CIBC Innovation Banking Podcast

Michael: [00:00:01] On this episode, I offer you a heartwarming David and Goliath tale about the son of a surgeon who watched Dad work only to get into the family business by improving upon the tools of his forefathers. [00:00:12][10.9]

Armen: [00:00:13] My dad was very blunt in saying that orthopedic surgeons, you know, sometimes they do make mistakes. And it would be great to have a device or a technology that helps, helps them improve the outcomes of their patients and helps avoid mistakes. [00:00:28][15.4]

Michael: [00:00:34] Hello, I'm Michael Hainsworth. The CIBC Innovation Banking podcast explores the world of startups, growth stage companies and late stage companies that have made a big splash in their industries around the world. [00:00:45][11.6]

Michael: [00:00:54] Armen Bakirtzian's Intellijoint Surgical offers smart navigation for joint replacement surgery, the precision Bakirtzian's tools provide ensure patients aren't readmitted over improperly installed replacements or need a little lift in one shoe thanks to a leg length change. Bakirtzian didn't intend to get into the family business. But in a roundabout sort of way he did. [00:01:18][23.4]

Armen: [00:01:19] I mean, having an orthopedic surgeon as a father, you almost get conditioned to like medicine and to like orthopedics. Actually, first time it was in the operating room, I was a young boy at eight years old watching an ankle plate for the first time. So it was something that's been ingrained in my mind for a long time. And of course, I've always had interest in medicine, interest in how people move and function, and I've always been attracted to engineering as well. So orthopedics is a great combination of medicine and engineering. [00:01:49][30.3]

Michael: [00:01:50] It sort of reminds me of the stereotype of the kid helping Dad with the car. He's going to hold a flashlight. You had a very medical 20th century version of that experience. [00:01:59][9.5]

Armen: [00:02:00] It started out of a need. My dad is an orthopedic surgeon and orthopedic surgeons doing hip and knee replacements, had to rely on their training and their judgment in order to make sure the procedure goes really well. And my dad was very blunt in saying that orthopedic surgeons, you know, sometimes they do make mistakes. And it would be great to have a device or a technology that helps, helps them improve the outcomes of their patients and helps avoid mistakes. [00:02:28][28.2]

Michael: [00:02:29] But ultimately, you went into the business more from an engineering perspective and help us understand as to what got that minimal viable product off the ground in the first place. [00:02:40][11.2]

Armen: [00:02:42] It really started from a need, orthopedic surgeons doing hip and knee replacement surgeries, want to deliver the best possible care for their patients. And we wanted to create a device that helped them do that. But of course, that didn't violate some of the other things that orthopedic surgeons and hospitals care about, which is ease of use, which is speed, which is integration with workflow. So we really did take an engineering approach to solve a real problem. And after we started the company in 2010, it took us just over three years to go from prototype to an approved medical device that was being used in surgery for the first time. So listening to orthopedic surgeons, listening to their needs and to their problems and to their constraints and really treating it as an engineering problem is what helped us get there. [00:03:32][50.1]

Michael: [00:03:33] But what made you think you knew better than the established competitors, like a Medtronic or a Zimmer? [00:03:39][6.1]

Armen: [00:03:41] Um, yeah. I mean, that's a good point. And I think entrepreneurs inherently are optimistic. They are focused on solving problems. And I think they don't shy away from any challenges. And, of course, entering into a market with titans like Medtronic and Zimmer Biomet and Strykers, of course, I think that's the mindset you must have because otherwise you probably wouldn't get started in the first place. So, you know, I don't think we knew better than than them. I think our approach was a bit different that we didn't consider just the clinical problems, but we also considered the environment in which that care is delivered. And we understood that older navigation devices violated some of those really important things that surgeons and hospitals care about, which is why they didn't, unfortunately, get adopted the way that they deserved. So when we started out, we wanted to ensure that that core value was preserved. But at the same time, we didn't violate those things that traditional navigation violated. So I think our scope was a bit broader. We were focused not only on the clinical benefit, but also the integration with the workflow and the integration into what hospitals and orthopedic surgeons are currently doing. [00:04:56][75.5]

