Fred Lampropoulos, chairman and chief executive officer of Merit Medical, spoke to Interventional News about building a business with lasting value in mind. He attributes the company’s success in developing and acquiring (recent acquisitions include Argon Critical Care, DFINE, Bard’s divestment assets and BioSphere Medical) a product portfolio that spans the breadth of interventional radiology to vision, planning and never putting himself ahead of his employees.
What makes Merit Medical unique in the healthcare industry?
Planning is an important part of what we do. Our biggest single advantage is that we wrote a 100-year business plan. That goes back to my military background as a US military officer and combat officer— I fought an enemy that was willing to fight for 100 years. If you look at our products, our programmes, and our global presence, these came about because we thought about them for a long time. We are now 30 years into the 100-year plan. We are not sellers; we are builders, dedicated to building something of lasting value. And that must be communicated and explained to employees, so that they know that they are safe, there is a future, they are not going to be bought out, and then made redundant. That is a powerful idea. Other key factors are being visionary and disciplined, and understanding the industry.
As a medium-sized company, how do you maintain a diverse portfolio in niche areas?
Last year, we introduced 22 new products. We are able to achieve this through a combination of internal research and development as well as strategic and tactical acquisitions. When we make those acquisitions, we invest in them the same as any other part of the company. We start research projects to enhance the new company, and maintain their facilities and people, thus retaining know-how and tribal knowledge, because that is key to success. People are the key to success.
How do you choose which therapeutic areas you operate in when deciding on acquisition?
We started out in cardiology with a simple polycarbonate control syringe. Then we went on to a digital inflation device. Today, we are the world leader in inflation devices that deploy stents or blow up balloons, even though we do not have a stent. People using the tools want stability, and to be familiar with them. Technology has moved from bare metal stents, on to self-expanding stents and drug-delivery stents, but the tools that deliver them are constant.
Innovation is also important. Most companies have one inflation device; Merit has six. We always have active research and development projects, and have moved from cardiology into interventional radiology, which candidly is now the largest part of our portfolio.
The equipment for cardiology is also used in interventional radiology, but on a bigger scale, because it works in the heart, feet, legs, liver, kidneys, and lungs, as well as in neural pathways and dialysis and PICC lines, There was a lot of room for improvement and innovation, and because it was so fragmented it meant that we could compete in this arena. Later, we looked at oncology and bought BioSphere Medical and its EmboSphere microspheres product line in 2010, and we have doubled the size of that company in the last two years with our focus on poly vinyl alcohol (PVA) and gelfoam and a number of embolics that we will bring out in the future.
Where do you see the most interesting growth opportunities in Merit’s product portfolio?
Without revealing any trade secrets and without sharing intelligence, Merit specialises in five areas — endoscopy, critical care, interventional oncology, the peripheral spine, and cardiology. We look for cross capabilities, points of sale that we can be active in and that we have knowledge of. There are common threads that go through all of our specialties. We also look at areas where other companies had given up, or there was underinvestment, or markets were fragmented. We tie common threads, where there are opportunities for cross-germination, and the things that we know about into products that we believe can be competitive.
In 30 years none of our product lines have ever failed – even though, usually, economic cycles eventually decline. Emerging economies are doing some of the things that were being done in the US 10 to 15 years ago; they use products that are still very good but they are further back in the learning curve. China is one of our fastest growing areas, and we believe it will continue to grow.
Recently, our market cap hit a record high of US$2.4 billion. Within three to four years, it will be $5 billion dollars. We started out as a penny stock.
We have R&D going on in numerous locations – in Singapore, China, and India. Another thing that distinguishes us from other small- to medium-sized businesses is the way that we have grown. The US business accounts for almost 50%, but we are also in Central South America, South Africa, North Africa, Iraq, Iran, Syria, Egypt, Lebanon, and Algeria.
What are the main drivers of the healthcare industry at this time of transformation?
It is always innovation, not being afraid of being a global company with a global perspective, understanding the regulatory environment – and not complaining about it.
It is also important to understand emerging trends via an understanding of demographic issues. All of South East Asia is growing rapidly, so we have expanded there.
Another driver is being able to sort through therapies and make decisions about what to invest in. In Europe and Japan, 80 to 85% of procedures are performed through radial artery access, but the USA was slow to adopt it—five years ago it was at 5%, today it is approaching 45%. We have moved a lot of our procedures and training to the USA so as to develop the products and bring about changes in the thought processes in the USA.
In politics, the saying is that you should act globally but think locally; doing that is different everywhere. For instance, people are smaller in Asia; therefore you cannot necessarily sell the same product to someone in Japan that you would in northern Europe. You have to adapt to the local market. This is part of our strategy and the tactics that support it.
What will the future of physician education look like?
Education is essential and it is a long process. Merit has educational and awareness programmes such as ThinkRadial (an educational platform for clinicians and patients focused on the radial approach), ThinkPAE (an educational course for prostrate artery embolization) and ThinkAccess where physicians are trained by physicians. If you provide training for procedures, and supply the products, service those products, and put support structures in place, people stick with what they know, and with companies that support them.
What is Merit’s approach to supporting online education and live events?
We provide a certain amount of online education but we need to do a lot more. We are relatively inexperienced at this point, but we do not intend to remain so, and there will be more investment and academic input into that process in the future.
On a related note, Merit is also involved in developing a bipartisan bill being introduced to the US Congress that will bring more funds into the training of interventional radiologists. We are involved politically and not just interested in selling products, we are interested in building the industry. Interventional radiologists understand patients from head to toe, but they do not control the patient. That is the real challenge—getting more people trained, and then doing a better job of raising awareness, through social media, word of mouth, and advertising, that men and women can choose to have procedures such as a prostate artery embolization or uterine fibroid embolization (UFE). Given that choice, patients will always go for the minimally invasive option.