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mission is to solve problems for their customers by becoming an extension of their OEM
partners in both the R&D and manufacturing of blood vessel Introducers, steerable
catheters and stimulation leads for numerous therapies and implantable devices such as
pacemakers, defibrillators and catheters
Medical Instruments & Supplies
Enpath Medical, Inc.
2300 Berkshire Lane North
Minneapolis, MN 55441 USA
John C. Hertig
Chief Executive Officer
Interview conducted by:
Lynn Fosse, Senior Editor
Published April 12, 2007
John C. Hertig
Chief Executive Officer
Mr. Hertig joined the company as Chief Executive Officer effective January 16, 2006 and
was elected to the Board of Directors at the February 2006 Board of Directors meeting. Mr.
Hertig brings more than 30 years of medical device executive level expertise, including
strategic planning and financing, at a variety of healthcare companies. From 1998 to 2001,
Mr. Hertig served as the Chief Executive Officer of MedSource Technologies, Inc., an
integrated medical device design and manufacturing services company. Under Mr. Hertig's
leadership, MedSource Technologies became a leading medical precision component supply
company with annual sales of more than $100 million. During his time with MedSource, Mr.
Hertig led the implementation of the company's innovative strategy focused on providing
consolidated supply chain management for the high-end medical device industry including
implantable devices, minimally invasive surgical instrumentation and orthopedic products.
Prior to his tenure with MedSource Technologies, Mr. Hertig was the President of Smith
Industries Medical Systems (SIMS) Level 1 medical device division and prior to that he was
in charge of the international single-use sterile Medical Device Division of Ohmeda, then
a division of British Oxygen Corporation.
Enpath Medical, Inc., headquartered in Plymouth, Minnesota, is a leader in the design,
development, manufacture and marketing of percutaneous delivery systems and stimulation
leads technologies. Its proprietary products include venous vessel introducers,
articulating and fixed curve delivery catheters, epicardial and endocardial stimulation
leads, and other products for use in pacemaker, defibrillator, catheter and infusion port
procedures as well as neuromdulation markets. Its products, which are primarily sterile
finished goods, are distributed worldwide through partnerships with other medical device
Enpath Medical has been a leading supplier of venous vessel introducers since 1985. Its
broad range of introducer products includes slittable and peelable introducers, various
locking mechanisms, a variety of materials - including FEP and PTFE - and other
proprietary features that can be customized to fit the specific needs of individual
Enpath has also developed capabilities in designing and manufacturing more sophisticated
steerable sheaths (deflectable or articulating catheters) for both venous and arterial
procedures, enabling physicians to more easily reach difficult anatomic locations with
existing therapeutic and imaging devices. Its experienced research and development team
works closely with customers internal engineering and marketing teams to design and
manufacture a delivery system that meets the needs of specific therapy and targeted
CEOCFO: Mr. Hertig, what was your vision
when you came to Enpath, and where are you today?
Mr. Hertig: The vision had been well
established before I arrived and it was one of the characteristics that attracted me to
Enpath. That vision is to support our OEM (Original Equipment Manufacturer) partners by
developing proprietary products that enable the delivery of their therapeutic products
into the human body. We have always focused on solving problems for customers by supplying
products that are key to their therapies, but require R&D and manufacturing efforts
that they viewed as non-core to their own businesses. Therefore, Enpath becomes a natural
and important extension of our OEM partners in both R&D and manufacturing in areas
where they prefer not to spend their resources. This allows them to focus on their core
competencies, which are in fairly sophisticated implantable devices such as pacemakers,
defibrillators and more recently, neurostimulation devices. Our vision is to enable our
customers to focus on developing and refining their core therapeutic products and fill an
important gap by supplying innovative, high margin products necessary to deliver those
Would you give us an example of what you might be innovating, creating or working on?
Mr. Hertig: We have three product
lines in which we are presently developing proprietary, patent-pending products. We
typically develop our own products and for example, we could be seen as a mini
Boston Scientific Corporation (NYSE: BSX) or Medtronic, Inc. (NYSE: MDT) up to a certain
point. We work with physicians, identifying needs that those end-users have, build
prototypes, develop concepts and evaluate those with the help of the physician community.
