Entrepreneur sold first firm for $80M, second for $400M
by Chris Herbert
New Hampshire Business Review, December 15-28, 2000
Reprinted with permission of the New Hampshire Business Review
Gregory Sancoff 43, family man and Land Rover owner, goes to work in relative anonymity wearing a Hilfiger jeans and shirt outfit.
Which is OK by him because he knows all about going to work in a suit and being on the front page. After all, he sold his first company for $80 million at the age of 30, and then sold a second company six years later for $400 million. Not bad for a graduate of Lawrence (Mass.) Vocational-Technical High School.
Now Sancoff somewhat reluctantly faces the prospect of once again finding himself the center of attention.
Sancoff is chief executive officer and president of Onux Medical in Hampton. And if history is any guide, the gifted designer of medical products is about to take over the $2 billion market for products dealing with minimally invasive (laproscopic) surgery.
Onux has developed two patented products that fit into the "disruptive technology" category. One product, called Touche, allows surgeons to suture without a needle. Looking like a gun with a long 5mm nose, Touche allows a surgeon to grasp tissue, suture the tissue, twist and secure a knot, cut the knot and then do it all over again without ever removing Touche. (Surgeons today insert two tools and must remove them after each suture.)
A second product, Salute, uses the same patented concept to let surgeons easily affix mesh to underlying tissue -- a frequent need in surgery.
Both products, in short, make today's surgery techniques obsolete.
"It's the first time I'll go after a market with no competition," says Sancoff. "We're really doing something important. This is going to change the world of surgery."
Right now Onux has only 28 employees, housed in a 24,000-square-foot building. Sancoff figures he'll double or triple employment over the next 12 months, at which point he'll be looking for more space.
The need for new employees is, in fact, the reason Sancoff now has to re-emerge before the public eye. "I need the exposure for Onux Medical. We need engineers and other staff to meet our growth plans," he says.
Both Sancoff and Onux are already well known by the players in the market. The world of surgery is relatively tight-knit. The dominant players are Johnson & Johnson, Baxter Travenol and U.S. Surgical, which is owned by Tyco, the global conglomerate headquartered a few miles away in Exeter.
"One of them, I won't say who, acknowledges that my products have use in all seven categories of the surgical market," says Sancoff.
There have already been acquisition overtures, but Sancoff has turned them down. "I want to build this into the next big corporation in surgery. Our patents are strong. Our products work every time. We have no competitors" he says.
With these ambitions in mind, Sancoff says Onux won't make the mistake of going after all the markets simultaneously. "We're going to be focused on the bread-and-butter markets initially. Losing your focus when you have revolutionary products can be dangerous," he says.
Gall bladder surgery (where minimally invasive techniques are already common), hernia operations and surgery for acid reflux are three early markets Onux will penetrate, says Sancoff.
Later, Onux will go after markets involving vascular and cardiac surgery. Sancoff has already staffed a separate research and development company (situated elsewhere on the Seacoast) that is developing applications for other surgical markets.
'Busier than you can believe'
Onux's products aren't the only things that will give the competition a case of acid reflux. Sancoff's history of success indicates the new kid on the block is likely to be formidable.
His father, a Wang systems engineer, "told me that if I wanted to be successful and independent, I'd have to invent my own products," Sancoff recalls.
Even when he was at the voc-tech, Sancoff liked to build things. "Most of these were to propel me faster," he laughs. At 17, and while still in high school, he formed his own machine shop, where he designed and manufactured prototypes for other companies.
In 1982, 25 and single, he sold his machine shop, jumped into a new Trans Am and headed for San Diego. "The weather is warm, and there was a lot of opportunity," says Sancoff about his plans at the time.
He was soon designing prototypes for other companies in markets ranging from computers to medicine.
Those in the medical field called the most. "Everybody was calling me from that industry. We were just busier than you can believe," he says.
Soon, the voc-tech grad was hiring Ph. Ds to work for his company, Block Medical.
But by 1989, the advice from his father began to take hold. "I said, 'Time out. We're inventing all these products but there's no royalty, no annuity,'" he says.
