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Repro-Med Systems’ RES-Q-VAC© airway suction device
and FREEDOM60 infusion
product represent the future of medical devices as
simpler, higher quality devices that are more affordable
Healthcare
Medical Equipment & Supplies
(REPR.OB)
Repro-Med Systems Inc.
24 Carpenter Rd.
Chester, NY 10918
Phone: 845-469-2042
Andrew I. Sealfon
Co-Founder, Chairman and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
August 11, 2005
BIO:
Mr. Andrew Sealfon, President and Chairman of the Board co-founded the Company in 1980. He
is an electrical engineer and inventor and has been granted numerous United States
patents. Before founding Repro-Med Systems in 1980, Mr. Sealfon was a Member of the
Technical Staff of ITT Federal Laboratories, and a member of the research staff of
Riverside Research Institute. Mr. Sealfon is a graduate of Lafayette College with
graduate studies at Poly Technic Institute of Brooklyn.
Company Profile:
Repro-Med Systems designs, develops and brings to market new medical products. The
long-range goal is to develop unique, proprietary high performance and low cost medical
devices, some of which will fall under the annuity type of product. This “razor &
blade model” typically tends to be low in cost to users and creates a continuing
consumer demand for replacement of the disposable component. The Company’s
products, RES-Q-VAC, FREEDOM60, Thermal Cautery Unit and the Endometrial Biopsy Kit are
all reusable products that employ disposable components that require replacement.
CEOCFO: Mr. Sealfon, you
are co-founder of Repro-Med Systems, how did the company come into existence and how has
it changed?
Mr. Sealfon: “Repro-Med was formed in 1980 to work on
male infertility, which was something that I was dealing with in my own life. I teamed up
with Dr. Adrian Zorgniotti, who was NYU clinical professor of urology. There were no real
solid treatments for men in my condition. He had a theory and I am an engineer and we got
together and we actually developed a product called the Repro-Med THD® (Testicular
Hypothermia Device®) that works well to reduce male infertility, hence the name of
our company Repro-Med; I now have two children. The problem with the product is that it is
sold primarily through urologists, which is a surgical discipline and we came up with a
non-surgical methodology, which is not widely embraced by the doctors who normally
prescribe in this area. We had a big technical success but not a big success in the
marketplace. The company transitioned away from that kind of product and now our current
two main products are the Repro-Med FREEDOM60 syringe infusion pump, which is a device to
infuse drugs into a patient and we make a device called a RES-Q-VAC© airway suction
system, which clears out airways of patients having difficulty breathing.”
CEOCFO: Is the
RES-Q-VAC© sold to individuals or strictly to emergency care?
Mr. Sealfon: “The RES-Q-VAC© airway suction was
primarily sold to emergency and medical services such as ambulances, fire departments,
rescue services, some police departments and the military. It is a product that could be
found on domestic airliners in the United States, but was primarily addressed to the
emergency area. It has wide applications far beyond emergency, which we are now entering
and is becoming the future market for us. We have recently entered the nursing home market
as well. There was a great push in Florida due to the hurricanes where Florida power was
knocked out for days on end. Elderly patients that were having trouble breathing and
swallowing and patients on ventilators or tracheotomy patients were in trouble without
power to provide suction and airway breathing. We found a huge potential for our product
in the nursing home environment for emergency use during power outages. We also found it
was very helpful for patients in the cafeteria and recreation area, patients going on
outings outside the facility and even in patient rooms where a patient needs routine
suction.
We have started getting orders in the hospital market. Hospitals have crash carts and
emergency departments. Most hospitals have electrical wall suction but they have found
that it is not available everywhere in the hospital when taking the patients down hallways
or elevators when they go from intensive care to radiology or when they suddenly have to
treat a patient in the cafeteria or the hallways. Now it’s expanded even more than
that. There are several requirements that hospitals are able to treat patients up to 250
yards from their primary facilities and they need to provide treatment in the parking
lots, near by roads, bus stops and so forth. In order to do that, they need portable
suction, and we provide that. Our device is not electric, is hand operated, portable and
comes with all of the sizes of suction tubes that are required to treat any kind of
patient from adult to infants. We can provide a sterile, high quality and protective
suctioning equal or better to the wall suctioning in the hospital.”
CEOCFO: Is it a
razor/razor blade model?
