The Prosthetics and Orthotics Podcast
The Prosthetics and Orthotics Podcast is a deep dive into what 3D printing and Additive Manufacturing mean for prosthetics and orthotics. We’re Brent and Joris both passionate about 3D printing and Additive Manufacturing. We’re on a journey together to explore the digitization of prostheses and orthoses together. Join us! Have a question, suggestion or guest for us? Reach out. Or have a listen to the podcast here. The Prosthetic and Orthotic field is experiencing a revolution where manufacturing is being digitized. 3D scanning, CAD software, machine learning, automation software, apps, the internet, new materials and Additive Manufacturing are all impactful in and of themselves. These developments are now, in concert, collectively reshaping orthotics and prosthetics right now. We want to be on the cutting edge of these developments and understand them as they happen. We’ve decided to do a podcast to learn, understand and explore the revolution in prosthetics and orthotics.
The Prosthetics and Orthotics Podcast
Navigating the Future of Prosthetics: Mergers and More with Joris and Brent
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Ever wondered how venture capital and private equity influence niche markets like the Orthotics and Prosthetics (O&P) industry? This episode takes a closer look at the high-stakes world of VC and PE funding, unpacking the pressures for rapid growth and the delicate balance between quick returns and long-term innovation. We delve into the complexities of large-scale investments in the O&P sector, drawing comparisons with significant deals like the $1.3 billion acquisition of Hanger. Our discussion reveals the unique challenges posed by smaller consumer bases and the potential for socially responsible funding models that prioritize measurable outcomes.
Finally, we tackle ethical considerations in social enterprises and the global consequences of aid and integration. We dive into the exciting realm of patient-invented prosthetic solutions, examining the impact of 3D printing technologies and the ongoing innovations driven by patient needs. From the strategic maneuvers of companies to the remarkable advancements in prosthetics, this episode is packed with thought-provoking insights and essential updates.
Special thanks to Advanced 3D and Limbguard for sponsoring this episode.
Emerging Trends in Upper Limb Prosthetics
Speaker 1Welcome to Season 8 of the Prosthetics and Orthotics Podcast. This is where we chat with experts in the field, patients who use these devices, physical therapists and the vendors who make it all happen. Our goal To share stories, tips and insights that ultimately help our patients get the best possible outcomes. Tune in and join the conversation. We are thrilled you are here and hope it is the highlight of your day.
Speaker 2Hi everyone, my name is Joris Beals and this is another episode of the Prosthetics and Orthotics Podcast with Brent Wright. How are you doing, brent?
Speaker 1Hey, Joris, I'm doing well. Man, I know you're a big fan of this seasons thing, right? You know a dozen episodes per season and all that stuff. Well, we're one episode away from closing out our eighth season, which means that we will have 96 episodes in the book.
Speaker 2What do you think about that? That's a lot dude. That's amazing. That's really amazing.
Speaker 1So, if you want, you can binge on yours and brent and the prosthetics and orthotics podcast that. That could make somebody go crazy, wouldn't it?
Speaker 2yeah, you could binge on it for like a really long time. Oh, that's crazy. I hope no one does this. Uh, okay, so today we don't have a guest, right so, but we do have like a sponsor, right so. So, so who's sponsoring this episode?
Speaker 1today. Yeah, so advanced 3d is, uh, actually sponsored this this whole season, uh, and it is a contract manufacturer. I'm a part of that, along with paul and tyler, and we essentially want to encourage everybody to look at additive manufacturing as a reasonable manufacturing technique to create prosthetic and orthotic devices. And we can meet you anywhere you want. If you've never scanned before to, if you've scanned, if you want to help with check sockets, definitive sockets, workflows, we can do it all, but you know. So that's advanced 3D. But you know we had Mike Astilla on from Limguard and he said you know what, brent, I had so much fun on the show and I think you guys are doing a good job, and so he wanted to sponsor these last few episodes of season eight, and so I thought that was really cool and super insightful with LimbGuard, which is the removable rigid dressings for people that have just had an amputation, so it's like a helmet for somebody's leg after surgery.
Speaker 2That's super cool, man, that's super nice. And where would you get it? Who would buy that and how would they buy it? I mean, is it something that the surgeon would get? The prosthetist would fit. How does this work? If I'm interested in this, how would that happen?
Speaker 1Yeah. So one of the interesting things that I thought especially Mike, and then we've had some other guests which I'll foreshadow for the following next week is about the removable rigid dressings and really the opportunity it is to get yourself in front of a patient and also be part of the patient care. So it's best if a prosthetist has a relationship with a surgeon. A surgeon does the amputation and it's just part of the care. Every person that has an amputation gets a helmet for their suture line, essentially, and it's crazy the numbers of people that actually fall, because a lot of people still think they have their leg and so they'll get up in the middle of the night and they'll fall, injure their leg and this is a way to protect it.
Speaker 2Okay, that's super cool. That sounds like a really really worthwhile thing and a really interesting thing to get involved with. If you don't yet have that kind of a solution, so thanks, I didn't even know that. So that's good Goodness. So, in lieu of having a guest, we're going to talk about some news and some goings on that we found very interesting in the market and the wider world. And yeah, we're just gonna start with some really some really exciting news, right, brent? And yeah, we're just going to start with some really exciting news, right, brent?
Speaker 1Yeah, and shout out to Linda Calabria, who we've had on the show and she just does an amazing job. And what is funny is she's like graphics that nobody asked for but I think that are interesting. Right, and she just has this graphic and if you take a look at it it's on LinkedIn within the last week or so, but it's just shows kind of the snowball effect of upper extremity companies that have been acquired so so like in the in the late nineties, phil, our acquired motion control then and and then there was a big period of time. And then, 2015, college park acquired liberating technologies. And then 2015,. College Park acquired Liberating Technologies. And then 2016,. Oser acquired Touch Bionics. 2017, autobach acquired B Bionic. It's like, holy moly, is there that much demand for upper extremity? And then 2019, two things happened Phil Lauer acquired TRS, which is pretty wild. And then OSER, a part of college park industries, uh, which was uh kind of interesting as well. And then, uh, it's snowballed, so co-op acquired then liberating technologies from college park, so that lasted two years, which is kind of wild. And then oser acquired naked prosthetics, which is for partial hands.
Speaker 1Then, 2023, out of nowhere, this company called Equal acquired Steeple, steeple, steeper. And then this is the news that, though, I wanted to get to is that in 2024, hanger acquired Philhour, which does a lot of stuff in the upper extremity realm. Hangar acquired fill hour, which does a lot of stuff in the upper extremity realm, and they distributed the task of uh, hand or task of prosthetics. But then, just this past week I think, equal acquired tasca. So it's almost like they kind of pulled I don't know if it's pulling the rug out from under I'm, you know, I I would love to be back in these smoke-filled rooms of these acquisitions and what really happens. But it appears that Equal was very nimble and acquired Tasca, which I don't know what that relationship now will be with Phil Hour, because Hanger and Equ equal are competing companies. So very wild, and I'm kind of curious to get your take on that.
Speaker 2Yeah, I think you know. So first of all, I remember, like, why upper extremity? So so what I've? Is it just cause it was more accessible to innovations? It was more accessible to kind of this robotics, new kind of, you know kind of this robotics, new kind of, uh, you know kind of like these new techniques, finding actual products. Is that the reason why there was so many companies that got acquired, or what do you think?
Speaker 1you know it's. It's an interesting question and and and I don't know the answer I think the reality is is the robotic side is very interesting so and has a global use, even outside of the prosthetic and orthotic industry. So, for instance, like these sensors and things of that nature, they can go into something like an exoskeleton, which then goes into the workforce and factory workers and that sort of thing, and there's a whole bunch more of those people than there are of people that need these devices. So I think it's a little bit of an intellectual property grab and let's get our foundation and some of our fingers in all these places so we have it for the future.
Speaker 1So that's kind of my take, because I can't imagine when you're looking at the grand scheme of things and I don't have the latest number, so you have to forgive me, but out of all amputations, I think there's only like three or five I think it's 3% of all amputations are upper extremity amputations, and then there's only and this is a terrible statistic, but I want to say less than 10% of those people actually wear a prosthesis. So you're like fighting for 10% of 3%, which doesn't seem like a good business move. So I'm curious, kind of like you. Why the interest? Right, and these companies are going for millions of dollars and for a hand that costs you $20,000, $25,000,. You got to sell a lot of hands to pay back all that money. So I think there's definitely more.
