150: How to Invest in Pain

Buck: Welcome back to the show today. My guest on Wealth Formula Podcast is Brendon Lundberg who is co-founder of Radiant Pain Relief Centers. He and his partner David Farley who is a Harvard MIT trained physician set out with a vision to build the safest most consistent effective and appealing solution to the chronic pain epidemic that is probably underappreciated in this world, I can tell you I’m in pain right now. Anyway Brendan and Dr. Farley opened what is called Radiant Pain Relief Centers and they opened their first Center in Portland Oregon in February of 2014 and following the success of the first Center they are now laying out a plan for expansion to open new centers and markets both nationally and internationally so Brendan welcome to Wealth Formula Podcast.

Brendon: Thank you Buck I am honored to be here.

Buck: Well that’s kind of you to say. So yeah we were talking earlier we know a few people in common and actually you were you were referred as a potential guest from one of our wealth Formula Network members and so that was a that’s always a nice you know, know like trust thing that we do around here when we get somebody on the show. So let’s talk a little bit about this whole chronic pain thing which you’re involved with and by the way I should point out the reason we’re gonna be talking we’re talking about this is there’s an investment opportunity and what we’re not just talking about this on an investing show just because. But first Brendan obviously you’re not a physician per se, how’d you get involved with chronic pain? Has it affected you personally? How did you find this area?

Brendon: It has affected me personally in fact I started developing chronic low back pain as a teenager, you know fit healthy active and kind of unknown as to why I’m experiencing this pain experienced in my low back at a young age and I had an uncle that was a chiropractor so I get regular adjustments throughout my growing up years and I always felt good and seemed to help resolve the pain but never fully resolved it long term. Into my 20s it started to get worse. I ended up talking to well I have a sister that through massage therapy school and I remember her doing something on me called structural integration which is very uncomfortable massage is really kind of you know fascial work and things and her commenting that it looked like there was some rotation happening in my hips that was kind of strange and I’m talking to a sports medicine doctor who thought maybe I was getting some scoliosis or something and I know his course of action was meds, watch it, keep moving at some point maybe we go in there and put in some rods keep that back nice and straight the pain doctors wanted to give me medication and injections and ultimately go in there and you know take some sort of surgical intervention towards it. I didn’t do those things and just kind of kept living my life and my career has been spent in healthcare related business, I’m not a physician as you said but have been in healthcare related affairs my entire career and saw an opportunity to start Radiant and as we did and we can talk more about that, but as we did I got treated there and I developed by this point really kind of debilitating sciatica pain down my right leg and into my groin that pain following our therapy has never returned now it’s been over three years and feeling much better in that way and then understanding the neuroscience of pain which is really fascinating stuff and really where where the science is leading helped us identify that there’s some neurologic deficiency that’s causing this and in my case I know the nervous systems job is to keep us alive which means it needs to see the landscape, it needs to be able to keep us upright the vestibular system balances us the touching feeling senses in proprioception which is our orientation in space so for many chronic pain sufferers there’s some disconnect between one of these sensory inputs and the brain or the brain’s interpretation of that and that results in the body trying to make some adaptation. In my case I have a right eye that doesn’t like to play ball like it’s supposed to and so I see just fine so when I go to the eye doctor I don’t you know it doesn’t get flagged as a bad eye but I walk around with my right eye kind of disconnected from the world and so consequently because my nervous system wants to keep me alive it makes a very subtle adjustment in the positioning of my head so that my left eye is positioned to be more dominant and see the landscape well that that causes some conversations that has to be made throughout the spine otherwise I walk in circles to my right and so the result is a manifestation of pain in my low back so you know that’s kind of a long story to say there’s so much kind of going on here. Our therapies they’ve been effective and I can’t wait to talk about it.

