management team from the ground up to tackle these opportunities.
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Episode Transcript
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Speaker 1 (00:16):
Welcome to another episode of the Vanguards of Healthcare series.
My name is Matt Hendrickson, the medical technology analyst at
Bloomberg Intelligence, which is the in house equity research platform
of Bloomberg LP. We're pleased to have with us today
Massimo Calafiore, CEO of Orthopix, a medical device company with
a comprehensive portfolio of spinal hardware, specialized orthopedic solutions, and
(00:39):
advanced surgical navigation. You can dive deeper into the company
and its financials by typing in o fix Equity go
on your Bloomberg terminal. Massimo, thank you for joining us today.
Speaker 2 (00:51):
Thank you for having me and.
Speaker 1 (00:53):
Masimo, you're almost two years, maybe slightly over two years
into the CEO role here at Orthofix. Why do you
start with just the steps in your career path that
led you to that role.
Speaker 3 (01:05):
Yeah, a little bit less than two years, just thirteen months. Look,
I was always a mercy medicine. I am the only
I think, the adult male that is not a doctor
in three generations so between my grandfather, uncle, brother father
has been always in medicine. So passion care has been
(01:28):
always front and center of my history.
Speaker 2 (01:30):
I was not let's say, drawn to the.
Speaker 3 (01:33):
Operating room per se, and I decided to start a
career on the business side of the business. So twenty
five years in the industry, all in the United States,
and I've been a very strategic on how built up
my experience that led me to run Orthopix today. First
(01:56):
part of working with a privately held company Valdemort Link
at the time with the largest privately held orthopedic company
in the world. From there moved to invasive, very steep
and fast career. At the end that was the chief
commercial officer there, so managing one of the largest spine
(02:21):
portfolio the world. And from there, first step as a
CEO working for a private equity group, successful exit.
Speaker 2 (02:30):
We saw the company I was leading lima to an.
Speaker 3 (02:34):
Novice for EQT as said, and now first time public
company CEO with Orthopix. So a were rounded career that
led me to where I am today.
Speaker 1 (02:49):
Interesting and so you know, this is your first time
as a CEO of publicly traded company. What was it
that you saw in the company that excited you before
you joined?
Speaker 3 (03:00):
So a company that was clearly undervalue I saw in
Orthopix and the opportunity kind of a canvas that I
could start to use in order to build up a
great story metech.
Speaker 2 (03:15):
A board of very.
Speaker 3 (03:16):
Supportive that you wanted to have a leader that was
leading change, and of course a good technology platform that
would allow us, you know, to grow to build something
very meaningful. So again was I saw a few aspects
(03:38):
of this company that really draw me to accept the
job and will.
Speaker 1 (03:43):
Dive deeper into some of the portfolio aspects there. But
what caught my attention was just talking about build change
because over these eighteen months you've gotten on a bit
of a hiring spree to hire new executives in the
C suite to kind of help build out your team.
How have you built out that team to take advantage
(04:05):
of those opportunities?
Speaker 3 (04:07):
So what I learned, you know, like I said that
was always immersive medicine, and what you learn that the
end you're in business of people. So you can have
a great technology, but if you're not the great people
that care and they're expert on the deploying the technology,
nothing really happened. So the board very supportive, and one
(04:32):
things that I wanted to achieve was orthopedicspine bone grow
therapy are very specific market. Okay, so you really need
the expertise in the marketplace. So what they did may
be different than many Every single member of my leadership
(04:53):
team a specific expertise in the market we compete.
Speaker 2 (04:57):
We have more than two hundred.
Speaker 3 (04:58):
And fifty years of a experience in spine orthobiology, cannable
in tech, bone growth therapy. So I have a group
of people now that can lead as a human being,
but also that they have a profound understanding of technology
in the market and that one has to be the
foundational of everything that everybody do on my seat.
Speaker 2 (05:22):
Yeah, understandable.
Speaker 1 (05:24):
And then you know another foundation for this market is
the actual market or the current state of these markets itself.
Orthofix is diversify between spine orthopedics, bone growth. How have
these markets evolved over the years.
Speaker 3 (05:41):
So you have a spine market that for many years
enjoy a very high growth rate. Now lately we're back
to more like a market growth rate around six percent.
But it's giving us the opportunity to play. You know,
(06:02):
a market it is almost as large as large ooint
where the opportunities for us today enable in technology is
becoming a highly differentiator in the.
Speaker 2 (06:16):
Market where we compete.
Speaker 3 (06:18):
So having access to seven D is giving us the
opportunity to be current in a market where recently we
saw a little bit of let's say slow down from
the growth perspective, but the foundation, the fundamental of the
market will compete are very strong because the introduction level
(06:43):
in tech, the evolution of technologies in both in spine
and orthopedics. It led us address disease for patients that
much more older than before. So you have a new
patient population that now you can address. There is a
pull and a ask from the customer to be more active.
(07:07):
So while before a certain age everybody was stepping.
Speaker 2 (07:12):
Back and just wait.
Speaker 3 (07:14):
Now they want to keep doing their own stuff. They
want to keep play pick a ball outside, they want
to still enjoy golf, So a good demand for patients
to go into the r So at macro level, we
participate in a market that foundational is very strong.
Speaker 2 (07:38):
Post COVID.
Speaker 3 (07:39):
Also we start to see a stabilization on the price
pressure from the provider perspective. So let's say we're very
content to be able to be present in the market
where we participate. What is interesting also for us that
the combination of the business that we have the hardware side,
(08:00):
the biologic the enabling tech and the bone growth therapy
let us follow the patient throughout the entire continuum of care.
So we help on the pre planning, we help inside
the R where we excel, and now with bone growth therapy,
we can check the evolution of the patient. So I'm
(08:23):
very excited about the opportunity. And this is why I
said at the beginning I was excited about taking this
position in Orthopix.
Speaker 1 (08:32):
Yeah, and so maybe you know it's a good segue
into kind of that enabling technology, because correct me if
I'm wrong, But it sounds like that ability for the
surgeons to be able to use that enabling technology allows
those surgeons to treat the patient sooner or at least
be able to be more efficient in their treatment. You
talked about the seventy What is the seven D system.
Speaker 3 (08:55):
So the seven D system is our navigation system. Is
a system that the surgeons can use in the R
to navigate them plans in the human.
Speaker 2 (09:06):
Body during the procedure.
Speaker 3 (09:08):
Okay, why seventy is highly differentiable. So we use a
visible light flash that we call it flash technology, that
we project into the spine if you do an open
procedure or onto the skin with some specific marker if
as a minimal invasive procedure, and what we do we
(09:32):
map the spine and we combine a preoperative city scan
that you have with the actually map of the spine
in the R. Why seventy is so important to us?
Why so highly differentiable? First of all, you can register,
so create this this mapping of the spine in thirty seconds,
(09:59):
okay to up to thirty minutes. Registration need to have
with competitive systems.
Speaker 1 (10:04):
So this is this is at the point where you've
done your preoperative CT scan. Yes, you're seventy right before
you begin the procedure. It's not thirty seconds.
Speaker 3 (10:13):
Yes, So if you do an open procedure to open
the spine and really flash the spine the open spacey
and you combine what was the preoperative scan with was
the current current position of the spine of the patient
spine in the operating room.
Speaker 2 (10:33):
Okay, okay, so you.
Speaker 3 (10:34):
Kind of give is a reference for now for the
system to guide them plans into the spine. One of
the challenges to see in the R sometimes the spine moves.
