Conventional wisdom suggests that the O&P industry lags behind other health care sectors in innovation, such as the pharmaceutical and high-tech medical device industries. But the industry is catching up to its health care brethren, and that is good news for O&P companies who are looking for ways to grow — and for companies who want to invest in that growth.
From an investment standpoint, the O&P industry may be a solid bet because it is always churning out new products and innumerable variations on existing products.
“If you can make a leg a little more comfortable by using a slide locking mechanism, for instance, you can patent that and become known for making it. You can make a difference and make a good return,” Matthew Evans, principal with Beverly Capital LLC, told O&P Business News.
Evans said his company has done much research into the industry and is eager to invest in this sector of the health care field, particularly the manufacturing end of O&P.
“We were interested in the industry to begin with. We specialize in health care in general, and believe there are a lot of opportunities in O&P. We are currently in discussions with multiple manufacturing and supply companies in the industry.”
The company’s first venture into the industry was with American Prosthetic Components LLC (APC), in Green Bay, Wisc.
“We read about the company, and thought it was compelling,” Evans said. He said APC was seeking an investment partner to help it expand and brought in his company to help bridge the relationship on the investment end.
Fruits of investment
Michael Curtis, founder and chief executive officer of APC, has been in business for 21 years, manufacturing prosthetic components. He said the company has hired additional engineers and has added eight or nine people to the payroll since the investment, bringing the total number of employees to 30.
In addition, APC has a planned remodel in the works to make room for additional machinery. The company has a new website and logo, a new catalog and new salespeople to support new marketing strategies.
“The vision that we have now is quite a bit different; instead of growing a little bit at a time, we’re expanding fast.” Curtis said. “We’re trying to do it for convenience to the end user — the practitioner, the shops. For them, there’s always costs, costs of shipping … this way they can buy their plastics, their socks and components from us.”
APC is growing to be a kind of one-stop shop for smaller O&P companies. Other manufacturers and suppliers look to the company to help make parts for their own customer base. They sell to distributors, and they also sell direct.
“We’re taking all the little guys, like we were a very little guy at one time … we want to merge with all these little guys and round out that product line,” Curtis told O&P Business News. “We think we can help because no matter what kind of product is out there, there’s machining that needs to be done. So by having the machining end of it, there a lot of these companies that we can help bring products to market.”
Evans cited APC’s capability to machine and customize parts as well as its ability to be a distribution channel. “They can serve as distributor for smaller companies that want to license out their products, or get their products out quickly to a bigger customer base.”
If another O&P company wanted to take this tack to growth, Curtis offered a suggestion.
“Not to try,” he said, only kidding by half. “It’s been a really long 21 years. It takes time to build the relationships and the confidence.”
One road leads to another
As with many in the field, Curtis did not take a traditional route to the O&P industry. He originally went to school to be a police officer, but did not pursue it as a career.
“I went to Denver and became a sales manager for a company that dealt in wiring harnesses. The guy was inventing a myeloectric motorized knee. I went to a show and I was absolutely fascinated. So I sold the house I had just bought in Denver, moved back to Green Bay where I was from and started a prosthetic company in the basement. I talked to people in the industry — who to follow, who not to follow, what’s working, what’s not. I spent more time on the road and I learned really quickly, met some people at the Mayo Clinic and pounded the pavement.”
Curtis said the worst part of the venture was not receiving a paycheck for several months in the beginning as it was trying to take flight. “You try to put everything back into the company. I tried to convince my wife that I sold the house because I need to do this, I have to do this, and continue to grow at the same time. Now we look at it, and anybody who started with the company years ago made us better, made us understand the industry better, knowing that customer satisfaction is number one.”
Curtis said being in the industry for so long has made it fun, and said he enjoys seeing many of the same faces at various industry shows. And although he doesn’t do the machining anymore, he does a lot of designing. He holds 10 patents, with six pending
“We’re problem solvers,” he said. If a customer needs a part to do something very specific that doesn’t already exist, “I might already have it by mixing two parts together. That’s different than selling five items that are made inexpensively. What’s made us successful is that we listen to people. We didn’t get creative when we made these parts, the industry did. They just told us what they needed. Or they told us about a problem, we listened and tried to figure out the problem. If we figured it out, we fixed it…and now we have a new item. And then other people might have the same problem, and that’s what’s made us grow.”
Eye on the future
One trend in prosthetic components manufacture is the use of more lightweight materials.
“We’re working with something new. If we can make something light as paper but with the strength of titanium, we can help the amputee as long as we can keep the costs down. That would be a win-win situation for everybody, the patient, the practitioner and us,” Curtis said. “We’re not tying up our time looking at a foot that can dance like a ballerina. It’s not the focus we want to sink our time and money into. We’re looking at the industry and the future of the industry as a whole.”
Evans said that APC has a reputation for its machining expertise and innovation.
“There’s growing pressure in health care to provide services at a much cheaper level and patients are feeling the pinch as well. A great aspect of O&P is that there’s a lot of room to innovate. What APC is able to do well is innovate in response to the market, and at the same time achieve it in a cost effective manner.”
Evans’ investment company continues to research the O&P industry, and he is confident that the investment can pay healthy dividends.
“From a sector analysis, unfortunately, it has favorable demographic trends. People are getting older and there are diseases like diabetes that can lead to the need for prosthetics. It’s a fragmented industry, as well so there are many different companies doing different things” in the field, he said. But he stressed that O&P is unique in the passion that practitioners and manufacturers have for the field and that is encouraging to him, personally and from an investment perspective.
“We’re looking at all different sectors of health care: dental offices, surgery centers … we’re looking at other health care. Everyone says they got into it to help people, but you get the feeling that it was the dollar that was driving them. But O&P is truly one of the first health sectors we’ve seen where people really believe that they went to train to help people. And when you spend some time at a clinic and you see the situations that come in the door that need help … it’s serious stuff. It’s great to be a part of something that’s not just profit-driven but that can certainly be profitable as well.” — by Carey Cowles