Buck: Let’s back up a little bit and I would be remiss if I didn’t try to drill down on this a little bit. I don’t know if you know my background is a neurosurgeon. I have a fair amount of interest in neuroscience and that was really kind of where it was. You said a bunch of different things and this is a frankly something that I want to make sure that we’re clear about because there’s a lot of misinformation out there and we get into this sort of you know allopathic medicine is BS and you know we’re doing everything the wrong way and that’s just not true and you know that. But let’s talk a little bit about first of all what was it that was causing the the back pain? You said you had sciatica so did you have some kind of a disk herniation or something or was there an atomically something that was causing you, if you’re a groin pain that’s probably like…

Brendon: Yep nerve disk herniation.

Buck: I mean I just do want to just kind of scrap with this because yeah this form and function and pathophysiology that you can’t just get around.

Brendon: Absolutely so well you know the body is an adaptation machine it’s made to adapt and so you know understanding the neuroscience the way that we do and that we promote within our clinic is that there’s a neurologic driver of function or dysfunction and oftentimes if we think of it like the circular of a clock with the brain being at the 12 o’clock position and then outputs of function or dysfunction around the curvature of the clock and then back up to the brain. The brain is both taking information from the inputs of the body as well as external so in dodges and external inputs that give it a sense of information about safety and function and movement and everything. We typically identify some level of dysfunction, pain or joints that aren’t moving like they’re supposed to and we address that. Our philosophy is that if the brain is the contributing factor to a pain experience then if we can change the brain it can potentially change the output and course correct itself. So I did have some and I still probably do have some mechanical misalignment in my low back and rather than trying to fix it there with a surgical intervention I exercise regularly and that helps keep it at bay but these identification tools or these assessments and drills that we do in addition to our primary therapy helped identify that my right eye wasn’t really doing its job or at least my brain wasn’t interpreting that my right eye was doing this job.

Buck: Although you do know I mean obviously people are usually either right eye or left eye dominant so it’s not necessarily abnormal.

Brendon: Correct it’s not necessarily abnormal but it doesn’t mean it’s optimal right I mean so there’s dysfunction there’s normalcy and then there’s optimal function and there’s obviously a range in the gamut within that and so you know most of us do live with some level of dysfunction and our body adapts and we survive but most of us have pain too right. So you know I think we’re at a really interesting intersection with what we’re doing at radiant because pain is such a big problem as you mentioned it’s probably understated in the United States over 100 million people are reported to have chronic pain and that’s more than cancer diabetes and cardiovascular disease combined. So it’s a big population of people that are you know hurting on a pretty regular basis and many of them feel baffled and betrayed by these bodies that you know are hurting and in many cases their doctors haven’t been able to have them identify or resolve it and it’s kind of inexplicable as to why it why it hurts.

Buck: So you talk about you know there’s a difference between I think you know a clearly identifiable anatomical purpose for pain in your caseperhaps it was a you know l2 l3 disc herniation which you know 90 some percent of the time that pain is gonna go away on its own about you know within about six weeks but then there’s also a kind of pain that sometimes you cannot identify exactly what the source is and I presume you’re kind of focusing more on that is that right?

Brendon: Yeah we look at pain as a protective function you know if you have your hand on the hot stove or you’ve broken a bone or you have cancer growing in your tissue you want to be feeling pain because it’s going to get your attention you’re gonna seek care it’s gonna get resolved hopefully. In chronic pain though we defined chronic pain is pain that’s been present longer than is appropriate as you mentioned six weeks or so tissue should heal the pain should subside it’s no longer necessary in most cases so when it’s lingering longer or when the pain is growing disproportionate to a cause or in some cases there’s no cause like fibromyalgia for many people is kind of an inexplicable pain experiences happening and growing over time this is that this is a non-productive type of pain experience it’s not serving the person it’s just literally a pain and it could actually be causing further problems because if they’re hurting likely they’re moving lesser than otherwise would which we probably you know incline them to gain weight their sleep is likely disrupted and that combination of factors creates many other comorbidities and problems and then most of us just pop pills and so the pills then inevitably you know we become dose tolerant to them with keep upping the dosing and inevitably there’s some sort of you know chemistry change in the body or side effect that starts to happen or addiction or a combination of these things and you know we have obviously this very omnipresent opioid addiction epidemic that’s kind of in the news and so you know we yeah again I we just feel really fortunate to have a therapy that’s you know very safe very effective.

