Ask Me MD: Medical School for the real world

Jonathan Northrup - Running a pharmaceutical startup

January 08, 2021 D.J. Verret, MD, FACS Season 1 Episode 26
Ask Me MD: Medical School for the real world
Jonathan Northrup - Running a pharmaceutical startup
Chapters
Ask Me MD: Medical School for the real world
Jonathan Northrup - Running a pharmaceutical startup
Jan 08, 2021 Season 1 Episode 26
D.J. Verret, MD, FACS

Jonathan Northrup, CEO & Co-founder of Stingray Therapeutics, joins Dr. Verret to discuss the process for starting a pharmaceutical company.

If you have questions or ideas for a show, send us an email at [email protected]. Hear the latest podcast at http://askmemdpodcast.com or through your favorite podcast directory.

Show Notes Transcript

Jonathan Northrup, CEO & Co-founder of Stingray Therapeutics, joins Dr. Verret to discuss the process for starting a pharmaceutical company.

If you have questions or ideas for a show, send us an email at [email protected]. Hear the latest podcast at http://askmemdpodcast.com or through your favorite podcast directory.

Announcer:

Ask me MD medical school for the real world with the MD Dr. DJ Verret

D.J. Verret, MD, FACS:

Welcome to Ask me MD medical school for the real world. I'm Dr. DJ Verret. Today we have the pleasure of being joined by Jonathan Northrup, CEO and co founder of Stingray therapeutics, a serial entrepreneur in drug development and an industry veteran from Eli Lilly. We're gonna take a short break and talk to Jonathan about drug development and startup medicine right after this.

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D.J. Verret, MD, FACS:

Welcome back to ask me MD medical school for the real world. I'm Dr. DJ Verret, and today we're talking with Jonathan Northrop, who is currently CEO and co founder of Stingray therapeutics. At the same time, Jonathan has board positions at two other startup medical companies who he was involved with. And he's going to provide us some insight into drug development and how physicians can become involved in drug development. Jonathan, thanks for joining us.

Jonathan Northrup:

Well, it's great to be here. Thank you, DJ.

D.J. Verret, MD, FACS:

So if you don't mind, obviously, we've we've talked in the past and and if you wouldn't mind, though, kind of give us an idea of your background and how you got to where you are today. So our listeners can know your, your extensive industry experience.

Jonathan Northrup:

Yeah, sure. So I got a BA in economics from Northwestern, and then went to Wharton and got an MBA in finance, and wound up getting hired by Eli Lilly and company, in the Financial Group. And I, after a few years transition into sales and marketing, because it was very clear in the pharmaceutical business, you can't save your way to success. So the action was really in, in the more commercial oriented activities. I ran parts of the sales force and launched the number of new products for Lilly. And then I transitioned into the corporate business development group. This is the group that looks outside of the company for new technologies that the company wants to bring in and add to their portfolio. So it's the the buy side to the sell side of what I'm involved in now. And I did that for 15 years and left as VP of corporate business development. And I started consulting and at that time, this was 2005. Asian was kind of blooming in the service business. And so I started consulting in Asia. I had hired out of Wharton for Lilly a lot of Asians over over my years at Lilly, and they came to me and said that they would help me and introduce me if I consulted in Asia. So I gave it a shot and worked China, Korea in India, I wound up after a few years, my consultancy was successful, representing local companies in those geographies and helping them gain entrance to pharmaceutical companies in the US and Europe. And then I wound up running the venture in group for jubilant Life Sciences out of Bangalore, India, which is a large Indian contract, services organization and the pharmaceutical business. And I did that until 2010 and 2010, I came back to the US and started my first biotech company and I've been a serial biotech entrepreneur since then. So now about 1011 years, and pretty much have worked entirely all the time, with one physician, Dr. Sunil Sharma, who is at translational genomics research institute in Phoenix, Arizona as Deputy Director. So Neil and I have started all these companies. The first one we in license from a company that hit the financial recession poorly and wound up losing its way, and we were able to gain access to the technology. The second company came out of syneos lab in terms of the program and the third company. We started together and funded together under sponsored research. And so our labs have been under sponsored research syneos labs to teach him. So that's what I've been doing and I found it to be extremely interesting and a lot of fun.

