The Prosthetics and Orthotics Podcast
The Prosthetics and Orthotics Podcast is a deep dive into what 3D printing and Additive Manufacturing mean for prosthetics and orthotics. We’re Brent and Joris both passionate about 3D printing and Additive Manufacturing. We’re on a journey together to explore the digitization of prostheses and orthoses together. Join us! Have a question, suggestion or guest for us? Reach out. Or have a listen to the podcast here. The Prosthetic and Orthotic field is experiencing a revolution where manufacturing is being digitized. 3D scanning, CAD software, machine learning, automation software, apps, the internet, new materials and Additive Manufacturing are all impactful in and of themselves. These developments are now, in concert, collectively reshaping orthotics and prosthetics right now. We want to be on the cutting edge of these developments and understand them as they happen. We’ve decided to do a podcast to learn, understand and explore the revolution in prosthetics and orthotics.
The Prosthetics and Orthotics Podcast
Speculation at Best, Joris and Brent Dive into the Embla Medical Annual Report
In the latest episode of their podcast-hosts Brent and Joris dig into recent developments and strategic moves of Embla Medical. The company’s communications and social media activities were among the topics discussed. Embla Medical has grown into a company with a very large role in the rehabilitation landscape. In fact, Embla has acquired several companies under its umbrella over the past few years and we discuss the implications for our industry and Embla’s role in the market.
They also discuss how Embla Medical changed its name from Ossur to better reflect the company’s expanded focus on novel technologies for mobility impairments, and how all of this can impact the company’s position in the market and how it relates to its customers.
The podcast ends with an analysis of Embla Medical’s path ahead, with potential new markets and technologies being discussed. The panel speculates upon the tactics that the company could employ to secure a competitive advantage, such as expanding into emerging markets and enhancing its product portfolio using the latest technologies, such as additive manufacturing.
Embla Medical 2023 Annual Report
Special thanks to Advanced 3D for sponsoring this episode.
Welcome to Season 8 of the Prosthetics and Orthotics Podcast. This is where we chat with experts in the field, patients who use these devices, physical therapists and the vendors who make it all happen. Our goal To share stories, tips and insights that ultimately help our patients get the best possible outcomes. Tune in and join the conversation. We are thrilled you are here and hope it is the highlight of your day.
joris:Hi everyone, my name is Joris Peebles and this is another edition of the Aesthetics and Orthotics Podcast with Brett Wright.
brent:How are you doing, Brett? Hey, Joris, I'm doing well. Man, it's good to be on and I'm really excited about this podcast today. We don't have a guest today, but we wanted to dive deep into a piece that I saw, and so I know we've been talking back and forth on it, but I'm really excited about that.
joris:Okay, okay, yeah, cool. That's super good, dude. All right, super good. Do we have a sponsor for this episode? Do we have people that made this possible, or something like that?
brent:Yeah, in fact, man, I almost jumped the gun. I was so excited about this too. But so Advanced 3D is the sponsor for this season. It's a contract manufacturer specializing in orthotics and prosthetics, but much more than that. I'm a part of it along with Paul and Tyler. More than that, I'm a part of it along with Paul and Tyler, and what we try to do is get people involved in digital somehow meeting you wherever you have a need, and so yeah, so really excited. So check us out. If you have any questions about where to get started either, from scanning design software packages to printing test sockets, to definitive sockets, we're here to help.
joris:Awesome, All right, cool. So what's this big news you're following all over yourself to talk about? Because it must be big news, because we've actually never thought of doing this right. We've talked about some friends in the industry, some things maybe should do the future of this industry. We've never just talked about one news item for the whole episode. So what's this big, big deal you want to talk about?
brent:Well, so Emblem Medical just had a bunch of stuff kind of come up under its umbrella and they released a 39-page graphic story about their company what's Emblem Medical.
joris:What is that? What is Emblem Medical? That sounds like a terrorist group.
brent:Oh my goodness, yeah, so it's.
joris:Oh no, it's Embla. It's Embla coming, they're going to take over the diamond fields. No, like seriously, what is Embla?
brent:So Embla Medical they do a lot of things in the rehab space. They say they cover anything with like like chronic mobility impaired people and acutely injured people, and so they do that through not only patient care centers but then also through vendors like oser, like college park, like fior against and those that's kind of their and that's kind of their umbrella.
joris:And so they're kind of building out their space. So, Osher, I heard of them, even like a new prosthetics orthotics newbie like myself has heard of Osher. So wait, did they buy Osher? What's going on here exactly.
brent:That's a great question. From my understanding, it must be like a funding group that's over top.
joris:So I don't know if it's a no. I think they actually made a bigger kind of company entity to control themselves. I think OSER is establishing Emblem Medical right. That's going to be the listed company, so the OSER listed entity will be Emblem Medical, oser H, hf, whatever that is. I think that's the parent company will change itself to emblem medical right and the idea is that oser has changed, uh, because it does now prosthetics, neuro-orthotic braces, uh, you know lots of things in these segments and it wants to be a better, bigger, global entity and that's why they've chosen emblem the first woman on Earth and references to New Beginnings Movement and Freedom.
joris:Embla is actually a Norse mythological thing, which is good, of course. Osir is probably the biggest company in Iceland and so they're doing a name change to Embla Medical. They won't change any kind of thing. It's a parent of product brands, which is Oser College Park and Führer Gens, which I don't know what that is, which are the customer and care facilities and they're going to and they have to get approval for it and they have to get, and the major shareholder, which is the Willem de Mont invest, which is the I think it's kind of like a family office kind of thing is all for it, right? So, and it will also change their ticker symbol to emblem, right? And that's the news which they want they hope to do. So it's not. It's proposed Next month. They'll vote on it, so maybe it gets down. But yeah, it is kind of like they.
