The Middle Path to Innovation | LSI Europe '24

Duke Rohlen 00:05
Thanks, morning, everyone. Wonderful to be with you. Thanks for joining us. And it's really, you know, I think it's a fascinating, fascinating article, and I really look forward to unpacking it with you. Duke, so very quickly, Mano Iyer with Sofinnova Partners. You know, Sofinnova is a 50-year-old venture capital firm based in Paris, with over 2.5 billion euros under management. I specifically work within MD Start, which is a very early-stage medical device accelerator, kind of turning ideas into companies. We've created 13 companies over the past 15 years. And in my former lives, I started and exited two companies. So really fascinated, been on the, you know, the VC side of things, right on the corporate side of things, and on the entrepreneurial side of things. And I think your background here is fascinating, but I'd love to start maybe with just if you could explain quickly to the audience what we're going to talk about, what is the growth driver and chassis model that you've architected here. So at the highest level, what we have tried to do is eliminate as many risks in the development process as possible. And what we have found, or I have found, specifically running companies for the last 20 years, is that what you want to try and do is isolate down to just technical risk, by eliminating capital risk, eliminating market risk, eliminating development risk, etc. And so what we've tried to do is figure out how we can eliminate that market risk. And so our idea, our chassis concept, is that you find a commercial engine, and in this case, it was Cardinal Health's Cordis, and you identify the deficiencies of that portfolio, and then you identify which technologies can be built, which technologies can be bought, which technologies can be licensed to offset the deficiencies in that portfolio, and then you fund them. And so we ended up partnering with two big private equity firms, Hellman & Friedman and KKR. We bought Cordis and surrounded it with a $300 million engine that was specific to developing new technologies that Cordis needed.

Mano Iyer 02:13
So the model, yeah, thank you. There's a lot there, and I think we'll go through and unpack that in our time. I would love to start, I mean, it feels like the foundation for this. Normally, we kind of do a very short bio and jump into the content, but your bio is highly relevant to how you got here, right? And I think there are so many unique experiences and so many success stories which you've built upon to get here. And I think, if I understand correctly, it really started with your appreciation for the importance of leadership and capital and risk in the restaurant industry that, yeah, believe it or not, so out of Stanford, I ended up graduating into a really, really tough economic environment and decided to start a restaurant. And the restaurant sort of...

Duke Rohlen 02:55
taught me the core tenets of how to start a company and how to manage a company, and I ended up growing that restaurant to 10 restaurants, and then we sold it to a much bigger restaurant company. At that time, I was asked to be the CEO of Sizzler, and I looked down that path and said, I'm not really cut out to be the CEO of Sizzler. That's not the life I endeavor to live. How do you explain Sizzler to a European audience? You don't have to. It is, yeah, it's a little bit above McDonald's selling steak. Yeah, not great.

Mano Iyer 03:30
And so I went back to business school and entirely focused on going into another space where I thought that I could have an impact. And the reason I chose medical devices is I had a ton of experience working with chefs, and chefs, in a lot of ways, are the smartest guys in the room, as are doctors, as we all know. Doctors are the smartest guys. My brother's a doctor, my dad's a doctor. So I'm very familiar with it, and I can use that, not in a pejorative term, but I can definitely poke fun at doctors. But they're very, very smart. They're trained to be exceptional at what they do, but a lot of times they don't have the other capabilities that are required to actually drive a company to success.

Duke Rohlen 04:12
And so I went back and decided to focus on going into medical devices without too much experience, no experience in the healthcare space at all.

Mano Iyer 04:22
And that leads you to Fox Hollow. How did you agree? Yeah. So my first job was at a company called Lumen, and I went in as the head of business development and ended up selling that company to Cordis. Believe it or not, Cordis was just the company that I bought two or three years ago.

Duke Rohlen 04:39
And I remember looking at this company. We had infrastructure, we had marketing, we had management, we had clinical regulatory. There was so much infrastructure associated with this single little product, and I remember thinking, gosh, it's going to be really hard to get a return on that investment. It had 45 or $50 million put into not a therapeutic...

Mano Iyer 05:00
But a niche catheter, and they ended up selling it for about 45 or $50 million. So from the perspective of an outcome, it was a success, but from the perspective of, you know, money on invested capital, it was a failure. And I thought, gosh, there's got to be a better way to do that. Fox Hollow, which was an atherectomy company, had just...