Speaker 2But then maybe the path from hook, if you will, to robotic hand has been much steeper. There's been much more progress and people pay a lot more for them and you can put a lot more intellectual property in that. Meanwhile, on the lower extremity side, we've got carbon fiber, all sorts of kind of more distributed innovations right of you know, liners, silicon, liner stuff. They've been more distributed amongst all the players, uh, but no one's come up with like some super mega robotic foot that really moves the needle for amputees, I think, whereas the difference between having a hook or having a kind of clamper or having kind of something that is very finger like is really pronounced, I think, and also maybe also just as if that prosthetic thing, if that look and feel the thing, is really important to you.
Speaker 2You know, you, it's much more difficult to forget about your hands and say, throughout the day, you know, if you're, I sit down, so I have a standing desk, I stand a lot, but I also just sit down for hours. So in that time maybe my leg could be more, you know, more kind of like forgettable, but my hand I'm using throughout the day, whatever I'm doing, all throughout the day to do all sorts of stuff. So you know, maybe it's just like that. It's perceived to be more important more technological innovation than going there, and maybe they're good. They're going to sell them for more. Maybe it's just that simple.
Speaker 1Yeah, I mean it could be, and I think one of the interesting things is it's one of those small companies that now is off the table, right, they've been consumed by a larger company, and so the crazy thing is this vertical integration allows a company like Equal, allows a company like Equal. Now they own the fabrication of this device and they have clinics and they also have a funnel of patients that would be users of this product. So so why not you? You control the whole thing and uh, I remember Paul, uh, from East Point saying the more money that you can run through your fingers multiple times, right, so you've got the manufacturing, you've got the patient care side of things, you've got all this stuff that's happening inside your company, the better off you're going to be, and I can't help but think that's what's going to happen. But off you're going to be and I can't help but think that's what's going to happen. But you know there's there's not many more independents.
Speaker 2Uh, left, yeah, in this space yeah, and also it's just also I think it may also be an investment model, like, imagine if you you make some kind of bionic thumb kind of thing right, you'll get money for that because you, like you said before, it's like a broader thing. Maybe people it's. It's not only a prosthetic, it's industrial automation, so maybe you get more money than if you're doing a foot kind of related thing. You know, with that more money, of course, comes responsibility, comes some guy on board who's got 20 of your company owns every friday in your life now and and and that guy wants a return so he wants to flip right.
Speaker 2Meanwhile, maybe some more of the lower extremity companies maybe they go the other way. They don't get that funding, so they bootstrap themselves so they don't have investors, so they don't have to flip and they just end up becoming maybe less jazzed up and bigger but still more profitable businesses. You know kind of charging along when these businesses kind of have to blow up more and kind of like, you know, go bigger, go home and then they have to sell. You know, yeah, so I think that that's also maybe because of what you said with this, this broader model, uh, you know it could be used for automation, could be used for the military, it could be used for whatever, you know. Maybe then these guys are getting more money and and then the more responsibility comes behind that. So I don't know, yeah, I don't really know. I think, I think it's interesting. And and what about these companies buying these things? Because you, yeah, we're both kind of worried about one of them's oser autobock.
Speaker 1Um, yeah, and now, you've got equal oser, autobock equal, and then hanger those are kind of your big, big four players.
Speaker 1but before we go down that road, here's one thing I mean I know you're on the vc side of things, especially with the additive manufacturing world how, like these investors, when they inject cash, how quickly do they want it back to go after the new, newest thing? And here's the reason why I asked this is um. The interesting thing in this slide that linda had is you can see that um, the company called it was LTI or Liberating Technologies was part of College Park, but OSER acquired that technology from College Park in 2019. But what's interesting is that then OSER was like eh, I don't know if this really fits with us. And so two years later, later, they spun it out and then co-op acquired it, and so this is like the first kind of um swap, so to speak, of like, hey, this might not fit us, or hey, hey, this might fit you and we want to just sell off some of our portfolio to get, you know, another shiny object. How does that work?
Speaker 2Yeah, it depends as well on the type of company, the type of VC, if it's a VC or PD investor or something like that.
Speaker 2There's a couple of things at play here. One is that they want outsized returns right, so they want to return a lot of capital for the investors that give them the money right, so they then get that money for, like, let's say, a decade, right Now. That could be extended, but that usually is a decade and they might have a fund for, like you know, robotic automation Asia right, or they could have a fund like robots right, it could be, like you know. So it's limited to that opportunity. It's limited to that 10 years, and they and their investors are expecting, like, outside, outsized returns. Like you know, this is much riskier. This is much more involved. There's a lot more downsides, there's a lot more work going into there. So the VC will take a bonus on what the return is and there'll be a fee baked in there somewhere for them to sustain their business while they're investing this money and getting it back. So they're essentially renting the money from people and try to get it back more, and a little bit of that has to sustain themselves, and they hope for a large percentage of the next Facebook. So the math is essentially they want, above the stock market type returns, wild type returns, 40 times the capital. Come back on what's at one company they invest in 10, it's kind of like typical eight will go bust and one will be like kind of sold, but then moi you know, and then one will be like Facebook. That's kind of the idea, right. Then they get 25, 100, 40 times invested capital back, which they get and get 20% of, and then the investor gets the rest and that's of course great for them. And then they so that money is deployed along 10 years. But their investment terms are much lower or less.
Speaker 2It depends on which stage they invested. Right, if you're staging in a concede round or kind of friends and family round, well you know there's going to be a couple of years in advance, whereas in a stage C round or something like that, you know that company's grown already. You're expecting an IPO or an exit event of some kind like quite close by. So it depends on what stage you invest as well. But we're talking about several years, so two to, let's say, maximum five years, seven years. Seven years is wild for that kind of ic money is more like other kind of funds, like beanie and stuff, so so that's quite quick in in in in the history of a company.
Speaker 2So so, and it depends, you know, if you're, if you're a early stage investor, you're going to wait a lot longer for your money and much later, kind of the last big push around, whatever. You're going to wait a lot shorter uh for, uh for your, but then it'll be a lot more sure thing. But you're going to have to bring in a lot bigger ticket, right. So the first investor maybe brings in 50,000, maybe 25,000, small amount, but hey, if that becomes like Instagram or whatever, then it's fine, right, but they'll have to wait a little longer. So so that has to do a little bit.
Speaker 2But it's also their attitude, right. They don't want you to do okay as a business. That does nothing for them, right? If you're doing all right and growing like 10% a year or something, they're like, oh, that's not interesting. They're like go, go, go, you know. So it's a very different kind of mindset.
Speaker 2So that kind of growth mindset, if you will, is very positive because it makes people really get the bang for the buck and really focus on growth and revenue.
Speaker 2But it's also bad because it could get people to focus on like cutting corners or not building a business that sustains itself or not like really like really capturing revenue rather than capturing clients for the long term or relationships forever, for example, as you may do if you, if you're, if you're more like a family-owned business or whatever. So it depends. But you know, we see that a lot with P&E private equity investors that they sell to each other, a lot where they gobble up each other's gains when it makes more or less sense to them, but the VCs as well. But also just sometimes, just like people change strategy, right, people could just say, hey, we want to go into devices in a big way. Then we find out that that all these other people are buying device companies and all of a sudden, that doesn't work for us anymore. You know, you know the device strategy doesn't work because we can't get a portfolio of 20 devices, because we're getting outbid every time by oser you know so it's.
Speaker 2It's more likely in my point, to be like a strategy change where somebody's like, okay, wait guys, this isn't working and now all of a sudden we're like a service business that has one product making little island and then it seems inefficient. That to me is much more like kind of corporates. Corporates do that a lot, that kind of stuff like oh, oops, okay, and then we sell them again.
Speaker 1So do you think that this like knowing what you know after we've been doing it this couple of years I mean, is this a good thing for O&P? You know, with the money coming in, I mean, is it going to push the innovation side of things or with these small companies being vertically integrated? So that's my first question is you know you've got a VC that comes in or some private equity and they want to return in five years. They've paid a premium for this. You know, entering into the orthotic and prosthetic space, you know, at year three and four you're going to start feeling the burn if you are not making gains for them to get their money back. Um, I mean is, is that a good thing?
