#26 - Anatomy of a Startup - How little Danek became the largest spine company in the world (68 mins)

Brought to you by Tiger Buford.

Hello, orthopedic friends. Welcome to Inside Orthopedics. My name is Tiger. I'm an orthopedic industry insider and retained recruiter for early-stage orthopedic companies. This is a real treat. This is episode number 26. Titled Anatomy of a Startup: How a Startup Called Danek Became the Largest Spine Company in the World. This is the real story as told by Ted Bird that he refers to as the growth of a spine dynasty. Ted was there. In this podcast, you will hear some great startup business practices and brilliant execution That helped Danek execute from zero to world dominance in spine. Ted is an industry friend and a veteran executive in spine and orthopedics. He was one of the first employees at Danek Medical in the early '90s and was part of the team that was responsible for dynamic growth in that period. Today, Ted is an independent strategic consultant. manager and enjoys helping others with innovative disruptive technologies reach success with go-to-market strategies. Enjoy.

All right, so I'm live with Ted Bird here. I'm really excited about this podcast. I've been wanting to find somebody that could stitch together the story of of Danak and the growth of a Spine Dynasty from the beginning. Ted and I have talked about this, and he's the perfect person to tell the story. Welcome, Ted.

Thank you, Tiger. It's a pleasure to be with you this afternoon and to share some of this interesting fabric of— I call it a dynasty, a Spine Dynasty, and how it was created. Lessons learned.

Terrific. Well, thanks for your time. So Ted and I have talked, and it's a long story, and it's best divided into 5 chapters. So we're going to talk about— the first chapter is the early years. The second chapter is the pedicle screw saga. The third chapter is strategy and execution in the late '90s. The 4th chapter is the Medtronic acquisition. And then the 5th chapter is really interesting. It's the Danek folks that are having a continued impact on the industry today. So let's just jump into the early years, Ted. How did Danek all begin?

Great. Well, I want to provide a caveat up front. I want to be as open as I can be and provide, you know, my knowledge. I may not have the story exactly right, but I believe everything that I provide is correct. And I really want to provide the color for the benefit of everyone listening that I joined the company in the early days in 1991, but I'm aware of the history. So the company— Through my relationship with the founders. But the company started in the early '80s, 1983, when L.D. Beard, who was a former president and chairman of Richards Medical Company, started a company called Biotechnology. And together with other investors, an orthopedic surgeon in Indianapolis, Dr. George Rapp. And that was the beginnings, the roots of the beginnings of Danek Medical. They acquired a company in 1985 called Warsaw Orthopedics. That is— was an OEM manufacturing company in Warsaw that was owned by a gentleman by the name of Miles Igoe. Who is also one of the founders of Biomet in Warsaw. So, you know, Danek and Sophomore Danek has those roots in Warsaw, better known as the orthopedic capital of the world. And that was part of the early history of Danek. So 1983 merger and acquisition of Warsaw Orthopedics. And then in '85, They brought in Alan Olson. Alan had his own company called Danek Medical, which L.D. Buford asked Alan to join them mainly for the sales and marketing connections that Alan had through previously being at Richards. And he had developed a soft goods company that customized slings and braces and ankle boots He had sewing machines set up in his garage, and people don't know actually that the name Danek is actually an acronym for Alan's family at that time. His wife Darlene, his name Alan, his daughter Nicole, and son Derek. So that's how Danek actually came about.

Hmm.

And we used to get calls later in the days, you know, people mistaking our company Danek for a Scandinavian furniture manufacturing company. And I would say, no, no, we're a medical device life sciences company. We don't sell Swedish furniture. But so Alan came along in 1985, and the company really got into spine through Alan. Developing with the Texas Scottish Rite Hospital in Dallas a cross-link. So their first spine product was not a pedicle screw, was not a plate, was actually a cross-link that would attach to the prevalent, prominent, most prominent spine fusion instrumentation at that time, which was the Couturel-Dubois system. from soon-to-be, you know, part of the company later, a sophomore. But that's where it all started, was a cross-link system that Alan developed with the team, Rich Ashman and the team at TSRH. And that got the company into the spine business. And then, you know, it— in bringing us in 1990 is when the arrival, I call it the arrival of the Richards team, Really came over. Ron Pickard was recruited over by L.D. Beard, you know, leader in Richards Medical, president of the orthopedic business there. Lawrence Ferry, financial, and to come on as CFO. Alex Lukyanov to come over as VP of marketing and had done a phenomenal job at Richards with the Elizaroff external fixation development and system. Other names: Rick Treehorn for clinical and regulatory affairs. The famous Lou Bennett, better known as Like a Million Lou, of great reputation and experience in the orthopedics market, came over. A few other names, and I'm sure I'm going to miss somebody, so my apologies to those that I am missing, but the engineering team from Richards, Mike Sherman, David Brumfield, the early marketing team, Jeff Horn and Ann Kramer, all from Airways Boulevard there, Richards Medical, where I had also worked back in the mid-'80s. Really transformed the company and brought on a level of experience and excitement about the company in that timeframe. 1990.