brent:It kind of signifies I guess they have a broader ambition than just becoming the kings of prosthetics, I guess, right yeah well, and you know what's interesting is, we've talked a lot and I haven't looked all the way through this report, but I am guessing they might have a couple things up their sleeves in the exoskeleton world, rehab world and things of that nature which power robotics and such, and so to have an umbrella that captures all that and do something. These powered exoskeletals are not only for people that have some sort of issues or weakness or paralyzation or what have you, but it also is very much used in the industry. How do you help warehouse workers and things of that nature?
joris:and having an umbrella group probably helps house some of that, instead of it being super niche just in prosthetics and orthotics and it could be they're doing a bunch of different things as well Like it's kind of difficult to kind of think you know you're OSHER, this, and they also have patient care. It also can be really confusing. And also for customers and prospective customers, it really is kind of like a really kind of confusing thing. And for the people who maybe don't know less than me about our thoughts and prosthetics of, oser is a giant Reykjavik big company, right, they, they are, you know, absolutely huge. They are in a lot of things, like you said, and, um, they're a disproportionate influence on the market. Let's say, right, Like with auto book and Oser, they're always kind of like named together, they're both kind of very large and you know, the rest of the market is very fragmented. So the big players are either them or the insurance companies and everybody else is like you know, the two people, a hundred people, that kind of thing. Right.
brent:Yeah, so I mean they had $786 million in sales in 2023. And just for like a perspective and that's operations in 36 countries. Hanger prosthetics and orthotics had just a shy of $1 billion. So as far as in revenue, a very large amount of revenue. And the crazy thing about this kind of vertical integration, not only with the clinics but also with manufacturers, is your margins on manufacturing are going to be higher than, say, margins in patient care. But how cool is it to have the margins in your manufacturing and then you sell to yourself and you have the margins in patient care?
joris:And OSER is not a bad business at all. It's got like $700 million in revenue, something like that $129 million gross profit and the margins actually because you're talking about margins 61%, which is really quite healthy, really really quite nice.
brent:And I think most people with a business, especially with a physical hardware type business- Well, and one of the other things that I found very interesting about what they've done. When you take a look at where they do their manufacturing, one thing sticks out big time and I don't know if it did for you as well is they have fabrication in Mexico, and so Mexico is a great place not only do you have a great labor market but you have a lot of skilled labor and kind of tribal knowledge in the manufacturing side of things at a high level with high technology type things.
brent:And then especially if you're distributing into the US, that jump from Mexico into the US is not that big of a deal. But then you go south. You can capture Central America and South America as well, which is amazing.
joris:I'm glad you said that, because Mexico, especially in the States, is kind of seen as a low-labor country, right, but that's always because, like you know, every video about Mexico is like some little boy and a donkey and a woman in a flamenco dress. You know every, every single like the representation is so, so poor I think, in the States and I think. But if you look at Mexico, you've got a lot of university graduates. You've got a lot of university graduates, got a lot of researchers, got quite affordable salaries for an external player and, yeah, you're right, I think it's a great point you're making You've got a lot of really quite high tech and also medium tech, let's say, things like trucks and electronics manufacturing going on there in lower to high value. So that kind of mix is really, really beautiful for you know, kind of a low mix, high volume or, relatively, you know, advanced manufacturing company.
joris:To do business in that country, I think is a really fantastic thing, I think it's really smart and, yeah, it's not super far away. They could do it in China or Vietnam, right, and the access to the US market, access to, you know, favorable US tax stuff and also the. What I also like about this is that the sheer distance right, it's a few days away right cost san ysidro whoop into the states and you've got, you're in the us. I don't know exactly what the times cost, but I'm thinking that you know, from the moment an order comes in, to get that product back into the states is actually quite, quite quick and you could do that quite quick. So with like a custom thing or like quicker turnaround times, you know, if you want to get your money quicker, if you want the patient and the shop to get her stuff quicker. Yeah, it's beautiful to be in mexico.
brent:I think it's a really, really good uh thing you picked up on there yeah, well, and and then looking at their timeline of how they've done their acquisitions, I mean I'll just go through some of the highlights. So they were founded in 1971.
brent:They listed on the stock exchange at the end of the 1990s, they acquire flex foot, which was the number one uh carbon fiber foot engineered solution. In 2000, then they do royce medical, which is more in the soft goods side of things, so back braces, casting equipment, tape and that sort of thing. And then in 2016, they acquired Touch Bionics and Mediprosthetics. Those two were big time because then you jump into upper extremity prostheses, bionics and that sort of thing. And then Mediprosthetics they are kind of the manual side of prosthetics. So they're known for prosthetic knee joints, some other components that are quite affordable, that complemented their already very good portfolio of components. So bringing in Mediprosthetics was very interesting. And then they acquired Naked Prosthetics, and Linda and us we talked about Naked Prosthetics a little bit.
brent:They're the ones that do the partial fingers with the articulation they're body-powered, very great, interesting. Fingers with the articulation they're body powered uh, very great, interesting. So not only now, you kind of own the by uh, the bionic or hand side of things, you're also into the body powered, manual, but high tech. So they use a lot of multi-jet fusion, 3d printing and that sort of thing. And then in 2024, they acquire, uh, fjord and Gens and you were like what are they? Who are?
joris:they. It sounds like a fashion brand. That sounds like something like they make jackets for people who sail or something.
brent:That's true, and they maybe they should. But, um, so what's neat about this company is they have really focused on motion and on the orthotic side of things. So the bracing, so you know, when you're walking you have ankle motion and knee motion, and a lot of these braces, you know, pre joints, I guess are, would lock up those joints which cause some instability, whether it's at your ankle or your knee. Well, they said, hey, let's free it up and let's give some degrees of freedom and control over that. And that's what became Fjord and Gens. And so now that they're into that, that establishes them into the very dynamic ankle foot orthosis market, the dynamic knee, ankle foot orthosis market, which they have not been in. But it also sets them up very nice to push into the exoskeleton side of things.
