Transforming treatment for osteoarthritis and other musculoskeletal conditions
Mike Daley is the CEO of OrthogenRx, a medical device company based in Doylestown, Pennsylvania. Since its incorporation in 2012, OrthogenRx has been working on developing and commercializing new treatments for musculoskeletal conditions such as osteoarthritis. In 2015, the FDA approved GenVisc® 850 (sodium hyaluronate), the company’s first product, which treats osteoarthritic knee pain.
EDWIN WARFIELD: Can you give us some of the ups and downs from your startup journey? Where did you look for funding?
MIKE DALEY: Initially, in order to do the application, my partner and I were doing all the heavy lifting. We needed funding in order to pay for the regulatory filing. There are three things: we needed the regulatory filing, we needed to pay for biostatisticians—because we were doing a lot of biostatistical analysis of showing our product was really equivalent to the existing product—and the third thing, which you never leave out as a startup, is lawyers. If you miss that, in terms of projecting out your cost, you can go bankrupt very quickly. Those were the three major costs that we had during that first $350,000–400,000 that we raised. We were fortunate in our first equity round of angel investors to find what I call a syndicated consortium through a colleague of mine—who, actually, I met in my past experience with Hyalgan—he was one of our speakers, he got it very quickly, and he put together a bunch of his friends. There was that and probably about another two or three other angel investors. We got matching funds from Ben Franklin, so it was total of $350,000–400,000 we had to make the application. We then raised an additional $400,000–500,000 through different angel investors. One of the lead investors who had put in a $100,000 was from a small venture firm called New Age Ventures. When we got the approvable letter in January of 2015, he also wrote a $500,000 convertible note.
We are now at about $1.4 million plus $500,000, and that $500,000 allowed us to get to the point where we were starting to become commercial. It allowed us to get to the point where we got our own reimbursement code. We thought we were going to need maybe another $5 million in a Series A round, so that was what we thought was going to stop our seed funding to get us to the proof of concept, but then he as a lead investor saw the opportunity because we got a very, very favorable reimbursement for our product, and we felt that there was a tremendous opportunity, so he wrote a $2.5 million line of credit. The $2.5 million line of credit allowed us to buy inventory, to pay for a contract sales organization, and to start to build the infrastructure for a commercial team.
We proceeded and did that, and in 2016, we were at least successful enough to become cash flow positive by the end of the year. And two months ago, we wrote a check for $1.7 million, because we were paying it down, and we are debt-free. We’re debt-free, we have money in the bank, and we’re on projection to do $15–20 million by the end of the year.
We are reinvesting that in other products—some of hyaluronic acid, some of other devices—all we focused on the same customer base: sports medicine, musculoskeletal, orthopedic, maybe rheumatology. If we can bring additional products into, shall we say, the bag of our sales professionals, the operational cost of that sale diminishes.That’s our focus. We will never license something that is outside of that focus. So, if it’s something that has $15–20 million total market in the US, we may put it into that bag because that can decrease our operating costs from going up significantly over adding those to the bag.
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