So, Ted, I was actually there at Smith Nephew when Ronnie left and went over. And that was a, uh, that was a— I mean, Ronnie had, you know, the whole story. Ronnie worked his way up at Smith Nephew, mowing the grass, working in the warehouse, all the way up to president. And he hadn't been president that long when he resigned and went down the street to this tiny little spine startup. And that was, that was a huge blow, uh, to Smith Nephew. Nobody knew what was going on. And obviously there were no non-competes back then, so, you know, all the best people left. Uh, so that was interesting. Um, so I have a different side of the perspective on that. Uh, yeah, help, uh, help the listeners with what was the state of Spine hardware industry in 1990?

Yeah, very different than the way that we know it today. Literally, you could count the competitors, the number of companies, on pretty much one hand. I mean, you had Sophomore. That was really the dominant company out of France with the CD system that had started in the early '80s, you know, '84, '85. You had Interpor Cross, you know, Cross Medical had not become Interpor Cross yet, it was still Cross Medical, and then you had Interpor, you had Codman, you know. Acromed.

Acromed.

Acromed was in there. Yep, yep, of course you got Acromed with the Steffi system, Art Steffi, the founder, a surgeon, you know, founder of Acromed in Cleveland, and so small, small market and small environment. But, you know, I, I was recruited to come back to Memphis by Lawrence Ferry, who had just joined the company and knew that they needed to build some marketing expertise. I had left Memphis and gone to work for Boston Scientific and then Johnson Johnson, and Lawrence called me and said, Ted, I know you're doing well at J&J, but I've run the numbers, you know, Upwards, downwards, sideways, and this market is going to blow up. It's going to be big. And the team that's being built there— I want to introduce you to Alex Lukyanov and, uh, love to, you know, see if you want to join the early team here on the marketing side.

So— So how did Lawrence know that? How did, how did they— there was only a few companies in spine. How did, how did you guys know that it was about the A huge market.

Well, I think that's part of the— I call it kind of the genius. They were kind of forward-thinking, you know, people in general. They were looking at the demographics and saying there's not a good solution right now, you know, the in situ fusion with the development of— and they had surgeons, you know, Dr. Rapp, George Rapp was an orthopedic spine surgeon on the board. advising them and telling them, look, there's a, there's a better way to do this. And they could just— Lawrence and the team, and Alan Olson was phenomenal at this. He was always running charts and incredible, incredibly optimistic group and always thinking, you know, outside of the box. So I was actually recruited there, Tiger, if you can believe this, in late 1990, early '91. Because they were already— Alan Olson had already looked into minimally invasive spine surgery and endoscopic technologies for application to the spine.

Wow.

And my background was I started my career in arthroscopy, sports medicine, and GI endoscopy with micro— so I had all this experience with scopes and cameras and minimally invasive You know, surgical laparoscopic, you know, surgery products from the early, you know, late '80s, early '90s. And they said, we can use your expertise as we broaden out our horizons. So, you know, really pioneers, you know, thinking about what's happening.

And, you know, a lot of the listeners may not realize back in 1990, the back was a huge— there was huge incision. To get into the working space in the back.

Yep. So that, uh, you know, they, they, um, they were visionaries. And, and, um, as I talk more about in later chapters, as we talk about the culture and the focus of the company, um, always pushing the envelope, you know, thinking about what's next, what's around the corner, and, and putting the investment in place and the structure in place in order to take advantage of that. And, and it's a big part of the story of the growth of this, this dynasty.

So what's— so what was the impetus for the IPO?

So, you know, financing, it was a team that looked at, do we take money, you know, venture capital money, or do we, do we, you know, actually go public? and access capital through the public markets. And that was the other thing that Lawrence had told me. We've run the models and we feel like it's a good time for the company, even though their sales were less than $15 million and they only had 3 products at that time, but a big plan for the future. They went public in Q2. Of 1991. In April of '91, they were successful in hitting the market at the right time and, you know, helping those investors, L.D. Beard and George Rapp and the others, and Alan Olson, you know, to see, you know, their early exit, an IPO-based exit, even though they stayed involved with the business. L.D. was chairman and Alan was still president. of the company when the public— the IPO happened. But as these new management team of Ron and Lawrence and Alex and Rick Treharn and Lou and others came on, you know, LD and Alan recognized that they were able to get the company by the bootstraps of Alan putting a Crosslink set in the trunk of his car and driving from Memphis over to Dallas or to Denver, Colorado to show a distributor a set, to the fact that they need to grow up and become a company and bring in experience and put structure in place. And step back to let guys like Ron and Alex, a marketing genius and visionary, kind of help set the table, set the culture. And the pathway for the company going forward.

Got it. Do you know how much— do you remember how much money the IPO brought in?

Yeah, I don't know the exact amount. I could probably look it up on Google these days, but it was about— I think it was at least $100+ million, you know, with what was raised. So it was a good, you know, good event obviously for the company to, you know, become structured financially and cash flow-wise to be able to invest in the business.

Okay, terrific.