So if the reference change we have we can re
register in twenty seconds. For a competitive system, you need
(10:55):
to go through the entire process from scratch. Okay, and
what we do because all our lighting is in stall
is pretty much our the form factor our the machine
look like. It's like lighting that we had that you
normally have in the operating room. We don't destroy the
(11:16):
workflow of a surgeon because pretty much instead of moving
the lights that are provided in the R, they move
our lights that come with the device. So between the
fast use how the seventies engineered is let us be
(11:36):
very accurate, create a safe environment for the surgeon, the
patients are stuff bringing the addition inside they are to zero,
and of course create the speed the efficiencies that everybody
is looking for in the operating room. We need some
study and we can save more than one hour per
(11:57):
procedure utilizing the seventy more interesting, you know, there is
a lot of now and I would say finally a
lot of scrutiny about the amount of radiation that are
used not set in the R but also outside with
all of the pre imaging that you need to do
with a patient. And now we have a relationship with
(12:20):
a company that let us a synthesize a city scan
from an MRI, so you can truly do zero diation procedure.
Combining the seven DY technology with our implants very interesting.
Speaker 1 (12:37):
Okay, So now basically, if I understand that correctly, you're
able to now use an MRI as your preoperative scan
and so basically you're cutting out essentially all city scans. Yes,
now just available with all the seventies or is this
a special next generation version that comes.
Speaker 3 (12:54):
No, No, this is our seventy is the time today.
There is a lot of things that you are working on.
I think the seven D will let us do stuff
in the r that nobody's doing right now. So there's
a lot of ur in the investment that we're putting there.
We are working on the second generation of FORLA like
(13:15):
of the device that is coming up in the future.
So very excited about the opportunity that we have with
the seven D and the results that we are seeing.
Are speaking loudly about the efficiency that we bring and
the quality of our implant and every ten technology together.
(13:38):
We talk often during our earning calls about air and outs,
which pretty much when we transact a seven D, we
let the hospital pay over time with the utilization our device.
What is very important to learn is that the contraction
(14:00):
so the hospital is a contractual obligation with us about
usage more than fifty percent of this contract. They're consuming
more implants than what the contract is saying. Okay, And
this talk talks very loudly about three things. One about
the quality of our implants, because when we do this,
(14:25):
earnout the vast majority of the time or a new user,
so they like our implant, they use more. They actually
use seventy because the usage that we're seeing is above
of what is contractually was contractually discussed. And when we
(14:46):
do a turnout in account where we already have a presence,
we see always an increase of utilization of our implant
because most of the time we can get new surgeon
that are looking to our main each head in the
account using seventy.
Speaker 2 (15:02):
Start to get.
Speaker 3 (15:03):
Curious, So a lot of opportunities that start opening up
because the combination of our product line with enable in
technology interesting.
Speaker 1 (15:13):
We'll talk more about that pull through opportunity, but I'm
just very curious because you know, you're seeing a lot
of headlines about hospitals, you know, potentially getting into the
red because of a lot of capital equipment purchases that
they've made. And I've also hearing other companies talk about
these leasing or other like real value based opportunities for
(15:34):
the hospitals. Is that going to get to the point
where we get you know, no hospitals are ever going
to purchase these outright and it's all gonna be leasing
or is it? Is it still going to be certain
hospitals that it'll be like we just want to own
it and not have to worry about anything else with
regards to that robot.
Speaker 2 (15:51):
Yeah, this is a great question.
Speaker 3 (15:52):
We see it depends on the expedients they had in
the past. Uh, the ernout model is not you so
we see said sometimes they bought very expensive capital equipment,
very big commitment. They start to struggle on actually do
the earn out, so they say, okay, now we don't
(16:15):
go through this ordeal. We want to buy out right. Ah,
there are like hospitals that we have a strong surgeon
advocacy inside that they are committing to the hospital. They
actually like our product, so you make the hospital more
at ease on doing earnout.
Speaker 2 (16:38):
So it depends.
Speaker 3 (16:39):
There are hospitals, as you said, that clearly cannot afford
to buy outright and they actually get the enable in
tech in house. If you can if they have a
strong surgeon advocacy. So it changed from let's say case
case case by case basis in our in our case.
(17:02):
Another thing that's important about seven D. We are in
a very sweet spot in terms of how much we
are pricing the device. I think that we are very competitive.
We have we have we are much cheaper than a
robot for a robotic platform right now. So you have
(17:23):
a competitive device in pricing with a clear place in
the marketplace that normally gets a strong surgeon advocacy. Makes
our conversation with the hospital little easier. And we are
becoming kind of agnostic if another enable in tech is present,
(17:44):
just because what we do is so different from how
the other address these issues that you see our results
with seven D is pretty compelling.
Speaker 1 (17:56):
Yeah, and it's interesting because you know, I think a
traditional robot X, your initial thought is always, oh, it's
the robotic arm is the robot. But you know, as
you get dived deeper and deeper into this technology, it's
a navigation system as much as anything, which is what
seventy does. Let me go the other way that you
have this seventy technology, which is differentiated from other technology
(18:18):
out there is that something in the strategic plans to
ever incorporate a robotic arm with that navigation system.
Speaker 3 (18:26):
Look, I don't think that this short term is going
to be one of our goal at the end developing
a robotic platform for companies that are much larger than us.
It is not an easy, let's say, an easy project
to endure. I believe, I believe that the robotics is
(18:46):
here to stay. Is there robotic today? What is going
to be let's say, the robotic of the future.
Speaker 2 (18:54):
I don't think so.
Speaker 3 (18:55):
As you said, right now, the robotic arm is pretty
much eye instruments holder, and I believe it. Like it's
happening in the orthopedic side, you will see companies that
are going to develop robots that are gonna be agnostic
to manufacturer. So I think that time waiting for the
(19:16):
market to keep evolving, and if we need to have
access to our robotic arm, I think that we're gonna
be ready to do so. But I don't see this
as an organic development for us.
Speaker 1 (19:29):
Interesting and something that I mean, like I said, five
ten years ago, we were the robots were just in
their infancy. There's a lot of development that could take place.
Let's go back to that pull through opportunity. Though you
know you because you sell cervical disks in our bodies,
other fixation systems, what in your portfolio maybe benefits the
(19:53):
most from the seventy navigation system or what procedures, particularly
because you know, when you think of spine, it's not
just one spine procedure for everyone. And you know you
have the cervicle, you have the lombard, the thoracic, all
those different areas. You have the screws, the inner bodies,
all those things. So one winded way of asking, what
are the best products and what are the best procedures
(20:15):
that you can use with the seventy system.
Speaker 3 (20:17):
Yeah, let me clarify one thing before. We are not
in the cervical this market anymore, okay, because we divested
them six.
Speaker 2 (20:26):
Okay, and we are divested.
Speaker 3 (20:28):
We are facing out M six since a couple in
the end of last year was a declining product for us.
We want to be really focused on reade product capital
in a high grow segment. So M six was part
of our history is not part of our history today.
(20:48):
But coming back to the portfolio that we have book seventy,
let us navigate back for in the entire spine from
cervical to alnumber.
Speaker 2 (21:00):
So of course all our.
Speaker 3 (21:03):
Fixation system benefits of having seventy. We are keep deploying
and adding all our implant to the seven D database
of implants that can be navigated. Of course with the
inter body they are altful. So if you see seven
(21:24):
D is fully is fully integrated today, is going to
be more fully integrated in the future with every single
aspect of our product portfolio. Of course, where seven D
shines is the most difficult cases, So the formity is
a clear focus of the company. Is the future differentiator
(21:49):
for spine for Orthopix is an area where seven D shines,
where we believe that the combination of the best implant
with the best technology system can help to increase outcome.
Speaker 2 (22:04):
But also.
