Orthocell Ltd (ASX:OCC, OTC:ORHHF) earlier this week said Remplir™ had moved beyond market access and into active clinical use within the US military and veteran healthcare system, marking an important step in the company’s commercial expansion strategy.
Managing director Paul Anderson told Proactive that approval for use across the combined Department of Defense and Department of Veterans Affairs hospital network had opened access to about 221 hospitals, including 51 military hospitals and 170 VA medical centres. He said the development represented “a really important milestone” for the company and one that had been recognised by the market.
Anderson said Orthocell had pursued a defined defence strategy based on the relevance of its nerve repair technology in military medicine. He noted that prior deployment of the product with the Ukrainian military had helped support that strategy by providing real-world validation in a military setting. He said “the fact that we have a validated product now that’s been used by the military in the military setting certainly helps us with a credibility perspective”.
That validation may prove important as the company seeks wider adoption across both military and civilian surgical settings. Anderson said Remplir™ had been specifically designed for nerve repair, contrasting it with incumbent products in the US market that he said were more than 20 years old and not fit for purpose. He argued that the company’s clinical data, post-market follow-up and purpose-built design gave surgeons a reason to switch.
A major near-term catalyst is rollout across the newly accessible US defence and veterans network, especially following the first surgical case completed in a Department of Defense facility in Ohio. Investors are also likely to watch manufacturing readiness closely. Anderson said Orthocell had worked hard to scale its Australian operations and was “perfectly poised now to supply increasing volumes in the US” as well as internationally.
The company’s current facility can manufacture around 100,000 units per year, and Orthocell has already begun work to expand capacity to more than 200,000 units annually. Anderson said the company had manufactured more than 65,000 units this year across its bone, nerve and tendon portfolio, underlining the need to stay ahead of future demand.
He also pointed to supply chain preparedness as another advantage in a volatile geopolitical environment, saying Orthocell had more than 4,000 units already positioned in the US. With cash of $48 million at the end of the March quarter, the company appears funded to support that next stage of scale-up and commercial execution.
Highlights summary
- Orthocell reported a strong March quarter, including $3.2 million in revenue and a cash balance of $48 million.
- Remplir™ has been approved for use across the combined US Department of Defense and Department of Veterans Affairs hospital network.
- The approval opens access to about 221 hospitals, including 51 military hospitals and 170 VA medical centres.
- The company has already moved into active clinical use, with the first surgical case completed in a Department of Defense facility in Ohio.
- Paul Anderson said the company’s work with the Ukrainian military has helped validate Remplir™ in a military setting.
- Anderson said that military use supports the product’s credibility and value for injured servicemen.
- Orthocell has been scaling manufacturing in Australia to support growing demand in the US and internationally.
- Current manufacturing capacity is about 100,000 units a year, with expansion underway to lift that to more than 200,000 units annually.
- Across bone, nerve and tendon products, Orthocell has produced more than 65,000 units this year.
- The company sees a competitive advantage in offering a purpose-built product, while some incumbent technologies in the US market are more than 20 years old.
- Orthocell also highlighted logistics preparedness, with more than 4,000 units already held in the US for immediate use.
Proactive: Welcome back to Proactive Investors, ladies and gentlemen. I'm your host Kerry Stevenson. Today I've asked Paul Anderson, the managing director of Orthocell. The ASX code is OCC. The reason I've asked Paul to come back is they’ve had a very solid March quarter, very solid. I'm just going through some of the numbers, $3.2 million in revenue, but really a growing trend in the US for their nerve repair product, Remplir™, which we spoke about last time. They’ve also got a cash balance of $48 million, and then really the defence hospitals, which are opening up massive opportunities over there in the US. But I don't want to take away all his thunder. It’s been a great March quarter. Paul, good to see you back again. Talk to that news last Friday. Share price, the market clearly liked it. So give us the update. What’s going on?
