Portland boss shares business secrets

Portland Orthopaedics CEO David Sekel told a recent gathering of the Australian Venture Capitalists Association that the company's rush to prepare for an IPO last year -- a process which did not come to fruition -- had been premature, and that a trade sale was now an attractive option.

"We decided to be opportunistic, but tried to do an IPO in an unreasonable time frame," he said. "During [the IPO process] we defocused."

Although he did not rule out a second bite at the IPO cherry, Sekel had some sage advice for biotechs confronting the choice of whether to IPO. "Stick to your plan," he said.

Portland began when Sekel's father orthopaedic surgeon Prof Ron Sekel was fixing a chair, and realised that the screw-join he was using could be adapted to hip replacements.

Portland hips use a double threaded stem to lock into the top of the femur. The prosthesis is easier for the surgeon to insert, more adjustable and patients can often by discharged home early.

In 2001 a series A financing of AUD$10 million from GBS Ventures (then the Rothschild Group), Superannuation Trust of Australia and Equity Partners provided the funds for the company to start marketing its hips in the US, European and Asian markets.

"It is really important when selecting investors that you don't just look to the money but to what else they can bring, including US contacts and their overall philosophy," said Sekel.

And in the mature and crowded joint-replacement market, it is marketing rather than intellectual property or regulatory hurdles which have presented Portland with its greatest challenges.

Sekel said that by concentrating on the revision hip-replacement market Portland has been able to educate and win over five surgeon 'gurus' who are now using the product and collecting data. "This post-operative data will become meaningful in the next two years," he said.

The time it takes to gain broader acceptance among surgeons -- 3 years' worth of data are standard -- is both a blessing and a curse. Sekel says that the requirement for data provides a "natural protection" against me-too competitors, in addition to IP protection.

Targeting the revision hip-replacement market -- as opposed to the much larger primary replacement market -- has allowed Portland to Trojan-horse its product into a highly competitive market. "We have come in the back door by getting access to surgeons through the revision market and cross-selling," said Sekel.

He said that 70 per cent of the company's sales are now in the primary space.

Looking back on the initial US marketing campaign, Sekel warns that American insularity shouldn't be underestimated. "We shouldn't have entered the US market branding Australian," he said. "Americans want to buy American. [If I were to do it again] I would Americanise very quickly. Be proud of being Australian, but brand American."

Sekel has also become wary of consultants and 'hired guns'. "If you don't' have specific expertise, buy it," he said. "Don't use a consultant because they are on and off tap. Bring [that expertise] internal."