joris:And and if you're looking at what these guys are buying, right, have they bought cause they seem to be to me, but I don't know? Are they buying like kind of? Have they bought because they seem to be to me, but I don't know? Are they buying like kind of like volume leaders, the big volume, or are they buying like the technology leaders, because that you know, for example, that Carbon Foot and the other companies, they seem to be a little bit on the bleeding edge. You know like they're buying, like technology that they could then leverage to build the market. Let's say, is that true or am I wrong?
brent:Or no, I think that's a very fair statement when you take a look at some of these big acquisitions. These are these are market leaders unique, and it also will compliment some of the things that they already provide, so it makes them I know this like more vertically integrated right. So so you can actually take care of the whole person, and I mean very similar to what Hanger has done with you know, they have patient care centers, they have distribution, they bought fill hour, which does a lot of the same things, so now they're able to keep all that in-house and also sell to themselves. Osir is doing that in their own way as well.
joris:Okay. So I think that technological edge thing is difficult. They were publicly traded quite early 1999. If all the businesses are quite small, then I think being publicly traded, even if it is in Iceland, which is a relatively small market, is an advantage, right. And also there were and I think this is interesting because we brought this up a bunch of times in our talks where we've had people on that are both patients and prosthetists, right, and we know that they have kind of an edge, I guess, between the empathy and the understanding of what matters to patients.
joris:And Mr Ossert or no, I'm sorry, ossert Christensen, who's like the founder of Ossert, so actually his first name, right, which I think, yep, he was actually a prosthetist, right, and he was also he had a transdibial limb difference, so he also understood how important the work was. You know and you know what I love about this that he invented the silicone liner, or was one of the people to invent the silicone liner. So to me that also is like a big deal and that also means that he's got, you know, a patient, prosthetist and inventor. So that's like you know, a patient, prosthetist and inventor. So that's like you know, wow, now he just sees the businessman skill and he's like he's there you know what I mean.
brent:well, and I think I think that's so true and I'm glad that you brought that up, because pretty much every prosthetist as well as patient that has been receiving prostheses for probably 25 years or more point to the liner as the defining point, most defining point for technology, for prosthetics. So I mean that's very much a theme of what we're seeing with now emblematical.
joris:Yeah, and okay, okay. And then another thing is that, okay which I think this is, I think is bizarre that this guy that left this hugely successful company to work on boat hulls and building boats Okay, cool, but and this is something that I think is kind of relevant that he actually Mr Christensen Christensen. Actually he passed away, actually in February of this year, so this also kind of bookends. His life and his legacy are now kind of it's his period where he was alive and now it's the post founder, kind of like we need a new breath, a new vision, and then also that kind of like, you know, the timing also then makes sense. Maybe also he wasn't on board for the name change, by the way, uh, but also the timing that also makes sense, I think, to to as, as management, to, like you know, be like, okay, now it's a new era, you know, uh. And then I think, also the big deal, if you look at this, they've all the time they invested in bleeding edge technology companies that brought them into new systems, right, new tools, right, and and then also we're talking about the cross sell, right, I sell you this already. Oh, by the way, I have this thing. Oh, by the way I also have this. So the same salesperson, the same delivery, the same relationship can cross, sell you all this stuff. So all the logical.
joris:And then all of a sudden they get into patient care and that's something I think we've talked about a bunch of times. On here. We have people that are kind of like uncomfortable with this and that are kind of like, oh wait, a minute, but I thought that was two different islands. Right, there was, you know, at the patient care, plus the thing you said yeah, you can make a ton of money there. But also it makes me, if I was another device manufacturer, I would be kind of very torn between doing business with the patient care things of OSER or sharing my latest mega innovations, whereas before, as just a practitioner, I'd be like oh, I'll tell them. Everywhere you want to know anything, I know I'll tell you just to get better devices. So I don't know how that'll play out.
brent:You know that's going to be that's going to be an interesting thing, uh, is how that plays out with innovation. Will it actually stifle innovation, uh, especially at an individual level, or will people kind of pull back and say, well, I have this and I'm not going to let the big company have it? Essentially, that'll be interesting. I want to pivot just a little bit away from we've never really talked about the numbers of amputees and such, and they have a really nice slide that they've talked about with this and this is wild. So they're saying that 850,000 new major lower limb amputees per year.
joris:Now, this is where it gets a little bit crazy. If you want to follow along at home, kids, I see a presentation about Emblem Medical. We'll link to it in the show notes Slide 11. Yeah, slide 11. Okay, I'm going to be there with you about emblem medical. We'll link to it in the show notes or the things yeah, slide and then, um, yeah, slide a lot.
brent:okay, I'm gonna be there with you, okay, so so so 850, 000 new major lower limb amputees a year. They say western world, so europe, and then the us, and can Canada about 200,000 a year. Emerging markets. So that's a nice way of, I guess, saying developing world too, 650,000. You look over. It says 30% to 40% of leg amputees are fitted with a prosthetic solution In the Western world, upwards of 60%. Emerging markets 10% to 30%.
brent:So the emerging market is the largest market where we're going to see the increase of amputations, but it's also the least amount that people are going to get fit. So it's pretty obvious that you want to focus on the 200,000, but at the max you're only going to get 60% of that. So every company big company, small company, little company, whatever they're fighting for 60% of 200,000 people a year essentially that's a lower leg right, a lower leg yep.
brent:Well, that would probably, oh, that says lower leg yep. Well, that would probably, oh, that says lower leg yep.
joris:Yep, yep, okay, okay.
