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CRH Medical’s paradigm shift for treating hemorrhoids

June 12, 2012 by · Leave a Comment 

By giving gastroenterologists (GEs) an opportunity to effectively treat the hemorrhoids they diagnose during colonoscopy procedures for colon cancer screening, CRH Medical (TSX:CRH; OTCQX:CRMMF) has created, not only a paradigm shift in the gastrointestinal sector, but also a significant market opportunity.

Edward Wright

“We know that approximately 20% of colonoscopy patients have symptomatic hemorrhoids. We also know that GEs did not receive training for the treatment of hemorrhoids during their fellowship programs. CRH provides GEs with the training and the technology to treat some three million patients each year at reimbursement rates comparable to colonoscopy,” CEO Edward Wright says in an interview with BioTuesdays.com.

There are about 15 million colonoscopies performed annually in the U.S. by some 8,000 GEs. The NIH estimates that one-in-two Americans will suffer from symptomatic hemorrhoids by age 50.

“This is a great time to be a GE,” Mr. Wright states, pointing to a recent upturn in public service announcements that colorectal cancer is 95% preventable with screening. “Raising awareness is making GEs busier than they’ve ever been.”

The CRH O’Regan System has been deemed the “gold standard” in non-surgical hemorrhoid treatment. It is a single use, disposable medical device that is safe and effective to remedy hemorrhoid grades I – IV. CRH distributes its hemorrhoid banding technology, treatment protocols, and operational and marketing expertise as a complete, turnkey solution, directly to physicians.

Mr. Wright, a former retailing executive with Cartier, who joined CRH at the end of 2006, says the company first adopted a clinic model, using its own surgeons to treat patients with the O’Regan device.

“The clinic model was unsustainable for a number of reasons,” he recalls. “I come from a retailing background, where if I sold you something, I believed the onus was on me to help you, in turn, sell it to your customer so that you’ll buy from me again.”

When he joined CRH, he brought that mentality with him. “Today, the relationships we build with our customers, the GE, are a considerable part of who we are as a company,” he says.  “We continue to hear how we stand out from the masses in this regard, only reinforcing the decision to make customer service a priority.”

When developing its new model, CRH also shifted away from the idea of a standard medical technology sales model that focuses on third party distribution. Instead, it opted for a pharmaceutical model of educating and building awareness with both physicians and consumers.

At end of 2010, CRH closed the last of its clinics and created a platform to focus on the marketing and distribution of the O’Regan System, directly to GEs. The primary goal of the CRH model is to train physicians and then create demand for the procedure at their practices by driving patients to them. The company immediately became profitable in the first quarter of 2011 and has stayed in the black.

“We have a great product that generates revenue for clinical practices and allows them to provide a continuum of care for their patients, all backed up by industry leading marketing,” he says. “What’s unique about our model is that we do a lot of things to generate new patients for the use of our device at the physician’s office.”

As part of its service offering to customers, all marketing material is provided to them at no additional cost. “We want them to advertise the procedure to their current patients and create awareness within their community. I knew that if we tried charging less for the technology and then turned around and charged them for our marketing materials and other services, we wouldn’t see the level of traction we see today,” he contends.

CRH also has made great strides in tapping the Internet for its awareness campaign. “We use the Internet for both educational purposes and as a service to link the patient and the doctor,” Mr. Wright says.

2,600 Leads Per Month

Its website has links to more than 700 physicians so patients can be directed to one in their vicinity.  By monitoring Internet traffic, CRH claims to generate 35,000 unique visitors per month, which results in 2,600 patient leads for physicians. CRH also provides advertising templates for practices to use in their local markets to attract additional patients.

The marketing campaign is working. Mr. Wright says that 95% of the GE practices trained to use the O’Regan System are still purchasing the device one year later.

He explains that CRH has general surgeons who travel to physician practices on behalf of the company to provide a training program that educates GEs and their staff about the procedure and its benefits to patients.

Physicians only need to assemble about 10 patients, and CRH will help guide the doctor through the patient’s first treatment. Physicians at the practice will then perform the second and third treatments on their own at two-week intervals, as necessary.

“We know that if we brought physicians to a central location, it would be more difficult to kick start this business,” he contends. “That’s why 95% of the practices trained continue to use our product.”

CRH has trained more than 1,100 of the 8,000 GEs in the U.S. to use the O’Regan System. “So the upside is significant,” Mr. Wright contends.

He figures the annual market opportunity is almost $500 million, based on three million patients and 2.5 treatments per patient, with $65 of revenue to CRH per treatment. “We’re initially focused on going after the first 10%, or $50 million, of that market,” he adds.

Financial Growth

In the first quarter of 2012, CRH had net income of $370,000, a year-over-year increase of 460%, on revenue of $1.7 million, up 35%. “In a very short period of time, we’ve achieved an annual run rate exceeding 100,000 units, giving us an annual revenue run rate of $7 million,” he says.

The company is currently selling the O’Regan System in the U.S., Canada, Spain and the Philippines. “Our focus has been in North America, but we’re also now moving into international markets,” Mr. Wright says.

As a one-product company, CRH is looking for other products to add to its marketing and distribution platform.  “We are not going to put a square peg in a round hole, but when we see something that makes sense, we’ll consider it,” he says.

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