Doherty has right recipe for growth

FRIDAY INTERVIEW:Bill Doherty, EMEA (Europe, Middle East, Africa) vice-president, Cook Medical

BILL COOK’S first commercial venture was selling shot glasses with pictures of nude women on the bottom. It flopped and, following a stint in the army, the young Illinois biologist turned his attention to healthcare, founding his first medical device manufacturing company at the age of 26 in 1957.

Six years later, he and his wife Gayle, with an investment of $1,500 and working out of their apartment, founded the company that would become a global manufacturer of medical devices to facilitate minimally invasive surgical procedures. Over the ensuing decades, they built a 42-company empire with annual sales of $1.7 billion, employing more than 10,000 people on four continents.

When Cook first looked at establishing a presence in Ireland in the early 1990s, Bill Doherty was its first employee. Doherty, an Irish engineer with a track record in high-quality manufacturing, fitted the Cook profile.

The initial £4 million investment in a plant employing 100 people producing endoscopes has grown into a business producing annual revenues of €190.4 million in 2010, boasting a 67 per cent increase in operating profit to €23.1 million and employing about 630 people.

Fifteen years after opening the Irish plant, Doherty has risen through the ranks and is now responsible for Cook’s operations across Europe, the Middle East and Africa.

Doherty sees Cook’s decision to keep reinvesting in its Irish plant as testament to Ireland Inc’s success in delivering for the company and its sector. In 2004/05, Cook added a shared services operation to the manufacturing side, a move Doherty cites as critical in Limerick becoming a core part of the company’s global operation.

Last week it announced a major investment in its future – a €16.5 million RD unit that will hopefully develop the devices on which Cook will continue to expand its Irish footprint.

“I think we are doing a lot right in Ireland. We have got much better at it,” says Doherty.

“The medtech sector is probably unique if you look at it in terms of spin-offs in Ireland. We have got some very innovative companies here. I think it has taken a long time to engage with the clinicians here in Ireland but I think there is now an understanding that there is a huge opportunity in Ireland to make it the global, or at least one of the global, medtech clusters. We are already on a global scale but I think we can go further.”

One area where more remains to be done is in clinical trials.

“It has been difficult to do clinical trials here for a number of reasons. Irish doctors and Irish hospitals in many cases didn’t see it as their business to get involved in that kind of thing,” he says.

For all its success, Cook seems determinedly low key – a trawl through the archives reveals just a handful of articles since the company established its presence in Limerick in 1996. In large part, this probably reflects its founder, who kept the business in private ownership across almost five decades.

Cook, who died last year, was at the time reckoned by Forbes to be the richest man in his home state of Indiana, with a worth of $3.1 billion, but he still lived in the three-bedroom house he bought in 1967 and drove himself to work, with his typical day starting at about 5am.

“A private company has a very different dynamic to a public company,” says Doherty. “A private company sees itself as having other values, as being part of the community. You need to make money but you also need to be doing these other things.”

He agrees that sounds a little corny to some people but notes that Bill Cook very much lived like that. Before he died, the company opened a manufacturing plant in Canton, Illinois, where he grew up, after its previous major employer closed, leaving the town devastated.

“There was no logical reason for us to do that other than a community reason. We could have put that investment in a lot of other places but Bill obviously felt he needed to give something back to Canton, and did it.”

He says the company’s choice of Limerick as a location is very much in tune with the company ethos.

“Bloomington [where the company has its headquarters] is a small town – it has 100,000 people, roughly the same as the greater Limerick area. Cook feels very comfortable in those communities. It doesn’t feel it needs to be in Boston, or in Dublin or wherever, and becoming an integral part of a smaller community is part of the business.”

From a commercial perspective, Doherty says the private company status allows Cook to adopt a long-term view. “You don’t have to be worrying about first-quarter results.”

Another advantage is the greater control the company has over its future in a sector where consolidation is a constant as shareholders look to maximise return. “You only become a target if you are willing to be sold and Bill Cook himself before he died was strongly of the view that he did not want the company to be sold.”

Cook’s wife Gayle and son Carl, who now runs the company, have expressed similar views.

On the other side, lack of public status reduces the flexibility when it comes to funding acquisitions so the company relies more heavily on internal development and strong links forged with local third-level institutions – whether in the US or at University of Limerick.

