Editor’s Note I: “This is a different kind of newsletter. It is news that celebrates the sense of community, the effort for society, love for others, the certainty that when we come together, we can do a lot and do it very well. It is news that celebrates science, life, and Brazil. In this edition, we will remember the 5 years of Covid-19, a painful period in the history of humanity, which unfortunately claimed the lives of more than 7 million people worldwide and 700,000 in Brazil between 2020 and 2023. Let us remember it as a way of renewing our perception of solidarity, overcoming, and affection. Join us in this reflection, full of empathy.”

The day was February 26, 2020. Radio and television stations, news portals, digital influencers, and newspapers turned their microphones, pens, cameras, and papers toward the then Minister of Health, Luiz Henrique Mandetta. The minister had something important to say: a 61-year-old man, who had just returned from a trip to Italy, was announced as the first official case of Covid-19 in Brazil.

Although everything was done with sobriety, trying to reassure the population, the fact is that, in Europe, Asia and North America, the signs were contrary to the calm tone adopted. Cases were increasing across the planet and clearly indicated: difficult times were on the way. In every sense. The population began to come into contact with expressions that required a Portuguese/English dictionary at hand, because names like “lockdown”, “SARS” and the name of the disease itself “COVID” dominated WhatsApp groups and social networks, practices considered safe, because distancing from each other was necessary.

Mandetta speaking about the COVID-19 pandemic. (Photo: Carolina Antunes/PR)

Editor’s Note II: SARS stands for Severe Acute Respiratory Syndrome; Lockdown was the expression used to decree the closure of schools, businesses, and activities in general; Covid stands for Corona Virus Disease, that is, Disease Caused by the Corona virus.

But at that point, in addition to becoming familiar with the expressions, there was a big question mark in the scientific community. Potential for transmission? How to effectively protect oneself? Little was known compared to the doubts at hand.

What we knew perfectly well was that this was no joke. It was very serious. Worrying.

“It was the end of February, and we were still debating the effect of the coronavirus in China and its economic impact throughout the world. Two weeks later, everything changed. The debate was already much more serious: global lockdown. And, we all began to realize that we were going through an overwhelming moment that would leave its mark on humanity,” recalls Gustavo Junqueira, partner at venture capital firm KPTL.

Empty streets of Rio de Janeiro due to the pandemic.

So much so that, practically a month after the announcement of the first confirmed case in the country, the Federal Senate unanimously approved, in a remote vote (something unprecedented at that time), the legislative decree that established the State of Public Calamity in Brazil due to the pandemic. From then on, like a domino effect, several states and cities closed businesses and put an end to face-to-face activities, such as classes in schools, universities and concerts, to avoid crowds and, thus, increase the risk of contagion.

It was Friday, March 20, 2020.

Pulmonary Ventilators, Part I

From that point on, March 2020, the world began to turn over several times a day. You may remember the discussions about whether the virus was more contagious in the Northern Hemisphere than in the Southern Hemisphere, about the use of masks, alcohol gel, oxygen, chloroquine, seamstresses making masks everywhere, the lack of toilet paper, people stockpiling supplies to the rafters, the parallel market for Covid-19 tests, the insane search for 70% liquid alcohol and the challenge of finding solid solutions, such as the race to develop vaccines.

Several entrepreneurs racked their brains to produce medical equipment in record time to care for Covid-19 victims. One of these devices became emblematic at the beginning of the pandemic: pulmonary ventilators.

Essential for helping hospitalized patients in serious condition, who were appearing in droves in Brazil and around the world, there was not enough equipment to care for everyone who required this care at the time.

This has a name. It is called chaos. It is sad to say, but it needs to be pointed out precisely.

It was then that a medical startup, headquartered in Cotia, a city in Greater São Paulo, entered the game in Brazil. Its name? Magnamed.

New pulmonary ventilators from Magnamed. (Photo: Rodrigo Paiva)

But before it began to become one of the lifelines when it came to ventilators in the country, the company controlled by three businessmen linked to the Japanese community in Brazil – Tatsuo Suzuki, Toru Kinjo and Wataru Ueda -, which had as partners the National Bank for Economic and Social Development (BNDES) through the Criatec I fund, managed by KPTL, went through difficult times. Its plant, in Cotia, received a “visit” from representatives of the city government on March 27, 2020, who decided to take 35 pieces of equipment under the claim that they needed to supply medical centers in the city. The case ended up in court and the ventilators were returned to the company.

Tatsuo Suzuki, Wataru Ueda, and Toru Kinjo, partners at Magnamed. (Photo: Ilana Bar)

Chaos.

This movement alone gave an exact idea of ​​what was to come. Disputes, lawsuits, and a mission from the federal government: to produce more than 5 thousand pulmonary ventilators to meet part of the demand in Brazil.

Call on Zap

But between the execution of the federal government’s order and the idea that it could be done – with chaos always lurking – technology took on the role of the MVP. Let me explain.

