WisBusiness: Third Wave thrives by narrowing its focus
By Brian E. Clark
MADISON – When Kevin Conroy took over as head of Third Wave Technologies in December of 2005, its shares were selling for around $3 and the company was struggling as it sought to develop more than a dozen products.
To Conroy, a lawyer who had formerly worked for GE and joined Third Wave as general counsel in 2004, the company seemed to lack focus.
But before he did anything drastic, he decided to do a lot of listening. So for the next few months he had coffee and chats with employees, customers and at least a few other biotech executives.
The result was a redirected company that concentrated on creating diagnostic tests to detect the human papillomavirus (HPV), which can be an indicator of cervical cancer, a disease that kills several hundred thousand women a year. The results have been an overwhelming success.
Third Wave recently submitted applications to the Food and Drug Administration for its tests and Conroy said approval could come next year. Then last month, Massachusetts-based Hologic Inc., announced it would pay $580 million for Third Wave.
That’s the equivalent of $11.25 per share, which was a 24 percent premium over Third Wave's average trading price during the previous three months. The sale was completed this week and the majority of Third Wave’s 181 jobs are expected to remain in Madison.
WisBusiness.com spoke to Conroy recently about his efforts to turn the company around and Third Wave’s future in Madison.
“The most important thing the management team did after I took over was to lay out our priorities,” he said. “We decided to focus about 80 percent of our resources around the HPV program, rather than develop a broad range of molecular tests.
“We decided a company of our size could have a much greater impact and a much greater likelihood of success if we chose something really hard, like the HPV test. And then take it all the way through the FDA, which is also exceedingly difficult.”
Conroy said that strategy carried risks, but was ultimately less perilous than trying to develop 10 to 12 products at once. It was also somewhat counterintuitive, he allowed.
“People think that if you are working on 12 products that one will do well or five will do well,” he said. “But what people tend to underestimate is the amount of resources that are required to launch even one program.”
Insteady of spending $4 million to develop the test, he said it ultimately cost more than $18 million.
Conroy said it was primarily people within Third Wave who drove the change.
“They knew all along that we were trying to do too many things,” he said.
“Listening to your people and your customers is where you really need to start. So I met with employees over coffee in the morning and listened to their ideas, complaints and thoughts about how to reinvent the company and that was incredibly helpful.”
He said customers also told him they would be happy to buy an HPV test if Third Wave could make it better than existing products.
The new focus on the HPV test required many changes, but Conroy said the company and its employees adapted well. He also said he had full support of his board of directors.
Conroy called the sale of Third Wave a positive step for Wisconsin.
“We have an incredible base of researchers at the University of Wisconsin that has translated into many strong companies,” he said. “We have highly skilled scientists and researchers, venture capital firms, a business community and a state government that is very supportive.
“The one thing Wisconsin and this region could improve on is just having an experienced group of managers who have gone through the process of starting a company, focusing a company around something that is meaningful and ultimately turning it into a public company or a large private company or one that is acquired by a bigger company.”
With Hologic planning to keep Third Wave in Madison, Conroy said he foresees the company adding employees, some of whom will eventually leave to found their own firms.
“Those are the things that need to happen,” said Conroy, who noted that Wisconsin is one of the states that generates a large number of patents, but often fails to turn them into companies within its borders.
“The difference is that we need more managers who can turn these ideas into profitable companies here in Wisconsin,” he said.