And then, you know, keeping in the early years in the early '90s, you know, to me it was the culture that was established, this customer-focused culture. But, you know, I look back fondly on the formula. You know, the great thing about Ronnie Pickard is he kept it simple. He always kept it simple. He would remind people, he says, look, I'm just a simple, you know, farm boy from Tennessee, and, you know, I like to ask pretty straightforward questions. He would have a great, you know, ability just to cut to the chase. And keep people honest. But with the combination of Ron's ability to, you know, hold people accountable and to drive, you know, the business focused on the customer. I always remember, you know, Ron saying our business, everything we do as we build it is like the hub and spoke. And we kind of knew about the hub and spoke from the kind of the FedEx model that Fred Smith developed, you know, in Memphis, but he said the hub of our business, everything we do, our product development, all the marketing programs that you guys are developing, our distribution, you know, process, how we work with the hospitals, how we look at licensing or bringing new products in, at the hub of everything we do is the customer. So all of that is around being tuned in to the needs, the wants, and the expectations of our customers. And that was driven home time and time again in the culture that was developed. And things like the way we did VIP, we called them VIP trips. You know, most companies still, you know, do that today to bring a customer to corporate to get a feel for The company, the individuals, the products. It was done, you know, at a level which, you know, we wanted to make it so that it was very memorable for a visitor. The way we put together the surge and design teams on projects, we would— we had a— process where we would hold the precursor to study groups. We would hold think tanks with surgeons where we'd want to, you know, ask questions about, you know, their behavior and their practice and what's coming around the corner, what's working, what's not. Medical education programs, the founding of the of an independent, you know, separate foundation. We called it the Spinal Science Advancement Foundation where we would put on courses and they'd be kind of an arm's length, almost creating a separate, you know, professional society that would educate fellows and residents and focus on teaching institutions. Very strategic market.

And long-term thinking too. But, you know, back then, surgeon education was not a core competency at all. I mean, other than the AO Foundation, which was separate from Synthes, nobody really did that. They didn't invest in that.

Brilliant. Right, right. So that, you know, that aspect of the strategy was really well done and a passion for Excellence. You know, the theme— we actually had t-shirts printed up called Customer First, you know, to reinforce the culture that we were establishing and growing as the company started to rapidly expand and grow. And Danek Medical was known as the spine specialist. That was the other kind of a service trademark that we had. And a good example of that is The quality of the sales training and the expectation of the knowledge of spinal anatomy that was required, not only by our distributors and sales reps, but our employees, you know, had to take a test. And the team that built that program and Lou Bennett, who was very involved in, you know, developing that program and expanding that program. And then even taking it beyond just distributors to surgeons where the programs for physician services that Lou would be available to provide with all of his expertise in the marketplace of working with surgeon groups, the company developed an entire reimbursement and coding support, practice management support. You know, really thinking about what's important to the doctor besides the implant and the instrument in their hands. You know, it's how they, you know, are successful business-wise. And so kind of out-of-the-box thinking that was applied to the whole strategic effort at Danek at that time. Strategically, Tiger, the other thing was the other programs that were put in place Beyond the surgeon education programs and the foundations like the SSAF, Spinal Science Advancement Foundation, and focus on young surgeons, fellows, and residents. Strategically, we would look at who was in line, who were the up-and-coming surgeons in NASS or the Scoliosis Research Society. What did that presidential line look like? You would know— Right. 3 to 5 years out, who was ascending into a place of leadership in those professional societies. And we would make it our business to form a relationship with those people because those were the key opinion leaders. Those were the ones that would be at the podium and influencing the rest of the marketplace. So we were very strategic about as we built our development teams, our product development teams, and our marketing and education programs to focus on those key opinion leaders. And then being responsive, you know, building the capability to build a custom or a special with being no more than 2-week turnaround time. And we even had a goal when a customer would come in to visit headquarters for a visit, that early days of pre-3D printing, but the— as an engineer, you would know, Tiger, that the ability to build wax and plastic models, we would have the surgeon draw out his idea in the morning, and then the engineers would go crank it out, and by the afternoon before they left, we'd come back and say— show it to them and say, was this what you were thinking about? Did you want that in stainless steel or titanium? And deliver it, you know, 2 weeks later.

That is impressive. That really impresses a surgeon with an idea that they want to work with this company because they're— you know, today you talk to surgeons and, you know, they're in contract negotiations for months before a company can respond.

Yep. So it just— our goal was to wow. You know, there's business books at that time were written about wowing your customer and And, you know, we were applying that in the way we— our goal was that we want to do business in a way where our customers and our distributors that we count as customers want to do business with us, make it easy to do business. So even as the company grew and, you know, bureaucratic, you know, process started to get in the way, that's where Ronnie Pickard would come in and break it down and have everyone— have us break it down and say, make this easier. And I think that's what allowed— not allowed, but created the momentum of tremendous growth for the company as it evolved from Danek to Sophomore Danek. And that takes us to June of 1993 when Danek acquired one of their biggest competitors. In Bourg-Plage, France, near the beaches of Normandy. Sophomore, which stands for, in French, company that makes orthopedic products. Professor Coutrel and Jean Duboissey with the CD system. But that was a powerhouse strategic move by Danek to create, you know, the powerhouse that is still number one today, Medtronic, you know, spine. in that only maybe 10% of Danek's business in 1993 was outside the US, was international. Sophomore was a global giant, started in France, very strong in Europe, and already in Asia. So that doubled— that acquisition doubled the size of the company overnight, took us over $50 million. and created a global play where then 25 to 30% of our overall sales was outside the US.

That's great.

A great move. People ask, why wasn't it called Danek Software since you acquired Sophomore? I remember back at that time, the deal was that the Cottrell family wanted to One of their conditions, they wanted to have their name first. And Ronnie Pickard, you know, sharing that, well, that's not such a big deal. We'll make that happen. We'll even create a new logo. It'll be Software Danek, and let's shake hands, and let's get this done and work together.

So— Ronnie wanted control, yeah. So, so tell me, uh, Ted, so I've heard it was a, it was a cashless merger, a cashless sort of acquisition merger.

