The principals of Miami-based Sanomedics International Holdings (OTCQB: SIMH) talk with the Opportunist’s Managing Editor Leslie Stone about their mission to improve the quality of life for patients and the physicians who treat them, their Anovent and Thermomedics subsidiaries and their recent $3 million acquisition of a leading national home medical equipment provider.
Sanomedics International Holdings manufactures and distributes innovative professional medical diagnostic equipment for professional healthcare providers. The company was founded by business partners Keith Houlihan and Craig Sizer about five years ago to bridge the gap between the high-tech medical world and the acute care, alternate site care, home care and consumer care environments. Houlihan currently holds the positions of president and chairman of Sanomedics, while Sizer is a co-founder. The men, who have been friends for 14 years, got the idea to start the company after they became new fathers at the same time and Sizer came across a new technology for a non-contact thermometer. “As new parents, thermometers are in the basket of what everybody should have,” says Houlihan. “When Craig found this new technology it was a no-brainer for us. We thought Wow; let’s see where this might take us. We knew we were on to something whenever we placed it in somebody’s hand. Literally everybody thought it was incredible and they would ask us ‘Is it real?’ ‘Does it work?’ ‘Where can I buy this?’ So we started distributing our non-contact thermometers through a retail channel, and before long the company evolved and morphed into a medical technology company. We made some traction with our thermometer and certainly put all of our efforts into that. And then we realized there was a need to capitalize on some of the other diagnostic products out there.”
“We did it all ourselves,” adds Sizer, who was a stockbroker during the 1990s and has worked with several other public companies. “My skill set is to procure capital for various businesses, and that allowed for development of our company as well. We started off as a thermometer company and we are still in that space, but what we are doing now is transforming the company. We have big ambitions to get into the sleep apnea space.”
In 2010, Ron Benincasa joined the company as an advisory board member. A pharmacist with a graduate degree in pharmacology, Benincasa has 40 years of experience in the medical device arena. “I worked for Richardson Merrell and American Home before they were Pfizer,” he says. “The technical side of the business is where I focus my attention.”
Benincasa and Gary O’Hara, chief technology officer, were the inventors and co-developers of the world’s first Infrared Tympanic Thermometer, the FirstTemp Genius®.
Opportunist: We understand you recently signed an agreement to acquire Prime Time Medical, a Largo, Fla.-based durable medical equipment (DME) manufacturer. Can you share the details of this transaction and what it means for Sanomedics?
Keith Houlihan: Sure. Prime Time Medical is a leading provider of home medical equipment such as wheel chairs—electric and manual—and scooters, rehab products, respiratory equipment like oxygen concentrators and nebulizer compressors and diabetic supplies. They also have hospital beds, walkers, commodes and support surface products for wound care management. Their customers are mainly in West Central Florida but they are expanding pretty quickly throughout the state of Florida. We intend to use Prime Time’s products to help launch our efforts in the area of sleep apnea treatment and prevention. They will also give us the opportunity to distribute our thermometers nationally and to secure new customers that are dealing with various disease states. We are ramping our operations up into a little bit more of I guess what you would call the acute care space.
Opportunist: What are Sanomedics’ competitive advantages?
Keith Houlihan: We are fortunate to have some very strong technical and business/marketing expertise in the company. For example, Gary O’Hara, our chief technology officer, has been involved in medical device development for over 40 years.
As a company, I believe we are very skilled at recognizing new technology and looking at devices that complement what we already have on board. There is a crossover from acute care to alternate site care to homecare to consumer care and it isn’t often that a company like ours emerges with expertise in each one of those vertical silos of provision for health care. We are developing that capability by bringing the first one to the second one to the third one to the fourth one—with a little technology developed slightly differently for each one.
Opportunist: Who are your competitors?
Keith Houlihan: That really depends on which side of the business we are talking about. On the thermometer side, the point leaders are definitely Braun and Welch-Allyn. In terms of the platform we are building for the sleep apnea side of our business, I would frankly have to say that we don’t have any visible competition at the moment that we are aware of. Most companies in the sleep apnea space are either providers of hardware or software like Philips Respironics or sleep labs. ResMed is a good competitor, even though they aren’t doing so well right now. On the corporate side there is a company called Integra Life Sciences (NASDAQ: IART) that is structured similar to the way we are.
Opportunist: Please tell us about your Anovent and Thermomedics, Inc. subsidiaries.
Keith Houlihan: Through our Anovent subsidiary, we are focusing on identifying specific market opportunities in the ENT [ear, nose and throat] space for sleep disorder patients. We have some proprietary technology within the company that we plan to market and position on a national level in the coming months and years ahead. Ron works in this division and is helping us as we develop sleep apnea products.
