Selling expensive new medical equipment to doctors today, no matter how good it may be, is no easy thing. Just ask Pathway Medical Technologies.
Almost three years have passed since the Kirkland, WA-based company won FDA approval for its first device, which drills through and sucks out tough-to-treat blockages in leg arteries. The company, founded in 1998, has raised $130 million of investment capital for this feat of engineering, and has a staff of 170 employees today.
Yet Pathway, stung once before by setting its own overly aggressive sales goals, has carefully watched its budgets the past couple years, and is taking a grind-it-out approach to get to the next level—sustained profitability.
“It’s not about growth at any cost. It’s about pursuing growth we feel we can afford,” Pathway CEO Paul Buckman said when I visited his office in Kirkland a couple weeks ago.
Pathway has had a lot of success with winning a series of FDA approvals for various versions of its device, which it markets under the Jetstream name. For those new to the story, Pathway’s device uses a tiny stainless-steel drill mounted on a catheter that slides inside clogged leg arteries, where it cuts through and vacuums out hard plaque blockages and squishier clot-like substances. It’s approved for patients with peripheral artery disease, a condition related to cardiovascular disease that has caused 2 million Americans to seek treatment, complaining of pain when they walk. Most people go undiagnosed, partly because there aren’t many good options for treatment.
The company showed some early signs of breakout potential in its first few months on the market, and raised $40 million in March 2009 during one of the worst stretches of the recession. But just a couple of months later, Pathway made a public admission that it had set overly aggressive sales goals, and had to cut 20 percent of its workforce to conserve cash, with an eye toward reaching break-even in mid-2011.
It’s mid-2011 now, and when I stopped by Buckman’s office for an update a few weeks ago, he said the company still isn’t profitable. Even though Pathway vowed two years ago that it wouldn’t raise more capital, Buckman now says the company will likely have to raise money next year.
Even though Pathway is falling short on those predictions, if there’s a word to sum up the company’s performance, it might be “stable.” The company still has 170 employees, the same as it did two years ago. Under constrained resources, it grew revenues by 50 percent in 2010, compared to the prior year, Buckman says. This year, Pathway expects to grow sales by another 30 percent, he says. About 15,000 patients in the U.S. have had a Pathway procedure done, and about 300 doctors are routinely using the device, Buckman says.
The hurdles here are numerous. Pathway doesn’t like to disclose what its drill sells for on average, but Buckman says all devices in its class sell for about $3,000 per procedure, and Pathway’s sells for a premium. This comes at a time when many hospitals and insurers are increasingly wary about adding costs. There are strong competitors like Dublin, Ireland-based Covidien and St. Paul, MN-based Cardiovascular Systems. And there is the inertia that comes from treating a form of cardiovascular disease in the legs that hasn’t traditionally been treated
