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LiDCO (LID.L) - signs up KOL Bio-Medical Instruments as its eastern US distributor
LID.L
Comment by Objective Capital , Jul 30, 2008
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LiDCO has announced the sign up of KOL Bio-Medical Instruments as their US eastern regional distributor. KOL have signed up to be an exclusive distributor of the LiDCOrapid™ in their target region and accounts. KOL adds an additional 15 salespersons to the 5 that LiDCO itself has in the US. It is expected that more distributors will be appointed in the US in the coming months to cover other territories that remain up for grabs.
Objective's view:
As expected, LiDCO has begun to roll out its distribution agreements and will continue to do so to reach our target of around 67 salespeople worldwide by year-end. In fact we believe that they will easily beat that target but prefer to remain on the conservative side in our assumptions here. KOL are a premier medical technology distributor in the US who has significant experience at marketing highly technical equipment into hospitals. They have distributed heart valves for St Jude Medical, invasive blood pressure monitors for Tektronix/Spacelabs, membrane oxygenators for SciMed and many other products.
KOL is a business run by ‘service disabled veterans’ (the founder was wounded in active duty) and so benefit from preferential commercial access to VA (Veterans Administration) Hospitals which represent a sizeable chunk of the US hospital market. KOL are considered to be a high-end, highly technical distributor in the industry and the signing of this agreement is likely to trigger some follow-on agreements with others who will see this as a sign to jump on the LiDCOrapid™ bandwagon.
The fact that this deal is exclusive on LiDCOrapid™ indicates to us that the sales of the latter could result in a greater canabilisation of LiDCOplus sales than we had originally predicted. However, we still believe that this effect will be felt mainly in markets where treatments in the ICU are nurse-led rather than physician-led and where the calibration of complex equipment is a more burdensome task; the US, some EU territories and UK markets would be the main focus of such an effect.
In territories (where the physician is much more active in the ICU unit (particularly with direct patient involvement) and oxygen delivery targets are set, the sales of LiDCOplus should continue apace. Net-net though for investors, the more LiDCOrapid sold the better. Disposable revenue streams are a given with LiDCOrapid™ versus sparse with the LiDCOplus (due to substitution of less expensive alternatives) so any shortfall in sales of the latter should be overcome by increased sales of disposables.
The coming months will enable us to paint a more complete picture of what is going on but our reading of the situation is so far so good.