In April 2020, less than a month after Friday, March 20 and almost two months after the first officially registered case in Brazil, Magnamed received an (almost) impossible mission. The federal government signed a contract with some manufacturers of pulmonary ventilators in the country. And, the goal was clear: together, these companies would have to supply 15 thousand pieces of equipment within the best possible time frame “for yesterday” style. In other words, by the end of the third quarter of 2020.

Chaos?

However, the comma is in the details. That’s right. These companies would have to make weekly deliveries of equipment until each one reached its quota. Do you see the challenge? It’s not a six-month deadline. It’s like: keep making it and keep delivering it to me.

Chaos. !

Cut to Magnamed.

The company’s part was the largest. Initially, the agreement with the Ministry of Health was to deliver 6,500 devices to the Unified Health System (SUS). Later, the demand was calibrated by the federal government and dropped to 5,060. But even so, it was equipment that never ends.

Magnamed assembly line. (Photo: Rodrigo Paiva)

But there’s a catch to this whole story. Magnamed manufactured 150 devices per month. In other words, it would need to multiply its capacity by about 35 times at the end of this whole story. Because in practice, it meant increasing production to 2,000 pieces per month. Easy? Far from it.

Well, when it “accepted” the challenge – because, let’s face it, was there any room for it not to? Of course not! -, the company contacted the suppliers to see if they could deliver a larger volume than usual. And, as expected, it realized that its day-to-day partners would not be able to take on the whole undertaking alone. After all, it was like so many ventilators, and the race for parts was global, not just in Brazil.

But that’s where the wonder of “networking” and technology comes in. There was a “zap” group that had very refined, elegant, and sincere people. Jokes aside, “good” people.

The zap group brought together students who graduated from the renowned Instituto Tecnológico de Aeronáutica (ITA), in São José dos Campos (SP). Well, if you’re around 40 years old, you must remember how “tough” it was to pass the entrance exam for this university.

Wataru Ueda, one of the three founders of Magnamed, is a graduate of the institution – class of 1982 – and was obviously part of this group. He soon called on WhatsApp and told everyone about the Herculean challenge that Magnamed was facing. His friend Walter Schalka, then president of Suzano (read more in the 3 Questions for… section), decided to collaborate by contacting the network of representatives of the pulp company abroad to find more suppliers. And from then on, the support network only grew.

The magic, in fact, happened. Klabin was responsible for managing the purchases and import of components, in addition to providing all the packaging necessary for transporting the devices; General Motors (GM) helped to readjust the Magnamed assembly line in Cotia; Embraer, in a friendly manner, charged only the cost of the raw material used to machine steel parts over a weekend, while Positivo called its contacts to find the components needed for the ventilator control board. And, the gas manufacturer White Martins, in turn, supplied the oxygen to test the equipment.

Voilà… Brazil began to breathe with more hope.

Pulmonary Ventilators, Part II

So far, everyone was in line. Messages to one side, messages to the other, but something very sweet was missing: a lot of money to finance the purchase of materials needed for production.

In this regard, once again the partnership with Suzano was crucial. One of the largest pulp manufacturers in the world lent BRL 10 million – interest-free and with 45 days to pay – to Magnamed. BV (formerly Banco Votorantim) granted a BRL 20 million loan without guarantee, as part of a program by the institution to support national ventilators companies during the pandemic. In addition, the Ministry of Health advanced BRL 129 million of the BRL 322.5 million forecasted in the contract signed with the company, which increased the company’s breathing space to accelerate production.

Here’s a side note. This advance from the Ministry of Health only reached Magnamed’s account quickly because BTG Pactual granted the letter of guarantee. From then on, it was bingo.

With the network of partners in place and money in hand, one of Magnamed’s roles, in addition to production itself, was to coordinate the entire process, which required outstanding management and leadership skills. Imagine the work!

“While our partners distributed activities among several employees, Magnamed had a significantly smaller multifunctional team, which needed to guide the teams and at the same time be involved in the execution. Overcoming this phase was possible thanks to directing the right people to the right places, regardless of their previous roles, who gave their best, respecting the company’s principles and values,” says Neusa. “Adjustments to processes were also necessary to increase productivity, and documents needed to be created or revised. Agility was essential and, once again, teamwork ensured that these activities were completed in a satisfactory timeframe, ensuring the standardization of processes and the delivery of the product safely and effectively,” adds Neusa. The industrial and management structure that Magnamed already had was essential for the success of emergency production. Without it, things would have gone wrong. There was a lot going on at the same time now.

Magnamed team preparing products for distribution. (Photo: Rodrigo Paiva)

But, do you know when everyone is aware of what they have to do and the company has very well-defined documents and processes? Well, it was this foundation that allowed us to make the double twist during the pandemic.

