Dallen Medical

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April 22, 2013 Issue

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With two FDA Cleared Product Lines for Bone Fixation and Repair based on Internal rigid fixation and compression: the Compressyn™ Band and the Compressyn™ Staple, Dallen Medical is well positioned for Growth

About Dallen Medical:

At Dallen Medical, we are committed to innovating bone fixation and repair. Our technology development effort adheres to the AO Foundation Principles of Orthopedics—specifically the principle of internal rigid fixation with compression.

Dallen Medical’s mission is to provide significant improvement in fixation and compression over current devices. Dallen’s Compressyn™ technology is intended to deliver improved patient outcomes, resulting in cost savings and reductions in length of hospital stay.

We are committed to deliver excellent clinical benefits to patients, hospitals, and physicians worldwide.

David H. Mills
CEO
 

David Mills is the President & CEO of Dallen Medical Inc., a venture backed orthopedic company whose focus is underserved markets where the company’s patented banding and staple technology can bring better patient outcomes while reducing the economics to the healthcare system. Mr. Mills has approximately 25 years of medical device experience having worked in management of five emerging companies, including start-ups; two as co-founder, three from seed round, and three of which have sold. David offers expertise in evaluation of early stage medical device technologies/ companies including product development, financing, capital structure, and exit strategies.

Prior to Dallen, David founded Harper & Associates, a healthcare consulting company specializing in start-ups and early stage medical devices. Harper & Associates and its global network of engineering and regulatory professionals provide a full range of services to take concepts from their genesis to commercialization and possible liquidity events. In this capacity, David has served in a variety of business development, sales management, and marketing roles, including founder and investor, assisting in the development and execution of marketing and distribution strategies, providing guidance and project management throughout the regulatory process, and sourcing of critical elements of the supply chain.

In previous engagements, David was the Director of Business Development Marketing & Sales for American Immuno Tech (AIT), developers of the Neptune Waste Management System, which won the 2001 Silver Medallion Medical Design Excellence Award. While at AIT, David wrote “Alternatives in Waste Management” which was published in Surgical Services Management magazine. The Neptune System was subsequently sold to the Stryker Corporation and is now a $200M product-line for Stryker. David was also one of the initial Zone Managers for Denver Biomedical which was acquired by Cardinal Health for approximately $80.2 million or 4x revenue. David has been involved with four other start-ups as a principal or founder that are ongoing entities.

David earned a Bachelor of Science in Business Administration from Miami University, Oxford, OH in 1984 and is a member of OCTANe, an Orange County Technology and Angel organization. David has served as Board of Director for the San Miguel Home Owners Association as well as the President of the Board of Directors of the Racine Condo Association (Chicago, IL).  David enjoys working out with his wife, Jamie, and playing with their three kids, Paige, Turner and Kate.

Healthcare

Medical Device

949-218-0030

Interview conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, Published – April 22, 2013

CEOCFO: Mr. Mills, would you tell us the concept at Dallen Medical?

Mr. Mills: We are an early stage orthopedic company with an intellectual property portfolio built around the orthopedic principal of delivering fixation with compression. Which is a tenant for promoting primary bone healing or achieving primary bone healing, that is you put the bones back in their proper position, fixate them properly, but then provide some compression for it, so a load bearing force which is Wolff’s Law, that you are signaling the bone to lay down more cells, and therefore the bone will grow back together more quickly. As opposed to say secondary healing, which is when scarring occurs, you have scarring on the outside of the bone, and it is basically growing from the outside in. If you do fixation with compression, inside out is the way the bone will heal and therefore it will be a stronger, faster recovery for the patient. We are applying these principals into what we believe are underserved markets, namely the sternum and small bone or extremity. Ultimately we plan on taking our banding technology to get into sports-med product.

CEOCFO: Why have these areas been under the radar? What is it you are doing with your device that will make a difference or that is different from what is being done today?

Mr. Mills: Most of the technologies in the market today deliver adequate fixation. But the way they try to achieve compression is either static compression where they turn the screw, or twist the wire, or secure the cable and from the moment the last twist is done, or the moment the last cable has been tensioned, it no longer maintains its tension because people move, people breath, the bone itself moves as the bones come back together and heal and even the bone reabsorbs, but our compression is dynamic. It is part of our IP position where we have broad coverage in how we deliver dynamic compression, and that is what should allow us to get better results than the other technologies on the market.

CEOCFO: Would you tell us how you do it?

Mr. Mills: In layman’s terms, we are integrating spring technology into our plate system, our hardware. The spring wants to go back to its’ relaxed state. By loading the spring with tension, the spring wants to come back to its’ relaxed position, and that is how we are pulling bone back together.

CEOCFO: What was the hardest piece of technology or the hardest concept to get in place once you had the idea that this would work?

Mr. Mills: First off, capital. Just getting capital to take a concept beyond an idea, then to take it to prototype, then to take it to prototypes where you can do regulatory testing. Capital is first and foremost and always will be the most difficult challenge for a startup or an early stage company; particularly in this economy of the last three to five years. I would not be behaving as a proper CEO if I did not say capital is and always will be the biggest challenge. Then, once you have the idea and the prototype, it is kind of miniaturizing it or getting it to actually work, and in the confines of the space that you have to work with or in an embodiment that will be well received by the market and easily used; that is the engineering challenge of it.

CEOCFO: Dallen recently received your FDA clearance; what are the next steps?

Mr. Mills: That was our second clearance, so the company is very proud that we have two FDA cleared product lines: the Compressyn™ Band and the Compressyn™ Staple. So we have two cleared Compressyn™ products, the Band and the Staple, and our next step is closing our Series B round to commercialize these products. We have a third product line that we are testing on and hoping to submit it for FDA clearance in April.

