Profitability
Truvale Medical's pediatric infusion-set line has quietly gone from its best margin to its worst — find where the margin went and size the recovery.
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Truvale Medical sells insulin pumps and the infusion sets that connect them. Revenue is $42M a year: pumps $16.8M, adult infusion sets $19.3M, and pediatric infusion sets $5.9M. The pediatric line matters beyond its size: it wins the family accounts, and families stay with the pump brand for years, which pulls through adult sets and pump upgrades.
Two years ago the pediatric line earned a 52% gross margin, the best in the company. Last year it earned 41%, the worst, and the finance team's first suspect, price increases on raw resin, does not survive contact with the data: resin cost inflation added about 2 points to every set line equally, and the adult line's margin has not moved. Meanwhile the pediatric catalog has grown from 5 to 12 stock-keeping units (colors, tubing lengths, and a preemie variant), because the sales team says every hospital group wants its own configuration, and the production scheduler's changeover board has gone from a whiteboard to a wall.
The COO wants a diagnosis and a recovery plan that does not involve raising prices, cutting the preemie variant (a reputational line), or fighting the sales team head-on. You advise the COO.
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