Operating with Confidence Twenty years at Integra LifeSciences

Thank you. Do I need to turn this on in the back? There it's on. Can people hear me? I'm getting over a bit of a cold from the weekend. Can you hear me in the back? Well, thank you very much for that nice introduction. I have a lot of ulterior motives presenting here today. For the students here, we're trying to recruit you. We've got even one of our HR people here. We're really excited about the opportunity to build the relationship between Integra and the engineering school and the Neuroscience Institute. My presentation today is to get many of you excited about opportunities in science, in business, in engineering, and also to get a quick sneak peek at some of you guys, so maybe there are some summer opportunities or long-term opportunities with us. It was an awfully nice introduction. One of the things I will tell you, my experience now in business for 20 plus years, if you can combine a lot of the things you enjoy in your daily work and figure out how to make it a lot of fun, it makes it a lot easier to lead. One of the things you'll see in the presentation is that at Integra I've managed to include my freshman year roommate at Princeton from the class of '83. We've managed to include quite a few amazing scientific projects that change lives, and we're also able to generate shareholder value and be a profitable company. If you can put together quite a few of the things that you enjoy, it makes it really a lot easier to get through the hard times and it makes you more likely to be successful when things are going well. The presentation today is called 'Accelerating Organic Growth with an Aggressive Acquisition Program.' The reason for that is that in many ways every company is a reflection of the chief executive officer. While you have a series of opportunities inside of any company and inside of any project, the way you direct them is critical. In my particular case, I came to Integra now 12 years ago as CEO. It was a single product company built around some amazing science, which I'll try to take you through. But what really made a difference strategically for the company was my bringing my experience and the team's experience in acquiring and integrating other companies into Integra, which then allowed it to be much more successful in a much more rapid period. The combination of my background, which is really as a financier putting companies together from an acquisition perspective, with the technological capabilities that Integra had, was what enabled us to grow in the last 10 years so effectively. You got to put this up when you're a public company. It basically means don't listen to anything I say and certainly don't act on it. I'm going to take you through a brief overview of what Integra is and the core technology that made us interesting as a medical company. I'll take you through a little bit of the history of the company. For those of you who are entrepreneurs in the audience, the history has a lot of ups and downs, and I'll try to keep them amusing, but some of them were nail biters. I'll take you through the financing because you can't take a technology and bring it to market and get it from just a few million dollars of sales to 700 without having a lot of financial support. For those of you maybe in the engineering school who are financial engineers, you may find this interesting because there's a lot of financial engineering, not just molecular biology, that went into Integra. I'll talk about acquisitions—we've done 40 of them in the last 10 years—and finally talk about the relationship between product development and commercialization strategy and how the different pieces fit together. Not everything in this talk will fit together, and that's a lot about business: it doesn't all fit together. So what are we today? We're a market leader in neurosurgery. We represent the largest company in the United States in providing products used for brain tumors, head trauma, aneurysms, epilepsy, and to some extent functional neurosurgery. We're at the leading edge of what many people think is the next big wave of medicine. Cardiovascular has been where much of the energy over the last 10 years in development and engineering has been. It's interesting to note that when you measure the output of a heart, there are about 30 different parameters that are measured, and when you measure the output of the brain, particularly in the ICU, we typically look at two or three. Clearly the brain is a lot more complicated than the heart, so we're at the very beginning of looking at what can be done for the brain. The company is a leader in medical instruments, as Vince pointed out. We move a lot of product from a big supply chain around the world. In the United States, we ship more than 15 million units of products from every country in Europe and many countries in the developing world through regulatory and quality inspections into the United States to be used in surgeries. Finally, we're a growing player in orthopedics. Many of our products are used to repair the spine, the foot, the ankle, and other orthopedic areas. We're located in Plainsboro, about four miles from here. We're in a little office park. We have about 400 people there, and we produce over $100 million worth of products. We have 3,000 employees, of which about 400 are here in Plainsboro; the rest are located in different places around the world. We make almost everything that we sell, so that's why we have so many employees. The funny thing about medical products is that a lot of them are made by hand. If you looked at one of our factories, you'd be amazed at how similar you