Read the Conversation
EF: What will 2022 be the year of?
LC: 2022 is the year of recovery and opportunity. The healthcare sector and patients alike endured challenging times during the pandemic; businesses are facing pressure to increase costs while recovering financially. When a part of the business operations is related to the infrastructure capital expenditure, it cannot be refuted, which poses a challenge to several businesses. Even though the sector is facing a lot of uncertainty, we had a very good start to the year with capital expenditure and projects resuming. Several companies had resumed their operations and begun recovering until recently.
EF: What are the biggest lessons learned for the industry from the past couple of years?
LC: Nobody saw the pandemic coming, and nobody was prepared for it. One of the biggest learnings came from everyone adapting to the unknown. The pandemic accelerated technology into the market because many companies had to reinvent themselves. Several MedTech and startups in the health-tech segment grew during these past two years because they increased in becoming digitally advanced and prepared. Transforming a big company can take time, which is why health-tech companies took the opportunity to participate in the market.
There was a lot of investment in health techs in response to what was happening at the time. Big pharma and healthcare companies had to reinvent themselves to continue operating through new means and platforms. We also had to reinvent our digital media and footprint, going from running traditionally to working digitally and meeting our consumers virtually. Accelerated digitalization is a silver lining of the pandemic.
Historically in disruptive situations like the pandemic, governments, businesses, and sectors accelerate and thrive, just like the healthcare sector thrived. It is an ongoing trend. The pandemic showed us the importance of technology and how to improve our access to customers, market our products, and create more innovative solutions.
We have been investing in different technologies at STERIS to increase the connection between our customers and products because we realized that this method improved our customer relationships and is more effective mid to long-term and cost-efficient. Investing now will reduce our operating costs long-term.
EF: What is the role of MedTech in developing the economy in Brazil?
LC: We are the protagonists in the change that is coming. I believe that healthcare is going to be one of the key drivers of growth in the future. The pandemic showed the importance of the healthcare industry and the importance of health. People have become more health conscious, and aware of the quality of living and preventive care, while the number of healthcare investors has increased.
Before the pandemic, healthcare was about diagnosis and treatment plans. After the pandemic, preventative care is a key focus. Many MedTech companies are investing in and are dedicated to preventive care. Value-based healthcare began approximately four years ago, mainly in the US, and advancement in productivity is essential for the future.
Stakeholders must come together and find ways to implement value-based healthcare to improve our patients’ healthcare and be more productive. The solution should benefit everyone involved. If the solutions do not benefit all the stakeholders, it becomes a weak chain, and some stakeholders may remove themselves from it. There should be more investment in the industry, specifically in Brazil, for us to go to the next level.
Many big groups in Brazil invest a lot in hospitals, insurance companies, and other medical businesses to gain scale. For MedTech companies, Brazil is one of the biggest potential markets. Healthcare is well-regulated here and there are a lot of needs. There are 250 million people in Brazil, meaning a company can be established and become stable, gain some market share, and get as close to the client as possible. The majority of Brazil's healthcare investment goes to the private sector. Its healthcare is still partially dependent on the public sector. I am very optimistic about the change.
EF: What is the role of Brazil in integrating into the Latin American markets, and what is the region's strategic importance?
LC: Brazil is the biggest healthcare market in Latin America. 33-34% of the Brazilian GDP is from San Paulo alone. Half of that GDP is from the metropolitan area in Sao Paulo, and the other half is from the countryside. To put things into perspective, the GDP of San Paulo’s countryside is the same GDP as Chile.
Latin America is still a land of opportunity in healthcare because it is a developing market and provides opportunities in terms of capital and investment. I believe Mexico, Colombia, Brazil, and Chile are the four drivers of the region. They will lead the trends and evolution of the healthcare market in Latin America.
However, the way business is conducted has changed, at least on our side, because our main selling point is not procedural like the other big MedTech companies. Our business model is a mix of 25% capital-related sales, and 75% consumables and services. Customers in Latin America are trying to find different ways to access medical equipment. Equipment rental is now a trend. Many companies are trying to find ways to run their business because of the constraints in budgets which is transforming the market.
STERIS has a strong competitive business in the healthcare market. We plan to invest more in services and consumables than capital because, in markets like Brazil, there are a lot of global and local competitors. Equipment and shippable products are expensive to import for the region, which is why services will drive the growth of companies like ours in the future.
In the US and Europe, we outsource our services to hospitals and provide maintenance services like instrument repair maintenance, flexible endoscope repairs, and outsourced sterilization services. This is where we have been putting most of our attention and investment into the future. The service business and market are still ripe with opportunity because it is still behind the other healthcare products and services.
EF: Can you elaborate on the company's role in creating awareness around sterilization?
LC: We are leaders in the segment of imported capital sterilization equipment, whilst the other hospitals are buying locally manufactured products. We are leaders in the specialized market in which we operate. Part of our company DNA is educating people. We have a department dedicated to educating our customers and consumers, that teaches about our products and services, OR procedures, sterilization processes, best practices, and international standards because we want to raise the level of care.
Some areas within the region have very high sterilization standards, and others have very low standards. We must raise the bar for everyone, have the best practices and operate at the same standard. We want everyone to participate in working at high standards and with increased levels of care. A lot of effort and investment is put into that: it is another way to be a protagonist.
During the pandemic, STERIS completed its biggest acquisitions to date. We acquired Cantel at $4 billion, which is a sign to show that we believe in being protagonists. To grow our portfolio, we bought the biggest company in endoscopy processes, which helped us improve the quality of our services and care during a difficult time. Another part of our DNA is looking for opportunities that add value to our customer care, this makes us a strategic partner for our customers in several areas and segments to achieve b outcomes.
EF: What do you look for in companies when investing, and what advice would you give other investors?
LC: Future opportunities are always attractive to any investor. When investing, the culture of the company is what makes it appealing. If it does not match our own, it will not work, because how the people work and do business in the company you want to invest in has to be maintained. A company can have the smartest people to operate the industry, but if you do not have the mindset to relate with the teams and understand their work culture, that's where strategy can fail. Furthermore, a company's segment and its strategic positioning within the sector are critical factors. But it is the people who enact the vision.