Block Medical honed in on the home health care market and soon produced a low-cost, disposable and portable IV pump for use in hospitals. It looks like an egg with a tube attached. An elastic reservoir inside the egg delivers fluid at a steady rate to a patient through an IV needle. Four other products followed, including a computerized infusion pump to handle more complex medication techniques.
Sales boomed. Block became a company with $20 million in revenues, on its way to more than $40 million, when, suddenly, Sancoff sold it to Indiana conglomerate Hillenbrand for $80 million. It was 1991, and Sancoff was only 30 years old.
Even as he sold Block, Sancoff had five ideas he wanted to develop, so he formed a company called River Medical.
River addressed a different market than Block. It designed single-use drug delivery products for hospital use. But now Sancoff, experienced in finance (he had twice raised venture capital in his career) as well as medical engineering, faced the problem of marketing products.
Rather than build a direct sales force from scratch, he looked around for an existing company to buy. Two San Diego companies, IMED and IVAC, had well-established marketing forces in the drug delivery industry.
IVAC, a subsidiary owned by Eli Lilly, was a former client of Sancoff, the medical equipment designer. He knew it well. It had 2,000 employees and annual revenues of $200 million. But it wasn't as profitable as it could be and word got back to Sancoff that Eli Lilly had it on the block.
"I had worked for the firm and knew it well. I understood first-hand what was going on in that company. They didn't have the infrastructure and management to drive product development," says Sancoff. Within days, he developed a turnaround plan for IVAC and headed east to make presentations to merchant bankers. Donaldson Lufkin Jenrette offered a $200 million bridge loan to Sancoff, and he bought IVAC in 1994.
Within a year, IVAC sales jumped to $240 million. More importantly, its earnings before taxes and depreciation went from $7 million to $49 million.
Sancoff was now 36 and married with two children. He lived in very upscale Rancho Santa Fe, Calif., 15 minutes from San Diego. He drove a Porsche and was anything but anonymous. His career had put him on business front pages many times even before he took over IVAC.
IVAC was on track to report $60 million plus in earnings when Sancoff sold it to Advanced Medical of New York for $400 million in 1995.
Return to New England
Even as Sancoff worked to buy IVAC, family and children caused him to look back to his native New England, particularly New Hampshire. In 1994 he built a home in Windham. All through his IVAC venture, he flew the "red eye" between coasts on the weekend.
"The family was back here, and I was wishing I was back here," he says.
"I wanted my kids to grow up in New Hampshire. It allows them to grow up as children longer. It's quality of life all the way," explains Sancoff.
After IVAC's sale, Sancoff returned full time to New Hampshire. He dumped the Porsche and drove a Ford F-150 pickup. "I went fly-fishing and wondered what to do," he recalls.
He formed Onux, originally locating in Salem, and brought in one of his first hires at Block, research engineer Fred Field. "I had hired him right out of college," says Sancoff.
The two men fixed their attention on surgery. "There's basically only two parts to surgery -- cutting and suturing. They'd brought every technology you could think of to cutting tissue. That left sewing."
Outside of gall bladder and arthroscopic surgery, both of which employ minimally invasive techniques, most surgery hasn't changed in decades.
"It was the suturing that was holding things up," Sancoff says.
One day Sancoff was watching a TV program on tornadoes. He noticed the force of the tornado winds could drive a straw through a telephone pole.
That provided the germ for his idea. It was 1996, and for the past four years Onux, working with Dartmouth Hitchcock Medical Center in Lebanon, $15 million in venture capital and Fleet Bank, has developed its disruptive technology.
And now the Onux story will begin to gather steam. Anonymity will disappear for Sancoff, once again.
Sancoff needs talent. And that means telling his story and that of Onux. "You're the first I've really talked to," he points out.
"I have a great core team right now. I've been lucky with people who can focus, work hard and make good decisions. Every employee has options. I want them all to share in the success we're going to have. I want to give back to them. That's the type of environment I offer," he says. "There are big, big markets waiting for us. We're really doing something important."
Onux Medical is located at 5 Merrill Industrial Drive in Hampton, NH, 603-929-6200
The history of Sancoff deals
VALUATION Block Medical $4.2M 18 $20M $80M River Medical $7.2M 24 0 $90M est. IVAC Acquisition $80M 25 $24M $400M ONUX Medical $15M 24 0 $180M est.