Once we reach a certain point, we begin to deviate away from our OEM partners in several
ways; essentially by selecting a potential partner who will ultimately market, sell and
distribute the product for us. By that time, we would have filed patent disclosures and
protected ourselves from an intellectual property perspective. As a result, we can focus a
majority of our spending on R&D as opposed to sales. We have found that this focus
allows us to remain on the cutting-edge of technology and to bring a continuous flow of
new, innovative products to the market that answer unmet needs. Enpath also has a very
strong, experienced regulatory affairs / quality assurance department and we obtain our
own 510(k) and international approvals as well.
We will then see if our potential OEM partner
is interested in this new product opportunity and what level of commitment they are
willing to make to us. Sometimes, that means a joint development effort to take the
product to commercialization and sometimes it means that we continue to do all the
development internally, but they will pay us a non-recurring engineering fee through the
completion. Sometimes they simply sign a development and supplier agreement and we will
work on it to the point where it is commercialized and Enpath has a three to five-year
supply commitment where the OEM Partner will distribute that product.
Our leads and introducer products continue to
be the primary driver of our growth. In that area we received clearance from FDA in
December 2006 for ViaSeal and believe that, this new product will be recognized as the
best-valved introducer in the world. A side port version of this product is nearing
development completion, and we expect to submit this product for FDA 510k clearance in the
first half of 2007. We have entered into a new development and supply agreement with a
large, well-established blue chip medical device company to produce a new introducer
design and sterile kit for an application in the arterial access market, which is 5-times
as large as the venous access market in which we have historically operated. We are also
continuing to develop and explore opportunities in order to use our catheters in
conjunction with our stimulation lead products to facilitate the delivery of epicardial
and neuro-stimulation leads less invasively and more efficiently.
Sometimes customers are coming to you to create a custom solution or clinicians
bring Enpath ideas and at other times your own internal technical team creates a solution
and then you find an OEM Partner that is willing to join you in commercializing the
technology, is that correct?
Mr. Hertig: It works both ways.
Sometimes we discover or generate the idea and we will develop it to a certain point and
take it to our customer base. We have 30 to 40 OEM partners, most of which have been very
loyal and with us long-term and these are very solid relationships that have developed
over many years. Sometimes our customers come to us and say, you make this product,
and we really like it but it, but could it be altered to fit our needs? Our answer for
them is yes, we can help you do that. We will look at the market opportunity
and then we will decide if that is something we feel it is appropriate to invest our
You specialize in a number of areas; is there one area that is more important for you than
Mr. Hertig: As I mentioned, our leads
and introducers are our primary growth driver. These products are used for the placement
of stimulation leads, dialysis catheters as well as other implantable catheters. This is
our bread and butter, and the largest market in which we participate. We have more than
50% of the worldwide market share in venous vessel introducers. We are now branching into
arterial introducers, which is a market 5 times larger. We have investigated this market,
the growth trends and competitive landscape and have decided to enter it because we
believe we can build significant market share. We also have a product line of very unique
catheters that are single-wire articulating and steerable, where, in the case of arterial
fibrillation, the physician has the ability to go into the heart and steer the tip of a
single catheter, thus eliminating the need for inserting several fixed curvature
catheters. This will allow physicians to be able to do various procedures with one
catheter, whereas today a physician often must choose a certain fixed curve and place that
into the heart. In many situations, the physician then finds out that it wont go
into the anatomical location where they need it to go. In that scenario, they may end up
having to remove it and use a different shape to navigate the anatomy. However, with our
catheter they can actually steer it or change the tip shape as they perform the procedure.
We developed that in-house and have a number of patents on our technology which is unique,
particularly due to its single-wire design, which allows us to make a smaller outer
diameter [can we explain what this means?] than competitive products on the market.
The third product line is stimulation leads; we are
one of just a few companies in the U.S. that manufacture epicardial stimulation leads. We
are also working with a number of partners and developing leads for the growing
neuromodulation market that includes applications such as deep brain, peripheral nerve and
spinal cord stimulation.
Do you manufacture the products yourself?
Mr. Hertig: We are very focused on
developing products that we can manufacture ourselves. We have a new 95,000 s.f. facility
in Plymouth, Minnesota, and we are consolidating two existing facilities into our new
home. We have over 18,000 square feet of Class 10,000 clean room production space. That is
where we produce all of our products.
