The Replacement Model
Most Fast 50 companies think they're going to do better this year than the year before; it's in the nature of entrepreneurs to be eternally optimistic. But, in the case of Christchurch-based Enztec, ranked 27th on the 2008 Deloitte/Unlimited Fast50 for its 231.78% growth, a new business model could deliver on that positive thinking.
And it doesn't hurt that the orthopaedic industry is continuing to have double digit growth due to ageing populations - the worldwide market for hip and knee replacements along is worth $11 billion.
"If there was such thing as a recession proof investment, this is it," says Stephen Norrie, a partner in Auckland firm Birnie Capital Partners, the company's major shareholder. Or, as Enztec CEO Stephen O'Neill says, "Demand is greater than supply, so it's a good business to be in."
Enztec was started in 1993 by toolmaker Paul Morrison, who teamed up with surgeon James Burn (both are still shareholders). Its specialty has been making smart instruments for surgeons to use on orthopaedic patients in theatre. More recently, it's branched out into producing a dozen or so custom-made titanium implants for kiwi patients, utilising an electro-beam melting machine owned by US Company Medical Modelling.
Exports account for 93% of revenue and to date Enztec's niche has been providing an innovative difference for big global partners.
"If they call the CEO here and say, 'I have an idea,' the surgeon can talk to an engineer that day and have a prototype the next day. In these big companies you'd have eight months delay and huge expense," O'Neill says.
This year Enztec won a local "deal of the year" award for its partnership with DePuy International - one of the world's top four orthopaedic companies - for which it has developed three surgical instruments to be sold with DePuy's new portfolio of knee implants. That deal alone is worth multi-millions to Enztec and will significantly boost growth.
But, instead of focusing only on creating intellectual property that is then sold by others, Enztec has teamed up with Boston-based OMNI life science, a hip and knee implant provider that is also partly owned by Brinie Capital Partners.
They've set up Orthopaedic Synergy as a full-service orthopaedic company, combining Enztec's clever medical instruments and OMNI's hip and knee implants that have made good inroads in the US, which accounts for half of the world market. The new venture will initially operate in the Australasian market before going global. Until now OMNI has focused on the US and only sold into Australia under an agency agreement.
While the new venture is already getting interest out of Asia, it's not ready yet to enter that market. It has to "crawl before walking and walk before running', Norrie says.
Joining forces presents a "better business case" - one that O'Neill says recently convinced a number of new and existing private investors to stump up a "substantial" sum to fund the new business model. It would have been difficult for Enztec alone to justify that capital investment.
"We're taking that leap to working to make ourselves rich rather than the other guys. We have now grown up enough to back ourselves."
So why not just merge the two rather than retain autonomous companies under the one umbrella? The companies have distinctive cultures and brands that are best kept separate, says Norrie, and the two design teams in Christchurch and Boston will also continue as before.
But certainly the plan is for more of both companies' business to flow through the joint venture over time. A Sales team has been set up in New Zealand to service the trans-Tasman market, rather than just selling through distribution partners.
Originally the idea was to list Orthopaedic Synergy within one to two years, but O'Neill now says they will "wait and see" whether or how long the global recession may delay that. But the company hasn't pulled back on its "bullish" growth forecasts even in the current market.
"We like to think we'll be in the Fast50 for another couple of years. We look to Fisher & Paykel Healthcare as a leading, listed, global, medical device company and see no reason why we can't be doing the same,” says O'Neill. "It's about attitude and believing we can do it."
BACK