• Medical supplies and drugs distributor Cardinal Health on Friday announced it has signed a definitive agreement to sell its Cordis business to private equity firm Hellman & Friedman for approximately $1 billion.
• Cardinal in 2015 bought the cardiovascular device manufacturer from Johnson & Johnson for $1.9 billion, but was dogged in subsequent years by integration problems. Friday’s announced deal with Hellman & Friedman is expected to close in the first half of Cardinal’s fiscal year 2022, which will span late 2021 to early 2022.
• The divestiture will decrease Cardinal’s medical segment profit by about $60 million to $70 million on an annual basis, according to the Dublin, Ohio-based medical device and drug distribution giant. While most assets and liabilities associated with the Cordis business will transfer to H&F, Cardinal will retain full liability and authority for lawsuits related to inferior vena cava filters in the U.S. and Canada.
• Cordis, which makes medical devices for diagnostics and interventional procedures to treat patients with coronary and peripheral vascular diseases, is an approximately $750 million revenue business.
• But it’s produced its share of headaches for Cardinal.
• In July, Cardinal was named as a defendant in 334 product liability lawsuits coordinated in Alameda County Superior Court in California involving claims by approximately 4,280 plaintiffs that allege personal injuries associated with the use of Cordis OptEase and TrapEase inferior vena cava filter products. Another 31 lawsuits involving similar claims by approximately 36 plaintiffs are pending in other jurisdictions.
• Cardinal CEO Mike Kaufmann said in a statement the decision to divest Cordis was based on efforts to focus resources on strategic growth areas “where we are an advantaged owner.”
• The exec also said Cardinal remains committed to its medical distribution and global medical products businesses, with a product portfolio generally more oriented around the operating and recovery rooms, including compression, enteral feeding, and wound care gauze dressings.
• Cardinal’s customers for its medical product and supply chain services include hospitals, laboratories, physician offices, surgery centers, as well as patients in the home. The company reported last month that second-quarter revenue for its medical segment increased 7% to $4.3 billion, driven by a net positive impact from COVID-19.
• Cardinal expects the Cordis divestiture to result in a pre-tax loss of up to $120 million in the third quarter of its fiscal year 2021. Additional costs of up to $125 million are anticipated to be incurred primarily in fiscal years 2021 and 2022.
• Stephen Mason in 2019 replaced Jon Giacomin as CEO of Cardinal Health’s medical segment and was tasked with addressing the operational and supply chain issues created by the acquisition of Cordis from J&J.
• Cordis manufacturing sites in Miami Lakes, Florida, Santa Clara, California, and Juarez, Mexico, will transition to H&F, whose partners in the deal include investment firm Ajax Health and startup Zeus Health.
• KKR teamed with Duke Rohlen in late 2020 to launch Zeus Health, a $100 million platform that invests in medical device companies.
Not too long ago, device marketers, alongside the hospital and physician groups who comprise their client base, spent actual time in each other’s physical presence. They jostled their way through trade show lobbies, shot the breeze in exhibit halls and clinked glasses during dinners and other social functions.
COVID-19 changed all that, and perhaps for good. When the pandemic thwarted the industry’s ability to conduct in-person business, manufacturers and marketers started to scramble to recalibrate their messaging and their means of delivering it. With most budgets set for 2021, device manufacturers are investing in digital outreach, content marketing, marketing automation and other technology channels that support the industry’s evolving commercial models.
Nobody’s all that happy about it. “COVID has our customers over a barrel,” says Tom Dudnyk, president of device specialist Vivo Agency. “They’ve lost access to targets at hospitals, practices and trade shows. And I don’t think these will bounce back anytime soon.”
Even prior to the pandemic, some hospitals and health systems offered limited access to company representatives in clinical environments. But when the COVID-era restrictions on admittance kicked in, device marketers pivoted to digital outreach.
“We saw a pretty significant shift from investing in sales/promotional types of strategies toward more digital, B2B account-based marketing campaigns,” explains Brado CEO Andy Parham. “We don’t think that change will go away.”
Industry giants, for their part, are preaching flexibility. Medtronic is taking a “ready for anything” approach to its marketing plans, according to Jaime LaMontagne, VP of global marketing strategy for Medtronic Cardiac Rhythm Management. “We are shifting to virtual, online and digital tactics, but also planning for shifts back to face-to-face, which gives us the flexibility to be ready to market to our customers as the market shifts,” she notes.
Like many other device makers, Medtronic has evolved its customer approach amid the pandemic. LaMontagne stresses the importance of adaptability in an uncertain climate: “We know that many others are also pivoting to online customer campaigns, which are flooding inboxes and social media platforms. So we are complementing this with focused one-to-one virtual conversations to remain as attuned to our customer needs as possible.”
Right now, device marketers are focused on making sure they’re digitally enabled in a way that allows them to nurture leads without relying on traditional, face-to-face models of communication. Enhanced website experiences, including virtual product tours and trade shows, have prompted varying degrees of customer engagement. Other tools, such as marketing automation systems and customer relationship management software that provide analytics around outreach efforts, have also proven useful.
On the agency side, Parham’s organization has worked with device firms to leverage data in a way that effectively measures marketing return. Particularly early in customer engagement, it’s vital to have “the ability to run content-driven campaigns in the B2B channel that boast the kind of measurement characteristics that great consumer campaigns have,” he explains.
In the first half of 2020, for a better understanding of where demand would fall for a client and what specifically would get “pushed out,” Brado performed an analysis of solutions for elective versus nonelective procedures. The agency team tracked Google search behavior across geographic markets over time to anticipate when demand would bounce back for elective procedures that had been stalled. This generated insight about the consumer behaviors that impact actions and, ultimately, buying cycle patterns.
