Company Interview / Canada's calling for this Aussie biotech

Key points:

MedTech expands into Canadian market, boosting potential revenueDistribution deal with BioHorizons brings $21 million to OrthocellOrthocell pursues regulatory approvals in Brazil, Singapore, and eyes US launch.

MedTech Orthocell is expanding into the Canadian market via a global distribution deal with BioHorizons. The deal will take its dental regeneration product to market, achieving sales just eight weeks after regulatory approval. John Van Der Wielen from Orthocell (ASX: OCC) notes that Canada’s sophisticated market is expected to significantly boost revenue.

The distribution deal with BioHorizons, which brought $21 million in cash to Orthocell and provides a blueprint for potential deals post-regulatory approvals in Brazil and Singapore. In the meantime, John says revenue growth continues to exceed expectations.

Orthocell's nerve product, approved in Australia and New Zealand, is gaining traction, with plans for a US launch next year. The company has $20 million in the bank and is strategising the best distribution approach for the US market.

Full unedited transcript below:

0:00

MedTech also has expanded into the Canadian market with the first sales of its dental regeneration product. The company is pushing for regulatory approvals in additional markets, including Brazil and Singapore, within the next 6 to 12 months. For the details, ortho Sells chair John van Der Valen joins me now. Hello, John. Welcome back to office. Thank you so much for joining us. Um, okay. So how big a deal is this expanding into Canadian cannabis market?

0:32

Well, Canada is a sophisticated market. It's a large population, and we expect it to significantly drive revenue for the business. Um, we've got approval already in Australia and New Zealand, uh, the USA and Europe. But to enter Canada is a major milestone for us. And most importantly, it was that we ended up with sales, uh, only eight weeks after the, uh, Canadian authorities have approved it. So it's a it's a great outcome for ortho. So Okay. Great. Now, how does this work though? Because I understand you've got a distribution partner. How does that work?

1:06

Yeah. So look, with biotechs and as you know, one of the risks is it's difficult enough to get approvals from regulators for your product. Then stage two past approval is then selling your product and generating revenue. And we've got a deal that's global with Buyer Horizons, which actually brought in $21 million to ortho sell some time back. They have the exclusive rights to distribute this dental membrane product. And that's growing month by month. And in fact, we just released an investor update, and sales in both July and August. Posted the record last quarter are again exceeding expectations. So it's really started to take off now.

1:48

Okay. And so, um, we just sort of alluded to in the introduction that this is, you know, the first phase of trying to expand into other countries as well So where are you at in the approval process in those countries. Singapore, I think, was mentioned in Brazil.

2:06

Yes. That's great. So we've got probably one of the busiest regulatory teams, I think, in Australia on, uh, biotech at the moment. So we have already lodged our applications into Singapore and Brazil, and we expect to receive those approvals in the coming months. Then we also have our nerve product, which is world leading, and that's for repairing damaged or severed nerves. And that's approved in Australia and New Zealand. But we're next stage is to report our clinical data prior to our US application with that product. And we've also got an application with the TGA, uh, on our smart graft tendon repair product. So in addition to growing revenue, we've also got further products in the pipeline that will roll out around the world. Okay. Uh, it sounds exciting. Um, when you think about, realistically, how much of the market you can capture, um you know, global or in key markets like does Australia offer any sort of a

3:06

blueprint for for how much you can expect to, to gain in these other geographies? Yeah, of course, it's a great question. So if we look at and I've spent a lot, I ran one of Australia's largest health insurers. So I understand um, the market and the revenue in terms of products like this. So Australia is a highly sophisticated market. So if you measure your market penetration on a population of 27 million, and then you can extrapolate that out, because most of the similar Western markets like Canada, like the US, like New Zealand and Europe all mimic the penetration that you can achieve in Australia. So on our nerve product recently, we've now got over 150 surgeons using the product. And the product is about, uh, you know, 15 to 16 months since, uh, launching for distribution on the dental product. Uh, that's starting to roll out incrementally month by month, the revenues increasing. We had a record year. We had a

4:06

record last quarter. And with biotechs, um, and there's many of them on the market, these products that research, um, you know, ortho sells like a decade long of research. We now have the products approved and we're now distributing, uh, what we'll look for next in the US is upon US approval for our new product. Then we're currently in discussions with a variety of different distributors, similar to what we do with ortho, with, um, Bio Horizon, so that we can make sure we pick up revenue in the US market, which is which is enormous in terms of nerve repair. Okay. So it's pretty exciting because in your most recent report, correct me if I'm wrong, I mean, sales are really starting to gain traction. So where is the tipping point for the sell? Because obviously you're still investing in a lot in R&D and distribution and, you know, cracking these other key markets So when does the rubber really hit the road in

5:06

terms of revenue. I mean, I suppose it's just way too early to talk about profitability.

5:13

Uh, no, it's not in the sense of we've had in seven quarters. We've had a 9% kegger, right quarter on quarter on quarter. We do not expect that to slow down. In fact, we expect it to increase as we then bring on these new regulatory approvals and what we've just proven with Canada, it was about eight weeks until we got our first sale. So we expect the exponential growth now to speed up with biotechs. People wait a long time, uh, for these products to get approved, to get distributors and then the revenue to arrive. The positive is that once revenue starts and your surgeons, your dentists, those, uh, pick up the usage, then the growth becomes exponential. Our product, uh, now in dental is known globally and therefore the uptake just continues, you know, day by day, week by week on the nerve product. The uptick is in Australia and New Zealand, but we've recently had US surgeons visit Australia

6:12

trialling the product. We're already talking to many surgeons in the US and preparing for that launch next year. So this is the company that I think is right on the cusp of that inflection point. We have $20 million of cash in the bank. We've got significantly growing revenues. And therefore, you know, we we expect over the the coming 12 months. Um, you know, the our biggest question is how do we decide to distribute in the US. Do we go multi distribution. Do we do another exclusive deal like we did uh with buyer horizons and take a large sum up front. So we're currently as a board strategizing best way to enter the US market with the new product.

6:58

You're really interesting. So which do you think would be more favourable at this time with a multi distribution deal as opposed to a single distributor in the United States. It's such a dynamic market, obviously massive but dynamic. And from what I've been told, you really need experts in how to navigate these. You know, the medical and I suppose dental systems there as well, which is not exactly like it is here in Australia. So these are all great questions. And the most important point is from a shareholder's perspective, we don't want to burn unnecessary cash. We proved in our last deal with bio horizons by receiving $21 million of cash net. Um, we think the right process is to allow other people to distribute for us because you can spend, you know, the US population is enormous, the geography is enormous, and therefore we've got no intent of going in organically and burning cash. We'd look for either an upfront deal, a joint venture or some form of major distribution

7:58

alliance. Uh, and the product is so well thought of. Um, what I can tell you is, uh, we don't need to make much contact. We've got people contacting us to get access to the product.