Speaker 2yeah, I don't know well, I think personally, I think, you know, you know P&E money. I'm beginning to see this as kind of poison, because they really just fire a whole bunch of people. They just put the debt on the company and it really is. It could be really disruptive in a bad way for O&P if they bought like quite a sizable company in the market. Also, a big competitive company will also be a husk of its former self, not be a husk of its former self, not caring about customers, not caring about quality, and they'll get rid of all the people that actually know what they're doing, you know. So P&E money is something that I really you know. In many cases I know there's good long-term P&E investors, but in many cases it's horrible. And I don't think it's horrible and good for an industry. I don't think it's good for customers, I don't think it's good for staff, I don't think it's good for anybody except for the PE and firm.
Speaker 2Now, vc money is know what you're getting, you know, know what you're getting yourself into. But I think the good thing is that they could bring innovation and people and growth and a lot of capital. Look what we're talking about. They can deploy tens to hundreds of millions of dollars to deploy on things that won't get solved by the industry, the OMP industry working on it by itself. Think about the most cutting edge robotics stuff. The most cutting edge robotics engineers like things like machine vision, all stuff like that. That could be really important. That's going to be behind the walls of companies like Toyota, honda, whatever KUKA, whatever those guys. But a VC company could make it a more democratic kind of arm related technology for a ton of people that could be used, uh, more broadly. So vc money for this industry I'm more open about, but then it would be more. I'm doing stuff like innovations. We couldn't afford to do an omp itself because they would cost like 200 million and no one's going to spend 200 million on this market, you know. But if I say that's going to make all the america's super soldiers of the future run faster, then maybe all of a sudden I'll get that 200 million and that would mean that everybody who's a lower limb amputee, whatever, can walk better, then that's good. So they can do real innovation that we'd find hard press to do with like a team. So you know, imagine you're like the best inventor in the world and you've got Sarah, who's a robotics engineer and Karen who's the best physicist or whatever, you could, with a small team, really do a lot of innovation and we're seeing that in OMP and that should continue and that's wonderful. But there's this really complex, really team sport type innovations where you're talking you're going to need hundreds of engineers to make it happen and millions of lines of code, years to make it happen and millions of lines of code.
Speaker 2Uh, you know the type of stuff like the electric, the self-driving cars, which you know that's a good example, I think the self-driving cars which is taking a lot of money, a lot of investment and still doesn't work. But this is important to know, uh, but uh, or it doesn't work completely. So so those are the kind of things that that that kind of investment, high risk capital can really unlock. You know, if somebody could want to, you know, bring spatial awareness or something, or like really advanced, really inexpensive robotics, like soft robotics, but then for lower limb I don't know something that we don't even think is possible at the moment. Right, you know the really accurate kind of feet-like movements, but using polymers, using flexible polymers. That kind of stuff could happen with vc. So there's a thing where it's like and but still, yeah, that you have to figure out what kind of investor they are and how long they're going to be. Uh, looking at you as an investment, you know yeah.
Speaker 1So I I think the other question I had I mean that's an interesting take and I hadn't really thought about that the vc money coming in. You have access to technology that is much, uh, greater coming in. You have access to technology that is much greater. And then you know it might be just a few lines of that code really makes a difference in a robotic hand or something like that. Or you know that team that's part of the KUKA is like, hey, why don't you do this? And it's literally, you know something that happens within a week, but it's revolutionary. So I see that side of things. But I guess my other question to you is, I mean, the prosthetic and orthotic industry. It's a good story, right? So, like for VCs or private equity, hey, we're trying to make the world a better place and helping people walk and providing artificial arms and legs and, oh guess what, we have a foundation that goes to haiti and to africa and all that stuff. So that's all stuff to get people on board and it's a good story.
Speaker 1The type of money that we're talking about is it like, in the grand scheme of things, like I think hanger got bought, the whole thing. Hanger got bought for 1.3 billion dollars right On a $900 and some million valuation. That as part of our portfolio, is that even really a big number? I mean, you know what I'm saying. So it's like they get a news cycle for a few weeks out of a billion-dollar investment. Is it worth it? I mean, is that the way to look at it, or is it more than that?
Speaker 2No, it's different. The VC guys usually have a fund like $100 or several hundred million dollars. It's the biggest California-type Sand Hill Road-type investors they can make and some of the biggest guys do tens of millions of dollars in investment in one thing and then they do that in 10 companies $100 million, and then typically there's very few that can do more than that, you know, but the biggest, like the ones that they could theoretically do that and I have there was a time I can't kind of crazy time with, like we work and stuff like this, when people are putting a hundreds of millions, uh as well, when they're kind of like self-fulfilling, trying to make it a self-fulfilling game, like if I invest it will work, kind of thing, uh, which didn't end up working, uh, but that was like the crazy time. Usually now people are putting in single digit millions, like a billion dollars investment. That's that's something that would require um, um, you know it's kind of institutional money banks lining up a lot of things and p and e type of investor uh kind of lining up a lot of financing. They then load up on the company or somebody with a very, very sophisticated plan, a very long-term plan. You know that's. That's different kind of money. It's like like the kind of money that, that that they would really have to see the growth of that industry happening, right, they would have to see like mega trends happening. They would have to see, uh, the underlying business have very good margins, right, they would have to see that business being able to generate cash. Uh, they would have to see no kind of natural competition or no natural way to disrupt that business. So either there's patents or there's kind of like, uh, um, you know you have to be registered to do it, or you have to, you know, have a kind of like territorial, kind of exclusivity. You know they want to see that kind of like, that kind of like the business continue to spin off money. So that's a very different kind of like calculus and that's a lot of money to be, you know, even for these guys it's a lot of money, you know. So that's a different thing.
Speaker 2And I think the issue with investing in O&P generally would be that if you look at the market size, it's not great. If you look at, everyone could own an iPhone, right, but how many people are going to want a bionic hand specifically? Well then, we're talking about millions of people, not billions of people. Specifically, okay, then we're talking about millions of people, not billions of people. And then a lot of these millions of people will actually be poor as well or like middle-income countries, and then, okay, then you have to. Your supersonic biomechanic hand doesn't work for those people or you can't make it for them, so you know.
Speaker 2So the economics of OMP really is generally that it's too small, and an investment of that kind in something like hangar is is, like you know, a bet on continued market dominance. The fact that it is kind of restricted, geographically restricted. You can't just set up shawl without having anything and people will trust a certain brand. And yeah, I think, with that economics of scale, of fabbing centrally and making things centrally, and that kind of solid plan behind that and saying you know we're going to now we buy. You know you know 30% of what we sell we buy from other people. Now we're in 10 years from now it's going to be 5% or something like that, you know some kind of internal logic that makes this deal seem like really attractive as a long-term proposition.
Speaker 1So one more question before we get to the big, because that actually brought up another thing In the US, it seems as though there is less money and more people bootstrapping, right, so people spending their own real money to to make some of these things go, especially like in the in the omp industry and I've just learned of this idea of there's there are some countries that give money, uh, almost like vc stuff, but they call it a social enterprise. Have you, have you heard that terminology? Yeah, it's kind of vague, but yeah, what's the thought? So my understanding is like oh, you want to help somebody that is missing an arm or a leg. You know what? We've got a few million dollars over here in the government here, why don't you give it a shot? And if it all goes away, hey, at least the investor feels good that they tried.
Speaker 2No, but there's a couple of different things.
Speaker 2First off, these terms are kind of being used by lots of people for lots of different things, so so, depending on where you are and what it is, so so there's one thing is that people are saying that they are more than just a company and they're kind of more like a b corp or a more responsible company, or they have stakeholders as everyone in the world, and they're kind of using cuddly terms. It's a bit amorphous. It's a bit like I'm like I want to be a nice guy kind of thing, and that you could kind of read into what you want. Either there's people that want to do more than just make money, or it's just some greenwash marketing kind of bs that they they want to do so that people can give them more money, right, depending on you know, if you're kind of like you know more cynical or not. Generally, what we can see that some people are doing with this term is the allocation of public money and or private money to do ultimately socially beneficial ends, right, that may actually have a return for the investor, right? So we could say that, for example, a government could pay a bonus and say, hey, if we know that we get women get better outcomes if they complete high school. Right, if you start a school here and this is Malawi or whatever some country like this and we check back five years from now and now we see that the graduation rate men in high school, for women is super low. It's only 30 percent, whatever, uh, it's only 20. But if that goes to 50 then you will get x bonus, right. So then the investor will invest their risk capital, if you will, into a plan to get more girls to graduate. And then the British government investing in Malawi will then think, oh wow, that's such an economic benefit for that country and those women and their families that we can express that as a dollar amount and we can give a part of that dollar amount to that investor as a return. So that's one element.