“This exponential growth in operations was only possible thanks to the solid quality system that supports us at every stage, ensuring standardization and efficiency in production,” explains Taís Alves, Production Manager at Magnamed. “We had practical manuals, and a ventilator designed to be robust and with high-performance, without complex obstacles in terms of parts and assembly. With the support of partners, we were able to train teams, qualify professionals and safely scale our production in a very short time,” recalls Taís. “In about 90 days after the project began, we expanded our operations, adopting extra shifts in our factory and implementing a large operation at Flextronics,” she recalls.

A Breath of Venture Capital

Gustavo Junqueira, partner at KPTL – the first institutional investor in Magnamed since 2008 – sums up this story in one sentence: “A huge success story!”, he says.

And it’s no wonder. As Junqueira notes, the São Paulo-based company, in the midst of the pandemic, managed to produce in six months what it would normally do in six years.

Magnamed received funding from the Criatec I Fund, co-managed by KPTL and Antera, investors since 2008, when the startup had virtually no revenue and was based at Cietec, an incubator at the Universidade de São Paulo (USP). Later, in 2015, another venture capital fund manager, Vox, joined the operation.

“What caught our attention at the time was the in-depth knowledge of the three founders, Wataru Ueda, Tatsuo Susuki and Toru Kinjo, in the area of ​​pulmonary ventilation,” recalls Junqueira. “With the investment from Criatec and the important support from other institutions, such as Fapesp and Finep, Magnamed was able to transform this in-depth knowledge into a large national ventilatory care company. And, I would say that this is our mission at KPTL: to help great entrepreneurs transform knowledge into business. Today, 15 years later, Magnamed is a relevant global player, exporting to more than 70 countries, and a reference in transport pulmonary ventilators.”

Fact. Because despite perhaps having been the craziest journey Magnamed has ever experienced, in the end, the company grew extraordinarily and holds the “seal” of having saved lives at a sad time in human history. What a great success story!

“Just like flowers, to bloom it is necessary to overcome the winter”

Author unknown.

3 Questions for…

Walter Schalka

Member of the Board of Directors of Suzano, one of the largest pulp and paper manufacturers in the world, and of Vibra Energia.

(Photo: Courtesy)

1) The Covid-19 pandemic imposed unprecedented challenges on global society and, in particular, on the production sector. And you, as CEO of Suzano at the time, participated directly in the case of the production of artificial ventilators by Magnamed during that period. What was your specific participation in that effort like and how did Suzano collaborate to make the production of the equipment viable?

The Magnamed project should make all of us Brazilians proud, because it happened as a coincidence. A college friend of mine (Instituto Tecnológico de Aeronáutica – ITA) expressed in a WhatsApp group his concern about Covid-19 and the opportunity to do something, because he (Wataru Ueda) was a partner in a company that had the potential to produce ventilators on a large scale. But this scalability needed to be supported, since he had neither the financial nor the human resources to make it happen. So, I think that the mobilization of several companies and several people – even individuals – was in the sense of each one contributing their best knowledge and some financial resources to make it happen. Suzano initially contributed the working capital, and contributed to the mobilization of other companies so that we could quickly increase the scale of production of the ventilators. In addition, it did important work with suppliers globally to obtain the necessary parts so that we could produce the ventilators. This created the possibility for us to quickly scale up production and mitigate the issue of ventilators here in Brazil. We should be very proud of this, and I think that it was not the work of one company or a few individuals, but rather a very well-done construction work, of collaboration between many, with the sole and genuine aim of supporting Brazilian society.

2) Many innovations emerge in times of scarcity and crisis. Do you believe that the accelerated collaboration model that you experienced can be replicated even outside of times of emergency?

I think you touched on a very sensitive point in your question, which is the fact that, in times of crisis and scarcity, people come together to address fundamental issues in society. And I wanted to bring up another fundamental issue that needs to be addressed, which is the issue of the climate emergency, the climate crises that we will experience from the moment of the warming that is happening due to the CO2 issue. I think we need to work together in this direction. And it would be very positive, as an example of what happened with Covid globally, if we also worked on this, because this is a challenge for 8 billion people. I believe it is essential that companies, individuals, and governments come together so that we could address the problems that are common and that afflict the world. Personally speaking, I consider this to be a fundamental task, and Suzano will certainly always be willing to participate in this game of construction and collaboration. It is a game that is not about competition. We are not playing company against company, country against country. We are putting 8 billion people together with the same goals, which is exactly what happened during the Covid-19 period.

3) Looking back, after five years, what lessons did that journey of collaboration at a critical moment teach you?

The main lesson, which left a strong mark on me as an individual, was not just the pride of having participated, but of the power that we can have as a society when we bring everyone together with the same goal. It was impressive to see how Embraer, Fiat, Suzano, in completely different sectors, worked together, putting their executives in a construction process with a company that at the time was smaller, in this case, Magnamed. It needed a lot of resources and a lot of support in the managerial aspect, in the aspect of financial, human, and technological resources, to be able to find alternatives. Some equipment was difficult to buy. So, this action showed the potential of people, companies, and governments, when they work together and with the same goal. This is the power that we can demonstrate when we work collectively.