MedNexis, Inc.

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Medical Equipment Business Plan

Strategy and Implementation Summary

General

Our strategy will be to target both the market for prevention/treatment of muscular atrophy and the alternative medicine market for non-stimulating magnetic therapy. The latter use will require no FDA approval while the former use will for widespread market acceptance. The device will be marketed separately and under different names in each market, and will have decreased power in the alternative medicine market ensuring that its magnetic fields will be non-stimulatory.

MedNexis will pursue specific market segments with a multi-tiered, multi-channel approach in each market. We will leverage our technologies with a direct sales and distribution strategy in both the alternative medicine and atrophy treatment/prevention markets. The former market will also be targeted using more consumer-directed advertising while the latter will be targeted using a sales force approach and contract sales. Insurance company reimbursement will provide for more wide-spread acceptance and is expected by Year 3. Currently, competitors in the industry are applying for insurance reimbursement codes and expect that they will be granted within the next year. This will make the process quicker and easier for our devices due to similar functionality. Even prior to insurance reimbursement, though, the expected benefits are great enough that out of pocket purchases are expected and accounted for in projected sales.

Manufacture of the devices will be accomplished through external contracting for Years 1 through 5 to minimize risk for potential investors. Upon realization of its projected level of sales, the company will seek to study the feasibility of manufacturing facilities of its own to improve on its cost structure and increase its profitability.

The company will seek to market to all regions in United States through the establishment of our products at key medical institutions throughout the country. A strategic partnership has already been formed with the Physical Therapy department at Duke University. Once 510(k) approval has been obtained and a fully functional prototype is made available, clinical studies will commence with the assistance of Dr. Daniel Dore, Director of Clinical Services in the Physical and Occupational Therapy department at Duke University. Dr. Dore is excited to begin the studies and to be a part of a technology which he feels has the potential to revolutionize the industry.

5.1 Marketing Strategy

Marketing will follow from industry and trade and physician awareness campaigns to specific executions directed at specific customer segments. The top tier of 20 to 30 customers in each segment will be the initial focus. These include the following organizations:

FacilityCity
Alamance Regional Medical Ctr.Burlington
Cape Fear Valley Medical Ctr.Fayetteville
Carolinas Healthcare SystemCharlotte
Central Carolina HospitalSanford
Duke University Medical Ctr.Durham
Durham Regional Medical Ctr.Durham
Frye Regional Medical Ctr.Hickory
Grace HospitalMorgantown
Harris Regional HospitalSylva
Haywood Regional Medical Ctr.Clyde
Highsmith-Rainley Memorial HospitalFayetteville
Hilton Head Medical Ctr.Hilton Head
Iredell Memorial HospitalSmithfield
Margaret R. Pardee Memorial HospitalHendersonville
Memorial Mission Medical Ctr., Inc.Asheville
Morehead Memorial HospitalEden
Moses Cone Health SystemGreensboro
Park Ridge Hospital (Adventist)Fletcher
Presbyterian Healthcare SystemCharlotte
Rex HealthcareRaleigh
Rowan Regional Medical Ctr.Salisbury
University Health System of Eastern CarolinaGreensville
University of North Carolina HospitalChapel Hill
Wake Forest University Baptist HospitalWinston-Salem
Wake MedRaleigh
Watauga Medical Ctr.Boone

We intend to market MedStim through direct sales efforts. Direct sales are necessary because our product is so revolutionary. Also, we do not believe that distributors would be efficient to develop, nor would they be effective at promoting our product. We believe that the high-cost nature of our product in the allopathic market is well suited to a direct sales effort, and we intend to pursue this method as our channel of choice for the foreseeable future.

Customers will also be able to view our products online. The online information will allow potential customers to become educated on the applications, benefits, and costs of our products.

MedNexis will achieve its initial sales goals from direct and distributed sales of the MedStim and TheraMag systems. The alternative medicine market is targeted first since it is an existing, well-defined market and will require no FDA approval. The atrophy treatment/prevention market will follow. While sales of MedStim are expected to be less than sales of TheraMag, sales of MedStim are expected to provide significant cash flows and should develop into a "cash cow" as the product's reputation is established. Thus, it will provide quality earnings to the company.

Because the alternative market is highly fragmented, our initial focus will be cities in the following regions: North Carolina, Southern Virginia, and Washington DC, with the possibility of Southern Florida. These are target markets because each has a high concentration of Sports Medicine Clinics, Wellness Centers, and Massage and Physical Therapy Offices. In Phase 1, we plan to send out informational videos with testimonials from physician's involved in the trials. We will follow these mailings with office visits and product demonstrations. This targeted marketing will be accompanied by advertisements in several popular health and fitness magazines such as Prevention, Healthy Living, Golf Digest, Runner's World, and others. We plan to build relationships with alternative medical products distributors such as painfreebody.com and medfaxxinc.com to further penetrate the alternative medicine market. Online marketing will be conducted by placing advertising links to our website on several sites geared towards alternative medicine and chronic pain.

5.1.1 Pricing Strategy

The MedStim and TheraMag systems are priced in two components, both in keeping with industry standards.

MedStim:

  • The logic controller is expected to retail at $18,500.
  • The array of overlapping coils at $1,500.

TheraMag:

  • The logic controller at $300 (reflects decreased power requirements and decreased functionality)
  • The array of overlapping coils at $80.

All collections in this plan for cash flow purposes are based on an average 45-day collection span.

5.1.2 Promotion Strategy

Public relations and industry media will help in over-all industry awareness plans. Feature articles and product reviews will help launch awareness. Direct mail to buying groups and ads in trade publications will help with buyer impressions. Finally, all will be integrated with physician materials and training videotapes to increase point-of-therapy usage.

MedNexis has already worked closely with physicians to design its products. The importance of working with physicians is well known. Initiation of clinical studies with the eager assistance of Dr. Daniel Dore, Director of Clinical Services in the Physical and Occupational Therapy department at Duke University will be invaluable in the promotion of MedStim as a viable medical therapy. It is expected that once the device is found to be effective, Duke University will use it as a high-profile example of its technological advancement.

5.2 Competitive Edge

MedNexis' competitive edge in this field arises due to the fact that it has filed a patent application for the MedStim and TheraMag systems. It is the patent agent's strong opinion that the patents will defensible and enforceable.

Competitive Strengths:

(1) Currently no similar product in the market that is as effective as the MedStim or TheraMag system

There is currently no product which will be able to provide consistent treatment as cost-effectively the MedStim System. The launch of our products is expected to be warmly welcomed by the medical and healthcare industry as a breakthrough.

(2) Magnetism is seen as one of the key energy healing techniques used in alternative medicine

It is documented that there are numerous groups in the world (i.e. ethnic, religious, etc.) that believe that magnetic energy possesses healing properties, though not always proven. There is currently medical research being conducted to examine and evaluate these healing properties.

This presents a potential market for the company to further increase its prospective sales in the alternative medicine industry.

Vulnerabilities:

Alternative technologies

We recognize that potential alternative technologies may arise which may provide similarly cost-effective, user-friendly treatments in the healthcare industry. However, with monitoring of developments within the bio-medical industry and keeping abreast with the latest innovations in the industry, Mednexis will seek to maintain its lead in its field of expertise and compete effectively against potential entrants, thereby maintaining its market position and competitive edge.

5.3 Sales Strategy

MedNexis' sales strategy is to open U.S. alternative medicine markets on a limited basis at the start of operations with the TheraMag system. Assuming 510(k) approval is obtained, MedStim will be introduced during this period as well. In domestic markets, insurance company reimbursement will provide for more wide-spread acceptance and is expected by Year 3. Even prior to insurance reimbursement, though, the expected benefits are great enough that out-of-pocket purchases are expected and accounted for in projected sales. The strategy will then be to grow the atrophy prevention/treatment and alternative medicine markets through Year 5 up to 10% and 15% penetrations, respectively. International markets will follow.

The sales strategy for the atrophy prevention/treatment market will be to pursue large contracts with HMOs and medical groups and increase its reputation amongst physicians. The strategy in the alternative medicine market, however, will be to target the end-user with intensive advertising campaigns.

Sales Forecast
Year 1 Year 2 Year 3 Year 4 Year 5
Unit Sales
MedStim- Logic Controller 1 44 465 1,302 3,416
MedStim- Array of Coils 5 221 2,790 9,115 27,346
TheraMag- Logic Controller 250 4,200 26,460 83,349 194,481
TheraMag- Array of Coils 250 4,200 26,460 83,349 194,481
Total Unit Sales 506 8,665 56,175 177,115 419,724
Unit Prices Year 1 Year 2 Year 3 Year 4 Year 5
MedStim- Logic Controller $18,500.00 $17,619.05 $16,780.05 $15,981.00 $15,220.00
MedStim- Array of Coils $1,500.00 $1,575.00 $1,653.75 $1,736.44 $1,823.26
TheraMag- Logic Controller $300.00 $315.00 $330.75 $347.29 $364.65
TheraMag- Array of Coils $80.00 $84.00 $88.20 $92.61 $97.24
Sales
MedStim- Logic Controller $18,500 $775,238 $7,802,721 $20,807,256 $51,991,506
MedStim- Array of Coils $7,500 $348,075 $4,613,963 $15,827,628 $49,858,851
TheraMag- Logic Controller $75,000 $1,323,000 $8,751,645 $28,946,066 $70,917,861
TheraMag- Array of Coils $20,000 $352,800 $2,333,772 $7,718,951 $18,911,430
Total Sales $121,000 $2,799,113 $23,502,101 $73,299,901 $191,679,647
Direct Unit Costs Year 1 Year 2 Year 3 Year 4 Year 5
MedStim- Logic Controller $3,000.00 $3,090.00 $2,809.09 $2,553.72 $2,321.56
MedStim- Array of Coils $300.00 $309.00 $280.91 $255.37 $232.16
TheraMag- Logic Controller $200.00 $190.48 $181.41 $172.77 $164.54
TheraMag- Array of Coils $50.00 $47.62 $45.35 $43.19 $41.14
Direct Cost of Sales
MedStim- Logic Controller $3,000 $135,960 $1,306,227 $3,324,942 $7,930,458
MedStim- Array of Coils $1,500 $68,289 $783,736 $2,327,715 $6,348,545
TheraMag- Logic Controller $50,000 $800,000 $4,800,000 $14,400,000 $32,000,000
TheraMag- Array of Coils $12,500 $200,000 $1,200,000 $3,600,000 $8,000,000
Subtotal Direct Cost of Sales $67,000 $1,204,249 $8,089,964 $23,652,657 $54,279,004

5.3.1 Sales Programs

Sales programs will include direct wholesale sales. Sales materials, video training tapes, and support materials will be produced. Physician materials will be included.

Direct sales will be through personal contact, direct mail, public relations, and media directed at key industry segments.  In addition, electronic marketing will be deployed whenever it fits with the buying patterns of a key group. A commerce-enabled website will be utilized to cultivate direct sales to key industry groups.

5.4 Milestones

The following are the key milestones for the first year of operations:

  1. All patents will be applied for by January 1, 2001. The total legal fees are expected to be less than the $50,000.
  2. Start-up capital will be raised by October 1, 2001
  3. Completion of strategic business plan.
  4. All other first year milestones are currently on schedule in accordance to the business plan.
Milestones
Milestone Start Date End Date Budget Manager Department
Business Plan 12/5/2000 3/22/2000 $3,200 Burnett Finance
Patent Applications Complete 12/1/2000 6/1/2000 $55,000 Callahan Legal
Supplier Selection 3/1/2001 5/1/2000 $18,000 Marriott R & D
Corporate Identity 5/1/2001 8/1/2001 $2,250 Bell G & A
CEO Hire 7/1/2001 10/1/2001 $25,000 Management G & A
510(k) Application Submitted 6/1/2001 9/1/2001 $5,000 Callahan Legal
Set-up Information Systems 8/1/2001 11/15/2001 $68,000 Marriott G & A
Sales Launch / Road Show 10/1/2001 12/1/2001 $60,000 Bell Marketing
Global Marketing Plan 6/1/2002 12/1/2002 $150,000 Bell Marketing
Engineering/Manufacturing Personnel 6/1/2003 10/1/2003 $26,000 Marriott Operations
Investment - Tranche 1 8/1/2001 10/1/2001 $0 Chia/Wain Finance
Investment - Tranche 2 6/1/2002 8/1/2002 $0 Chia/Wain Finance
Name me 9/1/2005 9/15/2005 $0 Chia/Wain Finance
Totals $412,450