Speaker 3 (22:07):
What we're seeing is that data are becoming a very
very important differentiator for company in the marketplace. So the
ability to have access to data in the r with
seventy to follow the patient post top with bond ger therapy,
it's going to give us the opportunity to collect and
(22:30):
of information and variable information to inform surgeon in the future.
What are the best procedure that you can have for
a specific patient given the commorbidity, the patient present pre
up age, any any other disease that may have and
(22:53):
to start to think about to start to develop this
idea of a patient surgeon centric UH procedure utilizing our
implant and our technology. So excited about the creation of
this ecosystem with the technologies that we have.
Speaker 1 (23:11):
Yeah, and that's the thing now is you get more
and more data, and you get more and more analysis
that data, you can definitely be able to pinpoint a
better procedure or update the guidelines based off of what
the previous procedures have.
Speaker 2 (23:22):
Done in the past.
Speaker 1 (23:25):
Well, let's move on to kind of the orthopedic segment
because this one got was on my radar because of
the high growth trajectory in the US. How does this
orthopedic portfolio differ from some of the other traditional orthopedic
procedures we see with other medtech companies.
Speaker 3 (23:47):
Yeah, Look, we are very excited about what we're doing
in orthopedics. You know, one of the things that we
did that a new management team ALASTA was really redefined
and rethink what orthopic seas. And so if you read
our vision, there are like two wars that are important
one this idea to be arrivaled and one to be
(24:09):
a meta company. So we talk a lot about spine,
but again Orthopix is not just spine. Yeah, and when
we think about arrivaled, we start to think, Okay, where
are the market segment? Okay, even if smaller, where actually
we can clearly win. I think that over time we
(24:29):
can participate into spine, but with few falls, smaller than
our competitor. Now you go into orthopedics, and you know
when I join, so this company that has a business
in the United States that was less than a third
of what we do overseas. So I started wondering, Okay,
(24:52):
I think that there is an opportunity there, but how
we can we take advantage of these opportunities? And so
we did. We hire a great leader like Patrick Fisher.
He was running foot and angle of a striker Rite
medical before. And what Patrick did was really start to
(25:13):
clearly think and give an identity in the United States
to this orthopedic franchise. So now we over time, you see,
we're going to stop to talk about orthopedics.
Speaker 2 (25:25):
We start to talk about limb re construction.
Speaker 3 (25:28):
Limber construction in a category within this universe that you
are redefining is pretty much the ability to address the
more complex trauma cases in acute format or post top
Sometimes you know you need to address a big bone
(25:49):
laws so lenth limb blend discrepancies that trauma can create
limb blend descripants that you have for bird big deformity
that you can have because of the trauma. Two more so,
and we are the only company today in the United
States offer a comprehensive portfolio of external and internal devices
(26:15):
to address this very complex issue. So while we were
exploring opportunity in the limber construction market with an opportunity
or address footthaulserve for diabetic patient with our new product
Truelock transferse bond Transport. What it does pretty much is
(26:39):
led us cure footthallser creating.
Speaker 2 (26:45):
A fracture in your tibia.
Speaker 3 (26:48):
So you're gonna cut a piece of little piece of
bond from your tibia. Okay, you will move this remove
from the from the tibia, this piece of bone, and
with what the body does, because the signal fracture is
start to really reform and all of the system, the
(27:10):
blood flow of the body, concentrate the blood flow the
body on the specific site where you created the fracture. Okay,
what it does because increase the blood flow near the
place where you have the ulcer. As a byproduct of
this procedure, the food start to the skin, start to
(27:32):
close the body, start to recreate skin, and close the ulster.
Speaker 2 (27:36):
So within thirty.
Speaker 3 (27:37):
Days you can start to see an improvement on the
patient foot where you have the ulster. And what you
do with this device you bring back the piece of
bond that you removed back inside to complete the procedure.
So some very amazing stuff. We're doing this in this
specific market segment.
Speaker 1 (27:58):
As I said, this is a very kind of sub
segments of the extremities market overall. My initial take from
those comments just now is that limb lengthening has a
certain opportunity, but diabetic all service, which is a you
know you think of at all the Type two diabetics
in the US alone, sounds like a much larger patient
(28:18):
pool there. Yes, that's all right, observation.
Speaker 3 (28:21):
Yeah, so now we enter to one point seven billion
dollar opportunity in diabetic food and a comprehensive two point
six billion opportunity in limber reconstruction. So all of the
sudden you can see that we have the building block
to create a rival procedure in a market. Actually very meaningful,
(28:45):
so excited about what we're doing there. Through or Elevate
has been one of the most successful launch, if not
the most successful launch in Orthovik history. On the orthopedic side,
the opportunity to create relevancy and market creation, and the
most importantly you start to see an evolution of our
(29:08):
customer base because again now we have an identity. Before
was very difficult for a surge in the United States
to understand why and why to call Ortho fix. Actually
everybody knew ortho Fix by name, because remember originally when
the company was funded, was funded around external fixation.
Speaker 2 (29:30):
It's around trauma.
Speaker 3 (29:32):
But there was a difficult to understand, Okay, when when
do I need to call Ortho Fix. Now they know,
and now it's on us and on the team working
on Orthopedis to take advantage of the great opportunity that
is ahead of us.
Speaker 2 (29:48):
Yeah.
Speaker 1 (29:48):
No, And actually it kind of sounds full circle where
you started with external textation with a spine and then
now you're circling back to back to the extremity market
opportunities there and kind of in the same way, of
circling back. We talked a lot about seventeen navigation is
enabling technology utilized in the extremities market as well the
(30:09):
plans to expand that overall.
Speaker 3 (30:11):
So right now, I think that where we are seeing
that the technology to develop is mostly on the pre planning.
So we plan our procedure. We are our a proprietary
platform that is utilized, so the opportunity to plan the procedure,
do some data collection. There is no real navigation that
(30:34):
is used into traumine foot and ankle yet if you remember,
city scan is always the base for navigation is not
used often for these patients and a lot of cases
are not pre planned. But the opportunity to help the
(30:59):
surgeon to plan the case, the opportunity to collect data
and what we're doing with with bone growth therapy, remember
we also focused on trauma what we call fracture and
we recently launched steam Connect, which is our platform that
(31:22):
we are the first company in the trauma side that
connect this bone growth that this steam to actually a
platform that let the surgeon follow the patient journey. Okay,
so again, uh, we are utilizing this case enable in
tech to to to learn that the patients are compliance
(31:45):
with what we do with what the surgeon prescribed. And
you know, we collect a lot of useful data that
can be us in the future.
Speaker 2 (31:54):
So uh.
Speaker 3 (31:55):
And one of the things that we did in order
to leverage all this portfolio, you know before you know,
talking about the team both Standish that was the inventor
of seven year leading just the vertical now is the
chief enable in Technology officer. So having purview of, as
(32:16):
he said, everything that has on an office switch within
all of the business. Over time, I think that he
is going to have the opportunity for opportunity arise to
use technology that are used within Ortho Fix in all
of the different market segments.
Speaker 2 (32:34):
Yeah.
Speaker 1 (32:35):
Just it sounds like you're storing the path to build
that database to provide that access. Yeah. And then you know,
just kind of rounding out the portfolio. You know, bone
growth therapy and biologic doesn't get as much attention as
all these other products and developments. But how does that
fit into the overall Orthopics business.
Speaker 2 (32:55):
This is a great question.
