AngioDynamics (NSDQ:ANGO) CEO Joe DeVivo’s deep roots in the medical device industry are common knowledge. The former CEO of RITA Medical Systems (acquired, as it happens, by AngioDynamics in 2006) spent four years at the helm of Smith & Nephew’s (NYSE:SNN) orthopedics division.
But not everyone knows how DeVivo cut his teeth in business, or how some good luck in the neighbor department landed him in the medical device world. DeVivo’s father, a blacksmith, emigrated from Italy and started a business making refuse and recycling containers that grew into a $12 million-a-year, 60-employee business.
"Pretty much everything I know or what I learned about business, I learned the basics from my father," DeVivo told MassDevice.
But it was a neighbor’s willingness to give a local kid a shot that set him on his lifelong career path, DeVivo told us. That neighbor, U.S. Surgical founder Leon Hirsch, gave DeVivo a job in sales and he never looked back, rising through the organization even as it was acquired by Tyco Healthcare (which later morphed into Covidien (NYSE:COV).
DeVivo also has a personal connection to us here at MassDevice: His first boss at U.S. Surgical was Charlie Johnson, father of MassDevice publisher Brian Johnson.
DeVivo took over a company coming out of a tough fourth quarter that precipitated the departure of his predecessor, Jan Keltjens (who’s since become president & CEO of Endosense). AngioDynamics posted a $752,000 net loss during the three months ended May 31, compared with a $3.7 million profit during the same period in 2010. For the full fiscal year, profits dove 33 percent on relatively flat sales.
By the end of the company first quarter – also DeVivo’s first at the helm – the trend was reversed: AngioDynamics reported net income of $1.4 million, or 5 cents per share, on sales of $54.4 million for the quarter. That compares with profits of $1.9 million, or 8 cents EPS, on sales of $51.5 million during the same period last year.
The company also has plenty of cash to burn, notwithstanding a $20 million share repurchasing plan that CFO Joseph Gersuk expects will eat up about two-thirds of the reserve. As of August 31, the company had about $137 million in cash, equivalents and marketable securities.
We caught up with DeVivo recently to reminisce about his salad days and to get his first impressions on his new role, the company he’s charged with leading and where and how the company plans to spend all that cash.
MassDevice: Give us a little bit of personal background about your long pedigree in the medical device space.
Joe DeVivo: Well, I started off in a family business, for about my first five years in Connecticut.
And then, when I decided to leave the family business, I was very fortunate to have personally known Leon Hirsch who was the founder of U.S. Surgical. He gave me a shot in the sales force and actually my first day walking in the building was meeting your partner’s father, Charlie Johnson.
Charlie gave me a sales job and I worked in sales and then came into corporate and worked in marketing. And ultimately, even after the acquisition by Tyco, ran a business within the U.S. Surgical division for a few years.
And then I left and became president of Computer Motion, sold that business to Intuitive Surgical, and then became CEO of RITA, and then was CEO for about five years. Interestingly enough, I sold RITA to AngioDynamics right at the beginning of 2007 and then went to work for SNN running its orthopedics business for 4 years, and now I’m feeling I’ve come home to AngioDynamics where much of the RITA business is still alive and well. I’m excited to be here.
MassDevice: What was the family business and what about the device space enticed you to leave?
JD: Well, that’s a tough one. We made refuse and recycling equipment. My father was a blacksmith in Italy, came over the U.S. and started to repair garbage trucks. And then he started to get involved with making garbage trucks, and then he made garbage containers and then the recycling equipment.
He had a pretty strong, growing concern in Connecticut – about a $12 million business, 60 people making a lot of these containers you see behind stores.
I grew up in that business. Pretty much everything I know or what I learned about business, I learned the basics from my father.
MassDevice: So quite a move, though, from that business to the medical device world.
JD: Well, when your next-door neighbor is Lee Hirsch, you’re pretty lucky.
I was very fortunate that U.S. Surgical had probably one of the best on-boarding sales force training programs, that can take anyone who knew how to sell and acclimate them to the medical device industry. So that’s basically how I got involved.
MassDevice: You’ve been in the corner office over in AngioDynamics, in what you mentioned as sort of a homecoming, since August. What attracted you to that in the first place?
JD: I very much enjoyed the experience with Smith & Nephew, learned a lot about orthopedics, and also a lot about some key operating mechanisms, so I’ve enjoyed the time there. I most certainly had a desire to get back to becoming a CEO. So while I enjoyed the time being a divisional president, there’s a lot of politics. It’s always better to run your own thing.
So I have several board members that I’ve known that were on the RITA board, who were here at Angio, and as the company was going through its own transition, they reached out to me. And the more I thought about it, the more it’s not only coming home to a business I know very well and have had success in, but also to a location where I have a lot of family. So in many different ways, it felt like coming home.
MassDevice: You folks haven’t been exactly shy to advertising your willingness to look for acquisitions. You’ve got quite a cash & equivalents reserve – if you include marketable securities it’s pushing $137 million – so there’s clearly some powder to burn there. Are you looking for bolt-ons to expand your existing businesses, or to geographical expansion? Or are you looking to break ground in treatment areas that AngioDynamics doesn’t address yet?
JD: The truth is, it’s all of the above. But it’s a function of which magnitude. We’ve very interested in making organic investments in new technology, which may represent new areas. But we’re not interested in making large acquisitions that are outside of our channel.
Today we’re fortunate that we have the best medical device oncology sales force in the world and we do feel an urgency to continue to strengthen that channel and bring some new products there.
We also have tremendous brand equity in our vascular access, peripheral vascular markets, a great sales force and a great company. And we would love to find ways to create as many new opportunities for that sales channel as possible.
So whether they’re acquisitions of size or whether they’re tuck-ins or whether they’re new technology, we’re looking to reinforce the existing pathways to our existing customers.
MassDevice: Can you give me a sense of how aggressively you’re pursuing the acquisitions trail? Is it just something that you’re always doing just as a normal part of doing business at any unit, or is this really a focus for you guys and can we expect some news there?
JD: I think there’s probably a greater sense of urgency than what would be normal. We do need to reinvigorate our top-line growth, and we have the means to do it. I think what holds us to and what will hold anybody back is we would like to do a good transaction for our shareholders. We don’t feel compelled to do something that’s not in the long-term best interest of the company – we’re not interested in doing a deal for the sake of doing a deal.
But yes, I think there’s a sense of urgency that we carry, and when you know doing some transaction would be healthy for the business, and when you have the means to do the transactions, it most certainly is a priority.
MassDevice: I have to ask and I know you’re definitely not going to answer this one, but are there any targets that you can name specifically?
MassDevice: Fair enough. Moving on, what’s the latest news for you with the NanoKnife?
JD: NanoKnife is, in my early view, as good as everyone believes it will be. The ability to ablate soft tissue, but also to possibly preserve blood vessels and nerves, is a new dynamic in a treatment of unwanted tissue. So we’re very excited about it.
I think the best update I can give you is in calendar 2012, we’re going to start seeing some data published of the medical success of the product, and it’s data that will drive this market.
The early adopters are driving it now, because they understand what can be, but until we get good scientific data to show the clinical benefits of the product that’s the next logical step to develop the market.