might find it to a bakery or a chocolate factory, or in some cases a semiconductor factory, but a lot of stuff is done by hand. We started in Europe about five years ago, and now we have a pretty decent sized organization in Europe as well, with about 450 people in Europe, and our products are sold around the world. They're all regulated by the US FDA as well as individual country regulatory bodies. Here's our executive committee. There are three of us who essentially have most of the executive responsibilities for the company. It's just interesting to know who we are. My background is as a financier. I worked at Goldman Sachs doing M&A for 10 years, and my interest was in strategy—putting different technologies and people and products together into perhaps a slightly different approach that would then make them more profitable and more successful. My undergrad here at Princeton was in international affairs and economics. My college roommate, Jack Haman, whom I met the first day at Princeton, was an attorney, worked in business development doing a whole host of things including financings, M&A, and other litigation activities as a lawyer. Jerry Carosi, who joined us a few years later, came out of sales and marketing as well as product development. We came late to the company; the company was already founded by our chairman. I'll talk a little bit about that. The skill set of R&D and technology and engineering was there already, and it was our responsibility to take what was a single product and try to expand it globally. One other Princeton connection: there are two directors here who live here in Princeton, and one of them is also class of '83, Chris Shade, who is the CFO of Medarex, a monoclonal antibody company here in town. Our vision is to be a market-leading, innovative company helping medical professionals enhance the standard of care. Our customers are hospitals, but hospitals don't choose which products they use; doctors do. One of the challenges you have is educating doctors and surgeons on your products and then getting hospitals to buy them. We'll talk about that a little bit. Today in the United States, particularly if you think about what's going on with the healthcare debate, there's a tension between medical innovation and cost effectiveness. Every study, every product, everything we're doing today, you have to study both. Having clinically relevant products that change the way surgery is done, and at the same time products that across a group of people are cost effective for the economy and for the country. Our value statement: one thing we do say because we ship so much product is that everybody in our company has a family member who will be operated on with one of our products in the next 12 months. All you need to do is the statistics to figure that out, and therefore you better treat the products that we make accordingly. How do medical device companies grow? I'm going to now take you through a little bit of the history of the company. First and foremost, if you don't have innovative products, you're dead. You have to start with having some engine of innovation, some technological differentiation that makes your products better than your competitors' products, and probably not just by a little but by a lot. The second thing you have to do is be able to create businesses. Having a really good technology or even a good product or two will not allow your company in the long run to thrive. You have to be able to turn that into a business. Many new technology companies, many startup venture companies, have a good product but they do not have the ability to turn it into a business. Candidly, one of the ways we've grown over the last 10 years is by buying those companies and turning them into businesses. The third thing you have to be able to do if you're going to survive is know when you've reached the limits of your own capabilities and identify others who have things that are interesting and somehow undervalued or underdeveloped, and figure out a way to get your hands on those products either by buying the company or by bringing the technology in-house. Fourth, geographic expansion is critical. The world market now: the US is now less than half of the market for medical technology. It used to be 70 or 80%. We're now less than half, with Japan and the major markets of developed Europe being the fastest growing in the last 10 years. If you look at where we're going over the next 10 years, the Chinese and Indian markets will grow so dramatically that they will by far represent most companies' major growth opportunities in the next 10 years. So what do we have as a company? We have core technologies in regenerative medicine, and I'll show you what that is in just a couple seconds. We are innovators in making medical implants that can be put into the body and either turn into your body or remain in the body, enabling it to do something that it perhaps lost the ability to do. Supply chain is critical. Hardly anybody is able to produce a product without relying on an enormous network of vendors whose quality responsibilities you own. We're very good at integrating other companies, and having an excellent regulatory, quality, and clinical group is now as important or more important than simply having good technology or good engineers. Finally, people are everything. It should be the first thing on the list here, but if you don't have motivated people, you're not going to be successful. Let me talk about the history of the company. You'll see this little picture here over there; it is the familiar theme of this presentation: it is money growing on trees. I say that because for almost any