Buck: Let’s talk a little bit about so you met up with Dr. Farley yep and he is a physician.

Brendon: He is a medical doctor again trained

Buck: What kind of physician is he, what specialty?

Brendon: He’s a family medicine doctor and he would tell you much to the chagrin of his instructors and professors and colleagues at Harvard and MIT chose to go into family medicine after doing some residencies and you know has been in clinical practice for about 30 years here in the Portland area.

Buck: Got it and and so tell me about the actual treatment. If you’re talking about treating I guess in any in non-pharmaceutical way, what’s the novel treatment that you’re proposing?

Brendon: Yes so again you know with the philosophy and understanding of the the most recent neuroscience is that pain is neurogenic it’s driven from the brain experience in the tissue and again in the short term it’s protective in the long term it’s not so protective and the brain essentially becomes habitualized or wired to kind of expect and perpetuate the pain phenomenon in a way that’s no longer serving a protective function. So rather than trying to mask it at the tissues or mask it with the drug or address it at the pinion site the tissue site where the pain is experienced we are able to transmit new information we have an FDA cleared medical device that we identified and you know then spending last few years really learning and you know position ourselves to be able to control, FDA cleared been researched at the Mayo Clinic and Johns Hopkins but ignored by mainstream medicine because it was predicated on a TENS unit when it was taken through the FDA and so it’s obviously been around for many many decades and you know this is in many clinicians first blush and an over overly price to tens unit but it’s actually quite different. So the technology acts like an artificial nerve essentially it generates a dynamic set of artificial nerve impulses. We attach electrodes on the skin in healthy tissue that doesn’t hurt but as a you know in proximity to the painful area, we turn the device on we begin to generate those impulses from the you know from the technology through the wires of the machine up through the peripheral nerves through what’s called the C fibers of the nervous system then in through the CNS and into the brain the brain receives these impulses and begins to interpret them essentially as an endogenous or a natural self generated message and it begins to ease the pain experience. What happens is that the messaging coming out of the device is dynamic and changing so the brain doesn’t become tolerant to it has to kind of respond to this and this helps break up these neuro tags or these associations or wirings that are perpetuating the pain experience it begins to break those up and the brain is able through neuroplasticity or its ability to learn it’s able to create a more normalized perception of pain. We give the first treatment for free because in many cases it’s pretty profound after some education about what we’re doing and how we do it and why we do it and then to give you know the experience of it the relief that many clients see is pretty profound but it’s really a process of repetition and exposure in order to change the brain and help to restore the brain back to a more normal pain experience.

Buck: So you know do you mention something and I’d like to kind of focus on it again because that’s what putting my physician hat on and neuro guy back on yeah you know a transcutaneous electrical nerve stimulation unit which is a TENS unit as you discussed works essentially the way you’re describing it’s a tingling buzzing sensation on your skin drives up sensations into your ultimately through your peripheral nerve peripheral nervous system up into your brain blocks or suppresses being messages to your brain it can also stimulate the body to produce higher levels of our own natural painkillers these endorphins etc. So tell me and tell all the doctors out there too because we’re wondering the same thing how is this different?

Brendon: Yeah well that’s a great question and it is significantly different. It’s different in the in both the output the intensity the waveform and the dynamics of the the impulse that’s happening, again it’s not a static message it’s a dynamic and changing message which is all important. Also the way that it’s administered on the body. So again a TENS unit is typically placed in the painful area, you’re creating an analgesic experience because you’re creating a new sensation in that area that’s being experiences pain. In our case we’re not just trying to mask the pain by giving that you know masking sensation or a new experience there but giving the brain new information so that it can go through the neuro the neuro plastic changing capability that it has to be able to learn and get basically it’s breaking up those new those those associations that it’s wired to expect of pain giving information so that it can normalize itself. And so we are able to achieve relief that becomes durable or lasting for weeks or months in some cases it’s indefinite and without the side effects and risk is pretty remarkable.