Duke Rohlen 05:24
reached a terrible inflection point. They were targeting the heart, and drug-coated stents had just come out. And so the market for drug-coated atherectomy in the heart went away. And so I came in, pivoting that company, never having run that company, but it was on sort of a downward trend, so they were willing to take a risk on me. We ended up turning that company around and growing it to be very successful, but we mimicked a lot of the failure modes that we had seen at Lumen. We were very, very infrastructure heavy. Our SG&A was like 140% of our revenue. We had very limited clinical data, and we were very, very good at what I call iterative improvements. Coloring, you know, orange and black was our marketing motto, and everything was orange and black. And we ended up growing it to be sizable, $200 million in sales, and selling it. But that success actually hid a lot of the failure components that I think bring down technologies, and I sort of vowed not to do that again. So you get experience on the commercial side of things, and you build a belief in efficiency, which leads you to CV Ingenuity. Is that right? Yeah. So Fox Hollow, we spent a lot of money, we went public, we grew it, and then when we sold it, I said, Gosh, there's got to be a better way. And I went back to the drawing board and said, Let's develop this technology. Let's see if we can spend $30 million, not $100 million. Let's see if we can develop a technology by making trade-offs, things that are not critical to the differentiation of the asset, but could be leveraged, right? So instead of building our own balloon that was going to be carrying the excipient and the drug, we partnered with Covidien at the time that had a great balloon, and we focused all of our energy on the coating and the excipient. And then let's see if we could sell it for $300 million. So, three years, $30 million, $300 million, which was very, very different than the Fox Hollow trajectory, and it forced us to be incredibly lean. You know, our office had no windows. We were on this very big highway; if you opened up the door, you were overcome by the amount of noise that the road was making.

Duke Rohlen 07:48
But we were incredibly efficient, and we ended up doing it. So Fox Hollow, I feel, hid a lot of the expense that I thought needlessly went into companies. CV Ingenuity was the other extreme. It was incredibly efficient. When we sold it, we still had $10 million in the bank, right? And so it was. It was the capital intensity, the capital efficiency was there, but I realized that we probably could have raised more money and realized more money from an exit if we had done a little bit more. So then I started another company called Spirox, which was in the ear, nose, and throat space, and I was trying to combine the capital efficiency and the lean operating mentality of CV Ingenuity with what became a skeletal commercial entity that mimicked Fox Hollow. But instead of building a 200-person sales force, we were going to do it with 10. So this was a technology that went into the nose. It was ear, nose, and throat. It basically replaced a procedure that was highly invasive for nasal valve collapse with almost...

Mano Iyer 09:04
like a little fork that you put in in a minimally invasive setting...

Duke Rohlen 09:09
and it basically propped open the nose.

Mano Iyer 09:14
We were capital efficient. We got to design freeze with like $2 million, and then we got through the FDA with about $10 million. And then, instead of building a massive sales force and trying to be a competitive company to single product companies, which is really tough. I was pulling up some data for this talk. And if you look at the top 25 companies that are $300 million or less in the public markets right now, all of them are down on average 80%. All of them have SG&A numbers that average to about 130% of sales. And in the last 12 months, they've gone down 30% alone, right? So being a single product medical device company...

Duke Rohlen 10:00
that's public is a very, very tough road. There are exceptions, Shockwave being one of them. Fox Hollow was one of them, but it was, I think, one of the last of its kind. So we were under the impression that we could basically do a small amount of investment, raise 10 sales reps, and go demonstrate the utility of this technology with a cohort of physicians that were supporters of it. And instead of building the requisite infrastructure to scale, we were able to demonstrate that this small group of people could do a million dollars of sales per rep. And it translated to another company coming in and then saying, Gosh, if we just put 100 sales reps, we're going to get a lot more revenue out of that. So it was a modification of both Fox Hollow and CV Ingenuity. Fantastic. And so, I mean, you have some wonderful success stories already, and you're not happy. You say, well, there's still room for improvement. There's still learning here, and we're not able to control our destiny on the upside because corporations are now buying these technologies, and the disproportionate amount of the upside then goes to the acquirer, right? And so that leads you to Epix. Is that right? I mean, yeah. So after they were there, then I started another company called Epix, which was in the electrophysiology space. And the idea there was we were going to create a portfolio of companies. So this was the precursor to the Ajax model, the model that we did ultimately implement with Cordis. But we were going to...

