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CEOCFO CEOCFO Monthly Analyst |
"To print this page go to file and left click on print" Ostex International - forming a bond between treating Osteoporosis and making sure that the therapies are working
Healthcare Bio of CEO, At menopause, OSTEOMARK NTx Urine and
Serum tests are used to measure current NTx levels, which are compared to a reference
range of normal. NTx results complement the measurement of bone mineral density (BMD) by
providing a more thorough clinical evaluation of bone status. NTx results are used as an
aid in predicting skeletal response (as measured by BMD) to antiresorptive therapy and in
monitoring bone resorption changes following initiation of therapy. This indication is
utilized by physicians to assist in the effort to prevent and/or treat osteoporosis when
prescribing antiresorptive (osteoporosis) therapy. Now with the availability of the
completely disposable and quantitative OSTEOMARK NTx Point-of-Care device, monitoring bone
resorption changes following initiation of antiresorptive therapy can be performed in the
physician's office during the patient visit and the device will be available for purchase
from pharmacies under the direction of a physician. A significant change in bone
resorption can be measured as early as three months following therapy initiation. Mr. Bologna: “Ostex was initially built on some
interesting technology that came out of the University of Washington, which was based on a
collagen-related thesis. In 1995, the company
went public, which was right about the time it was ready to produce its first product.
What we do at Ostex is pretty simple; we develop and commercialize products that are all
built around what I would call ‘the holy grail of medicine,’ disease
management.” Mr. Bologna: “The first area of focus is
Osteoporosis, which is an interesting opportunity for the following reasons: we have a
rapidly aging population and Osteoporosis is a disease that people are becoming aware of. Years ago you didn’t hear much about people
having Parkinson’s, Alzheimer’s or Osteoporosis, but as we are all living
longer, these diseases have clearly come into play. CEOCFOinterviews: Can you further explain the
difference between your technology and the older conventional one? Mr. Bologna: “The
older conventional technology is a bone mineral density test, which is a very
sophisticated x-ray system that takes a high quality picture of the bones. It will
determine if you have Osteoporosis. When
patients learn they had Osteoporosis, they go on a therapy and then wait a minimum of one
to two years to take a second picture to see if that therapy is working. Mr. Bologna: “Yes. We do not consider ourselves a diagnostic company;
I don’t think the world needs another diagnostic company. We are a company focused on
disease management. I believe firmly our particular product should be sold and dispensed
exactly like drugs. For example, drugs are prescribed by physicians and are picked up at
pharmacies and that is exactly what our intent is. Of course, you can also do the test in
the physician’s office. That is why if you look at how our strategy has evolved,
primarily over the last year-and-a-half, with our Point-of-Care device, you will see that
happening. A good example is right now Procter & Gamble (NYSE: PG) and their partner
Aventis Pharmaceuticals, US, division of Aventis S. A (NYSE: AVE) are essentially buying
every Point-of-Care device that we have available for use with their Osteoporosis drug
Actonel®. They are using it to help prove the benefits and value of their drug Actonel.
Think of it as a bat and a ball or tires on a car; they go together.” CEOCFOinterviews: So you have to create the right
partnership environment. Mr. Bologna: “Correct, and the strategy is
straight forward. For the physician’s office segment, we are working primarily with
the big pharmaceutical companies. Right now, it’s Procter & Gamble Procter and
their partner Aventis. However, we are also well into discussions with other companies
that are very interested in our technology. CEOCFOinterviews: In what global markets are your
products being sold? Mr. Bologna: “Presently, the NTx Point-of-Care
device is sold primarily in European and Asian countries. We have moved slower in the U.S.
because of our inability to meet demand. Once we started in Europe with Procter &
Gamble in mid to late 2000, we realized that we had something that was going to be well
accepted and would need to scale up supply sooner rather than later. Procter & Gamble
and their partner Aventis started expanding the program rather rapidly; and at about that
time, we acquired exclusive rights to the device technology for specified areas of
application and began to build our own manufacturing facility. That facility is now
complete and we are in the process of validating it.” CEOCFOinterviews: So you manufacture your own
product. Mr. Bologna: “Yes, we always manufactured our
test kits that we sell to centralized labs and soon we will be shipping NTx Point-of-Care
devices from our manufacturing facility. Manufacturing
is important for a number of reasons not the least of which I firmly believe that with a
company like Ostex, at some point in time, we may elect to sell the company and, if that
exit strategy occurs, we have to make sure we have everything a potential acquirer would
need. Alternatively, we may decide to use this technology or this company as a foundation
for building a bigger company through selected acquisitions.” CEOCFOinterviews: How did you build your product
pipeline, is it through R&D or acquisitions? Mr. Bologna: “Primarily through R&D. We
licensed the core technology from the University of Washington and applied it into what we
call an ELISA microtiter plate format. We sell 4 or 5 million dollars a year of microtiter
plate formatted product to large centralized reference labs for use primarily by opinion
leaders and forward thinking physicians and, of course, to the big pharmaceutical
companies to evaluate their Osteoporosis drugs. CEOCFOinterviews: So the development of this new
manufacturing facility will greatly enhance your capabilities to produce more products. Mr. Bologna: “Yes, the new plant is built. The
new equipment is installed and we have been hiring people at a steady pace. We are now in
the validation phase. We already successfully produced a couple of lots of product and
will do at least an additional one or more validation runs. Once we feel comfortable with
that, we will start shipping out of our facility.” CEOCFOinterviews: How many facilities do you
currently have? Mr. Bologna: “We have three facilities. We have
the office headquarters, we have a manufacturing facility where we produce all the
microtiter plate formatted products for centralizing lab testing and we have our
‘Point-of-Care’ manufacturing facility.” CEOCFOinterviews: Can you tell us about any
breakthroughs that may be coming out of R&D? Mr. Bologna: “The next product or disease area
that we plan to pursue is to apply our technology to the management of Osteoarthritis.