Yeah, it was done as a merger versus an acquisition, you know, for tax benefit. So the financial team and advisors were very smart, as we talked about earlier, um, about doing the IPO early and, uh, putting themselves in a great position to be able to dominate and grow that company. So the tax benefits of the merger of the assets was a phenomenal and attractive thing to the company at that time. Besides the top-line benefit and the strategic benefits and all the IP that got, you know, put together into the same bucket, it, you know, it was about, you know, it was a $300 million gain for the Cottrell family and other major stockholders for Sophomore, but a lot of it was in the value of Danek stock. Then the company changed names to Sophomore Danek Group, and I think we moved from the New York Stock Exchange to NASDAQ, and then kind of set up the company for the next chapter. Well, we'll talk about it in chapter 3, Strategy and Execution. But for phenomenal growth, you know, and ability to execute on licensing and subsequent acquisition activities going forward.

Right, right. I remember the stock symbol, SDG.

SDG, yeah.

So let's go to chapter 2, because this is fascinating. I remember vividly walking by the booth Academy during the Pedicle Screw saga, saying, that's really too bad. That was a great company. They won't be around a year from now. So yeah, tell, tell me what happened. Let's kick off kind of the late '90s, starting in '93 with the Pedicle Screw saga.

Sure. So one of the things in, even in the early growth pre-1993 and sophomore, you know, with The CD system and pedicle screws, and Danek with the TSRH screw, and, you know, Cross Medical and Acromed with the Steffi bolts, they were not approved for use in the pedicle. So, as a marketing guy, it was quite challenging, you know, and for medical education, we could not educate and teach and show the product in the pedicle. It was a bone screw. So it was an— it's an amazing story about how Rick Trehearn, who was Vice President of Regulatory and Clinical, and his team, Bailey Lipscomb, had to figure out a way to convince the FDA that they would back themselves into a corner and were not in a good place because this was the gold standard, had become the gold standard for fusion. But they couldn't, you know, the rules were you had to show a precedent of this product being used in that manner pre-1976. So Rick Treharn and Bailey Lipscomb, you know, with help from surgeons in the field, went back to Dr. Harrington, who was, you know, obviously you had to use the Harrington rods with Zimmer back in the day in the early '70s. And went to visit the Harrington Institute in Kansas City and found, literally found his secretary that had all of his notes. They had to produce an invoice that showed that this product not only was used but had been sold by Zimmer.

Commercial sale, yeah.

Right. The secretary told, I think it was Bailey Lipscomb, that, well, I actually sent that to the Smithsonian Institute in Washington. So you'll have to contact them. So Bailey— and this is where I think I got it right, because I remember hearing the story from Bailey and Rick— ended up going up to the Smithsonian Institute and tracking down this box, going into the bowels of one of the museums there to find Dr. Harrington's box and dig out an invoice and some of the notes to be able to take it to the FDA and say, Here, here's the evidence. And this was around, you know, around this 1993 timeframe. So just getting a 510 was part of it and part of the— I call the pedicle screw saga. And Sophomore Danik was the first one, you know, we got— we convinced the FDA to correct, you know, their position they had kind of put themselves in and gave them the tools that they needed to be able to do that. And we announced at our national sales meeting in, I believe it was 1994, the first 510 for pedicle screw with great, you know, fanfare. And Bailey, listen, hopefully got a nice bonus that year.

So that's a great story. Not only is it, you know, superhuman effort to go out and find the sale, 376, but the story behind that is you have to give the FDA a way to say yes. You have to, right, you have to take the risk away from the FDA, and that's exactly what you guys did. Yep.

So then on to the, the plaintiff attorneys. So if you remember, those of you from Memphis, even yourself, I know you were at Wright Medical at one point, but remember when it was Dow Corning Wright?

Oh yeah.

The company had, you know, the breast implant division, but of course the plaintiff attorneys had a big win against, you know, silicone breast implants and made a lot of money, and then they started looking around about where can we go next.

Right.

And one of them identified this issue with the fact that in orthopedics, there was a product that was not approved for its use in the spine, which is the other reason for the urgency of us getting, you know, a 510 for its use so we could properly train and market, you know, according to the On label indications, but these plaintiff attorneys went after initially primarily Acromed and and Art Steffi. And I remember the NAS meeting in 1993, in the fall of 1993, was in San Diego, and we were warned that 2020, the you know investigative channel. that was on the investigative show was going to have a camera crew making the rounds at the meeting. Again, there was probably only 30 companies overall in the exhibit hall back then total or less. All of a sudden, these camera crews were taking pictures and we're like, uh-oh, duck.

Right.

Look the other way. You don't want to get in that shot. Then we were trying to keep track of what was going on. The episode was aired on— I can't remember the exact date, but it was a Saturday evening or Friday evening in December, and it was the same night as the holiday, the sophomore Danek holiday party. I remember we actually set up a TV screen in a separate room to watch this episode. You go back and probably look, it's probably on YouTube somewhere. I haven't tried to look at it. It was really aimed at Art Steffi pretty hard because he was really contesting the FDA and they went after some surgeons and set up a bunch of patients that supposedly had back pain, but it turned out later they were fake. They weren't real patients necessarily.

Yeah.