Duke Rohlen 11:31
we were going to raise, we were going to put this very cool new ablation system with mapping and some of the other capabilities. And what we were going to do is sell it to one of the companies that wanted to be in electrophysiology but didn't have the products and didn't want to go and piecemeal buy four or five different technologies and put them together.

Mano Iyer 11:56
And it worked from the sense that we ended up selling that company to Medtronic for a lot of money. It didn't work in the sense that we had disparate investors who were not willing to come to the table and play the game. We needed someone who was going to develop mapping, someone who's going to develop the sheets, someone who's going to develop the transcept, all the different capabilities that you need to have a full-service division. And so I ended up selling that company and feeling like there was still more we could do, right? And that's when I looked at Cordis, and Cordis was a very neglected asset at Cardinal. It had been at J&J, and then it had been divested to Cardinal, and then Cardinal was trying to get rid of it. And so I looked at it, and I thought, Gosh, this is an unbelievably interesting opportunity. It's a company that had zero growth. It was $700 million in sales and basically no growth and almost no profitability. And so I think people thought I was probably smoking crack when I was really excited about buying this company because I felt that, gosh, it was the perfect venue to put this growth driver engine around and transform it. And so we ended up buying it. We ended up buying it at a very, very discounted price. We paid a billion dollars for it, which is about 1.3 times sales. And if you look at comps for companies that are not growing, that's about what you get. If you start growing at 10% and you have a revenue base, you start getting into, you know, three to four times if you're above 15% growth on a compounded basis, you can get into much higher multiples than that. So the vision was that we were going to go buy this company. We're going to surround it with these growth drivers. We're going to take a company that we bought for a billion dollars, take a 0% grower, transition it to a 10% grower, take a 0% EBITDA company and make it profitable. And we're on that track. We'll do a billion dollars this year, we're growing at double digits. Our profitability is double digits. And more fundamentally, the model is working in that over the next five years, every six months we're kicking in a new technology that's coming from this engine that...

Mano Iyer 14:13
that is called the Cortis X, which is the accelerator engine. So can we talk through the models as fast? Yeah, and how you actually implemented it in Cortis X? So, so I understand that there's kind of three buckets, right? The first is really identifying opportunities, and you really need to...

Duke Rohlen 14:30
work with the corporate. In this case, you had specific insight because you were buying Cordis. But how do you start? How do you identify the right opportunities that make sense, that are not incremental R&D and not big, huge VC bets, right? That kind of fit this yellow path, as you call it. So one of the problems I think with the med tech venture investment world is that everybody's focused on what I call transformative technologies. Okay, so transformative technologies are technologies that I was focused on, too.

Mano Iyer 15:00
What gets, what attracts the venture capitalists, right? They come in, they say, Gosh, nine of these technologies are going to fail. We need to have one that's going to be a home run to carry our fund. Let's focus on the ones that have the highest beta, I mean, the highest risk, but also the highest return profiles. And yet, most of those are the highest risk and take the longest, but they also yield the most amount of money. They're very, very hard to do. On the very other end of the spectrum, you have iterative technologies. And iterative technologies are technologies that are typically built by in-house R&D firms, right? So if you're Boston Scientific, what you're really good at is iterating on what your current products are. They're not good at building transformative technologies. Those days are done.

Duke Rohlen 15:50
Then there are synergistic technologies. And synergistic technologies are technologies that venture funds don't want to fund, but they accelerate the growth profile of an existing product in the portfolio. So, for example, you have an ablation catheter, and you need to have a balloon that goes with that ablation catheter that's specific to that. No venture firm is going to fund that balloon, but they need it. The big companies don't want to spend that money because it's a little bit beyond iteration, but it's also really needed. Then there's a third category, which is incremental. And incremental are tuck-in technologies that you need and that, again, aren't sexy and that don't command 10x returns on the invested capital. And so what I looked at and I said, we have to span that continuum. We have to have enough transformative technologies, but then we also have to have enough iterative technologies, synergistic technologies, and incremental technologies that this becomes a really powerful engine. And so...