Paul Anderson: Yeah, thanks. I really appreciate the opportunity. Certainly last Thursday we announced to the market that we now have approvals to be used in Department of Defense and Veterans Affairs hospitals. That adds about another 221 hospitals that we can use our product, Remplir™. So it’s a really important milestone for our company, a really important milestone that was recognized by the market and hence the plus 20% share price increase on the back of that information.
Proactive: I just want to ask you the question with that 221 defence hospitals in the US, because you did some work in Ukraine, I guess proving out the nerve repair product, Remplir™. Does that mean that defence around the world does? It’s almost like slowly, slowly then all at once. Because once you’ve been validated, especially in the US, does that open up every market around the world for you?
Paul Anderson: Certainly we’ve had a very defined defence strategy. That started with a realization that the use of our product in nerve repair is very applicable in this space, in the military space. The fact that the Ukrainian army were happy to receive our product and have deployed it actively in the market and in their battle soldiers. So the fact that we have a validated product now that’s been used by the military in the military setting certainly helps us with a credibility perspective. It helps us with a validation perspective that this is a product that is of value. This is a product that can help injured servicemen to recover and be better.
Proactive: Is it easy to scale for you guys? If the validation means that you potentially will have to scale and potentially quite quickly, is that any challenge there?
Paul Anderson: Yeah, we worked really hard at scaling up our manufacturing operation here in Australia. So we’re perfectly poised now to supply increasing volumes in the US and to provide increasing volumes internationally, both in the defence sphere but also in the general surgical sphere as well. So now we’re well ahead of the game there. Our current facility manufactures around 100,000 units per year in capacity. But interestingly enough, we have just embarked on improving and expanding that capacity to over 200,000 units per year. We have a modularized system so we can tack on to our current facilities further clean rooms, which means that scalability is there for us on our call.
Proactive: With the units per year, maximum 100,000 at the moment, you can scale up to 200,000. What are you currently doing?
Paul Anderson: In the facility this year, right across all of our bone, nerve and tendon, we’ve manufactured in excess of 65,000 units. So when you’re getting close to that sort of capacity, one starts thinking about where your next set of capacity is coming from. In this game, you have to be 18 months ahead of the business. From manufacture of your clean rooms to validation of those clean rooms, it takes some time to validate those. So we need to act now and we are doing so. As we’re well capitalized, part of that capital is deployed to increase our manufacturing capacity.
Proactive: Paul, anyone else doing something similar? Or have you cornered the market in this? Because it is a unique product. But can somebody else eat your lunch quite easily?
Paul Anderson: Look, we’re one of the bright new stars in this market. We’ve got a product that has an incredible scientific narrative that has been validated both clinically and in clinical trials and in post-market clinical follow-up. There are some incumbents in the market in the US, but both of those incumbents have technologies that are in excess of 20 years old and were not fit for purpose. Our product was specifically designed for this purpose. Most of the other products in the market are not fit for purpose and have come off the shelf from other companies. So we’re one of the only manufacturers of our own product, and we have a scientific narrative that is real and provides surgeons with the ability to make the switch to us.
Proactive: Okay, Paul, always good to speak to you. Before I finish up, what’s your biggest challenge right now?
Paul Anderson: Look, I think the geopolitical environment that we’re currently living in is very unpredictable. That certainly has an effect in the market. But I’m very pleased to say that we’re out ahead of the game here, and we’ve made sure that we have a product that is not temperature sensitive, that has a three-year expiry date and is easily transported. So we have over 4,000 units sitting in the US ready for usage now. That avoids a lot of these logistical issues. I’d like to think that the strategy of getting out in front of the market has been deployed successfully here.
Proactive: Well, congratulations. As I said right at the start, a very strong March quarter for Orthocell. Paul Anderson leading the charge there and with a very nice treasury of $48 million. So the company does not need your money. But that share price is getting stronger and stronger. Paul, always good to see you. We’ll look forward to chatting to you again soon.
Paul Anderson: My pleasure. Thanks for having me.