Mauricio Valero
Managing Director
Linet Group SE
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View from the Top

High-Tech Beds Secret to Good Hospitals

Wed, 09/06/2017 - 11:25

Q: How is your business divided between the public and private sector?

A: The public sector’s contribution in terms of medical devices is much more important. As of 2016, the public sector accounted for around 60-65 percent. Our business model does not include direct sales; we work only with distributors and we reach most of the public sector. This is part of our strategy to serve the market in the best way possible. Distributors are much better at navigating the public market. Hospital chains, the main contributors to the private market, know that they would not receive a high degree of added value from local distributors so they prefer to do business directly with a company if it is located within the country. Private sales do happen and it is an area of business we are looking to further develop in the future. Our range of products is the same for both sectors and globally. There is no difference between developing countries or mature markets. If people need a solution then it must be offered to them, even if it costs a little more.

Q: What is the company’s strategy in the face of public sector budget cuts?

A: Fortunately, our products suffer less from budget cuts. Cuts tend to affect the entire construction of a hospital rather than our business, which comes mostly from new hospitals. Because information pertaining to new hospitals is widely available, we can begin working in advance to position our products. The past two years have not been easy for the medical devices industry in general but they have been fantastic for us. This is our third year of operations here as a subsidiary and Mexico is our most important market in north Latin America. In our first year, we sold a little under €2 million B2B, €4 million the following year and an estited €8 million in 2016. This is exponential growth and we hope it continues.

Q: What is behind the company’s strong growth?

A: One factor is the product itself. It is of high quality and produced in the Czech Republic, which in terms of manufacturing costs has many similarities with Mexico and both have a high-quality labor force. Manufacturing in the Czech Republic has been recognized for many years for its excellence in cars, trucks and heavy equipment. Beds are no exception. There are two manufacturing centers, one in Germany and one in the Czech Republic. The quality control we gain by manufacturing the product under one roof and our competitive pricing also contribute to the product’s success. In addition, we sell in Mexican pesos, not in a hard currency. This is an important part of our financial work here, which improves our profitability. There are two major global companies selling these products, both from the US, and they are comfortable in their positioning. Linet Group SE is surely the third biggest producer globally. Our solid marketing, our strategy and the experience of our employees helped us make the right decisions when establishing our model. Picking the “lowhanging fruit,” as the Americans say, has helped us grow quickly. We do not have national coverage and we do not have a presence in the most remote areas. There are many areas yet to be explored, such as our German beds for geriatric or chronic care. This is a market that is opening as there are many retirement homes opening, especially for those with greater economic resources.

Q: What is the potential in Mexico to explore this new market opportunity?

A: The retirement-home market will grow greatly, amid an increase in the elderly population and in chronic-care patients and as the number of children to look after their parents decreases. We need general guidelines for this area and companies like ours must create the appropriate models. The National Institute of Geriatrics (ING) is starting to operate public centers for this type of care, but the states are not sure what infrastructure they should offer. The private side is developing again, although it is a little disorganized. Some homes have high standards and are very expensive while others only offer shared rooms with no professional care, furniture or fittings. A multidisciplinary team with nutritionists, a geriatrician, nurses and the adequate equipment are required. We are focusing on geographical areas that are agreeable to retirees, especially areas that have a large economic capacity such as popular tourists spots like San Miguel de Allende or Baja California.

Q: How is innovation shaping Linet’s offering?

A: Our intensive therapy beds are extremely important medical devices for a patient’s hospital stay. The first challenge is making people understand that this is not a piece of furniture. It is a medical device that can cost up to MX$1 million (US$55,000). That is a lot of money and technology but the goal is for a patient to have the best quality of life possible. One of our most important innovations with this bed is the possibility to offer automatic lateralization therapy because its construction allows it to move laterally and to incline. In this way, a serious disease called ventilator-associated pneumonia can be avoided. This disease occurs in intensive-care patients who are immobile. It is much simpler to avoid this disease, which is costly and prolongs the patient’s care, increasing the burden on the public sector.

We also have a line of active mattresses built around plastic cells filled with air. The part in contact with the patient’s body inflates and deflates, preventing the patient from developing pressure ulcers. These are serious wounds that are caused by immobility and are expensive to treat. There are protocols in place to avoid these pressure ulcers but there may be cases in which the nurses cannot move the patient because they are too heavy, for example.

Q: How can this technology help address the scarcity of beds in Mexico?

A: The idea is to reduce as much as possible the length of a patient’s stay in more complex and expensive areas such as intensive care. There are not enough beds in Mexico, which has a deficit of at least 20,000-30,000 beds. If we can free up beds in complex areas through technology, more patients can be treated and moved to less complex areas of hospitalization. Another trend that could arise is an increase in home care.

Although there is much to be done, the situation is improving. We differentiate ourselves through aftersales services. Beds are medical devices, not furniture, and they require maintenance. As far as I know, we are the only company with a clear aftersales service strategy. We also have personnel specialized in clinical applications. We provide thorough training to all that will be in contact with the beds. Services such as how to clean and dry the beds seem simple, but the useful life of a bed can shrink due to something simple being ignored.

Q: How will the acquisition of Borcard impact Linet’s Mexican operations?

A: We were previously collaborating with the company because it complemented our product line and now we have decided to acquire it. It is much simpler for us to offer clients a larger range of products. Borcard specializes in birthing beds, which is in line with our vision to provide quality care for women in labor. I believe this is an intelligent and logical acquisition.

Q: What are the company’s plans going forward?

A: Our growth in Mexico, Latin America in general and in the US is good. Linet Americas sold almost US$50 million of beds. This is the market where the world number one and two of the sector are from so it shows promise. The beds are shipped from the Czech Republic so we have a disadvantage on delivery times compared to the competition. It was decided that we will need to find somewhere to put another factory when the time and the sales volumes are right. At the end of 2015 we went on a commercial and diplomatic mission to Tijuana where there is an important cluster and a number of companies producing medical devices. There is a well-developed logistics chain there and the possibility to have three ports for exportation: two to Mexico and one to the US. There are advantages that are not found elsewhere in the Americas and so it is practically decided that Linet Group SE will build a factory in Tijuana. Global political uncertainties combined with the Mexican election campaign can delay projects. We will most probably see a few years that are not so dynamic. Although this sector is a little more immune to these factors, it will surely be affected to some extent.

Q: What other countries in Latin America does Linet want to expand to?

A: To ship beds from the Czech Republic to Chile takes two and a half months. The entire Pacific coast is far from Europe, so a Tijuana plant would benefit these countries, especially Peru and to some extent Ecuador.

We also hope to increase our number of technicians and clinical specialists. Because our beds are made in the Czech Republic, they are designed with the strictest security standards in the world. In 2012, the previous security standard of 1998 was updated and our competitors in the US have not yet adopted this stricter standard. It means the beds support a little more weight, are a little taller and are less likely to collapse. Measures have been put in place to ensure that a patient’s extremities cannot be trapped by the bed. The number of accidents that occurred in beds was high, which is why this standard was adopted. Our competitors have bought factories in Europe to sell to that market, instead of updating their own factories.