Buck: Yeah I mean I’m still not necessarily understanding the difference between the TENS unit based on what you just said but are there any studies right now comparing?

Brendon: Yeah there’s a few pilot studies that have been done at Mayo Clinic and Johns Hopkins you know there’s been economic challenges by the former licensee in terms of how they really commercialize this that tends pretty creation is ruined really an economic reimbursement potential with insurance because it’s predicated on a TENS unit and so TENS reimbursements quite low as you know. So what we’ve done is you know basically we’re building a direct-to-consumer business around this technology because we saw an opportunity it seemed really quite promising. So we spent the last five years mmm really understanding does it a work B can we create a replicable consistent business that allows us to you know to be able to deliver consistent results and then qui built a business model that makes it affordable without insurance coverage and still create an economically…

Buck: I get that and before we get to do that though I’m just again where it is sort of my fiduciary responsibility to do due diligence here especially given the fact that you know I had know a thing or two about this stuff yeah in general. What I’m trying to say is that typically the way we will judge in medicine you know whether something is better or different is through some kind of you know double-blind placebo or in this case do you have any reason to you know from from at least from the studies say that this works better than a TENS unit and I know what I’m trying the distinction between is subjective anecdotal data from your clinics which I’m not saying as insignificant I’m just I’m asking whether there are any studies right now showing differences?

Brendon: There are studies showing differences and they’re on our website and certainly happy to make them available to the audience that would be interested to review those but they are limited I mean in full disclosure they’re limited and what I found so prior to starting Radiant I spent a few years trying to sell this technology to physicians. The experience that I encountered was that most professional clinicians MDS and including the gamut of alternative care physicians are trained in pain science from the 1960s the gate control theory of pain and Melzack and Wall I believe were the publishers of best of that you know theory and model and and Melzack in the late 90s basically created a new theory called the pain neuro-matrix theory which essentially kind of debunked it and in a sense says that you know the the that pain is multifactorial and that is a real brain component driven versus what’s you know kind of explained in the gate control theory of pain so we found that many clinicians didn’t understand the science that kind of underlined both the more modern understanding the pain and you know the mechanism of action of our therapy. There was an economic disincentive for the in many cases for them to adopt this therapy because it’s very costly one device that retails over a hundred thousand dollars and there’s no no viable reimbursement so that’s an economic challenge and then you have an opportunity cost because you know there’s other resources that you have that are built into your practice and to you know to redirect those into something that is hard to you know figure out how do you price and command at a reasonable value to. So that combination of factors made it really hard and then there’s limited studies so as I went out to talk to doctors about it this combination of factors really made it hard for us to to create a level of trust and understanding because to your point physicians are trained to look at the studies to read the studies they want to see double-blind placebo-controlled longitudinal outcomes if possible and the reality is that that doesn’t happen. But the therapy does work really remarkably well and having personally spent about a decade in the hearing aid industry hearing aids are not covered by insurance they’re not cheap at an average sale price for a set of hearing aids is about seven or eight thousand dollars I thought well if this technology really does work and people are willing to spend money and I think you’ve worked also as a cosmetic surgeon for a while as well so you know people are willing to spend money for things that are important to them if they see the value and understand it. I created a different business concept which is to build clinics and go right to the consumer because I can’t create studies that don’t exist I can’t fund studies that don’t exist I don’t have there at this point didn’t have the rights of the technology to do that and you know would be illogical for me to you know deploy that type of capital if I even if I had it. So I said let’s just see if we can create a consumer appeal that makes this work and so what we’ve done is the last five years we’ve really been in the learning mode. You know we’ve had but we’ve been generating revenue but we really considered pre-revenue and really kind of a learning that both the therapeutic and the business side of things to marry them in a way that we think can be quite appealing. What we’ve seen is that we average across I don’t know the exact number but it’s over 500 people that we’ve treated over the last five years an average reduction of about eighty four percent on the bass scale. So people come in they typically measure pain from zero to ten and you know most of our clients are coming in pretty high levels of pain enough that they’re willing to you know eventually invest in our therapy but if there are six seven eight nine ten we average average shift that down 84%. So we may not fully resolve the pain pain is obviously a very human experience that we all have here I mean we want to set reasonable expectations, but it’s it’s significant to the point where we’ve seen people who previously have you know many of our clients I’ve tried everything quote unquote you know I mean we’ve had people that have elected to have for example a leg amputated after years of failed therapies you know drug addiction and nothing resolving their pain many of our clients tell us they’ve become suicidal and we have one client in particular who was so fed up he elected to have his leg amputated, they amputate his leg it becomes phantom pain because it’s a mirror genic problem not really a tissue problem at this point and at this point he’s in a very dark place. Fortunately he didn’t take his life and didn’t take other drastic measures and we were able to treat him and he’s you know his testimonial and in fact news clip they did a local news station covered his story you know it’s remarkable to see these people get their lives back and so we don’t have the answer that most physicians want in this in the sense of what is you know the the study evidence of it but we have certainly you know our own internal data and clinical results and anecdotal stories that are mind-blowing.

