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Accuro cim 12 29-11 rev 8
1. Confidential Information Memorandum (CIM)
PROJECT MEGA MARKET
____________________________________
The Right Product at the Right Time
____________________________________
2. Purpose, Notice, & Disclaimer
Purpose: This Confidential Information Memorandum, presented by Hunter
Wise Financial Group, LLC (“Hunter Wise”), is intended to acquaint
prospective investors with relevant preliminary information regarding Accuro
Medical Products, hereafter referred to as “Accuro”, “AMP” or the “Company”,
whose business is currently available for acquisition, recapitalization or merger.
The overall format of this Confidential Information Memorandum is designed to
reflect to prospective investors the factors that create value within the Company
and assumes that any sale will take the form of either the sale of assets with
assumption of operating liabilities or the sale of stock. This Confidential
Information Memorandum is being furnished only to prospective investors who
Contacts have signed a Confidentiality Agreement, and who have made a specific request
for information regarding AMP for the purpose of determining their interest in
submitting an offer to acquire or recapitalize the Company.
Hunter Wise represents AMP on an
exclusive basis with the fees paid by Notice of Confidentiality: Hunter Wise represents AMP on an exclusive basis.
the client. All IOIs, LOI’s, All information presented in this document is highly sensitive and confidential
questions, emails and correspondence and is for use only by those who have signed a Confidentiality Agreement for
are to be directed to Dr. Christopher the purpose of considering the business described herein for investment. This
Gayde, Managing Director or Confidential Information Memorandum and related information presented shall
Kenneth Hoganson at Hunter Wise, be treated as secret and confidential and no part of it shall be disclosed to others,
and not to either the Company or its except as provided in the Confidentiality Agreement. The Confidential
owner. For additional information, Information Memorandum shall not be reproduced, duplicated or revealed, in
please contact: whole or in part, or used in any other manner without the prior written
permission of Hunter Wise or the Company. Should there be no interest in the
Company as an acquisition, the Confidential Information Memorandum and all
Dr. Christopher Gayde – related information shall be promptly returned to Hunter Wise, or deleted if in
Managing Director & Leader electronic format.
Health Care Industry Practice
Direct Tel: (949) 732-4114, Disclaimer: The information contained in this Confidential Information
Cell (734) 262-2280 Memorandum, including but not limited to the Executive Summary, Business
cgayde@hunterwise.com Description, Marketing Analysis, Organization, Facilities and Financial sections,
has been supplied by the Company. Hunter Wise has not audited or otherwise
confirmed this information and makes no representations, expressed or implied,
Kenneth B. Hoganson, Jr. as to its accuracy or completeness or the conclusions to be drawn and shall in no
Managing Director way be responsible for the content, accuracy and truthfulness of such
Cell (630)915-7715 information. Any and all representations shall be made solely by the Company
khoganson@hunterwise.com and then only when set forth in a signed acquisition agreement or purchase
contract, which agreement or contract shall control as to representations and
warranties, if any. By requesting this Confidential Information Memorandum,
the recipient acknowledges the responsibility to perform a due diligence review
at his or her own cost prior to any acquisition of or business combination with
the Company.
The Industry Overview section of this report is the result of research utilizing
stheces and materials considered to be relevant to the industry. The Pro Forma
Income Statements presuppose infusion of any necessary operating capital,
adequacy of personnel, expertise at all levels of operations and a commitment to
attain growth. Such pro forma financial information and projections cannot
anticipate economic, socio-economic and political factors that might impact the
expected growth. Accordingly, Hunter Wise makes no representations,
expressed or implied, as to the validity of the projections.
3. PROJECT MEGA MARKET
Table of Contents
1. EXECUTIVE SUMMARY .................................................................................................................................................5
1.1 KEY INVESTMENT CONSIDERATIONS ...................................................................................................................................... 5
1.2 BUSINESS & PARADIGM SHIFT SUMMARY.............................................................................................................................. 5
1.3 CRITICAL SUCCESS AND FAILURE CHRONOLOGY ....................................................................................................................... 5
1.4 THE MARKET OPPORTUNITY SUMMARIZED ............................................................................................................................ 6
1.5 MARKET STRATEGY SUMMARIZED ........................................................................................................................................ 6
1.5.1 A Market Competitive Matrix .............................................................................................................................. 7
1.5.2 Products and Solutions Summary ........................................................................................................................ 8
1.5.3 The Apex System: Disruptive Market Maker ....................................................................................................... 8
1.5.4 Dressing Kits: Annuity Maker One ....................................................................................................................... 8
1.5.5 The Canister System: Annuity Maker Two .......................................................................................................... 8
1.5.6 Therapeutic Mattresses: ...................................................................................................................................... 8
1.5.7 Accessory Future Potential................................................................................................................................... 9
1.6 MANAGEMENT’S SWOT ANALYSIS ...................................................................................................................................... 9
1.6.1 Strengths .............................................................................................................................................................. 9
1.6.2 Weaknesses ......................................................................................................................................................... 9
1.6.3 Opportunities ....................................................................................................................................................... 9
1.6.4 Threats ................................................................................................................................................................. 9
1.7 EBITDA SUMMARY ........................................................................................................................................................ 10
2. THE MEGA NEGATIVE PRESSURE WOUND THERAPY (NPWT) MARKET ....................................................................... 11
2.1 THE CURRENT MARKET & THE PARADIGM........................................................................................................................... 11
2.1.1 Current Paradigm............................................................................................................................................... 11
2.2 THE COMPETITIVE PRODUCT MATRIX ................................................................................................................................. 11
2.3 A COMPETITOR REVIEW ................................................................................................................................................... 13
2.4 SALES ANALYSIS.............................................................................................................................................................. 14
2.4.1 Management Projects Sales by Product ............................................................................................................ 14
2.4.2 Potential Products by 2012 ................................................................................................................................ 14
2.4.3 Potential Products by Year 2013 ........................................................................................................................ 14
2.4.4 New Products: Wound Tracking Software ......................................................................................................... 14
2.4.5 New Products: Elopement Prevention Systems .................................................................................................. 15
2.4.6 Management Projects Sales by Market ............................................................................................................. 15
2.4.7 Management Projects Units Sold ....................................................................................................................... 16
2.4.8 Management Projects Average Unit Prices ....................................................................................................... 16
2.5 WOUNDPRO NPWT SYSTEM ........................................................................................................................................... 17