Speaker 3 (32:56):
It's kind of the glue that connects everything together because
on bond growth therapy, we can use our product into
spine where we are the market leader and if you
think about despite the leadership position, especially lately, we were
able to beat the market constantly. Why because we're taking
(33:20):
the advantage of the database that we have as surgeons
for spine that didn't use bond growth therapy with our
commercial team and over time we're going to try to
do everything vice versa. So we have bond growth therapy
in between Spine and the.
Speaker 2 (33:40):
Rest of the company Biologics.
Speaker 3 (33:42):
At the end, we are the number two player in
the world after you know Metronic with infuse the number one,
but in our category, in the dBm category, we.
Speaker 2 (33:54):
Are number one. And again all.
Speaker 3 (33:56):
Our products are used in the r with spine. But
Patrick and Esteem in the past that they were leading
a pretty large biologic market opportunity. So what we're seeing
the opportunity now for Biologic also to prediferate in orthopedics
(34:17):
and bone growth therapy. We participate in fracture, so again
a lot of connection with orthopedics. So you have this
is why I said the bigity and biology is kind
of the glue because you can leverage opportunities on both
sides in spine and in ortho with the product that we.
Speaker 1 (34:37):
Have very interesting and so then you know you're you're
talking about a lot of these growth opportunities. Also as
a Smithcap company, though, there's that fine balance between spending
money on that growth but also a path of profitability.
And so I always ask my Smithcap guests who come
in is what is your decision making process for those investments?
(35:01):
How do you choose which ones are your favorite children?
And how do you choose which ones are like Okay,
we can wait on those as we maintain a certain
level of path profitability.
Speaker 2 (35:11):
Yes.
Speaker 3 (35:11):
Look, since we started, our north startup has been a
profitable growth. So we want to change and improve, passionalized
with the lives with great technology that we have, but
without forgetting that at the end we need to create
value with our shareholders.
Speaker 2 (35:32):
I think that you can achieve.
Speaker 3 (35:33):
That just with the relentless prioritization.
Speaker 2 (35:37):
I think that what we.
Speaker 3 (35:38):
Are keep working within the company is this concept of
a vital fuse. Every year we pick six seven opportunities
that we believe that we're going to move the needle
to support all our main stakeholders you know, patient the surgeon,
(36:00):
our employees, and our shareholders. And we are learning how
to stay focused on just what we decide.
Speaker 2 (36:10):
Collectively what really matter.
Speaker 3 (36:13):
I think that is the only way that you can
that you that you can achieve what you just said,
create profitability. Given given our size, we we we take
a tough decision if you see, even controversial time. For instance,
we went through a big reorg into the distribution network
(36:37):
that created some temporary headwind for us. But again we're
whatever we are doing is just to create a sustainable
business that create value. And you can do that if
you are like very focused on what the priorities that
you said during the year, if you take decision that
(37:01):
that their long term and just then I think that
over time you create the balance sheet of the P
and L that's gonna make you also do the fun
stuff when gonna be larger.
Speaker 1 (37:13):
Yeah, actually, I'd love to dive into that decision about
the distribution network because I've heard that multiple times, especially
with international markets transition from you know, not in some
cases you know, a distributor to direct sales, things like that.
You know, and this is maybe a case study for
(37:34):
some of the NBA students are listening into this episode,
But how did you decide that this was an issue
to take a look at, and what were your experiences
in the past that you use to kind of make
that tough choice because as a publicly traded company, you're
gonna get grilled during the earnings calls, and you know
you always try to say please be patient, be please
(37:55):
be patient, but you know investors have a very short memory.
Speaker 2 (37:59):
So how did you.
Speaker 1 (38:00):
Go about and what were your experiences that allowed you
to say, okay, I feel comfortable making this decision.
Speaker 2 (38:06):
So what we did.
Speaker 3 (38:09):
We got the vast majority that our network is indirect,
so we have just a small direct presence in bond growth.
Speaker 2 (38:17):
Therapy to spine and a fracture.
Speaker 3 (38:20):
So what we found when we start to run Orthopix
was a lot of big a big amount of very
small distributors. What's happening in this case is that for
(38:40):
a small volume of dollars you create a lot of
effort within the company in order to support from the
Kapex perspective, instruments at you know, for the time perspective,
the management of thistude, multitude of contract.
Speaker 2 (38:58):
And so on. So there was a moment.
Speaker 3 (39:02):
Where you know, we we we're doing pretty well, but
there was a moment where I'm thinking long term, I said,
can I build Can we build a successful company with
this infrastructure, and the answer was clearly no. You build
up a successful company if you have loyal partners. So
(39:22):
in order to create loyalty, you need to consolidate in
distributorship and shop that actually can scale and that can
scale with you. In order to create efficiencies you need
to create you need to have an outlet of distributor
that actually with a smaller amount of instrument set because
(39:43):
remember in our in our industry in the United States.
Speaker 2 (39:46):
We don't sell the instruments.
Speaker 3 (39:48):
It's your instruments that you that you use in the R,
that the surgeon and the distributor used in the R
to make the procedure. So with size, you can use
less system and set to a more procedure. And this
one brings less capex requests, a better utilization of cash,
(40:10):
a better utilization or your balance sheet. So for us
was a choice of on the spine side to create
a more sustainable, a more sustainable salesforce in order to
give us the growth, the future growth that we see
that you want to see with much more loyalties and
(40:34):
as a byproduct, some headwind on the biologic side, because
in order to create loyalty, we try to consolidate also
biologic distribution on our most loyal partners. And then when
it takes what we learn, it takes a couple of
quarters for them to be more efficient, but over time
(40:57):
is a much easier business to run, much more efficient
business to run.
Speaker 2 (41:02):
And so this is why we drove this decision.
Speaker 3 (41:07):
You know, if we can summarize, we don't want to
be opportunistic anymore. We go to market, We're going to
be very strategical.
Speaker 1 (41:16):
We go to market very interesting and so you know,
I'll close out the episode with you know, we talked
about this path, the profitability, sustainable positive free cash flow.
How do your capital allegation strategy change now and in
the next few years. And what's interesting is that the
(41:37):
c Spine merger closed before you arrived. So what were
your takeaways of that, M and A and how does
that impact your thoughts for your own future M and A.
Potentially I want.
Speaker 2 (41:49):
To be.
Speaker 3 (41:51):
A company that in the market we can compete, we
can really start to inspire to be arrival, we start
to be inspire to be actually a winner. So from
the capital location perspective, I'm thinking how we're going to
invest in market orthopedics in limb reconstruction where we can
(42:14):
actually win. How can we keep working in with our
team in BONND growth therapy to take advantage of the
back office that we have that let a scale without
increasing the cost to do business. And when we talk
about Spine having seven D which is a highly differentiable
(42:37):
product for the formities, I think that's giving us the
basis to become a real player and help to solve
the most complex issues into Spine. So the overarching team
that you're going to see from us is a capital
location in market where we believe that we can win
(42:59):
and of course without losing sight of profitability for our shareholders.
Everything that we do and everything we think about is
always all of the different stakeholders of our organization. As
you know, as you asked me before you know, how
(43:20):
we are running our company. Our company runs thinking about
the caring to all of the stakeholders, our employee, our
surgeon and patient, and our shareholders. If you combine and
create and you connect the dots among them, I think
that you can instruct a very wise capital or location
(43:43):
in order to create value.
Speaker 1 (43:45):
Fascinating. I'll be looking forward to watching the story over
the next few years. But Massimo, thank you for joining
us today.
Speaker 2 (43:50):
Thank you, I had a lot of fun.
Speaker 1 (43:52):
And thank you to our producer did as Money for
all his behind the scene efforts, and to our listeners
for tuning in today. We hope you join us for
future episodes, and if you'd like to stay up to date,
you can click the subscribe button on Spotify or your
favorite streaming platform. Take care,
Welcome to another episode of the Vanguards of Healthcare series.
