Sabratek Corporation

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Sabratek Corporation

8111 North St. Louis Avenue
Skokie, Illinois 60076
U.S.A.
(847) 720-2400
Web site: http://www.sabratek.com

Public Company
Incorporated: 1989
Employees: 382
Sales: $67 million (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: SBTK
NAIC: 334510 Electromedical & Electrotherapeutic Apparatus Manufacturing

Sabratek Corporation designs and manufactures therapeutic and diagnostic medical systems and products for the alternative site health care market. The company believes that all of its current and future products will facilitate the creation of a “virtual” hospital room, where a wide range of care that was provided previously within the acute care and intensive ward setting will soon be provided by alternative site providers. With this purpose as its overall strategy, the company makes such items as multitherapy infusion devices, prefilled flush syringe products, portable diagnostic devices, ambulatory patient monitors, and it also provides remote programming software and other capabilities that allow for care givers to deliver high-quality, cost-effective health care services in alternative sites. One of Sabratek’s most important products in the creation of a virtual hospital room is MediVIEW, a remote programming, monitoring, and data gathering software system that enables health care providers to monitor a patient’s clinical status from remote locations over regular telephone lines. Since 1996, the company has focused on forming strategic partnerships and alliances that enhance its own position in the highly competitive stationary and ambulatory pump products market. Although Abbot Laboratories and Baxter International, Inc. are just two of the larger firms with which Sabratek competes, company management is confident that its products point in the direction where health care services are going in the future.

Early History

One of the founders and the driving force behind Sabratek is K. Shan Padda, one of the more accomplished men of his generation, and one of the most unusual. Padda was born into an East Asian family that immigrated to the United States. Padda’s father and mother had always been interested in providing a good education for their children, and Padda received the best that his parents could afford. But the one thing that made Padda stand out from his fellow students and other people his own age was his ambition and business savvy, which is an unusual combination in such a young person. By the time Padda was 25 years of age, he already had launched two highly successful business ventures, arranging for their financing and managing them for the short term.

As with most young men, however, Padda was bored with a lack of challenge. The two businesses that he had started were apparently so easy for him that he quickly sold both of them as soon as they were financially stable and viable firms. Then, seemingly out of character, he traveled around the Pacific Rim for an entire year, visiting China, Malaysia, Thailand, and other Southeast Asian countries. Many people who knew him professionally speculated as to the reason why he had embarked on such a long and faraway holiday. Some financial analysts surmised that he was storing up his energy to begin another start-up venture when he returned to the United States. Others thought Padda was searching for business opportunities in the areas where he was traveling. But the truth, as it turned out, was much more simple and straightforward. Upon his return, the young man reiterated why he sold his first two companies and gave boredom as the reason for his lengthy vacation. Padda had grown bored with what he had been doing up to that time and, consequently, he decided to take a break.

When he set foot back in the United States, he immediately reevaluated what he had been doing previously and what he would do different the next time around. Padda was certain that he was not interested in starting a software company or a medical device company, for example. Not knowing what to do, he felt anxious about his future. Yet the young man was supremely confident in his ability to listen to people and what they needed and to be creative and flexible enough to provide efficient solutions that would meet those needs. Most important, when he started a new business this time, Padda wanted whatever it was to help people.

As sometimes happens in life, Padda met Doron Levitas, another entrepreneur searching for an idea to which he could commit. Levitas and Padda entered into discussions about the state of health care in the United States, and how much it cost, and soon decided to provide a viable solution to the problem of long-term health care. The two men had listened to people within the health care industry and learned that approximately 70 percent of all medical costs are due to labor. The problem with which they were faced came down to the following question: How is it possible to maintain quality health care service while reducing the amount of labor involved in providing that service at the same time?

To find an answer, Padda and Levitas devoted the entire first year of their partnership to interviewing a host of CEOs, nurses, doctors, hospital administrators, people at HMOs, insurance companies, and numerous other health care providers. They asked the interviewees to explain to them exactly what they needed, regardless of the cost. The answers surprised the two men. They were told that the services already provided within a hospital setting were ideal, but that costs for such services were skyrocketing out of control, consequently, many hospitals were forced to reduce the amount of health care services provided to their patients. If alternative site health care could be provided to patients, which essentially recreated all of the services and functions of a hospital, yet was able to maintain a high level of medical personnel contact with patients, monitor patient compliance with prescribed therapies, and determine future variations in treatment and therapies to combat the patient’s disease, then costs could be reduced without affecting the quality of health care provided.