Michael: [00:05:00] The medical community is notoriously conservative about making new bets. Building a better medical mousetrap is no guarantee surgeons will beat a path to your door. But with more than a decade under its belt already, how did Intellijoint succeed in getting its gear installed in operating rooms across Canada and the United States? And how do you fight established competitors for that coveted OR shelf space? [00:05:24][24.3]

Armen: [00:05:29] In our case, we aren't necessarily fighting the Goliaths, we're fighting really the fact that most orthopedic surgeons today do not use navigation or robotics in their procedures, they rely on their training, and their judgment. And historically, that has provided a good outcome for patients. But we view it as there is room for improvement. The procedure is not perfect. And really what we're trying to encourage and convinced is that orthopedic surgeons can benefit and their patients can benefit from adopting our technology. And since we don't really get in their way while they're doing the surgery, our opinion is why shouldn't they use us on every procedure? Because it's easier to get fooled than you think. A patient is underneath the drape. They have such a small opening that the surgeon can see, the patient moves under the drape, and unfortunately, surgeons can get fooled by things like this. And it's really the technology that helps them in bounds, if you will, while they're positioning implants or they're trying to select the size of their implants. [00:06:38][68.9]

Michael: [00:06:39] So then I can imagine the role of early adopters in your technology is pretty critical, the way they would almost act as evangelists for the work you're doing. [00:06:48][9.4]

Armen: [00:06:49] Of course. And I think in every industry, in every sector, there are champions, there are early adopters. And that is probably one of the most important things going into medical devices, because having a colleague speak to another surgeon, speak to the benefits of a technology, ultimately, that's the strongest pitch that can be made to a prospective customer. And we not only had those surgeons adopt our products first, they were also our designers. These early adopter surgeons can make the mental leap that if I placed implants in the body more accurately, my patients are going to do better. Whereas the later adopters want to see more clinical evidence, they want to see economic data and things like that. So the evangelists, the key opinion leading surgeons are extremely important in design. They're extremely important in early adoption, and they're extremely important in generating that clinical research that ultimately leads to broader adoption in the marketplace. [00:07:54][64.3]

Michael: [00:07:56] You mentioned though the economics of it as well. What role does that play in a decision by a doctor or a hospital in deciding to go with your technology? [00:08:05][8.9]

Armen: [00:08:06] It's an important consideration. And where we have innovated is not only in the technology itself, but the technology enables a different business model for us. So, for example, we do not charge hospitals any capital. Intellijoint can come into a hospital and we can start doing procedures without a capital purchase being made by the hospital. We simply charge a fee every time the device is used. So that makes it an easier decision for hospitals. But ultimately, the surgeon is the champion. They are advocating to the hospital for the adoption of a particular technology, and it's really incumbent on the company and the surgeon to show not only does it provide clinical benefit, but it provides economic benefit as well. And as the health care systems around the world become more focused on value based procurements, that's what they want to achieve. They want to achieve clinical benefit and economic benefits. Unfortunately, one or the other generally is not enough. You need to do both. [00:09:07][61.5]

Michael: [00:09:08] That's fascinating that you've built a technology that instead of saying this is a five hundred thousand dollar piece of equipment or what have you, that instead it's more of surgery is a service. It's SAAS turned on its ear. Is this the future of your line of work of the medical technology community is a recurring revenue model this way? [00:09:31][22.6]

Armen: [00:09:32] It's definitely what we've seen more of in the marketplace. I think it makes sense for a reason. It's lower risk to adopt from a hospital's perspective. Yes, maybe it's a little bit more risk from the company's perspective because they're placing equipment without having it paid for. But ultimately, in the long run, we earn more margin. So it is beneficial for us in the long run, it's beneficial for the hospital in the short term, and it actually has no risk to the hospital because if they want to stop using at any point, they haven't purchased a five hundred thousand piece of equipment that's, what are they going to do with it after that point? So it provides an easier pathway to adoption and provides better long term returns for the company. And it allows the company to generate recurring revenue, which is inherently more valuable than capital revenue. [00:10:20][48.1]