My name is Matt Hendrickson, the medical technology analyst at
Bloomberg Intelligence, which is the in house equity research platform
of Bloomberg LP. We're pleased to have with us today
Massimo Calafiore, CEO of Orthopix, a medical device company with
a comprehensive portfolio of spinal hardware, specialized orthopedic solutions, and
(00:39):
advanced surgical navigation. You can dive deeper into the company
and its financials by typing in o fix Equity go
on your Bloomberg terminal. Massimo, thank you for joining us today.
Speaker 2 (00:51):
Thank you for having me and.
Speaker 1 (00:53):
Masimo, you're almost two years, maybe slightly over two years
into the CEO role here at Orthofix. Why do you
start with just the steps in your career path that
led you to that role.
Speaker 3 (01:05):
Yeah, a little bit less than two years, just thirteen months. Look,
I was always a mercy medicine. I am the only
I think, the adult male that is not a doctor
in three generations so between my grandfather, uncle, brother father
has been always in medicine. So passion care has been
(01:28):
always front and center of my history.
Speaker 2 (01:30):
I was not let's say, drawn to the.
Speaker 3 (01:33):
Operating room per se, and I decided to start a
career on the business side of the business. So twenty
five years in the industry, all in the United States,
and I've been a very strategic on how built up
my experience that led me to run Orthopix today. First
(01:56):
part of working with a privately held company Valdemort Link
at the time with the largest privately held orthopedic company
in the world. From there moved to invasive, very steep
and fast career. At the end that was the chief
commercial officer there, so managing one of the largest spine
(02:21):
portfolio the world. And from there, first step as a
CEO working for a private equity group, successful exit.
Speaker 2 (02:30):
We saw the company I was leading lima to an.
Speaker 3 (02:34):
Novice for EQT as said, and now first time public
company CEO with Orthopix. So a were rounded career that
led me to where I am today.
Speaker 1 (02:49):
Interesting and so you know, this is your first time
as a CEO of publicly traded company. What was it
that you saw in the company that excited you before
you joined?
Speaker 3 (03:00):
So a company that was clearly undervalue I saw in
Orthopix and the opportunity kind of a canvas that I
could start to use in order to build up a
great story metech.
Speaker 2 (03:15):
A board of very.
Speaker 3 (03:16):
Supportive that you wanted to have a leader that was
leading change, and of course a good technology platform that
would allow us, you know, to grow to build something
very meaningful. So again was I saw a few aspects
(03:38):
of this company that really draw me to accept the
job and will.
Speaker 1 (03:43):
Dive deeper into some of the portfolio aspects there. But
what caught my attention was just talking about build change
because over these eighteen months you've gotten on a bit
of a hiring spree to hire new executives in the
C suite to kind of help build out your team.
How have you built out that team to take advantage
(04:05):
of those opportunities?
Speaker 3 (04:07):
So what I learned, you know, like I said that
was always immersive medicine, and what you learn that the
end you're in business of people. So you can have
a great technology, but if you're not the great people
that care and they're expert on the deploying the technology,
nothing really happened. So the board very supportive, and one
(04:32):
things that I wanted to achieve was orthopedicspine bone grow
therapy are very specific market. Okay, so you really need
the expertise in the marketplace. So what they did may
be different than many Every single member of my leadership
(04:53):
team a specific expertise in the market we compete.
Speaker 2 (04:57):
We have more than two hundred.
Speaker 3 (04:58):
And fifty years of a experience in spine orthobiology, cannable
in tech, bone growth therapy. So I have a group
of people now that can lead as a human being,
but also that they have a profound understanding of technology
in the market and that one has to be the
foundational of everything that everybody do on my seat.
Speaker 2 (05:22):
Yeah, understandable.
Speaker 1 (05:24):
And then you know another foundation for this market is
the actual market or the current state of these markets itself.
Orthofix is diversify between spine orthopedics, bone growth. How have
these markets evolved over the years.
Speaker 3 (05:41):
So you have a spine market that for many years
enjoy a very high growth rate. Now lately we're back
to more like a market growth rate around six percent.
But it's giving us the opportunity to play. You know,
(06:02):
a market it is almost as large as large ooint
where the opportunities for us today enable in technology is
becoming a highly differentiator in the.
Speaker 2 (06:16):
Market where we compete.
Speaker 3 (06:18):
So having access to seven D is giving us the
opportunity to be current in a market where recently we
saw a little bit of let's say slow down from
the growth perspective, but the foundation, the fundamental of the
market will compete are very strong because the introduction level
(06:43):
in tech, the evolution of technologies in both in spine
and orthopedics. It led us address disease for patients that
much more older than before. So you have a new
patient population that now you can address. There is a
pull and a ask from the customer to be more active.
(07:07):
So while before a certain age everybody was stepping.
Speaker 2 (07:12):
Back and just wait.
Speaker 3 (07:14):
Now they want to keep doing their own stuff. They
want to keep play pick a ball outside, they want
to still enjoy golf, So a good demand for patients
to go into the r So at macro level, we
participate in a market that foundational is very strong.
Speaker 2 (07:38):
Post COVID.
Speaker 3 (07:39):
Also we start to see a stabilization on the price
pressure from the provider perspective. So let's say we're very
content to be able to be present in the market
where we participate. What is interesting also for us that
the combination of the business that we have the hardware side,
(08:00):
the biologic the enabling tech and the bone growth therapy
let us follow the patient throughout the entire continuum of care.
So we help on the pre planning, we help inside
the R where we excel, and now with bone growth therapy,
we can check the evolution of the patient. So I'm
(08:23):
very excited about the opportunity. And this is why I
said at the beginning I was excited about taking this
position in Orthopix.
Speaker 1 (08:32):
Yeah, and so maybe you know it's a good segue
into kind of that enabling technology, because correct me if
I'm wrong, But it sounds like that ability for the
surgeons to be able to use that enabling technology allows
those surgeons to treat the patient sooner or at least
be able to be more efficient in their treatment. You
talked about the seventy What is the seven D system.
Speaker 3 (08:55):
So the seven D system is our navigation system. Is
a system that the surgeons can use in the R
to navigate them plans in the human.
Speaker 2 (09:06):
Body during the procedure.
Speaker 3 (09:08):
Okay, why seventy is highly differentiable. So we use a
visible light flash that we call it flash technology, that
we project into the spine if you do an open
procedure or onto the skin with some specific marker if
as a minimal invasive procedure, and what we do we
(09:32):
map the spine and we combine a preoperative city scan
that you have with the actually map of the spine
in the R. Why seventy is so important to us?
Why so highly differentiable? First of all, you can register,
so create this this mapping of the spine in thirty seconds,
(09:59):
okay to up to thirty minutes. Registration need to have
with competitive systems.
Speaker 1 (10:04):
So this is this is at the point where you've
done your preoperative CT scan. Yes, you're seventy right before
you begin the procedure. It's not thirty seconds.
Speaker 3 (10:13):
Yes, So if you do an open procedure to open
the spine and really flash the spine the open spacey
and you combine what was the preoperative scan with was
the current current position of the spine of the patient
spine in the operating room.
Speaker 2 (10:33):
Okay, okay, so you.
Speaker 3 (10:34):
Kind of give is a reference for now for the
system to guide them plans into the spine. One of
the challenges to see in the R sometimes the spine moves.
