In less than 2 years in the corner office Johnson’s grown the employee base from 6 to 45, overseen Alliqua’s 1st acquisition and established several strategic partnerships for the company’s hydrogel wound care technology.
And he’s not stopping there.
Phase 2 for Alliqua is all about penetration, leveraging the new sales force and chasing regulatory clearances to widen the company’s footprint.
"If you think in fast forward, 3 or 5 years from now, when a wound care doctor comes in and sees a patient, I’d like to think the 1st thing they will think is, ‘You know, go and get that Alliqua salesperson, because they always have 2 or 3 innovative technologies that can help me help my patient more effectively.’ That’s really what our vision is – to continue to build out the portfolio to be able to do that," Johnson said during an interview with MassDevice.com.
Johnson’s plan appears to be working. Alliqua revealed in its most recent quarterly report that it more than doubled revenues year-over-year, although it had to dig deep into the red to do so.
The Pennsylvania-based company reported $6.2 million in net losses on $1 million in sales during its 2nd-quarter, compared with losses of $2.4 million on sales of about $500,000 during the same period last year. New losses were driven almost entirely by selling, general and administrative expenses as well as a $420,000 acquisition-related expense, according to an SEC filing.
In an-depth interview with MassDevice.com, Johnson detailed Alliqua’s recent transformation, the plans for phase 2 and the long-term vision for the company:
MassDevice: Tell me a little bit about yourself and how you got interested in the medical field.
Dave Johnson: To talk about my start in the medical field, we have to go way back. I always tell people that I got into the medical device industry by mistake 33 years ago. I have consciously stayed in it because I have become passionate about the device space and the incredible things that we do for patients around the world.
It was really just a great opportunity for me to join a company called American Hospital Supply back in the early ’80s and I have never looked back since. It’s been a great career for 33 years in the device space.
MassDevice: You say you got into the device space by mistake. What does that mean?
DJ: I have a business background. My wife likes to joke that I didn’t like to be in hospitals at the time I accepted my first job in the device space. The truth was, I was interviewed by a number of very young, dynamic people, and I just looked at them and said, "They’re so passionate about what they do. You know what? I’m going to take a chance."
I passed up an opportunity to go with Procter & Gamble on the consumer goods side to start with this company that I really had no idea about. For that reason, in some ways I never looked for it. It was somewhat of a mistake. But it’s the best mistake I ever made.
MassDevice: Aside from the passion that drew you in, what are some of the other things that keep you working in the healthcare field?
DJ: We work with some incredibly smart and talented people, starting with the physicians and healthcare providers who look after patients and who are so dedicated about making a difference in their lives, to the scientists and engineers who develop the technologies and the products that finally come to market to help providers deal with their patients in a more efficacious way.
It really has been about the people. It’s been about the passion. It’s been about bringing innovative technologies to patients all around the world. It’s really what finally got me here. It’s definitely what kept me here.
MassDevice: Tell me about how you landed at Alliqua.
DJ: As I mentioned, I’ve been in this business for 33 years, and really, 28 of those years I have spent running businesses in the medical device arena. In 2000, I joined ConvaTec, which was at the time a division of Bristol-Myers Squibb and an approximately $600 million business. I stayed for 12 years and helped lead ConvaTec from a $600 million business to a $1.7 billion business.
It was in that period – after stepping down as the Chief Executive Officer of ConvaTec in 2012 – that Alliqua came to my attention.
One of our largest sectors at ConvaTec was our wound care business, and I became very passionate about wound care. It is a very fragmented market with some incredibly innovative technology. After leaving ConvaTec, I was approached by Alliqua to join the Board of Directors and to help them in building their wound care company.
I spent 3 months on the Board of Directors. We realized that we needed to make a change in the leadership at Alliqua to really fulfill the vision that, in many ways, I had brought to the company from my days at ConvaTec. When we made that change, I was asked to come in and take over the day-to-day operations of the business.
In late February 2013, I came in as the CEO and continue to be a director on the Board. It’s been a very fulfilling time, coming from a very large company and leaving a global enterprise to now leading what is in essence a startup company in the device space.