Speaker 2There's people using the same terminology for that kind of stuff. The other element is people saying that they somehow have a major, like their major goal is only to do good, right, and that somehow they're secondary to that. Is that the fact that they're an enterprise? All these three things are used, used like kind of interchangeably, depending on where you are and who they are right. Uh, one is like there's a term and the other one is just, you know, an actual kind of program, public and private money being kind of deployed in a kind of in an advantageous way, and the other thing is just like more saying you know, I'm not just an entrepreneur, I'm, I saved the world too. You know too. And then all three are the same kind of thing.
Speaker 2The middle one, I think, is the most interesting because if the terminology changes, these guys will call themselves something else. We had that with the 3D printing gurus on LinkedIn and we had that with those guys. They'll call themselves something else. Now they're all AI gurus, probably, or half of them, and they'll call themselves something else if now they're all AI gurus, probably a half of them. So you know.
Speaker 2But the middle thing is the idea of governments kind of saying you know what we'll pay you for effective results, rather than we just pay you to keep the school running, and we think that the market or the businesses have a role to play in doing, in doing well.
Speaker 2Now, this, of course, is a lot of ethical dilemmas, a lot of stuff. Like you know, if the KPI is giving as many people legs, whatever, then maybe I don't care that much if the legs work right. If I only get paid how many amputees I help with a leg, then maybe that's not going to be a very good leg. Right, that's going to be some wooden chalk thing and go for it, you know, because I get money. So the KPI, or whatever the goal is, that you would get expressed as a target, really drives the performance. So if that KPI is well set you know, like you know, the graduation rate among Malawian teenage women and that's independently verifiable then we expect that to be very good. Right, there's no real way to cheat, but think about, well, you could go to the schools and get them to lower the exam requirements and let everyone graduate, for example. So there is a really interplay of incentives here and also, at the same time, there could be a lot of stuff that can go horribly wrong as well with this.
Global Consequences of Aid and Integration
Speaker 1Do you think it's that side of things, things? So when I, when I, when I hear that and I say that you know, typically it's it's somebody that has a very interesting idea that can make changes in the world, they they get some funding from a government or or what have you. It makes it very difficult for companies that actually do that for a living to compete. You know what I'm saying. So you've got somebody that's getting this free money towards a KPI that may or may not exist yet they're. Part of what they're going to use the money for is to enterprise, but their development costs are so much lower because they're getting free money to do this thing and compete directly with the people that are doing that. I mean, it is, or am I just looking into?
Speaker 2there's a problem all over the world, like, for example, one of the biggest problems with food aid, for will flood in a market and then be which? Great, keeping people alive, wonderful, right, and it sounds like you know the the ultimate unintended consequence. We're going to give these dudes rice and grain and stuff, but often what happens is that it'll flood into certain areas, be sold all that and and flood the local market as well. So all of a sudden, local guys who do have grain can't sell it, and now they're starving, right, or they can't buy meat or eggs or whatever, right, so, so.
Speaker 2So there's always these unintended side effects and always these kind of like market economics things. Right, if you make mosquito nets and you import them all of a sudden in Kenya, are you going to put all the local Kenyan mosquito net businesses out of business? Is that a bad thing? If the mosquito nets sucked right, or if it's employing 10,000 people, that's not good. Right, but you're curing malaria, so it's always like you're keeping people from getting malaria.
Speaker 2So it's always this trade-off game and there's no real way to avoid that in these places where the differences between getting that and not getting it are so stark. So I do think that's a really good kind of, um, that's the thing to worry about. But but there are other ways of doing this. Like think about and we've talked about this before, I think you know think about a guy in guatemala or something like that, where who's going to earn a lot more money because you give him a leg and then he'll pay in, you know, let's say, 10 of everything he earns more than he's earning today into the fund that will give more people legs.
Speaker 2So if the guy's earning, and if he earns below a certain threshold, then he doesn't pay anything. Indeed, if he earns below what he's earning today, he doesn't pay anything. That kind of a mechanism is a mechanism with your customers where the guy doesn't mind. I mean whatever, if I increase my income, like okay, whatever, as long as it's tenfold of what I'm making today, then okay, I don't mind giving you 10%, whatever you know. Huh, yeah, yeah, you know, and I wouldn't mind doing that out of gratitude, but also I wouldn't mind doing that if you took care of me. Sure, that leg thing still worked. Uh, you know, that's cool. And then the added benefit, of course, is that more people would have this.
Speaker 2So that kind of a securities type of model where a float or the continued revenue comes from the customer. That's great. But then the problem there is that you, you, it would feel kind of exploitative. You know it feels like oh, wait a minute, you're like this american guy, you know, exploiting the locals, so so it's like it's like how do you make that? So you see eye to eye to each other and it's not exploitative, but you end up helping that guy and you can help many more people with something that isn't because you know the problem about giving people stuff for free as well. Then they don't treat it well and then the thing doesn't last as long. So there's always incentives taking place when we do stuff like that.
Speaker 1Yeah Well, I know that was a little bit of a sidetrack, but let's talk about some of these big companies and what they're up to. Which company do you want to start with?
Speaker 2Which part of the alphabet? Equal, equal. That is the worst name of any company I've ever heard. No, seriously, it looks like it's spelled wrong or something. Equal I thought it was a joke. First time you were reading this, I was like EQWAL, really, I don't know. It sounds like.
Speaker 1What is it with the VC people or these big companies?
Speaker 2Pick a name out of a hat. I think I don't know, anyway. So tell them about this. I think I don't know. So tell them about this Equal thing, because I don't know what that is.
Speaker 1What is that? So Equal is a company that was. I mean, it's a very recent company, but I mean, one of the things that is interesting is they're making some of these big moves, not only into the digital space but into the clinical space, and they're creating some vertical integration. So they are in 10 different countries. They've got 2,700 employees.
Speaker 1They're all over the place. They have done a lot of acquisitions in the digital space, done a lot of acquisitions in the digital space. So they uh combine vorum, uh, techmed and rodent, which was an interesting, you know, collaboration or combination, and then they have actually brought that all under the name quadra. So you're gonna love that name, uh as well, but um so I think there's a spell.
Speaker 2How's the spell? Is it q w q?
Speaker 1w, of course, yes, okay, q w q w a d r? A, I believe is the name of it.
Speaker 1okay so, but what's interesting about that is they've got some really great workflows and things of that nature. So to me, as far as a big company looking at really hanging their hat on a digital workflow for the purposes of this podcast, I would say I think they've got some good things going and, who knows, they may start looking at some manufacturing and such, but they've been laser focused on this digital workflow, taking the friction out of the design side of things, which you have always been a big fan of. So going from scan to your definitive device, whatever that looks like in the digital space, in an easy way.
Speaker 2These guys like doing so. You mentioned a bunch of technologies and stuff and I love this digital workflow, so I'm on the website now. I'm like looking at this. They have 3D acquisition stuff right, 3d rectification software and million machines robotics. Sounds very like up our kind of alley, but do they do patient care and devices? Is it kind of alley, but did they do patient care and devices? Is it kind of like that or is it only doing devices?
Speaker 1what are these all is all about right, right. So the equal group quadra is like one of the companies under equal.
Speaker 1so equal does do patient care, and I think they've got like 200 and some clinics worldwide. So I mean it's, it's, they're, they're growing, right. I mean it's and, and they're growing every day. They're. They've made some very strategic things and and what what's interesting is, they're kind of growing through the people that were using that software. So when you look at some of the contract manufacturers, they were like, okay, so it's a pretty easy thing, who's using our software the most? Let's go get them. They would fit into our ecosystem or what have you. And so I think that's an interesting way to go, and what they looked at too I think if I was in that room is okay. So we don't only want to sell to ourselves, right, we want to sell to everybody else, and so finding a company that also sells to everybody else very specific niche things I think is an important thing to take into consideration, and I think they've done a good job doing that.