So if the reference change we have we can re
register in twenty seconds. For a competitive system, you need
(10:55):
to go through the entire process from scratch. Okay, and
what we do because all our lighting is in stall
is pretty much our the form factor our the machine
look like. It's like lighting that we had that you
normally have in the operating room. We don't destroy the
(11:16):
workflow of a surgeon because pretty much instead of moving
the lights that are provided in the R, they move
our lights that come with the device. So between the
fast use how the seventies engineered is let us be
(11:36):
very accurate, create a safe environment for the surgeon, the
patients are stuff bringing the addition inside they are to zero,
and of course create the speed the efficiencies that everybody
is looking for in the operating room. We need some
study and we can save more than one hour per
(11:57):
procedure utilizing the seventy more interesting, you know, there is
a lot of now and I would say finally a
lot of scrutiny about the amount of radiation that are
used not set in the R but also outside with
all of the pre imaging that you need to do
with a patient. And now we have a relationship with
(12:20):
a company that let us a synthesize a city scan
from an MRI, so you can truly do zero diation procedure.
Combining the seven DY technology with our implants very interesting.
Speaker 1 (12:37):
Okay, So now basically, if I understand that correctly, you're
able to now use an MRI as your preoperative scan
and so basically you're cutting out essentially all city scans. Yes,
now just available with all the seventies or is this
a special next generation version that comes.
Speaker 3 (12:54):
No, No, this is our seventy is the time today.
There is a lot of things that you are working on.
I think the seven D will let us do stuff
in the r that nobody's doing right now. So there's
a lot of ur in the investment that we're putting there.
We are working on the second generation of FORLA like
(13:15):
of the device that is coming up in the future.
So very excited about the opportunity that we have with
the seven D and the results that we are seeing.
Are speaking loudly about the efficiency that we bring and
the quality of our implant and every ten technology together.
(13:38):
We talk often during our earning calls about air and outs,
which pretty much when we transact a seven D, we
let the hospital pay over time with the utilization our device.
What is very important to learn is that the contraction
(14:00):
so the hospital is a contractual obligation with us about
usage more than fifty percent of this contract. They're consuming
more implants than what the contract is saying. Okay, And
this talk talks very loudly about three things. One about
the quality of our implants, because when we do this,
(14:25):
earnout the vast majority of the time or a new user,
so they like our implant, they use more. They actually
use seventy because the usage that we're seeing is above
of what is contractually was contractually discussed. And when we
(14:46):
do a turnout in account where we already have a presence,
we see always an increase of utilization of our implant
because most of the time we can get new surgeon
that are looking to our main each head in the
account using seventy.
Speaker 2 (15:02):
Start to get.
Speaker 3 (15:03):
Curious, So a lot of opportunities that start opening up
because the combination of our product line with enable in
technology interesting.
Speaker 1 (15:13):
We'll talk more about that pull through opportunity, but I'm
just very curious because you know, you're seeing a lot
of headlines about hospitals, you know, potentially getting into the
red because of a lot of capital equipment purchases that
they've made. And I've also hearing other companies talk about
these leasing or other like real value based opportunities for
(15:34):
the hospitals. Is that going to get to the point
where we get you know, no hospitals are ever going
to purchase these outright and it's all gonna be leasing
or is it? Is it still going to be certain
hospitals that it'll be like we just want to own
it and not have to worry about anything else with
regards to that robot.
Speaker 2 (15:51):
Yeah, this is a great question.
Speaker 3 (15:52):
We see it depends on the expedients they had in
the past. Uh, the ernout model is not you so
we see said sometimes they bought very expensive capital equipment,
very big commitment. They start to struggle on actually do
the earn out, so they say, okay, now we don't
(16:15):
go through this ordeal. We want to buy out right. Ah,
there are like hospitals that we have a strong surgeon
advocacy inside that they are committing to the hospital. They
actually like our product, so you make the hospital more
at ease on doing earnout.
Speaker 2 (16:38):
So it depends.
Speaker 3 (16:39):
There are hospitals, as you said, that clearly cannot afford
to buy outright and they actually get the enable in
tech in house. If you can if they have a
strong surgeon advocacy. So it changed from let's say case
case case by case basis in our in our case.
(17:02):
Another thing that's important about seven D. We are in
a very sweet spot in terms of how much we
are pricing the device. I think that we are very competitive.
We have we have we are much cheaper than a
robot for a robotic platform right now. So you have
(17:23):
a competitive device in pricing with a clear place in
the marketplace that normally gets a strong surgeon advocacy. Makes
our conversation with the hospital little easier. And we are
becoming kind of agnostic if another enable in tech is present,
(17:44):
just because what we do is so different from how
the other address these issues that you see our results
with seven D is pretty compelling.
Speaker 1 (17:56):
Yeah, and it's interesting because you know, I think a
traditional robot X, your initial thought is always, oh, it's
the robotic arm is the robot. But you know, as
you get dived deeper and deeper into this technology, it's
a navigation system as much as anything, which is what
seventy does. Let me go the other way that you
have this seventy technology, which is differentiated from other technology
(18:18):
out there is that something in the strategic plans to
ever incorporate a robotic arm with that navigation system.
Speaker 3 (18:26):
Look, I don't think that this short term is going
to be one of our goal at the end developing
a robotic platform for companies that are much larger than us.
It is not an easy, let's say, an easy project
to endure. I believe, I believe that the robotics is
(18:46):
here to stay. Is there robotic today? What is going
to be let's say, the robotic of the future.
Speaker 2 (18:54):
I don't think so.
Speaker 3 (18:55):
As you said, right now, the robotic arm is pretty
much eye instruments holder, and I believe it. Like it's
happening in the orthopedic side, you will see companies that
are going to develop robots that are gonna be agnostic
to manufacturer. So I think that time waiting for the
(19:16):
market to keep evolving, and if we need to have
access to our robotic arm, I think that we're gonna
be ready to do so. But I don't see this
as an organic development for us.
Speaker 1 (19:29):
Interesting and something that I mean, like I said, five
ten years ago, we were the robots were just in
their infancy. There's a lot of development that could take place.
Let's go back to that pull through opportunity. Though you
know you because you sell cervical disks in our bodies,
other fixation systems, what in your portfolio maybe benefits the
(19:53):
most from the seventy navigation system or what procedures, particularly
because you know, when you think of spine, it's not
just one spine procedure for everyone. And you know you
have the cervicle, you have the lombard, the thoracic, all
those different areas. You have the screws, the inner bodies,
all those things. So one winded way of asking, what
are the best products and what are the best procedures
(20:15):
that you can use with the seventy system.
Speaker 3 (20:17):
Yeah, let me clarify one thing before. We are not
in the cervical this market anymore, okay, because we divested
them six.
Speaker 2 (20:26):
Okay, and we are divested.
Speaker 3 (20:28):
We are facing out M six since a couple in
the end of last year was a declining product for us.
We want to be really focused on reade product capital
in a high grow segment. So M six was part
of our history is not part of our history today.
(20:48):
But coming back to the portfolio that we have book seventy,
let us navigate back for in the entire spine from
cervical to alnumber.
Speaker 2 (21:00):
So of course all our.
Speaker 3 (21:03):
Fixation system benefits of having seventy. We are keep deploying
and adding all our implant to the seven D database
of implants that can be navigated. Of course with the
inter body they are altful. So if you see seven
(21:24):
D is fully is fully integrated today, is going to
be more fully integrated in the future with every single
aspect of our product portfolio. Of course, where seven D
shines is the most difficult cases, So the formity is
a clear focus of the company. Is the future differentiator
(21:49):
for spine for Orthopix is an area where seven D shines,
where we believe that the combination of the best implant
with the best technology system can help to increase outcome.
Speaker 2 (22:04):
But also.
