Month: September 2018

Urgo’s M&A of SteadMed: Here’s What You Need to Know

There has just been another significant wound care acquisition. French MNC Urgo Medical just announced the M&A of Texas-based SteadMed Medical. The resulting entity will be known as Urgo Medical North America. If you’re an advanced wound care stakeholder inside North America, you may be wondering, “Who is Urgo Medical?” If you’re an advanced wound care stakeholder outside North America, you may be wondering, “Who is SteadMed?” Most importantly, the executives and investors reading this are likely wondering, “How will this affect the market?” Who is URGO Medical? Attend almost any major wound care or surgical conference in EMEA, APAC, and even LATAM in recent years, and you’re likely to have seen an Urgo booth side-by-side with other major international players such as Mölnylcke, Convatec, Smith & Nephew, 3M, Acelity, Coloplast, Medline, Integra LifeSciences, BSN Medical (Essity), HARTMANN, L&R, and B. Braun (and depending on the market, larger booths than the others). Likewise, Urgo products can frequently be found in healthcare facilities and pharmacies across those markets: Many–perhaps most–wound care companies have their own “algorithms” or slogans (the difference between the two is often blurred) which typically map out to corresponding products in their portfolio. Urgo is no different, with their, “Prepare–>Clean–>Accelerate–>Close” marketing, correlated to product packaging: Specifically, Urgo manufactures and distributes about 40 advanced wound dressings, prevention, compression, and related products across most of the major categories, including: UrgoClean and UrgoClean Ag UrgoStart UrgoTul UrgoCell UrgoK2 (compression) TRIACT technology (had been licensed by Hollister and used in the Restore brand) Multiple other tapes, films, gels, etc. Notably, Urgo is not currently involved in the “active healing” segment: As of this writing, they have no NPWT, allografts, oxygen enhancers, etc. Whether they introduce one or more active healing “anchor products” into their portfolio remains to be seen. In Europe particularly, they are considered one of the market share leaders across certain care sites (France, where they are headquartered, being one of the larger European wound care markets). Who is SteadMed Medical? SteadMed is a Texas-based wound and skin care product distributor who has over the years become a major player in the US, with operations in Canada and Mexico as well. As they have over 40 employees and a presence in virtually all major US regions, in addition to their activities in Canada and Mexico, we at Diligence Wound Care Global have sometimes referred to them as “the most significant North American distributor who is not also a principal” (in other words, they license products developed and/or produced by other companies for sale within a specific geography). SteadMed has historically not attempted to develop a full-line of advanced wound products (foams, alginates, collagens, allografts/xenografts, etc.), instead focusing on certain niche products. They especially established themselves with Drawtex (hydroconductive dressings), and a few years ago launched Vashe (hypochlorous acid cleanser and wipes), which they quickly grew to the overwhelmingly top US cleanser by market share–across a diverse range of clinical care sites. For several years, they distributed XPansion, a single-use split thickness skin grafting kit, which they recently relinquished to the Maryland-based acellular matrix producer, ACell. And just this summer, they announced that they are taking over distribution of Hollister’s Restore and TRIACT lines since the announced wound care divestment. The impact of the Urgo acquisition on distribution of Restore and TRIACT is to be seen, as there is significant overlap between those brands. Following are the brands distributed by SteadMed pre-acquisition: Drawtex hydroconductive dressings Vashe hypochlorous acid cleanser and wipes Resta moisturizer and antimicrobial moisturizer TRIACT and Restore (some of which were actually tech licensed from URGO) XPansion autografting kit distribution passed on to ACell earlier this year Clearly, there is some overlap between some of the the Urgo and SteadMed / Restore product lines. However, this is a bit misleading, since Restore TRIACT products were actually leveraging an Urgo technology. So in essence, the Restore brand’s transition to SteadMed was more of a stepping stone than anything else. Urgo products will need to move through the FDA approval process, inventory must make its way into the supply chain, and the sales and marketing teams will need to understand the new products and how they fit in with the existing ones, too. This will all need to be sorted out for the rest of 2018 and into 2019. As a result, the portfolio is likely to be fluid during the integration period, with changes to be expected. SteadMed Founder, President, & CEO Michael Steadman will continue to lead the firm, and its main office will remain in the Dallas-Forth Worth, Texas area. Why is this significant? Although Urgo is a major global wound care player, they were clearly latecomers to the largest market in the world, The United States. US wound care sales channels can be especially difficult to navigate, and customer intimacy has traditionally been a key success factor for firms in this space. Beyond the unique sales and marketing considerations, the healthcare payment and reimbursement systems in the US are complex and evolving. Finally, the regulatory landscape can be challenging, though for Urgo’s current portfolio this should not present much of a challenge (though it may be for future products in their R&D and M&A pipelines). For Urgo, the acquisition of SteadMed allows them to play “catch-up” in the US. They’re gaining access to a relatively sizable and competent sales force with existing relationships and channels spanning advanced wound centers, physician offices, the operating room, inpatient wards, home healthcare, and skilled nursing facilities. On the one hand, breaking into new accounts with primary and secondary wound dressings is difficult. On the other hand, adding them to the “bag” of existing sales teams (and their existing relationships) can exponentially decrease cost of sales and boost sales force effectiveness and ROI. Recently, there have been trends of renegotiation and consolidation of contracts as well as increased movement towards alliances and consortia, which we have analyzed as well. Most importantly, just like with Integra’s acquisition of DermaSciences, this news means the landscape has gotten all the more

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Were You Caught off Guard by the Healogics iSupply Announcement This Week?

