Diversify, globalize and innovate. It's a formula that has helped Kinetic Concepts Inc. endure one of the worst economic downturns in U.S. history. From the acquisition of tissue-repair products manufacturer LifeCell in April 2008, to the company's expected entry into Japan this year with its vacuum-assisted closure (VAC) wound-care treatment, the San Antonio-based medical-device manufacturer has aggressively pursued new investment opportunities in a down marketplace.
The company also plans to introduce three new products in 2010 and expand its manufacturing capabilities at its facility in Athlone, Ireland, says Michael Genau, president of Active Healing Solutions, Kinetic Concepts' largest division. The moves are part of an overall plan that's kept Kinetic Concepts profitable in an increasingly competitive industry, he says.
Michael Genau, president of Active Healing Solutions, a division of Kinetic Concepts
The company's profit rose 20% in its most recent reporting period to $64.6 million. Even its year-end results were respectable given the economic climate. Kinetic Concepts' fourth quarter ended with profit down 22% related to LifeCell acquisition expenses, while revenue rose 14%. Like many other manufacturers, the challenging year led to some restructuring, including the layoff of 300 workers worldwide in March 2009.
The company has high hopes, though, that the Japanese market will open up a new expansion opportunity. It received approval from Japan's health ministry in November to begin selling the VAC treatment in the country, where Kinetic Concepts expects to launch the product during the first half of 2010. VAC is said to help wounds heal faster by applying a negative pressure, or vacuum, at the wound site through a dressing.
Kinetic Concepts' Abthera open-abdomen negative-pressure therapy system released in August 2009 represents a $400 million global opportunity, according to the company.
The August introduction of an abdominal wound therapy called Abthera is another development that Genau envisions as a major growth contributor. Similar to VAC, Abthera utilizes a negative-pressure system that helps remove potentially infectious materials during open-abdomen procedures. KCI estimates there are approximately 250,000 open-abdomen procedures performed annually in the United States and Europe, with the potential to generate sales of $400 million.
In 2010, the company expects to release at least three more new product lines in the area of VAC therapy, Genau says. The new products will allow the company to broaden its reach from inside the hospital to providing care at a patient's home, according to Genau.
At the operations level, the company has been building six new production lines at its 100,000-square-foot Ireland facility, where lean manufacturing techniques have resulted in major improvements. As an example, Genau cites takt time on one production line dropping to 41 seconds from 3.2 minutes through a single-piece flow system.
Domestically, Genau expects the company's continued diversification will lead to more growth at its operations in San Antonio and Branchburg, N.J. The company is looking into more products in the orthopedics and surgery areas that will allow it to penetrate more deeply into patient care settings, Genau says.
The Japanese market opens Kinetic Concepts' VAC system to the second-largest gross domestic product in the world.