ROBERT L. CHIOINI is the Founder, Chairman, Chief Executive Officer and President of Rockwell Medical Technologies, Inc. Mr. Chioini has served as the Chairman since March 2000, as the President and Chief Executive Officer since February 1997 and has been Director of the company since its formation in October 1996. From January 1996 to February 1997, Mr. Chioini founded and served as Director of Operations of Rockwell Medical Supplies, LLC. From January of 1995 to January of 1996, Mr. Chioini founded and served as President of Rockwell Medical, Inc. From 1993 to 1995, Mr. Chioini served as Regional Sales Manager for Dial Medical of Florida, Inc., which was then acquired by Gambro HealthCare, Inc. From 1987 to 1993, Mr. Chioini served in sales, management and marketing capacities with various medical manufacturing and distribution companies. Mr. Chioini is a graduate of Michigan State University and earned his Bachelor's degree in 1987.


TWST: Can we start out with an update on the company, how you see Rockwell today?

Mr. Chioini: Rockwell is an innovative, US-based manufacturer and global distributor of high-quality hemodialysis products to the healthcare industry. The company supplies dialysis solutions and powders, blood tubing sets, fistula needles and other ancillary items needed for the dialysis treatment to be performed. The company currently operates two manufacturing plants located in Wixom, Michigan, and Grapevine, Texas. Sales for 2001 were up 20.9% at $9 million, developed primarily from our liquid and powder concentrate products. I see Rockwell today as a company that has the potential to grow to $100 million in annual revenue through proprietary products and internal expansion.


TWST: How big is the market that you're addressing?

Mr. Chioini: The hemodialysis market is a $1 billion market. With our current product line, we're addressing a market worth approximately $300 million annually. A new product, a proprietary product, that we've just recently licensed the worldwide rights to addresses a $350 million market in just the US, and is as high as $750 million globally.

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TWST: What is that product?

Mr. Chioini: It's a water-soluble iron compound that can be added to our current product line. Based on Phase II clinical results, delivering iron through our dialysate is a safer, more effective method for administering iron to the dialysis patient, versus the current iron products available. It should give us a strong competitive advantage over our competition.


TWST: Nobody else has access to this?

Mr. Chioini: That's correct. Nobody else has this. Dialysis patients need iron supplements because they're constantly losing iron from the dialysis treatment itself and due to a drug given to them used to stimulate red blood cell growth, called Epogen. Today the best available method to give a patient iron is intravenously (IV iron). However, IV iron is associated with toxic risks such as hypotension and anaphylactic reactions, which can be life threatening. Unlike the IV iron, our form of iron, when introduced through the dialysate, does not require processing by the liver and thereby eliminates liver toxicity. Our product is not absorbed in the liver; instead it enters directly into the patient's bloodstream. It's safer and maintains a constant state of iron balance. It's already been through Phase II clinical trials and we're anticipating beginning our Phase III trial shortly. We hope to have the product on the market in about 18 to 24 months. We believe this product will be a much better alternative to iron delivery than the current available products and will put us in position to replace the IV iron market as well as dominate our current concentrate market.


TWST: But it's not on the market yet?

Mr. Chioini: Not yet.

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TWST: Who is your competition in the basic business?

Mr. Chioini: In the dialysis concentrate business today we consider three companies to be our competitors, although all three companies are really focused on other businesses. Two of the three, Fresenius and Gambro, are vertically-integrated providers. In other words, their main business is in owning dialysis centers and providing dialysis treatments to their own patients. This is where they make the bulk of their money. On the manufacturing side they make their money on dialysis machines and dialyzers (artificial kidneys). They manufacture dialysis concentrate more or less out of necessity to service their own centers. The third competitor, called Minntech, was recently purchased by an endoscopy company. Although they offer concentrate, their main business has always been manufacturing reprocessing solutions, which enables the dialysis center to use an artificial kidney more than once. That's where they make most of their money and that's where their focus continues to be.

TWST: Given that you're competing with companies that essentially have their own centers, how do you gain share?

Mr. Chioini: Today there are somewhere in the neighborhood of 360,000 dialysis patients in the US and more than 1 million worldwide. If you take a quick look at the US you'll see that Gambro and Fresenius control approximately 100,000 patients. That leaves the remaining 75% of the US market open for us. Furthermore, most of the independent providers do not want to sell their dialysis business and if Gambro or Fresenius can't buy your clinic then they may put their own clinic up across the street and try to take your patients. The independent provider does not want to purchase from the vertically-integrated provider because they are in direct competition with them. The last thing they want to do is subsidize their competition. So there has always been a sentiment of not buying from your competition and Rockwell is not in the provider business. This is one of our competitive advantages in gaining market share.