CEOCFO: The investment community seems to have cycles where certain diseases or conditions are in favor, and others are not. Is orthopedics, in particularly the area you are working in, in favor today?

Mr. Mills: Generally speaking, yes; particularly the small bone space, extremities. Our first product for closing the sternum following open heart surgery has been a difficult concept to get people interested in, because every venture capitalist in the world believes that every open heart surgery is now being done minimally evasively—or will be done minimally evasively within the next twelve months, and that is actually incorrect. Minimally invasive surgery is absolutely a trend that makes sense and will continue, but there are still approximately 445,000 open cardiac procedure where open sternotomy is the approach each year here in the United States and that number is not going away because some procedures the doctor needs to get his or her hands on. Most of those 445,000 are coronary artery bypass grafts (CABG procedures). Unfortunately here in our country, we have an epidemic of obesity, an epidemic of chronic obstructive pulmonary disease (COPD), osteoporosis is a problem, particularly in the female community, and diabetes. You factor those patient populations and you have people needing heart surgery, and the vast majority are not candidates for the transcatheter approaches, where they replace the valve through the femoral artery, and minimally invasive is not the way to treat the vast majority of CABG procedures. The vast majority of CABG procedures are done via an open sternotomy approach. It is still a good market; it is a mature market, but still a very attractive market. For us, it is an attractive means of being capital efficient, because for my follow-on orthopedic products, the orthopedic procedures are being done in the six thousand hospitals here in the United States, three thousand surgery centers, and you have conservatively about thirty thousand podiatrists and foot, ankle, hand orthopedic surgeons. But conversely, with our focus on sternal closure for cardiac surgery first, you do not have surgery centers, you do not have six thousand hospitals, you only have eleven hundred hospitals. And within those eleven hundred hospitals, it is about forty-five hundred active cardiac surgeons, so my target customer for my first product is a much, much smaller population.

CEOCFO: You have been involved with a fair number of ventures in the industry. What have you learned that is most important that you bring to the table for this particular company?

Mr. Mills: Two things, and it is 1 and 1a as they go hand in hand. You have to be able to raise money. And then you have to be able to put yourself, surround yourself with a good team; people that understand the sense of urgency to make thing happen with the capital you have. If you are going to do a startup, they have to be constantly aware that the ability to raise money is tied to the company’s ability to hit milestones. If we hit milestones then we can raise more money. If we do not hit milestones and make progress, people are not going to put more money into your deal. It is a simple concept, but a lot of people just do not understand that. If you are not hitting milestones, no one is going to throw money at you. And there is money out there, it is just very, very difficult to get. You have got to have the right story to get it. 

CEOCFO: Do you find the orthopedic community in general is open to new ideas?

Mr. Mills: Yes. Absolutely.

CEOCFO: How do you reach them?

Mr. Mills: You go to the major trade shows where you believe your idea or concept is a fit. Also, read the electronic daily newsletters, or the monthly newsletters to see what’s new out there. I have literally one on my desk right now that I am looking at. And then find yourself a couple of good physician advisors who can help you pick apart your idea and improve it. To help you really examine whether your idea is really a good one, or whether it is just BS. You have got to have people that are going to really scrutinize your idea to see that it is an idea that is a) fundable, and b) in order for it to be fundable it has got to be an idea that the market is going to embrace.

CEOCFO: Our readers are primarily in the business and investment community; speak with many companies in healthcare and medical devices, along with others. Why should Dallen Medical stand out for investors and people in the business and medical device communities?

Mr. Mills: Because the major orthopedic companies, the “Bigs” as I call them, they do not do R & D. They might say they do, but they really don’t. What they do is acquire R & D. Then, they are good at iterating it. You as a startup might have the first generation, maybe even the second generation. They will take it a third generation, or they will drive the cost out of it, but they are not going to come up with the idea because of the regulatory and quality system obstacles in a big company. They will spend days, and weeks, if not months putting it through their committees and talking about it, whereas we get an FDA response turned around quickly. The FDA says, “We need this question answered.” Dallen had an issue posed to us and our COO/ Regulatory, who is really good, turned around a response to the FDA examiner in one day.  Big companies cannot do that, yet we did. We can respond very quickly, and we can come up with ideas whether it is getting them into a prototype or putting them on a CAD model and then ferret out the potential weakness. The idea is we can do it quickly. Ultimately, if we pick the right markets, one of the “Bigs” is going to want to buy. We are getting a lot of interest right now; a lot.

CEOCFO: Final thoughts?

Mr. Mills: Our government is not doing us any favors relative to the lack of transparency with the FDA. The FDA can kill little startups with limited budgets by not recognizing that the start-up would do what the FDA wants so long as the pathway toward clearance is communicated up-front. Instead we are in an environment where start-ups spend hundreds of thousands of dollars if not millions on testing only to be told by the FDA that the testing is fine but they need this test or that test. If the start-up knew what was required ahead of time then it would gear its budget accordingly before capital is wasted. A CEO of any start-up will do whatever it takes to achieve a milestone & gaining FDA clearance is a major milestone, and everybody wants product safety but the CEO also wants to be as capital efficient as possible, which means not wanting to do unnecessary testing or avoiding re-peat testing.

disclaimers

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“First off, capital. Just getting capital to take a concept beyond an idea, then to take it to prototype, then to take it to prototypes where you can do regulatory testing. Capital is first and foremost, and always will be the most difficult challenge for a startup or an early stage company; particularly in this economy of the last three to five years. I would not be behaving as a proper CEO if I did not say capital is and always will be the biggest challenge.”- David H. Mills

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