2.5.1 Management Sales Projections.......................................................................................................................... 17
2.5.2 The Summary Product Features ......................................................................................................................... 17
2.5.3 The Summary Device Features ........................................................................................................................... 17
2.5.4 The Detailed Product Features ........................................................................................................................... 18
2.5.5 Competitors Summary ....................................................................................................................................... 18
2.5.6 Future Products: Wound Pro .............................................................................................................................. 19
2.6 DRESSING KITS ............................................................................................................................................................... 20
2.6.1 Management Sales Projections.......................................................................................................................... 20
2.6.2 Competition Matrix ............................................................................................................................................ 20
2.7 CANISTERS..................................................................................................................................................................... 21
2.7.1 Management Sales Projections.......................................................................................................................... 21
2.7.2 Competition Matrix ............................................................................................................................................ 21
2.8 THERAPEUTIC SUPPORT SURFACES ..................................................................................................................................... 22
2.8.1 Management Sales Projections.......................................................................................................................... 22
2.8.2 Competition Summary ....................................................................................................................................... 23
2.8.3 Future Therapeutic Mattress Systems ............................................................................................................... 24
4. 2.8.4 New Products: Wheelchair Cushions.................................................................................................................. 24
2.8.5 Future Fall Reduction Systems ........................................................................................................................... 24
3. MARKETING AND SALES INFORMATION ..................................................................................................................... 26
3.1 SALES FORCE STRATEGY ................................................................................................................................................... 26
3.2 SALES SUPPORT .............................................................................................................................................................. 26
3.3 CUSTOMER SERVICE ........................................................................................................................................................ 26
3.4 LEAD MEASURES: ........................................................................................................................................................... 27
3.5 REPS IN PLACE AND PLANNED ............................................................................................................................................ 27
4. OPERATIONS INFORMATION ...................................................................................................................................... 28
4.1 PROCESS AND OPERATIONS OVERVIEW ............................................................................................................................... 28
4.2 INFORMATION TECHNOLOGY:............................................................................................................................................ 28
4.3 ORGANIZATION AND EMPLOYEES ....................................................................................................................................... 28
4.4 QUALITY ASSURANCE / REGULATORY AFFAIRS: ..................................................................................................................... 28
4.5 PURCHASING ................................................................................................................................................................. 29
4.6 ENGINEERING................................................................................................................................................................. 29
4.7 MEDICAL SUPPORT ......................................................................................................................................................... 29
5. FINANCIAL .................................................................................................................................................................. 30
5.1 EBITDA SUMMARY TABLE ............................................................................................................................................... 30
5.1.1 Gross Profit Analysis .......................................................................................................................................... 31
5.2 BALANCE SHEET AS OCTOBER 31, 2011 ............................................................................................................................. 32
6. EXHIBITS..................................................................................................................................................................... 33
6.1 NPWT BASICS ............................................................................................................................................................... 33
6.1.1 NPWT what it is and how it works ..................................................................................................................... 33
6.1.2 NPWT Additional Benefits .................................................................................................................................. 33
6.1.3 NPWT Indications for Use .................................................................................................................................. 34
6.1.4 NPWT Therapy Options ...................................................................................................................................... 34
6.2 QUALITY POLICY ............................................................................................................................................................. 35
6.3 EBITDA FULL TABLE ....................................................................................................................................................... 36
6.4 MANAGEMENT GROSS PROFIT PROJECTIONS ....................................................................................................................... 37
6.4.1 Hospital Gross Profit .......................................................................................................................................... 37
6.4.2 Nursing Home Gross Profit................................................................................................................................. 37
6.4.3 Long Term Acute Gross Profit ............................................................................................................................ 37
6.4.4 DME/HME Gross Profit ...................................................................................................................................... 38
6.4.5 Specialty Dealers Home Gross Profit .................................................................................................................. 38
Confidential - 4-
5. 1. Executive Summary
1.1 Key Investment Considerations
• Disruptive sales process
• Carefully differentiated device features and functions
• Device designed For Use in All Market Segments
• FDA 510K Issued January 2011
• Management available to stay following sale of business
(000’s)
2012 2013 2014 2015 2016
Sales $15,494 $23,007 $32,148 $45,010 $58,315
Gross Profit 62% 63% 63% 46% 45%
EB ITDA $6,255 $9,858 $13,753 $12,577 $24,061
1.2 Business & Paradigm Shift Summary
Accuro Medical Products (AMP) manufactures and sells medical devices in the Negative Pressure Wound
Therapy industry. AMP was founded in 2009 to serve the needs of the Wound Therapy industry. AMP
was incorporated in 2009 as a Colorado Subchapter S corporation.
The Company has 510K approval for its Negative Pressure pump and associated products, and sells
specialty Therapeutic Mattress Systems. The Company was in substantially a R&D phase prior to 2011.
Operations are conducted from offices in Denver, Colorado with manufacturing taking place in a recently
remodeled 6500 sq ft facility Downers Grove, IL.
1.2.1.1 The paradigm shift is that Accuro Medical will sell highly effective products directly to the providers in
the acute and post acute healthcare markets. We will save the end users and thus the healthcare industry
tens of thousands of dollars with every unit we sell while making very good margins. There are over 68
thousand specialty mattresses and over 47 thousand NPWT units in use every day.