Anyway, so the market, huge impact on the market. It became a big deal and all these plaintiffs' attorneys were pushing for a class action lawsuit after that in 1994. So as you were probably at the Academy in March of that next year, it was out there. It's like the party's over. The market that was growing double-digit, 20%, 30% in 1994 flattened out. The growth disappeared. Many of the surgeons and the new, you know, the neurosurgeons that were starting, wanting to get into doing spinal fusion surgery walked away, a lot of them. And the market— so everyone thought, oh, well, this party is over. And so by 1995, it got— came to a head. A judge in Philadelphia certified that the class action was denied. So they would have to pursue the lawsuits individually, state by state, and it was going to get expensive and drawn out. But these plaintiff attorneys had a huge war chest, and it became just, you know, a huge distraction. They were leveling lawsuits against the professional societies like the Mass, double A-N-S, calling, you know, claiming that the surgeons were in collusion with industry, you know, on a product that, you know, was not good and shouldn't be used and was off-label at the time. And the key event, Tiger, was the decision, strategic decision by Ronnie Pickard and the leaders at Danek, at Sophomore Danek, to not give in because it just wasn't right. And Alan Olson, who had kind of retired and left but asked to come back in and help fight the lawsuits, the team decided, no, we are going to fight this. So Acromed, our biggest competitor at the time, was not in, I assume, not in as good a financial position, established a $100 million settlement fund. And that announcement came out in December of 1996. And the team at Sophomoric was like, well, thank you, Jim Robeson and ACRIMED. That's not our position. We are going to defend this industry. Because that's the right thing to do. They took a pretax $50 million charge out against the financials to cover the uninsured cost of defending all these lawsuits. At that time, I was a leader in the marketing side and we precursored the social media. Back then, the fax machine was still a tool.

Mm-hmm.

We would do fax blasts where we would communicate with the entire marketplace and all of the surgeon lists in the database that we have to tell our side of the story and basically say, you know, this is not right. ACRIMED is capitulating. They are going to feed these sharks the frenzy of the plaintiff attorneys, but we're behind you. And that created incredible support. And loyalty from surgeons and the professional societies. And I'll never forget, there was an annual spine meeting every year in January that was held at Whistler, British Columbia, by Glenn Rechtein, who was the chairman. And he set up a debate that January of '97 between Jim Robson, the president of ACRMED, and Ronnie Pickard about, you know, plaintiff attorneys and who's right and who's wrong. And there was such passion, you know, from the audience, from the surgeons. I felt bad for Jim Robeson, but it was— years later, you'll still hear surgeons talk about, I flipped my business from Achromed to Sophomore Danek, and when that was done, I just, you know, just incredible support and loyalty that ensued.

It was, yeah, it was— People don't realize, maybe it was the first device manufacturer that stood up for the surgeons first.

Right.

Yeah, it was a big deal.

That was the position, and that was the position that we supported. We communicated it. We were very aggressive about, you know, putting the word out about what we stood for and why this was important, and it paid incredible dividends, I think, in As the market started to come back and recover from the flattening out and the drop in the growth rate. And South Morgannock, you know, really stepped up and not just with the market share top-line revenue position, but with the, you know, de facto, you know, leadership position for the industry, moved forward and helped the whole market, you know, recover and grow.

Right. So help us with some numbers here. So, uh, so Southmore Danek allocated $50 million to fight the losses state by state. How big— what were the gross sales at that point? How big was the gamble?

Yeah, so gross sales in, in '97 were about $300 million. Wow. So, you know, again, Talking about combined numbers with Sophomore and from '93 on, you know, we grew from $11 to $25 to $30, then the acquisition to $50 million. And then we were basically doubling in size every 3 years. We went over $200 million. But then in '94, when that class action lawsuit hit, we stalled and the market stalled.

Yeah.

You know, we stalled at $162 million, you know, 2 years in a row, but then we got it back on track.

Right.

$190, $250, $300, $350, $400. So we just— but it was a gamble in '97 to basically at that point put that aside. But again, smart Well-thought-out strategic planning as a public company, doing a secondary offering to pay off debt and provide cash flow, not just for the defense of the pedicle screw saga. That again, with vision and optimism led by Ronnie Pickard and Alan Olson, that we're going to win this thing because it's the right thing to do. And they ultimately did. The plaintiff attorneys went and ran and found another dark corner to hide in. My apologies to any plaintiff attorneys that may be listening in, but they had to move on. They were, they were, they were routed and defeated.

Wow. So it's another gutsy thing that the software side of the business didn't have anything to do with this. This was a US market problem, right? But they were on board with it. That's, that's amazing.

Yeah, absolutely. They, you know, I think a charismatic group, obviously, Ron, Lou Bennett, Alex, you know, easy guys to work with and not necessarily easy because they're hard drivers. And I really appreciate that and appreciate the experience that I got under my belt by growing and rolling up my sleeves and working alongside people like that. But, you know, again, the philosophy of make it— we're going to work hard, but we're going to play hard and enjoy, you know, and have some fun and make sure that our customers want to do business with us.

Yep. Terrific. That's a great story on the pedicle screw saga. And that was almost the death of the company. It was really close. People don't realize it. Yep. So let's go to chapter 3, strategy execution in the late '90s. This is where the company really took off. Take us there.

