This blog post is based on an article published by Biostock in Swedish on May 22nd, 2023.
Medtech company Pharmacolog announces changes in management and has changed business strategy to a SaaS model. Erik Hedlund, acting CEO, returns to the role of chairman of the board and current COO, Lars Gusch, takes over as the new CEO to put the strategy into action. BioStock talked to CEO Gusch about the new role, partnerships and the strategy ahead.
The medical technology company Pharmacolog develops the product series DrugLog™, WasteLog™, PrepLog™ and Pharmacolog Dashboard™ for quick and easy quality control in pharmaceutical compounding.
The products prevent medication errors in pharmacies and hospital wards and ensure maximum medication effect in the preparation process of potentially harmful injectable drugs. The company also prevents drug diversion of controlled substances, which is an increasing problem in healthcare.
New business strategy
In April, Pharmacolog announced a strategy change to accelerate commercial development. The business strategy was previously based on sales of capital investment products with limited opportunities for recurring revenue.
The new strategy means that the analytics software will be sold through a SaaS (Software as a Service) model. The intention is to secure recurring revenue by offering the products as a subscription service while reducing customers’ initial investment by up to 75 percent, according to Pharmacolog’s press release.
Market distribution has so far been based on sales through two partners, B. Braun and Codonics. Pharmacolog recently extended the distribution agreement with B. Braun to also include Portugal. Going forward, distribution will also be broadened through more distribution channels and partners.
Changes in management and board
The company is realizing the new strategy while carrying out a change in management. The changes mean that Lars Gusch, current COO, immediately takes over as new CEO, and Erik Hedlund, acting CEO, returns to the role of chairman of the board, replacing Björn Varnestig who is leaving the board.
Erik Hedlund, chairman of the board, comments on the change of CEO in the press release:
We are pleased that Lars has chosen to accept the position of managing Pharmacolog. Lars has had a significant role in implementing the SaaS offering and has extensive experience in both development and operational management in the company. Lars has also established good collaborations with Pharmacolog’s distributors and strategic partners and is thus prepared to broaden the distribution network to ensure high growth.
Reporting Q1
Pharmacolog recently reported the first quarter of 2023 showing signs of growth. The negative operating profit increased slightly to MSEK 4.2 compared to MSEK 4.3 in 2022. Net sales during the first quarter amounted to approximately MSEK 4.7, the company’s highest sales to date in a quarter and an increase of 134 percent compared to the same period in 2022. The increase is mainly due to a deal of just over MSEK 3 in the US with strategic partner Codonics.
Cash flow amounts to MSEK -4.3 compared to MSEK -3.5 in Q1 2022. Cash at the end of the quarter amounted to MSEK 6.3 (MSEK 15.4).
Carries out rights issue
Pharmacolog announced on May 14 that the company intends to carry out a rights issue of units of approximately MSEK 27.3, subject to approval from an Extraordinary General Meeting on June 16, 2023.
The reason given is that the company wants to implement the new strategy with the aim of further accelerating commercial development.
New CEO comments
BioStock contacted Lars Gusch to learn more about the new role as CEO, partnerships and the strategy ahead.
Lars Gusch, CEO, Pharmacolog
Lars, can you briefly tell us about your professional background?
– I have extensive experience in various areas of medical devices throughout the life cycle, including product and system development, regulatory requirements, service, and sales. I have worked with both hardware and software solutions in the field of image-guided surgery, radiotherapy, pharmacology and cardiology for several companies of varying sizes, which gives me a good overall picture and a solid experience in the medical technology field.
– As a newly appointed CEO with previous positions within Pharmacolog, I have very good insight into the company’s products and markets. I also have a good understanding of the challenges the company faces, and the solution strategy needed to move Pharmacolog forward.
Pharmacolog has adopted a new business strategy, can you elaborate on how it works?
– I want to summarize Pharmacolog’s new business strategy with a shift in focus from product development and initial market establishment of the company’s products to increased commercialization of our offerings. There are some challenges that we have analyzed in a structured way and defined solution proposals.
– The transformation of our product solution into a SaaS concept plays an important role in our future strategy. We can now tailor our solutions to customer needs in a flexible and cost-effective way, while at the same time we can offer Pharmacolog’s solutions at a lower initial cost for customers.
How do you view the plans to broaden the distribution network, initiate new partnerships and strengthen your market position?
– Since we offer a relatively new and specialized method, it is very important for us to work with competent partners who quickly and efficiently convey the benefits of our products to the right target groups in healthcare. Presently, we see an increased interest in integrating products into a holistic concept, which we address with current and future partnerships in order to strengthen our market position.
You have also announced that you intend to carry out a rights issue of MSEK 27, can you elaborate on why and what the capital will be used for?
– The capital will be used to implement the above-mentioned strategy update with the aim of further accelerating the company’s commercial development.
– Among other things, we will focus on marketing and sales activities as well as adapting and improving the products to the new strategy. In addition, part of the capital is intended to be allocated to increased geographical presence in additional key markets where the company intends to enter new partnerships.
What other activities are you looking forward to doing?
– The change in strategy means that we are working continuously to build and improve our business in a scalable and profitable way. This includes all parts of the company, from development to sales of both the product and service offering, which will also be an important part of our business in the future.
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