TWST: Doesn't that make it dangerous for you if they keep putting up clinics and taking it to market and serving it themselves?

Mr. Chioini: No, it's not that easy. To begin with, just because they want to buy your business doesn't mean that you're going to sell it to them. Moreover, the dialysis patient stays with their doctor and if the doctor doesn't want to work for the competitor, then it doesn't make economical sense for Gambro or Fresenius to build a clinic in that area. We're now seeing instances where doctors that originally sold to these competitors leave them once their employment contracts are up, and their patients are following them as they start their own clinics. Also, the vertically-integrated providers grew mostly by purchasing one company that owned multiple clinics and there's not many of those opportunities left. Not to mention they're at a size that brings FTC scrutiny. We also see some possible synergies with our competitors. At some point they may want to outsource to us. We've done that in the past and we know they would experience dramatic increases in their profit margins by outsourcing their concentrate business to us.

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TWST: As we look at the basic business, the part that you're in today, what kind of growth is that market showing?

Mr. Chioini: The growth has been about 8%-10% a year on average for the last 20 years. In terms of growth, the dialysis market is a perfect market. In addition to the average growth rate, there are approximately 18 million people suffering from diabetes in the U.S. today and a high percentage of those, probably 45% to 50%, may become dialysis patients. Also, our market is unaffected by the economy. Earlier this year the National Kidney Foundation put out a report, and I believe they're estimating the market to reach about 600,000 to 650,000 patients over the next six or eight years. It's a solid-growth market.


TWST: On top of that basic growth rate, can you gain market share to grow faster?

Mr. Chioini: Yes. We only service about 7% of the market now so there's definitely market share to gain. We're looking to grow two ways. We have proprietary technology that we believe will capture a large part of the market very quickly once it's introduced and we're expanding internally. In addition to our two new manufacturing plants, we have plans to start- up two more, one in the Southeast and one in the West.


TWST: What is the timing on those?

Mr. Chioini: Our plans are to have those completed in the next two years. By the fourth quarter of this year or first quarter of 2003 we would like to have number three in operation. We may also look to grow through acquisition. But the magnitude of the proprietary technology itself is pretty big.


TWST: Let's assume everything goes well. When will that be available?

Mr. Chioini: We think sometime between 18 and 24 months.


TWST: Is that time to approval? Is that the big issue?

Mr. Chioini: Yes. Well, really the big issue is getting the Phase III clinical completed. After that the approval process itself should move quickly. This isn't a very complicated study and it's not a new drug per se. IV iron is used today. We're just taking a soluble form and putting it into our dialysate, which is a safer, more effective delivery method. Dialysate is actually the most natural way to introduce supplements like iron into the patient's system.

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TWST: Why hasn't that been done before?

Mr. Chioini: I think the reason it hasn't been done before is that our competitors have never really focused on this product. Remember, they make their money as dialysis providers and manufacturers of machines and dialyzers. Their R&D focus is on their main business, not concentrate. They don't make money on the concentrate business but they were concentrate manufacturers before they were dialysis providers, so they're in it by default mostly to supply themselves. Most likely, they never looked at dialysis concentrate as anything other than a ‘me-too’ product. Dialysate runs through an artificial kidney as the patient's blood is passing through it, and as it cleans the blood it introduces calcium, magnesium, potassium, sodium, dextrose, and acetic acid into the patient's blood. This is the most effective way to get these electrolytes into the patient's blood stream. It actually makes perfect sense to take iron or other supplements and introduce them into the blood stream through the dialysate. I just don't think anyone has ever really focused on it as a delivery vehicle.


TWST: You said you licensed the technology. Where is it from, Europe?

Mr. Chioini: We licensed the worldwide rights to all patents, issued and pending, from two nephrologists who practice medicine in America. Patents have been applied for all over the world, including the European Union.


TWST: Do you have the expertise to get it through the FDA?

Mr. Chioini: Yes. We own five 510(K)s that have successfully gone through the FDA approval process. We have knowledgeable personnel and skilled FDA consultants who have a great deal of experience with achieving FDA approval for medical products.


TWST: Let's assume that it does go well and 18 months from now it gets approved. What will that mean to the company?

Mr. Chioini: We've done several analyses. Based on today's costs and the current dialysis population of approximately 360,000 patients, if we were to get 25% of that market, we're estimating that sales revenue could be in the neighborhood of $125 million with very high margins.

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TWST: Is that total or just for this product?