Speaker 2Okay, I like the idea that there's this quadra digital product and they could really push this as being like the backbone of a lot of these clinics and stuff like this and also to give themselves advantage. Right, If this stuff works well, it's going to really power all their workflows. Let them do all their ordering in-house and design and making in-house and, yeah, that could be a sustainable advantage for them in the long run. I'm always a bit nervous when you do like the components and the service and the digital altogether, you know. But it's interesting that all these big guys seem to be doing that right, I mean, there isn't like they all seem to have like the clinical stuff going for them as well. Is it just to make products? Is it better, or actually it's like a revenue thing as well? Because in Oser's case it seemed like it was a real revenue component as well, and a lot of these other guys it seems like it's a real revenue getter, custom acquisition kind of thing for them to have these clinics.
Speaker 1So I think that's a great insight and I think the thing to remember that makes orthotics and prosthetics very unique is that you know if the cost goes up on something, you can't just go out and raise the price and pass that savings along. You have a set price. So if you get $3,000 for a prosthesis and your cost of goods needs to be under $1,000 to keep your cost of goods under 30% and the price of your cost of goods goes up 10%, that means you can't go and raise your prices 10%. You're still going to get the 3%. So for these big companies, when they're vertically integrating like that, they are taking control of their margins essentially, and I think it's smart. So that is the one dial they can turn to create a higher profit because they can't just go out and raise the price.
Speaker 2Okay, and they also have a thing called Actor which has a Q in price. Okay, and they also have a thing called Actor, which has a Q in it, wow, which seems to be their own orthotics brand, let's say, I think for insoles, and they also do other braces and technical orthopedics and stuff like that, right, yeah, I'm actually not familiar with that sentence.
Speaker 2Okay, but that I like as well this branded kind of bracing, because that for additive we know that's going to be beautiful, that is a beautiful business case. All these custom braces and custom positions, custom orthoses, that is like the real money earner because that's something you can almost automate. You can automate the software, put the machine on boom. Compared to then looking at a socket or something like that, there's a lot more manual labor involved, a lot more also just salt and consultation time depend on these kind of things. So I think that kind of like branded thing is really good. But yeah, this is interesting, this is an interesting play. And they bought something called Tosca. What is a Tosca?
Speaker 1T Tosca. What is a Tosca? Tosca is a hand, specific hand, and it's like a super durable, waterproof hand. It's also pretty fast. It's kind of the go-to gold standard, for if you have the ability to pay or you have a payer that pays, that's the hand. The only downside to that hand is it was massive and heavy and so you can't put it on to like a kid or a woman or what have you, or you end up having this like Popeye looking hand. It's just not right. But they have created a very much smaller version of that.
Speaker 1So now I mean it's a really interesting play to me for the upper extremity market and you know Europe is different as far as the insurance side of things for some of these higher end things. So you can get paid, and paid well, for this. You're not limited, so to speak, on a specific code. For this. You're not limited, so to speak, on a specific code, and so you know, being them being a European company and then bringing this manufacturing in under their, under the house, I mean it's, it's great and I mean it is wild.
Speaker 1I mean I'd love to know what happened. I mean I wish I had more information, because it's just so odd that Phil Hour had the distribution rights and you know, I don't know what's going to happen with that, but then it's like equal is like equal, almost do that Right. And they were just like hey, we'll take that, we'll take that, and and and I would have to believe that that there was an offer or something on the table for TASCA, and I have no insider knowledge of any of that, but it just makes zero sense that Hanger would acquire Phil Hour, tasca is distributed by Phil Hour and then Equal buys TASCA. That is….
Speaker 2That could be a coincidence, it could be an inconvenience for everyone, it could just be… I don't believe in that with this industry man.
Speaker 1Unfortunately, I think it's Okay. Yeah, so I don't think it was a coincidence at all.
Speaker 2Another thing I do think is interesting. First of all, it's a myoelectric hand that's waterproof. This is the innovation. So does that mean the other ones? If I was in a rain I'd be like what happened? Dude, this is terrible.
Speaker 1Well, so yeah, a lot of times you have to really think about what are you doing with your hand, and that's one of the things with their stuff you don't have to think about.
Speaker 2Oh my God, I would be such a terrible prosthetics patient dude. I burn myself twice a week cooking.
Speaker 1I think you're just a bad patient in general. I don't think so when you had your ankle thing you're like I don't know Exactly. Oh my goodness, it was terrible.
Speaker 2I would short out my $40,000 hand twice a week. But then the interesting thing for me is when you said it was the gold standard robust, rugged hand. That just sounds to me totally like something an Oser would want. You know what I mean. That just sounds to me like totally like something Oser would want. You know what I mean. It totally sounds like the perfect Oser thing to kind of put on their necklace of companies right?
Comparing Acquisition Strategies of Medical Companies
Speaker 1Well, you would think so. They invested early on into the B Bionic line and so they've made that better and better and better. So I would say that'd be probably a competing product. They would. They would have to kind of yeah, so it's like it's not really worth it to put into the portfolio. And there's, you know, there's a lot of people that are b bionic fans and that sort of thing, or I forget what the latest generation of that is. Um, I, I don't really see either of the other companies Autobach or Ossur really being interested in something like this. Autobach they've been in upper extremity forever. They already have some of the technology in there, and so to me it would be a hanger or an equal purchase for sure. I don't see any either one of the other companies being interested yeah, I like that.
Speaker 2This is like an equal is actually also european. It's a european group. Right, it's a european kind of. It seems like it. Just like it's like a gobbledygobble little pac-man kind of like company that's just like been set up specifically to do this, right, uh, but it's been doing this since 1976. So they're french and and you know they've been doing this for a really really long time. Just they. Maybe a lot of people haven't noticed that they've been doing this for such a long time, you know, but they seem to be like super acquisitive but they're not mentioned as much like I didn't know they existed before today, but I knew about oser and autobalk, right, you know what I mean. So so this is kind of like a, you know, bigger group, but maybe not as like, uh, you know, maybe not as kind of in your face as the other companies.
Speaker 1I'm saying I, yeah, I mean, I would say they're sneaky good as far as what they're trying to do and they're they're definitely, out of all the companies, the most nimble.
Speaker 2Okay.
Speaker 1Okay, yeah. I think, and that's what they have going for them. So I think that if they, if, if they want to buy something, it's a it's a very low uh friction to buy something right.
Speaker 1Obviously, you've got to do your due diligence and all that stuff, or do you, I don't know? And they just say, yes, I want that and, and they go do it and and it happens really fast. And so I think I think that is one thing that they have going for them, that is, is is very good. So it's kind of like those companies that say fail fast too. So in the same way you think of like an Autobach I mean, they take forever to do anything, to innovate and that sort of thing. They want to make sure that it's done to perfection, all that before it's released. That's what they're known for, and there's a premium put on that and there's no problem with any of that. But it's the exact opposite, right, so? And you have to have all those in there. But to be nimble in this field, is is really important yeah, and we saw in 3d printing, we saw as well.
Speaker 2We saw all these corporate venture funds come in, lots of money, big, big companies, right and uh, and they kept missing deals because it would take too long, because of course it wouldn't be like their investment company would have to make an investment. It would be like some, you know, some giant company would have to make an investment. So this lawyer had to look at it, had to go through the board, and then, yeah, it would take a while right, the board doesn't meet every day and then they would miss out on so many investments just because they were just, like you know, doing things at their own pace. Of course you know you don't want to mess up with, like one of the world's biggest car companies or whatever that kind of stuff. So it makes sense. But you would just see them miss out on deals again and again and again. So nimble, I think, especially if the opportunities arise. You know Mr Smith built up his device business for 30 years. The kids don't want to run it. That's a really immediate concern for that family.
Speaker 1If he passes away, and then yeah, being nimble is a super, super big deal, then yeah Well, and I think one of the interesting things in any of these acquisitions is these are not startup acquisitions. These guys have some life under their belts. It's five-plus years in business. They're not going out and looking for the next unicorn that might burst. It's just good, solid, relevant. It's going to match the portfolio. I think it's good for any of them. Yeah, for sure.
Speaker 2Okay, I think it's a good point to make as well, and that also means that you have to be a little bit more you care a little bit more about the employees. You can't just kick out everybody. You have to be more kind of growth oriented in the longer term as well. As opposed to a startup where everybody's like, okay, I'll get my money. And whatever happens later, who cares right?