1.3 Critical Success and Failure Chronology
• Accuro Medical incorporated April 4th of 2009
• Hired Product Manager April 2009
• Awarded Engineering Contracts May 2009
• Received Prototypes November 2009
• Approved final design December 2009
• Receive first shot product March 2010
• Submit for FDA / UL approval April 2010
• Receive UL approval July 2010
• Receive FDA on Mattresses July 2010
• Complete pilot run August 2010
• Start Clinical Trials on NPWT August 2010
• Start field trials on Mattresses September2010
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6. • Complete debugging NPWT & Mattress systems December 2010
• FDA approval of NPWT January 2011
• Design transfer of mattress system to manufacturing January 2011
• Design Transfer of NPWT to manufacturing March 2011
• Move into new manufacturing space 6,500 in Downers Grove, IL
1.4 The Market Opportunity Summarized
The market strategy can be bullet-point summarized as follows:
• Service the Baby Boomer generation in the acute and post acute market
• Sell directly to the institution
• Sell to dealers that service the institutions
• Access the tens of thousands of units that are in use daily with direct sales
• Save the institution tens of thousands of dollars a year for every unit they purchase
• Help new dealers enter the market.
The wound care portion of the healthcare market is estimated to be over 20 billion dollars a year and
growing. On any given day there are several million people in the United States with wounds that are
serious enough to require advanced wound care.
A large percentage of the dollars spent on advanced wound care every year is spent on equipment and the
disposables used with that equipment in the treatment of these severe wounds. The therapeutic mattress
business is estimated to be between a 750 million and 1 billion dollar a year market. This is made up in a
large part by companies purchasing mattress systems and then renting them to either the healthcare
institution or the insurance company.
The negative pressure wound therapy market is estimated to be between a 2 and 3 billion dollar a year
market. The largest market share (1.3 billion dollars) is held by one company Kinetic Concepts Inc (KCI).
There are currently eight known companies in the world manufacturing negative pressure would therapy
devices. Three of the eight only offer rental product. Fthe of the remaining focuses on the homecare
market.
There have been three very significant financial transactions in the negative pressure wound therapy market
in the past five years.
• In May of 2007 Blue Sky Medical sold to Smith & Nephew for 87 million dollars. Blue
Sky Medical’s annual revenues at the time were only 11 million dollars. That is almost 8
times gross revenue.
• In 2009 Kalypto Medical received an investment of 9 million dollars to develop their
negative pressure wound therapy system. At the time of the close, sales were reported to
be 1 million dollars.
• In 2011 a leveraged buyout was started by Apax Partners where 6.3 billion dollars would
be used to purchase all the shares of Kinetic Concepts Inc. Within a couple of weeks it
was announced that Convatec was attempting to out bid Apax Partners with an offer of
6.4 billion dollars. Apax Partners countered with an offer of 6.5 billion dollars. That is
over 4 times annual gross sales. This transaction is expected to close before the end of the
year.
1.5 Market Strategy Summarized
The Company identified several unmet needs in the Wound Therapy device market and has launched
unique products and strategies to take full market advantage. The highly differentiated products sell
directly to the providers in the acute and post acute healthcare markets. As a result the end users and thus
the healthcare industry can save tens of thousands of dollars with every unit sold while generating great
Confidential - 6-
7. margins for the Company. There are over 68 thousand specialty mattresses and over 47 thousand NPWT
units in use every day. The Company is the ONLY manufacturer that has a single Negative Pressure
Wound Therapy unit that is appropriate for use in all market segments. The unit is powerful enough to
handle the most challenging wounds, but still small enough to be appropriate for the homecare market.
The Company identified several unmet needs in the Wound Therapy industry and developed a strategy to
take advantage of this.
• AMP’s line of therapeutic mattresses is sold under the product family name of
“Therapeutic Mattress Systems”.
• The Negative Pressure Wound Therapy line is sold under the name “WoundPro”.
All of the Company’s products are unique in that they provide features that the competitors do not. Both
families of products are appropriate for use in all market segments. This is to include Hospitals, Long Term
Acute Hospitals, Long Term Care facilities (Nursing Homes) and Home Care. The Therapeutic Mattress
Systems line of products has been on the market since March of 2011.
1.5.1 A Market Competitive Matrix
Confidential - 7-
8. 1.5.2 Products and Solutions Summary
Sales (000’s)
Product Line 2012 2013 2014 2015 2016
Apex 6,887 7,363 10,090 11,883 13,425
Canisters 1,383 3,057 4,650 7,614 11,171
Foam Dressings Kits 5,266 10,163 14,183 21,281 28,407
Therapeutic Mattresses 1,958 2,424 3,225 4,233 5,313
Total 15,494 23,007 32,148 45,010 58,315
1.5.3 The Apex System: Disruptive Market Maker
The Apex negative pressure system has been designed for use in all healthcare settings. It provides
effective, comfortable, and highly customizable therapy. Utilizing the highest quality materials and
advanced electronics, Apex offers providers various options for negative pressure therapy. Appropriate for
use in hospitals, long-term care facilities, and home care, the powerful pump and compact design make this
product incredibly versatile.
The Apex operates in continuous and intermittent modes; both modes give complete control of pressure
settings to the care provider. It will run on a battery charge for 24 hthes, and has many accessory options
with multiple canisters, dressing, and drain choices.
With a purchase price of less than what it would cost to rent a comparable unit to treat one wound and the
three year warranty, Apex may deliver a disruptive blow to a mega market with huge profit potential.
1.5.4 Dressing Kits: Annuity Maker One
AMP is one of two companies that offer a full line of both foam and gauze dressing kits. The gauze based
dressing kits contain all the materials needed to fully dress a wound for use with the WoundPro Negative
Pressure wound therapy system. We currently offer two types of gauze dressing kits with 3 sizes available
for each type. The two types available are a round (or channel) drain and a flat (or Jackson-Pratt style)
drain.
Accuro Medical’s reticulated foam dressings are also offered in three sizes to accommodate different sizes
of wounds. The reticulated foam is a 30 PPI (same as market leader KCI). We also offer a full line of
dressings, drains and cover dressings for use with the foam kits.
Accuro Medical offers a line of Silver dressings that are used to combat bacteria colonization in the wound.
The competitors silver dressings are coated with silver where AMP’s sliver dressings use ionized silver that
is mixed into the foam formula while the dressing is made. This process insures an even distribution of
silver throughout the dressing. The silver dressings sell for about twice the cost of the non-silver dressings.
