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Medsite has built a steadily growing revenue stream and customer base, primarily through online sales of books and medical supplies. It also leverages those e-commerce offerings to provide pharmaceutical and other product companies with a means of promoting themselves to physicians by using incentives, such as discounted books or supplies. With further growth in mind, the company filed a $100 million IPO earlier this year--only to withdraw it a few months later when the bottom fell out of the e-health public markets. Facing a suddenly hostile financing environment, Medsite's management re-engineered their business plan, with the goal of accelerating the company's drive to profitability by emphasizing the higher-margin end of its business that derives income from promotional deals with product companies. A key element of this effort is an ambitious package of customizable Internet tools for physician practices that is intended to bring in lucrative sponsorship contracts from product companies. In entering this arena, Medsite will find itself up against some major players with significantly greater resources. And to fund their ambitious new initiative, Medsite will have to convince a wary investment community that, in an industry apparently headed for domination by a few billion-dollar companies, they will be one of the survivors. But Medsite's management expresses confidence that its higher-profile competition has yet to make any deep inroads into the physician market, which they argue remains quite open. The task now is to persuade investors, product companies, and physicians that they can succeed---where others have largely failed--in getting doctors to make the Internet an integral part of their practices.
The number of early-stage deals plummeted as large drug companies fought their way through mergers and other late-stage deals designed to boost near-term earnings. Drug companies also looked to mergers to build up sales forces and, by building bigger-selling products, to compensate for the lack of R&D productivity. Meanwhile, biotechs, with valuations at record levels, looked to find deals that would allow them to keep the upside of their products and move their share prices up.
The revolution that the Internet is bringing to hospital supply is really two revolutions, one transaction-oriented, the other information-based. MedAssets hopes to capitalize on opportunities in the transaction-based realm by, in effect, applying Internet technology to two relatively traditional service businesses, group purchasing, and capital equipment refurbishing and resale. MedChannel, by contrast, is trying to create an infochannel that promotes wide efficiencies across a broadly defined supply chain, from OEM to end user. Both companies face a challenge: that of coming late to a B2B e-commerce market that is evolving rapidly. Their hope: a kind of "Second Mover Advantage", under which the early B2B leaders open doors to customers that both companies can more easily walk through.
Business-to-business e-commerce portals in the medical supply industry have attracted much attention in their efforts to bring order and efficiency to the currently chaotic product purchasing system. But for suppliers, the best strategy may be to wait until the smoke clears.
- Medical Devices