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One Liner: Trace Orthopedics is pioneering needle-based fixation, the future of tendon repair.

Problem: Partially torn tendons are painful and impede daily activity, yet often go untreated because repair typically requires invasive surgery with associated risk, cost and long recovery. Conservative treatments (e.g. pain management) are available but have not been proven effective in restoring function. Poor mobility brings down the quality of life. Patient groups with musculoskeletal injuries form a dramatically underserved addressable market population. The tendons around the body and their attachments to bones become damaged with both aging and trauma – often tearing away partially. The only viable repair methods involve open or arthroscopic surgery, a deterrent for many patient populations in need of soft tissue-to-bone reattachment.

About Us: Trace Orthopedics will achieve repair of certain torn tendons, ligaments and fascia to bone without an incision and using only local anesthetic and conscious sedation. Our proposed device is a specially designed screw and wire coil implant to quickly repair these injuries using imaging guidance through a percutaneous needle, eliminating the need for costly or debilitating surgeries. Our first indications include rotator cuff and gluteus tendons. In the United States, 33 million musculoskeletal injuries have been reported per year, 50% involving tendon and ligament injuries. General call points include Interventional Musculoskeletal Radiologists and Orthopedic Surgeons. Current or potential/target customers include the eleven commitments received by Dr. Morrison, representing the primary candidates for our alpha launch. Our customers are the providers of tendon repair procedures. The hospitals/surgical centers will be attracted by the CPT reimbursement codes, decompression of overbooked surgical suites and increased patient volume.

Highlights

We have achieved the following critical steps:

On track to submit for FDA 510K clearance in Q2 2023
Produced prototypes and demonstrated function in human cadavers
Validated market opportunity through clinician interviews and lined up alpha test sites
Secured patent rights, first US patent issued

Business Model: The Trace Ortho revenue model flows from selling single-use procedure-based products to hospitals and surgical centers. Each tendon repair case using the Trace fastener and procedure equates to a single sale of the product kit. The initial estimate is a unit price of $800 for the system kit, consisting of a pre-loaded fastener implant and single-use implantation needle per procedure plus a surgical tray. The average margin of orthopedic devices has been reported at 73.6%[1]; thus the COGS target assumption is $211.20/product kit. This serves as a preliminary benchmark while confirming the actual costs of production, sales, and corresponding activities.

In the context of the overall payment scheme, Trace resides at the end of the waterfall. The primary payment comes from medical reimbursement supplied in association with a procedure classification. The health care services coding system is regulated by the Centers of Medicare and Medicaid Services (CMS)[2]. CMS established the recognized Current Procedural Terminology (CPT) coding system which pays for when the procedure is performed. The CPT codes comprise the Level I Healthcare Common Procedures Coding System (HCPCS)[3]. Level II of HCPCS covers supplies used to perform the billable procedure.

[1] Yang BW. Orthopaedic Device Approval Through the 510(k) Versus Premarket Approval Process: A Financial Feasibility Analysis. 5/2019
[2] https://www.ama-assn.org/practice-management/cpt
[3] https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo/HCPCS_Coding_Questions

Quote

Trace Ortho’s novel tendon fixation device solves the major problems of existing devices for treating partial tendon tears. The device’s advantages are:

Implantation through minimally invasive needle insertion (no open surgery), therefore will not require surgery/arthroscopy to utilize, reducing medical costs for OR/surgery suite usage
Immediate fixation of partially torn tendon will immediately reduce pain, while allowing use of limb after implantation
Patentable device design provides consistent tendon compression against the bone, while drawing the tendon tissue into the anchor hole, facilitating more complete and rapid healing
Novel design is unlikely to break, pull out or cause tendon tears like common suture anchors eliminating need for repeat treatments and re-hospitalizations
Cost of device and simplicity of implantation will allow for a significant proportion of partial tear patients to finally receive curative care that will substantially improve quality of life for patients

This combination of characteristics will allow the Trace Ortho device to become the preferred/first line-choice for treating partial tendon tears in major joints. The current gold standard in soft tissue-to-bone fixation is the suture anchor, historically performed as an open surgical procedure. Presently, this is the only truly viable option for effective repair and is routinely deployed in cases of full tendon tear. While partial tendon tears can result in tremendous pain for years, repairing them is not considered worth the associated cost and risk of surgery if they are likely to progress to a full tear in the future. Therefore patients are left with few options for dealing with their painful partial tears due to clinician reticence surrounding the risks of performing surgery prematurely on partial tears.

Revenue To Date

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MRR

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Revenue YTD

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Burn Rate

$75K

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CAC

$90.10

LTV

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Churn

N/A

Margins

73.6%

Business Strategy: Trace Orthopedics will utilize an outsourced sales group for support within the commercial launch of the Trace tendon fastener. This effort will be led by the future VP of Sales and Marketing of Trace in collaboration with the future Chief Medical Officer and corresponding support staff. Initially we are focused on the interventional musculoskeletal radiology community, beginning with 2 territories exploiting current relationships with KOLs (Key Opinion Leaders) accustomed to new technology.

PHASE I (Pre-Launch): Limited products will be given away to obtain case experience, training, and marketing tools.

PHASE II (Alpha Launch): Convert these sites to commercial customers and rapidly expand the territories. Simultaneously develop a marketing effort that contains the collections of case summaries and journal publications, a robust social media and website strategy, and a strong medical advisory board.

PHASE III (Full Launch): The full commercial launch will increase sales territories, progressive training platform, publishing and speaking agenda, and scale-up logistics. Sales strategy will include simultaneous attention to national accounts, hospitals (large volume and long sales cycle) and surgery centers - (short sales cycle with immediate cash flow).

Competitive Analysys: Current standard of care is non-operative treatment - pain management via meds, injection, ablation Last resorts are assistive living devices. Standard tendon fixation involves a suture anchor, for which the market is mature. This is the only truly viable
option for effective repair today, and over 200 suture anchor products have been cleared by the FDA for open or arthroscopic surgery. However, this is an indirect competitor to the Trace product as standard fixation is an open surgical procedure, whereas Trace’s fastener is designed to prevent progression to full-thickness tears without the need for open surgical implantation. Trace will compete more directly with the likes of Tenex percutaneous ultrasonic tenotomy, which has gained widespread adoption, even though its long term effectiveness is questionable. Tenotomy involves an image-guided needle insertion for scar tissue ablation and removal. Percutaneous PRP injection is also a widely used treatment for temporary pain relief. Key players from adjacent verticals of the competitive landscape are listed below.

INTERVENTIONAL TREATMENT
HydroCision TenJet
TendoNova
Trice Medical Tenex
Sonex

INTERVENTIONAL REPAIR
Trace Orthopedics

SURGICAL REPAIR
Arthrex
Parcus Medical
Conmed Linvatec
Smith & Nephew
J&J (Depuy Synthes, Ethicon)
Stryker
Medtronic
Zimmer Biomet

Competitor	Website
Arthrex	arthrex.com
Tenex	tenex.com

Networking: We are open to meeting up to grab a coffee, or just to chat. We would really enjoy your feedback and insight into our venture and would be happy to discuss anything that you are currently working on to see if we can be of service!

Name	Amount
Amount Left	$535,000.00
Amount Raised (This Round)	$965,000.00
Amount Raise To Date	$1.38M
Investment Type	N/A
Type of Raise	Equity

Trace Orthopedics

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