FROM THE EDITORS
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But sometimes big companies can stand in their way. Large companies have the sales and marketing resources to maintain market leadership in the most lucrative product areas, regardless of whether their technology deserves that status. This can leave a small firm feeling that it has little alternative but to hope that a bigger competitor will decide to acquire it. If that doesn’t happen, then the small firm is stuck.
But at the RBC Capital Markets Healthcare Conference, held in December in New York City, there were a number of companies that have found another way. And that way is to choose to play in markets big enough to make a satisfying amount of revenue, but not big enough for the conglomerates to care about.
“About five years ago we made a change in strategy and realized two factors that were going on in our market space that we have taken advantage of,” said Howard Root, CEO of Vascular Solutions Inc. (Minneapolis). The company makes diagnostic and interventional devices used in vascular medicine. “One is that large companies, particularly those on the coronary side, have to focus on the much larger opportunities, [such as] the drug-eluting stents, and they really have ignored the smaller opportunities, the $5 million–$10 million product lines. They focus on the things that make sense [for them] financially. The second factor is that the small companies have a harder time getting a direct sales force. Just getting onto the vendor list of a hospital can be a year-long process. So we’ve seen small companies that sell smaller products fall away, and that has left a big open space for us.”
Root said his firm now considers any technology that involves a needlestick a vascular product. If a product’s market potential is in the $10 million range, it’s likely the firm will be interested in it. If it’s in the $100 million range or higher, the firm will leave that market to the big players.
Even medium-sized companies such as Angiodynamics Inc. (Queensbury, NY) are adopting a form of this strategy. Angiodynamics has an extensive line of products used to treat peripheral vascular disease. Although it can go after larger markets than Vascular Solutions can, it still picks the best spots so as not to be crushed by the conglomerates, said Eamonn P. Hobbs, president and CEO.
“Our business model is to provide a broad base of products to the interventional physician,” he said. “We are really the only broad-based company that is totally focused on the interventional physician in peripheral vascular and cancer therapy. We compete with very large
companies—Boston Scientific, Cordis/J&J—and many others in the space, as well as small one-product, one-technology companies. But the big guys are focused more in the cardiovascular space, and the little guys have a very narrow product line. So that puts us in a unique position.”
The source of the company’s success, he said, has been a combination of organic growth from a healthy pipeline and choice acquisitions that fit in the firm’s space. “I’ve never been associated with a better product line, and I’ve never been more excited about the future,” Hobbs said.
In a perfect world, the best ideas and the best products would always win, no matter the market. But the reality is, the big companies are going to dominate the biggest markets. That means other device makers must be strategic. For small and medium-sized device companies, just as important as developing the best technology is figuring out how to position it for success in the marketplace.
Erik Swain for the Editors