Yep. So the building blocks is the market recovered and the company continued to evolve. A new team came in, Alex Lukyanov and Rogan Fry on the international side. stepped out right around 1995 to do something, you know, new and different. And I call it the U.S. surgical team arrives. So we had Mark Laguidice, Ed Traurig, Nick Lake, Mark Puzio, Doug King, who, you know, still involved with the company as a leader up till recently, with mostly U.S. surgical background came in. And they brought, you know, an experience also of excellence. in training and sales operations and aggressiveness, you know, in terms of, you know, growth, you know, models and expectations. But there was an incredible run in the 1995 to '99, the latter half of the '90s, of strategic business development deals to transform the company beyond just a pedicle screw And, you know, cervical plate. And, and of course, in those years were the years when interbody cages became the, you know, cage rage, you know.

SpineTech.

SpineTech BAK, the Ray Cage, and Ray Medica. And, you know, the company, in order to maintain leadership, had to, had to make some moves. So, you know, one of the, one of the moves they made, just to speak to the cage situation. They kinda caught a little flat-footed and not being able to introduce a titanium, you know, cylindrical cage at the same time SpineTech was in 1997. But they said, well, we're gonna do that, but it's gonna take us, you know, 18 months to get that to the market. We're gonna introduce an allograft bone dowel cage. So they licensed from the University of Florida Tissue Bank a, you know, cortical bone valve, you know, and spun it and marketed it as a natural alternative to titanium until they could get their own, you know, titanium product launched. But of course, University of Florida Tissue Bank was a precursor to RTI and also did an injectable bone paste product called OsteoFill. This is all in 1996. But the big biologic story was actually the year before that. 1995 was licensing BMP from Genetics Institute and putting up $50 million for the licensing rights on a program that was going to take a PMA and preclinical and animal studies. It was going to be a 10-year program before they could get payback. So that was a big deal for the company in 1995 when sales were, you know, $100 and, you know, right around $200 million to put up $50 million. At the same time, they were putting aside $50 million to fight plaintiffs' attorneys to make the BNP bet.

Yeah, that was, I remember reading that story and talking to people. I mean, that was an incredible thing. To spend $50 million on literally a molecule that would not be a product for 10 years, a lot of people thought that was just crazy.

Well, it's kind of long-term optimistic, you know, glass half full mindset management and thinking that— and listening to the customers, you know, working closely with Scott Bowden at Emory in Atlanta who was saying, look, This has something here. You guys need to take a look at this and supporting it. The same thing with image-guided navigation technology. The same year that we did the licensing deal with University of Florida Tissue Bank, the company acquired the StealthStation, the S from SNT. The first early, together with Brainlab, image-guided navigation technology, the future of robotics. This is 1996.

Wow.

And then even expanding beyond orthopedic, you know, spine surgeons into cranial with the cranial mesh, acquiring a company called MedNext that had drills and TiMesh, you know, for cranial in 1996. '96 was a big year, 3 or 4 deals. Genetics Institutes, BMP, licensing, you know, with bone tissue, doing the SpellStation deal, licensing IP from Gary Michelson.

Yeah.

You know, Gary was the IP holder of— patent holder of the BAK and, you know, had had the rights over the Ray Cage as well. So, you know, we brought Gary in and negotiated the rights. That didn't play out so well later as Gary, you know, ended up taking the story— as the story, you know, can be read and goes, took the company to task for not fully taking advantage of all the IP that he licensed and ended up winning, you know, quite a hefty sum, you know. in the billion-dollar range from the company for doing that and kind of forcing the company to recognize his IP and apply it across their portfolio in the industry. So that was all done in '76— I mean, sorry, '96, '97. Wow.

A lot of big gambles.

Big gambles and strategy and execution, you know, growth. driven by the team at that point. Ron continued to evolve the senior leadership team and brought in Bob Compton. Jim Gallogly was there during that time, who also had Richards roots and ENT roots. Just not afraid. Ken Hayes brought in for the stealth and restructured the company from being all products in one area to setting up strategic business units, one just for thoracolumbar products with the president, one just for cervical products, one for biologics products, and one just for interbody products. And that's when Michael Demaine was brought in again through another Richards contact and flown back to Memphis from Australia where he was country manager for Smith Nephew to come in as president of the interbody group. ultimately, you know, to take the reins from Ron Pickard later in the evolution of the company. But, you know, it's incredible moves, forward-thinking, and, you know, again, with the customer being at the focus and the hub of everything that the company did. Right, right.

So let's— that takes us to chapter 4. So 1999, the big acquisition by Medtronic. So Tell us the story of how that happened and what were the changes. Yes.

So, you know, the announcement was kind of— it was known at the very end of the year in '98. I remember, again, the NASS meeting is a big annual meeting. It was in Chicago that year. And it was kind of interesting that this company Medtronic just happened to have a booth right next to ours. And they were, you know, they were a STEM company, you know. neurostimulation company and their people were very interested in our products. And I wasn't part of the, you know, the transition or acquisition team, but then, you know, I reported into the Chief Operating Officer and he shared with me this is going to happen. So it was announced and then closed in January of— announced in December of '98 and closed in '99. And as a leader on the executive team responsible for at that time, Global Medical Education and Emerging Technologies together with Mike Sherman, you know, I started doing some of the transition work with the folks in Minneapolis. So, you know, I started to see having had the experience of being with smaller companies and, you know, bigger companies like Johnson Johnson, but smaller companies like Dionyx before they were part of Smith Wesson, and I could see And that, you know, as questions were being asked, as I was sharing how we did things, you know, with the focus as a nimble, go-go dynamic company, even though we were, you know, approaching $500 million of revenue, we were doing these think tanks where we would take a group of combined neurosurgeons and orthopedic surgeons to talk about, you know, being one spine surgeon and taking annually a group up to—

Alaska.