medical technology company, including Integra, there is an enormous sunk cost that goes into getting the company successful, often well in excess of any value that is available today. Said differently, many companies like our own are built on the failures of others. If you add up the sunk cost inside of Integra, even when I got there, over half a billion dollars had been spent on research and development, and most of those companies were bankrupt. So we brought their technologies in, we brought their patents in, and their shareholders and investors never got the benefit of all the work that they put in. That's just a consistent theme in our industry and I suspect in others as well. A lot of failure before there's success. The company was founded by our chairman in 1989. He too was not a scientist; he was a business person. He got it in his head that it was a sort of ridiculous thing that he was getting old and he felt his organs were wearing out, and he said there's got to be a way to grow new ones. Without even a bit of experience or medical background, he went around trying to find people with medical background and experience. He went up to MIT and worked with a couple engineers at MIT who were working on a matrix made of collagen. Collagen, after water, I believe is the most ubiquitous molecule in your body. Pretty much everything in one way or another is fashioned out of collagen. It essentially serves as an infrastructure, a scaffold into which most everything else is growing in your body. He wandered around and met companies, entrepreneurs, scientists, all of whom were working on collagen, and you see five different technologies that Rich Caruso, our chairman, brought together under one roof over about a six-year period. Interestingly, every one of these had a university beginning with a number of either engineers, molecular biologists, scientists of various sorts working on biomaterials, polymers, proteins, with the idea of building a scaffold that when you implant it in the body will one way or another regenerate a new organ. These are the five different companies that he brought under one roof, and then the company went public in 1995 and raised $35 million. What were we working on? We were working on an artificial skin. In the period 1950 to the 80s, there were about five or ten different teams around the country, affiliated again with different engineering schools and universities, trying to develop an artificial skin. The general concept was to do cell transplants from either autograft, so from someplace in your own body, or xenograft from an animal, or cadaver. The idea was if you put cells into the body, somehow you could teach the body to keep those cells alive and grow them. Almost every one of those was a failure. The concept behind Integra was: don't put the cells in, just build a matrix and implant the matrix in the deficit in the hole, and then let the body's own cells grow into the matrix, take over the matrix, build a human tissue, and then consume the matrix and regenerate your own organ, in this case dermis. After close to 30 years of research and then 7 years in clinic, the product was approved in 1996 as the first product the FDA gave a claim that it regenerated an organ in the body, in this case dermis. This was a lot of people's work; it was literally hundreds of millions of dollars. Even inside of Integra, we spent in the first six or seven years about $60 million to get this product through a large multicenter clinical trial across the United States. I guess the premise was the world would beat a path to our door, so we went public and we did that before we actually had any revenues. We went public with an expectation of $20 million of revenues in the first year, $60 million in the next, $120 million in the next, and $240 million. Everyone expected exponential growth, and sadly it didn't happen. First year was $5 million, second year was $7 million, and the company was losing $15 million. This is the stock price graph from 1995 to 1997. I think the approval was right here, which is the highest the stock got. The stock was down 75%, and people were wondering why they invested in this company and what were we going to do about it. Our chairman, and by the way the product is saving lives, and I decided with this audience not to show you graphic pictures, but this product can cover a patient who has burned over 90% of their body surface area and regenerate an entirely new dermis for that individual. The clinical success of this product is extraordinary. You can go to our website, which I'll give you after the talk, and actually see photographs of patients with regenerated skin. But commercially, ask yourself a question: how many people do you know who were burned? None. Who gets burned? The elderly, children, and very poor people. So clinically this is a very important product; commercially it was a disaster. Now ask yourself a different question: how many of you have either parents or family members who are diabetic? Quite a few. Who have foot ulcers? It's an enormous market. Over the last 10 years, we had to take what was a great product but come up with a completely new commercialization strategy to bring these products to where sadly the money is, and the money is in solving people's diabetic foot ulcers and venous stasis ulcers. We haven't stopped curing these burned people, but wrong target market: burns. So that's when Rich Caruso basically brought in a new management team including myself, and the idea was to redirect the company and come up with a new—by the way, that's still money growing on trees. By then I think we had lost about $70 million. The sunk cost in the company was about $500 million from other companies and those other technologies we brought. I came in in 1998, and I don't have a slide here on it, but in my first three years I figured out how to lose another $70 million. But we brought in basically a whole new management team. We restructured the business. We started cutting the costs inside the company, and we started work on another technology application of the same core collagen technology, which was a dural patch—a device to close the dura mater, the thin membrane that surrounds the brain and the spine. I'll show you why that's important in a couple seconds. We got an investment from George Soros, which is always good. At that point our market cap had fallen, I think about by then another 20%. Today we have about a billion dollar market cap, and when I joined it was about $100 million, and within a few months of my being there it was down to $50 million as we were doing all this restructuring. George Soros invested $20 million in the company, and by the way he sold it a few years ago for $120 million. We began the search for a way to bring DuraGen to market. Pause for a second. This is the 10-year track record of our company in revenues. Here's where we were in 1998. This core collagen technology now in 2008 is about $140 or $150 million, and the products are used now to generate artificial skin, dural grafts, tendon repair, nerve repair, bone repair, and a few other areas. We've also done a series of acquisitions, which I'll talk about in a few minutes, but our 10-year compound annual growth rate in revenues is about 45% per year. A little more history. We spent about two years developing DuraGen. Like the Integra skin, it's a collagen graft, but it gets implanted instead of in the dermis on top of the dura mater. Why would you be touching the dura mater? It's typically after brain surgery. You have to remove a brain tumor or fix an aneurysm or do something where you need to penetrate to the brain. On your way out, you have a big problem: you have a big hole in what's supposed to be a waterproof bag. If you don't handle the hole properly, the brain will sag right onto the brain stem and kill you. So they've got to close the bag. The traditional way of closing the bag is to take a patch, usually a Teflon patch, and put the patch on and sew it closed. If you sew a bag closed, you get pinhole tears. If you have pinhole tears through the bag, you're leaking. If you're leaking, your best possible outcome is you have a really bad headache, kind of like having a spinal tap. Your worst case is you get an infection, they've got to go back in and redo this Teflon patch. Our product, made out of collagen, is a natural hemostat. It induces a clotting reaction. You can take this collagen patch and put it on top of the dura mater, and to everyone's surprise, you can stop the leak, and indeed it'll grow a new dura mater the same way it grows a new dermis. That was really the genius behind the invention of DuraGen. Now how do we get this to market? We've lost tons of money. We demonstrated with the launch of skin a not very successful launch. This is where bringing a different skill set to play paid off for the company. We said let's go buy another company that had a track record of launching products. So we bought a company called NeuroCare; it was the first bullet point in 1999. We were losing $15 million, no bank would lend us any money. How did we actually do this? George Soros invested in our company, and we actually used his $20 million to go do a leveraged buyout of another company. We bought a company that had a well-established sales and marketing organization, a well-established set of products, and was well known to neurosurgeons. That was this company, Camino. We spent $35 million. By the way, we didn't have any money, so we spent other people's $35 million. We actually ran it as a standalone company for about two years and gave it our DuraGen product to sell. That sales force started growing DuraGen and grew it in the first few years to almost a $50 million product, and by the way a profitable product. Over the last 10 years, we continued to build this neurotechnology company through a series of other acquisitions, and we also launched several other grafts, including our nerve repair graft, which is basically a tubular form of collagen with a slightly different molecular structure, but it will help a nerve regenerate down a path. We launched that product, I think it was in 2006. So we put together a company now with about $250 million of sales. It's got pretty much every tool that a neurosurgeon would use when they do a brain tumor procedure: everything from image-guided surgery devices, fixation devices, brain mapping devices for looking for foci to cut the brain if you have an epileptic surgery needed, biopsy products, fixation, and then you can see a whole host of products used in surgery including ablation tools, monitoring devices, and of course our DuraGen product. More recently, we did another acquisition to do radiosurgery for removing tumors non-invasively using radiation therapy. That's the first chunk of Integra's history. We had a market-leading business in neurosurgery, and we had a very ambitious group of people. We said, can we do it all again? We set out to do it in another area, which is reconstructive surgery—basically surgery for the reconstruction of hands and feet and skin. Without going into too much detail, we did two more acquisitions, a series of new product launches, and built roughly a $100 million business in artificial joints—wrist joints, ankle joints—and then soft tissue products for regeneration of bone and skin. The