D.J. Verret, MD, FACS:

When you say sponsored research, wha , what exactly are you talkin about

Unknown:

So there are two ways to access technology. One way is to start at the very beginning, which is you have a target that you want to intervene on in the human body. And if it's a small molecule, you start doing chemistry. And if it's an antibody, or you know, some natural aspect of the human system, like cellular therapy, you'll, you'll start to purify and pull those cells out in some way. And all those approaches, if you do it yourself from the start, you can do it cost effectively. And you can not wind up having to pay a university, a lot of money and milestones and royalties, to take a program out of the university. But you have to find that early capital to do the program. The other way to do it is to is to walk the halls of the university, and talk to the biomedical PhD researchers and look at what they have and pick something that you like, and then try and do a deal with university to license it out at some economic terms, and then take that forward in a company.

D.J. Verret, MD, FACS:

So you've so we'll step through that that process then. So now, you've identified a good idea, either from university and you've been successful in licensing it, or you've done some basic research, maybe some of our listeners actually have labs that they've identified a compound they want to bring forward. What's your next step atthat point?

Jonathan Northrup:

Yeah. So I would say the first thing is that if you've identified a technology that you like, and think really has legs, and you're interesting, interested in taking it out, and and trying to see it get developed, recognize that the biggest challenges are ahead of you. And the big money that you need is ahead of you. So you want to do some real diligence on that program. And you want to validate some of the key experiments. And you want to understand how well done the program is. In other words, many university programs are a little bit like Swiss cheese, they have a lot of exciting things that have been accomplished. And then they have some big holes that haven't really been looked at. And that's that's not because maybe the university professor who is pushing the program forward is in any way dishonest off, that's always a possibility. But it's more likely, because it's just outside of his expertise. There are a lot of different disciplines that are required to be brought into bear to develop pharmaceutical technology. And so the things that that university professor just may not be knowledgeable about. So let me give you a couple key examples. So typically, if you're working with a university professor who is primarily a biologist, then you have to be very thoughtful about whether or not the chemistry is advanced enough for that program to really be a human therapeutic. It may be that the university professor is using a compound that has broad based activities across several systems, which does have activity across the system he's interested in, but those additional activities are going to be a problem for you. So how do you get to a compound that's highly specific, highly selective and highly potent?

D.J. Verret, MD, FACS:

So basically, you're talking off target effects? They're right,

Unknown:

right, right. And so and so you need to make sure you have as many of those pieces as possible. And then you also need to make sure that it can be formulated, you know, if it's a small molecule that's going into the human body. My first company, I did not appreciate what a problem that was if the compound you're trying to get to work and the human body was not water soluble, you know, we are water based.

D.J. Verret, MD, FACS:

Because we are a big water bag. Basically.

Unknown:

If you don't have a water soluble compound, that represents a whole series of formulation challenges, which can be quite challenging. We were we were able to get through that but only with some pretty exotic technologies and spending a lot of money and time to figure that out. So those are some of the things that you can run into

D.J. Verret, MD, FACS:

now, and I think to kind of interject a different viewpoint on it. I think those points are also very useful. For physician as potential investors in these companies to make sure those issues have also been addressed as well.

Unknown:

Yes, yes. And so you do see many, many people as they think about investing in biotechs. They like to follow other people, so they can rag on their diligence. And that's always a nice situation, if you can do it. The challenge is to make sure that you're writing on good diligence. And for the right reasons, you know, you can have VC partners, for example, that might not want to invest in that company anymore. But want to see if they can pull the money that they've already invested out by having other people invest in it. So that's not really the investment you want to chase. And so you have to watch everybody's motivations and things like that. And also, you know, look at the track record and look at the involvement and whether or not the group has the expertise to get done, what it's done. What people like the most, of course, is if somebody has successfully made a lot of money for investors with a previous program, then that's probably the easiest program to raise money on is their next program. Because because people like to follow success.

D.J. Verret, MD, FACS:

So let's kind of get back to the the whole approval process, because we were talking before we started the show about where your current company is, in determining where you you found a molecule you have your your molecule that you want to bring to the clinic, but there's still a lot of work to be done before you can actually start your clinical trials.