1.5.5 The Canister System: Annuity Maker Two
The WoundPro has multiple disposable canister options. We offer two sizes of canister replacements. A
300cc canister for normal usage and an 800cc canister for wounds with a high level of exudates. All of the
canisters contain an integrated filter and an automatic shutoff to prevent spilling and damage to the pump.
The canisters include a coagulant that solidifies any liquids it comes in contact with to help limit the
possibility of spillage. Each canister comes with either a 4’ or 8’ length of extension tubing and hose
clamps for easy installation and use.
1.5.6 Therapeutic Mattresses:
Given current ownership limitations, the huge therapeutic mattress market is the last product line to be
developed. Management has multiple mattress market targets and differentiated design features in process.
The Low Air Loss system moves air across the patient’s skin while the competitors only use the air to wick
Confidential - 8-
9. the moisture away from the patient (like a Gore-Tex jacket). Further, the Alternating Pressure System
allows the care giver to select from fthe levels of alternating pressure from static to very aggressive. Very
aggressive alternating pressure is used to treat the most serious wounds
1.5.7 Accessory Future Potential
As works in process and/or under construction, there are several accessories available for the WoundPro
Apex system including AC Power Adapter, Pole Clamp and Carrying Bag.
1.6 Management’s SWOT Analysis
1.6.1 Strengths
• New Company
– people will take notice of a new player in the market
– can change directions quickly not tied to old ideas and habits
• New Products
– not tied into a specific strategy or product
– no barriers to overcome with existing customers
– focused on the task at hand not diluted over several lines
• Sophisticated Manufacturing Restheces
– founders long history in manufacturing many parts on demand
– comprehensive work flow management software that will keep the pipeline full
– ability to setup manufacturing processes right the first time
• Direct End User Pipeline For Feedback
– able to get timely accurate assessments of product performance
– direct feedback on product needs
• National Account Relationships With Large Chains
– able to move through the approval process much faster
– high level of trust
1.6.2 Weaknesses
• New Company
– limited cash
– limited brand name
• New Products
– limited experience in the manufacturing of medical devices
• Limited Sales Force
– reduced exposure to the customers on a national basis
– slower ramp up time to bring products to all markets.
1.6.3 Opportunities
• Disruptive Sales Process
– develop products designed to be sold directly to the end user health provider and not a middle man
– creating a paradigm shift in the industry from rental to ownership
• Glaring Market Issues and Voids
– Bring products to market that address issues that others have either ignored or unaware
– Remote control
– Maintenance free products
– User interface that is simple and easy for the end user
• New marketing approaches that target end users and dealers not just dealers alone.
• Fresh look of a new company
1.6.4 Threats
• The customers don’t like what we have done as much as we believe they will
• Other companies figuring out what we have figured out and come to market with similar strategies
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10. • Lawsuits filed from competitors because they do not like what we are doing to their profit margins and
business strategies.
• Inability to meet customer demand for products
1.7 EBITDA Summary
(000’s)
2012 2013 2014 2015 2016
Sales $15,494 $23,007 $32,148 $45,010 $58,315
Gross Profit 62% 63% 63% 46% 45%
Marketing and Sales 15% 14% 14% 14% 14%
General and Administrative 7% 6% 6% 5% 4%
EB ITDA $9,588 $14,604 $20,095 $20,833 $ 26,424
Some key considerations to the table above:
• Given the mega market product demand and the Company’s disruptive sales process,
management’s experience shows sales to be a function of the number of qualified sales
personnel in the field: the more sales force the more sales.
• Given the current mega market gross profit structure, the Company can offer the
customer serious price reductions at substantial gross profit margins. Management
anticipates and therefore projects gross profit “right sizing” due to likely case competitive
response to the disruptive sale process. Gross profit will vary by market segment.
• To support the sales projections, management assumes all sales will be processed through
independent sales force on a 10% commission fee basis.
Confidential - 10-
11. 2. The Mega Negative Pressure Wound Therapy (NPWT) Market
Healthcare Is A
4.5 Trillion Dollar
Industry
Wound Care Is a
5 Billion Dollar
Industry
Negative Pressure Specialty Mattress
Rentals Rentals
is a 1.3 Billion is a 500 Million
Dollar Industry Dollar Industry
Approximately Approximately
47 Thousand 68 Thousand
Units A Day Units A Day
Are In Use Are In Use
2.1 The Current Market & The Paradigm
• On any given day there are one and a half million patients in the United States with
pressure ulcers. This is a five billion dollar industry. The vast majority of the five billion
dollars is spent on equipment used to treat current pressure ulcers and prevent future
pressure ulcers.
• The manufacturers that are currently providing medical devices used for the treatment of
pressure ulcers have backed themselves into a corner. The vast majority of these
companies manufacture products that they sell to Durable Medical Equipment Rental
(DME) companies. These DME companies then in turn rent these products into the
healthcare network. The relationship with the DME company makes it all but impossible
for the manufacturer to sell their products to the actual care facility.
2.1.1 Current Paradigm
• Products are purchased (or manufactured) by a company that rents them to the end user
• Rental companies generally have a three to fthe month return on their investment
• End users never own product
• End users never stop renting product
2.2 The Competitive Product Matrix
Up until October of 2010 Kinetic Concepts (KCI) held patents on the use of polyurethane foam to fill
wound beds that were treated with negative pressure wound therapy. They have spent 10s of millions of
dollars marketing the effectiveness of the use of foam with negative pressure wound therapy. Their efforts
have been very successful.
Confidential - 11-
12. The KCI patents were originally challenged by Blue Sky Medical in the early 2003. It was during this time
period that Blue Sky Medical sold to Smith & Nephew. A federal district cthet in Texas ruled in favor of
Smith & Nephew in October 2010, ruling that the patents had clearly been issued in error and that there
was prior art work to substantiate this. This has created a tremendous opportunity in the market for
manufacturers to offer the foam dressings with other negative pressure would therapy devices. Currently
the only companies that offer foam dressings are Kinetic Concepts, Smith & Nephew, ITI and Accuro
Medical. Kinetic Concepts, Smith & Nephew and ITI only offer their products as direct rentals into the
institutional market. They battle back and forth over the daily rental rate. This has created an enormous
opportunity.
