Why TSO3 Needs Its Own Marketing TeamThis question was brought up many times, so I will try to take a stab at this. Others please feel free to chime in.
Background:
- Getinge does not have the best reputation in the US:
- Customers: long history of poor sales and service record. This was exacerbated by the recent organization disarray from the pending company split
- Regulators: Getinge is still in consent decree with the FDA
- As a result, Getinge needed a differentiated, "game changing" product in its portfolio. It is not about how much money they can make on this particular product, but its ability to get Getinge through the door to hospital adminstrators, and the ability to cross-sell other Getinge products afterwards
- VP4 fits this description perfectly. Since TSO3 fully took care of the development and regulatory clearances for VP4, I doubt Getinge is making a lot of money on this. On the contrary, Getinge is much more focused on cross-selling Getinge developed products to hospitals, and this is where they will make their money. But you can have one without the other...
- If we look at product portfolio of Getinge USA, we see a lot of products for central sterilization units, operating rooms, workflow solutions, etc. This is where Getinge has experience and resources in.
- On the other hand, the GI sterilization market deals with a different group of customers: GI suites within hospitals and ambulatory surgical centers. This market is very nascent right now, as there were previously no technology that can terminally sterilize all scopes, which means there is no regulations requiring them to do so. Hence Getinge has very little to no presence in this area.
Near Future:
- Assuming TSO3 gets FDA approval on the duodenoscope claims, it will mean VP4s can terminally sterilize all scopes. With this technology in place, regulators (FDA, AAMI) can now mandate terminal sterilization of all scopes. Speed of implementation is unknown, but the direction is well telegraphed.
- If you are Getinge, would you spend a lot of NEW resources quickly to ramp up this GI market? You know you don't make a lot from VP4 sale, and there is limited cross-sell opportunities to this set of GI customers, as your product portfolio does not really fit with their needs. So there is a potential agency problem here.
- Eventually, if Getinge serve the GI suite customers right, hospitals will get more comfortable with them, which means higher chance of Getinge winning bids on central sterilization as well as other areas in the hospitals. So I am not worried about Getinge not getting involved in GI, but the pace of ramp might be more questionable
- In order to avoid another slow Getinge launch, RR is ramping up his own team to help with both sales and installation. Main focus is rightly on the GI market. I think this is a smart and logical move, and I have zero issues with it. Like I said, once the FDA and AAMI hurdles are cleared, I personally hope RR put even more resources into this
Warning Signs:
- TSO3 team should be focused on GI market only. Given TSO3 is the subject matter expert on VP4, I will not be surprised (and expect) them to get involve in bidding siutations for large hospital contracts in the SPD. However, I do not want to see any of them doing "cold calling" or "tracing sales lead" for the SPD market. If they ended up doing a lot of "groud work" for SPDs, then we would have to question Getinge's commitment
- High turnover in TSO3 team: these guys are likely heavily compensated on commissions. Given TSO3 is selling a game changing product into a new, virtually monopolized (via FDA claims) GI market, this should be very "fun" and "rewarding" for these people, which mean low turnover. However if the opposite is true, then we have to wonder how much traction VP4s are seeing.
Finally, I would NOT worry about when exactly the 2018 Getinge order will come out (vs. the 2017 order). Getinge is having an extraordinary shareholder meeting on Dec 4 to vote on the company split, and the split will offically take place on Dec 12. So Getinge has a lot on its plate in the immediate future, so don't be alarmed if there is a slip in timeline for the order. Personally, I think these orders are likely just the minimum purchase requirements stipuated in the contract. As long as Getinge doesn't walk, they will be fulfilled eventually.