Yesterday, Dr. Kobi Richter did what he hates most: talk to reporters. Richter apparently understands that war is war, and you cannot concede the media battleground to your opponents. These opponents – the managers of Boston Scientific (NYSE: BSX) – exploited the vacant field of battle to bitterly attack Drs. Kobi and Judith Richter.
In an interview with ''Globes'', Richter was quoted as calling himself "a marketing animal, whose edge is his ability to connect human needs with existing technology." This marketing animal now has to market himself and his story.
Richter's long silence imposed a heavy shadow on his business activity, while strengthening the myth surrounding him. In his long career, Richter was often the man with the last laugh, but in the Medinol affair, the greatest laugh of all, Richter's chuckle still has not been heard.
Kobi Richter, raised in Kibbutz Ramat Yohanan, is the son of German emigres who founded the kibbutz. When Richter was a boy, well-known child psychologist Dr. Bruno Bettelheim visited the kibbutz to study the effects of the children's dormitories on kibbutz children. His conclusions, published in "Children of the Dream", were unambiguous. He wrote that the children would grow up to be uncreative conformists. He predicted they would place obedience to groups above all else. If the biographies of Kobi Richter and his brother, Orbotech president and CEO Yochai Richter, tell us anything, it is how wrong Dr. Bettelheim's analysis was.
Richter, 56, completed the Israel Air Force's pilots course, serving 22 years. He was noteworthy as a man who never hesitated to defend his opinions, earning many enemies. An example of his foresight was in his last post as head of the Air Force Weapons Systems branch, where he vehemently opposed the Lavie fighter project. His position put him in direct conflict with then IAF Commanders Major Generals Amos Lapidot and David Ivri, who supported the Lavie.
During his service, Richter completed his Ph.D. in neurological research at Tel Aviv University. In 1977, he went on leave from the IAF in order to embark on post doctoral studies in the US, working at the MIT Artificial Intelligence Laboratory (AI Lab). At this time, he met Zvi Lapidot and Shimon Ullman, with whom he founded Orbot, which manufactured computerized optical systems for printed circuit boards. Following his discharge from the IAF in 1986, Richter was appointed Orbot's marketing director.
Richter left Orbot in 1992 after it merged with Optrotech, forming Orbotech (which his brother, Yochai, now manages). Richter turned his interests to high-tech entrepreneurship, and co-founded Tel Aviv Stock Exchange (TASE)-listed Marathon Venture Capital Fund.
In addition to Medinol, in the early 1990s, Richter also co-founded Medcon, a medical communications company. Although Richter prevented Medinol from floating shares, he had no qualms about bringing the public into Medcon. The company was floated on the TASE two years ago, and it is now traded at a market value of $15 million.
But Medinol is the biggest story of all, seemingly taken from a fairy tale. Richter met rising scientist Gregory Pinchasik, when he moved next door to Richter and asked Richter the way to the seashore. Pinchasik mentioned how hard it was to become adjusted to Israel, to the point where he even found it hard to locate an apartment. He also told Richter about some of his inventions. Richter told his wife, Judith, who told him to find Pinchasik. The result was Medinol.
The invention was a more flexible stent (a wire mesh tube that is inserted in a vascular artery and placed over an angioplasty balloon catheter in order to keep the artery open). The precise application of the invention, and which arteries it was suitable for, were unclear. Richter therefore hired urology expert Prof. Benad Goldwasser, giving him 13% of the company. Goldwasser's biggest contribution was to push Medinol away from urology and into vascular cardiology.
In 1995, following press reports that US giant Johnson & Johnson (NYSE: JNJ) was negotiating to acquire Medinol for $360 million – a record price at the time – the Richters and Goldwasser clashed. Goldwasser sued the Richters, claiming, "From that moment, the couple began behaving erratically, driving away the other parties in the negotiations."
The negotiations with Johnson & Johnson broke down, and in October 1995, their main competitor, Boston Scientific, acquired 13% of Medinol for $40 million. Goldwasser claimed, "At about that time, it finally became clear to the couple that the company had immense potential." He claimed that from this point, the other Medinol shareholders had to cope with a maelstrom of pressures and threats.
One after another, most Medinol shareholders pulled out of the company: Ira Yaron, Goldwasser (who sold his shares to Boston Scientific for $23 million, reflecting a company value of $200 million), and two years ago, Polaris Venture Capital (now Pitango Venture Capital) of Shrem-Fudim-Kelner & Co. A clash with the Richters also preceded Polaris's sale of its 8.6% stake. In the end, the Richters paid Polaris $32 million, at an estimated company value of $370 million, nearly double the value Goldwasser received, and apparently far less than Medinol's economic value.
The next, and biggest, clash is now underway with Boston Scientific. The strained relations between the two companies have moved from the negotiating table to the courts. Both parties are now waging juicy and creative media campaigns. How will it end? Who knows? But based on history, it is hard to imagine Kobi Richter losing.
Published by Israel's Business Arena on 22 October 2001