With the spinout of Kimberly-Clark‘s (NYSE:KMB) former K-C Health Care medical device division slated for Nov. 1, MassDevice.com sat down with Chris Lowery, the Kimberly-Clark executive who’s in line to become the COO of the new company, Halyard Health.
Alpharetta, Ga.-based Halyard, which threw off $1.6 billion in sales last year as K-C Health Care, does about 30% of its business in medical devices and the rest in surgical and infection-prevention products. Lowery, who’s vice president of sales and marketing for K-C Health Care until the spinout goes live, told us that Halyard is well-positioned to take advantage of the new healthcare landscape’s focus on cost reduction and outcomes.
The mission of Halyard, which is planning to list on the New York Stock Exchange under the "HYH" symbol, is to "advance health and healthcare by preventing infection, eliminating pain and speeding recovery," said Lowery, a Covidien (NYSE:COV) veteran who joined K-C in 2010.
"I’m particularly excited about the advance health and healthcare piece, because I think a lot of what we do not only serves the patient and the individual’s health, but also can have a great impact on our healthcare system, in costs and quality," he said, noting that both sides of Halyard are designed to "really help our customers at the intersection of cost, quality and outcome."
"With the Affordable Care Act and all the focus on quality, HAIs, re-admissions – all those types of things have a big impact both on cost and revenue," Lowery said.
Following is an edited transcript of our conversation:
MassDevice.com: Tell us a little bit about your background. I understand that you spent quite a few years at Covidien?
Chris Lowery: Yeah, I realized just recently that this is my 20th year in healthcare. The last 4, a little over 4 with Kimberly-Clark, then 16 prior to that with companies that eventually became Covidien. I started with Kendall healthcare in ’94, and we sold. It was the first major healthcare acquisition that Tyco did. I was with that team for the majority of the roll-out that Tyco did in the healthcare phase.
MassDevice.com: How did you make the move to Kimberly-Clark?
Chris Lowery: You know, it was interesting. Kimberly-Clark had just acquired, in late 2009, 2 more medical device-oriented companies, and they created a position for somebody that had experience in medical devices. As I got educated on what Kimberly-Clark was trying to do at that time and some of the folks here, it became a really intriguing opportunity, to operate a $500 million medical device business inside of a huge consumer products company. It’s an interesting challenge, in and of itself. So it was a great opportunity to really get in and shake an organization, and a strategy for growth in medical devices. It was a very compelling opportunity.
MassDevice.com: What was the rationale behind the spinout of the business that will become Halyard Health?
Chris Lowery: It was an opportunity to create value for Kimberly-Clark shareholders. Equally important, it will better enable Halyard Health as a standalone to execute our mission, which is to advance health and healthcare by preventing infection, eliminating pain and speeding recovery. I’m particularly excited about the advance health and healthcare piece, because I think a lot of what we do not only serves the patient and the individual’s health, but also can have a great impact on our healthcare system, in costs and quality.
MassDevice.com: There’s an increasing call for services wrapped around a medical device or medical product. How is Halyard Health planning to respond to that new dynamic in the marketplace?
Chris Lowery: The opportunity in our sector, really, is to help our customers with that challenge of cost, quality, and clinical outcomes. The customer is faced with the pressure of those competing priorities, and there are numerous opportunities in helping them manage that challenge. We don’t need to limit ourselves to product-only solutions. In fact, we have a couple of efforts that are ongoing today where we’re piloting some solutions or services-oriented offerings to do just that, to fulfill our mission and also help the customer manage things like [hospital-acquired infections] or re-admissions. That’s something we’re looking at more and more.
MassDevice.com: What about dealing with more outcome-based criteria and the rise of the accountable care organization?
Chris Lowery: We’re going to operate our business in 2 business segments. Our surgical and infection prevention business is really a family of products that helps our customers prevent hospital-acquired infections, both on the patient and caregiver side, and when you think about the size of that problem, then think about 700,000 people acquire HAIs in the U.S. alone and 75,000 or 100,000 of them actually end up dying as a result.
It’s a big problem, and with the Affordable Care Act and all the focus on quality, HAIs, re-admissions and all those types of things have a big impact both on cost and revenue with the customer, so that segment of our portfolio really aligns well with the underlying themes of the ACA.
On the medical device side, we’ve got 4 therapeutic areas we cover, but we really focus on narcotic reduction. You have pain management in a non-narcotic fashion. Narcotics is really an epidemic here in the United States. It is the leading cause of adverse drug event deaths and there is great opportunity in those pain platforms to really help our customers at the intersection of cost, quality and outcome.
When we use our On-Q pain management solution, as an example, it delivers local anesthetic, either to a surgical wound site or to a nerve or a nerve block, and it allows a reduction of narcotic use, fewer post-operative complications, like post-operative nausea and vomiting. It decreases length of stay and decreases the time before somebody can go to rehab, so there are all kinds of clinical, and economic and outcome-related benefits with the use of that therapy versus the standard narcotic approach. We’ve got 100 published clinical studies that independently validate the value there, and I get particularly excited about those areas of our business where you can see all those different pieces coming together, not just clinical, but also cost and quality outcomes.
MassDevice.com: Sales growth rates in the medtech sector have been slumping in recent years. Where do you see opportunities for a return to stronger growth?
Chris Lowery: For our business, we see opportunities across our portfolio of products. One of the benefits of the spin-off for Halyard is that we will be able to independently set our own direction and re-invest more appropriately in the business for growth. As a result, I think across our portfolio, we will be able to accelerate our growth. I think, from a sector standpoint, we may not have the same types of pressures as, say, an orthopedic implant company, which is really a different proposition altogether. What I like about our portfolio is we have a lot of solutions that address that fundamental cost, quality and outcomes, and so as long as we’re effective in demonstrating to the customer how we deliver that promise I think that we have an opportunity for accelerating growth in the future.
MassDevice.com: Another hot-button issue is consolidation, with the Medtronic-Covidien deal and the Zimmer-Biomet tie-up. What’s your take on the implications of that for the spectrum of companies in the medical device arena?
Chris Lowery: Well, there’s a lot of discussion in the marketplace about the size and scale. I think we have a lot going for us, on Day 1, as a new company, because we will be over a billion and a half in revenue with leading positions in a large market. We’ve already got a strong portfolio of brand and great cash flows, so I think we will be well-positioned, right out of the gate.
In fact, part of our growth strategy moving forward will be to look at M&A as a source for future growth. We think we will be better positioned to attract healthcare talent and have a better opportunity to allocate capital for growth-related activities, whether it be an increase in R&D spending, or mergers & acquisitions. All of that stuff really creates an exciting future which our entire organization is very jazzed up about.