The founders knew that by targeting a narrow niche, they could build a stable base of steady customers. Hemophiliacs easily buy $40,000 -- and as much as $100,000 -- worth of factor a year. Physicians would be more likely to give referrals to an outfit that positioned itself as a full care giver for a few diseases, rather than a provider of one service or another. "If you talk about the disease itself and serving that disease, physicians relate to that," says David Edlund, who runs two Quantum branches. The disease-treatment approach also helps in long-term positioning: it's logical for Quantum to diversify into other chronic diseases such as genetic emphysema. The company anticipates that much of its future growth will come from that kind of expansion.
Founders with less experience in the industry might have assumed that physicians would flock to their company because of the services it was ready to provide. But Stickney and his managers anticipated the tough sell. It was to their great advantage that through their work at Western Medical, Stickney, Yamaguchi, and many of the field managers already had physician contacts. It's a small, close industry: there are only about 20,000 hemophiliacs in the United States. Quantum's 1990 revenues of $40 million came, in fact, from just 1,000 end-users.
Although the company suffered the perennial start-up woe, a longer-than-expected sales cycle of 6 to 12 months, its half a million dollars of initial capital kept it going during the lean months. Fortunately, and somewhat remarkably, Stickney's projections for the company's first three years, based on little more than educated guesses about how many contacts the company could make and the percentages it could convert into paid customers, have been right on target. Investors like that. "He's an extraordinary manager in terms of ability to attract high-level people and motivate them, combined with an outstanding understanding of the numbers," says Wallace R. Hawley, a general partner at InterWest Partners, a venture-capital firm that invested $3 million in Quantum two years ago. "That's rare. We don't often find people who are so good at both."
Quantum kept overhead low, since profits were dependent on that; the company also bought in bulk to lower the cost of goods. Stickney says the company now buys about 12% of the drugs manufactured for hemophiliac care, and has been able to leverage that into even better prices.
And Stickney knew that Quantum's relationship with insurers would be critical. The company tries, he says, to position itself "with the people who subsidize the care, in a kind of pseudo-managed-care role." Payers look to Quantum, he maintains, both as an expert on the different disorders and as a conduit for getting customers to become self-sufficient in their care -- and cheaper, subsequently, to care for.
Still, a crucial issue for Quantum is how well it collects from insurers. "If we blow that particular activity, shame on us," says Stickney. "We don't go back to the patient for the money. That's our job." Quantum built in quite a cushion for those collections; when the company started, it set aside 10% of billings for "uncollectible accounts" -- 10%. In 1990 actual bad-debt losses were 6.3%, fully $2.5 million on $40 million in sales. "It's a large number, but I think it's probably right in the middle of the road," says Stickney. Branch manager Edlund puts it this way: "You could say this company was built around paying attention to receivables."
While the founders learned a lot about their market from Western Medical, they clearly haven't built a clone of that company. One of Quantum's major differences -- and a key to its operations and growth -- is its decentralization. With regional outlets -- each staffed by pharmacists, nurses, customer-service reps, reimbursement specialists, and salespeople -- the company is poised to grow smart and grow fast.
Branches that have taken over collections during 1991 have been able to get their money faster -- in some cases cutting the time from 90 to 70 days. "If you're collecting from local payers, you just can't do it as well centrally as you can locally," says Edlund. General managers overseeing their own profit-and-loss projections get numbers from the corporate office within five days of each month's close. Bonuses are tied to the outlet's performance.
"We think of ourselves as a consultant group," says Yamaguchi of the relationship between the corporate staff and the general managers. Salespeople don't report to Yamaguchi; they report to the field and regional managers. General managers have autonomy in deciding which kind of diseases to target, given local demographics. They're given not just responsibility but authority. And they've been thriving.
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To date, the Quantum plan is working. Eighty percent of revenues are coming from a stable base of patients. The company has expanded gradually, with a third of sales now generated by people with disorders other than hemophilia. At the initial public offering, stock opened at $14 a share. It's now trading at $23.
"Since our IPO, we've definitely bred more competitors," says Stickney. "I take it as a compliment that there are more and more companies out there talking about meeting the needs of families with chronic disorders. But I don't believe there's anyone right now who has, on a national basis, the number of contacts and the credibility we have.
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"The last six months have been so new," Stickney reflects. "Working with analysts. Working with funds managers. Speaking at conferences. Trying to do some significant strategic partnering instead of just giving away my stock, which, it can be argued, wasn't very bright in the early days. For me, that's created a sort of Renaissance.
"I think one of the things we've all done pretty well is separating the personal from the professional," he continues. "This group can go out on a Saturday night and enjoy each other's company without having to focus on work. It's the ability to go and watch my boys, Christopher and Bobby, play soccer for four hours on Saturday and not worry about Quantum. In the early days I worried more, but there's a certain comfort in knowing we've got the momentum going, we're well capitalized, and we've got great people. That's pretty much what this is all about.
"By the way," he adds, his face brightening, "Christopher scored a goal on Saturday, and boy, I embarrassed him. I went crazy. The first goal of the year. It was huge." With that, Doug Stickney is on his feet again, outlining with his hands the brilliant play on the soccer field. And once again he's pacing behind his desk, elaborating on his passions with an infectious enthusiasm.
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FINANCIALS
($ in thousands)
Year ending 12/31/88* 12/31/89 12/31/90
Employees 12 100 200
Net sales $1,362 $12,845 $40,004
Pretax income $51 $347 $2,050
Total assets $1,748 $7,984 $19,689
Net owners' equity $1,012 $4,101 $10,724
*These figures represent financial activity beginning June 22, 1988, the date of start-up.
