{ "docId": "019dd923-622c-750b-8b98-be9011f05a27", "docSlug": "1cbf7684bf7d", "documentTitle": "Penumbra, Inc. (PEN)", "authorId": "54_Spruce_Point_Capital", "authorName": "Spruce Point Capital Management", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2019-07-31 00:00:00", "orientation": "landscape", "aspectRatio": 1.3333334, "pageNumber": 38, "pageCount": 61, "prevPage": 37, "nextPage": 39, "slideType": "testimonial", "function": "expose_contradiction", "density": "overcrowded", "nDataPoints": 0, "notes": "The slide uses testimonials to frame a competitive disadvantage for the subject company (Penumbra) regarding pricing power and bundling capabilities.", "elementsJson": [ "headline_text", "paragraph", "callout_box" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b98-be9011f05a27/38", "deckHref": "/decks/019dd923-622c-750b-8b98-be9011f05a27", "deckJsonHref": "/decks/019dd923-622c-750b-8b98-be9011f05a27.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b98-be9011f05a27#slide-38", "components": [ { "bbox": { "h": 0.06, "w": 0.96, "x": 0.02, "y": 0.91 }, "kind": "callout", "text": "Penumbra, meanwhile, would not be able to analogously take stent retriever share by lowering its stent retriever prices due to widespread disdain for its stent retrievers.", "attrs": null, "subkind": "primary", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "9521c7f7-f96b-420f-bf98-33cbc6b963e2", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "callout", "text": "Discounted bundling by deep-pocketed medical device companies poses a powerful risk to industry pricing: assuming that its near-term stent retriever market share projections are correct, Medtronic, whose stent retriever has dominant share, is widely regarded as the industry's gold standard, can effectively give away its aspiration catheters for free and still grow profit dollars into FY19, without even assuming any market share gains in the stent retriever space.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-64d2-7657-bbde-d11adb875151", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.9, "x": 0.05, "y": 0.17 }, "kind": "paragraph", "text": "According to doctors with whom we spoke throughout our diligence, product bundling has grown increasingly common in the mechanical thrombectomy space...", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "3df4ad39-056d-4168-9e2c-ffe6d9e7cd42", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.48, "x": 0.51, "y": 0.67 }, "kind": "quote", "text": "\"Penumbra's stent retriever is definitely inferior. And its strategy of bundling a low-cost stent retriever with its aspiration catheters is not working. Others are already at price parity, so it doesn't really matter anyways.\" - Neurosurgeon", "attrs": null, "subkind": "testimonial", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "0cf5367e-60e2-4b93-967a-a5c613ca5449", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.25, "w": 0.48, "x": 0.51, "y": 0.41 }, "kind": "quote", "text": "\"The primary competitive advantage that Medtronic has over Penumbra is its company size and its ability to bundle its products across service lines and offer volume discounts to hospitals. From a pricing standpoint, Medtronic can be more aggressive than Penumbra or Terumo. Penumbra shouldn't rest on its laurels. It should make them nervous if Medtronic has painted a bulls-eye on them. Medtronic is a behemoth of a company that can flex its economic muscles -- it can bundle product and give rebates. Medtronic has great ways to encourage hospitals to use their products. Our hospital has a contract with Medtronic. [Us doctors] are always being pushed by hospital administration to use more Medtronic because of the greater rebates being offered. As more companies develop aspiration technology there will be more price competition.\" - Surgeon", "attrs": null, "subkind": "testimonial", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "6749b0dd-5464-4e64-8075-12a96c8b09de", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.48, "x": 0.02, "y": 0.67 }, "kind": "quote", "text": "\"From a cost perspective, it is cheaper for us to use Medtronic. To go back to Penumbra, I would have to see a significant improvement in performance. I really don't think the pump is the distinguishing feature. Each company will now give you their pump for free. A few years ago when there was no competition, you had to buy the pump from Penumbra.\" - Neurosurgeon", "attrs": null, "subkind": "testimonial", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "7497196f-f78a-4d86-a4be-f3d7df59f0ed", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.25, "w": 0.48, "x": 0.02, "y": 0.41 }, "kind": "quote", "text": "[Medtronic] is saying – the intermediate aspiration catheter, the React – the microcatheter, the Phenom 27 – and then the stent retriever, and the wire, the Asahi wire...let's bundle all of this. The list price of all of this when you put it all together is $14,000 or $15,000. 'So we're going to give you a bundling discount, and let's now bring it down to $12,000. So if you use all of this together, and we're going to give you a discount to $12,000.' Well, if the doctors are using it already and like their products, then that's attractive to the hospital - it becomes very palatable to use this combination of bundling and so forth. So I think it's a sales tactic - it's a tactic of 'you win, we win.'\" - Neurosurgeon", "attrs": null, "subkind": "testimonial", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "9dbe08b8-ed79-4c1e-b4b6-0e0cd5e0add1", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "[Medtronic] is saying - the intermediate aspiration catheter, the React - the microcatheter, the Phenom 27 - and then the stent retriever, and the wire, the Asahi wire...let's bundle all of this. The list price of all of this when you put it all together is $14,000 or $15,000. 'So we're going to give you a bundling discount, and let's now bring it down to $12,000. So if you use all of this together, and we're going to give you a discount to $12,000.' Well, if the doctors are using it already and like their products, then that's attractive to the hospital - it becomes very palatable to use this combination of bundling and so forth. So I think that it's a sales tactic - it's a tactic of 'you win, we win.' — Neurosurgeon. From a cost perspective, it is cheaper for us to use Medtronic. To go back to Penumbra, I would have to see a significant improvement in performance. I really don't think the pump is the distinguishing feature. Each company will now give you their pump for free. A few years ago when there was no competition, you had to buy the pump from Penumbra. — Neurosurgeon. The primary competitive advantage that Medtronic has over Penumbra is its company size and its ability to bundle its products across service lines and offer volume discounts to hospitals. From a pricing standpoint, Medtronic can be more aggressive than Penumbra or Terumo. Penumbra shouldn't rest on its laurels. It should make them nervous if Medtronic has painted a bulls-eye on them. Medtronic is a behemoth of a company that can flex its economic muscles -- it can bundle product and give rebates. Medtronic has great ways to encourage hospitals to use their products. Our hospital has a contract with Medtronic. [Us doctors] are always being pushed by hospital administration to use more Medtronic because of the greater rebates being offered. As more companies develop aspiration technology there will be more price competition. — Surgeon. Penumbra's stent retriever is definitely inferior. And its strategy of bundling a low-cost stent retriever with its aspiration catheters is not working. Others are already at price parity, so it doesn't really matter anyways. — Neurosurgeon", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd953-64d2-7657-bbde-d581547ae783", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.65, "x": 0.31, "y": 0.03 }, "kind": "title", "text": "Discounted Bundling By Deep-Pocketed Mega-Cap Competitors Threatens Industry Pricing", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "e7ffcd8b-9e27-4050-a3ee-8551102eaa83", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [], "arcBeats": [ { "to": 61, "from": 31, "beatId": "12d3c67f-b91e-48ff-a8d3-c9685144b586", "arcName": "Overcoming the Monster", "arcSlug": "overcoming-monster", "beatName": "The Victory", "beatSlug": "overcoming-monster-the-victory", "evidence": "The document presents Spruce Point's conclusion of 40-55% downside risk in PEN shares.", "position": 2, "confidence": 0.8, "parentBeatName": "Turn", "parentBeatSlug": "turn" } ], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }