Uscom on the cusp of a billion dollar transformation
Australian medical device company Uscom has pushed through a domestic start-up environment that is littered with more death stories than tales of survival, and is on the verge of what founder Rob Phillips says is a “major transformation”.
Mr Phillips, executive chairman of the developer of cardiac, vascular and pulmonary monitoring devices, has plans to turn the $20 million company — it counts the International Space Station as a customer — into a $1 billion stock.
“We started in cardiovascular pulmonary because that is what I know. I’ve spent my whole life developing concepts, ideas and mathematics around physiology. That’s my love and life.”
He said when he started Uscom people told him it was a great idea but would never work.
Fast forward to today and Mr Phillips says the company, which has made two acquisitions and is rapidly expanding its global reach, is on the cusp of a major transformation.
“Things are changing quickly for us. There was about 15 years of clinical and research work that was followed by 15 years of direct work in the company. These things don’t just happen, you invest in them, understand them and grow them.
“We are now starting to have substantial international conversations that will transform the company. But it has taken a long time to get to that point of credibility.”
Mr Phillips, also chief scientist and chief executive of Uscom, said the company’s mission is to produce non-invasive technologies that replace inaccurate, invasive technologies. The International Space Station and the Russian space program both use Uscom products — developed out of research Mr Phillips started at the University of Queensland — to measure vascular and cardiac performance.
Its leading product, the Uscom 1A, is the standard of care at London’s Great Ormond Street Hospital for Children, the Kings College in London and the Pediatrics Department at the Pittsburgh University Medical Centre in the US. That device uses ultrasound technology to measure cardiac output — the volume and rate at which blood is pumped out of the heart and into the vessels. The alternative to the device is the use of painful catheters.
“We are interesting as we have partnered a lot overseas,” Mr Phillip said. “We are international. That is our strategy, to go to the best places in the world and work with the best people in the world.”
Under a global strategy, the company bought Thor Laboratories in Budapest last September, followed by the establishment of British subsidiary. The Budapest facility will become the hub of manufacturing as Uscom up-scales.
The first of Uscom’s products were manufactured from its small office at Sydney’s Circular Quay but Mr Phillips said Australia did not have an attractive environment to expand its production locally. “Manufacturing in Australia is harder work than it would be anywhere else,” he said.
“The incentives from places like Singapore, Hungary and Britain are amazing.
“Businesses like ours don’t happen overnight. You need to develop the concepts and ideas to make it into a business. There’s a lot of depth behind them. You want to align where you know you have a stable, supportive ¬environment.”
Mr Phillips added that while steps were being made in Australia to support manufacturing, it would be some time before the country caught up to the rest of the world, and then overtook other markets.
“I will have to go if things don’t change for manufacturing in Australia by the time we get profitable and that’s not a decision I should have to make,” he says.
The experienced Australian biotech advocate said there had been a large number of Australian companies that had left the country and a significant level of innovation has moved offshore in the past 10 years.
Malcolm Turnbull, who is now in election mode, has positioned himself as the innovation Prime Minister and launched a statement last year to cement his position on the space.
Mr Phillips said he was consulted by the government ahead of Turnbull’s innovation statement and while he said it’s a positive move, it would take a while to see it implemented. “It is quite a cautious step,” he said.
Despite the struggles to get off the ground in Australia, Mr Phillips said the company is now growing at 60 to 70 per cent a year, mostly out of China.
He added that China was starting to measure success in health metrics and its last five-year plan committed to a 20 per cent year-on-year growth in medical device spending.
“They are by far the fastest growing medical device market in the world,” he said.
The company this week added former Johnson and Johnson’s Asia executive, Chao Xian He, as a director to strengthen ties with the Chinese medical market.
Mr Phillips said about 60 to 70 per cent of Uscom’s sales were in China, in just one product.
“We could easily do 10 times what we do in China in a short period of time,” he said.
Talk of rapid expansion in China showed how far Uscom had come since it was founded in 2003. Just as it was getting off the ground, like most start-ups, it was hit by the global financial crisis as markets dried up.
“We struggled for three to four years ... we just survived,” Mr Phillips said.
He had stepped back from the company he founded to bring in outside management, which he now says were “totally useless”, so he stepped back in 2011 and recapitalised Uscom.
“They didn’t understand the science or the market and weren’t able to see the vision for the company,” he said.
“In companies like ours, you need the vision and drive of someone who will work for a low price, for long hours, and be committed to the passion and driving the products.
“Once you have a big company, perhaps there is a place for professional management but I think in that early stage, professional management can do enormous damage to small companies.”
The chairman said the company is now in a vulnerable position if potential suitors wanted to circle.
“It’s dangerous for us at the moment because we have so much off balance sheet value,” he added.
“We have to pass that middle section ... it’s a fairly tightly held company, the long-term vision is not a transaction, it’s to build a company.
“I started the company with a clear vision. I said I’d keep going until someone stops me and that is the mentality you need to adopt.”
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