Northwood Implants

Northwood Implants LimitedCreating new medical treatments with bio-compatible implants

Richard Malczyk

Managing Director

Northwood Implants

Our First ApplicationThe Problem: Prominent Ears

• A psychologically distressing condition

• Patients suffer:– Teasing/bullying

– Loss of self-esteem

– Lack of self-confidence

• Most would prefer not to have them

Northwood Implants

An incision is made behindthe ear

The skin is degloved and suturesare inserted into the cartilage to

create a new shape

Ear Correction – today’s approach

Northwood Implants

Imagine a cross-sectionthrough an ear at the

level indicated

Ear Correction – today’s approach

The suture istightened and

the cartilage bends

SkullCartilage

A suture is insertedto bend the cartilageand produce a fold

Northwood Implants

Ear Correction – today’s approach

Sutures are inserted to pullthe cartilage into position

The sutures can be seenrecreating the antihelical fold

Northwood Implants

Post-surgery complications

Asymmetry of prominent earsSuture material extruding

from the ear 1 year post-op

Collapse of ear after infection

post-surgery

Keloid scars on both ears 2 years after

surgery

Northwood Implants

Ear Scaffoldswww.earscaffolds.com

• A new minimally-invasive surgical approach to correct prominent ears

• Ear Scaffolds transform a complex 1.5 hour surgical operation into a 10 min outpatients procedure

Northwood Implants

One (or 2) smallincisions are made on the

anterior skin of the ear.A small subcutaneoustunnel is made to allow

Ear Scaffolds to beinserted

A prominent eardue to absenceof the antihelical

fold

Ear Scaffolds areinserted & fixed

creating theantihelical fold

How Ear Scaffolds work

Northwood Implants

How Ear Scaffolds work

Northwood Implants

Patient FeedbackEar Scaffolds

• 100% preference for Ear Scaffolds• Key reasons:

– Less Surgery

– Faster recovery

– Quicker procedure + instant results

• Wider patient spectrum:– 50:50 male to female– 50% aged below 18 (rest up to age 60+)

• Low price sensitivity (other factors more important)

* Based on direct market research undertaken with 100 patients

Northwood Implants

Target Customers:Cosmetic Surgeons & Clinics

• 3 out of 4 surgeons willing to try it• Key reasons:

• Quicker procedure• Less complex• Less patient trauma

• 42% believe demand may increase• Significant cost reduction in fees (34%

+)• Positively received by top UK cosmetic

surgery centres:• Transform Medical Group• Spire Health• Nuffield Health• BMI Health group

* Based on direct market research undertaken with 270 UK surgeons & 66 clinics

Northwood Implants

UK Cosmetic Surgery Market

• UK Market Growth:• +42% in 2005

• +53% in 2006(Key Note Jan 2007)

• +42% in 2006

• +49% in 2007(Mintel Nov 2007)

• + 534% growth - last 5 years• Market value: £900M in 2007• Forecast to grow to £2.5Bn by 2011 (Mintel Nov 2007)

Forecast Value (£m)

0

500

1000

1500

2000

2500

3000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

£m

“Less invasive surgical techniques are driving growth” (Mintel Nov 2007)

Northwood Implants

Market PotentialProminent Ear Correction

• Approx 5% to 10% of the human population has prominent ears

Market Potential Otoplasties %

UK 3 Million 6,500 NHS3,000 Private

0.22%0.1%

US 15 Million 28,000 0.19%

Developed World

60 Million ?

Ear Scaffolds potential could be 10x or even 100x current demand by appealing to the majority.

(Analogy = Teeth brace)

Northwood Implants

UK Market DistributionCosmetic Clinics

Private Hospital Groups

(144)

Specialist Cosmetic Surgery Clinics (320)

Beauty Clinics & Medi-Spas (20,000)

Private Hospital Groups

(144)

Specialist Cosmetic Surgery Clinics (320)

Beauty Clinics & Medi-Spas (20,000)

Spire, BMI, Nuffield

Transform Medical Group & 200+ independents

Healthcare Commission Licensing

Target Market

Northwood Implants

Competition = current methodsThe AuriClam® Device

Lock

Cartilagefolded over

at antihelicalfold

The AuriClam® devicefolds the earcartilage by pushingup from behind

External Splints Otoplasty surgery Ear Scaffolds

• Relatively low cost

• Non-invasive

• Limited application

• Lengthy treatment period

• Low compliance rate

• Unreliable

• Broad age range (7 yrs+)

