Morningstar | Coloplast's steady stream of innovation has allowed the narrow-moat firm to gain market share.
Based in Denmark, Coloplast is a leader in the global ostomy and continence-care arena. The firm has made inroads into the concentrated urology and fragmented wound-care markets, but it remains a peripheral player there. We think Coloplast has dug itself a narrow moat thanks to consistent innovation in ostomy and continence care that has led to a dominant position in Europe. Since 2008, the firm has done an admirable job of trimming its cost structure as it focused on profitable growth. As a result of shifting the majority of its production to Hungary and China, Coloplast now enjoys gross margin that beats that of rival ConvaTec by 1,600 basis points. Now, Coloplast is altering its emphasis to enhance growth by entering new geographies and taking advantage of cross-selling opportunities. We think Coloplast's urology segment may offer growth potential, as there are attractive cross-selling opportunities to introduce female pelvic slings, kidney stone management products, and inflatable penile implants to the underpenetrated European market. While Coloplast remains a smaller competitor in this area (with an estimated 5%-10% global share), especially compared with giants like Boston Scientific and Johnson & Johnson, we think its outsize footprint in the European ostomy and continence markets should give its urological expansion a leg up in this geography. We are less keen on Coloplast's wound-care segment, where competitive product launches abound. Perhaps more important, we are concerned that Coloplast's limited wound-care portfolio--mainly foam dressings--is on the lower-tech end of the spectrum, leaving the firm more vulnerable as advanced wound care has moved toward negative-pressure wound therapy and hydrofiber products. Without greater breadth in its wound-care portfolio, Coloplast faces the march of commodification from manufacturers of lower-tech dressings. Additionally, the majority of wound-care products are sold to providers (versus directly to patients themselves), which means there is greater pricing pressure from group purchasing organizations and government bidding processes.Coloplast is a supplier of intimate healthcare products and services. Co. develops and markets products that support people with diseases of a private nature. Co. operates in three business areas: Ostomy care, products for people whose intestinal outlet has been rerouted through the abdominal wall; Urology and continence care products, for people suffering from diseases of the kidneys, the urinary system and the male reproductive system; Dressings, for the treatment of chronic wounds and skin care products for prevention and treatment. Co. markets and sells its products and services globally. Co. supplies products to hospitals, institutions as well as wholesalers and retailers.
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