MassDevice: What do you mean by a startup company? What are we looking at with Alliqua?
DJ: You’d measure it in a couple of different ways. When I joined, we were a 6¢ bulletin board stock. We had a market capitalization of $15 million. Today, we are a $6.00 stock and have a market cap of just under $100 million! We started from very small beginnings. We had a contract manufacturing business with revenue at $1.2 million a year in 2012. This past quarter we did close to our full 2012 sales!
This was really a case of taking the pieces of a very innovative technology, utilizing that technology as a start to move into the wound care platform, and then building around it, as we have since been able to do. In that way, it really has been a startup business within the platform that we had to work with.
MassDevice: You also mentioned that the wound care market is very fragmented. What do you mean by that?
DJ: If you look directionally at the wound care market globally, we estimate it to be in the area of $8 billion. Out of that, you have approximately 6 companies that represent 50% of the global market share. You literally have hundreds and hundreds and hundreds of companies that represent the other 50%.
Most of these are very small-to-medium size technology companies, and all of them really come with similar things. There’s a need for capital. There’s a need for sales and marketing expertise. There’s really a need to be able to spread your wings further. That’s why I call it a fragmented market.
You have these many hundreds of companies all trying to play in a similar space.
MassDevice: You said when you started you were a bulletin board stock. You had about a $15 million market cap. How much has changed in the past year and a half or so?
DJ: We have transformed the company and really created a wonderful platform for the wound space. I’ll walk you through some major areas of change.
First of all, we have grown from 6 employees to 45. That all started with our management team. I was able to attract a senior leadership team who are literally some of the most experienced people and who have demonstrated success in this space for most of their careers.
I originally brought in 2 ex-colleagues who had worked with me at ConvaTec; Lori Toner, who headed up all of the company’s global marketing for wound care, a $650 million business at the time, and Brad Barton, who headed up all of our sales and distribution for the Americas. Both of them came in with me as partners in the early days to bring this vision forward. We have since augmented that with a top-quality CFO, Brian Posner, who is on his 4th public entity where he’s been the Chief Financial Officer.
We brought in a Chief Medical Officer, Dr. Janice Smiell, with some tremendous roots at Johnson & Johnson, at LifeCell, at Celgene. I would say the first thing we’ve done is build a high-quality management team and we have some great people around.
Number 2 is, while we started by having 2 FDA-cleared reimbursed products from our proprietary hydrogel platform, we have done 3 business development deals in the past 9 months that have now created 4 technology platforms for us.
The first of these was completed in September. It is a commercial partnership with a company called Sorbion. This is a German-based company that has a very distinctive technology called hydration response technology. It has become the market leader in the European marketplace in what I will call high-absorbent dressings or wound technology. We have become their commercial partner. We signed the deal in September. We couldn’t be more excited about what happened in the marketplace.
Another technology platform came from a deal we signed with the Celgene Corporation. As you probably know, you couldn’t find a better company to partner with. Celgene is one of the great successes over the last decade, going from a $100 million market cap to a $55 billion market cap in that period of time.
Celgene happens to have a biologics franchise. They licensed all of the biologics from their cell therapeutics division to Alliqua for wound care applications. We were lucky enough to launch their first product, a human amniotic membrane allograft, in April at the Society of Advanced Wound Care conference, called Biovance.
We now find ourselves in the regenerative medicine space in wound care, which is the largest and fastest-growing space within the wound care market. We will launch a second technology platform out of Celgene in the first half of 2015. That was our third technology platform.
In May, we completed our first acquisition, a company called Choice Therapeutics based in the greater Boston area. Choice developed a brand called TheraBond 3D. This is a tremendous antimicrobial technology that has target areas and indications in areas of burns, in post-surgical incisions and in chronic wounds.
So, the first change at Alliqua was growing our management team. The second was building a platform of 4 technologies, which today are all on the market, all FDA-cleared and generally all reimbursed.
The third thing we did is build up our sales and marketing team. Today we have 23 direct sales people. We have more than 45 independent agents, all out selling these 4 technology platforms. The 23 sales people were hired in the first quarter of 2014. This is their first quarter out in the field. We couldn’t be more excited about what we’re seeing.
