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| Company and Background: |
| -- |
Medcorp Medical Devices was a startup
that had a prototype for a new type of cardiac monitor. |
| -- |
Nearly 4 million Americans were admitted
to non-federal hospitals with coronary heart disease yearly. |
| -- |
The cost of heart disease had risen
to over $117 billion per year. |
| Challenges: |
| -- |
After two years, Medcorp Medical Devices
had no product and did not know if the market would accept their
prototype. |
| -- |
The investors needed an objective
evaluation of the prospects for Medcorp and the Cardometer. |
| Solutions: |
| -- |
Winett Associates analyzed the market
for cardiac devices by reviewing the literature and interviewing
dozens of medical clinicians, sales people, and other experts. |
| -- |
We also studied competing devices,
noting how they were packaged and distributed. |
| Results: |
| -- |
A realistic view of clinicians' practices
and requirements. |
| -- |
A realistic view of the size and characteristics
of the market opportunity. |
| -- |
Recommendations for essential modifications
to the Cardometer to satisfy the needs of clinicians and salespeople. |
| -- |
Data for making a go/no-go decision.
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Client Case Study - Medcorp Medical Devices
Medcorp Medical Devices-A Chicken and Egg Situation
CLIENT OVERVIEW
Medcorp Medical Devices, a start-up, planned to produce
and market a basic unit of its cardiac output monitor and use the
revenue to fund development of a more sophisticated unit. Having funded
the venture for two years without seeing a product, the investors
insisted on testing market acceptance of the novel device. The investors
wanted to know:
| --- |
How would emergency medical professionals and cardiologists,
the target market, use cardiac output information to gauge patient
well-being? |
| --- |
How should Medcorp design, price, and sell the
cardiac output monitor in order to make the device appealing to
the target market and to the distribution channel. |
BUSINESS CHALLENGE-VALIDATING PRODUCT CONCEPT
Investors in Medcorp wanted to assess the US market
for Medcorp's Cardometer, a novel non-invasive cardiac monitoring
device. The investors had already underwritten two years of development
efforts. Animal trials had shown that a prototype of the Cardometer
could measure cardiac output. Existing cardiac devices could only
provide information on blood volume pumped out (ejection fraction)
while the Cardometer could measure the volume that was originally
present in the heart. The company believed that doctors and nurses
in hospitals, cardiologists with private practices, and paramedics
in ambulances and helicopters would use this device, but they had
not yet validated these assumptions.
That year 3.7 million patients had checked into non-federal
short stay hospitals with a diagnosis of coronary heart disease. At
the time the estimated total cost of coronary heart disease had risen
to over $117 billion per year, including medical services, drugs,
and loss of productivity. Medcorp expected that non-invasive instruments,
which provided easily obtained, but accurate, cardiac information,
could help improve the care of cardiology patients while helping to
contain healthcare costs.
WINETT ASSOCIATES' SOLUTION-TESTING THE MARKET
Winett Associates interviewed doctors, nurses, physiologists,
and emergency medical personnel on the ground and in the air to explore
current methods for gauging cardiac health and also gauge acceptance
of the Cardometer. To learn how companies market and sell medical
devices, we also talked with people who sell medical devices ranging
from disposables to MRI equipment. At the same time we searched medical
literature for articles on using ejection fraction to assess patient
well-being. We also interviewed editors of medical journals. Additionally
we estimated the size of the market and the size of the potential
opportunity for the startup.
WHAT WE LEARNED
It was a classic chicken and egg situation: Cardiac
output data was unavailable; therefore, doctors and nurses did not
know how to interpret or use this type of information. Besides being
unfamiliar with cardiac output, emergency healthcare technicians claimed
not to have the time to connect a patient to the Cardometer to learn
what they could just as easily learn by looking at the patient. Additionally,
the device would have to be properly packaged. The Cardometer had
to withstand being dropped on hard ground-level emergency room floors
during a crisis. Also, people had to be able to operate it in the
dark during evening trips in an ambulance or helicopter.
Salespeople had other reservations about the Cardometer. As the Cardometer
was incompatible with medical equipment produced by the market leaders,
it would be hard to sell. At $500-$1,000 each, the monitors were too
complex and too expensive to be listed in catalogues alongside disposables
and other low-end equipment. However, this price point was too low to
be of interest to salespeople on commission
OUR RECOMMENDATIONS
In order to sell the device, Medcorp first had to demonstrate the
value of cardiac output information to medical personnel. This would
take time. Medcorp would also have to redesign the device to make it
compatible with the devices used in emergency rooms, operating rooms,
and ambulances. Medcorp would also have to motivate the distribution
channel to sell the device. These measures would require additional
funds and considerable effort.
VALUE TO THE INVESTORS AND TO MEDCORP
Winett Associates provided the investors with a realistic view of
opportunities and issues associated with marketing the Cardometer. In
addition, we provided Medcorp with recommendations for adapting their
product to meet the needs of both users and sales and marketing people.
The investors found that bringing the Cardometer to market would require
a significantly expanded investment in the company over several years.
During this time Medicorp would have to enhance the design and performance
of the product, educate the target market, and forge relationships with
partners and distributors. And, of course, the investors would then
have to subsidize the company as it navigated the three-phase Food and
Drug Administration (FDA) approval process. In short, Medcorp would
need several millions of dollars to bring the Cardometer to market.
We provided the investors with sufficient information to decide whether
or not to continue fund the company.
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