Mr. Chioini: That's just for this product, and that's with 25% of the market. We feel this product could gain market share quickly, and potentially make the competing concentrate and IV iron products obsolete.


TWST: So it would really be a revolutionary approach.

Mr. Chioini: Definitely. This method of iron delivery has shown to be superior versus the IV iron. This could transform the company's direction going into the future, it could steer us more towards the biotech/R&D arena.


TWST: Is anybody else working on something like this?

Mr. Chioini: I don't believe so, and at this point any similar product would be subject to patent infringement.


TWST: What else is going on?

Mr. Chioini: We recently secured another product line, blood tubing, which is a great addition for us. We've been looking for blood tubing sets for about six years. We finally found a high-quality product and signed an exclusive agreement to market and distribute it. We are just now introducing that product. It's important because we can double our sales with just our current base of concentrate customers ordering it. If we had been selling that product last year to our current customer base we would have generated about $15 million to $17 million in overall sales revenue.

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TWST: Who do you compete with in the blood tubing market, or is it really sold as part of a package?

Mr. Chioini: Every time a patient receives a dialysis treatment, they need our concentrate, which is comprised of something we call acid and bicarb, a dialyzer, two fistula needles – the needles that carry the blood to the blood tubing – and one set of blood tubing. We don't sell dialyzers, but we sell the blood tubing, the fistula needles and the concentrate, that's the package. The blood tubing product that we compete against today became the leading product in the marketplace by default. Back in 1992-1993, there was a company called NMC that dominated the blood tubing market, but the FDA shut down their plant in Mexico. That left another company, a middleman with no distribution, as the only viable distributor. Ever since, they've been sitting on top of the market with no competition. So this is the first time they've had some serious competition.


TWST: How are you going to break into this market?

Mr. Chioini: It's a natural for us, because most dialysis providers prefer to get their blood tubing and fistula needles from their concentrate supplier. Plus, we have our own distribution company. We have our own trucks and we have our own drivers, and our drivers are very important. They enable us to offer exceptional delivery service. They see the customer every week, every two weeks or every four weeks and they address their needs. These customers ask if we can get them blood tubing, fistula needles – everything. The company with the competing product uses three or four different distributors. With Rockwell they have a competitor that offers the blood tubing, the concentrate and the fistula needles, plus the distribution. Adding blood tubing onto our current delivery is a competitive advantage.

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TWST: So one-stop shopping becomes important.

Mr. Chioini: Yes. And it's a good time for us to enter the market because a lot of the contracts between the middleman and the distributors are expiring. So the blood tubing market, probably over the next one or two years, is going to be in a state of flux which should provide us with a good opportunity to gain some market share.


TWST: And you intend to do that.

Mr. Chioini: Absolutely.


TWST: What kind of growth are you capable of generating over the next couple of years?

Mr. Chioini: If we can execute our current strategy of securing business in a timely fashion, then we could generate anywhere between $14 million and $18 million in sales revenue on an annualized basis by the end of this year. We're anticipating bringing on about $20 million over the next two years, which would put us at $30 million plus annually. That's just with the concentrate, not including the ancillary products or the benefit of the iron.


TWST: When do you become profitable?

Mr. Chioini: We hope to be running at a profitable rate by the fourth quarter of this year. It's going to come down to how quickly we can bring on the business that we are currently securing; how quickly we can ramp up and start servicing those customers. There is no question that we'll be profitable. It's just a matter of how fast we can get there based on our book of business. So we're targeting the fourth quarter of this year, but if we experience any delays then it could be the first quarter of 2003.


TWST: What does it take to get you profitable?

Mr. Chioini: Volume. We have the infrastructure in place with our two new plants. Most of our costs are fixed. It's just a matter of capacity. To get business you have to be able to service it and now we're able to do that.

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TWST: What does it take to get a plant up and running? Is there a lot of FDA involvement?

Mr. Chioini: The plants are FDA-regulated and subject to FDA audits, which assure they're operating under proper FDA guidelines. The FDA is not involved so much in getting your plant up and running as they are in making sure your plant is operating according to proper GMPs, good manufacturing practices. Our most recent FDA audit resulted in 'substantial compliance,' which is a very good thing to receive from the FDA.


TWST: Do you have the management team in place that you need now?

Mr. Chioini: We have experienced management that is skilled in facilitating fast growth. We will add some more plant management and regulatory personnel as we expand our manufacturing capability, and as we get further into the iron we may add some R&D personnel. With the kind of growth we're expecting, we'll add some people going forward, but we have a solid foundation.