4
Confidential - 12-
13. 2.3 A Competitor Review
Home
Channels Acute LTC LTCF Care Pricing Comment
If pushed then sell
KCI Direct X X X X Rental
@ $20K-$30K
Smith & If pushed then sell
UHS Direct X X X X Rev share
Nephew @ $20K-$25K
Rental
X X Rev share
Medela Dealers
Rental
X X X Sell
Prospera Dealers
Rental
X X X Sell
Talley Group Dealers
Kalypto DMEs X Sell
Ohio Medical DMEs X Sell
Institutions
X X X X Sell Can Also Rent
Accuro & DMEs
Confidential - 13-
14. 2.4 Sales Analysis
2.4.1 Management Projects Sales by Product
(000’s)
2012 2013 2014 2015 2016
Apex 6,887 7,363 10,090 11,883 13,425
Canisters 1,383 3,057 4,650 7,614 11,171
Foam Dressings Kits 5,266 10,163 14,183 21,281 28,407
Therapeutic Mattresses 1,958 2,424 3,225 4,233 5,313
Total $15,494 $23,007 $32,148 $45,010 $58,315
Some key considerations:
•
•
•
2.4.2 Potential Products by 2012
• Bariatric Mattress Systems
• EgressEZ Mattress
• Foam / Air Combination Mattress
• OEM mattress systems
• Basic Wheelchair Cushion
• High Level Pressure Management Wheelchair Cushion
• Lateral Rotation Mattress System
• Multi Zone Mattress System
• Advanced Wound Dressing
• Unique Integrated Drain System for WoundPro
• Touch Screen Apex
• Wound Tracking Software:
• Mid Level Wheelchair Cushion
• High level Pressure Management / High Level Positioning Wheelchair Cushion
2.4.3 Potential Products by Year 2013
• Ultra Small NPWT System
• Fall Reductions Wheelchair
2.4.4 New Products: Wound Tracking Software
– Wounds in institutionalized patients are a big deal and both state and federal healthcare agencies
monitor them very closely. The facility is required to document everything about any wounds
patients have.
– The real sell is that the software would integrate with the higher end Therapeutic Mattress Systems
and the WoundPro products. This would allow the user to track wound progress on the device at
the bedside and then transfer the information to the PC or Web where charts, graphs and data
sheets could be produced.
Confidential - 14-
15. – This project would required software, mechanical, electrical and industrial engineering. The USB
port and tracking software would be integrated into the both the Multi zone air mattress and the
touch screen Apex products.
2.4.5 New Products: Elopement Prevention Systems
– One of the more challenging things we deal with in the elderly and developmentally disabled
population is keep track of them. I believe we could develop systems that would be used in privet
homes for people with elderly parents or disabled children as well as systems that could be used in
the institutional setting.
2.4.6 Management Projects Sales by Market
(000’s)
2012 2013 2014 2015 2016
Hospital 1,534 2,767 4,040 5,448 6,400
Nursing Homes 1,663 3,161 5,312 7,353 9,564
Long Term Care 2,139 3,392 4,626 6,068 7,170
DME/HME 6,904 9,346 12,746 19,722 27,570
Specialty Dealers 3,254 4,342 5,423 6,419 7,610
Total $15,494 $23,007 $32,148 $45,010 $58,315
Some key considerations:
•
•
•
Smith &
Kalypto
Nephew
Medical
Prosper
Medical
Medela
Accuro
Group
Talley
K.C.I.
Ohio
a
Types of Wounds To Be Treated
Low Volume Wounds Yes Yes Yes Yes Yes Yes Yes Yes
High Volume Wounds Yes No Yes Yes No Yes
Multiple Wounds Yes No Yes No No Yes
Market Segments Company Fits In
Hospital Yes No Yes No No No Yes No
Long Term Acute Facility Yes No Yes No No Yes Yes Yes
Nursing Home Yes No Yes Yes No Yes Yes Yes
Home Care Yes Yes (no code) Yes Yes Yes No Yes Yes
Confidential - 15-
16. 2.4.7 Management Projects Units Sold
Total Units Sold
2012 2013 2014 2015 2016
Apex 1,550 1,725 2,900 3,750 4,600
Canisters 115,500 250,050 375,900 637,200 965,100
Foam Dressings Kits 173,250 375,075 563,850 955,800 1,447,650
Therapeutic Mattresses 1,150 1,525 2,050 2,775 3,500
Some key considerations:
•
•
•
2.4.8 Management Projects Average Unit Prices
Average Unit Prices $
2012 2013 2014 2015 2016
Apex 4,443 4,268 3,479 3,169 2,918
Canisters 12 12 12 12 12
Foam Dressings Kits 30 27 25 22 20
Therapeutic Mattresses 1,702 1,589 1,573 1,525 1,518
Some key considerations:
•
•
•
Confidential - 16-
17. 2.5 WoundPro NPWT System
2.5.1 Management Sales Projections
(000’s)
Sales by Product Line 2012 2013 2014 2015 2016
Apex 6,887 7,363 10,090 11,883 13,425
Total 15,494 23,007 32,148 45,010 58,315
2.5.2 The Summary Product Features
• High utility
• Innovative
• Feature rich
• Cost effective
• Efficacious
• For purchase (not rent)
2.5.3 The Summary Device Features
• Virtually maintenance free products
• Simple intuitive controls
• Designed to be purchased as opposed to rented resulting in thousands of dollars saved per unit per year and
increases access for patients
• Meet head on and exceed the changing needs of the market
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18. 2.5.4 The Detailed Product Features
• Adjustable air loss therapy
• Adjustable alternating pressure therapy
• Automatic fowler boost
• Pressure sensor monitoring
• Side bolsters
• Patient safety rails
• Power failure system
• Sealed system for easy cleaning
• Water proof top cover
• Disposable top sheet
• Wireless remote control
• Weight selection as well as comfort adjustment
• Deflate button
• Evacuation system
2.5.5 Competitors Summary
Prospera
Smith &
Kalypto
Nephew
Medical
Medical
Medela
Accuro
Group
Talley
K.C.I.