Mr. Sealfon: “Our revenue model is a razor/razor blade
model. It consists of a reusable suction pump connected to a canister, catheter. Inside
the canister is a special proprietary patented filter, which we call FSP, which blocks all
pathogens, viruses, and prevents fluid overflow. This is a requirement of OSHA
(Occupational Safety and Health Administration); it is a requirement of most infectious
disease control, both in the nursing home and in the hospital. It is essential for
treating patients who might have a very serious communicable disease such as SARS,
influenza, the bird flu, HIV, AIDS, hepatitis, tuberculosis, and that type of thing. It is
important when we are treating patients that we not only do an outstanding job for the
patient to keep them alive, but we prevent the spread of disease. In the hospital you have
patients who are in isolation that require suctioning, and it is essential to protect the
staff while you are providing life-saving treatment to these patients.”
CEOCFO: Can you give us
a more detailed look at your revenue model?
Mr. Sealfon: “The RES-Q-VAC© is a single-use device.
Once the filter is contaminated or exposed to fluid for example, it seals over and the
canister is unusable, so they would replace the canister, the catheter, and the only
reusable part is the pump. The fascinating part about this is, is because we have the
filter, we totally protect the pump from all contamination, all overflow, so the pump is
very reusable. It is a rugged hand-held pump and it provides the lowest cost per use of
any system because you are able to safely reuse our pump since it is not contaminated and
then you connect to different disposables.
From the economic side, our margins are excellent; we run about 60% margins, so having
this replaceable canister filter tubing system, generates an annuity reusable just like
the razor blade that you mentioned. As we sell more pumps, we sell more disposables. We
sell 100 pumps one month and disposables for 100 units. If we sell another 100 pumps next
month, we now sell disposables for 200 systems. This is the annuity we talked about.
Some of the other new markets we are entering include hospice and care for the
aged. Elderly patient at home needs care and you do not want them to be miserable for the
amount of time that they have left. Many families are purchasing these devices to care for
their loved ones. It is also used for patients with ALS (Amyotrophic lateral sclerosis),
known as Lou Gehrig’s disease, and cystic fibrosis, where they may have swallowing
disorders. It is low-cost, and portable. Many parents want to take these devices in their
cars just to take their kids to the hospital. The worry that they have suction at home and
the hospital but on the drive over they could have a catastrophe, so they buy our
product.”
CEOCFO: Do you need any
special training to use the device?
Mr. Sealfon: “They need some training but families are
trained to use these devices. Either they are self-medicated or the caregivers are given
the appropriate training.”
CEOCFO: Where are you
percentage wise in penetrating the marketplace?
Mr. Sealfon: “We are a fraction of a percent. We are a
small company, somewhat under capitalized to hit the ground running. We have a huge market
out there. There are 19,750 nursing homes alone. When you look at the number of hospitals
that are out there, and the complexities of the buying groups and the purchasing
organizations, and the group purchasing organizations, it is a complex sale. The good news
is that the product is clearly needed. Hospitals cannot fulfill their legal requirements
unless they are able to provide the standard of care; nursing homes have the same problem.
Nursing homes are very vulnerable to lawsuits for failure to provide reasonable standard
of care. They have the fear of being unable to respond and the fear of having the families
come after them. There are several layers of reasons why they need to have the product.
Even though nursing homes are under-funded, there is an urgent need for the product. When
a patient collapses, you have three to five minutes to get their airways cleared and get
them breathing or you will likely have a very bad outcome. The RES-Q-VAC© is available
without power, batteries, having to be plugged-in overnight, without having to be
recharged. It is quick, fast, powerful and it will out-perform most battery-operated
suction devices. In terms of what the patient needs, it does an absolutely outstanding
job.”
CEOCFO: How big is the
Freedom-60 market?
Mr. Sealfon: “That market is huge. In fact, our infusion
product, the FREEDOM60© has a larger market then the RES-Q-VAC©”
CEOCFO: How big is the
competition in the suction device area?
Mr. Sealfon: “They are copying our RES-Q-VAC© product
in China because we are the market leader and the standard of care in the world for the
hand-held portable suction. We have a number of people copying our products all over the
world; they are also copied in India. However, we still have an edge, because they are not
able to copy our quality; we have the top quality, which is essential when you are
treating a patient like this because you have only a few minutes and if you are not able
to respond quickly, the patient dies. The competition units do not have the patented
filter protection so it will not meet any of the CDC (Center for Disease Control)
guidelines or the OSHA regulation, and it won’t meet infectious disease control of
any hospital or nursing home. We sell our products in the configuration of what any
hospital needs. We provide RES-Q-VAC© in sterile formats for the hospital; none of the
other imported products are available sterile with our filter, with the proper catheters,
configuration and with the reliability and performance. As a result, there is no
competition. There is nobody currently selling in our new markets.
