Waiting for the Dough

The CFO of a start-up maker of medical devices is prepared for years of intense capital-raising efforts and tough cost-allocation decisions on the way to profitability.

It was not cost-effective, and we discontinued it. Now we’re using the same technology for different indications, but harnessed in a small box the size of a desktop computer that weighs 20 pounds. The good thing is that we had trained 4,400 foot and ankle surgeons and podiatrists to use the OssaTron, and we’ll be taking our new device for diabetic foot ulcers to those same doctors.

With a company in the stage of development yours is in, what are the CFO’s day-to-day activities?

You wear a number of different hats. Lately I’ve been working a lot on SEC reporting. But the biggest thing is continuing to raise funds to take us through the end of 2010. Part of that is presentations to retail-based investors who can buy stock today. Another part is continuing to work with larger, private investors.

Will you be issuing new stock to get more public investment?

We could do that today, but under the rules the stock would not be registered for a year. People could buy the shares but couldn’t sell them. So we can either wait a year or do a full S-1 filing with the SEC to register new shares, like you do with an IPO, which is what we’ll probably do. It will take a few months, but there are people who are interested in investing in us, and whether they invest tomorrow or four months from now or a year from now, they’re going to want the shares to be tradable. So we might as well get started on that.

What else are you involved in?

Now that we’re public, we need to be very cognizant of our forecasts — make sure we set realistic goals for our clinical work and product development, and then achieve those goals. In our case, that is not driven by revenue but by what we’re spending. The clinical studies are expensive — the first one is running close to $4 million over a three-year time frame. We include that in our R&D costs, which total between $3.5 million and $4 million a year.

What costs have you identified that you could trim back since you went public?

Well, unfortunately, there’s none that we’re going to take down. Over the past two years, we’ve spent significant effort streamlining the operation to where it’s running very lean and efficient. I actually see increased costs. Being public results in accounting, filing, legal, and staffing costs.

What I’m doing with costs is more of a utilization strategy. It’s looking forward and managing the resources we have according to the priorities for the four verticals we’re in. Cardiac is really for the future, even though we know it has huge potential. The other three we’re already working on, and as things progress, things may come up that offer quicker opportunities, so we’ll go down that path and hold off on something else that needs more time and capital. It means staying on top of how things are going on the clinical side and with R&D.

Those aren’t just finance decisions, are they?

Oh, no. That is an all-hands strategy, working with sales and marketing, R&D, the regulatory quality people who are tied in with the FDA approval process — everybody. My role is to keep things moving along and focused and see that we’re getting the return on investment that we want.



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