last part of the story: starting in 1999, we also began acquiring surgical instrument companies. Most of the products that are used in hospitals for surgery are manufactured in the developing world, processed in Germany, and brought to the United States. There are literally millions and millions of these instruments, so it's all about having an efficient supply chain. We've done a series of now 10 acquisitions that make us the number two player in the United States in surgical instruments. It's a billion dollar market, and our products are used in virtually every hospital in the country. You can see, I hope, this is actually what a surgical field looks like in the operating room. Here's your surgeon. I'll just point out the products that he's using. He's got a fixation device basically holding the patient's head in place. He's staring into the patient's head using a headlamp which lights the field of view, and we make that headlamp. We make these fixation devices. He's using handheld surgical instruments. He's using an ablation tool to remove tumors, and he's using image-guided surgery. Much of what they do is minimally invasive, so they're looking through a keyhole and you're looking at it on a screen as they're doing surgery, usually stereotactically. In summary, our objectives were to create a commercial infrastructure to leverage these collagen high-margin products into multiple customer markets. We did that in markets where we were, in our opinion, able to be a number one or number two player. You can only do that in markets that were big enough to be attractive but small enough that you could avoid competition from some of the larger competitors. Our objective was to provide consistent incremental product improvements, the development of divisional management and succession planning, to create an ethical, transparent culture dedicated to providing the highest quality products, to continually train our employees and give them opportunities for new development, to build an identity in the customer base for Integra, and to continue to expand internationally and drive these products into what is a global healthcare environment well beyond the US. One last comment on financing. The company has raised, to put all these acquisitions and all the product development in place, actually close to $800 million since the history of the company. I personally had to raise the bulk of it. We did that through every possible avenue: from banks, from convertible bond holders, from debt holders, from equity holders, from warrant holders. You have to be as creative in your financial engineering to make a company like ours successful as you are in your product development. We've bought our stock back, we've bought our bonds back, we've sold them again, and it's all about trying to create enough capital to invest in the company and grow. Last thing, since we're here at Princeton: in the world service, we do a great deal also to support the community and give a lot back, whether that's activities where our employees go out and support our customers, activities where we provide funds for education and clinical development, or things like what we're doing here today. So we're trying to build the next great medical device company, and I would welcome any of you to be part of it, whether it's through the research you do here at Princeton, collaborative opportunities with our own engineers and scientists at Integra, or students who might seek to be part of our workforce. I've got this little bit of an advertisement here about our rotational program. We have, I think, two Princeton students just joined us in the fall. We have a great program for mostly undergrads, but I'm sure we would be interested in grads as well. It's a two-year program where you work in various of our departments and then ultimately rotate into a permanent position in any of regulatory, quality, clinical, engineering, product development. Since there are so many Princetonians on our staff, including myself, we absolutely view this as a critical place to hire. Excuse my ulterior motives. I'm happy to take any questions. I realize the talk was a little bit eclectic, but hopefully it gave you a sense for the texture of what it is like to piece together a company and turn it hopefully into a successful one. Thank you.

Are you? Yeah, we're always planning to raise capital. Well, you know, it's a funny economy right now. During the first six months of this year, the most extraordinary thing happened. Actually, it never happened in my tenure, and I've been in business since 1988 when I graduated from the University of Chicago. In the first quarter of this year, the capital markets in the United States shut down. No one can remember that happening, and it fundamentally changed the way all of us look at risk. So we're always looking at making sure that we have cash. For a while there, and you'll find this interesting, a little company like Integra had $200 million of cash in the bank and we didn't know where to put it. In one week we moved it from one bank to the other to the other because everybody was telling us that the banks were going out of business. We were used to the banks worrying about us going out of business. In this environment, it helps to be liquid, so we keep a lot of cash around and we're always looking at financing ourselves. The other side of it is interest rates are at an all-time low, so it's a really good time to borrow, but stock prices are pretty low, so it's not a great time to sell your stock. That reflects on what we might do, but we have quite a bit of effort at all times looking at whether and how we should finance ourselves.

