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.

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.

top | back