Why are companies choosing Enpath?
Mr. Hertig: We have been around since
1985 and have established an excellent reputation because of our speed to market, our
responsiveness, our ability to meet customer quality expectations and our technical
capabilities. We can move very quickly to get an idea into the marketplace because we have
the appropriate systems in place. Another reason customers are choosing Enpath Medical is
that our internal quality systems are equivalent to that of our customers. We have
invested a lot in regulatory and quality assurance, so we have all the processes and
procedures in place to guarantee that we only ship quality sterile quality products. We
have a reputation of being a very high-quality manufacturer of implantable devices. In
addition to our technical staff for developing products, we have our own regulatory group
and we obtain our own 510K approvals with the FDA, with whom we have a good relationship.
We have the complete package and we are very responsive.
2006 was a very good year for Enpath Medical; would you tell us about the financial
picture of the company?
Mr. Hertig: I agree, 2006 was a good
year. For the year ended December 31, 2006, revenues increased over 25 percent to $36.8
million compared with $29.4 million in 2005. Over the last 5 years, our aggregate sales
have climbed 19.8% year-on-year. Our long-term target-operating model calls for
year-over-year growth of 15 to 20% and we were pleased to surpass this in 2006.
We are focusing on a more systems approach to our
products. For example, not only are we developing deep brain stimulation for nuero
applications, but also a delivery tool that will allow the physicians to quickly map and
find the right location in the brain, to fixate the stimulation lead in that location so
that it does not move, then remove the implantation tool and leaving the stimulation lead
We are going to provide a number of new products
during the next year or so. Our pipeline is robust. In fact, one of the challenges Enpath
has had in the past is we have had more opportunities than we could digest with our
technical resources and development capability. We put in place in early in 2006 a product
portfolio system that considers multiple perspectives on every new opportunity, including
market size, our resources, technical, clinical and regulatory risks, development costs
and demand. All those factors go into a formula that yields a net-present value for each
product opportunity. Then we prioritize and carefully focus our resources on those
opportunities that we believe will return the most value to the company. This product
portfolio process allows us to select those projects that we believe are going to give us
the biggest bang for our buck and also get the attention and resources they
need to be successfully developed.
Why should potential investors be interested in Enpath, and what should they realize that
might not jump off the page?
Mr. Hertig: There are a couple of key
considerations and one is that we are a unique company that fulfills the unique needs of
large and growing medical device companies. We incubate, develop and, at times,
commercialize novel and proprietary technology that enables the delivery of new therapies.
There isnt a company comparable to Enpath out there. Our customers are developing
cutting-edge therapies that are predicated on our technology. As a result, we have steady
interest in our products and capabilities driven equally by high-growth new market
opportunities such as neurostimulation, and steady, predictable growth of large,
established market opportunities like the ICD industry. In specific reference to our
products, we are the best in the world at creating introducers. Introducers are a basic
building block of interventional medical device therapy, widely used and highly important.
Regarding catheters, we have been making these for a long time and we are very efficient
and good at developing new them. If you combine Introducers, Steerable Catheters and
Stimulation Leads together, then the investor sees a company that has unique capabilities,
that is focused on developing products that have imbedded intellectual property in order
to ensure they can maintain margins or increase margins and revenue growth. We can grow a
lot faster than the markets that we currently serve today due to our new product
In closing, what should our readers remember about Enpath Medical?
Mr. Hertig: The only message I
continually try to get out to the investment community is that Enpath is an R&D driven
company that develops and manufactures proprietary, solid margin products for the largest
medical device companies in the world. Our products are sold through our customers
combined sales forces that total more than 5,000, professional sales people who knock on
hospital doors everyday carrying Enpath products in their bags. By selling through our OEM
partners, we are able to shift the cost-of-sales dollars into new product development and
while growing our profitability.
Some members of the investment community view us as a contract manufacturer because we do
not have our own direct sales forces. This couldnt be further from the truth. Enpath
Medical is an OEM with a large and growing proprietary position in leads, steerable
catheters, and stimulation leads, with a solid commitment to R&D and the market
position and focus to remain the leading developer of devices that deliver innovative
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