brent:The other interesting thing is when you look at this slide, it says 65 to 70 is the average age of the amputee population. But that's not what you're seeing in the news, is it? You don't see the 70-year-old person that's showing off their a hundred thousand dollar arm. You see the ones in more basic prostheses. So this is this is what I think is most interesting to me is the bionics. I love them, all that stuff, but really probably not for this patient population. But what they have done is they've invested their portfolio into some of these things where it does actually target this average age of the amputee population. But that also means another thing is they have put themselves in a position to reach the people in the emerging markets because it's the lower dollar stuff and I think it's very smart.
joris:So, anyway, I just thought that was interesting, uh I think it's interesting also for a different reason because, like, there's two ways you can read this. So, basically, they're saying there's 850 000 of these guys in the world, 200 000 in the western world of lower leg amputees annually per year, 650,000 in the emerging markets right, only 30% to 40% are fitted with prosthetic solutions, where the percentage is far higher in the Western world than in emerging markets, right, and the average age is 70. So what we're seeing here, like there's two ways of looking at this right, there's three basic things you can draw from this. There's a ton you can draw from this, actually, but one is oh my God, what we need is lower cost solutions for these emerging markets, right, because that's where the growth is. That's a three times larger market, right, right, the market penetration is also much lower. So it's actually kind of more, you know, blue ocean, but it's more open, that market, and we have to fight for it in France with like Gold and so many other competitors, but if we started up in Benin, we'd maybe be the first people there. So that's the one thing that you could just say look at this slide and say, oh, my goodness, I've got this market that I'm already king in and you know what the big growth is in that market. Like a similar thing has happened in mobile phones, where there's these people, several companies the name escapes me again that they've they've sold the the mobile phone market and then they made they look at the mobile phone market. We've got apple, we've got samsung, all these giant companies, and they know what they did. They made special phones, much lower prices, specifically made for africa, and they made their brands and they pushed them really, really hard across Africa and they became leaders in that space, because that was a much more kind of blue ocean type of space, right.
joris:The other thing that I think is really interesting is that only 30 to 40% of these people are prosthetic, even in places where you can get funded or partially funded for that, even in places where you can get funded or partially funded for that. So what we don't see a lot of people doing is changing that or is working on how they can change that number, how they can make it more acceptable, more desirable, cooler, um, easier, cheaper for that group to become I don't know 100, right, because because if, if we see that these people don't do anything, because for whatever reason, of course, you know we could easily out of that group if only 30% 40% is getting a prosthetic. If we increase that a little bit, then we're using the same people, the same prosthetics, the same everything to reach more people. It's like free money.
joris:So that's the second thing I think is really really interesting about the slide. And then the other thing is that I did not know, and that is the one thing that you found most surprising as well the 70% right, most people in this market that have these prosthetics are 70 years old, 65 to 70 years old, and that is any kind of business. You are scared of that, you are terrified of that. If your biggest customer group is 70, you're doing the math and you're saying, uh-oh, you know.
brent:But 70, you're doing the math and you're saying, oh, you know, uh, but also, yeah, go on, yeah. So I mean I think to that point though 65 to 70 is is like uh oh, but you got to remember too is in the us you qualify for medicare when you turn 65, which?
brent:means which means that you're going to get your prosthesis paid for at a lower uh deductible, like a, more will be covered than if you were, say, on a private plan. So you can say oh no, but you can also say oh yes, because we're going to get coverage, um for it. So it's like that group of people not only will have the insurance coverage, but a lot of times we'll have the money as well to pay for their co-pays and co -insurance and that sort of thing. So it's it's almost like getting money from the government. So to me that's not a big deal.
joris:As if we were a clothing brand or whatever.
brent:Okay, Right yeah, correct yeah. So I mean for me it's like, uh okay, as worrying as if we were a clothing brand or whatever. Okay, right yeah, correct yeah. So I mean for me it's like kind of like yippee, because the government is going to be paying for these prostheses okay, okay, yeah, I agree, okay that that that just made me feel a bit differently about that.
joris:Um, okay, but that's interesting. But yeah, to me it feels like they're going for the rich people rather than trying to make the market bigger, right, you? You know, it's kind of like that when, when in the oil crisis in the eighties or something like when American cars were big and they kept making them and then Toyota and all these other guys came in with the smaller, cheaper, really tiny cars and everybody's like, oh God, no, who wants them? Well, if oil prices go through the roof, it turns out a lot of people. If oil prices go through the roof, turns out a lot of people. So I think it's that kind of they're leaving their huge door open for some company to come in here and say you know what? I actually want to go for the bigger group and I actually do want to figure out what it's like to import stuff into benin and figure out how to do that and how to, you know, manufacture there or whatever. I want to do the hard heavy lifting.
brent:So, yeah, well, so that's an interesting bit we talk a lot about additive manufacturing and how we believe that to be the future of orthotics and prosthetics. There is zero in this report about additive manufacturing that's sobering, that's sobering process, and so like that's.
brent:So it's either somebody's keeping a really good secret or it's not really on the table, or they just see it as an alternative fabrication method, just like traditional fabrication. They don't say anything about traditional fabrication. We know they use a lot of carving. Uh, we also know that naked prosthetics uses 3d printing. I don't know, uh, and, and you know I can't say that I'm in the know, but they they have some app-based stuff, say structure sensor type of stuff, maybe some phone stuff. Um, I think actually naked prosthetics has just started using, um, the iphone 12 and above, um, facial recognition for partial hand stuff, which is really cool. But I just found it fascinating that all this stuff that they're looking at, there's nothing about additive manufacturing on the roadmap, and that's tough to see here, or what have you, especially when you have a partner to the south, like in mexico, that has this technology so it's one of two, I mean, I don't think.
brent:I think they know that it's coming, um, and maybe they just don't want to tip their hand on which way they're going yeah, but also an investor, like you know.