Buck: No, no and I and I totally get it and I’m not trying to discredit by any means I think that there’s two different things we’re talking about here one is which you know there there’s a lot of things out there that tend to work for people that there isn’t a lot of studies on. For the longest time we didn’t have a lot of information on acupuncture now we do have information on acupuncture I think the the primary thing I was trying to get at is you know from an from a neural physiology standpoint I’m trying to make that distinction try to understand exactly what the difference is. But let’s focus a little bit on the business side of this because obviously this is an investing show not a medicine show. Let’s talk a little bit about well first of all you were featured in Ink magazine, your book was. Tell us about your book, what was that all about?

Brendon: Well our vision is to build a chain of stores and these are treatment centers but you know our brain is called Radiant Pain Relief Centers and the vision of building clinics is twofold. Number one it allows us to create consistency in the experience to create a whole new experience in fact we’ve modeled the entire business model around delivering this therapy in the most effective and consistent and appealing way. So we’ve created these centers and we have a couple here in Portland that we’ve been learning through and refining but you know they allow us to create consistency which is necessary to build a brand and as we control the brand we control the revenue and the P&L for the center we have a vested interest to want to now start to promote that directly to consumer create a return. It allows us to create efficiencies in that so that we can price it to be affordable in fact it advertised around ten bucks a day for our clients to get and maintain relief depending on how much they use it and and still build very profitable enterprise as a business. Our growth model just to touch on this real quick is instead of you know opening the center’s and owning them and you know having to have the capital to do that is to create an investment opportunity for local clinicians instead of selling them a device for a hundred thousand dollars that they then have a high opportunity cost and have to try to figure out does it really work how do I make it work you know both you know clinically and financially they can invest a much lower amount of money in a local center that we build it’s completely passive for them there’s no opportunity cost they can refer if and when it makes sense and they get a return based upon the performance of that Center that’s uncorrelated to their referrals so it’s clean of stark flaws and anti-kickback flaws and this will allow us to use local capital to create hopefully fans and influencers and referers in the market and be able to accelerate our growth so that’s that’s our kind of our business plan.

Buck: So what you’re doing right now is a regulation crowdfunding or reg regulation Triple A offering.

Brendon: Well right now we’re in a reg D so we’re still closing out a private private placement at the time of this recording we’re headed to Kevin Harrington’s Angel Investor network event in the middle of March and that and a couple other things we hope to be able close out our private placement round soon and then and then we will go into a crowdfunded public offering opportunity regularly.

Buck: What was your sort of curiosity was the structure of your private placement, what kind of GP LP and sure was that?

Brendon: Yeah initially it was a convertible debt and then as we as we began to make plans and you know submit to the SEC to prepare for the Reg A+ we went through a conversion process and converted everybody into equity and we since then have been raising money in equity and then in the Reg A+ basically created a new company that’s primarily focused on just the technology piece not all the infrastructure and management of the centers just technology it’s a simpler business and in that you know we’ll sell equity obviously right to the right to the crowd anybody not even non-accredited investors could participate in that low price point.

