on more than 500 patients at about $4,000 apiece in the product launch phase. But Pathway, like a lot of medical device companies, struggled to live up to its projections, as hospitals became cautious during the recession and the uncertainty around federal healthcare reform. By May 2009, the company laid off one-fifth of its staff, as it fell short on its launch sales projections. By cutting costs at that time, Buckman said, Pathway set a goal of turning profitable by 2011.
The company never did turn profitable, at least based on the most recent interview Buckman gave to Xconomy in June. At that time, the company had made a couple of important iterations to its product to make it more competitive, and it had built its staff back up to 170 people, about the same headcount it had at the time of its layoffs two years earlier. Even while watching its expenses on sales and marketing carefully, and facing competition from Covidien and Cardiovascular Systems, Pathway grew its annual revenues by 50 percent in 2010, and was on pace to boost sales by another 30 percent this year, Buckman said. About 15,000 patients in the U.S. have had a Pathway procedure done, and about 300 doctors are routinely using the device, Buckman said in June.
Medrad is the kind of acquirer that certainly has the horsepower to exploit Pathway’s Jetstream product line if it really wants to. The company is a global manufacturer and distributor of sophisticated medical devices, like CT scanners, MRI machines, and cardiovascular tools. The company was founded in 1964, and went public in 1992 when it had $65 million in revenues, according to a company history posted on Medrad’s website. By 1995, it went private when it was acquired by Schering AG, and it was later absorbed into Bayer through Bayer’s acquisition of Schering.
Pathway’s acquisition ultimately isn’t much of a surprise. Buckman signaled back in the June interview that he was interested in turning the company profitable, not in going back to the VCs to ask for more money to keep the ship afloat.
“For the short term, it’s about blocking and tackling, gaining market share, expanding our ability to treat the entire leg,” Buckman said in the June interview. “Those things alone will continue to grow our business. If we do that, it enables us to enlarge our footprint a bit, maybe add some attractive products. It could make us a more attractive acquisition candidate.”