That application is a bit far out because today there are no Osteoarthritis drugs.
Osteoarthritis drug development is today where we were with Osteoporosis drugs maybe back
in the early to mid 1990s. In the early
1990s, the Osteoporosis treatment most widely used was hormone replacement therapy, but in
1995 Merck & Company, Inc. (MRK) came out with an excellent drug called Fosamax®.
Then in 1998 Eli Lilly & Company (LLY) introduced Evista® and most recently Procter
& Gamble and Aventis came out with Actonel®, which is a lot like Fosamax, for the
management and treatment of osteoporosis. In other words, our technology provides the most
value when drugs are available for treating and preventing a given disease. In the case of Osteoporosis, today there are drugs
available and it makes sense to assume patients want to know if their drug is working.
With Ostex’ technology, we answer the basic questions: Is your Fosamax working? Is
your Actonel? Is you Evista working? Is your osteoporosis therapy working? These drugs are
very good but have their own set of characteristics. Let’s take Fosamax, which a
woman takes in the morning, she takes it standing up with a glass of water; and she
doesn’t lie down for about thirty minutes. You really want to make sure the drug is
doing what it is supposed to do if you are going through this regimen. The point is it
took time for the drugs to catch up with our technology and the real value is in using the
drug/Ostex technology combination for the management of the disease.” CEOCFOinterviews: Does your device present the
healthcare industry with possible cost savings? Mr. Bologna: “Yes, the cost factor is important
because a drug like Fosamax costs about 600 dollars per year per patient. Our NTx
Point-of-Care device sells for 38 dollars per device, so if a patient uses it twice in the
first year of his or her therapy, for 80 dollars they could determine if this 600-dollar
expenditure is doing what it was intended to do. The NTx Point-of-Care device gives you a
number and based on whether or not that number is decreasing, it provides an assessment of
whether or not a given therapy is working.” CEOCFOinterviews: Has your revenue model been built around disposables? Mr. Bologna: “This NTx device is completely
disposable and that characteristic is a key component of our strategy. A traditional
diagnostics company would build an instrument and have disposable components for a series
of tests. We do the exact opposite; we have a disposable device for a given disease that
does not need an instrument or even a simple reader. Our product is a “laboratory in
a device” that is about the size of a credit card. It goes with the strategy of
marketing the Point-of-Care device like big pharma markets drugs for the treatment and
prevention of Osteoporosis.” CEOCFOinterviews: How would a patient use your NTx
device? Mr. Bologna: “It is simple to use. The patient takes a urine
sample; puts it into the device, at which time the device is automatically activated. If
something is wrong, the device will give you an error code. The first thing that you will
see on the LED is 5, which means five minutes; the device will count down to zero while it
is doing all the measurements. A numerical number will appear. If that the number has gone
down after the patient has been on therapy for about 3 months, it can be assumed the drug
is working.” CEOCFOinterviews: What is the size of the market
place? Mr. Bologna: “It is very large. In January of
this year (2002), there were 800 thousand drug scripts written for the prevention and
treatment of Osteoporosis. As we look at the aging demographics, the market opportunity
should get even bigger since we all know that people are living longer. Osteoporosis drugs
are not taken once or for a short period and you are finished; you are committed for life
to these drugs. There are only winners with this because patients are taking drugs that
may very well help them live better lives. With this device, they get feedback. The
pharmaceutical company wins because it helps them demonstrate how well their drugs work.
Economically it works well because the economics are so compelling in the sense that if
you need these therapies, you should take them, and if you don’t need them, you
shouldn’t.” CEOCFOinterviews: Currently, where are you with
regard to market penetration? Mr. Bologna: “We are just starting to penetrate
the market. Last year our sales were a little over 5 million dollars and a lot of that was
from our older product lines, the microtiter plate business that we have been selling to
large centralized laboratories. The real upside will come from our Point-of-Care device
because for the first time this technology is being made available to the general public
in a user friendly format. It all comes down to is this little device, the OSTEOMARK NTx
Point-of-Care.” CEOCFOinterviews: What do you need to build out your
business going forward? Mr. Bologna: “In the short-term it is to build
capacity to meet demand and as that happens we will take on more business.” CEOCFOinterviews: Do you currently have the cash
and/or credit to do this? Mr. Bologna: “We finished last year with ending
cash at about 3.8 million dollars and we announced in the first quarter of this year that
our Japanese partner, Mochida Pharmaceutical Co., Ltd., bought the exclusive distribution
rights for the NTx Serum test for the Japanese market for 750 thousand dollars. Our burn
rate has been about 150-250 thousand dollars per month. Theoretically, it looks like we
will be able to at least break even with the amount of cash that we have.” CEOCFOinterviews: How strong is your patent
protection? Mr. Bologna: “It is clearly the most extensive
in the industry. We have well over fifty patents for the market opportunities we are
pursuing. We also have exclusive rights for the point-of-care format for our areas of
focus.” CEOCFOinterviews: In closing, what would you say is
the most exciting news coming from Ostex International? Mr. Bologna: “Clearly the most exciting news is our NTx Point-of-Care device and the business model that we have developed. We believe this device will help big pharma, will help the consumer, and clearly as a result of helping those two contingencies, it helps the shareholders of Ostex.In closing, I would like to say this should be the year that everything comes together for Ostex. I would use the evolution of the computer industry as an analogy to where we are. Think about it. There was the MAC and then the P.C. and the computer was made available for the masses; that is an analogy to what we are doing. We have the NTx Point-of-Care device. I would think of the NTx Point-of-Care device as being the Macintosh or P.C. for the management of diseases with Osteoporosis being the first area of focus.” disclaimers |