Speaker 2yeah uh, you know, if you go, if you've been working with people for 20 years, you've got all these people trained up to take over and stuff. You want more continuity and stuff like that.
Speaker 1Yeah, that's super cool so so we've got we. We covered equal in your favorite spelling, right. Then you've got oser um, and we did a whole episode on oser embla, that sort of thing, and I think you had the same kind of critique of embla, right as far as the naming choice now.
Speaker 1No, I think that was a wonderful name oh, there you go, comparatively speaking uh so, uh, if you, if you haven't had a chance to listen to that episode actually it's probably one of the more downloaded episodes that we've done together and it was so much more than going over an annual report it was, hey, what are the actual trends in O&P? And I thought they did a great job putting that together. So if you want to know more about that, I would say, um, find that episode. I think it was in this season that we did it um, and so let's, let's, uh, go over to autobox, since that is one of the ones that you know, uh, know, or know of. I mean, what are your, what are your thoughts on? Um, you know them as part of the big four.
Speaker 2So you know my. Okay, you're going to have to run me through that list of the big four. Okay, so we've got.
Speaker 1Autobach yeah, oser yeah.
Speaker 2Embla.
Speaker 1Equal. Yeah, embla, sorry, embla, equal and Hanger.
Speaker 2Yeah, and Hanger. Oh yes, yep, so we've got Autobach and hanger to cover those two.
Speaker 2So Autobach to me, what I know of is it seems to be quite the Germans always say about this it's like you know, it's like kind of like solid and kind of like well put together. Right, it seems to be that they're you, you know a company that doesn't really kind of like operate maybe on the cutting edge but then get stuff done eventually kind of like, kind of the. That's the kind of impression I get, and they don't seem to be like you said there's now, like you don't. They don't seem to be like innovating at light speed, the speed of light, let's say. And where where oser to me seems more aggressive I don't know if that's true at all and seems more kind of like focused on winning at the cutting edge. These guys are just like grinding out a win kind of. You know what I mean, and that's just my feeling.
Speaker 1Yeah, I mean, I would say the exact same thing. It's like not only grinding out a win, but they've have, you know, every, any of these companies have what is called a war chest right. If something happens, they've got cash to go into to keep, keep the company running. And, um, you definitely aren't going to want to bump up against autobot because they will win every day of the week. They just that's, it's kind of like bumping up against Apple, it's a cash cow sort of thing. Definitely international selling, international, vertically integrated for a long time, yes, I would say slower to innovate, but when the innovations come out, they just work and I think that's that's really neat. Um, so I think that's that's what I would say about autobock is they are, they are the top that has a spinning and they have this momentum going and it's yes, it's hard to steer, but it doesn't need to be nimble.
Speaker 2Okay. And then the other thing is uh, cause of course I know this kind of stuff to have, like this, this IFAB thing, this is like their kind of digital backbone thing, I guess the same thing that I equal doing Right. And then they have like, uh, like, uh, you know, some kind of like 3d printed adjacent products, this, uh, the tt thing. I think they have a helmet, right yeah.
Speaker 1So I've heard heard great things about the helmet that the trans-tibial prosthesis has been in. You know design for a long time. Um, you know it's, it's not going to fail. I think it's more on the expensive side. There's not a lot of um like post-processing finishes, like there's no like vapor polishing. You know the pretty side of it it's. It's literally a plain socket, but they've got the the, the bones of it right. So it's it's not going to fail, or if it's going to take something super catastrophic to fail.
Speaker 1I think, one of the things that's been interesting about Autobot on the digital side is they have been trying to focus on creating some kind of internal softwares that are more click type of things like hey, you want a trans-tibial socket, here's an easy way to modify and then the rest of it's automation. I think that's pretty smart to do, especially as you're growing on an international scale. You can give that tool to your clinicians and you've got something that's a known quantity, you know, I would say on that same note, though, I think you run the risk when you're developing internally like that, the market's going to outrun you much quicker. You know so. Like you know, we've had duan on for the 3mf stuff and I learned so much there. But like, I guarantee you that 3mf, I would be surprised if they know what that is. You know so it's not like, uh, now they may know one day, but it's not going to be part of their ecosystem right now.
Speaker 1So you're, you're talking about a lag in some technology and even in the scanning side. Um, you know, making some of that stuff internally. That's a that's cool and it's good to have a closed solution. But man, what about some of these other scanners, like the INScan that has come out. That's a very affordable great scanner. Can you talk to some of that stuff? You know the results are going to be great. And I don't know if you saw the latest thing Creality is releasing that blue light scanner dude.
Speaker 2Let's talk about that later. I want to talk about that as well. That's good.
Speaker 1Okay, like later in another episode, or like later today.
Speaker 2I want to talk, I want to hear your opinion on that, cause you're you're an iron scan fan, so I thought that was kind of amazing.
Speaker 1So I'm I'm a good scanner fan, right and affordable. So when I say affordable, under $10,000. So but yes, let's finish up. So I mean that's where I'm at. On Autoblock, I think there's positive and negative and I think it's good to have your internal kind of workflow. But one thing I did notice and I can't get back to it. I can't find it. It does seem like they have a little innovation hub, so maybe their little renegade team, right, that evaluates all these technologies and maybe has a small group of people I think that's really good to have and then release the technology as it looks to be mature or working within your portfolio.
Speaker 2Yeah, what I like. So all the back to me feels slow but okay. So what I like about them? I really like this micro thing. This is their head, their baby deformed head helmet, thingamajiggy right.
Speaker 2So I look at this thing and I like a lot of things about this thing that I don't like about some of the other things on offer on the market. So first of all, you know, yeah, okay, I agree that you need to make a choice as a company like that to say like, hey, are we open playground for everyone or do we have our backbone and we only do our own technology right, and that's going to limit you as to who can connect with you and who can make stuff. But what I really like about the kid helmet that I think is the best of kind of a big company developing stuff is, first off, yes, it works with their kind of like scanning type of thing, which may be limiting, but it's using the 3d printing for the customization, the lightweight fit. But they have a closure system as well, which means that if your kid's head grows, then you can adjust it really easily and you don't have to come back and order new ones right, which I think is a real value. And what I love about this thing is it's got a liner, right like on the inside of it that makes it soft and I think that's a much softer than some of the just only mgf printed alternatives. Uh, and also that liner is removable, right, so you can wash it they. They give you one so you wash it, and a baby is of a way of like just getting like stuff everywhere and all this.
Speaker 2So that's a real kind of real life kind of thing, where you're on one hand, saying let's make it more comfortable for the kid with an extra thing, this liner and also let's make that you know that kid's going to be all over the place crawling with his head on the floor, whatever, yeah, let's make it so you wash the liner.
Speaker 2That's like a really useful thing. You know what I mean. So that to me is an idea like yeah, we're getting innovation, maybe they're slower, but they might end up having a product that's actually like a really good fit for the actual consumer or the actual user. So that to me is like that's the you know the good and the bad of being that like such a big company that you do it slower maybe, but maybe you end up with a better product or a more comfortable product for your customer, you know you know, it's interesting that you chose that product yeah, okay, because I know nothing about them and I looked at this course, because I looked at all these helmets, because that's the one of the biggest things for 3d printing at the moment is that the helmet thing?
Speaker 1yeah, well, so that is the one product in their whole portfolio that they're getting sued over. What really? Yes, so this is. This is interesting. This is probably a discussion for another day, but, um, they are getting sued, which to me means that they're onto something right, or the other company is not.
Speaker 1So Cranial Technologies, which is a large national company think of it like Starbucks for helmets is suing Autobach, and I don't see that this lawsuit is closed. So it's still open, apparently, but this started in April of last year and it says that they're violating or in violation, or what is it infringing on a patent from Cranial Technologies. So it's really going to be interesting to see where that goes, because I'm sure autobock has their own ip around this thing, and then this is going to be settled out of court. The lawyers are going to make money, all that stuff, but uh, you know, cranial tech must think they've got something or they can settle and that's a great. You know other revenue source, but, uh, when you're, when you're poking the bear, um, this, this is probably one I wouldn't want to poke, um, unless there was some sort of massive upside.
Speaker 1But I'm like, looking at this, this, um, this patent, and I'm like this is the reason why I hate this stuff yeah, exactly like I understand like you need intellectual property and all this stuff, but like, okay, so this goes on for years and years and years and now all these kids that have deformed heads and such don't have access to life-changing therapy through some of this stuff. Like that. That kind of stuff drives me crazy, um, so anyway.