Ron Benincasa: Our Thermomedics subsidiary designs, develops and markets medical diagnostic equipment for professional healthcare providers in a wide range of medical settings. I think the fact that we have the Thermomedics division and the Anovent division fits well together. Thermomedics is already functioning well as a unique diagnostic product on the clinic level, in long-term care, and is moving into acute levels of care. The ENT space is not as well developed in terms of the full continuum of care for ENT doctors to take their patients from diagnosis of sleep apnea right through treatment and home care and to package a program that lets them identify a patient and prescribe a proper product for therapy. We are in a position to offer products and services that deliver all three of those for ENT in one package, if you will. Our diagnostic side with our non-touch thermometers is penetrating the classic markets. We are looking at DME dealers and other providers to then interface with respiratory care models.
Opportunist: Are you pursuing any other strategic alliances?
Keith Houlihan: On our distribution side, if that is what you’re referring to, we have a group of strong medical supply dealers that are preparing to launch our products through a network that serves the entire country focused on acute care settings and will supplement the alternate site as well. More medical suppliers are initially handling this, and to some extent that’s a major breakthrough because these types of distribution organizations are very careful about the type of products that they are willing to distribute. Reputation is always involved. This is happening very slowly—it will likely happen in the next 30 to 60 days—and will be very rewarding for us. That is a strategic alliance of sorts, and we also have some DME acquisitions that are strategically important.
Opportunist: Do you have any plans to expand beyond your current two subsidiaries?
Keith Houlihan: We do have some things on the back burner but, overall, I think our hands are full with what we currently have going. There is more than enough on our plate at the moment—certainly on the diagnostic and thermometer side—so I am not sure we could handle anything else. Whenever there’s a compelling product or device that we feel we could add something to or make better or market we will pursue it. Typically, though, when you start to show some unique capability to penetrate the market and produce revenues in this business space other people will approach you with their ideas, products or concepts that they would like to take to market. Sometimes you grow organically, but usually you grow by acquisition.
Opportunist: What do each of you enjoy most about your work?
Ron Benincasa: I am always happy to be able to spot a technology or concept and turn it into something that we can make the standard of care. That’s the key—to take something unknown and make it into something valuable and make it the standard of care. We have done that several times already and we intend to do it again. That’s just me, though. [Laughs]
Keith Houlihan: I like that, Ron. [Laughs] What excites me most are the people behind this company. They are a great group of guys. They keep me motivated and, quite frankly, they are the best in the business. It is wonderful to be surrounded by professionals who have great synergy and work well with one another. It isn’t every day that somebody has an opportunity to participate with a company like this.
Craig Sizer: For me, it’s the deal-making side of the business and just getting deals done. That is what I enjoy. It is very rewarding when we land new clients or distribution for our products. Other than that, I will feel even more rewarded when we accomplish some of the goals we have set for ourselves. We are still in the development phase of the company, which in itself is a lot of work so much of the reward is on the other side.
Opportunist: What is a typical day for each of you?
Ron Benincasa: My days are different from Craig’s and Keith’s, who are both building a top down structure that we can operate within. I am primarily involved in the product and business development and marketing sides of the business and my day is generally filled with looking at distribution and trying to decipher what the competition is doing, attending medical trade shows and looking at new product candidates that might be part of our next offering. I also participate in the development of our promotional material and sales collateral, as well as working with Group Purchasing Organizations and national accounts.
Craig Sizer: I basically work with our team to source new deals and new targets to consider. I also spend a lot of time talking with our shareholders and investment bankers.
Keith Houlihan: I think Craig and Ron summed it up well. Here at our Miami headquarters, we are trying to build a solid foundation. I do have dual roles in operating Thermomedics closely with Ron on a day-to-day basis, and I also work closely with Craig on due diligence, potential acquisition targets, dialoguing with our vendors and ensuring that things move smoothly.
Opportunist: Where do you see the company in five years?
Craig Sizer: We will continue to work on marketing and distributing our thermometers and continue to target acquisitions and implement those companies. We will introduce proprietary products into that channel as well.
Outside of the two acquisitions we have previously announced, we are expecting to do an acquisition a year coupled with organic growth in the next four or five years. We anticipate being able to drive our top line to about $100 million dollars and add $20 million to our EBIDTA. If we execute that strategy we can definitely proceed within a specific time period.
Leslie Stone is an award-winning writer/editor with more than two decades of experience covering business, finance and lifestyle issues for newspapers, magazines and online publications. Originally from Virginia, she currently resides in Florida. Follow her on twitter at @les7989.
Visit Sanomedics Online - www.sanomedics.com