Jeffrey Schwartz has spent much of his working life in his chemistry lab at Princeton University — thinking up compounds, making compounds, and testing compounds. For someone who is not a chemist, that may not sound very exciting, but earlier in his career Schwartz discovered something that made chemical history, and he is working on another technology that could make medical history.
The first discovery, some 35 years ago, was a compound for zirconocene hydrochloride that was named after him (“Schwartz’s reagent”). To the delight of organic chemists, the compound added to the arsenal of reagents available to them.
Schwartz’s current project has the potential to delight anyone who needs any kind of implant — a hip replacement, a knee replacement, a stent, a catheter, a shunt, or even a dental implant. We’re talking millions of people. From football players to grandmothers, one out of every 100 people will get an implant this year. And one of every six implant recipients suffers from complications — loosening or infection — which could result in additional operations. Even when the surgery is successful, implants wear out in about 15 years.
To make better implants has been Schwartz’s dream for more than a decade, ever since he experienced his own severe back problems. Schwartz’s Princeton lab has a grant from the National Football League for technology to reconstruct torn ligaments. With Gregory Lutz, a physiatrist at the Hospital for Special Surgery in New York, he co-founded Orthobond, which has a medical device coating technology. Yet after six years, Orthobond had raised $4 million and had yet to get a product on the market.
In November, 2008, Arthur Alfaro, a successful serial entrepreneur who had co-founded three other companies, took over as CEO, and Orthobond took a turn for the better. On August 28 it signed a deal with San Diego-based Provenance Partners LLC to use the technology in microarray analysis.
Of the many potential uses for Orthobond’s technology, it will focus first on orthopedics. By 2014 the company predicts its sales will reach $98 million “at extremely high gross margins,” according to Alfaro. Orthobond seeks a place in the medical device coating technology industry estimated to be worth $4.8 billion now, and according to BCC Research that market will reach $7.5 billion in five years.
Last month Alfaro moved Orthobond from 7 Deer Park Drive to the New Jersey Technology Center, space previously occupied by a company that he had co-founded, Orthocon. “Orthobond needed a more professional space, with regard to image and being able to conduct the work, and be associated with other companies,” says Alfaro. The location is convenient. And Orthocon had worked very well with the Tech Center. It is something the state of New Jersey does very well.”
In its new 2,000-square-foot headquarters Orthobond has four full-time and two part-time employees. It has three more companies interested in licensing some of its technology, and it hopes to have products on the market by next year. “Even though we feel we have the best technology out there,” says Lutz in a telephone interview from his Nantucket vacation spot, “we needed a lot of data to convince a strategic partner to buy in. I think we are very close to some deals, but it has been a very long road.”
The Schwartz team says the technology is fundamentally different from anything ever tried before. How does it work? In the joint replacement arena, Schwartz and his Princeton University cohort, molecular biologist Jean Schwarzbauer, used surface chemistry to create a nano coating that will bind to titanium. Osteoblasts (bone-generating cells) cover and mineralize the titanium, so it is covered with a calcium phospate material. Then, in animal trials at the Mayo Clinic and the Hospital for Special Surgery, they proved that the body will not automatically reject these implants; rather, bones grow rapidly on them. More animal trials are needed.
Orthobond’s trick of taking an inert material and changing the surface chemistry to impart biologic characteristics uses Self-Assembled Monolayers of Phosphonates or SAMPs. (Phosphonate is a chemical class of phosphorous compounds with three oxygens and one carbon bonded directly to the phosphorus.) “SAMP makes coatings so thin that you don’t compromise the architecture,” says Schwartz.
To put the coating on a metallic substrate takes about an hour of processing followed by a heating step, which could take overnight. Polymers require a three-step process that takes a couple of hours. Then, growing bone on that surface is controlled by the biology of the system, and in previous tests bone growth started within a few days.
Though SAMP can work on titanium, it can work more dramatically on other materials. For instance, SAMP can be applied to bone replacements made of a polymer called PEEK, a kind of hard plastic, which can “act” more like real bone than titanium does, perhaps enabling PEEK implants to last longer in the body. By itself, PEEK has minimal osteoconductivity, the ability to grow cells. But with the SAMP coating, many times more cells grow on PEEK than on implant-grade titanium. “Lots of major companies asked if we could make PEEK osteoconductive,” says Lutz. “Then we couldn’t, now we can. We have a proprietary method.”
SAMP is not just a coating: it’s a covalently bonded surface, and it has innumerable potential applications. For instance, Alfaro is working with two major cardio rhythm management companies on a license to covalently bond a super-lubricious coating to catheters. The super-lubricious coating would facilitate the implantation of pacemaker leads, since it would pass through tissue so much more easily. Potentially, it would also facilitate the removal of the leads that need to be replaced years later.
These and other companies are also looking to use the SAMP technology to make their implants anti-infective. “This is a hot issue in the medical device industry, since hospitals are no longer reimbursed for hospital-acquired infections,” says Alfaro. In addition to the personal toll, these infections can cost the hospital more than $100,000 to treat a single patient.
