What happened?

Today (2018.07.02), Mölnlycke Health Care announced its acquisition of SastoMed GmbH. Mölnlycke is of course known in the industry as a top global wound care (also wound prevention and surgical) product brand, particularly in Europe and the United States. SastoMed, a much smaller German firm, was a subsidiary of SanderStrothmann GmbH, a company which assesses, formulates, and produces cosmetic, skin, and medical products for hundreds of well-known global brands. SastoMed has developed and commercialized two wound care products at the heart of this acquisition:

  1. Granulox, a hemoglobin spray that delivers oxygen from the surrounding air into to the wound bed via facilitated diffusion (see this article for a video + discussion).
  2. Granudacyn, a hypochlorous wound irrigation solution for cleaning, moistening, and rinsing of acute, chronic, and contaminated wounds, and 1st and 2nd degree burns.

 

Why is it important?

There have been multiple wound care M&A and JV deals in recent history, including:

Yet despite the volume of wound care activity, this deal is unique and significant for a variety of reasons:

Innovation Significance

Both Granulox and Granudacyn are innovative products beyond what we normally see in the industry. Let’s briefly recap why:

Granulox

There exist dozens of negative pressure wound therapy (NPWT) devices, over 80 allografts, and hundreds of dressings and pressure offloading solutions. Clearly, not all wound care products in each category have the same levels of efficacy, quality, and cost-effectiveness, yet as a whole, these categories are clearly becoming increasingly saturated and sensitive to reimbursement and other economic factors.

But what about solutions for delivering oxygen to hypoxic wounds (most chronic wounds are hypoxic)? Historically, the only options for these patients have been:

  • Vascular procedures (bypass surgery, stents, etc.): These overcome blood vessel blockages and are important procedures not going away anytime soon. Indeed, the other options listed below are not substitutes for improving the underlying circulation addressed by vascular procedures. However, such procedures and are both invasive and expensive, so not every patient is a good candidate. Revascularization benefits also apply primarily to the large blood vessels, often having less impact on microvasculature, which is a key challenge for many types of chronic wounds (such as diabetic ulcers and pressure ulcers).
  • Systemic medications (blood thinners, diuretics, etc.): These are and will continue to have important roles in cardio-vascular management (circulation, edema management, etc.), and they aim to help balance  negative impacts of certain co-morbidities. Still, many chronic wounds will require additional oxygen to optimize healing–especially at the wound surface and surrounding microvasculature.
  • Hyperbaric oxygen therapy (HBOT): Thousands of patients receive and benefit from this treatment daily (the vast majority are in the US). However, it requires proper functioning of the patient’s blood vessels in order to be effective (and to be approved for reimbursement in the US), and there is a steep drop-off in perfusion between treatments. The high cost, long treatment time (~2-3 hours per day for ~20-60 days), contraindications, low availability (outside of the US), limited indication coverage, and recently heightened regulatory scrutiny and cost pressures mean that while HBOT is and will continue to be an important wound care tool, it is not enough to meet the large and growing need for wound oxygenation solutions.
  • Topical oxygen devices (besides Granulox): The growth of this category in recent years underscores both the increasing awareness and need for tools to combat wound bed hypoxia. On the other hand, the existing alternatives have the following limitations:
    • Difficulty overcoming the exudate (moisture) barrier: A thin layer of just 0.1mm of moisture, such as is found on most wounds and between the cells, blocks 99% of oxygen diffusion from the air to enter the wound bed (hemoglobin molecules such as in Granulox can break that barrier, which is why the mechanism of action is referred to as “facilitated diffusion [of oxygen]”).
    • Incompatibility with many other treatments: Application of most topical oxygen products limits clinicians’ choices for which dressings can go on top (often, the dressing is part of the delivery mechanism). Granulox can be used together with most standard and advanced wound care products.

Granulox is the only hemoglobin-derived oxygen transfer product for wound care. But most importantly, Granulox complements all of the above treatment options. So it does not disrupt clinical practice, but rather is a readily available adjunct treatment to initiate oxygen delivery which overcomes many of the hurdles making wound oxygenation such a challenge. The ~100% reduction in slough buildup and ~50% reduction in pain for Granulox patients across all wound types are two more underserved clinical needs (in addition to the increased oxygenation / 50% faster healing) that make this a very innovative development.

Granudacyn
  • Natural and pH balanced: Hypochlorous Acid (HOCl) is produced by the human body as part of the immune system, and innocuously breaks down into water and a salt. As such, Granudacyn can be used inside body cavities and will not impact cellular tissue products (CTPs), which makes it complementary to Mölnlycke’s surgical business in addition to wound care. The importance of balanced pH in wound healing is also well documented.
  • Excellent stability: Many otherwise high potential wound cleansers suffer from a relatively short shelf life. Granudacyn can be stored for a minimum of 18 months, which is plenty for any typical wound care setting.

