KCI: In Wound Care, A Surfaces Company Goes Deep
Executive Summary
Kinetic Concepts' 28-year overnight success story rests on an opportunistic acquisition designed to complement its core business in specialty beds designed to prevent or relieve wounds caused by patient immobility. In 1994, KCI acquired rights to the VAC (Vacuum Assisted Closure) Therapy System, a non-invasive wound closure device that uses controlled, localized negative pressure to help promote healing in chronic and acute wounds. VAC is now the company's principal growth driver, accounting for 71% of the company's revenues, and a growth rate of 28%. VAC has been everything that KCI hoped--and much more. But now, in order to penetrate the $3.3 billion markets that it is targeting, the company will have to move beyond the core hospital markets where it's been successful, to the more challenging extended care and home health care markets.
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Spiracur Inc.
Indicated for many types of acute and chronic wounds, negative pressure wound therapy kicks off many mechanisms useful in wound healing. However, the devices aren't used in all patients for whom they're indicated for reasons that have to do with inconvenience, logistics and quality of life. Spiracur offers the same negative pressure therapy in a small, entirely mechanical, tether-free disposable device that replaces the cumbersome electric pumps that dominate the market today.
Smith & Nephew Challenges KCI in Wound Care
KCI created a wound healing market potentially worth $6 billion as the first company to offer a new modality known as negative pressure wound therapy. Having uncovered such a large potential market, it's only natural that it would attract competition, and it has. In March 2009, wound care leader Smith & Nephew launched its own negative pressure wound therapy product line. KCI isn't going to give up market share without a fight; it's talking up its advantages and defending its IP portfolio mightily.
Advanced Wound Care: The Device Industry's New Billion Dollar Product Market
For some time now, investors have hated wound care. They've been scarred by past failures, most famously, the simultaneous bankruptcies in 2002 of Advanced Tissue Sciences and Organogenesis, two tissue-engineering companies targeting chronic wounds. "Show me one success," VCs tell start-ups seeking funding. Well, now there is one. Kinetic Concepts is pulling in a billion dollars in revenues from a single product in the advanced wound care market. Is it time for VCs to love advanced wound care? Five new device start-ups hope so. Three are developing therapeutic devices for chronic wounds and two are beginning in acute wound care, an emerging surgical market. (This article also appeared as "Wound Care: Medtech's New Billion Dollar Product Market," Medtech Insight November/December 2007)