Speaker 3 (22:07):
What we're seeing is that data are becoming a very
very important differentiator for company in the marketplace. So the
ability to have access to data in the r with
seventy to follow the patient post top with bond ger therapy,
it's going to give us the opportunity to collect and
(22:30):
of information and variable information to inform surgeon in the future.
What are the best procedure that you can have for
a specific patient given the commorbidity, the patient present pre
up age, any any other disease that may have and
(22:53):
to start to think about to start to develop this
idea of a patient surgeon centric UH procedure utilizing our
implant and our technology. So excited about the creation of
this ecosystem with the technologies that we have.
Speaker 1 (23:11):
Yeah, and that's the thing now is you get more
and more data, and you get more and more analysis
that data, you can definitely be able to pinpoint a
better procedure or update the guidelines based off of what
the previous procedures have.
Speaker 2 (23:22):
Done in the past.
Speaker 1 (23:25):
Well, let's move on to kind of the orthopedic segment
because this one got was on my radar because of
the high growth trajectory in the US. How does this
orthopedic portfolio differ from some of the other traditional orthopedic
procedures we see with other medtech companies.
Speaker 3 (23:47):
Yeah, Look, we are very excited about what we're doing
in orthopedics. You know, one of the things that we
did that a new management team ALASTA was really redefined
and rethink what orthopic seas. And so if you read
our vision, there are like two wars that are important
one this idea to be arrivaled and one to be
(24:09):
a meta company. So we talk a lot about spine,
but again Orthopix is not just spine. Yeah, and when
we think about arrivaled, we start to think, Okay, where
are the market segment? Okay, even if smaller, where actually
we can clearly win. I think that over time we
(24:29):
can participate into spine, but with few falls, smaller than
our competitor. Now you go into orthopedics, and you know
when I join, so this company that has a business
in the United States that was less than a third
of what we do overseas. So I started wondering, Okay,
(24:52):
I think that there is an opportunity there, but how
we can we take advantage of these opportunities? And so
we did. We hire a great leader like Patrick Fisher.
He was running foot and angle of a striker Rite
medical before. And what Patrick did was really start to
(25:13):
clearly think and give an identity in the United States
to this orthopedic franchise. So now we over time, you see,
we're going to stop to talk about orthopedics.
Speaker 2 (25:25):
We start to talk about limb re construction.
Speaker 3 (25:28):
Limber construction in a category within this universe that you
are redefining is pretty much the ability to address the
more complex trauma cases in acute format or post top
Sometimes you know you need to address a big bone
(25:49):
laws so lenth limb blend discrepancies that trauma can create
limb blend descripants that you have for bird big deformity
that you can have because of the trauma. Two more so,
and we are the only company today in the United
States offer a comprehensive portfolio of external and internal devices
(26:15):
to address this very complex issue. So while we were
exploring opportunity in the limber construction market with an opportunity
or address footthaulserve for diabetic patient with our new product
Truelock transferse bond Transport. What it does pretty much is
(26:39):
led us cure footthallser creating.
Speaker 2 (26:45):
A fracture in your tibia.
Speaker 3 (26:48):
So you're gonna cut a piece of little piece of
bond from your tibia. Okay, you will move this remove
from the from the tibia, this piece of bone, and
with what the body does, because the signal fracture is
start to really reform and all of the system, the
(27:10):
blood flow of the body, concentrate the blood flow the
body on the specific site where you created the fracture. Okay,
what it does because increase the blood flow near the
place where you have the ulcer. As a byproduct of
this procedure, the food start to the skin, start to
(27:32):
close the body, start to recreate skin, and close the ulster.
Speaker 2 (27:36):
So within thirty.
Speaker 3 (27:37):
Days you can start to see an improvement on the
patient foot where you have the ulster. And what you
do with this device you bring back the piece of
bond that you removed back inside to complete the procedure.
So some very amazing stuff. We're doing this in this
specific market segment.
Speaker 1 (27:58):
As I said, this is a very kind of sub
segments of the extremities market overall. My initial take from
those comments just now is that limb lengthening has a
certain opportunity, but diabetic all service, which is a you
know you think of at all the Type two diabetics
in the US alone, sounds like a much larger patient
(28:18):
pool there. Yes, that's all right, observation.
Speaker 3 (28:21):
Yeah, so now we enter to one point seven billion
dollar opportunity in diabetic food and a comprehensive two point
six billion opportunity in limber reconstruction. So all of the
sudden you can see that we have the building block
to create a rival procedure in a market. Actually very meaningful,
(28:45):
so excited about what we're doing there. Through or Elevate
has been one of the most successful launch, if not
the most successful launch in Orthovik history. On the orthopedic side,
the opportunity to create relevancy and market creation, and the
most importantly you start to see an evolution of our
(29:08):
customer base because again now we have an identity. Before
was very difficult for a surge in the United States
to understand why and why to call Ortho fix. Actually
everybody knew ortho Fix by name, because remember originally when
the company was funded, was funded around external fixation.
Speaker 2 (29:30):
It's around trauma.
Speaker 3 (29:32):
But there was a difficult to understand, Okay, when when
do I need to call Ortho Fix. Now they know,
and now it's on us and on the team working
on Orthopedis to take advantage of the great opportunity that
is ahead of us.
Speaker 2 (29:48):
Yeah.
Speaker 1 (29:48):
No, And actually it kind of sounds full circle where
you started with external textation with a spine and then
now you're circling back to back to the extremity market
opportunities there and kind of in the same way, of
circling back. We talked a lot about seventeen navigation is
enabling technology utilized in the extremities market as well the
(30:09):
plans to expand that overall.
Speaker 3 (30:11):
So right now, I think that where we are seeing
that the technology to develop is mostly on the pre planning.
So we plan our procedure. We are our a proprietary
platform that is utilized, so the opportunity to plan the procedure,
do some data collection. There is no real navigation that
(30:34):
is used into traumine foot and ankle yet if you remember,
city scan is always the base for navigation is not
used often for these patients and a lot of cases
are not pre planned. But the opportunity to help the
(30:59):
surgeon to plan the case, the opportunity to collect data
and what we're doing with with bone growth therapy, remember
we also focused on trauma what we call fracture and
we recently launched steam Connect, which is our platform that
(31:22):
we are the first company in the trauma side that
connect this bone growth that this steam to actually a
platform that let the surgeon follow the patient journey. Okay,
so again, uh, we are utilizing this case enable in
tech to to to learn that the patients are compliance
(31:45):
with what we do with what the surgeon prescribed. And
you know, we collect a lot of useful data that
can be us in the future.
Speaker 2 (31:54):
So uh.
Speaker 3 (31:55):
And one of the things that we did in order
to leverage all this portfolio, you know before you know,
talking about the team both Standish that was the inventor
of seven year leading just the vertical now is the
chief enable in Technology officer. So having purview of, as
(32:16):
he said, everything that has on an office switch within
all of the business. Over time, I think that he
is going to have the opportunity for opportunity arise to
use technology that are used within Ortho Fix in all
of the different market segments.
Speaker 2 (32:34):
Yeah.
Speaker 1 (32:35):
Just it sounds like you're storing the path to build
that database to provide that access. Yeah. And then you know,
just kind of rounding out the portfolio. You know, bone
growth therapy and biologic doesn't get as much attention as
all these other products and developments. But how does that
fit into the overall Orthopics business.
Speaker 2 (32:55):
This is a great question.
Speaker 3 (32:56):
It's kind of the glue that connects everything together because
on bond growth therapy, we can use our product into
spine where we are the market leader and if you
think about despite the leadership position, especially lately, we were
able to beat the market constantly. Why because we're taking
(33:20):
the advantage of the database that we have as surgeons
for spine that didn't use bond growth therapy with our
commercial team and over time we're going to try to
do everything vice versa. So we have bond growth therapy
in between Spine and the.