Indeed, to engage targets, device marketers are focusing less on the product itself and more on the value they can bring to the table. While this requires assets that are digitally delivered, the message is as important as the means.
“It can’t just be about tech,” Dudnyk notes. “It has to be about how the tech transforms care models.”
While medical device marketing has typically relied heavily on a product’s features, genuine interest arises more from how specific problems can be solved. In today’s climate, that means the effects of the pandemic are placed front and center.
“Complementing our product benefits, we are pivoting our marketing strategies to focus on the benefits we provide to hospital systems, patients and clinicians that are particularly important during the COVID pandemic,” LaMontagne says.
She notes Medtronic’s continued engagement with all levels of customers, whether they sit in the C-suite of a health system or at some point in the supply chain. “These include remote and distance device programming, remote patient management, allowing patients to stay out of the hospital and limiting the number of people in the OR,” she adds.
With Medtronic’s recent launch of smartphone-enabled heart device monitoring, patients can pay closer attention to their health and share data easily with their clinicians. “We’re meeting patients where they are in their everyday lives,” LaMontagne continues. “These messages are important to communicate across all levels of customers.”
As for physician-owned practices, many device marketers are seeking a fresh and intimate understanding of the ideal target physician and how that clinician’s beliefs can be genuinely leveraged to change behavior. This is accomplished by more nuanced and careful segmentation of the market, Parham says, adding that this isn’t an easy thing to do.
“It requires investment and continuous connection and dialogue with those customer bases. It also requires an emphasis less on product orientation and more toward making a business or ROI case,” he explains.
So, when it comes to altering marketing strategies to achieve a stronger digital focus, Dudnyk suggests starting with an effort to map out the new-customer buying journey. This should provide greater understanding on where to engage and what to say.
“You can’t just beat your chest about how great the tech is. These decisions aren’t being made by a physician anymore; they’re being made by a CFO or by a whole team,” he explains. “You have to align your value proposition to the C-suite’s strategic objectives. A lot of med-tech companies are failing to do that. You have to be selling care transformation and a better patient outcome enabled by your technology.”
The most effective device marketing approaches differentiate one organization from the others that are mostly focused on features or dollars, which is why Dudnyk recommends presenting how a solution improves outcomes and/or solves big challenges. Illustrating the ideal way to use a product, whether via education, consultation or demonstration, often proves the clincher.
By way of example, Vivo Agency worked with Boston Scientific on CVForward, a thought-leadership campaign that targeted historically overlooked yet increasingly powerful non-clinical decision-makers instead of interventional cardiologists. After bringing together the non-clinical cohort to discuss industry changes and shifting needs, Vivo created content (articles, videos and infographics) that demonstrated best practices for value-based cardiovascular care. This, Dudnyk reports, generated extraordinarily high levels of engagement: Nearly 50% said they would be willing to pay for the content.
In Dudnyk’s mind, CVForward succeeded because it showcased Boston Scientific more as a transformation partner than as a product manufacturer. He believes this type of targeting has similarly been deployed to great effect by pharma, which has long armed its reps with consistent brand and product messaging.
Parham notes that medical device marketers can reap similar results by modifying their tactics: “When you build disciplined digital campaigns aimed at that B2B customer — whether that’s a health system decision-maker, an ambulatory surgical center [ASC] owner, or a physician practice group — where you begin the process by identifying your ideal client profile then building your investment model, you’re creating the kind of content that will add value to that target and set the table for your sales team.”
As for what comes next, the verdict is out on whether the direct-to-consumer methods pharma cherishes have a home in the medical device environment, or whether their use is a work in progress. According to Parham, device marketers that have teamed up with providers to activate local, geotargeted DTC marketing campaigns are having some success pulling in new customers.
“Device marketing in the past has concentrated almost exclusively on the clinical/physician audience, as opposed to DTC,” LaMontagne says. “But in the last couple of years, several medical devices have launched or are in clinical trials that will go up against drug therapy. I anticipate more and more device players will experiment with pharma DTC marketing tactics to determine if the investments provided a meaningful and sustainable return on marketing investment.”
Olympus has exercised its option to acquire Israeli medical device company Medi-Tate to drive growth in its urology business and expand its minimally invasive treatment product portfolio.
Medi-Tate develops, manufactures, and markets benign prostatic hyperplasia (BPH) treatment devices for transurethral resection of the prostate (TURP) procedures, including resectoscopes, as well as a range of electrodes.
Olympus chief operating officer Nacho Abia said: “The investment in Medi-Tate has expanded our patient care offerings in BPH, adding to Olympus’ market-leading plasma resection portfolio for TURP.
“Our partnership with Medi-Tate has supported one of Olympus’ key strategic initiatives to drive growth in our urology business and to expand our minimally invasive surgical solutions, enabling further improvement of clinical outcomes, reduction of overall costs, and enhancement of patients’ quality of life and safety.”
In 2018, Olympus initially secured the rights to distribute Medi-Tate’s products, along with an option to acquire 100% of Medi-Tate later.
Medi-Tate’s leading product, iTind, is a temporarily implanted nitinol device that supports the relief of lower urinary tract symptoms (LUTS) due to BPH.
With EU CE Mark, the device is US Food and Drug Administration (FDA) cleared for use in the US and is approved for sale in the EU, UK, Israel, Australia, and Brazil.
Depending on the past two years’ iTind sales experience and clinical value of the product, Olympus has decided to exercise its option to acquire Medi-Tate to explore its potential in BPH treatment.