Unknown:

Yeah, well, and everybody works out a business model that works for the marketplace and works for them. And the business model that my partner and I have worked out that I've been the architect of over these last three companies. And we're sort of repeating the same model again, and again, and we're finding it each time is that we start very early, with a target that we believe is underappreciated. So So we take an intervention, the human body, which pharma hasn't yet fully validated, hasn't yet fully appreciated. And the reason that's important is because we're going to work on less money, and therefore, it's going to take us more time to get to goal. And we can't be competitive with the 20 to $40 million kind of resources, that a big pharma or a strong VC backed biotech can throw in a problem to try and make progress very quickly. So we need to, we need to pick targets ahead of the curve. When people don't yet fully understand the value of that target, we have to be smarter than other people. And then what we do is we do as much of the work as we can early on, and we throw in a lot of our own money. And in the early days, we typically work without paying ourselves, we just pay ourselves in equity, we don't take salaries, so we can be as cast as efficient as possible to make as much progress as possible. And then what you have to do scientifically, is you have to find your molecule, you have to find a great molecule that really very potently hits the target. And then also is very specific, in other words, it doesn't hit anything else in the human body, as as much as you can determine. And you'll still probably have some toxicities, because usually the body could service pathways for many things. So any target that you pick, is usually going to also have some sort of off disease effects that are just fundamental because of the biology. And so you have to deal with those. And then you have to get a molecule that's a good molecule for humans to take. And so the way we talked about that is we talked about first having a head, which means I have a molecule that interacts with a target. And then I want to make that hit very potent. And then once I have that potent hit, I want to make it very selective. And then once I have that I have a lead. And then I want to take that lead. And I want to optimize it for the human body, meaning that I want to get it as close to a simple once a day droned you can take orally as I possibly can. And if I can get it all the way there to that status, that I have a great drug for human beings to take. So once you Have that you have what we call a clinical candidate, which means I have the final molecule that I think I want to take into the clinic and put into people. And then now you have to work for the regulators. And you have to do all the studies that will prove to the FDA that the risk you're taking by entertaining first and man human trials is reasonable and appropriate for what you're trying to do. And that's all disease specific, and up to the FDA. And we happen to be particularly, very deep in oncology. So I can talk to oncology, which is quite different than other diseases. So in oncology, then what we have to do is we have to build GMP, which means good manufacturing practices, both material. So that means that you have to be able to prove to the FDA, that your bulk material is exactly what you say it is, there's nothing else in it that you don't know about like virus or bacteria, and contaminant and also that it is stable and will remain potent over time, so that you can store it. And so this has to be done by specialized manufacturing group that is in this business. And then you have to take that bulk material, and you have to formulate it into a drug product, in our case, capsule or tablet that you expect people to be taking. And then also those same requirements apply. For the final formulation, the tablet has to be you have to know exactly what's in it has to be packaged correctly, has to be stable over time. And all this takes testing and money and work. And then at the same time, you have to do toxicology studies, in usually in two species. Now, the species can vary according to what you're working on, we have done. One is almost always rat, and the other is going to vary. Usually, if you have an oral drug, it's it's going to be dog. Because you you want an animal that will easily take the medication and the medication will get into the stomach. If it's an injectable, we have considered mini pig rather than dog because mini pig is actually a species closer to human being. So in that way, it's a little more informative. But the problem with giving an oral medication to a mini pig is that as you probably know, pigs can eat about anything. And so they have all these razor sharp teeth in their mouth, which is pretty hard to navigate, to get them to take a pill. And if you try and get them to take a pill a fair amount of the time, it's going to wind up going down the wrong passageway and wind up in the lung and then you're going to have effects in the lung that represent just not getting the pill to the right destination, which is not what you want to have in your TOC study. So you need a specialized board certified toxicologist to do the TOC study. And the TOC study is covered under many rules to make sure that animals are not unduly sacrificed or badly treated. And the purpose of the TOC study and why it's so important is because this is what you're going to take to the early clinicians to say if a patient is going south because of this medication, this is what you're going to see, this is what you have to watch. This is the first organ that likely will be in danger. And what you can monitor to see if the patient is tolerating the drug very safely, and that sort of thing. So that's very important information to give the first physicians using the drug. And that requires a very specialized toxicologist because he has to push the drug to the point where it exhibits those effects, but not push the drug so far, that you don't get any good information on what dosages makes sense starting the clinic that are going to be safe to get people beginning after you have all of that plus your clinical plan and you have to put together your clinical protocol and what you want to actually do To test in phase one and phase two in your ind your investigational new drug application. That all gets packaged up and goes to the FDA, and they have to approve it in a month. Now. in that month, they can stop the clock if they see something that bothers them, and they have a lot of questions and they can reach back and ask you a number of questions. And when they do that, they stop the clock for that. So that might can turn into 45 or 60 days if you're not very quick on your responses, but often it's done in just a month. And depending on the agency that you're going to, you'll get different kinds of reviews. If you have a drug, which is very novel and very much needed by patients, you'll get some large tests and some gravitas from the agency, because they'll recognize the medical need. If you have the next any diabetic, when they're probably 40 drugs that people could take, and they're all very good, and they're all very safe, then safety is going to be a much stronger concern by the agency. And they're going to want to see a lot more information there. So it all depends on what you're trying to do and the group and the agency that you're working with. And then what you'll get from the agency is you won't get an approval, but but you will get permission to proceed. So they'll basically say they see no reason to reject you, and allow you to proceed to the next level, they won't endorse the program. And that allows you then to go on to hospital IRB fees, and physician IRB s, where you can go through the IRB process. And the IRB There is also there to make sure that the patients are safe, that the protocol is reasonable. And then it's done in the right way. The IRB typically will be made up of a broad array of physicians from the hospital, often by specialty, and they'll review the protocol. And they'll review the preclinical data and the ind package and make their decision. And IRB is often take three to six months to do their decision. So even though you have an approved FDA ind, it may be six months before you can dose your first patient because of the IRB process. And then as you start in phase one, you can start in phase one anywhere in the world, we like starting in the US because the US has, in many cases, an unusual physician who is involved in phase one trials, and this is a physician scientist, who really is deep into the biology of the human body, and really can kind of put together two plus two. In other words, if they see something unusual or perplexing, they can try and understand what might be causing that. Many times in Asia, for example, you can find great physicians, but they're fairly disconnected from biology and biologists. It's unusual to have medical physician in Asia, who also has a deep not that there aren't any but it's unusual, that has a deep understanding of the biology. And if a side effect starts to be seen in phase one, can really help you figure out what's causing that. And why is that side effect coming to the fore? And what might you be able to do about it? So we think the US, Europe is well, in many cases are particularly great places to do first man studies.