So that's an excellent point and one that's salient both to the founder, to the management, to the employees, and to the other stockholders. When Rich founded the company, which was about 20 years ago, Rich was the sole owner. In fact, he trucked all the equipment himself from Kansas City to Plainsboro on a truck, which he claims he drove—I don't believe that—and he financed it himself with about a million dollars. He got the owner of the equipment to lend him that million dollars, so he didn't actually put up any money himself, and he owned 100% of the company. In the period between when he was the sole owner and when I joined, he had done a couple different financings with different people and had diluted his equity ownership to 50%. When I came on board, he owned 51%, which when you think about it is a critical thing even for a public company because he's on the one hand an individual, but on the other hand he owns more than any other institutional investor. The challenge that we always had was how to try to grow the value of the company, which is essentially the stock price, and do it in a way which limited dilution. The definition of dilution is your ownership interest of the company. There's a tradeoff. If you borrow, borrowing comes with lots of strings attached. I talked about that first leveraged buyout that we did. There was an infinity of strings attached. We couldn't do anything, including pay bills, without having to go to the banks for sign-off. So you're trading one devil, which is the dilution that you might take, for another devil, which is having the bank as your partner. That's a nuance that you manage every year, and you do tradeoffs. Indeed, we have taken advantage of the fact that sometimes when our stock is down but we think the company is doing well, we actually buy stock back and reduce the number of shares outstanding, which is good for those people who retain ownership, including our chairman. Similarly, if the stock is doing particularly well and we have good opportunities, we may sell stock. The last time we sold stock was almost, I think, seven years ago. Now our primary way of funding ourselves is through debt, which because we're a bigger company and we have strong cash flow, we don't have as many strings attached when we borrow. We have a lot of flexibility without limiting the ownership upside for our equity shareholders, whether they be our chairman or public shareholders. I can't give you a crisp answer because there is no right answer. It's trying to balance the strings that come with debt and the risk that comes with having to pay back the debt with the benefit of not having so many shares outstanding that you never create value for your owners, for your stockholders. I would say it also takes trust. Rich, our chairman Rich Caruso, really believed in the vision of the company and was at least as enthusiastic about the growth that we had as about his own share ownership. To the extent that he really believed in what we were doing, he was willing to accept dilution if it was good for the long-term success of the company, including the share price. I think what happens with a lot of venture companies, particularly when it's institutional venture companies, they become a bit fixated on their dilution, a bit fixated on maintaining their ownership, and sometimes become maybe as short-term in their thinking as people may blame managements or public shareholders.

Well, competition was critical. In every one of these product lines, we had a lot of competition. We have a unique technology, but there are other technologies that can do similar things. It's more than just having the technology; it's the ability to take the technology and translate it into a product that indeed has good and useful short-term efficacy and also a good story. I'll give you an example. We were so into, as a management group, the idea that we could regenerate an organ that we were really talking to ourselves. When we went out and launched Integra skin, we went out and told people you can regenerate an organ. Well, there's no doctor who regenerates an organ, and there's no payer for that. There are people who do surgery, and there are surgeries that get paid for. There was a little bit of naivete in our approach. Fast forward: when we launched DuraGen, we launched it with the message you can regenerate the dura. Well, no neurosurgeon cared at all. They didn't want to regenerate the dura; the dura is just a bag. Now if you could regenerate the brain, that would be interesting, but the dura is just this nuisance that gets in the way of getting to the brain. We moved quick, and we had a good sales force that we acquired, and they came back to us within a month of our product launch and said nobody cares about it. But you know what one of the doctors noticed? When you put the Teflon patch down, he doesn't have to sew anymore, and he can get out of surgery 30 minutes faster. We didn't know that when we launched the product. The fact that we had a good commercial infrastructure and we reacted quickly, we changed the message entirely. We took out any references to regenerating dura because nobody cared. What they cared about was 30 minutes less in surgery. Brain surgeries often go eight hours. It takes about four hours to dissect to the brain, and that's a brain surgeon who doesn't even want to dissect to the brain. Their whole interest is in touching the brain, but getting to the brain without damaging all the vital organs on the way down is a huge part of their surgery, and the worst part and the least interesting part. There's four hours in, you're standing up, it's very uncomfortable, and then you get to do the cool part. Then on your way out, you've got to close. By the way, a lot of times here comes the resident; he just wants to go home, or she just wants to go home. The idea that you could put a Teflon patch down and close it and get out 30 minutes faster—that was a hell of a selling message. We quickly changed our whole commercialization strategy, and it was fast. Nobody else worked fast. Now there are other companies, five years later, that can do similar things, but the first guy there usually has a big advantage. We've probably been able to keep still 60-70% market share because of our first-mover advantage. The other thing we did well with this product is we differentiated it quickly. We created probably 30 different flavors of this product. A lot of our competitors don't have this technology in-house, so they partner with other companies that have this technology. It's hard to convince another company to make 30 flavors for you, but if your own scientists are doing it, they love making different flavors. That's another big advantage: we've got big, small, thick, thin, sewable, non-sewable, lots of different things. If you're a bigger company that does not have this inside, it's more of a challenge to convince your partner who's making it for you to make it in different flavors. There's been a ton of competition, and it scares the bejesus out of you because you've got this great product, and unlike pharmaceuticals, you don't really have much patent protection in medical devices. You can't really count on 10 years or 15 years of patent protection. Even when you do have the patent protection, your competitors just knock it off anyway and say, 'See you in court.'