Mano Iyer 16:59
our model is not to develop those in-house. So what we did is we came up with a list of things that we wanted to do, and then we went out to the ecosystem of people that have worked for me in the past, and I said, Do you want to run your own company? And they said, Yes. And I said, Okay, I want you to build this sheath, and I'll fund it, and I'll buy it back from you on a predisposed price, but you're only doing this, and the predisposed price is like three times invested capital, not 10. And we've done that like almost 23 times now. And so what we've done is we've taken great, great people who have a really keen interest in being entrepreneurial, who have a challenge in doing that because they can't get capital. There are so many challenges, so many impediments to being able to develop a technology. And we've harnessed them, right, and put them to work. We funded them, and they're all very, very myopically developing technologies for...

Duke Rohlen 18:01
for Cordis, yeah. So just on step one for a moment, just on ideation, you know, you had unique experience with peripheral, you know, vascular disease and cardiology. And of course, Cordis is well known for, you know, I think it's access, treat, you know, access, diagnose, treat, close. And so these types of devices, guide wires and guiding catheters and sort are well known. You mentioned drug... Can you just give a sense of like, what were the types of products that you ultimately made for them? What fit like? How did you fit the game? Yeah, I feel like, so we looked at the, we decided, where are we going to be? Are we going to really go into coronary? Are we going to go into peripheral? We had like 5,000 SKUs at Cordis, and about 2,500 of those SKUs were not even being sold, right? We were selling in 60 countries. So we had to really clean up the strategy, clean up the house, make sure that what we were going to invest in was actually going to make a difference. What we ultimately decided is that we're going to go very, very heavy into one aspect of the heart and one aspect of the legs, leveraging a drug-coated balloon, which is something that I was very focused on and familiar with, based on CV Ingenuity. But then we developed sheaths. We have closure devices. We have some transformational technologies like IVL, next-generation IVL. We have a whole carotid portfolio that we're developing.

Mano Iyer 19:27
All of these...

Duke Rohlen 19:29
are part of the purview of Cordis, but had been neglected, and we ended up feeling like all of these products, whether they were iterative or transformational, would be impactful. And so, I mean, our industry is predicated on intellectual property. So, yeah, how do you think about that in this process? Because it seems like you're walking, you can be walking a fine line with some of the developments that you're talking about. Yeah. So, yeah, I've never had a problem with intellectual property, to be honest with you. We don't violate it, but we...

Mano Iyer 20:00
With really creative minds, we have been able to get around...

Duke Rohlen 20:04
the intellectual property barriers and the picket fences that have been put up around some of the key technologies, but we spend an enormous amount of time making sure that the ideas are going to both hold up as well as be uncontested going forward.

Mano Iyer 20:21
The bigger issue was timelines, right? So you have to make sure that if you're putting something into the carotids, that you have a transformational technology that's going to come online at the same time as you have all of the other...

Duke Rohlen 20:38
you know, iterative, all the other pieces of the portfolio for the carotid that would make sense, because that's how you get the leverage for your sales call. Your sales call from white... The reason a lot of these companies have an SG&A budget of 140-150% of their revenue is because they have one product selling into hospitals, so there's no leverage, right? So we wanted to have a portfolio so that we could go sell them the carotids and get five touches versus one with that doctor. Great. So, you know what you want to make a step. Step one. Step two is you have to fund it, and you created a $300 million incubator in Cortis X to do it. You speak about that. I mean, how do you think about that? How do you think about the amounts? How do you think about... You'd mentioned timelines, of course, you know, we're glossing a bit over, you know, development, timelines, regulatory, clinical. There's a lot there, right? And there's potential delays. How do you think about the amounts you need and how to, you know, going forward? You know, to get a corporation to invest in something like this?

Duke Rohlen 21:33
It's a really good question. You have the answer? No.

Mano Iyer 21:37
So what we became really good at, not so much with Fox Hollow, but CV Ingenuity and past was or and beyond was being incredibly good at figuring out cost...

Duke Rohlen 21:53
to the point where we would have a budget for a company that started...