D.J. Verret, MD, FACS:

Okay, so we've and let me interject here a little bit and go go back some? Because I have a couple of questions along the way. So what you've described is sounds like a fairly long process just to even start the clinical trials in humans. How long? In general, have you seen it take from actually getting a drug compound to being able to start the drug trial? And how much money have you seen that process end up taking,

Unknown:

it usually takes us three to four years to get a great molecule to give people and to identify it. And to get all those features that we're after. And what what I found over time is if I shortcut that early process, I pay for it later, because then I have a drug that is difficult to formulate. Or maybe it has to be taken on an empty stomach instead of a full stomach. And just trying to fix those problems later. In formulation is a lot more expensive, takes a lot more time than if you can start with a great molecule that doesn't need any of that. So three to four years is typical. Some companies can go much faster. In many cases. If you put a lot of people on something, you can do things much faster. But I would say minimum is two years usually and then That's to get to the molecule you need. And then the fastest you can go from that molecule to filing an ind is usually about a year. And sometimes it's 18 months. So. So you're at minimum three years, at maximum, maybe five at this point, when you file your ind, and you're able to start doing clinical studies. And then clinical studies take a different amounts of time because the FDA prioritizes different studies. So if you have an orphan drug, with four group of patients that have no approved therapies, the FDA is going to give you all their top designations, and you might be able to get to market and start selling your drugs three year, three years after you dose your first patient. If you don't have that situation, if you have a drug, which is going to a population that has a number of therapies, that isn't going to get those designations, that is a big population. So maybe there's a big commercial reward at the end, then you're going to have to do the full three phases of clinical development, phase one for safety and tolerability, phase two for non disco efficacy, and phase three for statistical efficacy that regulators will accept to put the drug on the market. And that typically takes eight years and in Rockers, probably a quarter of a billion dollars.

D.J. Verret, MD, FACS:

Now let's talk a little bit about because because it kind of sounded easy in your explanation. But I know there's a lot more involved. Talk to me to talk to our listeners a little bit about selecting the indication that you're going to go after, during your pre clinical time.