Ohio
Therapy Options
Two 25 –200 40 - 200 40 - 200
Pressure Settings
0-150 mmHg choices mmHg mmHg mmHg
Continuous Mode Yes Yes Yes Yes Yes Yes Yes Yes
Intermittent Mode Yes Yes Yes Yes Yes Yes Yes
Variable
Intermittent Mode Yes No No No No Yes No No
Pressure Intensity Automatic / Low, Medium,
None None None None None None
Setting Variable High
Suction Drain Options
External Suction
Flange Yes Yes Yes Yes No No No No
Internal Flat
(Jackson Pratt) Yes No No Yes Yes Yes Yes Yes
Internal Round
(Channel) Yes No No Yes Yes Yes Yes Yes
Alarms
Vacuum Leak Yes Yes Yes Yes Yes Yes Yes Yes
Blocked Line Yes No Yes Yes No No Yes Yes
Canister Full Yes No Yes Yes Yes Yes
Low Battery Yes Yes Yes Yes Yes Yes Yes
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19. 2.5.6 Future Products: Wound Pro
– So the goal here is to set the trend and then keep raising the bar so that competitors are always
trying to catch up.
– Touch Screen Apex – These would be the same unit we have currently with a touch screen
instead of the key pad and display window. It would sell to the higher end market.
– Advanced Wound Dressing – Finding a dressing that did not violate the KCI patents and was not
gauze based could provide us a niche that could result in long term product loyalty.
– Unique Integrated Drain System –This would be a drain that was integrated into the cover
dressing. This would result in easier application which would result in a significant marketing
advantage
– Ultra Small NPWT System – This would be a NPWT system that could fit in the palm of ythe
hand. They have a very small canister (around 100cc).
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20. 2.6 Dressing Kits
2.6.1 Management Sales Projections
(000’s)
Sales by Product Line 2012 2013 2014 2015 2016
Foam Dressings Kits 5,266 10,163 14,183 21,281 28,407
Total 15,494 23,007 32,148 45,010 58,315
2.6.2 Competition Matrix
Prospera
Smith &
Kalypto
Nephew
Medical
Medical
Medela
Accuro
Group
Talley
K.C.I.
Ohio
Foan Dressings
Gauze Dressing Kits Yes Yes No Yes Yes Yes Yes Yes
Foam Dressing Kits Yes No Yes No No No Yes No
Silver Foam Dressing Kits Yes No Yes No No No No No
Hydrophilic Foam Dressings Yes No No No No No No No
Foam Bridge Dressing Yes No Yes No No No Yes No
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21. 2.7 Canisters
2.7.1 Management Sales Projections
(000’s)
Sales by Product Line 2012 2013 2014 2015 2016
Canisters 1,383 3,057 4,650 7,614 11,171
Total 15,494 23,007 32,148 45,010 58,315
2.7.2 Competition Matrix
Prospera
Smith &
Kalypto
Nephew
Medical
Medical
Medela
Accuro
Group
Talley
K.C.I.
Ohio
Canisters
Small Canister 300 ml No 500 ml 300 ml 250 ml 300
Large Canister 800 ml No 1,000 ml 800 ml 800 ml 600
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22. 2.8 Therapeutic Support Surfaces
2.8.1 Management Sales Projections
$ Sales 2012 2013 2014 2015 2016
Therapeutic Mattresses 1,958 2,424 3,225 4,233 5,313
Total 15,494 23,007 32,148 45,010 58,315
• The most important aspect of a therapeutic support surface is its ability to relieve pressure on the skin. This
is normally accomplished in one of two ways.
– Continuously Low pressure that is consistently below 32 mmHg
– Alternating Pressure where the cycles are above 32 mmHg half the time and below 32 mmHg half
the time
• Low air loss to control moisture on the skin surface by reducing moisture around the skin.
• Low friction low shear materials that reduce the risk of damage to the skin when the patient is moved.
• Reduction in pain is frequently seen in patients that are placed on a therapeutic support surface
• Used to prevent and treat pressure ulcers
• Family of six to be released March 1st 2010
• Three foam based preventative mattresses
• Three air based treatment systems
• Therapeutic support surfaces are indicated for use any time the patient has or is at risk of developing
pressure ulcers.
• Therapeutic support surfaces are indicated in the treatment and prevention of pain.
• Therapeutic Support Surfaces will offer one or more of the following therapies
– Low Air Loss (air escaping from the system to help manage moisture
– Low Pressure (pressures below 32 mmHg at all times)
– Alternating Pressure (pressures below 32 mmHg half the time and pressures above 32 mmHg half
the time).
– Lateral Rotation (system turns from side to side to help reduce the effects of immobility
• The Low Air Loss system moves air across
the patients skin while the competitors only
use the air to wick the moisture away from
the patient (like a Goretex jacket).
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23. 2.8.2 Competition Summary
Evacuation Sale or Purchase Low Alternating Easy
Warranty
System Rental Price Air Loss Pressure Cleaning
Accuro Medical Yes Both 2-3 K Yes Yes Yes 3 Year
KCI No Rental N/A Yes Yes No N/A
Hill-Rom Yes Sale 20 30 K No No Yes 1 Year
Recover Care No Rental N/A Yes Yes No N/A
Stryker / Gaymar No Rental N/A Yes Yes No N/A
KAP No Rental N/A Yes Yes No N/A
Pegasus No Rental N/A No Yes No N/A
24% 9%
24% 9%
KCI
Hillrom
Recover Care
Medi STAT
Triline
Independants
10%
24%
Confidential - 23-
24. 2.8.3 Future Therapeutic Mattress Systems
– Bariatric Mattress Systems – These are mattress systems used to treat pressure ulcers or other
complications associated with immobility in the obese patient.
– Foam / Air Combination Mattress – This system fills a niche between the line of foam
mattresses and the air mattresses. They can be powered with a small pump or non-powered. They
are products that would not require a lot of engineering expense.
– Lateral Rotation Mattress – These systems turn patients in bed from side to side to address
serious lung issues and other issues found in seriously ill patients. These are the top end of the air
mattress products.
