Mallinckrodt shifts focus to medical specialties

Operational and marketing changes at Mallinckrodt Medical overthe past three years helped the firm increase sales by 25% infiscal 1990 (end-June) and 28% in 1991.

The St. Louis medical supplier, a wholly owned subsidiary ofImcera, reached $512 million in revenue last year. It expectsto sell $1 billion annually by 1995, said president C. Ray Holman.

Holman spoke with SCAN during Mallinckrodt Medical's nationalsales meeting in San Francisco last month.

Much the firm's sales growth can be attributed to the successof Optiray, a nonionic radiographic contrast agent developed in-houseand introduced in Europe and the U.S. in 1989 (SCAN 5/23/90).Optiray is Mallinckrodt Medical's top-selling product, Holmansaid.

Mallinckrodt signed on Yamanouchi Pharmaceutical last monthas an exclusive distributor of Optiray in Japan. A new drug applicationhas been filed for Optiray in Japan and approval is expected earlynext year, Holman said.

Optiray is sold in France and several other European marketsby French contrast firm Guerbet. Guerbet manufactures Hexabrix,a low-osmolar agent sold by Mallinckrodt in the U.S.

Optiray's introduction explains only part of Mallinckrodt Medical'simproved performance, however, Holman said. The company has restructureditself since 1988 in two main ways:

• organization of its business units was changed froma product-focused structure to one based on five physician-basedcustomer segments (anesthesiology, cardiology, critical care,nuclear medicine and radiology); and

• worldwide sales responsibility was unified under generalmanagers in charge of each of the five business units.

A separate marketing staff and dedicated sales force sell Mallinckrodt'scontrast media, radiopharmaceuticals, catheters and other medicalproducts to the five different specialties. This structure givesthe company a better understanding of clinical requirements andproduct development possibilities, Holman said.

"We find that products change over time, while the customersdo not," he said.

The clinical needs of radiologists and cardiologists, for example,differ substantially, said William J. Mercer, group vice presidentfor medical imaging.

Mallinckrodt is developing speciality therapeutic productsin its cardiology business, such as anti-restenosis drugs foradjunctive use in angioplasty. These products are a response tothe firm's improved understanding of the cardiac field, he said.

"Two or three years ago, we had no idea of the opportunitiesthat exist in cardiology beyond contrast media," Mercer said.

Radiologists, on the other hand, are primarily interested innew contrast products, particularly in MRI, he said. The firmexpects to have seven to 10 MRI compounds in its product portfolioby the end of the decade. MRI contrast agent development is thelargest area of R&D expenditures at Mallinckrodt, Holman said.

International (non-U.S.) sales make up a third of MallinckrodtMedical's total revenue and should reach 50% by the end of thedecade, Holman said. Much of this increase will come through directsales. The firm has about 300 sales representatives in the U.S.and half that many selling internationally.

Mallinckrodt Medical has its own company in Japan that sellsangiographic catheters and other products. It chose to use a Japanesedistributor to sell Optiray because of the need for a quick startin that market segment, Holman said.

Japanese radiographic contrast use has largely converted tononionics, and two nonionic contrast suppliers, Schering and Nycomed(through Daiichi Pharmaceutical), have large sales organizationsalready in place. The x-ray contrast market in Japan is estimatedat $400 million per year, he said.

MALLINCKRODT MEDICAL WAS INCORPORATED as a separate subsidiaryof the Imcera Group last year. Imcera, formerly InternationalMinerals and Chemicals, has three subsidiaries; the others areMallinckrodt Specialty Chemicals and Pitman-Moore, an animal healthfirm purchased from Johnson & Johnson.

Separation from Mallinckrodt Chemical helped the medical businessimprove its market focus and name recognition, Holman said. MallinckrodtMedical revamped its corporate logo last month as part of a newidentity campaign.

Mallinckrodt was formed 125 years ago as a chemical supplierand branched into contrast products at the turn of the century.Avon purchased the firm in 1982 and sold it to IMCC four yearslater. At that time, IMCC was predominantly a fertilizer company.

Imcera exited the fertilizer business after acquiring Mallinckrodtand stripped out two layers of middle management. Each subsidiarypresident reports directly to the president and COO of Imceraat Northbrook, IL, headquarters, Holman said.

The results of this restructuring effort impressed the financialmarkets. Imcera's market value as a publicly held company hasdoubled from $1 billion to over $2 billion, Holman said.