Unknown:

It's a great question, DJ. So it depends a lot on where you're working and the molecule that you have. So in our current program, we're in immune oncology. And we have a molecule that can be used quite broadly across seas. So we have a lot of choices. That's not always the case, you might have a molecule that's specifically designed for a very specific and narrow disease, and the decision is easy. But it but for us in oncology, the decision is often difficult. In our business model, we always try and do two clinical trials, we always try and do a clinical trial, which I consider to be primarily for the FDA, which is an orphan indication with patients that have dire need, which meets all of the FDA top criteria, so that we can go for all of the FDA top designations and get to market in three years. Because that's very valuable. And if it's a pediatric disease, or tropical disease, then you may also get a pediatric voucher from the FDA, which is an ability to sell accelerated approval to some other company that has the therapy and those typically, you don't get those until you launch the product. But those typically can be worth anywhere from 50 to $100 million in cash, or you can use them on the next product in your own portfolio. The other disease that's really important to go after is because we're fundamentally oriented toward selling our program to Big Pharma, you know, our our business model, is to take things through phase two, at most no further. And the reason for that is I can do that with a team of 15 to 20 people that are very specialized and very high performing that don't require a lot of oversight efforts. And I like working in that kind of group that fits my personality and who I am, I really am not interested in running a company that has thousands of people doing all kinds of you know, boots on the ground things that is too much too much spanned and too much worry and bother in politics for me personally to to enjoy. So I like to leave all that big stuff to the pharmaceutical companies. They have the infrastructure for that. They're well designed for that they do that with multiple programs all the time. And I like to work in this earlier stage which has a great inflection point. So you can make a lot of money you can make a lot of money for your investors. You Much more controllable. And I think you have a reasonable chance of being smarter than other people by making good decisions. So that's the business model we go after. So in that model, we typically go into the clinic. But we only do phase one and phase two. So we're talking about treating no more than maybe 100 patients, and then selling the drug. And if we can sell earlier than that, that's great. If you could

D.J. Verret, MD, FACS:

we were kind of approaching our time limit here. But I'd like to get into a kind of a brief discussion for our listeners on advice you would have for physicians who would be interested in working in the pharmaceutical realm, particularly with startup drug companies, either that they might want to invest or they might want to consult or they might want to be the participant in the clinical trials. What kind of advice would you give them to to bring those ideas to fruition?

Unknown:

Yeah, so as an investor, there are a number of great organizations that that are available to you. I'm thinking of GPG, which greenparks in golf, here in Dallas, which has a very good platform, does diligence, invests, and that'd be a great place to start to look at deals and think about them. Also, Angel MD is another one. It's more of a national, sort of oriented approach and has a platform and also has a lot of physicians involved hails out of Seattle, but has moved into Houston in Dallas and Denver in a number of other cities, and is a good place. There are a number of local Angel groups you could check out. Every city has one or two Angel groups that look at deals and some of those look at healthcare deals. Health wildcatters in Dallas is a great incubator for early deals, where you can get very closely involved with companies and many people actually become involved with health wildcatters so that they can pick companies that they want to be involved in. And then perhaps have a much stronger relationship with, in some cases, even being an officer of the company. So those are all ways you can start to get involved. I think, also, universities, you can talk to the people in the technology office, and talk to them about deals that they have at the university or technologies that are looking for a home, that's a little bit more shoe leather work on your part. But you might find some very interesting things. And hear, you can get involved very early, maybe even be involved in taking that technology out of the university. And you might be able to team up with a great biologist or great biology and chemistry team. So those are all great ways to get started.

D.J. Verret, MD, FACS:

That's that's extremely helpful information. And as you know, I've I've worked with Healthcare Wildcatters, I agree, I think t's a good early stage echnology greenpark and golf oes really good diligence, hey've they've come a long way n their their time now and have eally become a streamlined rganization, putting in a lot f work into the companies that hey're working with. So I think hose are really good examples. alk to me a little bit about aybe physicians who are who ren't interested so much in the nvestment side, but would be nterested in looking at new rugs, participating in clinical rials, if they have fairly arge patient base, maybe in ncology or rheumatology or hatever specialty, what are ome thoughts you would have for hem in getting involved with ind of startup drug companies o run clinical trials?

