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Lynn Fosse, Senior Editor

Steve Alexander, Associate Editor

Bud Wayne, Editorial Executive

Christy Rivers - Editorial Executive

NextStep Arthropedix, leveraging Technology to Improve Patient Care

Farzin Khaghani

President

NextStep Arthropedix

www.nextsteparthropedix.com

Contact:

508-510-0010

[email protected]

Interview conducted by:

Lynn Fosse, Senior Editor, CEOCFO Magazine
Published – December 9, 2019

CEOCFO: Mr. Khaghani, what is the focus at NextStep™ Arthropedix today?   

Mr. Khaghani: NextStep Arthropedix is looking to establish itself as an innovation leader in orthopedics with a focus on novel materials.

CEOCFO: Why the interest in orthopedics? Would you give us a little background on the company?  

Mr. Khaghani: The origins of the company dates back to the early 1990s, when Randy Theken, the founder of NextStep, started Theken Orthopedics to provide mechanical testing and FDA regulatory services to medical device companies. This gave birth to Theken Spine which was founded on the experience and capabilities built at Theken Orthopedics with a focus on developing and manufacturing a full range of spinal implants. Theken Spine was quite successful and in the early 2000s the company continued investing in research and development for next generation spinal devices. In 2008 they were approached by Integra LifeSciences with a lucrative acquisition package. After the exit, Randy Theken had a five year non-compete in orthopedics only to return to the space in 2014 with the launch of NextStep Arthropedix.      

CEOCFO: What are you looking at at NextStep? Is there a particular part of orthopedics, a particular focus?

Mr. Khaghani: If you look at the orthopedic space it is dominated by four major players: DePuy Orthopedics, Stryker, Zimmer Biomet and Smith & Nephew. These four companies own about eighty-five percent of the orthopedic market share. For small to medium sized companies like ours to be successful, we have to find innovative ways to differentiate ourselves. We need to create value in ways that the larger orthopedic companies do not necessarily have the speed and agility to do so. NextStep launched its hip system at the end of 2016, with a Best-in-Class 3D printed acetabular cup and other well differentiated features. We plan on building on the success of our hip platform, continuing to grow and innovate with a focus on novel materials to improve patient care.

CEOCFO: Would you tell us how your product is Best-in-Class?

Mr. Khaghani: The titanium-alloy acetabular cup is additively manufactured, enabling an engineered porous titanium structure which facilitates a solid initial fixation and long-term biologic fixation. The stem design features a quadruple-taper geometry designed to restore joint biomechanics, stability, and load transmission. A key differentiating feature on the stem is that we specifically engineered the head to stem taper junction to limit trunnionosis.    

CEOCFO: Does the orthopedic community understand the difference?  

Mr. Khaghani: Yes, we believe our value proposition and the benefits of the system are quite clear to physicians and those in the industry. In designing our products, we focused in on areas we felt we could make an impactful difference in improving clinical outcomes.

CEOCFO: How do you reach out? How do you get a foot in the door?  

Mr. Khaghani: That is a great question. In orthopedics, field relationships have a major impact in opening doors to have those initial customer conversations. Ultimately, what makes a product stick and gain the interest of providers and hospital systems is the quality of the implants and instruments. It is the overall value proposition of the product and clinical outcomes. However, what gives you the access to be able to have those conversations with hospital systems and clinicians is the relationships we have in the field.     

CEOCFO: Would a doctor or hospital keep these on hand? Would they order as needed? What kind of production and inventory do you need to maintain?  

Mr. Khaghani: Managing inventory is one of the main challenges in orthopedics. The number of instrument and implant sets required to service an account is quite capital intensive. Entering the orthopedic market and building a business from the ground up can be prohibitively costly. Instrument sets and implants are consigned to hospitals and facilities as needed. We then backfill consumed implants periodically to keep the inventory levels where they need to be.

CEOCFO: Are you seeking funding, partnership or investment as you continue to grow?