joris:They know they like to see things. This is made for investors, so it's not necessarily for us. So they like to see things that you own, like I have a patent, I have a device, I have a thing, I sell it, I'm allowed to sell it, I'm the only person in the world to sell it. So you know, for them to show off like an HP machine as being the future is not. You know, it's kind of more.
joris:Stuff like this is what we are doing, like our own future. Like you know, an HP machine everyone else could buy it as well. So then maybe they think, you know, they don't really have a handle on how that necessarily can lead to growth. But we both know that they could patent a ton of stuff in additive and that they probably are patenting a ton of stuff in additive. So it is part of their growth. But I think it maybe doesn't fit the story very well at this point. If the story very well at this point, if they would have their own machines, for example, then maybe it does well, and so I think that's so.
brent:I don't disagree with your take on that. However, one of the things that they've been pushing with the digital manufacturing side of things like carving and that sort of thing and some of their app-based stuff so they do have some modification software that is called design studio uh, hasn't been updated in a while, but they might be working on that on the back side, but they have what they call the oser leg, or it's almost like leg in a box. You know, we've talked about that where, hey, you 3d print your socket, you've got your components and it all comes in a box and you put it together. There is not a better story to tell than, uh, uh, centralized production, uh, decentralized or centralized design, decentralized production, right, and so you've got all these locations where you could do production and you have, uh, an area where you could do centralized design and create these kind of like leg-in-a-box type of things. To me, that's a story worth telling and it's just something that popped out to me.
joris:One thing I just want to point out. If we're looking at the beginning slide, one of the things that pops up to me is the EBITDA margin is 18%. So we said earlier that margins are 60, evident margins 18, which is still, you know, nice and and still nice if you're in hardware and stuff like that. But I did want to point out, just in case people think, that we're doing like a different kind of thing.
brent:Um, and that's probably like an average, including the clinical sites, right? So I think there's there's two. Yeah, so there's. I think you're probably right on, like the production side of things, or, uh, the manufacturing side of things, that those numbers are going to be higher, whereas, uh, like even a healthy clinical practice, you're, you're still, I mean, you'd love to get to double digits, but more than likely not happening unless you're super controlling costs, which they're going to be able to do because they own a vertical.
joris:Yeah, so their whole story is about them being increasingly patient focused and basically it kind of like you show them like being like one for one stop shop, essentially, right, I mean, I think I think that's what we've got. They make the orthotics, they make the tools and they also do the patient care and everything else, and that's kind of what they point out. What's really interesting that I did not expect is that prosthetics and something called neuro-orthotics which I'm sure I'm not sure what it is is 46% of sales, right, bracing is 18% and patient care is 36%. So that's already like a huge chunk, like I. I, until I saw this slide, literally, if you would have told me, I would have thought that the prosthetics part of this was way, way bigger than it is. Well, is that surprised you as well? Are you like you know?
brent:well. So when you take a look at the stats and such and I'd love to know just a little bit more on that but like people that have had strokes or that have been in a terrible accident or um, uh, or different conditions that leave them in a weakened state or a paralyzed state, those people are looking for braces and they would far outnumber any of the prosthetic care thing by a large margin. And so I think that's where this Fior and and gents uh acquisition gets very interesting. Now, what I know about the joint, uh, while it is an amazing joint, is quite expensive to um manufacture. I mean, it's very complicated, there's a lot going on, and so, um, I think they will probably be looking at something to be able to take that design and incorporate it into a brace that is more cost effective than what it currently is. So it'll be interesting to see what they do with that.
brent:But I think that group of bracing stands to be a large part of growth, and I mean, at 46% of total sales, that already shows, hey, this is something that we're committed to.
brent:You know, I think what's interesting about that slide and for those that are following along, that is slide five You've got 46% of total sales in the prosthetics and the neuro side, and then you have the fewer and against people acquired, and I think what that shows is that the neuro side is growing is growing.
brent:So stroke, ms, chakramuri tooth, a bunch of other things in the bracing side of things is growing and they want to capitalize on that. The other thing that we have not talked about and when you take a look at these pictures is carbon fiber, right? So FlexFoot was an early carbon foot, so they have tribal knowledge in the carbon fiber space. And that is also allows you to have an advantage when you're making some of these more advanced devices that incorporate a joint, like what the Fjord and Gens stuff does, a joint like what the Fiora and Gantz stuff does. So they're taking some technology they already have, acquiring another one and creating a whole different product class and be able to bring the price down because they control that whole process. I think it's pretty smart.
joris:We also see that they have a reasonably split revenue between, basically, the US and Europe, right, or the US and Brazil, I think the US, canada, brazil and Europe and really small in APAC, right and they don't seem to really be kind of like being like a lot of companies are like oh my God, the future is China or whatever. They don't really seem to be relying on this. They also tell us about, like you know, that they make the bionics in iceland and scotland, most of the stuff in the us and mexico, and they only have the soft goods, which I think would be like pads and stuff like that, uh, outsourced in china. So they don't really seem also like they're going to go like super low cost, like let's make everything in china as well yeah, well, it's a.
brent:It's a dangerous. That's a dangerous game because, uh, you end up starting to see other products that look like yours and almost are exactly the same as yours, um, in there, but it's almost, it's almost.
joris:I agree with you and I think, I think, and I think almost almost. If they're seeding this asian market, if they're saying like, okay, china is the future, yes, there's going to be lots more, uh, people that can afford lots more in the future there, and there's lots of people there, obviously. But we're going to, like, we think, that local players are going to, you know, kick our butt there, whereas they are active in Brazil, which is another one of these markets, these emerging economies that could be very kind of, you know, interesting for them to do.
