Cable TV, technology spells gold for Kennedy

Tuesday, May 31, 2005

CLEARWATER, Fla. -- Before selling to Lincare in early April, Home Oxygen 2-U employed consumer advertising on cable TV to roll up an estimated (and eye-popping) 4,000 oxygen patients in just 18-24 months. Just as extraordinary, the company sold for between $30 million and $50 million, say industry watchers.
"I was astounded at how high the alleged numbers were in this short amount of time," said one industry insider. "Kennedy did it again."
Kennedy is Bill Kennedy, the man who founded Rotech and went on to create drug manufacturer Nephron Pharmaceutical. Kennedy and Lincare declined to comment for this story.
By advertising transfilling oxygen concentrators by Invacare (Venture HomeFill) and Chad Therapeutics (Total O2) on cable TV, Kennedy and his network appear to have tapped the desire by respiratory patients for increased freedom and portability. The HomeFill and Total O2 allow patients to fill lightweight cylinders at home, making it unnecessary for them to wait around the house for a provider to deliver portable tanks.
"I talk to people all the time who say they can steal market share by offering technology," said another industry watcher. "It's not so much newer and higher tech. It is something that has some appeal to a patient."
For example, he said, liquid oxygen is not new technology, but because of the expenses involved, many providers don't offer it. For providers who do offer it, much of their business comes from word of mouth. When it comes to ambulating, many patients and physicians still feel liquid oxygen is superior to gas.
"If someone wants liquid they are going to get it," the source said.
Most industry watchers surmise Home Oxygen 2-U built its business by luring patients away from providers who do not offer the HomeFill. Providers who do offer it report that they lost few if any patients to Kennedy's venture.
"We're not going to lose a patient over it," said Mark Hanley, president of O2 Science in Tempe., Ariz. "We're doing HomeFill units and that is probably why (Kennedy) didn't come into our market." HME