What happened? The latest wound care development is the new Healogics iSupply program, announced this week. Highlights of the initiative include: Special pricing on many/most categories of wound care and related regenerative medicine products. Leverage of outcomes and utilization management data. Quarterly product/supply reporting initiatives. Potential for future evolution based on the Healogics database and economies of scale. Participating brands (not all products from each brand were included): Integra LifeSciences (NASDAQ:IART, up about 5% as of 48 hours since the announcement), BSN Medical, Solsys Medical (TheraSkin), Hydrofera, and a new advanced dressing private label line launched as part of the initiative: Healogics by DermaRite. Three types of wound care executives This development caught many in the industry off guard. This is unfortunate, as deepening collaboration with product firms has been openly discussed by Healogics leadership for quite some time now. In fact, it was shared as a corporate strategic initiative for 2018. We have always encouraged product firms to keep a finger on the pulse of wound care management and services trends, not to simply look to what other product firms are doing. The good news is that for many of our scenario planning and business war gaming strategy clients, the ability to participate in the Healogics iSupply selection process–or choose not to–was a conscious one. Executives reading the iSupply press release this week can be grouped into three categories: Wound Care Product Executive Type 1: Prepared and Active Participants Those participating went in with confidence about the unique needs of wound care management firms and their healthcare facility partners, more effectively conveying their portfolio’s proposition. Wound Care Product Executive Type 2: Confident Decliners On the other hand, strategy, sales, and marketing executives who decided to not participate (or to only explore at the early stages before pulling back), did so with confidence that the costs–both direct and indirect–of such a partnership perhaps would not have best served their stakeholders. Such clients then were able to develop and stress test plans and contingencies from product pipeline, to international expansion, to sales call points, to digital health strategies and of course partnerships with other wound care services providers that they believed would be the best focus for their firms. Most importantly, both of the above groups who adequately planned and prepared for the iSupply reality are not losing any sleep over the announcement–they either navigated the process and joined the initiative, or moved on with confidence and a clear path forward. Wound Care Product Executive Type 3: Caught off Guard and Scrambling Unfortunately, there exists a third group: Executives who neither anticipated nor prepared for the iSupply scenario. This includes those who did not consider the option of a Healogics-branded private label competitor emerging from the process (which is precisely what happened). Such individuals do indeed have cause for concern of how to answer the inevitable grilling that will come from senior leadership and the board of directors (if not already). At least one major US wound care firm has already laid off a significant chunk of its strategy and marketing managers. More casualties may be on the horizon… The stakes were high and on the table… About ten months ago, as the new Healogics CEO stepped into the role, I published an article entitled, What the Recent Healogics Developments Can Teach Us About the Future of Wound Care. After briefly summarizing the history of Healogics and US wound care overall, I posed a series of questions–from the hypothetical perspective of their management team–including (quoted from the original article): What value can we [Healogics] extract from our wound outcomes data, and to what extent might we share / sell that to others (product firms, payers, regulators, hospitals, SNFs)? To what extent should we be open to partnering with product firms (the product firms are extremely open to that idea), and if so, should that be an R&D/clinical outcomes partnership, a monetization one (they currently monetize just one product: HBOT), or another model? Should we focus on other management firms…product companies, payers, other specialty service companies…mHealth/telemedicine firms, wound care provider firms, or other partners and structures? Would our interests be better served by proactively renegotiating our contracts…or do we focus on driving operational and other efficiencies to better compete within the existing model? Can and should we provide more product selection and formulary streamlining advisory to our hospital partners to potentially offset the expense incurred by us managing their wound center (and if so, should we contract with specific product companies, or keep such an initiative to within the hospital’s decision making system)? Both before–and especially after–the article was published, there was tremendous interest from several well-known wound care product companies about the merits and drawbacks of participation in specialized group purchasing organization (GPO)s, clinical data/outcomes registries, and how to maneuver the changing wound care landscape to capitalize on opportunities, without placing too many chips on a single bet. The above questions I floated nearly one year ago are as relevant as ever. They are indeed playing out, not only this week with the Healogics iSupply brand, but throughout the advanced wound care space. As wound care business models evolve, the dynamics will cascade to other companies and alliances. Be confident in your wound care business decisions Were you or your colleagues caught off guard from the announcement, or did you have the proper plans and contingencies in place to capitalize on it (regardless of whether you were part of the partnership)? Are you… …a product executive tasked with exploring collaboration with services or other product firms? …a services firm interested in providing a product or technology suite to your stakeholders? …an investor trying to sort this all out? Don’t get burned by your next wound care business decision. Tell us your unique wound care business or investment situation. We’ll give you confidence in your path forward.