joris:Another thing that I think is really, really cool 70 to 80 percent of prosthetic component sales are to recurring sales to existing patients. Wow, you know, that means that if you are trusted and if they know how to find you, find you and they know how to find your prosthetist, they'll, they'll keep buying for you. So I think that is, to me, is like a really uh, very, very exciting kind of uh number. Uh, that really really does indicate that this is a relationship business, not only for the prosthetist right we always talk about that prosthetist relationship with the patient but also for the bigger device companies in the back, that relationship with the prosthetist and with the. If your prosthetist is more likely to recommend more production of oscar as they do now, there's a huge influence that that could have you know yeah well, and I think the other that's a huge influence that that could have.
brent:You know, yeah Well, and I think the other thing that's interesting about that is that they also have dominated so long the athletic side of the market. So they're the ones that you know when you call the cheetah foot, well, they're the first ones that had the cheetah foot, that Seaspring-style foot. So I think that's interesting. But you have a patient that, like what we've had on before, Faisal Hamdoon, and he tried all kinds of prosthetic knee joints and always would come back to the total knee joint. So he literally tried a $60,000 knee joint and instead chooses a $3,000 knee joint to go do his activities daily living.
brent:so and it's oser and so, and then going back to their roots of the, the gel liners. If you ask a prosthetist who makes the best gel liners, most of them are going to say OSER. Now, oser's products are the most expensive products.
brent:And a lot of times, because of funding and such, you're not able to do that. But they have a standard of quality and they charge appropriately and proportionally for the perceived standard and the true standard of quality when it comes to liners and such. But it does leave some market open for lower cost. But what's interesting is they have not really gone into the budget side of those liners. It's hey, this is what we're good at, this is what we're known for, these liners, even though they shouldn't, they can last forever and we're just going to keep on that. And this is the price and it is what it is.
joris:Yeah, yeah, yeah. One concrete thing I just want to point out as well. They're saying they're a growth strategy. There's a bunch of vague stuff in it. Innov One concrete thing I just want to point out as well. They're saying their growth strategy. There's a bunch of vague stuff in it. Innovative solutions yeah, okay. O&p. Value creation of course, right. But there's one thing that jumps out at me there. It's like one of the five main growth pillars, right.
brent:One is bracing, simplified, so that seems to me to be like a thing that they expect a lot from that and they expect a lot from that bracing thing to really become a bigger thing for them I think that's a good point, and so one one aspect of that that I love is that a lot of times, the people that need bracing there is also and this for people that have had, like, a traumatic brain injury or some other types of things there's also cognitive issues that happen at that time, and so, like, if you have a bunch of straps and all those straps stick together, that's going to be frustrating. So figuring out how people that don't have use of one arm and don't necessarily have care in-house put a brace on and be successful every single day, the only way that you can get there is something that's simplified. So I think that's a great catch and I think it's super important, especially moving into that market.
joris:I think it's okay. I think another thing is really. What I thought was really interesting is this whole. They have a thing well, they have a nice thing showing that they offer products from up until mind-controlled prosthetics, which I think is like the big thing in the future. But they have solutions from 70 bucks to 40,000. I think that's really quite active Bionic feet, bionic feet and knee, you know everything. But they also say something really interesting and that is that solutions that match the needs of low active amputees.
joris:So we're talking about the elderly, we're talking about people who are now, you know, we're getting this group of about a billion people, or something like this, in OECD countries, the rich countries. They're 70 plus and they really want to, you know, reduce the risk of falls, reduce the cost of elderly care, increase mobility. So they're looking at people that are quite elderly that maybe have things like well, you're mentioning stroke before, but maybe also things like from diabetes and other things like mixes of different kind of pathologies all going on, morbidity, but or all sorts of stuff going on. Uh, you know, and they want to take these guys from a socket to a user-friendly technology, whatever. That means right, which I thought was really interesting, whatever. What does it go from socket molding to a user-friendly technology I think that might be a reference to additive, right, and then for a mechanical need or powered me.
joris:So I think that they really see this rich group and the rich countries that are increasingly have a higher expectation of doing cool things when they're older. Right, you don't want to sit behind the drain and watch like, uh, the golden girls, right? Um, uh, you, you want to, you want to do stuff, you want to travel, you want to go on a cruise, whatever, and to target that market that are also as you said before, they have medicaid and all that kind of stuff, but they're also probably they're kind of quite wealthy. Um, so, that's also as you said before. They have Medicaid and all that kind of stuff, but they're also probably quite wealthy. That's also quite innovative to me to say no, no, no, we're not going to focus on the kids. We are going to actually develop products for this elderly, low mobility. No, we're not doing the athlete that's going to win the Paralympics or something. No, no, we're going to do that big group of people that are sitting there retired and they want to go to italy, right?
brent:well, yeah, and I think the other part of what you were saying, that from socket molding to user-friendly technology, one of the things and you and you wouldn't know this unless you looked really, really hard at that slide is you see the lacing, so that on the one socket so that is a tip of the cap to adjustable technology, so something that has some adjustability to it. Now they do not have, as far as I know, a relationship with Click Medical, which we had on earlier for the RevoFit, and then they had started with the BoaDials, but that is a big part of taking care of a more elderly population is especially ones that has a vascular issue. Is that you're going to want to have adjustability? Uh, because you're totally going to buy one of those two.
joris:There's like two options right. There's like the go big or go home, or like the smaller kind of like guys we had on and you know that could be interesting it would be interesting.
brent:I don't know how all that would go, but uh, that would be interesting, but nonetheless it's the tip of the cap brent thinks they're gonna buy boa uh, yeah, that is not what I said. Um, I I said that they value adjustability and that's where we'll leave it, okay okay, okay, all right, okay, they can invent a competitor as well and, like you know, okay, but yeah, okay.
