Specialist
Former VP at Medline Industries Inc
Agenda
- Medical distribution industry developments, including Medline LBO update
- Demand for core PPE (personal protective equipment) products, including supply chain challenges, increased costs and margin impact
- Government and private contract dynamics, and RFP (request for proposal) pipeline opportunity
- Competitive positioning under new PE ownership vs players such as Owens & Minor (NYSE: OMI) and Cardinal Health (NYSE: CAH) as well as potential new entrants
- International and margin expansion outlook, including inorganic growth opportunities
Questions
1.
What major medical distribution trends and developments have you been following? Can you give an update on Medline Industries’ since our last Interview [see Medline Industries – Potential Sale – 23 April 2021]?
2.
How sustainable is this PPE volume demand tailwind, considering your updated understanding amid the resurgence of the Delta variant? What might be the timeline to price normalisation for some of the Medline’s
core offerings?
3.
Are distributors experiencing material supply chain issues, especially those relying on manufacturers in international markets where vaccines are less widely available? What’s the trickle effect of supply chain inefficiencies on distribution operations and customer relationships?
4.
How is consolidation of large health systems affecting contracting for players such as Medline, Owens & Minor and Cardinal Health? Which players tend to benefit from a smaller concentration of customers, and who might take a hit?
5.
We’ve noted some of the challenges of lower distribution fees and higher costs. To what extent can some of these costs be passed onto customers? How do specific contracting stipulations factor in here?
6.
Could you expound on Medline’s use of technology to reduce distribution spend? What innovations are being utilised and how do these improve process optimisation or efficiency?
7.
How do you think Medline’s strategic outlook will shift under its new private investor ownership from its LBO earlier this year? Do you expect any material cultural changes under the new leadership?
8.
What new products or services might be attractive for increasing Medline’s value proposition or expanding margins?
9.
Can you discuss the importance of prime vendor awards in the distribution segment and the advantages that come with prime vendor status?
10.
Could you outline some of the key differences in Medline’s relationships with GPOs [group purchasing organisations] and IDNs [integrated delivery networks], respectively? What’s important to note about its relative arrangements with these entities?
11.
Can you compare contracting dynamics with customers in the private sector vs government contracts, perhaps assessing differences in distribution fees, contract lengths and volumes? Which segment is more lucrative for Medline?
12.
We discussed VA [Veterans Affairs] contracts being rolled up under the Defense Logistics Agency’s umbrella in our June 2021 Part 1 Interview. How much of a hit could this be to Medline if it’s cut out of the fold? Do you expect any litigation to challenge the move? What are the scenario implications for Medline?
13.
What are your thoughts on Medline’s May 2021 acquisition of the Hudson RCI brand of respiratory products from Teleflex? What was the likely strategic rationale here? What synergies can be leveraged through product bundling?
14.
Where might Medline next seek inorganic growth under its new ownership? What areas or names might be attractive tuck-in acquisitions to broaden its product portfolio or expand its margins, given our discussion earlier?
15.
Do you expect any threat from GPOs moving to vertically integrate their businesses by building out their manufacturing capabilities? Is this a tangible risk to distributors or would it cause too much tension between GPOs and their distributor partners?
16.
What kind of competitive threat do new entrants pose to the medical distribution segment? How might Amazon or Walmart challenge players such as Owens & Minor, Medline and Cardinal? What are the barriers to entry and how do you assess the ability of those companies to enter, given their entrenched existing logistical capabilities?
17.
Is there anything about Medline that we haven’t discussed or you’d like to reiterate that’s especially important to highlight?
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