Prochon Biotech, the Woburn, Mass.-based company that’s developing biologic knee repair technology, got its start in an unlikely sphere.
The company is leveraging its core technology, a patented fibroblast growth factor variant, grew out of research into achondroplasia, a skeletal condition that leads to so-called dwarfism.
Along the way, researchers discovered that the FGF technology can help stimulate cartilage cells, called chondrocytes, to regenerate. Prochon’s BioCart system uses that concept to help repair damaged knee cartilage by taking healthy chondrocyte tissue samples, stimulating their growth in a lab, and “re-seeding” them into the damaged or defective area using a bio-compatible scaffold.
MassDevice asked Prochon CEO Patrick O’Donnell, who was brought on early this year to drive the company’s transition from research and development to commercialization, about other potential applications for the technology, both within and outside of orthopedics, and about the pitfalls facing the medical device manufacturing sector.
MassDevice: How long have you been in the medical device industry and how did you get your start? Why is it a good fit for you?
Patrick O’Donnell I’ve been in the industry since 1991. I got my start as a joint sales rep for DePuy in Chicago. They had purchased a spine company, and later I became one of the first sales representatives in the country for their spine business.
I had escalating roles of responsibility in terms of regional sales management and worked with a biologics company called GenSci, which utilized two sales forces to sell their de-mineralized bone matrix technology throughout the U.S. and Canada. Then I went into a marketing capacity and launched the first three biologic products for DePuy Spine. After 13 years with DePuy and Johnson & Johnson, I left for Confluent Surgical and worked for Amar Sawhney, the CEO of Confluent, which had a very nice exit through an acquisition to, at the time it was Tyco Healthcare but by the completion of it it became Covidien.
Then I left to start another company, but this opportunity presented itself and I came on to build the U.S. management team and a number of other initiatives, including tech transfer to the U.S. and all the day-to-day operations that we manage here.
It sounds kind of trite, but I’m pretty athletic and I’ve always enjoyed the idea of helping people. If you’re going to put 50 or 60 hours a week into something, the notion of doing something that helps people get back to doing the things they enjoy in life is a great way to spend that time.
I like working with surgeons. I’ve been working with surgeons for 15, 16, 17 years now, and my brother’s a surgeon. It’s kind of something that’s always appealed to me, the whole idea of improving the quality of life and activity levels for people. It’s always been something I’ve gravitated toward.
The other thing that really intrigues me about this particular opportunity, as well as some of the other ones I’ve been involved in, is being on the front end of new technology, bringing new technology and innovation to the marketplace. It’s different than simple “me too” type of products that fight for market share, really trying to do things that are transformational to the treatment of patients and healthcare standards in orthopedics. That’s the exciting stuff.
MassDevice: Can you give us a little background on the origins of Prochon?
PO: The “chon” in Prochon comes from chondrocytes, or cartilage cells. It’s a fantastic story and one of the things that appealed to me. There’s an investor in the U.K. who had a disorder in their family called achondroplasia — essentially dwarfism, a skeletal issue. They searched the world over, literally, to put some of their money toward finding a cure for achondroplasia and they identified a gentleman by name of Avner Yayon, who’s a doctor and PhD in Israel at the Weizmann Institute of Science who trained here at Harvard [Eds. note: Yayon is Prochon’s co-founder and chief scientific officer]. He had some unique research that really compelled them. They worked on that for about six years and while they didn’t find a cure for achondroplasia, they developed some exceptional research.
Along the way they learned that the use of fibroblast growth factor variant, which they patented, could help stimulate cartilage regeneration. So they changed the focus of the company to cartilage regeneration, because they felt they needed to go after something more commercially viable.
In January of this year the board, made up of investors in the U.K. as well as the Musculoskeletal Transplant Foundation, which is the nation’s largest tissue bank, decided the company had kind of gone its route in terms of being a research and development entity. It really needed to become a commercial entity and needed people who were experienced in taking companies from here to there.
MassDevice: BioCart is intended for knee cartilage repair. Is this a platform technology that can be applied to other joints?
PO: The first word is focus. A lot of times when you have a scientist who’s the inventor who develops the company, there are a lot of things they can do, particularly with platform biologics. There are a lot of ways they can be used. But the thing is, you don’t have the resources, either human or financial, to do everything the technology could do, so you have to focus somewhere. The best place to focus is on where your clinical study is focused. Our clinical study is focused on the knee. There are 1.8 million cartilage procedures a year, and most of those are in the knee, so that’s not a bad place to focus.
That said, we have implant experience, clinical experience, using the technology in the ankle as well as on the patella. In addition to that, we see obvious further applications in the hip and in the shoulder, maybe even in the elbow. But those are smaller opportunities, with the exception of the hip, in comparison to the knee.
MassDevice: Do you see Prochon as riding the leading edge of the regenerative medicine wave? Where do you see the next innovations coming from in this space?
PO: That’s a great question. I think it’s fair to say that there are several companies that are going after this kind of holy grail, if you will. Genzyme in particular has been at it for over a decade.
We feel we’ve just come up with a better mousetrap, and a technology that’s going to lead to better long-term clinical success, by way of regenerating the native hyaline cartilage as opposed to a fibrous hyaline-cartilage mix like the first-generation technologies.
i think the first-generation technologies were fantastic, in that they were better than what had been done before, but there was still a lot of room for improvement. As a result, we’ve learned a lot over the last decade.