Interesting correction. I probably didn't get this across: we have actually very few medical doctors in the company. We do have several, but we have lots of engineers and lots of scientists. But you can't make a product without a doctor. A lot of what we do is we will partner an engineering team with a surgeon team. The surgeon team has to be practicing medicine all the time because they've got to be at the cutting edge of what is current here and now in surgery. Then you need an engineer who is allowed to not touch the patient but sit there and watch and say, 'Wait a minute, I see what you're doing. You're doing the same thing seven times. I know how to make a machine that can do it seven times,' or 'I see what you're doing, wrapping this vessel with Teflon. I could probably make it out of collagen and it would stick.' All of our products in one way or another are collaborative in nature. There are three or four doctors who are working on the concept and the procedure and the surgery, and then our engineers or our scientists are working on the product, and it's iterative. There are rules and regulations on how you can iterate, whether it be in the lab or in preclinical or in clinical practice. Did I answer your question?

We sell in South America. It's more challenging to sell in South America, and there's not quite the perceived opportunity that there is in China or India. In China and India, you're looking at a middle class of somewhere around 60 to 150 million people who are expecting a standard of care pretty much similar to what you have in Europe or the United States. Those are huge markets, and a lot of the products they have, they want to adopt from the US or Europe. The policies in some Latin American countries work to favor local manufacturers, so you'll bring your product in and not only will they knock it off, but then they'll prevent you from selling it there. In China, they'll knock it off but they'll let you still sell it there. The markets are so big in China and India that there's a lot of focus now. I would say in Brazil, all of our products are used in Brazil, but it doesn't seem to have quite the opportunity that China or India does. It should, but it's not structurally organized to do that. We'll take one more question.

That's a great question. Actually, the headhunter who got me there, Jan McAllister, is in the back. I was flattered that she came. I'll tell you the honest truth. I was working at Goldman Sachs as a merger and acquisition adviser to larger companies, companies like J&J and Bristol-Myers here in town. The challenge, of course, is you're always advising somebody but never getting to make the decision yourself. If you're a consultant or a banker or a lawyer, that's your inevitable frustration. You're always giving advice, but no matter how good the advice is, it's not yours to decide; someone else is making the decision. I found after doing that for 10 years, I thought my clients were having more fun than me, so I wanted to make the switch. I told everybody I knew, including Jane there, 'If you can find a company crazy enough to hire an ex-investment banker as CEO, bring it to my attention.' By the way, there weren't a long list. This company kind of was perfect. It had a great technology, and it needed somebody to change it—not a lot, but a little—so it was a good fit for me with the chairman and with the company. From my perspective, I did a huge amount of due diligence. One thing you don't think of necessarily as a student, but is so critical, is ask everybody you can the same question over and over and over again, and eventually you'll get an answer. I spent a good year talking to everybody I knew about Integra. 'What do you know about the technology?' I talked to my clients about Integra, I talked to investment banks about Integra, I talked to employees, and I just asked a ton of questions. I convinced myself that the core technology was going to be successful and that it was worth taking a risk on. Other companies and other situations didn't seem as promising, both from a technology perspective and from an interpersonal perspective. I really thought that the management and our chairman got it and knew where we needed to go and just needed some additional help to get there. The people part of it is critical because you can have the best technology, the best company in the world, but if you can't all work together, it won't be a success, at least for you. Thank you. Please join me.