Speaker 2 (33:40):
Rest of the company Biologics.
Speaker 3 (33:42):
At the end, we are the number two player in
the world after you know Metronic with infuse the number one,
but in our category, in the dBm category, we.
Speaker 2 (33:54):
Are number one. And again all.
Speaker 3 (33:56):
Our products are used in the r with spine. But
Patrick and Esteem in the past that they were leading
a pretty large biologic market opportunity. So what we're seeing
the opportunity now for Biologic also to prediferate in orthopedics
(34:17):
and bone growth therapy. We participate in fracture, so again
a lot of connection with orthopedics. So you have this
is why I said the bigity and biology is kind
of the glue because you can leverage opportunities on both
sides in spine and in ortho with the product that we.
Speaker 1 (34:37):
Have very interesting and so then you know you're you're
talking about a lot of these growth opportunities. Also as
a Smithcap company, though, there's that fine balance between spending
money on that growth but also a path of profitability.
And so I always ask my Smithcap guests who come
in is what is your decision making process for those investments?
(35:01):
How do you choose which ones are your favorite children?
And how do you choose which ones are like Okay,
we can wait on those as we maintain a certain
level of path profitability.
Speaker 2 (35:11):
Yes.
Speaker 3 (35:11):
Look, since we started, our north startup has been a
profitable growth. So we want to change and improve, passionalized
with the lives with great technology that we have, but
without forgetting that at the end we need to create
value with our shareholders.
Speaker 2 (35:32):
I think that you can achieve.
Speaker 3 (35:33):
That just with the relentless prioritization.
Speaker 2 (35:37):
I think that what we.
Speaker 3 (35:38):
Are keep working within the company is this concept of
a vital fuse. Every year we pick six seven opportunities
that we believe that we're going to move the needle
to support all our main stakeholders you know, patient the surgeon,
(36:00):
our employees, and our shareholders. And we are learning how
to stay focused on just what we decide.
Speaker 2 (36:10):
Collectively what really matter.
Speaker 3 (36:13):
I think that is the only way that you can
that you that you can achieve what you just said,
create profitability. Given given our size, we we we take
a tough decision if you see, even controversial time. For instance,
we went through a big reorg into the distribution network
(36:37):
that created some temporary headwind for us. But again we're
whatever we are doing is just to create a sustainable
business that create value. And you can do that if
you are like very focused on what the priorities that
you said during the year, if you take decision that
(37:01):
that their long term and just then I think that
over time you create the balance sheet of the P
and L that's gonna make you also do the fun
stuff when gonna be larger.
Speaker 1 (37:13):
Yeah, actually, I'd love to dive into that decision about
the distribution network because I've heard that multiple times, especially
with international markets transition from you know, not in some
cases you know, a distributor to direct sales, things like that.
You know, and this is maybe a case study for
(37:34):
some of the NBA students are listening into this episode,
But how did you decide that this was an issue
to take a look at, and what were your experiences
in the past that you use to kind of make
that tough choice because as a publicly traded company, you're
gonna get grilled during the earnings calls, and you know
you always try to say please be patient, be please
(37:55):
be patient, but you know investors have a very short memory.
Speaker 2 (37:59):
So how did you.
Speaker 1 (38:00):
Go about and what were your experiences that allowed you
to say, okay, I feel comfortable making this decision.
Speaker 2 (38:06):
So what we did.
Speaker 3 (38:09):
We got the vast majority that our network is indirect,
so we have just a small direct presence in bond growth.
Speaker 2 (38:17):
Therapy to spine and a fracture.
Speaker 3 (38:20):
So what we found when we start to run Orthopix
was a lot of big a big amount of very
small distributors. What's happening in this case is that for
(38:40):
a small volume of dollars you create a lot of
effort within the company in order to support from the
Kapex perspective, instruments at you know, for the time perspective,
the management of thistude, multitude of contract.
Speaker 2 (38:58):
And so on. So there was a moment.
Speaker 3 (39:02):
Where you know, we we we're doing pretty well, but
there was a moment where I'm thinking long term, I said,
can I build Can we build a successful company with
this infrastructure, and the answer was clearly no. You build
up a successful company if you have loyal partners. So
(39:22):
in order to create loyalty, you need to consolidate in
distributorship and shop that actually can scale and that can
scale with you. In order to create efficiencies you need
to create you need to have an outlet of distributor
that actually with a smaller amount of instrument set because
(39:43):
remember in our in our industry in the United States.
Speaker 2 (39:46):
We don't sell the instruments.
Speaker 3 (39:48):
It's your instruments that you that you use in the R,
that the surgeon and the distributor used in the R
to make the procedure. So with size, you can use
less system and set to a more procedure. And this
one brings less capex requests, a better utilization of cash,
(40:10):
a better utilization or your balance sheet. So for us
was a choice of on the spine side to create
a more sustainable, a more sustainable salesforce in order to
give us the growth, the future growth that we see
that you want to see with much more loyalties and
(40:34):
as a byproduct, some headwind on the biologic side, because
in order to create loyalty, we try to consolidate also
biologic distribution on our most loyal partners. And then when
it takes what we learn, it takes a couple of
quarters for them to be more efficient, but over time
(40:57):
is a much easier business to run, much more efficient
business to run.
Speaker 2 (41:02):
And so this is why we drove this decision.
Speaker 3 (41:07):
You know, if we can summarize, we don't want to
be opportunistic anymore. We go to market, We're going to
be very strategical.
Speaker 1 (41:16):
We go to market very interesting and so you know,
I'll close out the episode with you know, we talked
about this path, the profitability, sustainable positive free cash flow.
How do your capital allegation strategy change now and in
the next few years. And what's interesting is that the
(41:37):
c Spine merger closed before you arrived. So what were
your takeaways of that, M and A and how does
that impact your thoughts for your own future M and A.
Potentially I want.
Speaker 2 (41:49):
To be.
Speaker 3 (41:51):
A company that in the market we can compete, we
can really start to inspire to be arrival, we start
to be inspire to be actually a winner. So from
the capital location perspective, I'm thinking how we're going to
invest in market orthopedics in limb reconstruction where we can
(42:14):
actually win. How can we keep working in with our
team in BONND growth therapy to take advantage of the
back office that we have that let a scale without
increasing the cost to do business. And when we talk
about Spine having seven D which is a highly differentiable
(42:37):
product for the formities, I think that's giving us the
basis to become a real player and help to solve
the most complex issues into Spine. So the overarching team
that you're going to see from us is a capital
location in market where we believe that we can win
(42:59):
and of course without losing sight of profitability for our shareholders.
Everything that we do and everything we think about is
always all of the different stakeholders of our organization. As
you know, as you asked me before you know, how
(43:20):
we are running our company. Our company runs thinking about
the caring to all of the stakeholders, our employee, our
surgeon and patient, and our shareholders. If you combine and
create and you connect the dots among them, I think
that you can instruct a very wise capital or location
(43:43):
in order to create value.
Speaker 1 (43:45):
Fascinating. I'll be looking forward to watching the story over
the next few years. But Massimo, thank you for joining
us today.
Speaker 2 (43:50):
Thank you, I had a lot of fun.
Speaker 1 (43:52):
And thank you to our producer did as Money for
all his behind the scene efforts, and to our listeners
for tuning in today. We hope you join us for
future episodes, and if you'd like to stay up to date,
you can click the subscribe button on Spotify or your
favorite streaming platform. Take care,
Host
Jonathan Palmer
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