And they, you know, this was pre-Advamed. So then Advamed started to come in and they were asking, you know, when you— what were you doing in these think tanks? Were you actually talking about business? I saw a picture of salmon fishing. Were you actually salmon fishing and who paid for that? So, you know, it was clear, you know, that to me that, you know, the dynamics would change. It wouldn't be The ability to be as dynamic as we had been, kind of a big company with a startup mentality, was going to go away. And I was the first one to leave. So, you know, I stayed for about 9 months and I left in December of '99 after the acquisition was announced. I think we're hands-off. I think the company continued to grow phenomenally. Still through the early 2000s. BMP was launched in early 2000s, I think 2001, 2002. Obviously, that was a big shot in the arm and growth. But things slowly but surely, you know.

Right.

I left. John Crawford left, Ronnie Pickard left, and Lawrence left, and Alex had left in '95. got NuVasive started, and then Keith Valentine and Pat Miles, you know, ended up coming back around and joining Alex and, you know, created kind of that culture and that focus that we applied and benefited from in the '90s into that model at NuVasive. And obviously the 2000s in that next decade and beyond were phenomenal because it was a formula that wasn't that difficult. Keep the customer the focus, keep the innovation the focus, keep thinking outside of the box, do things differently. And still today, I would live and die by that. It works. You just have to execute.

Right, right. So let's go to chapter 5. and talk about the kind of the long-lasting effects of the Danek group and what they're doing today.

Yeah. So it's pretty phenomenal to take a look at, and I started making a list of— and I know I'll miss a few names, and I apologize up front. I tried to identify those that clearly, you know, are still in the market today and had an impact. And then I started to mention NuVasive, but Alex, Keith, and Pat, phenomenal leadership team, built a culture, built a dynamic business with changing paradigms, basically. Instead of employees in the early days, they weren't employees, they were called share owners. There was a sign as you enter the parking lot at NuVasive, the share owner parking lot. And everyone had a piece of it with stock options and ability to have long-term vested interest. You look at that, the team's changed now and moved on, and Keith is running C Spine as CEO, and Pat's moved over in that same zip code neighborhood of San Diego to AlphaTech as chairman and CEO. And, you know, applying those formulas of customer focus, innovation, and responsiveness, and differentiating yourself. Then you look at, Tiger, other, you know, major players that are currently being led by individuals that grew up in that environment of the '90s. The number 2 company in the market, J&J, DePuy-Synthys, the current company group chairman there, Aldo Denti, Was brought into Sophomore Danek in the in the '90s in the Paris office and helped helped run the European business there, and then came to Memphis and was part of the marketing team. And another another member most recent announcement of one of the worldwide presidents at J and J for the Depucinti Sports Medicine business MyTech is Russell Powers, who also you know did. his time, I think almost 10 years at NuVasive. So J&J's got leaders that know that formula, Aldo and Russell. Another bigger company currently being led on the spine side in the orthopedics area, Zimmer Biomet, their group president for spine, cranial, maxillofacial is Ori Bruno. And Ori was a distributor sales rep in the early '90s for the distributor we had in New York and then ended up coming inside into the marketing group and learned kind of the fundamentals of the formula there. Jim Kloor, who's also there now as general manager, you know, president of the spine business at Zimmer Biomet, was part of that Interbody Group and they came in in the mid-'90s at Sophomore Danik. And then the US surgical team, you know, moved off and they're all pretty much together and involved with SpineWave. Mark Laguidas and John Pafford kind of got that started up in Connecticut. Nick Lake and Ed Traurig there, and on their board actually Ron Pickard and Marie-Hélène Poulet-Poutrel as investors and supporters of that effort. And then you go to the smaller companies, the startup environment, either in stealth mode or, you know, having an impact in different areas, not just spine but orthopedics. Active Implants in Memphis with their meniscal replacement device. I believe you spent some time there, Tiger.

Yes.

Rick Treharn is VP in Clinical and Regulatory Affairs, you know, key member of the leadership team there. Pedigard out of France, Spine Vision and subsequently Pedigard was 2 sophomore engineers that were part of my team and the marketing team as we put Sophomore and Danek together. Pierre Jerome is the chief chairman. Stéphane Bett is the CEO of that company. In the biologics arena, Serapedics, again, leading the clinical and regulatory efforts for the iFactor. Roger White, you know, doing IDE studies. Roger and I were teammates in the early days of pioneering spinal endoscopy and microendo systems. And Bob Winolek and Dysgenics, you know. Also, he helped run Osteotech after he left Sophomore Danik. And then engineers like Mike Sherman, you know, very involved in the Memphis scene still with MB Venture Partners and the annual Memphis Musculoskeletal meeting that happens every year and now running a contract engineering and development company called MB Innovations. Others in the neurostimulation area, Tony Arnold became CEO of a company called Setpoint Medical that is making huge waves in the neurostim market. But together with Mike Onischek and Jim Schurich were part of Advanced Bionics. It's now the franchise that Boston Scientific has in the neurostim arena. So those guys all were part of the team in the '90s from Soft Organic. And then just today, an announcement about a new CEO for a company that Alex Lukyanov is chairing, Fusion Robotics. Brad Clayton announced as CEO, and Alex has got a number of stealth mode companies, so it's exciting that he's applying his dynamic genius, forward-thinking thought process to companies like Fusion Robotics. DuraStat and tissue differentiation intelligence. So to me, there's a lot of excitement in the marketplace where you look at the margins, you look at the startup environment that you specialize in, Tiger, and the future is bright despite the battles that go on today, you know, and the difficulty in getting pedicle screws and cervical plates and cages approved by the GPOs. There's a future, and it's called innovation and customer focus.