joris:And then another thing is I think it's really interesting and I don't know if this is going to work, right. Um, so they also have identified the cpo stories, which is something we've talked about, and then the new generation cpos being like clinical efficiency and clinical labor, that kind of thing. Regulatory burden and digitization is in there, right. So what they're going to do, what they want to do for for a business partnership omp is one is outsource fabrication. They want to make the osu leg, they want to do cfab. They, they seem to want to be in that market, right, and they also want to use an app to help you get reimbursement. And they also want you to do like partners and compliance audits and reimbursement regulatory, and they also want to be your business it management company.
joris:I mean, is that something that you would like? Okay, you're, you're guys, are independent. Let's say, would you be like, really be like, oh my God, oh sir, yeah, please, or would you be a little bit hesitant to to look to them for this? I mean, I know you're a fan of them as like a component company, but if they start all of a sudden saying, oh, we're going to do all your IT and you're doing reimbursements.
brent:Yeah, I would say probably not. I mean, and the main reason is well, I guess I would say it depends, right, it depends what the offer is. Well, if my margins increase because you're taking care of everything and then we're also taking doing components and that sort of thing, maybe. But one of the things that I think we can't be naive about with some of these big companies that have distribution partners and that sort of thing, is if they take a look and they say, oh, my goodness, you should take a look at what brent's doing in Raleigh with that company. Maybe we should put another office right there and give them a little competition, or maybe we should buy them, but you're giving them information or data that is valuable, based on how busy your clinic is, how busy your clinic is, and I would say, just those are the types of thoughts that you have to have, regardless of who you're using for your distribution and components and that sort of thing. This is how they make a living and there's very, very smart people.
joris:They could ring fence it. They could have some kind of Chinese wall seeing stuck between these two things. But it would be if they don't, they could ring fence it, they could have some kind of Chinese wall seeing stuck between these two things. But it would be, if they don't tell you that there's some kind of ring fence data thing, then, yeah, somebody, a corporate, some really bright-eyed, bushy-tailed kid, is going to be like, okay, where are the clinics making the most money in America? And they're definitely not going to go away from that. So, yeah, I think that's something I think you should think about, unless to go away from that. So, yeah, I think that's a really that's something I think you should think about, unless they do, you know, give you a little contract that says that your data will be, I don't know, in a manager, somebody else with that.
joris:The other thing their m&a strategy things. Three things they want to do market access, reaching more patients. So that's good news if you would like to sell your clinic, I think this means they are looking at that. I don't know we want to build by individual clinics or larger units, but hey, they're looking at market, market access, and that would be a way for them to obtain it. The other one is portfolio expansion. Expansion, now, one serving more chronic patients okay, means they're not going to go the dr shoals route, I'm guessing. Uh, so you know, portfolio extension. And the third is technology and innovative of it, omp solution. So I think those are the three things they're going to focus on and I think you know bracing right, some kind of like open and shut, boa type like solution More clinics, more what don't they have?
joris:You know, let's look at that. You know that kind of thing. Are there areas of the market they don't have yet? So I'm pretty sure they're going to buy it because they seem to want to be like the, the total, like, uh, you know, one stop shop of this stuff, you know yeah, yeah, yeah, I don't know where, like if I was, if I was them, I don't know where I would look next yeah, what would you do?
brent:yeah, that's a good question yeah, it's actually a better question than my question you know where would I go? Would you buy if?
brent:you were also you really have to take a look at. Uh, who is doing stuff in the? To me, the bleeding edge on the manufacturing side of things, software side of things, materials, yeah, um, stuff that can complement what you already have. But, like I know that there is a shortage of technicians that make stuff, and they make a lot of upper extremity prostheses. I think the turnaround time on one of their prostheses takes a long time, but there's not many people that can do it because of the labor that's so specialized.
brent:Is there something that can take that pain out Not necessarily replace it as far as people but is there something that, hey, I've got this $60,000 arm that I need to fabricate, but I can't get it back for X amount of time? How can I say you know what, if you have a scan or a test socket or whatever in alignment and you're going to have that back in three days, not only will you turn cash flow better for that independent clinic, you also then turn cash flow for yourself because you don't have this tied up. And so if you are able to squeeze that in a little bit, I think that's a win I think what I would do.
joris:So then I'd just buy the whole software tool chain. You know accounting software, reimbursement, everything. They're going to need it anyway. They want to operate a lot of clinics, so they're going to want that whole software backbone. So I would just cobble that together, buy like five, six companies, whatever I need, and the whole solution so I'm the best solution in the world. Then use my own clinics to make that solution the best and then kind of like sell that to everyone else and then do that as like a subscription thing $30 a month for all the software you need or whatever.
joris:Right, yeah, yeah. And then you know if I get all the data, it's beautiful. I'll know how many people are doing in the Southwest or doing finger stuff, and I don't know what's on the rise and what people want and what's being problematic for reimbursement. So that kind of mean. That's what I would do, I think. I think if they really see that that that that operating co, that service business, is a big part Cause then you know, imagine how important appointment software is to them, like an easy way for you to get an app to make an appointment if they want to operate hundreds of clinics they already have 200 of them. That, just if they make that software just a little bit better, that people don't have to call to the clinic, that is just going to save them tons of money.
brent:Yeah, you know well and um, yeah, you decrease cancelization, cancel cancellations and all that stuff. Uh, canceled appointments all that stuff. So I think the software side. I don't know anything about their internal software side of things, but it's funny that you say that, because there's really only a few providers of software specific for O&P.
joris:Yeah, exactly, there's a bunch of them that have been on our show and I'm thinking that would fit nice.
brent:That would be nice, that would be yummy spot. But I think after this whole exercise, it should be super obvious to people that these big companies aren't going anywhere. They have money, they have cash. They're going to be buying things up to make things better for themselves access for patients, that sort of thing. In the end, what are we going to be left with in 10 years, 20 years or what have you not? Not a ton of independent companies?