We have the opportunity, based on our clinical experiences, to really advance clinical outcomes for these patients. I think a lot of that has to do with the fact that we’re expediting the patient to the rehabilitation process. The sooner the patient can begin more rigorous rehab, the better the results are going to be.
In terms of what’s next, I see a big opportunity to not only regenerate the cartilage, but the bone below the cartilage. Some of these defects are full defects, so I think that’s a fantastic opportunity.
There are a lot of opportunities to take the technology and see how it could be used for other applications like meniscus repair. Our fibroblast growth factor IP has applications in vascular and neuro-regeneration, potentially, so there are a lot of future applications. But the most important thing is to focus to establish yourself, even if it’s in a small subset of a big market that you own. That’s a good place to start.
The objective for us, essentially, is to make the company acquisition-friendly and all the things that involves, in terms of reducing perceived risk in the technology and the company by demonstrating excellent clinical outcomes.
MassDevice: How much of your focus is on ensuring reimbursement for the treatment?
PO: There are a few thresholds when you’re looking at these startup companies. One is, “Is it just cool science or is it really meeting a large, unmet need?” That’s the first analysis you go through. When i was evaluating this opportunity, that was the first box I checked.
The second box I checked was reimbursement. We’re very fortunate, because Genzyme has blazed a trail on reimbursement and there’s already a code for this technology. The hospitals are getting reimbursed $25,100 for the implant — thats essentially what Genzyme’s charging. Our clinical study patients have to be pre-authorized by their insurance company in order for the hospital to do the procedure. We don’t charge them for the implant, you wouldn’t do that, but they’re still charged by the hospital for the procedure. They’ve all been approved, so the system, even in the trial, has been tried and tested in terms of reimbursement.
That’s one of the things investors find very, very exciting. Our technology is in more than 70 humans. There are 10 patients over four years out; we have 30 patients that are over two years out, and data being generating on them. We have tried and tested the reimbursement system and it’s worked in our favor. Those are some of the big risks.
The only other risk that’s left, other than just execution on the company side, is the FDA and the final approval. With that, you do the best you can and hope for some logic. But it’s all very encouraging from the reimbursement standpoint.
MassDevice: Assuming all goes well and BioCart makes it to market, what will your sales approach be through direct sales or through distribution?
PO: We’re still at a stage right now where we’re evaluating several different approaches. Optimally, I feel that this technology needs to get in the hands of a large global organization with global reach, an orthopedics company like a Zimmer or a DePuy or a Smith & Nephew or a Stryker, someone like that. Otherwise, it’s going to be difficult to serve all the markets adequately. Those sales forces have 400 or 500 feet on the ground and that’s what it takes.
Short of that, we’ll get U.S. and EU approval about the same time. We do see setting up independent distribution and a complete network to do that. That’s the nice thing about orthopedics, there’s a very good independent distribution structure. So you’d have an internal commercial management team made up of sales and marketing people, with regional management that would manage independent distributors, who would be your sales agents, essentially. But that’s just one model that we’re evaluating.
MassDevice: How has the recession affected Prochon? Has it forced you to adapt your strategy? And looking ahead, how do you foresee it affecting the business?
PO: Although this is an elective procedure, there hasn’t been an impact on our business from a procedures standpoint. But it has affected our business in terms of how we focus on raising money and working with potential investors, including venture capital groups, because they’ve been affected by the economy.
From that standpoint, it’s affected us. It looks like things are coming around a little bit. But it hasn’t affected the business as it relates to procedure potential.
You might not want to prolong [treating damaged knee cartilage], but it’s elective. Because we have a reimbursement code and it’s predominantly 30 to 50-year-olds who are active — we’re talking people who are mostly privately insured, so were not talking about about medicare or medicaid patients — from that standpoint, it’s just not impacting us.
These are young people who are well-insured and even if they weren’t, they’re so motivated to get back to their lifestyle at that age that they’d pay out-of-pocket. There are professional athletes who fly all the way to Israel [for this treatment] and they pay right out of pocket for the whole nut. And of course they’re not reimbursed for that. Because it can be kind of debilitating, people want to get it taken care of.
MassDevice: In your view, what’s the biggest challenge confronting the devices industry?
PO: I think there are two areas impacting the industry that a lot of us that are running orthopedics-focused companies are keeping an eye on.
One is the impact of the healthcare changes on the surgeons themselves. I’m not saying there’s going to be a shortage of surgeons, but there’s a vast gap between the growth of new surgeons versus the growth of the patient population. It’s just not commensurate by any stretch, and so having enough surgeons to take care of all the patients over the next decade or two is something to keep an eye on.
If there are dramatic changes to the healthcare system, surgeons are going to say,”I don’t want to be a surgeon anymore. I can’t afford to be a surgeon anymore,” and they’re going to go on to new businesses or other endeavors. That’s one concern.
The other concern might be that the FDA is taking a very close look at the 510(k) process and, depending on what adjustments they make to the 510(k) process, it potentially could impact the amount of innovation in the industry. But that really depends on how they address it.
Those are just two areas worthy of keeping your eye on over the next year or two, because they have long-term implications, to the orthopedics industry in particular.