Michael: [00:10:21] So once you've convinced a surgeon or a surgeon group to work with them and that this not only is a technology that works, but it's also financially viable, how do you go about mobilizing these surgical opinion leaders? [00:10:33][12.7]

Armen: [00:10:35] I think at first surgeons take that leap of faith that, for example, in our case, if I placed my implants with more accuracy, my patients are going to do better. Then as they adopt and use the technology and they actually see those benefits and those results themselves. I think inherently surgeons and doctors in general want to deliver the best care for patients. Yes, for their own patients, but for the patient community at large. So if they see that something they've adopted, something that they're doing is benefiting their patients, I believe they want to share that with their colleagues. They want to share that with other surgeons from other thought centers. They want to do clinical research that shows that their institution or themselves are also thought leaders by adopting early technology and translating that adoption into clinical and economic benefits. So surgeons are wants to deliver the best possible care. They are competitive. So all of these factors really empower surgeons to be champions of technologies and devices that really benefit their patients. And I think that's what gets them excited. [00:11:46][71.0]

Michael: [00:11:48] So then as an entrepreneur who is mobilizing these people to fly the flag on your behalf, let's talk about that other hat that you have to wear, because the job of engineer very different than the job of entrepreneur. And you once told me that when it comes to that side of your job on day one, at the beginning, ignorance was bliss. You didn't know how hard that road would be. [00:12:12][24.2]

Armen: [00:12:13] In our case, ignorance was definitely bliss in the beginning. In hindsight, now, almost 11 years later, I don't think we would do anything different. For me, the big part is that we are actually making such a positive impact on people's lives. And yes, there's been tons of challenges over the years. There's been peaks. There's been troughs in our journey. Ultimately, what puts a big smile on our face is seeing videos of surgeons posting of their patients postoperatively that they're up and walking on the same day, that the legs are the same length, that they don't have any complications or any issues. So definitely ignorance is bliss early on. But I think seeing results is what keeps the motivation high and keeps us really focused on building this business into the future. [00:13:00][47.2]

Michael: [00:13:05] Being a small startup certainly gives a company an advantage over the monolithic, established players. Being nimble means reacting to change more quickly, responding to criticism and recommendations with speed and looking for avenues into a competitive space where there's a demand but little supply. But startups are rife with unexpected early challenges on the path to disruption. Armen says everything from fundraising to building that better mousetrap had tricks and traps of their own. [00:13:34][28.8]

Michael: [00:13:40] So then let's go from ignorance to knowledge. What were some of those early, unexpected challenges you spoke of, of being a small, disruptive technology company in this space? [00:13:50][9.9]

Armen: [00:13:52] That's a great question. And I have to pick because there was tons of them. I would say if I could pick on two, it would be fundraising as a medical device company. And second, it would be creating a medical device just in general. Fortunately, that medical device companies can't just whip up something in the lab and post it online and have users use it. So there's a lot more rigor that that goes into that type of testing, that type of product development. There's a lot more constraints, a lot more structure around how you develop a product in a medical environment versus outside of the medical environments. So I think that was a big challenge for us. And we were fortunate to be introduced to someone who had done that before that really coached us and guided us. And we've really taken that experience that we've gained over the years and try to retain that experience in Canada, in our ecosystem, in Kitchener and Waterloo, because there are few medical device companies that have that experience. Canada is not necessarily well known for creating and commercializing medical devices. So we actually learned from folks in the US and we kind of imported that knowledge into our team. We retained our company in Kitchener over the years and now we're trying to pay it forward and really trying to educate the next generation of startup on what it takes to develop and commercialize a medical device globally. [00:15:24][92.4]

Michael: [00:15:25] So you've gone from leveraging mentors to help you get going in those first 11 years to being a mentor yourself? [00:15:31][5.3]