Mano Iyer 22:00
from the time we had design freeze, right? So you can spend a million or $2 million and have it not work and be okay. If you spend 15 or 20 or 50 or 100 million dollars and have it not work, you're in real trouble, and your career is over. So we would be myopically focused on cost when we were developing the product to get to design freeze, and we became very good at hitting those numbers, whether it was 30 or 40 or $50 million to get through to what we called the liquidity inflection point, not to the sale, but to the point where you could sell it or you could raise money. That's the inflection point. Liquidity inflection point, we became really good at that, and what that allowed us to do is transition from venture investors to private equity investors. So...

Duke Rohlen 22:51
with Spirox, I went to KKR, which is a firm that has aspirations to be a trillion-dollar investment firm, and they're at about $600 million right now. I know them very, very well. And I said, Listen, try us on. Try us on like, we've done Fox Hollow, we've done CV Ingenuity. Here's our budget for Spirox.

Mano Iyer 23:14
And it was very, very detailed out. We'll hit it, and this is the kind of return we're going to get from it. And it worked. Like, I don't know how it worked, but somehow it worked. And they ended up saying, Gosh, this guy knows what he's doing. I didn't really, but I had a pretty good idea of what...

Duke Rohlen 23:30
you know, wasn't too hedged. Was hedged enough that I wasn't going to miss it. And so then KKR became a partner to us. And KKR then backed Epix. And then KKR backed...

Mano Iyer 23:42
Cordis. And...

Duke Rohlen 23:44
along the way, I brought in Hellman & Friedman, which is a super elite private equity firm that I have tremendously high regard for. You just along those lines. I mean, how did these firms have hundreds of billions under management, right? And how do they think about investing in early, mid-stage med tech? I mean, today is a big day in the markets because the Federal Reserve is going to decide whether to, you know, change interest rates, which is, I mean, for many of us who are in the startup world, you know, you don't think about that, right? You're taking big, long-term bets. But for companies with this much capital, it significantly changes or modulates their definition of risk, right? So how does, what is the... How do they think about this, and how do you convince them to invest? So the, you know, the previous discussion was about the...

Duke Rohlen 24:26
the profile of med tech as an investment class, and what's going to happen, the war between Israel and Palestine finishing up, etc. Historically, med tech in the last 15 years as an asset class has been deplorable, right? So if you're an institutional investor looking at investing in industrials, looking at investing in real estate, looking at investing in biotech...

Mano Iyer 24:53
the last thing you're going to do is allocate money to...

Duke Rohlen 24:58
med tech. And...

Mano Iyer 25:00
So why is that? You know, if you look at, if you look at the amount of money. So if you take the top 25 med tech companies, top 25 largest med tech companies in the world, they're spending about $45 billion a year on R&D, and about $45 billion on M&A, all right? So it's $100 billion...

Duke Rohlen 25:23
they're still challenged by innovation. So there's this dichotomy. You have this massive, massive need for innovation, which these companies are right now paying for because they can't build on their own. And then you have a broken asset class, which is the venture guys, takes 10 years, 12 years. You know, if you invest in a Series A, it's highly, highly risky and probable that you're not going to get very much return 10 years later. That's just not interesting. People invest on a five-year cycle. So what's happening is that people, and the reason our model got traction is people are saying, Gosh, how do we solve that problem? How do we solve that innovation problem? But at the same time, create an interesting asset class. And to create an interesting asset class, you have to do a few things. You have to, a, reduce risk, right? So single product companies are highly risky, right? There’s a very significant probability that they'll fail. We've all been part of those. Single product companies are inefficient, right? To get the traction that you need to develop and create someone wanting to buy you, you have to spend enormously on infrastructure. Single product companies are beholden to a buyer universe that has all the power. Okay? So if you look at, if you look at the big companies, and if you look at the companies that are being sold, there's everybody's got a company, but the big companies are only buying the best companies, and they're typically not paying a lot of money for it, right? So what we decided is, gosh, let's take those risks out. Let's have a portfolio of technologies. Let's have capital that doesn't put us in a position where if we run out, we're recapitalizing the company.

