CEOCFO Current Issue
Cover Story Archives
Private Equity Review
CEOCFO Interview Index
This is a printer friendly page!
Hypertension Diagnostics is offering physicians a test that could
not only help them increase revenues but also better diagnose hypertension thereby
decreasing the risk of heart attack
Medical Instruments & Supplies
Hypertension Diagnostics, Inc.
2915 Waters Road Suite 108
Eagan, MN 55121-1562
Mark N. Schwartz
Chairman and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
December 1, 2005
Mark N. Schwartz
Chairman and CEO
Mark N. Schwartz has been chairman and CEO of Hypertension Diagnostics, Inc. since August
2003. Previously he was CFO of DDD Group plc, a digital media company he took public on
the London Stock Exchange. He was the founder and CFO of Bodega Latina Corporation, a
successful Hispanic grocery warehouse retailer in Los Angeles. Mr. Schwartz was an
investment banker at Credit Suisse First Boston and Donaldson, Lufkin, Jenrette. He is a
former member of the board of directors of Starbucks Coffee Company.
Hypertension Diagnostics, Inc., headquartered in Eagan, Minnesota, was founded in July
1988 to develop a proprietary blood pressure waveform analysis methodology into a
non-invasive means for measuring the elasticity of large and small arteries. HDI has
developed proprietary blood pressure waveform analysis technology, which has been
incorporated into the design of several products.
Hypertension Diagnostics is in the business of saving lives by helping reduce the risk of
cardiovascular disease using the CVProfilor. The CVProfilor is a device that enables
physicians to identify heart disease before it results in a heart attack or stroke. It
works by measuring small and large artery elasticity, the key indicator of cardiovascular
health. Approximately 50% of the population in the United States dies from cardiovascular
disease, but with early detection, 90% of the people at risk can be saved.
The CVProfilor painlessly and non-invasively measures
both large and small arterial elasticity. The test, a simple 7-minute process,
enables physicians to identify patients who require immediate and aggressive therapy based
on evidence of underlying vascular disease. It provides a reproducible and reimbursable
way to differentiate between hypertension and elevated blood pressure, risk-stratify
patients with diabetes, atherosclerosis and hypertension, and detect vascular disease in
white coat hypertensive, borderline hypertensive, hypercholesterolemic, and pre-diabetic
patients. The CVProfilor enables physicians to screen their at-risk patient population for
early signs of cardiovascular disease years or even decades before they manifest symptoms.
Five drug manufacturers have permitted the public
disclosure of their use of our CVProfilor in their multi-site clinical research trials:
Alteon, AstraZeneca, Parke-Davis, Pfizer, and Solvay. The CVProfilor was used in the NHLBI
Multi-Ethnic Study of Atherosclerosis (MESA) research trial in May 2000. Recently, the
American Society of Hypertension (ASH) released its new definition of hypertension at its
2005 annual meeting, which emphasizes the vascular health component of cardiovascular
disease. Pfizer released the results of the AVALON trial at the ASH meeting, which showed
the benefits of its new drug, Caudet, on improving arterial elasticity in as short as
eight weeks. There are over 200+ published, peer-reviewed scientific articles and
presentations on HDI's methodology, which provides evidence on the validity, accuracy and
reproducibility of the CVProfilor.
CEOCFO: Mr. Schwartz,
what was your vision when you came to Hypertension Diagnostics and how has that developed
Mr. Schwartz: What attracted me to HDI was the fact
that the CVProfilor was a device that really could save lives. It is a technology that
one-day will be in every primary care physicians office in the United States and
around the world. It is at the early stage of its deployment into the marketplace. We are
at that classic situation where the technology is ahead of the marketplace and studying
Jeffrey Moore, Crossing The Chasm and the other books hes written; there is an
opportunity to develop market niches for the company as the marketplace caught up with the
technology. This was also an opportunity to one day have an extraordinary
technology/medical device company.
CEOCFO: Where is HDI today?
Mr. Schwartz: We now have the core business model that
gives us the launching pad to deploy a profitable business model. It is an economic model
that we have refined that is attractive to our customers, attractive to our sales
representatives and extremely compelling to investors and to the marketplace. We feel that
we can now grow the company exponentially. We can double the size of the company every
year if not more, for the next five to seven years.
CEOCFO: Is this your rent to own plan?