For the Provenance Partners contract, SAMP will be used to perform sets of miniaturized tests of DNA fragments, antibodies, or proteins. “Since the SAMP technology provides a highly uniform surface, the microarray analysis is far more efficient and accurate,” Alfaro says. “Because of this, and because SAMP also provides a more robust bonding to the glass slide, we will be able to drive down costs and change the basis of competition in the highly competitive microarray market.” Orthobond will receive royalties, development, and processing fees from its joint venture with Provenance Partners. (Princeton University will reap a percentage of the royalties.)
Alfaro says the company’s R&D will zero in on osteoconductive applications despite an amazing array of possibilities. Further into the future, SAMP could be employed to deliver cancer drugs to targeted cells much more effectively than current therapies. In the near future, the first product on the market may very well be a form of dental implant. “The regulatory pathway is not as onerous, and there is not much direct competition,” says Lutz. “There is quite an appetite among dental companies to acquire our covalently bonded nanotechnology.”
Schwartz and Lutz didn’t exactly stumble across the technology — there were a lot of long hours in the lab — but luck did help them stumble across the need. For instance, it was definitely luck that Lutz married Paula Gibson, who as a teenager was a babysitter for the Schwartz family’s two sons. So when Schwartz had a back problem, he went to Lutz’s Research Park office.
A native of Wayne, Lutz is the son of a psychiatrist and a nurse, and he and his four siblings all went to medical school. Lutz graduated from Drew University, where he met his future wife, went to medical school at Georgetown, and did a Mayo Clinic residency, ending up at the prestigious Hospital for Special Surgery (HSS) in Manhattan, where he is physiatrist in chief and an associate professor at New York Presbyterian Hospital. He focuses on non-operative solutions to sports injuries, especially spinal problems, like the one Schwartz brought to Research Park, where he shares an office with his brother, Chris, who is also a physiatrist at HSS.
At his appointment Schwartz chatted with Lutz about a disagreement he had with a visiting French scientist who lectured on titanium implants. “Your English is excellent,” he had told the man with his characteristic asperity, “but your science is not.”
Schwartz informed Lutz that, as an expert in surface chemistry, he could find a better way to entice living cells to adhere to a steel rod or an artificial hip, and Lutz dared him to try. “I said, ‘you’re an MIT graduate, prove it,’” Lutz remembers. With his organometallic chemistry background Schwartz began to look at ways to interface synthetics such as metals with organics, stitching the organic to the substrate.
It was also luck that each of the students in Schwartz’s lab had a relative with an implant — a trauma pin, a dental implant, a jaw that had been pinned, a parent with an artificial hip — so there was lots of personal involvement. They set to work with enthusiasm, studying the literature and basically starting from scratch to build a surface treatment fundamentally different from anything else ever done.
“It was based on sound science,” says Lutz. “He built a firm foundation for a coating to bind to an implant that would resist the degradative forces of the body. When the titanium was completely covered with calcium, it gave us enough confidence that Jeff was on to something.”
The biologists on the team were not surprised that they could grow cells, but the chemists were completely amazed. To celebrate, Schwartz went to his favorite French pastry shop, the Little Chef on Tulane Street, for a fancy cake. Something of a Francophile, Schwartz is always yearning for the next trip to France, his favorite destination since he was a teenager, when he spent the summer in Paris with relatives. Cakes became a celebratory tradition.
It may not have been luck, but it was certainly good fortune that Lutz and Schwartz had excellent contacts. Lutz’s brother Chris had been All-American in football at Princeton. The team physician for the New York Giants, Russell Warren, is chief of sports medicine at HSS and on the Orthobond board. Other board members are David Helfett, a trauma surgeon at HSS, Eric Milledge, formerly a company group chairman at J&J, Donald Young, the CFO and former chairman of Invesco’s Global Structured Products group managing $23 billion, and Lisa D’Urso, an investment manager and former principal of a New York supermarket.
Lutz inherited some money that he invested in the young company. His father, German born, was an avid mountain climber and taught the sport to his sons, often climbing in Austria. When he was in his early 60s he went to Austria to climb a familiar mountain — and did not survive. Lutz’s mother died soon afterward. “They worked so hard to put us all through medical school,” he says, “and they didn’t get to enjoy it. I put my inheritance into this firm because I know they would have supported it. It will be their legacy.”
When Orthobond looked like it was going to run out of money, one of the board members who had worked with Alfaro at another company suggested that Alfaro step in. “We felt we needed someone with business experience,” says Schwartz. “Not realizing that was part of our learning curve.”
A native of North Jersey, where his father was a truck driver, Alfaro graduated in 1975 from the University of Maryland and has an MBA from Fairleigh Dickinson. He has six children. After a decade at Ethicon, Johnson & Johnson’s medical device firm, he worked for two other medical device firms and was president of three other companies, including Orthocon. He remains a shareholder there but is no longer associated with management. (This year Orthocon landed $25 million in venture capital, said to be the biggest influx of VC money in the greater New York area, and in July it moved from the New Jersey Technology Center in North Brunswick to NJIT facilities in Newark. See accompanying story, page 35.) Before that Alfaro had been president of Eatontown-based Osteotech.