Duke Rohlen 27:08
Let's be highly, highly focused on a therapeutic area, and if a strategic doesn't want to buy it, we could take that company public. So that was our... We are creating what I call BATNA, which is the best alternative negotiated agreement. It's the ability to have an outcome if and when the intended strategic buyer decides not to pull the trigger and lie. I think you nicely elucidated in the article. We talk about Cordis being $750 million of revenue, about 1-2% growth, and if you could increase that to 8-10%, you go from a $1 billion market capitalization to $5 billion, right? And then you, you're able to, you know, everyone benefits, right? You're able to be a shareholder in that process. Whereas, if you have a product sold within a division, it's the equivalent of cash, you're not getting anything, right, because that's dropped up, and we can't, we can't benefit as external shareholders. Great, that's a good... That's exactly right, yeah. So step one, ideation. Step two, funding. Step three, you actually need to make products. You need to execute. So can you talk a bit about how you... What this? Because this is the really a very unique part of this structure, right? Efficiency, capital efficiency, you know, talent efficiency. So can you kind of walk us through that? Yeah. So what I've found in med tech companies is there are incredible engineers, right? There are incredible engineers. They're incredible people, but they're not fit for purpose as CEOs. Or if you're a CEO and you're an intelligent CEO, you need the engineer. It's just so instead of doing that, we said, let's go and let's mimic the App Store model, right? Let's go find app developers. In this case, they're engineers, people that know how to build a technology. Let's talk to them about what we need, and let's then empower them. We'll provide the financial oversight. We'll provide the capital. We'll oversee, you know, the development of it, but they're in charge of taking the idea that we give them from start all the way to finish. And when they don't have to focus on raising money, and they don't have to focus on, you know, trying to get a strategic involved, etc., they're incredibly efficient, and they do that incredibly well. So we've taken... It was a nice Wall Street Journal article written about our model, and they talked about how we take an eight-year timeline, from a development standpoint, down to three and a half, and it's not us, it's actually the people that are developing those technologies. You take away all of the challenges and all of the things that are non-core to developing the product, and they're very good at it. And so then we just started populating, you know, developers to build these technologies. And we've, now, we've grown that. So now one of the core differentiators of Ajax is having this ecosystem of incredible talent. And, you know, the...

Mano Iyer 30:00
We're less inclined to go buy one of your technologies or invest in your technologies. We don't do one-offs, but we're highly, highly incentivized to come in and bring you into our ecosystem and have you guys become a developer for us, and it gives you the ability to take away market risk and take away capital raising needs and get really good returns very quickly. So can you get into details a bit how? So, how does it work? You have the accelerator, which is funded, and you have a list of ideas that you want to work on. How do you find the talent for the individual? Is it? Was it a group you're putting out RFPs for trying to find different groups bidding on the different technology so it can end up, you know, spread across a number of different development pathways? Is that right? We typically, our budgets for... Even though we're a... We buy things for a lot of money, our budgets for development projects are between $5 million and $50 million, right? So...

Duke Rohlen 30:56
and we have an enormous inflow of now that people are aware of our model of talent that want to be part of it, and so we typically, we're pretty good at budgeting, so we're not putting them out for... We're not doing RFPs. We're basically just getting people that we know are good, we validate them so that they have a little, like a... My kids always talk about Instagram where you got a check mark. Yeah, you're good. We've got, we got it. We got... We give them a check mark, and they become part of our system. And then we just start, we start empowering them. We've now done... So the Cordis model, now we've done with four other companies, four other very, very large companies, where we're building divisions for them. So our universe of need for people that are developers is growing exponentially, and so is there a set development house, or everyone has their own kind of development capabilities, and they bring those unique skills to the accelerator? So, yeah, they're all running up. They're all running their own shop. Okay, there's no... AJAX is 14 people. So they win a bid, and the budget is $20 million, and then the exit is capped at $60 million. Is that right? Yeah. And the way they do it is they get 20% of the $60 million. Okay, so they're getting the investor return. Yeah, from that. And I know none of us here ever experienced any delays or going over budget. But what happens? Should that, you know, theoretically happen? That happens. I mean, it's...

Duke Rohlen 32:22
it's happened to me a million times. It's a process of engagement where people know, in my case now as the investor, which is an odd hat to wear because I have typically been the operator. I have a...