Wow, what a great story, Ted. I really appreciate you taking the time to kind of stitch it all together. Most people know a little, a chapter here or there, but have never heard the whole story. I think you're the first person to ever put it together. It sounds like All the apples that fell from the tree and are creating great new companies today, it all kind of goes back to Ronnie. I mean, it looks like they, they learned their leadership from Ronnie. Is that your opinion?

I think it's a combination. Ronnie brought that operations, keep it simple mindset of holding people accountable. I mean, as a young product manager, if you went into a project meeting that was set up And you weren't prepared, you would, for lack of better words, get your rear end handed to you, and you would know it.

Oh, yeah.

And it would be embarrassing. So it brought everyone's standards up. Responsiveness. Ronnie set a rule about answering the phone. He said, I want the phone answered by a human being within 3 rings, or there'll be hell to pay. And he would be out in the field, and many of us who've been out in the field have been frustrated by this. You know, you can't get a human being or you get stuck in voice jail. And, you know, so people would jump, you know, to make sure that phone was answered. And then quality—

Yeah, I remember Ronnie. I mean, I remember him saying at Smith Nephew before he went over to Xanax, he would often say, uh, fix the problem or I will find somebody that can fix the problem. That was very motivating.

No, he would walk around and management by walking around and being present and particularly when we were bringing customers through regularly and if they wanted a neat, tidy— not tidy but the professional office. Many times startups you get in that cardboard boxes and loaner set trays and stuff lying all over the place. Stale bagels in the conference room, he would go nuts. He would come down the aisle and see a cardboard box, he would dropkick it into the next cubicle.

Yep.

So he kept everyone on their toes. The other person that I give a lot of credit to is Alex. He's a genius. He's a marketing genius, always thinking outside of the box. What's next? How can we do this differently? He put a— I remember in his office when he was VP of marketing before, you know, he got promoted into the president role, an ad agency, you know, drew up a newspaper headline saying, Bannock Medical, 60% market share, dominating the market. I think we got there close, you know, in the '93-'94 period. I think we got up there close to 50%. But, you know, he kind of set the vision for the company and the culture on the customer-first front and continues to do that. Did that with NuVasive, and I expect great things to still come, you know, from any startup company he's involved with.

Right, right. I mean, Alex was there when NuVasive was just a neural stimulation and took the company from nothing to number 2 in the spine market, maybe number 2, number 3, not quite number 2 before he left.

Right up to $1 billion, yeah.

Yeah, unbelievable. Well, there's some great stories in here, Ted, that a lot of startups can learn from.

Yeah, I've often, you know, I feel blessed to have had the opportunity to have the experience, and people have said you should You should write a book, Ted. You know, you're just— you had that opportunity. So, so this may be the start of my book. We've got 5 chapters so far, but—

All right.

Again, I apologize to those that are listening that I, that I left out. There's many other players that, that were part of the team, and it was truly a team effort. But it, you know, I think everyone would agree, and then in the field, you know, the distributors like Doug Kraft and others from the very beginning that were cheerleaders from the— I think he was a distributor of biotechnology even before it was Danek Medical.

Wow.

So just an incredible, you know, legacy and team. And for those, you know, at Medtronic today that are listening in, you know, they do have the Museum of Spine Surgery there, but I don't know if it's open to the public. But this at least gives those that aren't able to visit that museum to know some of the inside story of what created the, the, what I call the dynasty, because it continues to, uh, um, bring, you know, new and other companies and, and formulas for management success into the market today.

Yep, yep, that's terrific. So you may have started something, it may be the beginning of a book. I'm sure people will reach out to you. So what's the best way for somebody How do we get in touch with you, Ted?

Yeah, the best way would be probably just look me up, Ted Bird, B-I-R-D, on LinkedIn, or my company's Bird Medical Group, tbirdmedical@gmail.com. Shoot me an email. I'll wait for Steven Spielberg to, you know, ask me about the movie rights, then I'll probably have to share that with Ronnie and Alex or others, but This has been a lot of fun. Kind of noting it down is a great idea. I appreciate you asking me to share. I'm not the ultimate authority. It's just— again, it was a team effort. But it was a phenomenal time. I think there's great lessons to be learned from the application of, you know, startup mentality, you know, hard work ethic, working smart, focusing on the customer. And getting up and doing it again every day. It really is an exciting, you know, way to do business.

Terrific. Well, hey, thanks again for your time and, wow, all the great detail. And I'm sure you will hear from many in the industry. That's a wrap. Thanks, Ted.

Appreciate it. Thank you, Tiger. Have a good afternoon.

All right.

Bye-bye.

Bye-bye.

So that's a wrap. Hope you enjoyed the story of Danek. As always, don't forget to subscribe and thank tigerbuford.com for your next key hire. Keep innovating, my friends.