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By Brian R.
Hook
Transforming a small startup into a publicly held company takes
a mixture of ingredients, including access to capital, talent and
infrastructure. “St. Louis has a very good supply of all three ingredients,”
says Bevil Hogg, president and CEO of Stereotaxis Inc.
St. Louis-based Stereotaxis, which makes high-tech systems for use
during cardiac surgery, is the first of the region’s advanced-technology
startups to launch a public offering. Hogg says St. Louis provided
Stereotaxis with the needed ingredients. “Missouri has had an activist
approach toward facilitating venture capital. St. Louis has been
very accommodating with regards to research incubators,” he says.
“I don’t think there are any ingredients lacking.”
Accessing capital is the hardest ingredient to locate, Hogg says.
“Obviously more capital is always better than less capital. But
St. Louis has a flourishing venture capital scene,” he says.
Stereotaxis relocated to St. Louis in late 1994 from Menlo Park,
Calif. with two employees and $5 million in financing organized
by St. Louis-based venture capital firm, Gateway Associates. Stereotaxis
eventually raised a total of $130 million prior to its August 2004
initial public offering, according to the State of the Greater St.
Louis Region’s Venture Capital Industry 2004 Annual Report. Stereotaxis’
IPO brought in another $48 million. Stereotaxis then went back and
raised yet another $61.7 million earlier this year
| Transforming
a small startup into a publicly held company takes
a mixture of ingredients, including access to capital,
talent and infrastructure. “St. Louis has a very good
supply of all three ingredients,” says Bevil Hogg,
president and CEO of Stereotaxis Inc. |
|
Along with raising the necessary capital, the right mix of talent
is also needed. “We’re attracting talented people who are relocating
from out of state. We have over 100 employees, and we’re contributing
very significant payroll dollars to the local community,” Hogg says.
To accommodate Stereotaxis’ expanding need for research and office
space, the company moved into the first building opened by the Center
of Research and Technology and Entrepreneurial Expertise (CORTEX)
in midtown St. Louis in December. The 179-acre CORTEX West urban
research and redevelopment district is a collaboration of Washington
University in St. Louis, Saint Louis University, University of Missouri-St.
Louis, Barnes-Jewish Hospital Foundation and the Missouri Botanical
Garden, with support from the City of St. Louis, Civic Progress
and the RCGA.
Stereotaxis graduated from the Center for Emerging Technologies
incubator located nearby. CET is a public-private-academic partnership
supported by the University of Missouri - St. Louis, the Missouri
Department of Economic Development, St. Louis Development Corp.,
Missouri Development Finance Board and the U.S. Economic Development
Administration, among a handful of St. Louis-based companies. Hogg
says CET was yet another necessary ingredient for Stereotaxis, providing
a “nurturing environment at very reasonable rates.”
Underlying the need for the right mix of capital, talent and infrastructure
is access to the right technology. “Obviously you have to have technology
that works. Getting the technology to work and deliver value is
the first challenge,” Hogg says. Stereotaxis’ technology is an advanced
cardiology-instrument-control system for use in a hospital’s interventional
surgical suite. It provides image-guided delivery of catheters and
guidewires through blood vessels and chambers of the heart to treatment
sites. This is achieved using computer-controlled, externally applied
magnetic fields that govern the motion of the working tip of the
catheter or guidewire.
The core components of the Stereotaxis system have received regulatory
clearance in both the U.S. and Europe. A delay in the regulatory
process in the U.S. hurt revenues at Stereotaxis last year. Revenues
for 2005 totaled $15 million compared to $18.8 million in 2004.
The outlook is once again bright, however, now that the U.S. Food
and Drug Administration recently approved two catheters for use
with the company’s Niobe magnetic navigation system.
Stereotaxis also pleased shareholders and analysts when the company
announced in February that it had received 72 orders worldwide,
as of December 31, 2005—of which 42 had been delivered. “Our backlog
had built more rapidly than had been expected by Wall Street, which
would account for the positive reaction on the share price the following
day,” Hogg says.
Stereotaxis expects total revenue for 2006 will range from $26 million
to $30 million. But Hogg warned shareholders when releasing the
company’s annual results that Stereotaxis expects the year to be
back-end loaded, as the order and revenue rates recover from the
impact of last year’s regulatory delays. He told investors that
Stereotaxis’ sales cycle is similar to other companies selling capital
equipment to hospitals, which is often “relatively long and can
be subject to lumpiness from quarter to quarter” due to last-minute
budget decisions and delays.
“Prudence dictates that we should anticipate the occasional impact
on our quarterly results of such unexpected delays,” Hogg told shareholders.
Investors will also have to wait to see profits. Like many other
startups, Stereotaxis has yet to turn a profit. But Hogg says the
company is following the right course of action, and there is no
need now to switch direction.
“We plan on growing through expansion of our technology platform
and expansion of our clinical applications,” Hogg says. “We think
we can grow rapidly within the confines of our business model. We
don’t have to go and switch horses and start acquiring companies.”
Hogg says the ingredients already in place in St. Louis should help
other startups to flourish as well. “Stereotaxis is very grateful
to St. Louis and the State of Missouri. We recognize that being
part of the community has been a major-ingredient in our success,”
he says. |
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