Armen: [00:15:31] Yes. I mean, we think it's important to to really guide the next generation of company, the benefits to patients, the benefits to our local economy, the benefits to our ecosystem and the benefits to our country for commercializing a medical technology company at home are tremendous. And we want more of those types of stories. We want more companies domiciled in Canada. We want more companies commercializing from Canada and selling their products all over the world. [00:16:05][33.4]

Michael: [00:16:05] You're trying to do all of this amid the worst pandemic in more than one hundred years. How is this impacted your ability to build out your roadmap? [00:16:15][9.5]

Armen: [00:16:16] That's a great question. And I think the the response is really dependent on what stage companies are at. In our case, we are a revenue generating company. So with the pandemic and elective procedures being postponed, of course, that impacts our revenue. And really for us, that was a big challenge that we faced this summer. And that was true across all of our markets in Canada and the US and Australia, elective procedures were halted almost overnight. So it was a huge challenge for us. And I think our response was, first of all, to rally together as a team. Secondly, to be fully transparent, open and honest with the challenges that we're facing and the steps that we're taking to not only survive, but thrive in that kind of environment. And, you know, we talked earlier about ignorance being bliss and optimism being an important trait for entrepreneurs. And in this case, I think the opposite was beneficial, that we were extremely pessimistic and tried to be very negative about what the future could hold. And let's get prepared for that pessimistic case. And obviously, we hope that we are able to avoid it. But if it does bring itself to us, we're able to survive. And in our case, since we were able to avoid that pessimistic worst case, we were actually able to make deeper investments in our roadmap, in our team and our future in the second half of twenty twenty. And it's really thanks to the mindset of being pessimistic and preparing for that worst case scenario and really crossing your fingers and hoping that we're able to avoid it. [00:18:07][110.5]

Michael: [00:18:07] Here on the podcast, we've heard time and time again that it's critical, particularly during these, of course, unprecedented times, to be open and honest about the challenges that your company is facing and that we need to redefine success with our clients, with our investors. Did you do that? How did you go about doing that? [00:18:27][19.6]

Armen: [00:18:28] First of all, you hire intelligent people. I think not being transparent with them is one of the worst things you could do, you lose credibility in their eyes and maybe you lose credibility of anything else that you say to them after that. So in my opinion, being honest and open is critical to bring the team together in the time of significant challenge. Being a single group, a tight group standing shoulder to shoulder with your teammates is the most important. That's how you survive challenges like this. And to me, it was being open and honest that really enabled that type of mindset for our team. And, you know, like I said, they're not oblivious to what's going on out in the world. And I think they look to to their company. They look to their to their leader to really give them the cold, hard facts about what's going on. And that's the approach that we took. And I'm thankful that we did, because my my assessment and my honest opinion is that our team is closer now than we were a year ago before the pandemic started. [00:19:38][69.5]

Michael: [00:19:39] And what do you do to redefine success and to manage expectations with the investors? [00:19:44][4.4]

Armen: [00:19:46] I think being open and honest with them as well is is the right approach. I mean, we communicated early with our shareholders that this is the impact that we're currently facing today. We are not saying that we know exactly how it's going to play out in the future, but we know it will likely stay between these two goal posts. And this is how we'll survive and thrive in those two possible scenarios and ongoing and open communication in sequence after that initial message is what's continued to give us credibility in the eyes of our investors. [00:20:23][37.8]

Michael: [00:20:25] Tell me about the future post pandemic. There's so much talk about Industry 4.0, the Internet of Things 5G. The future is remote surgery, but it strikes me that the kind of work you're doing, the future is in the data that you would generate that could then be fed into machine learning systems and help doctors in a whole new way. [00:20:49][24.0]

