Active approach

Like the actor performing to an empty theatre, the development of a technology can hardly be counted a success unless it reaches its target audience.

Many innovators have overcome all the technical hurdles only to founder on the rocks of the apparently more mundane matters of sales and distribution.

The challenges are particularly acute when a technology business is seeking to export to multiple markets around the world and is working in a heavily regulated industry where painstaking approval processes can be measured in years.

If the business wants to make the most of its potential, however, there is no choice and Corin, a UK medical technology group, has decided that fortune favours the brave.

Corin, based in Cirencester, Gloucestershire, has carved out a strong reputation in innovative orthopaedic technology. The company develops, manufactures and distributes systems for hip and knee replacements.

Its technology is aimed at the growing worldwide market created by younger, active patients needing orthopaedic procedures.

People in their fifties and sixties who are otherwise healthy and active place different demands on replacement hips and knees to those in their 80s. For the latter group, who will mostly lead very sedentary lives, a hip or knee replacement can vastly improve their quality of life without coming under much strain.

Younger patients, by contrast, will expect to resume many of the activities they enjoyed before their natural knee or hip deteriorated, and the replacement system must be able to cope accordingly.

The good news for Corin is that the 'baby-boomer' generation is a global trend, spanning Europe, North America and Asia. From its base in the Cotswolds, Corin could see the potential to export its technology. The difficulty it faced was how to go about it.

Over the last 20 years, and particularly since its flotation on the stock exchange in 2002, Corin has transformed itself into a global operation, with a presence in each of the three major international markets for its products.

These are Europe, Japan and — by some way the most significant — the US.

Chief executive Ian Paling said the company needed to develop distinct strategies for each of these target regions, taking into account the differences in demand for its technologies, and the way the medical systems market is structured in each.

Closest to home, Corin has gone down the tried and tested route of establishing direct sales forces in major European nations.

In the case of Germany, for example, this was done by acquiring a business that gave Corin not just access to key technology but a sales presence in the country. The direct distribution model allows Corin to retain a strong degree of control and brings the benefit of high gross margins, said Paling, who added that the UK group would 'look very seriously' at making an acquisition in France for the same purpose.

If direct distribution remains the best way forward for Corin in Europe, however, the US is a very different matter. Accounting for about two thirds of the global market for replacement hips and knees, access to the US is a major priority for Corin.

When Paling and his team looked at their transatlantic options, they realised that their European models were simply not viable, at least not on the scale needed to make a major impact in the giant US market.

'As far as doing it ourselves was concerned, we discounted that pretty quickly,' said Paling. 'From a financial point of view, the risks of putting three or four hundred sales guys on the road was just huge.'

The second possible approach of gaining a presence in the US by acquisition was also off the agenda for Corin because, according to Palin, it lacked the huge financial muscle that would have been needed to buy an American business of sufficient scale.

The third option, and the one chosen by the UK group, was to form a partnership with a major US incumbent. In Corin's case this was to be Stryker Corporation, a Michigan-based medical technology behemoth with a $5bn (£2.7bn) turnover and a portfolio of products spanning the healthcare industry.

Most recently, the relationship between Corin and Stryker was strengthened by an exclusive 10-year marketing and distribution agreement for the UK company's Uniglide knee system.

In conjunction with an earlier deal, Stryker now has US rights to three out of four of Corin's major products. The advantage to Corin is clear — access to a market presence far in advance of anything it could realistically have achieved independently.

The appeal of Corin to Stryker, according to Paling, is the ability to use the UK company's technologies to plug gaps in its own portfolio.

Another attraction was the position of Corin's systems on what Paling described as 'the regulatory ladder'. Medical technology businesses, particularly in the US, stand or fall by their ability to secure regulatory approval for their products or systems.

Depending on the exact nature of the product, negotiating the approval procedure of the US's formidable Food and Drug Administration (FDA) can take five years or so.

Approval for Corin's metal-on-metal hip system Cormet is, the company hopes, tantalisingly close, opening up new possibilities for the product in the US thanks to the partnership with Stryker.

Japan, Corin's third big target market, presents the UK group with different challenges again. So far the company has developed its Japanese presence through a joint venture business, of which it recently assumed full control.

However, Paling said Corin is also near to an agreement with a partner that is a major player in Japan's medical technology market, but not currently a force in the hip and knee specialities of the Cirencester business.

The company's strategy in Japan — a local subsidiary and partnership with a domestic business — also offers the significant benefit of being seen as a Japanese rather than overseas organisation, said Paling.

When a UK-based company establishes a strong presence around the world, there is bound to be concern that the R&D and manufacturing end of the operation will itself go global and exit these shores.

This has happened in a number of cases, but is not inevitable. Corin's R&D and manufacturing base remains in Cirencester, where Paling said the company has the skilled employees and strong degree of control it needs. As the business grows extra manufacturing capacity will be needed locally, and what Paling described as 'R&D outposts' will be established abroad to serve the needs of regional markets, but the high-value elements of Corin's technology remain in the UK.