Add on to that commercial footprint agreements with companies like McKesson and Owens and Minor and Cardinal and many other regional distributors. We’re very excited about the commercial footprint that we’ve put together. That’s number 3.
Finally, we reformed our investor relations strategy. As I mentioned, we started as a $0.06 bulletin board stock back in February when I joined. In November, we did a reverse split. We were able to get our stock price up to a level where we could apply for an uplisting to a national exchange. In January 2014 we started trading on the Nasdaq.
Today we are a Nasdaq company. Through that period, we have raised $37 million of capital financing. Today we find ourselves with $23 million on our balance sheet, which we think is exactly the kind of money we need to execute on our business plan and de-risk it as we continue to move forward, together with doing a couple of very small tuck-in acquisitions as we progress.
What has happened in 15 months is pretty extraordinary. We’ve built a management team and an organization around a wound care franchise. We have 4 world-leading technology platforms. We have a tremendous commercial footprint. We find ourselves uplisted onto the Nasdaq, with much greater access to capital, with $23 million on the balance sheet, flush to be able to execute on what we think is a very powerful business plan.
MassDevice: It sounds like you’ve had an extraordinarily busy, busy year and a half. What are you doing next?
DJ: When you work with such incredibly talented people as I do, it’s fun to watch them, with their passion about building our business. We don’t look back. We only look forward. The way that we view this now is that phase one of our strategy is over. We have built a platform. Phase 2 has started, which we believe revolves around the building up of our platform.
Number one, it is about continuing to take our existing sales force and penetrating the market with our 4 technology platforms. We’re excited. We just bought TheraBond. June was our first month actually selling the TheraBond products.
We just launched Biovance and Sorbion only back in September. It’s a really nice suite of solutions that are starting to be able to be marketed to our wound care practitioners. Definitely, number one is just good strong and sales marketing executions.
Number 2 is continuing to build on our regenerative franchise. We will submit for a 510(k) regulatory approval for our second phase of regenerative technology in the third quarter of this year, launch it in the first half of 2015 and that, we think, can build us into one of the strongest regenerative medicine franchises in the business. Finally, we will continue to look to expand our product portfolio through business development.
We intend to continue to look for good, strong and accretive transactions that can build on our product portfolio and continue to build the critical mass we think we need to deliver on our vision.
I haven’t really explained where the endpoint is, because our vision is really to build a suite of technological solutions so that wound care practitioners around the world can deal with the challenges of chronic and acute wounds.
If you think in fast forward, 3 or 5 years from now, when a wound care doctor comes in and sees a patient, I’d like to think the first thing they will think is, "You know, go and get that Alliqua salesperson, because they always have 2 or 3 innovative technologies that can help me help my patient more effectively." That’s really what our vision is – to continue to build out the portfolio to be able to do that.
MassDevice: Tell me a little bit more about Alliqua’s products and what makes them special.
DJ: In the very simplest terms, what we’ve been able to do is take technologies that are currently already accepted within the wound care space – if you think about it in a generic sense, we have a hydrogel platform, we have a super-absorbent platform, we have a regenerative medicine platform, now we have an antimicrobial platform. None of those in itself is unique to the space.
What we have been able to demonstrate is that the clinical efficacy of each one of these is superior to what the leading technology currently is in the market – and all of that at an economic value proposition, which is more affordable, not always just on price, but in the ability to manage a wound more cost-effectively than they did before.
That really is where we have been able to demonstrate efficaciousness. You start with our Sorbion technology. The reason it has gone from a startup company in Europe to the market leader in a 5-year period is because of their hydration response technology.
For hydrating wounds, as you’re trying to prepare a wound bed, there’s 2 key things you want to do. You want to manage infection and you want to manage drainage. This is a technology that is able to vertically wick the drainage off of the wound directly into the dressing and then trap it in there so that none of it’s able to get back into the wound and create any kind of what we would call maceration in the wound.
That’s a powerful value proposition for wound care practitioners and the reason they’ve become the market leader – and the reason we think we’ll be able to penetrate the market in a very positive way.