Mr. Schwartz: This is a combination of renting and then
converting to ownership once a customer is doing in excess of 20 tests per month. At
that point, the economics no longer favor renting and it makes business sense for the
physician to purchase. It is the difference between going to Hertz rent a car and spending
$55.00 per day for a 30 days for several months, versus what it would cost to get that
same car if you bought it through a car loan or a lease. It is pretty simple economics
that we show, so what eventually happens is that they become owners of the technology
using some of their rental payments to buy down the purchase price of the equipment.
Therefore, we get a nice sale; our salesmen get a nice commission and as long as we
continue to repeat that process of bringing on new customers, it is a very profitable
model for HDI.
CEOCFO: Tell us how the
economics will work for the physician.
Mr. Schwartz: We focus on the primary care physician
who on average, across the board in the United States, makes $164 thousand per year. We
can increase his earnings, 25 to $50 thousand per year with very modest implementation of
our technology and that is real money. Therefore, a lot of physicians see the power of our
economic value and get really excited about the technology. We like to find a balance
between those that see clinical value and those that see economic value.
CEOCFO: What group of physicians are you targeting?
Mr. Schwartz: We target primary care physicians who see
a lot of hypertensive and diabetic patients, which means primarily: internists, general
practitioners, family practitioners and endocrinologists.
CEOCFO: Given that doctors are presented with new ideas all
of the time, how do you reach them?
Mr. Schwartz: That is a very good question and a very
important part of our process. First, we attempt to hire sales representatives that have
relationships with those types of physicians. They would be ones who know their way into
the physicians offices and their gatekeepers whom theyve done business with in the
past and whom they have a trusting relationship with. Therefore, we are bringing people
onboard sales reps who have entrée into those types of customers. Second of all, we have
a referral plan that allows physicians to act as opinion leaders and get their colleagues
to come onboard. We find that existing customers are the best way to get new customers.
They often are very effective in identifying and convincing other physicians to try our
CEOCFO: What does your product line consist of?
Mr. Schwartz: The model that we use for the physician
office is the CVProfilor®-DO-2020; it is the FDA approved device. The model that we have
for research is the CVProfilor®-CR-2000 and that model is purposefully not FDA approved,
so that if a pharmaceutical buys a number of those devices for a clinical trial, as Pfizer
Inc. (NYSE: PFE) has done and others will, it cant be used in the practice for
billing patients because it is not FDA approved. We wanted to have a distinct research. It
is also used by government agencies; the NIH (National Institute of Health), and the
Center for Disease Control. Our CVProfilor®-MD-3000 is used in the physicians practice
outside of the United States.
CEOCFO: Does the physician administer the test himself?
Mr. Schwartz: Our test is done by the medical
technician or the lowest person on the totem pole in the physician practice; I could train
you to do this in an hour. After 10 or 15 practice tests you would get the hang of it. The
physician generally does not do it, which is very positive. The physician doesnt
need to take the time to do these tests themselves; the physician doesnt have to
have a high powered lab assistant or specialized assistant onboard like you do with
ultrasound. The receptionist, the mailroom clerk, the UPS delivery guy or whoever is the
least costly resource in the practice, can administer the tests. The results are self
evident, because they printout and there is a scale on the back and it allows the doctor
to come in; quickly analyze the results and recommend a therapeutic regimen in response to
the test results.
CEOCFO: Where are you
with regards to reimbursements?
Mr. Schwartz: We are in good shape with payers across
the United States. We have worked very hard to maintain our reimbursement, with some
outstanding reimbursement consultants in Washington, D.C. This is a test that generally
reimburses in the 100 and $150.00 range. Of course that is dependent upon the geography,
the plan, and the insurance that the patient has. Therefore, it is a very attractive
economic model. If you have competent biller, you will get reimbursed. If you dont
have a competent biller, you may not get reimbursed, but thats true of any procedure
or diagnostic tool in a physicians office. There is a very high correlation between
the expertise or the biller and the ability to get reimbursed and the amount that you get
CEOCFO: What is the financial position at HDI today?
Mr. Schwartz: We are very close to profitability and
anticipate getting there this year. We are aggressively ramping up our sales team, so we
are putting people on who require some time to reach their level of productivity and
efficiency. Further, the company is well capitalized to meet its plan and objectives for
the next year.
CEOCFO: What about the production and are disposables a part
of your sales and revenue model?
