Let's talk about an unpopular topic in orthopedic circles - profitability.
Many orthopedic device companies can deliver world-class products that surgeons love, can grow top line revenue, but cannot create a profitable business. In other words, they have a financial leverage problem.
This leverage problem is caused by some sort of operational drag on the business. Let's look at a four examples.
1/An inventory drag - Too much incremental inventory cost for each new customer added.
2/A selling drag - Too much incremental sales/distribution cost (or selling cost) for each new customer added.
3/A regulatory process drag - Too much incubation time (carrying salaries) before new products can reach a new customer.
4/A technology drag - Too much incremental cost in design/manufacturing incremental implants for each new surgery.
Company Example.
Let's pick on Conformis because of the availability of long history and public financials.
Let me say up front... that Conformis makes great products, and arguably the best total knees in the world and surgeons love the tidy disposable instrument boxes.
Conformis has a classic technology drag problem. They have never found leverage in th...
