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DJO Hits Its Stride As a Private Company

There’s an old folk saying that good things come in threes.

That’s certainly true for DJO Global Inc.

The medical device maker based in Vista comes in at No. 1 on the 2012 List of the Largest Private Companies, earning the distinction of topping that prestigious ranking three years in a row.

The business generated nearly $1.1 billion in sales in 2011 compared to $966 million in sales in 2010, an 11 percent gain year over year.

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And to what does DJO attribute its achievement in a tough business environment?

Vickie Capps, senior vice president for business development and investor relations, said the achievement is due to part luck and part strategy.

“Being a medical device provider is a good position to be in,” she said. “We’ve found niches where patients need high quality products, and we’ve found ways to acquire the companies that have them or develop them ourselves.”

Following the Boomer Generation

DJO markets more than 1,000 products, including the recently introduced OA Nano, an off-loading knee-brace design for mild to moderate cases of osteoarthritis.

At just over 14 ounces, the company says it is the lightest device of its kind on the market — a market that includes patients suffering from obesity as well as those in the aging Baby Boom generation.

In addition to knee braces, the company boasts product lines that range from diabetic footwear to electronic devices for pain relief and generating new bone and muscle tissue.

“We’ve been strategically focused on a combination of organic growth as well as a few acquisitions,” she said. “The two have proven to be a very worthwhile growth strategy for us. That combined with a reasonable level of organic growth is helping us to grow as a total company.”

DJO did four acquisitions in 2011, said Capps. “They were also sort of little tuck-ins to our overall business, but they do add up to overall growth.”

For example, the company acquired a therapeutic footwear maker, Wisconsin-based Dr. Comfort, in March 2011 for $254.6 million in cash, which gave DJO leading market share in an underserved diabetic footwear market.

A Positive or a Negative

DJO is 96 percent owned by The Blackstone Group, the asset management firm headquartered in New York City. Blackstone purchased the company in 2007 for $1.6 billion, and then merged it with ReAble Therapeutic Inc., another orthopedic device maker located in Texas.

DJO was a public company before the Blackstone acquisition in 2007, and has been private since.

So, is past performance any guarantee of future success, especially with the arrival of the Affordable Care Act starting to cast a shadow on medicine beginning in 2014?

“It impacts all health care, of which we are certainly one; depending on how we are positioned, it can be a positive or a negative,” said Capps. “We’re certainly trying to view it as a positive, since we’ll have more people with medical insurance. That means more patients will have access to home care, and our products.”

“Of course, the government will be trying to pay for all this, so that could put pricing pressure on our products,” she added. “But most of our products are lower cost options for patients who would otherwise be using pain relievers or having surgeries, or doing something that’s going to cost the health care system more.”

“We feel like we’re well positioned to do well in an environment of health care reform, but a lot of that is still in the process of being played out,” said Capps.

Meanwhile, Capps said the company would focus on innovation, as well as research, to stay competitive.

Ankles and Elbows

The business got its start in a Carlsbad garage in 1978 when Mark Nordquist, then an offensive lineman for the Philadelphia Eagles, partnered with a local attorney to make supports for the ankles, elbows and knees from the material used to make wetsuits.

In 2011, DJO’s owners brought in Michael Mogul as president and CEO.

Previously, he served as an executive at Stryker Corp. which also makes and markets orthopedic devices, so he has experience in the sector.

Outside the U.S., the company sells products across Europe, with France and Germany being the largest markets, as well as in Asia and other parts of the world.

The amount spent on research is small, compared to overall sales, about 2 percent, but it’s a key factor in recent growth.

“That’s been a success, because we’ve been able to accelerate our growth in each quarter of 2012,” she said. “We want to make sure that as many patients as possible get access to our devices,” she added.

Top of the Pyramid

Lada Rasochova, managing director of the Rady Venture Fund at the Rady School of Management at UC San Diego, said that medical device companies such as DJO form a hub that has become critical to the region’s innovation economy.

In fact, DJO sits near the top of a pyramid consisting of more than 200 such companies in the county and 700 in the Southern California region.

“That particular sector is really important to the region,” she said. “It’s one of the fastest-growing for adding employees.”

DJO employs more than 5,100, according to data supplied by the company, second only behind Garden Fresh Corp., owner and operator of fresh healthy restaurant chain Souplantation, which employs more than 5,900.

But the mix of jobs is much different.

“Many disciplines are involved in medical devices, including the scientific and engineering sectors,” which represents a very highly educated and highly paid workforce, she said. “That’s why DJO and the other device makers are so important to the San Diego economy.”

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