Floating, not drowning

Source: Technology Digital

Date :29/05/2007 13:55:48

Optos is a remarkable UK technology success, and a company driven by ideals. What decisions does a company like this make on the road to international success?

By John O’Hanlon

Optos was founded in 1992 by Douglas Anderson after his then five year old son went blind in one eye when a retinal detachment was detected too late. Although his son was having regular eye exams, routine exams were uncomfortable, especially for a child, which made it impossible for the doctor to conduct a complete exam and view the entire retina. Anderson set out to commercialise a patient-friendly retinal image product that encompassed a digital wide-field image of the retina in a single capture.

Clinical trials began in 1998. In 1999 the Panoramic200 Scanning Laser Ophthalmoscope received both FDA 510k clearance to market in the United States and the European Economic Area CE marking. Full commercial launch occurred in 2000 in the United States and the United Kingdom, in Canada in 2003 and in Germany in 2004. The machine takes a patient-friendly digital image of virtually the entire retina, known as an 'Optomap'. Reviewing an Optomap allows optometrists to screen for widespread conditions, such as diabetic retinopathy, glaucoma and age-related macular degenerations all of which can be treated - if identified early enough.

A clever business model

Anne Glover, founder and CEO of Amadeus Capital Partners explains Optos’s unique business model: “Because the company uses a clever ‘pay per patient’ model it can use lease finance to fund the placement of machines at the premises of optometrists. The optometrist’s credit rating is security for the leasing bank, and Optos carries only limited lease finance as debt. Optos gets its money and they have no capital outlay” Glover has been personally involved with Optos’s business for many years and regards it as a good example of the application of information technology to healthcare markets that has made itself a leader in a market that has the potential to grow to $2 billion. Amadeus assisted Optos with strategy development, by introducing the company to speciality financing sources who underwrite the company's leasing programme and by introducing the company to leading underwriters and financial analysts as the company worked towards its IPO.

John McNeil is Director of Communications & Assistant Company Secretary at Optos, so was deeply involved with the company’s float on the London Stock Exchange in February 2006. Privately held up to that point, the company’s aim was always to grow the business in the key North American market. “The IPO raised £30 million in primary, and £20 in secondary proceeds to facilitate growth, invest in new markets and to broaden the product offering,” he says. “The P200 is unique. It takes just a quarter of a second to scan a much wider field of the retina than any other method can. Our objective is to have our Optomap examination as part of every one of the estimated 160 million eye examinations carried out in our markets.” That objective is the $2 billion opportunity identified by Amadeus.

That figure is presented in dollars because though Optos is a Scottish company 90 percent of those eye examinations take place over the Atlantic. “As a high service, asset-based business we had to decide how to manage the huge opportunity the American market presented. We decided to float to fund our growth.”

The choice of market

“We could have gone to the AIM market earlier,” explains Anne Glover, who now sits on the Optos board as a non-executive director. “But AIM companies are less attractive to international investors, and we were setting out to create an international shareholder base. The choices were either the London Stock Exchange or NASDAQ, and as the company has a UK headquarters and London is the leading financial market in the world, that was the right choice.” Another reason, she says, was that companies that have a market cap of less than $500,000,000 tend to fall below the radar in the US markets.

Yet another reason why London suited Optos’s culture better was that it is a principles- as well as a rules-based market whereas the American exchanges are entirely rules-based and highly prescriptive. Finally, of the four leading banks which expressed an interest in representing Optos and taking it public three recommended the LSE.

Goldman Sachs was appointed global coordinator and book-runner for the flotation, a role it executed with excellence, according to John McNeil. “They didn’t miss a single deadline, and they were present at every meeting, and I don’t just mean in London. I think it is vital to have a highly engaged sponsor battling for you and with you.” It is just as important to have a diligent board, adds Ann Glover. “The Optos board was extremely vigilant, and its role in the transaction was critical.”

Amadeus Capital Partners was founded by Anne Glover and Hermann Hauser in 1997, and has been an investor in Optos since 1998. Having identified Optos’s potential as an entrepreneurial technology based company it assisted its growth at every stage, and was able to get the attention of the investment banks at an early stage, convincing them that this was going to be a stellar company. “A venture capitalist has the advantage of being able to get the attention of a big bank,” she observes drily.

That Optos was deserved that attention is a matter of record. John McNeil ran through the company’s revenues:

2000 $1.8 million

2001 $1.8 million

2002 $5.4 million

2003 $14.3 million

2004 $29.8 million

2005 $48.4 million

2006 $67.7 million

“The growth continues…” he says. Well, who wouldn’t want to invest?