– Multi zone Air Mattress – These systems have multiple zones from head to foot and allow the
care provider to adjust these zones to treat specific areas of the body differently.
• OEM mattress systems – The idea here would be to develop a line of products that we
could sell to dealers in different markets offering each dealer exclusivity for that product
in that market.
2.8.4 New Products: Wheelchair Cushions
– This is a nature addition to the line. If a person is mobile and has a pressure wound they need both
the mattress system and the wheelchair cushion.
– Basic Wheelchair Cushion - We would have an entry level cushion that would be very
inexpensive (30 40 dollars) for those institutionalized patients
– Mid Level Wheelchair Cushion – This cushion would provide pressure management for the
compliant patient that required more therapy. The sell price on this cushion would be in the $150
range. It would most likely be a molded foam cushion with a gel insert that we would have made
for us.
– High Level Pressure Management Wheelchair Cushion – This cushion would provide
outstanding pressure management and some positioning. These is the perfect cushion for the
paraplegic. It would sell in the 400 to 500 dollar range. This would be a foam / gel /dynamic air
cushion.
• High level Pressure Management / High Level Positioning Wheelchair Cushion –
This cushion would provide outstanding pressure management as well as outstanding
positioning of the patient. It would be use on the most complex patients. The cushion
would use foam and gel in the front portion (under the legs) of the surface but an
alternating pressure system in the buttocks region and adjustable air positioning cells. this
cushion will sell for between $1,000 and $1,500.
2.8.5 Future Fall Reduction Systems
– Fall Reductions Wheelchair: We would look at developing a system that would allow the patient
to stand up if they wanted to but protect them if they fell. This would allow many patients to
continue to stand and walk when they wanted giving them increased freedom and a better quality
of life.
– Fall Reduction Mattress: The issue with patients trying to get out of bed and falling is addressed
through the use of siderails or assist rails. In order for siderails not to be considered a restraint the
patient has to be able to get out of bed at will. Now that presents a whole new problem,
entrapment. Entrapment happens when the patient tries to get out of bed and gets stuck between
the side rail and the mattress. There are over 50 deaths each year caused by entrapment. The same
thing can happen with assist rails.
– The EgressEZ mattress was developed to address this situation. Accuro Medical now has
exclusive rights to this product and we are looking into addressing the cost issue. We should have
an answer in the next several months. If we can get the cost out of the product it may have real
potential.
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26. 3. Marketing and Sales Information
Prospera
Smith &
Kalypto
Nephew
Medical
Medical
Medela
Accuro
Group
Talley
K.C.I.
Ohio
Sales Model
Sell To Institution Yes No Yes No N/A No No Yes
Sales Price to 8,000 to 20,000- 10,000-
N/A N/A N/A N/A N/A
Institution 12,000 30,000 15,000
Formerly
Sell To Dealers Yes Yes No
not now
Yes Yes No Yes
2,880 – 3,000 - 2,500- 3,500- 3,000-
Sales Price to Dealers 3,780 4,000
N/A N/A
3,000 4,000
N/A
4,000
Sales Force
Type of Sales Direct /
Representatives Indepent. Direct Direct Direct Independent Direct Direct Direct
Estimated # Sales
Representatives 4 / 25 2 300 5 6 2 50 2
Product Origin
Continent Where
Product Is Made USA Asia USA Europe Europe Europe Europe
Country Company Is
Based Out Of USA USA USA UK UK
3.1 Sales Force Strategy
• Accuro Medical has two full time Regional Sales Mangers that divide the country in half
• We have two contract National Accounts Managers. Both have over 30 years experience.
• We have 25 Independent Sales Representatives covering approximately 70% of the
country. All of them have numerous years calling on healthcare accounts. We expect to
complete national coverage by the end of 2011.
• We have one in house and one contract marketing professional working on marketing
materials and strategies. The contract employee has over 30 years healthcare experience.
3.2 Sales Support
• Accuro Medical has two full time Regional Sales Mangers that divide the country in half
• We have two contract National Accounts Managers. Both have over 30 years experience.
• We have 25 Independent Sales Representatives covering approximately 70% of the country. All of
them have numerous years calling on healthcare accounts. We expect to complete national
coverage by the end of 2011.
• We have one in house and one contract marketing professional working on marketing materials
and strategies. The contract employee has over 30 years healthcare experience.
3.3 Customer Service
• Establish a customer service person (or people) that would learn the Accuro Products to a
level that would allow them to assist with customer service calls.
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27. 3.4 Lead Measures:
• Attend all major trade shows for each of the Market segments
• Advertise in one major trade journal for each market segment by the end of the second
quarter of 2011
• Establish Internet based social networking presents by the end of 2010. To include
Facebook, Twitter, Blogs, and forums
3.5 Reps in place and planned
• All of California
• Phoenix & Tucson areas
• Kansas City area
• St Louise area
• Chicago area
• North Carolina (State)
• Atlanta area
• Maine
• New Hampshire
• Vermont
• Florida (new)
• California is the largest market that we still need to cover.
• Florida (have independent representation)
• Midwestern states are next
• Northwest is the lowest priority.
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28. 4. Operations Information
4.1 Process and Operations Overview
• Accuro Medical developed and implemented a quality management system to better
satisfy the needs of its customers and to improve management of the company. The
quality system complies with the international standard ISO 13485:2003; ISO 9001:2008,
FDA Quality System Requirements as found in 21 CFR 820; Canadian Medical Devices
Regulations(CDN MDR); and European Medical Device Directives 93/42/EEC. It covers
the production, inspection, handling, and storage of the company’s products.
• The manual is divided into 5 sections corresponding to quality system requirements of
the ISO 13485:2003 and ISO 9001:2008 standards.
• Each section outlines how the general policy should be carried out and references the
relevant operational procedures.
• The purpose to define and describe the quality system, to define the authorities and
responsibilities of the management personnel affected by the system, and to provide
general procedures for all activities comprising the quality system.
• The scope of the quality system includes the design and manufacture of Support Surfaces
(replacement mattress systems) for use in the treatment and prevention of pressure ulcers
and Negative Pressure Wound Therapy Systems.
• Another is to present the quality system to the customers informing them specific
controls being implemented to assure a quality product.
