Simplex sells diabetes testing kits, glucose monitors and other supplies under the Diabetes Care Club brand name — an operation it bought two years ago — and it plans to sell other types of medical supplies soon to diversify.
CEO and co-founder Doug Hudson says Simplex's eventual goal is to become a publicly traded company. Already, Diabetes Care Club ranks among the top three firms nationally for the sale of diabetes supplies, with projected sales of $185 million this year, Hudson said.
"Two years ago, we were nothing but an idea, a concept. Over the next 18 to 24 months, we expect to double in size, to around 600 employees," he added. Hudson discussed how Simplex intends to reach its goals with Tennessean Business Editor Randy McClain.
What's your background; did you have any medical supply experience before starting this company?
I had just come from selling my piece of HearingPlanet.com, which was the largest hearing aid retailer online and a direct marketing business model. So, diabetes supplies wasn't too far a departure from that. My background was in marketing and call center operations. That led to this new venture.
Also, I knew diabetic supplies would be a much larger opportunity than Hearing Planet because of the size of the problem of diabetes. We went from 35 people employed by Diabetes Care Club when we bought it to more than 300 today and growing.
Who are the top three players today in diabetes supply?
If you start at the top, Liberty Medical is No. 1 with almost 1 million patients. Medco (a health-care giant with more than $51 billion in net sales last year) acquired them about the time that we bought Diabetes Care Club.
Another one we compete with is CCS Medical, which is backed by Warburg Pincus private equity, and they probably have 400,000 patients.
CCS has a very large sales force around the country that calls on physicians. We do more direct sales to patients.
In Nashville, there's also AmMed Direct, which focuses on mail-order medications for the diabetic patient. We focus on diabetic testing supplies, test strips, glucose meters.
We made a conscious decision early on not to get into the mail-order meds business because we feel like there's lots of other guys out there (that) do a great job for the patients. We want to focus on different areas where we think we can add the most value.
Diabetes is growing so quickly. Testing supplies are a primary product for the patient newly diagnosed with diabetes. That's how we want to get to know and keep the patient.
How do you tap into that huge market?
If you look at the U.S., there are 1.5 million new diabetics being diagnosed every year.
When they get the diagnosis from their doctor, they ask: "What do I do next?" And one of the first things they have to think about is routinely testing their blood sugar. And that's where we step in.
When it comes to testing equipment, what sort of meters do you supply?
We try to focus the patient on some of the newer meters, some of the newer technologies. Our goal isn't to just send them the cheapest meter. One of the big developments in our industry is no-coding technology.
With older meters whenever the diabetic got a new supply of test strips they'd have to punch a code into the meter to properly calibrate it for that batch of test strips.
Statistics show that one in six people code their meter wrong or don't code it at all. That's important because a lot of times those readings are what they set their insulin dose based on.
We decided early on to get no-code technology into the hands of our patients to make it a better experience.
When do you hope to take the company public, sell stock to investors?
Not at this time. We know it has potential, but right now we're focusing on growing our core business.
We're moving into a 92,000-square-foot office in Cool Springs off Carothers Parkway in November, and we will begin the process of recruiting for about 300 new staff members.
We're looking to double the size of our operations over the next 18 to 24 months. We can expand the new offices by an additional 50,000 square feet as the need arises.
We'll hire across the board. The jobs will pay anywhere from $30,000 to $75,000 a year. And here in Nashville, a health-care capital, we've got a well-trained, educated work force from which to recruit.
When you hire call or contact center personnel, how do you screen for medical knowledge or just plain patience?
Ellen Hitt, our vice president of human capital management, came on board and helped us get it right. There are a couple of things you look at. You hire attitude first; we want people on board who want to serve our patients.
There's a big difference between someone at a call center selling Ginsu knives, or just taking an order, versus someone who really personally connects with a patient and wants to help them.
We also hire for technical expertise. We do a skills assessment to judge whether they can handle the job. Secondly, we don't just sign off on a person after a single interview. They meet with their potential team captain, the department manager, a recruiter and human resources. Also, we're very focused on training and quality control after we hire someone.
What are some of Simplex's quality-control measures?
One of the things we look at is patient attrition; if we bring a patient on board and they order for the first time, do they order again? That's the ultimate metric on whether they're satisfied or not.
We also pay attention to feedback from patients on things they don't like. We used to print "Diabetes Care Club" on the boxes that we'd mail to people's homes. But many customers said they didn't like that. We thought from a branding and information standpoint it was a nice touch to have that on the box. But from the standpoint of someone newly diagnosed as a diabetic, many didn't want their neighbors to know or they were somehow embarrassed or bothered by it. We took that off the package.
How many patients do you have now?
At the end of August, we were at 187,000 patients, and we consider that ahead of plan. It's also evidence of just how bad the problem of diabetes is for our country.
In 2007, we had roughly $8 million in gross revenue. In 2008, it was around $56 million. This year, as of the close of Aug. 31, we were at $127 million. We're targeting around $185 million for this year as a whole. All that is through organic growth, not any other acquisitions.
Where do you advertise to reach the diabetic patient?
You'll see us on television, and you'll also see us on the Internet. On TV, we reach more of the newly diagnosed diabetic. On the Internet, you tend to see the patient's caregiver or a family member reaching out to find information — the son or grandson trying to help mom or grandma.
We like to use TV and the Web because we can easily track it to see what's effective and what's not. On TV, we run commercials with literally hundreds of 1-800 phone numbers so we know exactly which TV spots are working for us. We intend to spend $36 million on TV next year.
Are you considering making other acquisitions?
Let's take a step back and I'll tell you the broader vision for Simplex Healthcare. We'd like to serve 1 million patients across four or five product categories, not just diabetic supplies.
Right now, we have our Diabetes Care Club brand, and in August we launched a new division called CPAP Care Club that provides supplies to patients being treated for sleep apnea or sleep disorders.
We know there's a high incidence of people who have both diabetes and sleep apnea. We'd like to help them with both. If a patient is wearing a sleep apnea (oxygen machine) at night, we can provide them the masks, the filters, the tubing … all of which need to get replaced on a regular basis.
We have diversified as a company with CPAP Care Club. We didn't do this one through an acquisition. We started it from scratch. We'd like to get our bearings first and learn how the market works. We think that will make us a much smarter potential acquirer later in this arena.
Separately, for us to buy something else in the diabetic supply space … the odds are pretty low.
How did you pick sleep apnea services as your second division?
We asked our existing clients a whole list of questions, and what we found out was that about 62 percent of our patient base has sleep apnea. So, there's a very high coincidence of diabetes with sleep apnea. And, I wear a sleep apnea machine. Hey, I know a little bit about this, too.
Masks, filters and tubing are key supplies. It's a consumable that needs to be replenished every 90 days. And as we touch base with our diabetic patients about their supplies, we can serve both and do it in a cost-efficient way.
Source: www.tennessean.com
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