• Treats wide range of ear deformity

• Flexibility via different techniques

• Heavily dependant on surgeon skill & experience

• Risky: high post-op complication rate

• Outcome not guaranteed

• Instant results + predictable outcome

• Patient choice

• Less patient trauma

• Lower complication rate

• Foreign body

• May not fix extreme ear deformity

+

-

Northwood Implants

IPR Position

• National patent applications derived from [WO2007/0232964] covering EU and 11 other key national & economic territories

• IPR search confirms no barriers to commercial exploitation

• Extension of IPR portfolio will occur with further R&D

Northwood Implants

Business Model Partnership Approach

• Northwood Implants promotes & licences a novel ear correction procedure

• Limited access to Ear Scaffolds available only to licensed ‘Practitioners’

• Training/Certification Fee• Fee per procedure

– (Ear Scaffolds & accessories provided inclusive)

• Quality controls, practitioner approval & device distribution controlled by Northwood Implants

Northwood Implants

Partnership ModelBusiness Forecast

Year 1 Year 2 Year 3

Revenue 740 3,252 8,432

Gross Profit 692 3,056 8,045

GP% 93.5% 94% 95.4%

Overheads 845 1,683 3,042

Net Profit (loss) (153) 1,372 5,003

Franchise business

-1,000,000

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

Revenue Direct Costs Gross Profit Net Profit

Year 1

Year 2

Year 3

Northwood Implants

Business Model Partnership Approach

Pros• Potentially higher

profit• Protected market &

pricing• Greater control over

procedure quality & availability

• Lower-skilled practitioners possible

Cons• Unproven – no

precedents• Growth is constrained

by ability to train new practitioners

• Requires monitoring & controls

• Potential ‘abuse’ of inclusive pricing

Northwood Implants

Financials

£’000s 2009 2010 2011 2012 2013 2014

Revenue 740 3,252 8,432

Direct Costs 47 177 382

Gross Profit 692 3,074 8,049

Overhead 403 430 170 886 1,722 3,149

Net Profit (403) (430) (170) (196) 1,198 3,726

Product Development Phase Market Development Phase

• High Gross Margin

• Breakeven achieved by end of 1st year of sales

• Investment recovery within 2 years of starting sales

• Profit triples in the last 2 years

Northwood Implants

R&D DevelopmentCosts & Timescales

Design & development

Manuf

Animal Study

Tox

Human Study

Year 1 Year 2 Year 3

Costs: £420k £450k £200k

Total:

£1.07M

Northwood Implants

Funding requirementYear Investment Application

1 £400,000 Set up operations and start product development

2 £450,000 Complete product development, testing & validation

3 £150,000 Clinical Trials

4 £250,000 Market launch & pilot trials

Northwood Implants

PartnershipsHealth Enterprise East – founder stakeholder

• Continued IPR management and advice

West Hertfordshire NHS Hospitals Trust – founder stakeholder

• Facilities support for a clinical trial

Spire Healthcare Group

• Pilot trials of Ear Scaffolds in Private sector

Royal Free Hospital

• Pilot trials of Ear Scaffolds in the NHS

Northwood Implants

Management TeamNorbert Kang FRCS – Inventor, Founder, & CTO

• Extensive plastic surgery & medical innovation experience

• Considerable clinical trials experience

• Strong links with private hospitals, NHS & surgeon community

Richard Malczyk MBA – CEO

• Business management experience (start-up, marketing, finance, operations & legal)

• Programme management experience for new product introduction

• Global sales & marketing experience

Supported by:

Dr Paul Seabright of NHS Innovations East – Non-executive Director

• Extensive IP management & medical innovation development/commercialisation experience

ANO of West Herts Hospital Trust – Non-executive Director

• Extensive operational experience and contacts in the health sector

Northwood Implants

Milestones

Phase 1Near Past

(last 18 mths)• Experimentation

• IPR Protection• Market Research• Ear research

Phase 2NOW

• Business Plan• Company set-up• Fundraising

Phase 3Short Term

(2 to 3 yrs)• Product Devmt• CE marking• Clinical Trial• Marketing & PR (awareness)

Phase 4Mid Term(3 to 6 yrs)

• Market Devmt• UK pilot / launch• EC pilots/ launch• FDA approvals• Ear Scaffold 2.0

Phase 5Long Term

(6 yrs+)• US pilot / launch• ROW launch

Exit 1

Exit 2

Exit 3