joris:yeah, okay. So let's look at this as somebody else. Auto book right, often in the same breath as osher, often also on the premium end, big portfolio. What if they stay like we're independent, we're not going to compete with you, kind of? Or do you think that they're just going to be two integrated players as well? Or do you think Autobulk is going to be much more like the device route, if you will?
brent:So Autobulk has already been in clinical care for a long, long time, so not only so, they're probably, if they're not, the biggest worldwide, and then they've started adding clinics. I think they've been on a little bit of a freeze of late buying clinics, but yeah, they already have patient care clinics, so it's pretty much the same, so they're probably going to do the same thing. Yeah, so I mean their struggles are the same, so they're probably going to do the same thing?
brent:Yeah, so I mean their struggles are the same. The software side how to vertically integrate how do we get this stuff out?
brent:The one thing that we didn't talk about that, I think, is really important, and we have talked about it before, about Hanger and specifically, but now that these other companies are coming in, you have to be absolutely sure, when these products go on the market, that they're ready for people, because you never want to get involved in some sort of recall thing because you didn't do your due diligence, and so that's what, especially in the States, right, huge, huge.
brent:And so I think that's one of the things that's interesting about this whole thing is and I think that's why I've been a little bit slow into the additive side of things is you don't want to put something out there and these clinics are loving it, loving it, loving it, and all of a sudden somebody comes and says oh, by the way, we had a bad batch of powder.
brent:And you're going to have to recall all that. Man, that's a that you don't want to be in the middle of that, and so that is something that it's not mature enough for them.
brent:Is it or is it not, I don't know. Or, or are there ways that you can get um around some of that for these big companies? Or how do you minimize the risk, um, of getting involved into additive manufacturing? So I think those are all things that I don't envy the people that make those decisions. That that it's cause. It's truly black and white, and I can't see in the black and white right, it's, it's, it's, it's gray to me. We're a small company, we're nimble, we move quickly, um, but when you're trying to drive this big ship and you see a technology that can potentially really give some hockey stick growth, it's, it's hard to hard to pull back, totally agree.
joris:Totally agree. I think it's going to be exciting. I think I think this is really interesting. I think, from a business perspective, this is really interesting. What I am seeing like and one thing I want to see more of, more of like we're looking at this as a growth perspective is, yeah, the software tool changing seems like the most important thing. They keep on buying innovative. They've been really good at buying innovative stuff so far, making it themselves, so that's cool. They know what they make. They know what they don't make, so they'll probably go on buying, buying whatever, and buying the right stuff. That's good as well. Cheetah, whatever, um, uh, but what? And they do in the, in this presentation, do talk about, like you know, we, we do. We want lower cost products for the developing world, and I really would have liked them to just say hey, you know what? We've got a hundred dudes. We're going to teach them all to speak bahasa indonesia and we're going to set them all up in indonesia, because that's this giant country and we're gonna, like you know, make that a country for us. You know, we're gonna really expand in those, those really emerging ginormous markets.
joris:There's something I used to say this is really long, long time ago. I remember when blackberry was like a phone that people had, right, and I would always tell this to people and it's kind of bad that blackberry died. But I was saying, how many blackberry users are there in nigeria, right? And then I'd always ask people like, like, because we always were talking about, you know, 3d printing being a solution for very few people like this. And there's one kind of thing and I said, well, you know how many blackberry? And everybody would get it wrong always. And there were 20 million blackberry root users in in in nigeria at the time and that is just an astounding number, right?
joris:If you talk about the country I'm from, the Netherlands, we have less people than there are people that back in the day, used to use BlackBerrys in Nigeria. So there's just like these. Wait a minute. So if I develop an app showing Nigerian football or whatever, that is a huge market maybe a bigger app than you could make for all the Dutch people to be on. So I think there is just so many numbers there and it would be so valuable for one of these guys. He's like you know, we all know what's Kingmaker, right? If it's either going to be, is Hanger going to build its own Oster quicker. Is Oster going to build its own Hanger? Or is Oster going to buy Hanger right, that's it, because Hanger's Kingmaker right, or is, whereas those are going to buy up so many clinics that they become an alternative for Hanger or Regional Champion or something. And then I think the other way of looking at it is to say you know what, if it's going to be Hanger or these clinics, eventually it'll be super expensive.
joris:How about Indonesia? Guys, let's go, let's do this, you know, I think that's the only thing I'm missing a little bit, that I'm like you know. I think that would be a big thing if one of these guys like really focus on an emerging market, the strong vietnam, right, I think. Companies like that 80 million, 100 million, 300 million people I mean that that's going to be. You know, their development is huge. It's going to be huge going forward. So that's the one thing I want to see a little bit more of. If they really want growth. I can understand maybe they're shy of china because they don't want to get copied and all this, but hey, what about a company like Vietnam or Indonesia? That they're huge. That's what I like to say. I thought this was great dude. I can't wait to see what people think of this. Thanks for doing this. I think this was a lot of fun.
brent:It was a lot of fun and I don't know if we should say it, but probably something like on the last slide of Ematical that says these are yours and I are not trained professionals in the orthotic prosthetic investment.
joris:These are forward-looking statements yeah, exactly, I know nothing. I'm not a registered investment advisor. This is not investment advice.
brent:This is just purely our opinion on what we see exactly, exactly.
joris:But hey and joining, hey and joining guys, cause this is all like we're looking into the tea leaves of the future and stuff. So, yeah, tell us what you think, and maybe you have a completely different opinion, and, uh, that would be really exciting for us to learn about as well. So, thank you so much for listening to the prosthetics and orthotics podcast with Brent Wright and yours feels. Have a great day, thank you.
