I got out at a small loss a long time ago, but sometimes nostalgia and curiosity make me check in on stocks I used to hold, hence this visit. That's also a disclaimer. If you think those who don't hold shouldn't post comments, read no further. This is a long post, as it includes a conversation with a knowledgable source that was one prompt for my getting out, which may be useful for holders, or those who want to ask questions of management.
Regarding the "better light bulb" theory, there are lots of examples where a better product doesn't do as well. Beta was better than VHS, but the latter won the video wars of the 1980s. Apple was a better operating system than Microsoft, but the latter got the market and Apple almost went broke. In the case of Osteopore, it's open to question whether it has the better product. Many surgeons obviously prefer the existing methods. Osteopore has been around for over 20 years and hasn't made a dent in the sales of the well-known players.
OSX has been a listed company for years, had regulatory approval in huge markets (China, USA, Europe), many partnerships, lots of research, and supposedly diligent sales teams. This isn't a case of Osteopore not having a well-run sales team or marketing strategy. Surgeons and hospitals don't buy specialist products like those made by Osteopore because they're being pushed by salespeople. It's not a new line of hair care products at the supermarket. Surgeons know exactly what they want and buy that, regardless of what is being pushed. Hence the ridiculously small sales figures for OSX.
Here's the gist of a conversation with my neighbour long ago. He's a rep with Johnson & Johnson's Medical Devices dept in Australia, a competitor to Osteopore. He knew about OSX, but not much. He doesn't have much to do with the other parts of J&J's global empire, just the Australian operations. Our conversation was as neighbours, not investors, so feel free to write this off as simply anecdotal.
I mentioned my surprise about OSX's low sales, given how long they've been selling their products and how many good patient outcomes they can claim. I quoted a stat that impressed me when I bought in: their products have been used in over 50,000 operations so must be well-known by surgeons. My neighbour said that was a good number for a year in Australia. I was a bit shocked by that and said: Actually that's for 20 years and throughout the world. He said this is an insignificant number.
That led to my next question, about the oft-claimed addressable market size of $100 billion worldwide. To which he laughed, telling me that J&J commands 30% of the med devices market worldwide, and their annual take (globally) is $10 billion (i.e the total market is $30 billion). Next question was why he thought Osteopore hadn't had any serious market penetration. That led to a long explanation of the time, money and effort that J&J puts into relationship building. In a nutshell, they start the process when the surgeons-to-be are in their final year of uni. It continues with serious interaction over the course of the surgeon's career. They also have different teams working within the three arenas reflecting the difference and importance of each: government; hospital admin and procurement; surgeons. That's an awful lot more than OSX's sales teams do.
We covered a lot of ground, but generally I was interested in his opinion of OSX's prospects. He said the realm is hugely competitive and just not practicable for a small player because it requires so much money to stay in, and succeed in. He was impressed by the products OSX offers and thought disruption is indeed the coming threat to J&J. But the threat was too far off, and OSX too small, to be concerned about now. His metaphor was a meteor hitting earth – worth monitoring, but not spending much time and money on. I countered by saying that disruptors can quickly change the landscape (e.g Afterpay). His reply was along the lines of: If they could have, they would have by now.
My last question was whether he thought J&J might be interested in a takeover, given that they could remove a competitor and eliminate a threat (albeit a small and distant one) for a very cheap price. He doesn't work in M&A, so didn't know, but said that going by the sales numbers and trend, didn’t see any threat worthy of buying OSX.
Anyway, good luck to all who still hold, I hope things turn around.
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