I hope today’s discussion (as opposed to yesterday’s) is less  emblematic of the joint ventures we just arranged.

Back in 1984, when we first spun off and started Bicarbolyte, we offered a most unique product to the dialysis industry.  And, because it was unique, we wanted to sell it in a unique fashion.  (We sold our product per treatment, not per gallon.)

And, when we started this venture in May 1984, there were 8 of us. (Admittedly, all of us were part-timers, at the start.)  Every one of us was a techie.  I had grown up in dialysis (OK, at least from age 8), so I knew most of the folks in the industry.  Which let me- as a techie- be a fairly effective salesperson.  I had the trust of the industry, so, if they were in the least bit intrigued to offer a better treatment for their patients, I could probably close the sale.

Which would explain how our start-up managed to attain a $ 2 million sales rate by the end of 1984. (Assuming everyone would use our product- an unrealistic proposition but within our aspirations- our sales would have been about $ 50 million a year back then.)

So, it wasn’t surprising that one of the then three big firms in dialysis (CD Medical) approached us in early December to set up a joint venture.  (By this time, none of us were part-time.  We all took leave of the firm from which we were spun.)  CD Medical wanted to add our product to their offerings.  And, this firm was doing about $ 50 million in dialysis industry sales (about ½ its total sales), with 10 or 12 sales folks covering the US marketplace.

We were somewhat trepidatious.  After all, we were offering a new product concept with a unique sales proposition.  We didn’t think this company would adhere to our standards.  But, they kept chugging at the proposition.

Eventually Steve Meyers and I (COO and CEO, respectively) were brought around and a deal was struck. We would train their sales persons and provide them product at a reduced rate so they could resell it to their customers.  And, our initial deal was inked for a 6 month test program.

As they learned, it did take a unique process to convince customers to switch to our product.  Sure, they knew it was better than what they were using for their patients now.  But, it also added 25 cents to the per treatment costs.   (Maybe now is a good time to remind you that the government covers most of the costs of dialysis, now for ½ million folks- and the per treatment price has been fairly stable for nearly 40 years.  So, 25 cents can be a tremendous impediment to adopting our offering.  Eventually, our cost differential was all of 2 cents.)

Five months into the pilot, CD’s sales were running at a $ ¼ million rate.   And, they were psyched.

On the other hand, our sales were more than 12 X higher and we weren’t.  They had 10 salespersons and we had maybe 1.  It was clear to us that they might have elevated product awareness, but their results were slackish, at best.

So, when they approached us to renew for another 6 month period, we begged off.  We thanked them for their interest, but we could make more money without sharing our product with them.

The key point is we left as friends.  They didn’t fail in their mind- we just had much different aspirations. And, the end result is that we hired a young man (keep in mind that back then, I was all of 34- as was Steve) that we could train and send out as a salesperson.    And, CD still recommended our product for their customers (because there were less problems with their equipment if our products were part of the regimen).

Not quite a win-win.  But certainly not win-lose.

In the recent joint venture case, it’s clear the bigger firm will generate some $ 1 billion in sales over the first year, the smaller firm will gain prestige and about $ 200 million in sales.  But, the smaller firm will then be able to ramp up production of this and every other of its projected products, with that added capital.

We’ll see if it’s a win-win or or win-not lose soon enough.