Mr. Khaghani: We are currently in the midst of a fundraising initiative. Although we have been self-funded by our founder to date, we are currently looking for outside investment to build inventory and accelerate our growth. We are having difficulty keeping up with the demand and interest in our products and a capital injection will allow us to meet these demands.

We have had a lot of interest from companies our size and larger that want to partner with us. What we have built here, as well as the legacy that Randy brings going back to Theken Orthopedics, has been very helpful in building industry relationships.     

CEOCFO: What else do you have available? What else are you working on now?  

Mr. Khaghani: Our knee platform launches in the second quarter of next year. We have a very robust product pipeline mapped out for the next 5 years including some game-changing technologies we plan to incorporate into our knee and hip portfolios.    

CEOCFO: What have been some of the biggest changes in orthopedics? I know you mentioned materials. Are there other technologies as well that might come into play?

Mr. Khaghani: Yes, absolutely. There is currently a significant focus on robotics and personalized medicine. Another area where we have seen quite a bit of development work and innovation is in augmented reality, where rather than having a robot do the planning for you, the surgeon will be able to perform the procedure using virtual instruments. Where NextStep plans to differentiate is in finding ways to improve patient outcomes through the use of new innovative materials.   

CEOCFO: How are you able to test the new materials?

Mr. Khaghani: The two pathways to brining a product to market in orthopedics are through an IDE or a 510(k). The more common pathway is the 510(k) which requires showing equivalency to a marketed device similar to the device you are seeking approval for. There are established testing requirements for this pathway which, given the Theken-roots of the company, we are very familiar with. The other option would be an IDE (Investigational Device Exemption) which is for a product without a substantial equivalent on the market. The requirements for this pathway are more stringent and it typically takes several years to bring a product to market via an IDE.   

CEOCFO: How are you preparing for the launch of your new product?

Mr. Khaghani: The next product we plan to bring to market is our knee system. We plan to do a limited launch with our development surgeons and follow this with a full commercial launch supported with instrument sets and inventory.

CEOCFO: Are you primarily in the US or do you see going global in the future?  

Mr. Khaghani: We currently sell our products only in the US and plan to focus on growing our market domestically. International opportunities are certainly in the plans.

CEOCFO: How do you focus your time as president? What do you do all day?  

Mr. Khaghani: That is a great question! In my opinion, the key to success for any leader is to maximize the efficiency and output of your colleagues. At every interaction, I am thinking, “how can I make sure that everyone has a very clear understanding of what they need to do for us to be a successful organization”. A focus on process drives scalability and that is critical for a growing company like ours. To achieve our goals and execute on our vision over the next four to five years, we have to make sure that everything we do is grounded in process - in a mechanism that is going to be scalable for the future. It is not simply getting through the day and getting through a check list, I try to focus on adding clarity to everyone’s roles and responsibilities and let them know their value to the organization.      

CEOCFO: Why should people pay attention to NextStep? Why should NextStep jump out from the crowd?  

Mr. Khaghani: Most of the truly impactful products and technology in orthopedics has come out of small and medium sized companies. We believe the innovative solutions we are working on today are going to have a major impact in orthopedics in the next two to three years.

CEOCFO: What, if anything, might people miss when they look at NextStep that should be recognized?  

Mr. Khaghani: NextStep is at a really interesting point in its history. We have made it through the early startup phase and are currently in full commercialization mode of our hip system. We have some very exciting products in our pipeline and are actively investing in next generation solutions to improve patient lives. A company is defined externally by its identity and internally by its culture. We have covered in some detail the identity of the company and how we intend to serve patients and the orthopedic market over the next 5 years. Equally as important is the culture we are building internally to execute on this vision. I feel privileged every day to come in and work with an extremely talented group of colleagues who genuinely care about improving patient lives. We are building a family and a company, and I know we will look back years from now with a great sense of pride and satisfaction in what we are about to accomplish.

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