Speaker 2So good job, picking the only product on their portfolio that they're getting sued maybe, but yeah, I think think the lawsuit thing, I think we can discuss it in a separate episode. Well, yeah, that's, you know, the most broadest patents are the ones that are the most valuable. In certain extent, that doesn't actually necessarily mean you're innovating. It means you'll be able to obtain that patent and that you've got a good attorney to do that for you. So you know, and I agree with you, I think it does retard innovation.
Speaker 2Certain things and a lot of things like these guys might think that they'll try to sue them because they think a settlement is in the offering or they think they may, but I think they'll get 100 different competitors, you know, to do this additively or do this in a customized way. So at one point they you know, you see a lot of patents like this in 3d printing as well, like the digital manipulation of files to make a custom thing or something like that, and then imagine getting a patent out of it for, like, footwear or helmets or whatever. So you know, I think that kind of stuff is kind of a yeah, it's a bit of a downer for me, I think, as well.
Speaker 1Yeah, and you know, these are the kinds of things that I don't believe Autobach would roll over on right. So, like it's, it's going to be one of those things of whose pockets are deeper and I know whose pockets are deeper um but this this, this is, you know, I, and I know this is corporate stuff, so, but it's still driving me crazy. So we got one more company left hanger prosthetics and orthotics. Well, what do you know about them?
Speaker 2well, they're like kind of like. Well, they're trying to do the Starbucks of this thing. This is the most logical strategy. I think You've got all these mall and pop shops. They're going to stop at one point. There's no natural company to buy them or sell them to. What you do is you hoover them all up. You hoover them all up, you buy them, you give the founders an exit, you keep the employees. Hopefully, you train up a whole bunch of new people and then you kind of industrialize it and then you start making more and more of the components yourself and make it more profitable. Yeah, it's super straightforward.
Speaker 2I think the Hangar model is super straightforward. It could be really, you know, for these other guys. It's like it seems like the the hangar is is really focused on this retail part of it, and if they can really, you know, be a counterweight to insurers and really kind of like make the running of a shop really efficient and and really place these things well and then have these network effects and stuff, um, then I think I think really they could. They could really kind of um, you know, uh, you can do a lot of like become really big and especially if they would do really good deals with hmos or other kind of uh insurers, other kind of health care providers. Right, if they become the sole source of all mpts from x health system, go to their clinics, they can do that, right.
Speaker 2Yeah, some local guy. You know, I'm there with my three people. I can't do that, you know. Yeah, so there's these real economies of scale they can really benefit from and they really seem like they're kind of the king maker out of all these guys. Right, the other guys are kind of like doing exactly kind of this mixed kind of thing, but they're really retail heavy and they're so big in retail that they could really make any one of these other companies much, much bigger than the other.
Speaker 2You know what I mean yeah if two of the other two of the other four emerged, yeah sure they'd be bigger, right, but if hanger emerged with any one of the other three, it would have like kind of a lock on the market and on the device business.
Speaker 2Uh, meanwhile, it doesn't have to pay top dollar for the cutting-edge things. It's going to build a nice beautiful factory in Mexico to automate the hell out of making these things close to the customer and really in an efficient way, using not only Mexican cheap labor, like we said this last time, no, no, usingican inventors, uh, engineers and and software developer and people that are that are, uh, you know, cheaper than the people in the states but still really really high level, so that to me it seems like a lock. The strategy is, just like you know, locked in, already, homing in on the target. You know what I mean. And and and apart from them doing operationally kind of being bad and getting investors to not lose faith in them, I don't see how they can fail essentially If they were. Just like it's just a money, it's like it's Starbucks for orthotics and prosthetics, right.
Speaker 1Yeah.
Speaker 2And we do more stuff ourselves. We make more profit all the time. We do more CFAB stuff all the time. Move everything to Mexico. It's beautiful. I don't know what it does for prosthetic care. I like the idea of these independent people offering, you know, personalized care, being their own business, you know.
Speaker 1But but this is like you know, the logic to this is really kind of kind of very ever-present, you know I think one of the best things that hanger ever did was go back to being private or privately held right off the stock market so they don't have to have these, you know, quarterly calls and earnings calls and you know I I remember back in the day when I was a resident was like, okay, so where are we going to go? Like, really, on the on the money side of things, hey, do you think you're going to be able to deliver this prosthesis out the door? Well, you know, you know we might be able to, we might not. That's you know, that's probably still happens. I mean, it still happens in small companies. But you're right, the economies of scale. Now you can spread that over a larger and you just focus on taking really good care about what Hanger's doing. So a couple of things right. So they've got the clinic side, they have SPS which is distribution of multiple products.
Challenges and Advancements in Healthcare
Speaker 1So not only do you have a clinic, but then you have a distribution that takes care of all the distribution right Of every single product that you don't have in your portfolio. And then they have some off-the-shelf products and white label products as well. The thing that I like about that is well, like and dislike is that you now have, if Hanger Prosthetics comes to XYZ company in some small town in Kansas that has a really cool product, and they say, hey, we have 900 clinics and we're interested in buying your product and distributing it through SPS, will you give us a discount? You're going to say yes, but then you give the discount right, no-transcript, because they can resell it. They can buy it at a discount and resell it and still make money. They don't care if they don't own the. So I love that aspect of it, um, and I think it makes a lot of sense. And I think the other thing that you said is you can be a national company, part of national contracts for insurance companies and that sort of thing, and I think that makes a lot of sense. But I think, even bigger than that, they have started this thing called Hanger Ventures, and Hanger Ventures is interesting. So it's like their own little VC company that looks for small companies that are innovating and they look to inject cash into these companies to bring products to life. I don't know how it works, but I like the idea of it and so, yeah, I just think that's interesting. So I think you're right on the money.
Speaker 1As far as I think one of the best things that has happened is they've gone private. I think the other thing that's been great is they're now really focused on patient care. I have a lot of friends that are in the Hanger Clinic market and they're happy as employees. I think they're good doing their employees. They're innovating, they're doing some cool things.
Speaker 1They have, according to some of my friends that are vendors, one of the best shows, not only clinically relevant shows, but it's just for them. It's a private show because they've got 900 clinics and so they have the vendors to themselves. They have all this expertise that's within the company. I think that's really cool. So I think they've got a lot going. I think the one thing that's probably frustrating on their side of things is that, um, there is opportunity and they probably have cash to spend. But I think just kind of like what you were saying is that if you're not nimble, you're going to lose out on some deals to some of these other companies. And, um, so I think probably one of the things that they're going to want to work on is trying to identify early, be nimble and make quick decisions.
Speaker 2Um, because these other companies are going to be making quick decisions that's a good point, I mean, I think, and and that is like, yeah, managing those 900 clinics, it's almost like a really different business than you know. Just this is this acquisition company that just goes around and buys new technologies and new sites. It's almost like you have to be very kind of like split between that, that nibble, go, go go company that will take risks and that will go, and the other one that just has to. You know, imagine just the, you know the call, what it would cost them, you know, one device failure or or a problem with a patient or something like this, that really careful business that has to maintain all these clinics and all these patient interactions. So it's almost two different companies and managing that, I think, is going to be the challenge for everyone.
Speaker 2And then, if you're more device-focused, you also have to be innovative. So you've got to do like three completely different things and we see that as being very different. One is like kind of like a Marriott type business, right, where day in, day out, you perform, day in, day out, you make sure the burger is the same burger, right, there's no innovation in the Marriott burger. Nobody gets paid to innovate the Marriott burger, but you go to, like South Africa or New Zealand or Tokyo, the Marriott Burger is the same right, and that's what they want. And you order on Monday, tuesday, wednesday, it's the same weight, same amount of cheese, everything.
Speaker 2And then that's very different than a business where you're supposed to find out how people walk, you know, using something inspired by sponges and storks, whatever, and that is very different from a business where you're on the financial cutting edge, you're trying to take over the market in Phoenix in the best way possible. Do you buy these 10 clinics, or do you buy these 10 clinics but then you do buy them in Anaheim? What's the better? That kind of like a really harsh kind of financial business. It almost seems like it's three different businesses, right, anyway?
Speaker 1That was a long episode. Man, do you want to cover the creality thing, or is that for another day?