Alfaro brought along his long-time cohort, Marc Burel, now vice president of business development. Alfaro and Burel are full time, as are Jimmy Lin, the director of product development, and senior chemist Randy Clevenger. As Alfaro reaps investors for a third round of funding, he says the board has been very careful to protect the initial investors. That’s because early on, the young company had been sustained almost completely by “friends and family” contributions. After all, until the recent success of the animal trials, the technology was only a theory.
Orthobond did get an Edison Investment Grant plus about $600,000 in grants from the state, but most of its income came from $2.5 million in seed funding in 2005, followed by another funding round of $1.5 million. Alfaro says he is closing on $1.5 million in convertible debt and claims it may actually be oversubscribed. Now that he has signed the first deal, his goal is for Orthobond to be self-funded.
Like any new technology, Orthobond can expect to get resistance from companies that have invested in current technology. For instance, Stryker Orthopedics in Mahway, and Johnson & Johnson’s DePuy in Massachusetts use hydroxyapatite coatings. And Alfaro says there is quite a bit of R&D in how to grow bone with peptides, polypeptides (protein), and small molecule therapies.
After nearly 40 years at Princeton, Jeffrey Schwartz is chomping on the bit against the restrictions of academe. Schwartz grew up as the middle brother in Dobbs Ferry, a suburb of New York, where his father was an attorney and his grandfather had a factory in the garment district. After working in his grandfather’s factory as a teenager, Schwartz graduated from MIT in 1966, earned his PhD from Stanford, and came to Princeton in 1970. He and his wife, a retired Rider University administrator, have two grown sons, one who is an attorney and one who works at Princeton University Press.
Interviewed in his office, piled high with books and papers, Schwartz shows the 12-foot shelf stocked with bound PhD theses of the students he supervised. In the last two years he graduated five PhDs and is in the process of replacing them, and he generally has four undergraduates under his wing.
That’s what he likes to do — teach, work with students, and be in the lab. He decries the paperwork, bureaucracy, and grantwriting that accompany academic success, and he points to a framed copy of a page from the Gutenberg Bible that he bought on a trip to Mainz, Germany. The page he chose to frame: The first chapter of the book of Job.
Orthobond is not his only focus. Funding from the National Football League to design a new anterior cruciate ligament (frequently ruined by athletes) is for his lab, not for the company. He has a stake in the success of another firm, Universal Display Corporation, a now public firm that sprouted in the Princeton lab of Steve Forrest. Early in UDC’s development, Schwartz solved one of its technical problems.
Schwartz is not willing to admit that he was fated to make the Orthobond discovery. “Luck always plays a role,” he says. “You can think things through, but whether they work or not, luck has a good deal to do with this. Compared to chemistry, there are a lot of unknowns in biology. Look at the pharmaceutical industry. You can plan and plan and plan and nothing comes of it. Was I fated to do this? No, I don’t think so. To make it work was not luck, there was a lot of chemistry in there.”
“Who is ever satisfied in science? You always wish you could do more,” says Schwartz. He is certainly busy. On this August day, three weeks before the undergraduates return, people are popping in and out of his office. He’s editing a post-doc proposal for a departing PhD (“You haven’t told them what you can do that’s different from the next person”) and plotting with Clevenger and Burel about the next steps for making super-lubricious coatings.
“I started this at age 52 and I’m now 64,” says Schwartz. He gets his energy from the prospect of pairing his knowledge with the expertise of someone in another field. “When you push the envelope of what you know, maybe together you can make synergy. You can make new things when you combine two ostensibly unrelated things.”
But in the back of his mind is the problem of backs — his back and everybody else’s that needs help. To fend off debilitating pain he does an hour of stretching every morning, and he works out at Dillon Gym three times a week.
His biggest concern: “We need a lot more animal data to do what we need to do. When we design the test one way, a prospective licensee says you should have done it this way.” His least concern: The potential dilution of his stock in the company, as more investors buy in. “We shouldn’t worry about dilution. We should worry about progress.”
His biggest surprise: That you never have enough data when you go out to prospective clients. What looks good as technology may not look good as a business.
In contrast to the helpful behavior of the 20-some angel investors, many of whom are doctors, Schwartz was taken aback by the attitudes of some of the potential partner companies. As he went around to companies making funding pitches, they were asking what he considered the “wrong” questions. As he talks about it, he shakes his head in disbelief. Instead of asking “How will this help patients?” they wanted to know, “How will this improve our profit margin?”
Yes, there must be a profit motive, but Schwartz hopes against hope that his discovery will be something that people can use, something that works. “I would like to bring out a product that is better than what people use now,” says Schwartz. “I want to do something that helps people’s health.”
Orthobond, 675 Route 1 South, Technology Center of NJ, North Brunswick 08902. 732-729-6235, fax 732-683-9476. www.orthobond.com.