Our human amniotic membrane allograft is just a great example. We have a single-layer amnion, which is what we would think of as the most pure form of amnion – creating a scaffold so that live cells in the body on hard-to-heal wounds can gravitate toward this scaffold, and these continue to allow these cells to move toward the different type of proteins that are on the scaffold.
Those are 2 examples of what I think are just greater clinical efficaciousness, but a price point either the same or better to what the leading competitor is in each of the spaces we play in.
MassDevice: Does that also describe your criteria for evaluating potential acquisitions?
DJ: It is. We’re looking for technologies that we believe we can demonstrate with good strong data and good strong case studies that the products are able to help patients greater than whatever the available technology is today. Clearly in today’s marketplace, it must be at economic proposition that makes sense for the provider. You really do need to look at both of those as you move forward.
MassDevice: What do you think are some of the primary challenges in the wound care market right now, either from a business standpoint or from a clinical standpoint?
DJ: Let’s deal with each of them. From a business standpoint, I’ve always thought one of the great challenges in this marketplace is 2-fold. Number one, there’s just a lot of players in the space. At times our customers can be confused because of a lack of data in this market.
The challenge is to be able to educate the customers on your technology, to be able to demonstrate efficaciousness. That is always a challenge for any company in this space. Thus, the reason why a direct sales force, in my mind, continues to be critical is the ability to get out and educate customers on what the most appropriate protocol of care is for wounds.
We’re doing that. The level of representative we’ve been able to acquire at Alliqua really does set us apart from others in the business. That would be number one.
Number 2 is an opportunity. So often people are really trying to push a technology. That is not something that we have in our minds. We believe that offering a solution to a physician is a much better way to go.
You can think of it as when a patient comes in and you need to prepare a wound bed – we have a variety of different options already with our 4 technology platforms that could create a solution for a wound care practitioner. We’ll continue to build on it so that at no time are we trying to drive a technology into a market that is inappropriate for that specific evolution of the wound.
We really give the wound care practitioner a choice and continue to drive the solution-oriented approach to wound care. We think that’s a big idea and something that many companies aren’t able to do in the market.
Those are both the challenges and the opportunities of the business. On the clinical side, it continues to be how we innovate, how we continue to demonstrate the clinical efficaciousness as a whole.
Wound care is a unique spot in the medical device industry where the highest level of outcomes is what we would call double-blinded, randomized clinical trials. Because of the nature of wounds, it’s just not ethical to do that.
We have to utilize as many of the higher outcomes as we can to demonstrate the clinical efficaciousness of the product and of the technology. That is always a challenge, something that all of the companies continue to strive to be able to do.
We try to mix that up with good randomized trials, good case studies, and then what I call real-world data, which more and more are being called for in the market, and something that we continue to try and bring out to help practitioners demonstrate that the technology works – not just under confined conditions, but really in any kind of real-world environment they might be working in.
MassDevice: What’s the long-term vision for Alliqua?
DJ: It’s been staying the course. We’ll continue to build the suite of technology solutions so that we can offer wound care practitioners a choice of different technologies for all of their patients’ chronic wounds and acute wounds.
We’ll continue moving into technologies that are unique and best-in-class in each space that they play in. We’ll continue to build the company for both organic growth and through a very strong, targeted and disciplined acquisition strategy as we move forward.
That’s really who Alliqua is. That’s who we are today and that’s who we continue to build ourselves into.
MassDevice: How does the medical device tax affect Alliqua?
DJ: I was part of the AdvaMed board when I was with ConvaTec, and we went through the entire medical device negotiations and challenges. I’m going to be as political as I can. It’s just a regressive tax.
When you look at the statistics in this country regarding the number of jobs – and high-paying jobs – that the medical device industry has been able to bring forth over the last decade, to put a tax on that kind of innovative industry just seems to be a backward step for the entire country.
It’s disappointing that this was implemented in the way it was without any kind of discussion. It hurts us. It hurts everyone in the device world from big to medium to small. It just challenges the entire space. You look at the number of jobs from some of the larger organizations that have now moved overseas. It’s just very disappointing and poorly thought out.
MassDevice: One last question. What with the name? What does Alliqua mean?
DJ: I’ve been asking that for 15 months. (laughs)