Unknown:

Yeah, I think if you're looking to do clinical trials, as a physician, I would actually suggest that from from that chair, I might start the other way. In other words, I might start to see how can I be part of phase four trials for large pharmaceutical companies and large biotechs that have marketed drugs? And once I did phase four trials that I would look at, do I want to do phase three trials. In other words, I would work backwards because when you work back to the phase one trial, you're talking about the highest risk, most liability, most intensive Istiklal equipment required kind of trying, the the easiest trials to do are first of all generic drugs, because you're just proving that you're the same. So you can do those trials pretty much in healthy volunteers and just take a little blood, you don't necessarily even need to have heavy duty monitoring equipment in your facility. As long as you have a vehicle that can get somebody to the hospital in five minutes, you might not even have have an emergency facility there on premises. So I'm just thinking about the the physical equipment and expense of getting involved, I might go at it the reverse way, start with phase four, and move down to phase one. You know, and I think this is where maybe small companies, it'd be more difficult to help them. Now, the difference is I'm talking about therapeutics here, but there are many other companies in healthcare than Justin therapeutics. So there are lots of digital companies that maybe have a device where you can do a much less formal trial, because the device may be isn't invasive, who are doing monitoring, and, and other kinds of approaches. So they might have ancillary things that they're doing within the context of a trial that you could easily be involved in. So I would look also on the digital side of health care, because there's a lot happening there, and external medical devices that don't need to be implanted. These things can be done much more easily with without a lot of burden on equipment.

D.J. Verret, MD, FACS:

And I think to kind of find those opportunities, all of the places you mentioned Angel Angel MD, h althcare wildcatters, looking t those folks to kind of see w at the startup company l ndscape looks like would be a n tural starting point as well.

Unknown:

Yeah, absolutely, absolutely be a great starting point. That was one of the nice things about Dallas is you really do have a pretty competent, eco structure there that has developed over time for major city that hasn't really had a major pharmaceutical company. Be there.

D.J. Verret, MD, FACS:

And finally, one more one more question for you. If I'm a physician, and I have a basic science lab are identified one of those areas where I think a molecule can be easily created to address a need. What What would be your advice on seeking out the business side CEO like the partnership that you have, with Dr. Sharma, what would be your advice for a physician to search out the business executive to help them in product development?

Unknown:

Well, a great place to go is to go to whatever incubators are in the area. And Dallas, for example, I has four or five. But go to the incubators in the area because as you get to know these folks, you know, this is a business where not everyone succeeds. So some of these people, they currently have something that they're doing, maybe next year, they won't, and they could be available. So making those connections, making those relationships. And also talking to the same folks we've been talking about who run those incubators or venture groups, they may know of people that have hit adversity. Maybe the science didn't perform when the drug went forward, and someone becomes available. And so that's another place to go, I would just offer this caution. You know, this is a very difficult area, it's a very difficult area to make money. And so you really need somebody who's very good. And so if you have your baby, that you're taking forward, I would really encourage you to stay involved. And even if you get someone like this who is helping you, you need to be in there sort of shoulder to shoulder talking about everything being a sounding board, making sure things make sense and and talking to other people that you know, who are in this business or have been in this business and can give you healthy advice. Because it's it's very easy to wind up with people if they don't have a strong stake in the technology in the business. If they don't know what they're doing. Then, you know, you can be you know, part of their learning experience, which is not what you want. Have you

D.J. Verret, MD, FACS:

know you definitely don't want to be part of someone's learning experience. Jonathan, thanks so much for joining us. I appreciate it. It has been extremely informative. And I think it was a really good insight into the difficulty of particularly drug development and and how much time and effort it really takes to bring a drug to market. Well, really

Unknown:

fun for me DJ and I hope your listeners find it at some value. Thank you very much.

D.J. Verret, MD, FACS:

We've been talking with Jonathan Northrup, CEO and co founder of Stingray therapeutics, a serial drug development founder and industry expert, you're listening to ask me MD medical school for the real world. I'm Dr. DJ Verret. Thank you for joining us. Make it an awesome week.

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Thank you for joining us for another episode of Ask me MD medical school for the real world with Dr. D.J. Verret. If you have a question or an idea for a show, send us an email at questions at ask me Md p dcast.com.