Buck: And what will that typically look like in terms of GPLP split on that kind of thing?

Brendon: In terms of in terms of what will the dilution or the valuation be is that what you’re asking?

Buck: Well I mean presumably is this something that it’s a private it’s it’s it’s I’m just wondering how its structured obviously I mean we’re you know if you you’ve got a fund job it’ll be you know req triple-a whatever but you know is it you know 2 and 20 is it you know is it is there some kind of split? What’s between the the operator side and the…

Brendon: Yeah so what we’ve done is we’ve sold you’re getting convertible debt initially and then migrated into equity we’ve been selling equity since then in radiant health management corporation which is a right now at Oregon C Corp and that’s the management company that will run and manage and grow the assets for the individual clinics we’ve created a new company and basically replicated the cap table of from the from the reading health management can be replicated at as founders in the new company so for our investors in that private placement there’s no cost additional cost to then become quote unquote a founder and the new company. It’s that new company the Radiant Technology Holdings that will take through this reg a-plus and so we’ll raise money at a much higher valuation in that new technology company. And then we have two businesses that are different one is focused on management and operations one is the technology holding and you know selling company. The technology company is a pretty simple business to operate because we buy and or manufacturer technology at price X we sell it at price Y not a lot of operating so a bulk of that revenue flows right to the bottom line giving us the ability to create a dividend potential for investors in that side of the business. And then our plan is to say we have two entities and you know there’s a potential you know acquisition opportunity with somebody like a like a DeVito or some other aggregator that might want to buy the management company at some point and then you know the other company that’s focused on technology may be more appealing to a technology-based company like a you know Medtronic or J&J; or somebody you know bigger down the road or what our plan is currently is to try to keep our fortunes as controlled as much as possible ultimately once we’ve grown the company over a couple years period of time merge those back together so there’s gonna create a you know partial liquidity event for the shareholders and reading Health Management Corp merge those companies back together and then up list on an exchange and take the company public through an IPO. That’s probably about three years down the road.

Buck: Got it. And tell me you got the obviously you’ve got the shop in Oregon how’s that one doing?

Brendon: Therapeutically is doing phenomenally well from a business standpoint we’re right on track with our with our key performance indicators. So we’ve had basically a pilot operation we’re now able to grow those to full capacity and we’re gonna be opening a new Center in Boston here in about 90 days Los Angeles to follow.

Buck: Are you profitable in Oregon?

Brendon: Well we’re not net net profitable but we are seeing the Cape the KPI is it would indicate as we grow scale will hit profitability.

Buck: And that one’s been about three years. What’s your so your KPI is where do they predict profitability?

Brendon: Yeah so a single Center takes about a half a million dollars to capitalize and open and it should grow and I’ll talk about our revenue model because we’ve really refined that revenue model to make it an appealing aspect to our our clinical business too but a single Center will grow to over about two and a half to three year period of time as it hits maturity about a million in top-line revenue and net about 35% EBIT of profits out of that Center.

Buck: Yeah okay great well listen it was good talking to you and definitely good luck. How do we how do we learn more about the business and potentially get involved with the offering if it’s something that people are interested in?

Brendon: Yeah thank you Buck well we’d love to chat with anybody clinicians or non clinicians I mean pain is a really significant problem in the opioid addiction epidemic obviously makes us pretty urgent so you know if you’re interested the best place is to go to a simple landing page that we have at RADIENTPAINRELIEF.COM and there you can indicate if you’re a clinician and you want more information about the science or the business opportunity related to clinicians if you’re interested in the Reg A plus if you’re interested in the private placement if that’s still open at the time if you’re just interested in the book or following our story or if you have pain yourself that’s the best place to go we’ll get you the appropriate information and route you appropriately but RADIENTPAINRELIEF.COM

Buck: Brendon thanks so much for being on the show today.

Brendon: My pleasure Buck thank you so much. Cheers

Buck: We’ll be right back.