I'm excited to present to you Osteal Therapeutics. We are a developer of antimicrobial therapeutics for orthopedic infections, and we focus on drug-device combinations. Fundamentally, what we are treating is the problem of biofilm infection. So biofilms, for those who aren't familiar, are these polymicrobial organisms that essentially consist of multiple species of bacteria. They form a shell over themselves, which protects them from the immune system and from systemic drugs like systemic antibiotics. This makes these infections incredibly difficult to treat. The common theme that you see across these types of infections is that these biofilms like to form on orthopedic implants. They form on foreign bodies, further isolating them because once they're sitting on the metal, they become disassociated from the bloodstream, making it even harder for the immune system and systemic antibiotics to reach them.

So, these markets break down into basically three big segments: periprosthetic joint infection (PJI), which includes infected hip and knee implants, some shoulders and elbows, spine, and trauma, specifically fracture-related infections. For Osteal, our initial market that we're going after is periprosthetic joint infection. It's about a 45,000 patient market worth about $3 billion, and today there are no approved products to treat PJI. Part of the reason PJI matters is that it's a killer. It has a five-year survival rate lower than breast cancer; in absolute numbers, one in five of these patients will be dead at the end of five years. The outcomes for these patients are poor, but they're also really bad for the healthcare system. They are incredibly expensive to treat, averaging over $190,000 a year for a typical PJI in direct healthcare spending, and in overall costs, it's well over half a million dollars. Those numbers are actually a little old; with inflation, that's probably more like $700,000.

The real issue in terms of treating these infections is that the current standard of care just doesn't work very well. A patient in the U.S. who is receiving the gold standard therapy for PJI is going to undergo what's called a two-stage exchange arthroplasty. They will come in for stage one, where the infected prosthesis is removed, followed by radical debridement, and then a bone cement spacer is placed. This spacer is non-load bearing, so that patient is minimally ambulatory while being treated. They are discharged for six weeks of IV antibiotics, and if they're lucky, they come back after an average of 16 weeks to undergo a second-stage procedure where the spacer is removed, they are debrided again, and then they receive their final revision implant, hopefully restoring their ambulatory status.

The lucky ones are those who reach the 16-week mark because half of the patients never get to stage two. This is a graph of 12,000 Medicare patients who had stage one procedures, followed for four years. You can see that half of the knee patients and only 45% of the hip patients ever received stage two re-implantations. If you don't get there by 12 months, you are not going to.

In response to that, Osteal has developed a new approach called cyclic local antibiotic irrigation, whereby during a stage one procedure when the infected prosthesis is removed, we insert a titanium fenestrated spacer that's attached to an irrigation control unit and surrounded by foam dressings. This allows us to directly administer two broad-spectrum antibiotics in concentrations 1,000 times higher than what's achievable with systemic treatments. We are able to overwhelm a biofilm infection with these high concentrations, and it also allows us to minimize systemic uptake, which can be dangerous to the patient's kidneys and hearing. If you tried to go 1,000 times higher with systemics, those patients would end up with no kidneys and would be deaf.

This is a drug-device combination. We sell the drugs, the spacers, the irrigation control unit, instruments, and dressings—all single-use disposable products that allow a hospital to treat a patient not in 16 weeks, but in seven days, with 100% of patients receiving their new revision prosthesis on day seven. We take a 16-week therapy down to seven days and a 50% re-implantation rate up to 100%.

We're in the late clinical stage. We've performed two clinical trials, Apex and Apex 2, with endpoints at 180 days and 360 days, with 580 being the primary endpoint. What we're looking for is what we define as overall success: a composite endpoint where the patient must survive the follow-up period, get re-implanted, have no further reoperation on the joint, show no signs of infection, and must be off antibiotics by those endpoints. You can see here in the combined data from the two studies, at 180 days, we had a 41-point treatment effect over the standard of care. We will complete the final readout on Apex 2 next month, and then we will move forward with submitting our NDA.

Further in the Apex trial results, we observed 50% lower mortality in the experimental arm, with 100% re-implantation versus 87% re-implantation on average, and patients were re-implanted 108 days faster, saving the surgeon 60 minutes of OR time, with no serious adverse events related to our drugs. The FDA views this very favorably. We have every special designation that the FDA can confer upon an anti-infective drug. We are a breakthrough, orphan drug, qualified infectious disease product, priority review, Fast Track drug. They'll review our application in six months.

Critically, because we're orphan and QIDP, we have 12 years of regulatory exclusivity upon approval, whereby the FDA will not approve the use of the drugs we're using for the treatment of PJI by any other manufacturer. We turn these generic antibiotics back into branded products. It's a highly concentrated and rapidly growing market. 50% of the cases are in 300 hospitals, and 70% of the cases are in 500 hospitals in the U.S. There's one payer—65% of cases are Medicare—and this is growing at the same rate as total joint arthroplasty, at a 6% to 7% annual CAGR. This is because the infection rate hasn't changed in 25 years; it's about 2%, as it has always been.

We have very attractive economics, both for Osteal, with a 90%+ gross margin, but also for the payers, providers, and surgeons. The surgeons will bill the same codes they bill today and get paid what they get paid today, but save 60 minutes in the OR. We have done extensive work evaluating CMS's economics and found that we can provide CMS with a break-even proposition with a massive improvement in outcomes. Hospitals will also bill the exact same codes they bill today, but they'll also receive a 75% NTAAP that we automatically qualify for as a qualified infectious disease product.

So we feel that we're well poised to become the standard of care in this space. We will be the first approved therapy for PJI in the United States. We don't expect anyone to be closer behind us than about three years; we think maybe even five. We have very strong clinical data, which is unusual in the orthopedic space to have randomized controlled trials. We are well capitalized with investment from both Zimmer Biomet and Johnson & Johnson, who sit on our boards but have no strategic rights.

Near-term milestones: we will be submitting our NDA right at the beginning of next year, following the readout from our clinical trial in Q4, and we will be raising our Series E financing to fund commercialization right about the time we expect to be approved in August of next year, with a launch in Q4 of 2025. Thank you very much. I appreciate your attention. Have a great meeting.