TWST: How about from a balance sheet point of view? Do you have the funds you need?

Mr. Chioini: The thing that has made it the most difficult for us during the last two years has been not having the proper amount of funds at the proper time. With the way the market has been I'm sure we're not alone. But now we've gotten through the rough period. We're actually in the middle of a private placement, and it looks like it's over-subscribed. We also have funding offers from investment banking firms and institutional funds that we're evaluating now. We hope to be flush with cash shortly.


TWST: What will it cost you to get through the clinical trials on the iron product?

Mr. Chioini: A fair estimate would be somewhere between $2 million and $4 million.

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TWST: Your stock has done very well recently. What's gotten it going?

Mr. Chioini: I think it's a combination of the overall market sentiment changing, our proprietary technology, our expansion strategy and more investor awareness. The technology crash that the market experienced has probably sent some investors looking for healthcare companies. These are companies that actually have a product in a market that is going to continue to grow, as we do, and companies that are in a position to capture a significant portion of that market share, as we are. I believe securing the rights to the proprietary iron delivery technology has helped. Its success could transform Rockwell into more of a bio-tech/R&D type of company. There are examples of companies that gained proprietary technology, brought that technology to the market and then saw their stock price increase accordingly. One example that comes to my mind is Amgen's drug Epogen. Obviously with RMTI there is risk, and there are no guarantees, but if we get our iron product to the market and it has the success we believe it can, then the stock price could appreciate significantly. I think some investors have figured that out and are attracted to the risk-to-reward ratio. I also believe receiving patent approval for our Dri-Sate™ Dry Acid Concentrate Mixing System has helped. Dri-Sate changes the dynamics of shipping and storage in the dialysate industry. For the supplier it has a positive impact on distribution. Instead of shipping our concentrate product as a liquid in a 55-gallon drum, we now ship it as a powder in 25-gallon box. This enables us to put more revenue on the truck and then have it empty after deliveries are completed, which enables us to generate revenue by carrying freight for someone else as the truck makes its way back to the plant. It gives the provider the ability to reduce their cost per treatment as well as their storage space. Storage space is very important because the dialysis market continues to grow and a center only has so much space to perform treatments. Dri-Sate enables the center to have more space available which allows the provider to dialyze more patients. This enables the provider to generate more revenue at less cost. I believe our plant expansion and the blood tubing addition to our product line has also been important. Plant expansion enables us to further reduce our freight cost, control the concentrate market and position us a potential outsource supplier to our competitors. Blood tubing gives us the potential to double our sales just from our current base of business. We've also made more banking firms aware of our products, our strategy and our company. I believe these things coupled with improving market conditions have helped the stock price. If we successfully carry out our strategy we should see further appreciation in the stock price.

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TWST: Some people are beginning to understand what you're up to?

Mr. Chioini: Yes, and it's really a very small number right now. But as we go forward, I think we're going to see a higher level of awareness of RMTI. Our iron product in particular may affect some very big companies and some of the bigger investment firms that follow those companies may become aware of Rockwell.


TWST: If you were sitting down with some potential longer-term investors today, what two or three reasons would you give them to take a look at the company?

Mr. Chioini: The first point would be the potential the proprietary iron product offers. It's a safer, more effective iron delivery method than any of the current products available. It can dominate a $750 million global iron market. It really has the potential to change the company – its direction, its whole look, and to change the sales and profitability dramatically. Dri-Sate is also an important product that is capitalizing on the dialysis patient population growth trend. It benefits both the dialysis provider and the manufacturer by reducing per treatment and freight costs respectively. Dri-Sate is really a market-changing product. We believe it's in the beginning of the product life cycle and that over the next two to three years 80% of the customers in this country will be using some form of dry product. And we feel confident that we have the best dry product available. Multiple manufacturing plants reduce our distribution costs and give us the advantage of capturing and dominating the regions that are most heavily populated with dialysis patients. Plant expansion puts us in a position to become an outsource supplier to our competitors as well. Also, blood tubing is a product addition that doubles our gross sales per patient. It's an add-on product at no additional cost to our current delivery. We operate in a market that is ripe to be taken advantage of. None of our competition is really active in the concentrate market. They have their own clinics and are focused on servicing their dialysis patients. They are not making money on their concentrate business. They are not focused on it and that gives us an edge. Rockwell can offer above average growth potential and appreciation because it's at an early stage of development. We're a smaller company that can grow faster and for investors who want to be where the growth is, this is a company to take a look at. Early stage companies are usually riskier, but the investment rewards can be much greater.


TWST: Thank you.