RE:RE:RE:RE:If all the quotes become sales I thought I should update interested investors regarding a conversation I had in past days with a significant end user of the VP4. We have been told by TSO3 management that the issue with adoption is not related to the product but rather to executing sales and installs.
In order to confirm this, I sought out and spoke at length with an early adopter of the VP4 to get his opinions on the product. I have to admit I was surprised by his enthusiasm and candour. He expressed almost effusive praise for his experience using 2 VP4’s for over a year and he had nothing negative to say about the VP4. His hospital system uses it routinely at present to sterilize duodenoscopes, as well as gastroscopes and colonoscopes. He is an educated trained specialist in sterilization and a highly respected leader in his field both locally and nationally.
Why, I asked him, if this product is superior does he think TSO3’s VP4 technology has been so slow to be adopted?
He highlighted 2 factors:
- there has been a shocking lack of general awareness of the scope (pun intended) of the contamination issue among hospitals and end users, especially with superbugs such as CRE continuing to be reported, despite repeated studies finding that other reprocessing modalities (specifically high level disinfection) are simply not adequate to eliminate bacterial contamination.
- While end users are gradually waking up to the extent of the problem, most remain hesitant to address the issue because of a simple lack of awareness that the practical, cost-saving, and time efficient solution of the VP4 exists. (Dr. W. Rutala another specialist in sterilization in his most recent presentations notes that there are only 2 FDA recognized solutions for sterilizing complex scopes like duodenoscopes - TSO3’s VP4 and Anderson’s largely irrelevant, cumbersome, impractical, inefficient, and probably unsafe in-the-bag ETO system.) (Note that TSO3 today in their commercialization update addressed their approach to this issue of getting their name and solution out into hospitals, end users, and the market in ways their former exclusive partner had simply never done…)
Regarding 1), this end user reported having just given very well received presentations both abroad and locally about the positive experience his hospital system has had using the VP4 to sterilize complex multichannel duodenoscopes, gastroscopes, and colonoscopes. He acknowledged clearly that the VP4 is superior to its competitors because it can sterilize a swath of complex scopes that other H2O2 based low temperature sterilizers simply cannot handle.
One of the points he made in his discussion that he likes to point out to people is that when doing a biopsy, for example with a colonoscope, there is no questioning among end users or doctors that the biopsy forceps used must be sterilized before use yet people can’t explain why the scope through which they pass their sterile forceps need not also be sterile. Not using sterile scopes just doesn’t make sense. The pushback from doctors is that mandating sterilization will reduce time efficiencies (read… throughput of patients and income to doctors and for profit GI clinics) but, in addition to finding using the VP4 cost and time efficient, as a national leader in sterilization, he firmly believes sterilization will become the standard of care for scopes including gastroscopes and colonoscopes in addition to duodenoscopes (and not simply be recommended if available - as AAMI has previously recommended in line with the use of scopes to perform critical procedures according to the Spaulding Classification): terminal sterilization will soon be mandated for these scopes both in Canada and the US.
And, given that (as the TSO3 update again reiterates) the VP4 is the only FDA approved, practical, and efficient solution, its general adoption as the number one low temperature sterilizer will only be a matter of time.
Which brings us to the question, ‘Why are most institutions and standard of care organizations so slow to adopt new better technologies such as the VP4?’ This user with whom I spoke reported that he believes TSO3 is making inroads as shown by the fact that he was recently in Colorado where he witnessed the recent installation and use of 8 new VP4’s, as we have heard in one of TSO3’s recent joint press releases and reiterated today. But, he reported, most end users just don’t want to be the first or early adopters, (as leaders like his institution, UCHealth, Altru, Leigh Valley among others like to be). The medical field is generally simply slow to adapt and accept new standards, but he strongly believes this new technology is coming and the standard of care is changing for the better.
I believe we all agree, as do our present CEO, CFO and Board, that the number one priority in turning this company around, and restoring our share price back into the $3+ range at the very least, is making sales and establishing a solid installed base of VP4’s in the N.A. market that will beget broader market acceptance, penetration, and eventual dominance, as well as capital and consumables income.
IMHO, given the opportunity that TSO3 now has to sell 200+ units with aggressive pricing (because of their opportunity to recently buy back these already paid for units for far less than their normal cost) TSO3’s sales people will now be making inroads by aiming to achieve a 250+ unit installed base by H2 of 2019. As noted in this new press release, their pipeline of quotes already exceeds their existing inventory which indicates TSO3 has added at least another 100 quotes to those done previously by Getinge and followed up by TSO3 sales people. This is very positive. August is a summer month when many targeted users are on holiday, and TSO3 did need to take time to transition all customers and update quotes from Getinge. They have sold 30 units (consummating deals for the +-20 that Getinge/TSO3 had sold but not installed when TSO3 assumed the complete order book at the beginning of August plus another 10 more). I presume the reason installs have been recently delayed is related to users awaiting the roll-out of the new more efficient O2 concentrator solution also announced today. I would hope the TSO3 team can now complete these installs asap and consummate another 40-50 sales in this final quarter.
Which brings me to the share price. .56? .58? Really? The patents this company holds on this revolutionary technology are worth $3 a share, at least, especially to a company like Fortive that is in the process of purchasing JnJ’s ASP division that makes the old Sterrad units. Why is Fortive purchasing ASP? For their industry leading yet fading installed base and the recurring revenues from consumables they will derive from this! Fortive is, I hate to say, the perfect fit to acquire TSO3. They need to grow their declining market share and revenues. ASP (soon Fortive) has a large sales and service force in place that could, once they have established their independence from JnJ in early 2019, with an acquisition of TSO3’s leading technology, cement and secure their position as the leader in this growth industry for years or decades to come. TSO3 must achieve their installed base of 250+ before the people at Fortive wake up and see what’s coming. Once we have this beach-head of an installed base, we will not be taken out under $4. I only hope Fortive people don’t read this blog and, seeing this timely opportunity, make a hostile bid for TSO3 at $2 even before they have finished their acquisition of ASP.
Just MHO.