Hartford Business Journal

www.HartfordBusiness.com August 22, 2016 • Hartford Business Journal 13 Kelly leads Oral Fluid's leadership 'trifecta' By Keith Griffin kgriffin@HartfordBusiness.com T here are three men behind the company known as Oral Fluid Dynamics, but it's major- ity owner Robert Kelly who is out front when it comes to promoting the Farming- ton startup. He owns 60 percent of the fledgling biotech, which is trying to develop an artificial salivary gland to combat the problem of dry mouth, an affliction that seems minor but affects upwards of 60 million peo- ple in the U.S. A conversa- tion with Kelly is interesting for its contrasts. He's professorial when discussing what the team's invention will do — they're devel - oping a dental implant with a pump that takes fluid already present from the mandible bone and supplies it to the mouth. Asked if he envisions what he might do with the money if the product strikes gold, and he admits he hasn't thought about it. Or, if he has, it's not about gaining person- al wealth. "All the [company's] part- ners," Kelly said, alluding to Douglas Adams, a mechani- cal engineer who works in orthopeadic surgery at UConn Medical School, and Martin Freilich, an implant surgeon and prosthodontist at UConn Dental School, "are really mostly motivated by solving a medical problem for some desperate folks. If it works, there will be plenty for everyone." Talk to Kelly about his time in the Navy, where he served for 21 years as a dental officer, and he becomes more animated. A trip from his office at UConn Health's Farming- ton campus down to his lab involves multiple turns and elevator rides in the cavern- ous facility. It reminds him of the first time he stepped on a carrier. "I got lost the first day," he said. "I couldn't find my way." A transplant from the San Francisco Bay area, Kelly also lived four years in Boston dur- ing his two-decade long stint in the Navy. After his service, he landed at UConn, where he's worked for 17 years, and moved to Connecticut, part of the New England region he and his wife grew to love. It's a good fit for his hob- bies too, which include walking and photography. His aesthetic side becomes apparent when he express- es a shared admi- ration for the view from a UConn Health conference room looking out east towards Hartford. Freilich, who owns 20 per- cent Oral Fluid Dynamics, has the longest ten- ure at UConn. He has been treating patients in the dental faculty practice, teach- ing and conduct- ing research since joining UConn in 1985. He is the director of p r e - p r o s t h e t i c / i m p l a n t surgery in the division of prosthodontics. He also serves as the prin- cipal investigator of studies developing new methods of jaw bone re-growth and as the principal investigator of a clinical study assess- ing the relationship between osteoporosis and jaw bone re-growth. Adams, who also owns 20 percent of the company, has written extensively on the effect of various diseases on bones. Scholarly arti- cles have included tips on accelerated fracture heal- ing and the effects of sickle cell anemia on the bones of female mice. It's his research that will help with the effects of plac- ing the dental implant in the mandible bone that forms the lower jaw and will be the host to Oral Fluid Dynamic's implant if it hits the market. Kelly says the combination of Freilich and Adams with him make for a perfect trifec- ta when it comes to develop- ing a dry-mouth solution. n from the University of Texas Health Center at San Antonio and Rice University, which are working on another possible solution for dry mouth that focuses on tissue engineering through the use of cells to grow salivary glands. "It's not going to work. The technology isn't far enough along and won't be for 30 years," Kelly said. Kelly doesn't express those words with any form of braggadocio. He has a scien- tist's detachment when discussing his device. His excitement, it seems, comes more in the response to the new world his invention has opened for him. In July, for example, he took a trip to Basel, Switzerland, to meet with the heads of three companies that could manufacture the implant if it eventually receives FDA approval. The implants could also be made as close as Andover, Mass. "We don't want to manufacture this ourselves," he said. Local connections So far, Oral Fluid has raised money from various sources including Connecticut Inno- vations, the state's quasi-public venture arm, the UConn SPARK Technology Commercial- ization Fund and Acclerate UConn. Recently, the company picked up an MBA student on a half-time fellowship because Oral Fluid Dynamics received $10,000 for general business purposes as part of Accelerate UConn, a university startup incubator and funder made possible by a grant from the National Science Foundation Innovation Corps. The student gets a $5,000 stipend. Outside of some specialty accountants and lawyers, Kelly said he has found most of the support Oral Fluid Dynamics needs in Connecticut. "This is pretty well funded," Kelly said, acknowledging that he and his partners are not entrepreneurs with killer business instincts. "We're out there to provide solu- tions to desperate people." One funding option the company has avoided so far is venture capital, and its not by accident. Using venture funds would mean turning over control of the company, some- thing Kelly doesn't want to do. Still, all funding is important because the inventors need about $1 million annually for the next five years to get the product to market. Kelly hopes a manufacturing part- ner covers that expense because the reward could be worth it. If the product eventually gets regulatory approval, about 200,000 