Speaker 2I think it's for another day. I want to look at this tooling thing because I think it's a really big thing and I think, uh, because long time these guys, these iron, scan things was the only game in town, kind of, and uh, so we should talk about scanning, I think, in the scanning market another time.
Speaker 1I think that would be a good thing okay, well, I think, like you know, the only thing that's close I would say to this and I apologize to the listeners, I may, I may even cut this out, who knows?
Speaker 2we're gonna, we're just gonna go with it but to have an affordable blue light scanner.
Speaker 1So the blue light is cool because it can be used on reflective surfaces without targets, and um, I mean at 1200 bucks. I mean the cheapest one, I believe, is the um, oh, it's from, uh, um, I'm scan as well, but I think it's still around 20,000, something like that. I mean it's amazing, it's amazing scanner, but to at a 1200 price point. I mean you've got to be kidding me. So I mean I'm super curious on that yeah, me too, I think.
Speaker 2I think for a long time yeah, there have been everybody tried to do low-cost scanners. To give you an idea, I always tell the same story, but I I do this like report on scanning and 3d printing and basically for 3d printing, after every year you know new printers or some new market entrants and stuff like that, and for scanning, it's like this company went bankrupt. This company went bankrupt. This didn't work. It's a bloodbath, the scanning market, right. So for a long time the only people that were able to put out a cost-effective scanner and succeed for a long time were these ion scan people. And there have been some people historically as well that had some pretty good runs there. But they made a really good run of it and everybody thought this was kind of the game in town.
Speaker 2And then Creality comes in. There's a company that makes $200 printers like millions of them, by the way and they have as a goal to really populate the ecosystem, to drive parts to 3D printing, to develop the 3D printing market. So acquiring geometry is, for them, something that will power printers and power their printer sales. So this is like a business development thing for them and this is actually quite a formidable company. First they made quite low cost terrible printers, to be honest but the value engineer of these things made it a lot better and it's incredible what they're capable of. So putting them against Shining I I think will really be really, really amazing for the consumer and professional users. I think.
Speaker 1I know this is a thing for another day too, but it also is difficult to compete with a company that has backing of a large company, a large government like theirs, right. So it's almost like it's the ultimate cheat code, I would say.
Speaker 2Yeah, it's a different thing, of course. Yeah, but in given areas that are strategic, yeah, the Chinese will have a big advantage. Yeah, and then that's going to make it very difficult for, like a Belgian company or something, they will not have access to the real same resources, cause this is super on point in China's kind of up market push, their technological push, uh, they're kind of um, uh, they're pushing to to more precision manufacturing and push into 3d printing. It's a perfect nexus of something that they uh that a lot of government people in China and a lot of banks and investors around that would love to support. So, yeah, I agree, I think that it's going to be very difficult for someone else to out-compete them on ScaleScope and the functionality of this thing.
Speaker 1Well, in closing, let's put a bow around all of this. Okay, so we talked about the E's. Let's put a bow around all of this, Okay, so we talked about, uh, your, the ease right, Equal emblem Yep, Hanger, Yep. And auto box. So the big four, um, so to speak. Hey, if, if we missed one, let us know.
Speaker 1But I'm trying to think like I'm racking my brain, I can't level, and then, you know, coming to a close next, with the next episode that's going to drop, what are some what would you say, some takeaways that have been a surprise for you say, over the last three to four months, that you've learned about our industry pleasant or unpleasant, I guess you could say.
Speaker 1But I mean, we really try to be positive because there's so many things that are positively going on in the field and there's not really a reason to be negative in general, right, when you're talking about some of this stuff. So what has really struck you and then I'll say some of the stuff that struck me just learning, you know, and and I think that's what's been wild about this podcast is, you know, with almost 96 episodes under our belt, uh, like the genuine curiosity that you have for the field has has definitely rubbed off on me. You know cause I was. I was, um, you know, kind of had my blinders on. I've been in the field for a long time, I have some preconceived notions and you've helped me shed some of that, so I think that's great. So, yeah, any thoughts there?
Speaker 2First of how amazing the business case is for 3D printing, how quickly you guys actually buy printers it doesn't maybe look like this but how quickly people can make the shift to exploring buying first printer then then boom out of them justice. That's much faster, I think, than than a lot of other businesses uh, just how fragmented this market is and how kind of you know we're really. It really is. We're on the cusp of something like as in for the digital stuff, but also for this disruption by these large players. It really feels like you're at this pivotal moment. You know what I mean. It's not like we're talking about, well, the car industry. You know the electrification is a big deal as well, but it feels kind of like that sea change, you know, between these mom and pop stores and these giant integrated vertical line firms.
Speaker 2Just how many patients have invented something? This is crazy. I mean, does this happen in other businesses? Are there a lot of heart patients out there making stents? You know what I mean. It's like you know, I think it's that We've interviewed like a bunch of them already and just how good those inventions are and how big invention is as a part of, like your daily practice. That still continues to amaze me Is your daily practice like you're improvising, innovating, inventing, and how important is this industry to keep coming up with new products? Yeah, no.
Speaker 1I mean, I think that's been neat. I love the thing about the patients inventing and and the empathy for clinicians. I think that people don't talk about that enough. Like people rely on these, on clinicians, to walk and this is not a nine to five job and you have. You have to uh know that. Um, but absolutely this adoption seems to be snowballing into the additive manufacturing side. It's like you know, the bamboo lab printer now is the gateway drug to the much bigger stuff, and so I think that is very neat.
Speaker 1And I would say in closing for this and I just did a, I actually did a webinar kind of webinar on the dollars and cents of 3D printing specifically for orthotics and prosthetics and I'd love to go through that sometime with you. It was just kind of a fun exercise of where the opportunities truly are for orthotics and prosthetics and you know one of the things that I learned. So I did this webinar. I took foot orthoses, smos, afos and prostheses and does it make sense to 3D print those? And you know, all the powder bed fusion players are pushing the hey, you should be doing foot orthoses in powder bed fusion. When you actually look at the numbers of the costs to do powder bed fusion foot orthoses in powder bed fusion.
Speaker 1When you actually look at the numbers of the costs to do powder bed fusion foot orthoses, it makes zero sense to do powder bed fusion foot orthoses unless you're saying, hey, let's do less waste. Where it does make sense is fdm. I think fdm for foot orthoses is brilliant. Not only are you using less waste and all that stuff, um, you're, you're turning these things pretty quick. The cost of goods is good, is is makes a ton of sense. It beats traditional fabrication. You don't have to wait on a technician to you know, build these things. There's so many good things, so, um, but powder bed fusion shined in other um sides of things with the afos, smos and that sort of thing. So it's just. It was just interesting to me when you're just talking numbers, not anything else. The foot orthotic market really benefits from FDM.
Speaker 2I totally agree with that. I think there's a lot more in there as well, actually, that I think that FDM could actually be better. You know, the exception I think would be if we get cheaper TPU and if you're doing it on a certain scale, because at a certain scale, batch to batch, I think would be if we get cheaper TPU and if you're doing it on a certain scale, because at a certain scale, batch to batch, you know, powder refusion becomes beautiful again. But you're still looking at the high acquisition cost of the machine and generally I super agree with you.
Speaker 2I think it's limited and it's also a reason why a lot of these photo authorities companies that use powder refusion have failed. Right, it's just these devices end up being way too expensive and FDM can make them for a fraction of the cost, a third to a tenth of the cost, depending on how you cost them. So yeah, I agree that definitely try FDM as a technology and to try and see if you get it to work before you try powder effusion, because powder effusion to me is much better with mechanical devices, complex assemblies, larger devices, custom-made kind of bracing, custom-made kind of things to fit your body. That's where it really shines, especially if you need 10,000 of something a day or something like that, Then it's absolutely beautiful to go in there.
Speaker 1Yeah, yeah, for sure. Awesome man, let's shut it down.
Speaker 2All right man. So I really enjoyed this. I thought it was fun. I hope everyone enjoys this. This is this episode of the Prosthetics and Orthotics Podcast.
Speaker 1Have a great day, hey thanks for tuning in and a special thanks to LimbGuard and Advance 3D for sponsoring this episode. If you enjoyed it, don't forget to like, subscribe and share it with your friends and, if you feel so inclined, please leave us a review. Your feedback helps us improve and reach more listeners. Have a great day.
