A company can create a product that has the ability to change the world, but its commercial success and failure often hinges on how the product enters the market – particularly for complex products like those found in the medical field.
There are many different ways for a medical technology developer to get a product into the market.
This can involve selling the product directly, or, in other cases, the technology may be licenced to a third party.
One commercial model that is typical in the medical device industry is also found in many other commercial endeavours – the manufacturer/distributor model.
This model enables a device developer to focus on the ongoing development and manufacturing of the device, and build commercial partnerships with parties which will be responsible for the sales and distribution of the products into the market.
For this to succeed, the choice of distributor is critical – the distributor needs strong relationships with the end users (who may be consumers, doctors or other health professionals, or hospitals and health services), as well as the right sales and client support necessary for market penetration of the technology.
One company that knows the importance of selecting the best distributor is medical device developer Osteopore (ASX: OSX), which is commercialising a range of 3D printed bioresorbable scaffolds for regenerative bone healing.
Osteopore chief executive officer Khoon Seng Goh said with such a specialised product, it is vital the company secures the best possible distributor for each region to facilitate market penetration and sales, as well as maximise the improved patient outcomes available through their unique technology.
“Distributors are obviously critical from a commercial standpoint; however, our technology has the added benefit of drastically reducing complications associated with traditional bone regeneration, so securing more distributors will lead to an increased number of positive patient outcomes globally,” Mr Goh said.
While the company is building an underlying revenue base from an Asian based distribution network, Mr Goh told Small Caps the eventual US and EU distributors would also have strong relationships with key decision makers and expertise in the reconstructive and craniofacial areas.
Mr Goh said a distributor’s network and existing relationships would be critical to getting Osteopore’s products “through the door”.
Part of this is understanding the inner workings and hierarchies at the target hospitals – because they all differ between health facilities.
Mr Goh added the distributor needed many “people on the ground” that have developed relationships with decision-makers – pointing out that these types of relationships can take years to build.
“If you get a good distributor, they can get the product in front of the surgeon. It can then be used, and the outcome observed. With a positive outcome, it will lead to more orders.”
Finding the right US distributor
Osteopore currently has three US FDA cleared and CE Mark approved products which have allowed the company to focus on finding the right North American distributor instead of implementing a regulatory approval strategy after its IPO.
Mr Goh said that securing a US distributer is one of the company’s highest priorities.
“The current bone graft market is worth around US$4 billion, and sales of permanent implants are estimated at over US$100 billion annually. With a large portion of this opportunity sitting within the US, penetrating this region would be one of the biggest milestones in our company’s history.”
When hunting for the right distributor, Mr Goh said Osteopore is looking for a company with 10-30 years’ experience in sales and marketing in the field. And as part of the search, Osteopore has attended a number of conferences that have led to the company being approached by multiple potential parties.
One event known as MEDICA was held in Dusseldorf, Germany late last year and attracted around 5,600 exhibitors from 68 countries and 121,369 visitors from 176 countries.
Mr Goh said Osteopore used the event, and others like it, to evaluate distributors – particularly the amount of people the company has on the ground and the strength of its relationships with target markets.
Back in Australia, Osteopore’s head of business development Paul Turner said the company was looking for a distributor that had experience and local relationships nationally and in New Zealand.
Mr Turner pointed out the Australian-appointed distributor would need to have strong experience in reconstructive and craniofacial fields. Both areas are high growth and are the initial target indications for Osteopore’s technology.
“One of the key things we are looking for when evaluating a potential distributor is the group’s strong existing relationships and their capability to initially trial products with key customers.”
Mr Turner said he was also looking for potential parties that had reach into the company’s future target segments and direct access to key opinion leader surgeons.
“These key surgeons are able to influence their peers, and present and publish on the impact of Osteopore’s products. This would facilitate global commercialisation and growth.”
Mr Turner said another influencing factor for Osteopore when deciding on its preferred Australian distributor was its access to both private and public hospitals throughout the country.
“This would expedite the availability of Osteopore’s products in the private and public hospital systems throughout Australia,” he added.