people can be treat- ed in the first five years because of the capac- ity of dentists who can perform the work on an annual basis, Kelly said. "But you're looking at hundreds of mil- lions in profits per year," Kelly estimates. That's just in the U.S. treating about 5 percent of the people who are affected by dry mouth. Initial profit, Kelly said, based on "rough, back of the envelope figures," would be $5,000 per implant, which insurance companies, at least right now, don't cover. "We have no problem with people spend- ing $25,000 to rebuild their mouths," Kelly said. "There are people out there who can afford it." n Douglas Adams, mechanical engineer in orthopeadic surgery, UConn Medical School Martin Freilich, implant surgeon and prosthodontist, UConn Dental School ▶ ▶ ' We're out there to provide solutions to desperate people.' Robert Kelly, UConn School of Dental Medicine reconstructive sciences professor and founder, Oral Fluid Dynamics Will Obamacare survive as insurers pull out? By Tami Luhby CNNMoney I f three of the nation's larg- est insurers can't make it on the Obamacare exchanges, can anyone? That's the question hanging over President Obama's signature health reform law less than three months before enrollment begins for 2017. Aetna is pulling out of 11 of the 15 states where it offers Obam- acare policies after losing $430 million, the company announced last week. Its move follows down- sizings by UnitedHealthcare, which will operate in only three states in 2017, and Humana, which is withdrawing from nearly 1,200 counties in eight states. There's no doubt Obamacare is suffering a major shakeup three years after the exchanges opened. Those who've signed up for cover- age are sicker and costlier than expected, while too many health- ier Americans are opting to pay a penalty rather than a premium. That's prompting many insurers to raise their rates by double-digit percentages for 2017 or minimize their presence on the market. The high-profile insurers' actions, however, mask the fact that Obamacare is working for many people and has become a vital part of the healthcare land- scape. More than 11 million Amer- icans are covered by Obamacare policies, with 85 percent of them receiving federal subsidies that blunt the impact of premium hikes. That's sent the uninsured rate down to a record low 9.1 percent. Also, some insurers are turn- ing profits on the exchanges and expanding into new Obamacare markets. This is particularly true of companies that entered the individual market after special- izing in providing Medicaid ben- efits to low-income Americans. The turmoil is not unexpected, experts say. It's crucial that both the government and insurers take steps to stabilize the program, but Obamacare is not doomed, they say. "It's a brand new market. It's volatile," said Sabrina Corlette, research professor at Georgetown University's Health Policy Institute. But "the fundamentals are sound." Who's profiting from Obamacare? There's no question many insur- ers are losing big money on Obam- acare. Costs exceeded income by 5 percent in 2014, and that figure doubled the following year, accord- ing to McKinsey's Center for U.S. Health System Reform. Losses are expected to grow this year. Only 30 percent of insurers ran profitable individual divi- sions in 2014. That share slipped to about a quarter last year, according to McKinsey. Insurers that have fared better on the exchanges typically offer more restrictive policies. They have more limited networks of doctors and hospitals and man- age their enrollees' healthcare usage more tightly. Take Molina Healthcare, which has a profitable exchange business that targets lower-income custom- ers who qualify for both premium and out-of-pocket subsidies. A Molina executive noted on a confer- ence call last month that it doesn't offer its policyholders access to Cedars-Sinai Medical Center, a prestigious Los Angeles hospital. That helps it keep its rates down. "... They're priced way above what we and our population we're targeting can afford," said John Molina, the insurer's chief finan- cial officer. Bigger insurers, like Aetna, UnitedHealthcare and Humana, on the other hand, have focused largely on the employer market, which typically demands more choice and control. "Their traditional products are not working for this population," Corlette said. National carriers aren't the only ones struggling with high- er-than-expected costs on the exchanges. Many Blue Cross Blue Shield companies, which have insured individuals for years, and smaller players are also suffering, said Dan Mendelson, president of Avalere Health, a consulting firm. That's because there are too many sick people in the risk pools and not enough healthy ones to offset the costs. And the situa- tion is getting worse, he said. "The government will have to get involved," Mendelson said. "The exchanges are viable in the long-term, but only if the govern- ment stabilizes the risk pools." Making the exchanges healthier Experts suggested several ways to lure healthier people into the exchanges, including increas- ing the penalties for not having coverage and boosting the subsidy levels to make it less expensive to obtain insurance. Also, state and federal govern- ments can offer incentives to insur- ers to participate on the exchanges — both through carrots and sticks. Alaska, which will have only one carrier on its exchange next year, created a fund that will help insur- ers cover high-cost patients. The money will come from a tax levied on all Alaska insurers (not just health insurers). Nevada, on the other hand, requires all insurers that partici- pate in its Medicaid market to also offer coverage on its exchange. n

• Cover