Strategic Significance

Prior to this acquisition, the focus of Mölnlycke’s wound care business had primarily been on prevention (offloading, reduction of wound/periwound trauma and irritation) and passive healing (moisture balance, infection management, etc.). Granudacyn of course strengthens their wound management (and surgical) portfolio(s), but with Granulox, it can be said that Mölnlycke has now established a significant position in the field of active healing.

Stated differently: Pre-acquisition Mölnlycke had products to optimize the wound bed and surrounding area via the body’s own healing process. Post-acquisition Mölnlycke can now offer its customers active acceleration of tissue regeneration, infection fighting (white blood cells require large amounts of oxygen to function), and significant pain reduction (it is hypothesized that wound pain is at least partially a result of tissue hypoxia). In this sense, the acquisition is also somewhat evolutionary for Mölnlycke.

Both Granulox and Granudacyn also fit into Mölnlycke’s stated, long-time strategy of focusing on consumable (i.e. not capital equipment) products with demonstrated cost effectiveness.

Due to the current wound care services and HBOT landscape, the awareness of oxygen’s importance for healing is at an all-time high, but there are relatively few treatment options. At the same time, criteria for patient eligibility, workup, and documentation have become increasingly tedious for US service providers and facilities impacted by CMS prior authorization initiatives for non-emergent HBOT. Such initiatives have also significantly reduced expenditures in regions where it was piloted.  In part due to these developments, as well as the fact that most US hospitals who want a wound care and HBOT program have already launched one, the number of new U.S. wound care and HBOT centers opening each year has begun to slow.

All of the above suggests that while the specific requirements and processes for HBOT utilization may continue to evolve, the general trend will be a reduction in the growth rate of HBOT services, even as the number of patients with chronic wounds soars. Owning a best-in-class asset that is an efficate, cost effective, mobile, consumable, and adjunct treatment for virtually all wound types, in all care settings, during all stages of healing has enormous strategic value in such a landscape.

International Significance

In the US, the top-selling wound cleanser product in recent years has been Vashe (also an HOCl-based product), distributed by SteadMed. In many of the emerging markets in which Diligence Wound Care Global operates, wound cleansers are the top grossing and/or fastest-growing advanced wound care category.

And although Granulox is not yet US-FDA approved, it has significant traction in the other global markets where planning, regulatory approvals, launches, and commercialization efforts are well underway across dozens of markets via strong partnerships.

Likewise, the SastoMed products will particularly benefit from Mölnlycke’s scale, reach, and reputation in the developed markets, while Mölnlycke’s established portfolio stands to gain in the emerging markets with Granulox and Granudacyn as “anchor products.” Expanded penetration as well as the strong appeal of Granulox and Granudacyn in markets where wound care as a sub-specialty is still in its infancy and very sensitive to cost-benefit and other value considerations may end up driving success of the entire Mölnlycke portfolio in those regions.

 

What’s next?

In addition to the typical integration activities which must take place following any acquisition, Mölnlycke will especially need to:

  • Keep up with the momentum of existing and future demand and growth in the existing and planned markets where Granulox soft and hard launches are in full swing (such as across Southeast Asia as a result of SastoMed’s partnership with Zuellig Pharma, which will continue to market Granulox post-acquisition).
  • Evolve and grow the competencies of their sales, marketing, and other functions to position and sell active healing products in addition to prevention and passive healing–as well as to achieve wins in care sites on which they have not traditionally focused.
  • Drive the regulatory and related initiatives to make the product available in the US, which is still by far the world’s largest wound care market, as well as other key geographies.
  • Plan and execute launch of the newly acquired products in markets such as Australia, India, China, Japan, Brazil, and others where they have the potential to not only capture massive market share, but to even act as an anchor to drive penetration of other Mölnlycke solutions as well.
  • Leverage their recent digital health collaboration with Tissue Analytics to augment the above goals, from sales and marketing strategy, to regulatory and clinical data, to new market entry and customer empowerment.

For all the above reasons, I see Mölnlycke’s purchase of SastoMed as more than “just another deal” to expand geographic reach, broaden the portfolio, grow top-line revenues, and/or drive economies of scale. Beyond all that, it has significant implications for both the company’s strategic position, as well as the future of wound care in both the established and developing markets alike.

 

Are you facing a wound care discovery, due diligence, or groundwork challenge that requires trusted expertise readily available at your disposal? Contact us today to become a keener wound care executive.

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