Armen: [00:20:50] Of course, and I think that's what's very exciting about our future, is the amount of data that can be generated in medicine. Medicine has always been data rich. I think it hasn't necessarily been captured and it hasn't been organized and kept in mind. Yes, medical device companies and pharmaceutical companies will run clinical studies. They'll generate data, they'll organize and publish that data. But it is contained to a study. Maybe they'll look at three hundred patients in a study, maybe they'll look at a thousand patients. But then after that study is complete, they'll go out and do that therapy or that service or use that device on one hundred thousand patients or a million patients. And imagine the strength of the data that can be collected from that type of cohort. And then if you're able to analyze and mine that data and see, well, how did I treat this patient and how did they do? And then if you can do that hundreds of thousands of times, then you're able to really say, well, if I want this outcome, then I should do this service, I should do this input. And that's how you start to close the loop in and start to use outcomes to inform preoperative or our treatment decisions. [00:21:58][68.2]

Michael: [00:21:59] It fascinates me because it wasn't that long ago. And it's still, I'm sure, to a large degree the way it is today, that what we had was a chart and that chart sat in a cabinet. And we'd be lucky if the doctors had the time to analyze that data. The future is spitting out answers to serious problems. [00:22:19][20.3]

Armen: [00:22:20] Of course. And I think that's the we're in the digital revolution of health here. That's all of those charts getting are getting digitized and having access to that type of data and aggregating that data and mining that data is really what unlocks tremendous a tremendous value. Medicine tends to be a laggard, generally speaking, when it comes to technology, adoption. And I think we're seeing the value of really crossing that chasm in medicine, of going from paper based to digital and seeing all of the benefits that can be unlocked by that transformation. [00:22:54][34.2]

Michael: [00:22:55] So how does your dad feel about your success? [00:22:57][1.5]

Armen: [00:22:58] Well, of course, he's proud. I mean, he's biased. He's my dad. But I have to say, one of the proudest moments that that we've both had is when he did our first surgery in the United States in 2014. It's a really proud moment to be in the same operating room that we were in seven years before then, thinking out loud about the possibility of creating something that helped him and helped his colleagues deliver better outcomes for their patients. And being in his operating room seven years after that with a device that we had created and had the FDA clear, was really a tremendous moment for both of us. And we've been thankful to have many other successful milestones like that. And there are few things more rewarding than working with family and really advancing a profession and advancing an industry and keeping things close to home. It's been an unbelievable experience for me. Ultimately, patients are healthier. They're getting back to work faster. They're getting up on their feet faster. They don't have as many post-operative complications. Their legs are the same length. They're not dislocating after surgery. They're not going back for repeat surgeries. They're not going for extra physio or all the things that a patient would have to do if their outcome was not was not perfect or was not ideal. So in this industry, the sector is one of the most rewarding. And yes, we've had tons of challenges over the years. But like I said, happy patients solves a lot of things. [00:24:40][101.4]

Michael: [00:24:40] It must have felt remarkable for you as well watching Dad do that first surgery. It wasn't like you were holding the metaphorical flashlight, you built the metaphorical flashlight. [00:24:50][9.9]

Armen: [00:24:52] I mean, I was definitely not alone. Yes, I am an engineer. However, my co-founders are really where the technical talent lies. I've been super fortunate to be surrounded by extreme talent over the years and and significant intelligence. And I really am standing shoulders in the backs of my co-founders that really provide the technical talent and the technical know how. [00:25:18][25.6]

Michael: [00:25:18] Armen, thank you for your time and insight. [00:25:20][1.2]

Armen: [00:25:20] It's my pleasure, Michael. Thanks for having me. [00:25:21][1.4]

Michael: [00:25:25] Armen Bakirtzian is the CEO, director and co-founder of Intellijoint Surgical. Turning to thought leaders in your industry for insight and guidance is a key strategy used by startups to borrow the halo of angels within their world. Those leaders turned to mentors when their advice is acted upon and give the startup entrepreneur a leg up against the competition, big or small. And with the support of your industry as the Rock and David Sling, Goliath can be slayed and success can be achieved. [00:25:55][29.5]

Michael: [00:26:00] This has been the CIBC Innovation Banking podcast where we learn the secrets to innovation economy success from the entrepreneurs who are paving the way for the future. If you haven't already subscribe on Apple Podcasts, rate the show and tell us what you think with a review. I'm Michael Hainsworth. Thanks for listening. [00:26:00][0.0]

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