Mano Iyer 32:40
I have no problem with mistakes or things going over. I have a problem if I don't hear about those mistakes before they happen, right? Like, Hey, we got a problem. We got to solve it. But that's just part of med tech development, right? So you mentioned earlier. I mean, it sounds like the Cortis X model is working out well. Can you comment on where you are today? Where is Cortis and kind of, what's next? I mean, yeah, so we formalized the relationship with KKR. So our firms now Ajax, KKR, which gives us enormous horsepower to do this. The model expanded from buying the chassis. So if you remember, we bought Cordis, and then we surrounded it with growth. Now there are companies that are coming to us and saying, Hey, listen, can we do the Cortis X thing? But we're a $20 or $50 or $100 billion company. We're not going to sell you the company. So now what we do is we partner with those strategics and we create growth driver engines. Usually, it's building a whole portfolio for them in an adjacent space that they want to go into, and that's what we're doing now, right? Assessing. Somebody was thinking about, well, would some of the larger corporates, would they, you know? Do you think is there, is there a champion internally that could, you know, that has the political will and strength and the time left in their career to do this? Do you think that's feasible? Are you getting that level? I think the market's shifting, right, because they need the innovation. I'll give you a data point. About 12 years ago, I was at a meeting in Silicon Valley with maybe the top 10 or 12 venture investors in the med tech space or in the healthcare space, and we were sitting around the table, and I said, what we should do is we should take one therapeutic area, and everybody should decide that they're going to build one thing instead of trying to compete against each other. And they all looked at me like, this guy's lost his mind. And then we...

Duke Rohlen 34:38
I went to Medtronic, I went to Boston, I went to all the big companies and said, Hey, listen, like, instead of us building things and hoping you want to buy them, why don't you tell us what you want to build, and we'll build them for you. And they wouldn't do it. Now, there's a receptivity factor that's much higher, right? So now the world's changed, and orchestra is doing it. There's a recognition that...

Mano Iyer 35:00
they need innovation. It's got to be built in-house, or, I'm sorry, out of house. There's also incredible pressure on earnings per share, right? So they don't want their R&D budget to swell to try and develop products. They have, you know, those 25 med tech companies, they have $200 billion...

Duke Rohlen 35:18
the top 25 med tech companies in the world have $200 billion in balance sheet power. $200 billion, so they have no problem buying technologies off their balance sheet. Yeah, but you've got to convince them somehow that you're capable to be able to execute for them. And I think the market is changing. I think that there's going to be more synergy between developers and companies that are starting in big companies, right? So I have to ask this question, last question, you know, where we're in southern Europe, and you know, it sounds like, you know, the quarter you're developing products in the US, I don't know, maybe not say, for the US market. How do you think about kind of the international component here, for the types of products, the types of opportunities? Obviously, the regulatory environment and this commercial environment has been challenged in Europe recently, yep, and it's kind of, it's quite opaque. Is that? Is that a factor? Yeah, so Europe for Cordis, Europe represents about... China represents about 30% of our sales. Europe represents about 20% of our sales, and then the US is about 45% of our sales in smaller countries. So we think we take a global perspective. So when we're figuring out that portfolio, we're looking at, okay, how is this going to sell in Europe? How is it going to sell, etc.? And the common denominator is, cost has to come down, right? So as we're thinking about new technologies for Cordis in the US, it actually... We have the burden of trying to make it work in Europe, where reimbursement doesn't comply with what your reimbursement looks like in the United States, right? Which puts a... It allows you to force you to be more disciplined in terms of cost, which I think is positive. Yeah. So final thoughts for this audience, since incredible ish on, on med tech. If I hear one more biotech investor saying, med tech is for the people that...

Duke Rohlen 37:11
that just have human hearts and biotech is the area for people that want to make money, I'll, you know, I'll be very disgruntled. I feel like this is a very, very interesting time. I've never seen more strategic interest in innovation. I think the onus is on us collectively to figure out new ways to align with these buyers, the strategics. If you can do that, it's going to open up a lot of efficiency and take away the sort of the black mark of med tech being a poor, poor asset class for investment. Yeah. Thank you. You have an incredibly inspirational story. I encourage everyone to read the article and learn more. Thank you, Scott, for this wonderful forum, and hope everyone has a wonderful rest of the conference, the day. Thank you. Bye.