Red Bag captures $ in toxic waste
by Urvaksh Karkaria , Staff Writer - Atlanta Business Chronicle
Friday, August 12, 2011
Don Millard: Red Bag will use the Fulcrum money, invested over 12 months, to commercialize the ozone-based sterilization technology and grow sales and marketing.
An Atlanta company is developing a technology that uses ozone to sterilize dangerous medical waste and reduce the need for toxic landfills.
Red Bag Solutions Inc. has developed a system that grinds medical waste, such as syringes, needles and disposal medical devices used in surgery. The company then uses ozone to “cook” or sterilize the waste material.
“Ozone is a natural sterilization agent,” Red Bag CEO Don Millard said. “It’s been used for years to purify water and in commercial laundries to clean clothes.”
The Red Bag system is also able to separate and recycle metals, plastics, paper, glass and woven materials from the medical waste.
Red Bag has raised $3 million in commitments from Fulcrum Equity Partners Inc. The Atlanta-based growth equity firm is raising an up to $100 million fund.
“Medical waste is a big problem for the health-care industry,” Fulcrum co-founder and partner Jeff Muir said. “Red Bag has a ... green solution that is also cost-effective.”
Fulcrum, which invests in health-care services and information technology companies, brings more than dollars to Red Bag — it can open doors to potential customers.
“We believe we can introduce [Red Bag] to hospitals and major medical centers and help them get some sales traction,” Muir said.
Selling into health systems is a challenge and typically requires a long sales cycle, Muir said. Getting the hospitals to change the way they’ve been handling medical waste management could also be an issue. Medical waste management is not a core function of the hospital, nor is it a major expense line item for a hospital, Muir said.
Launched in 2003, Red Bag is profitable. Millard declined to disclose financial details, but said revenues are between $5 million and $10 million.
Red Bag will use the Fulcrum money, invested over 12 months, to commercialize the ozone-based sterilization technology and grow sales and marketing.
Red Bag’s current system, which uses steam to sterilize the waste, is marketed to hospitals, biotechs and pharmaceutical companies. The hardware includes a 4-foot high, 3,500 pound tank, and an accompanying 350 pound filter-separator, used to dry out the processed solids.
By exposing infectious medical waste to superheated water and steam (272°F) and simultaneously using a proprietary cutting system, the Red Bag system renders infectious medical waste noninfectious, nonhazardous and nonrecognizable. The processed medical waste can then be discarded as ordinary municipal trash.
Red Bag’s new system replaces steam with ozone as the sterilizing agent. Ozone is made naturally in the upper atmosphere by sunlight and by electric discharge from lightning in the lower atmosphere.
Ozone is the most powerful available oxidant and can destroy contaminants, such as bacteria and viruses that mutate and become resistant to antibiotics, said Ron Larocque, a consultant to Red Bag and president of Ozocan Corp., which make ozone-generation devices.
“Bacteria or virus cannot mutate to protect themselves from ozone, except by growing a thicker and thicker skin,” Larocque said. “All that means is, it just takes a little bit more ozone and time to oxidize the thicker skin.”
The Red Bag system’s process of sterilizing pathogens — organisms known to cause disease — with ozone is unique, Larocque said. The device can be programmed to use the appropriate amount of ozone, for the appropriate length of time, to sterilize the waste based on the mix of pathogenic contaminants
Ozone-based sterilization is not only green, it saves greenbacks.
Sterilizing medical waste with ozone is about 20 percent to 40 percent less expensive than incineration or dumping in special landfills, designed to securely store biohazardous materials, Millard said.
It’s even cheaper than using steam, since it eliminates the cost to heat water. The ozone system costs about 20 percent to 25 percent less and is 25 percent to 33 percent faster than the steam-based approach, Millard said.
While Red Bag sells the hardware, Millard said, most customers prefer to have the company install the device and process the waste on-site for a fee.
Sterilizing the waste on the customer site, instead of hauling it off to a processing facility, has advantages, Millard said.
“Whenever anything leaves the hospital,” he said, “you can have an issue of lost patient confidentiality or contamination.”
Medical waste disposal is a $3 billion annual business in the United States, and growing about 5 percent each year.
Stericycle Inc (Nasdaq: SRCL) has about 50 percent market share, with the rest fought over among several smaller players.
As the population ages and surgical techniques improve, medical procedures and surgeries are increasing, driving up the amount of medical waste generated. Increased regulation surrounding patient records is also driving demand for secure document destruction.
Medical waste that can’t be sterilized must be incinerated or stored in special landfills, which are difficult to get approval to develop, Millard said, because “those are not things people want in their backyard.”
“You’re having a reduction in the number of landfills that people can put [medical waste] in,” he said. “So, that’s creating an opportunity for us.”