Mr. Schwartz: We assemble the products in our office in
Eagan, MN and the components are manufactured to our specifications by third party
manufacturers. In terms of a disposable, the test is the disposable when you are on the
rental model. We charge $45.00, but we bring in the equipment to do the test, which is a
computer with our software, sensor, blood pressure cuff and printer. We set it up in the
physicians office, the printed reports, and the ink cartridges, we supply. If there
is a purchase involved, they can buy extended warranty protection.
CEOCFO: Can you explain the difference between hypertension
and high blood pressure?
Mr. Schwartz: One is a disease and one is a risk actor.
Hypertension is the beginning of cardiovascular disease and high blood pressure is just
that; it a reading above 120 over 85 at a given moment in time. It may be what is known as
white coat hypertension, which is something that may elevate your blood pressure level;
such as being late for the doctors appointment, couldnt get a parking space or
got a traffic ticket. What we have is a device that diagnoses the evidence of the disease
and allows the physician to treat the disease, not a risk factor. The reason why that is
important is that 50% of the people who have a heart attack or stroke, have normal blood
pressure, 120 over 85 and normal cholesterol and yet they experience these cardiac events.
Unfortunately, half of those cardiac events are fatal, so the diagnostic tools that the
physicians have today, the blood pressure cuff and the cholesterol tests, are missing 50%
of the people that actually will have a cardiac event. Our technology is able to pick up
those patients and we all have heard stories about people who are in excellent health and
suffered a heart attack. It is tragic; you take Bill Clinton, President of the United
States, who for eight years in the White House had his own personal physician and yet no
one picked-up that he had cardiovascular disease until he had a near heart attack and had
to go in for a coronary artery bypass graph. On top of that, three months latter he had to
go in and have it re-done. He had advanced stage cardio vascular disease; we should have
picked him up ten or twenty years ago and could have with our CVProfilor.
CEOCFO: Are you able to work with organizations such as the
American Society of Hypertension?
Mr. Schwartz: The American Society of Hypertension at
its annual meeting in May, pronounced a new definition of hypertension that went beyond
the blood pressure cut points, the 120 or 85. The idea is to begin to look at the vascular
components of the disease and the target organ damage and that is the beginning of closing
the gap between where the technology is and the marketplace coming together. They have
been the most progressive in terms of saying that it is not enough just to do a blood
pressure test; you have to understand the vascular health of the patient. Pfizer recently
did a study on a new drug called Caduet®, which used our technology and showed the
improvement in the vascular health. The fact that the largest pharmaceutical in the world
is beginning to incorporate this into clinical trials gives us another piece of evidence
that the gap is closing.
CEOCFO: What is ahead for HDI and why investors should be
Mr. Schwartz: We are on a very strong trajectory in
terms of our revenue growth and our earnings growth. Weve cracked the code on how to
take this technology that should be in everyones office and build it into a
successful business. Therefore, we can have an explosive growth rate in our revenues and
our earnings, and have a great impact for our investors. We view this as a great
opportunity to be joining HDI as an employee or coming in as an investor; we are at the
CEOCFO: In closing, what should people realize about the
company that might not come through when they first look?
Mr. Schwartz: I think the first thing people think of
is that our product should be in every physicians office and one day that will
happen. It is so obvious that everyone should want on of these tests. The question is,
why isnt it out there, and the answer is that we live in a system where
we dont have healthcare, we have sick care. The orientation of the insurance
companies is not towards prevention, but the orientation of the consumers is very much
towards prevention. There is a disconnect between what the medical system provides and
what the customers want. Eventually that dysfunction will correct itself and come into
alignment. Clearly, we will be the beneficiary of that
We can build the business to the point where the market has accepted it and then it
becomes a mass product. It is very similar to the Blackberry experience. I was involved
with the software company that provided the software for Remote Email Access. Seven years
ago they were marketing it to the big corporations, but nobody wanted to get emails via a
cell phone. The question then was, why would anyone want to do that, well
just log on and check our emails when we get home or, if we carry a laptopm when we get to
our hotel and can dial up. There wasnt a business opportunity then, so the company
had to position itself into a niche market, where the concept of emails going through a
wireless telephone made sense. They focused on the deaf and hard of hearing market, where
the text was the only way to use a cell phone. Eventually, the corporate market caught up
and people did want to check their emails remotely . We are exactly in that same phase; we
are going after the doctors who need this type of test and can appreciate this. The great
market opportunity is a few years ahead of us.
Any reproduction or further distribution of this
article without the express written consent of CEOCFOinterviews.com is prohibited.