4.2 Information Technology:
• Hardware support required for Online marketing strategy
– We will want to insure that the hardware and pipe size that we have stays ahead of the demand as
the internet activity increases.
• Software development for Online marketing – blogs, forums, bulletin boards, etc,
– To be outsourced
• This is an ongoing project for the next several years
– Development of videos for the end user of all of the systems that would be sent out with each unit.
To be completed by the end of 2010.
– The video work will be outsourced.
– Videos will be linked to the website so the customers can access easily.
– Development of a user’s only area on the website that will allow us to allow the customers to
access things that we do not want the general public to access. I would like to see this done
second quarter 2011.
– Bring Same Time up so that people outside the company can attend web based meetingsI would
like to do this by the end of third quarter 2010.
4.3 Organization and Employees
4.4 Quality Assurance / Regulatory Affairs:
• To start with I believe Tim will be able to handle most of this with the exception of the
audits (he cannot audit himself) which would have to be done by someone that does not
report to him.
• Starting in 2012 I see this growing in to a half of an FTP.
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29. • When we go to Europe we will most likely have to increase this to a full time position but
I don’t see that happening before 2014.
4.5 Purchasing
• Accuro’s purchasing needs will remain about the same as they have been for the past
several months. As we add new products workload will increase but I do not see this as a
consistent demand. The day to day ordering will continue to increase but I do not see this
resulting in a full FTE in the foreseeable future
4.6 Engineering
• We will see increasing the engineering needs year over year for the next several years.
While we do not see us needing a full FTE I can see us needing ½ of an FTE.
• This would all change if we brought product development in house. This may be a good
idea for 2012 after we have had a couple of years to determine the potential utility of
these people.
4.7 Medical Support
• Accuro Medical’s Vice President of Medical Affairs is Dr Michael Miller. Dr Miller is one of the worlds
foremost authorities on Negative Pressure Wound Therapy.
– Dr Miller is available to the sales team as well as the customers
– He provides consultation on specific cases and provides education on a regular basis.
• We have hired an firm to produce the clinical practice guidelines, three tiered training program and to assist
us in putting together a national network of certified wound care nurses.
– This network will assist the customers with their clinical education needs.
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32. 5.2 Balance Sheet as October 31, 2011
Current Assets:
Cash 32,237
Accounts Receivable 850,344
Allowance for Doubtful Accounts 435
Inventories 875,499
Prepaid Expenses 1,658
Deferred Income Tax
Total Current Assets 1,760,172
Property and Equipment:
Land
Leasehold Improvements
Machinery 101,738
Patterns and Dies 166,601
Office Furniture and Equipment 7,721
Automobiles and Trucks
Construction in Progress
Less accum depr & amort (46,104)
Property and equipment, net 229,957
Other Assets:
Related Parties (894,860)
Deferred Income Tax
Other Assets 23,429
Total Other Assets (871,431)
Total Assets 1,118,697
Current Liabilities:
Notes Payable 909,856
Accounts Payable 259,964
Current portion of Deferred comp 10,092
Income Taxes Payable
Due to Related Parties 1,885,552
Customer Deposits
Accrued Expenses 79,416
Total Current liabilities 3,144,880
Total long-term liabilities 0
Equity (2,026,183)
Total Liabilities and Assets 1,118,697
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33. 6. Exhibits
6.1 NPWT Basics
6.1.1 NPWT what it is and how it works
NPWT
• The first and most
visible effect of
NPWT is the removal
of exudate (any fluid
that filters from the
circulatory system
into lesions or areas
of inflammation) from
wounds and the
establishment of a
fluid balance.
6.1.2 NPWT Additional Benefits
NPWT additional benefits
• Studies have show that the application of negative
pressure in the wound can cause arterioles (small
diameter blood vessels) and capillaries (the smallest
blood vessels) in the wound edge tissue to open. The
opening of these capillaries and arterioles allows
more nutrients and oxygen to reach the wound bed,
which is imperative for healing. The process of
nutritive delivery of the blood to the wound bed is
known as perfusion.
• Several recent studies are showing that using
intermittent pressure in the healing process
(increasing and decreasing between two pressure
settings) has an even greater impact on the success
and the rate of healing in wounds.
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34. 6.1.3 NPWT Indications for Use
Indications for Use
The WoundPro Apex Negative Pressure Wound
Therapy System may promote wound healing,
through the drainage and removal of infectious
materials and other fluids from the wound site
using continuous and or intermittent negative
pressure. Patients with chronic, acute, traumatic,
subacute and dehisced wounds, partial-
thickness burns, ulcers (such as diabetic or
pressure), flaps and graphs may benefit from the
use of this device.
6.1.4 NPWT Therapy Options
NPWT Therapy Options
• There are currently three types of Negative Pressure Wound
Therapy. They are Continuous, Intermittent and Variable
Intermittent.
– As the name implies continuous therapy is the continuous
application of negative pressure to the wound bed.
– Intermittent therapy is defined as therapy that is applied and
then released. So the set pressure is held for a certain
amount of time and then released. In most cases the
pressure is released to zero.
– Variable Intermittent therapy is defined as being able to set
both the high pressure and the low pressure as well as how
long each is applied. This therapy offers the most options.
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35. 6.2 Quality Policy
1. Accuro Medical has established, documented, implemented, and maintained a quality
management system in accordance with the requirements of the ISO 13485:2003 and
ISO 9001:2008. Accuro Medical shall take actions to maintain and continually improve
the effectiveness of the quality management system.
2. Accuro Medical will identify the processes needed for the quality management system.
3. The interactions of the processes are defined throughout the quality manual and
procedures.
4. Accuro Medical has ensured the availability of resources and information necessary to
support the operation and monitoring of the required processes.
5. Accuro Medical has monitored, measured, and analyzed processes (as described in the
Quality Manual) to ensure they are effective and to allow for continual improvement.
6. Accuro Medical has implemented the actions necessary to achieve planned results and
continually improve the processes.
7. Outsourced processes, such as design, have been controlled in a manner described in
the Purchasing section of the Quality Manual.
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