SmallCapNews | Interview with Andy Jones, CEO of ClearStream Technologies plc

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Interview with Andy Jones, CEO of ClearStream Technologies plc

15 May 2009

After leading a management buy-out of medical device specialist ClearStream Technologies plc nine years ago, chief executive Andy Jones and his team encountered a seismic shift in their core market that forced them to rethink the company’s entire strategy.

Today, ClearStream is behind a growing portfolio of catheter and stent products that can save lives and (literally) limbs. And with multi-national medical device groups starting to take notice, Jones is confident that the company is poised to take advantage of rapid change in international healthcare markets.

In particular, he thinks the surging rate of diabetes – and the consequently high numbers of limb amputations – presents a major opportunity for ClearStream, whose interventional devices can prevent the need for such major surgery.

But while the signing of blue chip contracts with the likes of Johnson & Johnson’s Cordis, and more recently C.R. Bard, have proved a boon for the company, its journey since listing on AIM in 2004 has been far from easy.

Despite enjoying soaring revenues in the years following the MBO from US group AngioDynamics, Jones and his team quickly ran into trouble. With just two main catheter products, it had been doing a roaring trade selling them on to larger manufacturers. But when a new system – known as a drug eluting stent – was launched by Cordis, it obliterated the competition, sank a few of ClearStream’s top customers and forced a rapid change of direction at the company.

Market transformation

Catheters and stents are the devices used by surgeons to unblock and prop-up clogged arteries, either in the upper body (coronary) or legs (peripheral). The drug eluting stent, which Jones reckons achieved 90% market adoption in the US over 12 months, has the added bonus of an in-built treatment that improves its performance and helps the arteries heal up properly.

“This transformation meant that four of our customers, who were the other medical device companies, went out of business in the space of 12 months,” Jones said. “It was like we had been all the way up and all the way back down.”

Jones and his team were left searching for a number of new strategies to try and bridge over that period, and primarily that meant looking for other channels to market.

While the company had made hay selling catheters to larger manufacturers, the business model was risky. The introduction of products like the drug eluting stent, as well as the disruption caused by mergers and acquisitions activity, had caused serious instability.

“We made a strategic decision to do two things,” Jones explained. “One, we wanted to get other channels to market so we set about looking for potential partnerships with other companies. In doing that, we established the ClearStream brand which we took to market through local distributors, and that gave us some degree of independence.

“The second, and probably more significant strategic change, was that we refocused our R&D to rapidly fold-out our portfolio. With two products we were extremely limited, and in the in the coronary sector of the market, where we were working, there was low differentiation between companies and it was very hard to establish any sort of leadership or niche position. So we had to set about broadening the portfolio and putting together something that was unique.”

Jones and his team took their lead from the fact that many of the larger device companies were scrambling to develop a blockbuster drug eluting stent. ClearStream chose to look further afield and opted to move into the peripheral market, where unblocking blood vessels in the legs is the main aim.

“We had to learn all about the peripheral market and develop products for it,” he said. “We had to understand the challenges and talk to specialists in the field to find out what they really needed.

“You can see the result of that shift now. If you go back three years, our sales in the peripheral market represented 3% of our business. Two years ago it was 10%, last year it was 30% and this year it is likely will be just over 50%. So the strategic shift has been quite dramatic.”

The decision to target the peripheral market meant ClearStream could pin-point niche areas and become a larger player in a less crowded sector.

“In some areas there are maybe only one or two competitors – and we would certainly claim to be building a leadership position in some of those niches,” Jones said.

“The margins are also better. It’s a much smaller market but it is an infant market that is growing – driven by better skills and better products, leading to higher success rates.”

Jones draws a direct link between his strategic rethink with a growing perception in the market of ClearStream as an innovator. He says that perception is what now lies at the heart of the company’s brand.

“Our contracts with Cordis and now Bard reflect the fact that the big corporations are seeing that,” he said. “They are recognising that ClearStream is something different in the peripheral side of the market.”

Blockbuster potential

In particular, ClearStream is making a play in field for what Jones describes as high-risk patients. Here, conventional drug eluting stents carry with them complications that often require patients to take blood-thinning drugs. While the combination of the stent and the medication has a high success rate, if patients need surgery later on or forget to take their drugs the results can be life-threatening.

“There is a niche here for what are known as high risk patients,” Jones explained. “One of the products we have developed is a drug eluting stent which could overcome these problems and could potentially be positioned in this niche of high risk category patients. We’re currently in the process of gathering more data to prove the effectiveness on a larger scale.

“It is a very interesting product and it could represent another major strategic shift for the organisation – working out how to deal with a blockbuster product. So along with gathering more and more data, we also need to go out and look for strategic partners who might be able to take this product to market.”

Jones is clear that ClearStream’s success in refocusing its strategy has been underpinned with a whole new approach to product development and manufacturing.

Eighteen months ago, the company embarked on a project to speed up development and find a way of rationalising a manufacturing operation that draws on literally thousands of components.

“If you’re setting out to design a catheter it takes 18 month to two years to go from product concept to product on the market,” he explained. “Now we have got this all rationalised, the average is about four months, simply because we are effectively drawing down from known and proven components and putting them together. That has enabled us to develop 23 products, which are on the market.”

In turn, a streamlined manufacturing operation has seen the throughput lead times for each catheter drop from four days to four hours – and with it a huge chunk of cost has been stripped out of the business,

“We now have a coherent development strategy combined with a coherent manufacturing strategy,” Jones said. “We needed the diversification to be able to compete in the market place and we needed to be able to cope with that diversification without massively increasing our overhead.”

Market strategy

With two major partnerships in the US, Jones is confident about the company’s position in the market. In turn, he doesn’t rule out similar deals in Europe.

He says that by deliberately targeting niche markets within the peripheral and coronary sphere, ClearStream’s future thinking is driven around the concept of treating diabetics and diseases that derive from diabetes.

“Diabetes is the fastest growing disease in the world and is the cause for a large number of preventable amputations,” he said. “I wouldn’t claim that our products are the complete solution to that, but they are a major component in the solution.

“The problem is that there haven’t been enough skilled interventionalists, the products have not been good enough and the healthcare systems have not been established to funnel the patients into the right place for the right care.

“The reality is that there will be a change in the market - and that change will be in the direction of the interventional method. We’ve honed our products, we’ve got some of the best products on the market, and I think that as markets open up and become more aware then that will transform us.”

Ben Hobson, SmallCapNews.co.uk