Growth and Expansion in the 1990s

Padda and his partner took these suggestions to heart and began to create a company that addressed the rising costs of health care in the United States by promoting the concept of the “virtual hospital room.” Incorporating Sabratek Corporation in 1989, the two ambitious entrepreneurs found themselves with one of the most formidable challenges any businessman has ever faced, namely, devising a strategy to change the way health care is delivered in the United States. Managed care companies, employers, government agencies, indemnity insurers, and the medical profession itself were all employing a number of different strategies to contain health care expenditures. Yet their overriding concern was to maintain the high quality of health care services provided to patients, which led to a general reluctance or suspicion about the alternative site health care industry.

Sabratek Corporation appeared on the scene at precisely the moment when the alternative site health care industry was just beginning to grow. The delivery of respiratory therapy, pharmaceutical therapies, intravenous infusion, physical therapy, and skilled nursing services in outpatient centers, in long-term care facilities, and in the home had grown substantially during the entire decade of the 1980s. Between 1980 and 1990, the expenditure for alternative site health care services had grown from $11 billion to $24 billion, indicating that alternative site settings were more and more accepted as critical components in cost-effective medical care strategies. One of the most important ingredients of this movement was the development of highly sophisticated medical technology that facilitated the provision of quality health care services outside the hospital setting. With such technology, the medical profession discovered that diseases that ordinarily necessitated traditional acute care hospital settings, such as neurological conditions, infectious diseases, AIDS-related symptoms, digestive disorders, and various forms of cancer, were able to be treated in alternative site settings, most notably the patient’s own home.

Padda and Levitas recognized that infusion therapy was one of the most important components of providing alternative site health care services and, therefore, began to develop and manufacture sophisticated infusion pumps as the core of Sabratek’s business. Infusion therapy involves a patient being administered and receiving fluid intravenously at a regulated volume and rate. Employed in a wide range of applications, including pain management, the delivery of antibiotics, chemotherapy, and nutrition therapy just to name a few, infusion therapy soon became one of the fastest growing components of the alternative site health care industry. Since all of these therapies require highly specialized infusion pumps to provide patients with extremely precise dosages of the fluid needed, Sabratek Corporation developed its own stationary multitherapy infusion pump for use in a wide variety of infusion therapies. The pump incorporated preprogramming capabilities, multiple language capabilities, remote communications capacities, and a relatively easy-to-learn format. Using this infusion pump as its flagship product, Sabratek Corporation was able to sell millions worth within the first year of its introduction.

Company Perspectives:

Our corporate logo, the desert cactus, is the perfect representation of Sabratek’s vision and what it means for our customers, our employees and our stockholders. The cactus thrives by successfully adapting in a difficult and changing environment and by making the most of its resources. And, in doing so, it produces a beautiful and useful result. A similar result for health care has been the focus of Sabratek’s efforts since we began manufacturing technologically advanced medical devices.... Our goal is a model of seamless, innovative efficiency that expands health care access while maintaining and even improving the quality of care. This model provides health care systems with the necessary resources and efficiencies to adapt and thrive in today’s challenging health care environment.

Additional products were developed and manufactured by Sabratek Corporation at a rapid pace, including: MediVIEW, a remote programming, monitoring, and reporting software system that operates over regular telephone lines; PumpMaster, a portable device designed to provide diagnostic tests on the company’s own infusion pumps; Stat-Site System, a portable, hand-held system that provides immediate diagnostic blood testing; Ambulatory Patient Monitor 2000, a monitor that measures a patient’s temperature, pulse rate, heart rate, respiratory rate, and other vital signs; and Virtual Hospital Room Communicator, a miniature computer with eight communications ports that a care giver uses to plug in a host of different mechanical devices to monitor a patient’s health.

At the same time, the company was forming strategic partnerships and collaborations that enhanced its market position. In November of 1998 Sabratek entered into a software licensing and marketing agreement with Healthmagic, Inc., a firm that develops information management tools by employing intranet technology so that medical personnel can access essential information regarding a patient regardless of the location. Other partnerships included an agreement with Unitron Medical Communications, the developer of MOON, a unique clinical patient information management network; an agreement with GDS, a medical device company that specializes in point-of-care diagnostic testing equipment; and a collaboration with Healthcare, L.L.C., a firm that provides consulting services for supply chain management of integrated health care delivery networks. In addition to these strategic partnerships, Sabratek acquired CMS Healthcare, a company that provides utilization management services.

The company faces daunting competition from such behemoths as Smiths Industries, pic, Abbott Laboratories, Baxter International, and McGaw Inc., but the leadership of Padda and Levitas is astute enough to develop Sabratek into a player within the field of alternative site medical equipment. The company’s sales figures jumped 55 percent in 1998 over the previous year, which indicates that the two ambitious and talented entrepreneurs know how to build a viable business.