“The environment you work in is very important and we are literally right in there beside UL. We have worked with them over a number of years, starting with small projects and moving on to more research type of stuff. It [UL] was one of the reasons why we are where we are. Cook has grown a lot out of working with the colleges in the US, so it was a logical thing for them to do, to put the company beside the university.”

The high-profile RD announcement last week is not the company’s first foray into this area.

“We’ve had RD in Limerick for a number of years but this has brought us up the RD chain in that we are now looking at Class 3 medical devices, which are the most critical devices – typically ones that are in the vascular system or in the heart or the central nervous system.”

These include the Zilver PTX drug-eluting stent, which aims to keep open arteries in the leg which, if untreated, result ultimately in amputation. Doherty sees it as a huge market – possibly one in six of the population – including those suffering from diabetes and peripheral vascular disease.

From Limerick, the company exports the device to nearly 40 countries worldwide, and it brings the Irish entity into the key vascular side of the business.

While the relationship between Ireland and Cook has been mutually beneficial, Doherty stresses that we cannot rest on our laurels.

He sees the education system, traditionally seen as a strength, as an area where a failure to address a number of issues could become a weakness.

“There is the problem with honours maths at Leaving Cert level, but it starts even earlier,” he says. “You have to get kids interested in science when they are nine, 10, 12 years of age.”

He also argues that the mentality surrounding the Leaving Cert, which has driven everybody to learning everything by rote, does not prepare people to solve problems.

“We are starting to address those issues but it is an enormous issue to address. Ireland, as a society, has been conservative so parents have seen that, if you want to get on, be a doctor or a lawyer or whatever. Now I think people are starting to see there are opportunities in these multinational companies in medtech and elsewhere and they do pay well, and if you have the right skills, you will have employment.

Doherty is conscious when looking at the thorny issue of competitiveness that it is a question of trying to get the balance right. “You cannot drive costs down so that people are not earning a decent wage, so it’s finding a balance.

“I think we had gone out of kilter. We were definitely getting to be way too expensive. Typically, US companies will look at costs in Ireland against costs in the US. Labour costs-wise, we are probably doing okay but we still have a lot of costs – particularly energy and service costs, you know legal and accounting costs, those have not really come down even though a lot of other prices have come down.

The issue of competitiveness is a sensitive one for the sector with continual downward pressure on costs by hard-pressed healthcare providers, largely governments.

“It’s becoming more of an issue for the whole medtech sector. There is a perception that technology is driving the cost of healthcare up but if you scrutinise that, it does not really stand up. In general, medical devices typically around the world are 6 per cent of the healthcare budget and they have stayed stable at somewhere between 5 and 7 per cent overt the last 20 years.

“So, if you are talking 6 per cent of a huge healthcare budget, you cannot really say that it is driving the cost of healthcare, so it is much more complex. People are living longer and healthcare, and medical devices in particular, are allowing that to happen.”

While education and healthcare models are medium-term issues, Ireland’s economy is a more immediate concern and Doherty has strong views on the core issues in our ongoing debate within Europe to develop a more cohesive euro zone.

“Corporation tax is one thing that just cannot be negotiable from our perspective. You have to remember we are on the periphery here and we have found a niche in the global market which allows us to attract FDI. Our exports are probably the best chance we have of getting out of the mess we are in and we do not want to take one of the key planks of that policy out of it.”

While he accepts that a referendum on closer European Union would cause turmoil, he is sanguine on the medium term-impact for Ireland.

“Uncertainty anywhere causes nervousness . . . but I don’t think that at the moment it is a cause of concern for the FDI community. I think the corporate tax rate is more important than that. If you look at the things that make Ireland attractive, it’s location, it’s the availability of talent, the corporate tax rate and the English language. All of those issues are not going to go away because of something that happens in Europe.

“So I think over the next 10, 20 years maybe, if there were to be some kind of split, that would cause us problems, but not in the short term.”

ON THE RECORD

Name:Bill Doherty

Age: 55

Position: Vice-president EMEA for Cook Medical

Why is he in the news?Cook last week announced a €16.5 million investment in a new RD unit at its Limerick plant.

Interests: A member of both Lahinch and Ennis Golf Clubs, he gets "not enough time" for the occasional round.

Something you might expect:With a plant in Limerick, Doherty is very involved in promoting regional development and improving the profile of Limerick.