We also sell the RES-Q-VAC© in the dental market for back-up, for dental/oral surgeons,
for anesthesia where it is called Dental Evac©. It is sold in veterinary markets. We make
custom configurations for each market. The Chinese are good at copying products but not so
good at putting the quality into them and they do not want to make a lot of different
products; they want one size to fit all. We make the specialty products, we address each
market and we provide exactly what they need and a very high quality. Our system must work
out-of-the-box; when a paramedic grabs our product on a rain swept road at three a.m.,
treating a motorist accident where the guy went through the windshield, his face full of
blood and he needs suction now, it has to work, and it has to do its job. We test our
systems 100%, every single part of it to guarantee zero out-of-the-box failure. Our
product will work and save lives when needed and that is what separates us from anybody
who is copying our product; we are very concerned about our quality and our performance
and that is well-known in the industry. There are number of companies that test the
products in the United Kingdom where we are opening up a new division over there, and they
actually have ambulance services who test the product. They test the competitor’s
products and they say that they do not work and they are not reliable; you can’t
depend on them.”
CEOCFO: Let’s talk
about the FREEDOM60!
Mr. Sealfon: “The FREEDOM60© is a syringe infusion
system originally designed for home antibiotic therapy. The homecare market is a $6
billion market and we are going after a market size in the range of $150 to $200 million
at the time. The problem in the market today is that reimbursement is going down. The
FREEDOM60 is the lowest cost, highest quality infusion system that exists today. It works
on a slightly different system than conventional systems do, but it provides the utmost in
safety, reliability and performance to the patient and it comes in at the lowest cost per
dose of any powered infusion system. What we are seeing on the FREEDOM60© is new
applications, which increase the market potential enormously. The latest entry is immune
globulin delivered subcutaneously for primary immune deficiency; it is not yet fully
approved by FDA however the FREEDOM60 has been in clinical trials at the Cleveland clinic
for over three years; it is a very effective device. There is long-standing use of
Igg delivered into the vein for this indication and it is now becoming a standard of care.
They are now infusing this the immune globulin subcutaneously (under the skin). We do a
great job on this and at a cost that these people can afford.
We are also outstanding for the use of the Freedom60
for specialty drugs such as vancomycin, which is a difficult antibiotic drug to infuse
safely without having adverse reactions. With the superior performance of the FREEDOM60,
we are able to infuse difficult technical drugs quite successfully. It is a razor,
razorblade technique, it is a low-cost pump compared to conventional pumps. The FREEDOM60
retails for $245.00 for single pump and it competes with pumps in the $1,000.00 to
$4,000.00- range. Each of our pumps requires a dedicated tubing set and for a standard
antibiotic flow-rates, they cost retail about $3.40. Every time the pump is used, it
has to be used with one of our dedicated tubing sets. It is an annuity stream of
income.”
CEOCFO: Where are you in
the marketplace with the FREEDOM60?
Mr. Sealfon: “We are at the beginning. Our biggest
problem is capitalization. When we go to the tradeshows, the biggest question we get is;
“how come we have never heard of you if this is such a great product, and how come
you are not getting the word out?” That is an expensive thing to do. We need to get
better promotion and advertising. The product is a badly needed product. We are the
solution to homecare. Homecare has the problem of how do we provide this therapy to
patients and be able to stay in business with the current level of reimbursement. We
provided part of that answer; the FREEDOM60 will be able to provide high-quality infusion
therapy to your patients and you will be able to live within the reimbursement and
actually make a profit.”
CEOCFO: In closing, what
would you like to say to potential investors?
Mr. Sealfon: “We represent the future of medical
devices, which have been moving towards more complexity and higher cost, but it has now
gone to simpler higher quality devices, as well as more affordable. Unless we think
reimbursement is going to increase anytime soon, we are the future of medical devices. Our
technologies are the kinds of technologies that will survive into the next century. When
deciding what kind of companies to support, you ask how will reimbursement work over the
next years. When you look at France, Germany, Italy and the U.K., you see medical costs
being tapered down and the same problem is occurring in the U.S. Medicare/Medicaid is
being cut back and this will continue. How do you provide quality care? It is going to be
through companies that are innovative like us, that provide high-quality, very effective
medical devices at an affordable price.”
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