TS03 Inc Trust Units TSTIF

RE:RE:TSO3 - Europe / Question

[Drrwong]

@ Tictac:
Joey is correct:  the main reason we are not there is resource limitation.  We must be mindful that EU is a different market vs. the US:
-  Size of the Western EU market is large, but it is made up of many different countries.  Despite many of them being part of the EU, the regulations and reimbursement systems are different.  Hence it will likely require more resource to sell and service in EU vs. US (all else being the same)
-  The ASPs for sterilizers in EU is not as high as the US (although better than Canada), and hospitals there are more cost concious.  Hence, there are more low cost providers there (e.g.: Steris or ASP knockoffs from Eastern Europe, Korea, etc.).  Adding in my first point, profit margins are lower.  Hence RR does not want to burn our precious balance sheet for something that is less profitable for the time being.

I must emphasize that this is a temporary situation:  RR wants to ramp up US so our brand and technology is well known in the industry, and our cashflow solidified before moving across the pond.  Given the size of the market, EU is definitely we will go after eventually.  Our product is actually quite "popular" there:
-  Getinge sold 15+ machines in EU, all in 2018 (recall the Getinge PR in Jan 2018 on first EU installs).  Compare that with only 50 installs + 20 orders in the US over a 2.5yrs period--our EU uptake is respectable
-  After the Getinge deal fell apart, Getinge pulled all support for VP4 in EU, and enticed existing VP4 customers there with very cheap switch to Getinge's Stericool.  Despite the switch offer and having zero support, there were a couple hospitals that held out and stuck with the VP4 for 2+ more quarters (one of them is the Dutch hospital that was sterilizing duodenoscopes with VP4).  Eventually they caved due to a lack of support, but it shows that our technology is something EU hospitals want

We also heard real demand from Australia and some Asian countries.  Again we don't have the resources to go after those yet, but we will.

Food for thought:
-   MMM (not 3M) is the largest German distributor, and it had a pact with JNJ's ASP.  With the Fortive acquisition, that relationship will likely go away.  So there might be a low-cost opportunity for us to partner with MMM to enter the German market