For over a year, Admedus (ASX:AHZ) has been engaged in a significant restructuring effort as it looks to break trends of overspending and edge towards profitability. The company is finally seeing fruits of its labors, posting its 1st cashflow neutral quarter this year and looking to a hopeful turn to profitability in the future.
To lead the restructuring effort, the company turned to 25-year pharmaceutical vet Wayne Paterson, who told MassDevice.com in an interview that he’s been able to contribute a unique global perspective to the company, along with a wealth of experience in steering companies in the medical field in the right direction.
Before taking the reins at Admedus, Paterson had spent 25 years in global pharmaceuticals, living in 7 countries over the past 20 years – something he says helped him right the ship at Admedus. During his time at Merck, he held positions as president of Japan, president of emerging products and EU president.
Restructuring is a topic Paterson says he knows well. His restructuring at Admedus was his 4th, having turned around the European division for Merck previously.
“The last one I did was Europe for Merck, and we had about 30% out of Europe, and that was hundreds of millions of dollars and thousands of headcounts. It’s not a new process from where I sit now,” Paterson said.
So far, Paterson has helped Admedus reduce its cash burn from approximately $5 million down to $2.5 million per quarter, while reducing headcount and increasing sales and business by about 50% at the same time.
“More importantly we put in all the systems and metrics and processes you need to have to run a global organization. We restructured the US, where I sit, moved a lot of the global commercial functions to the United States, kept the back office functions in Australia, HR, finance, et cetera. We’ve started to reshape the European operations as well,” Paterson said.
Paterson said that in the restructuring, the company had “grown up” into a corporation, with the metrics and tools its needs to manage itself on a global scale. During the time, the company has launched 3 products, with an additional product, the CardioCel 3D, slated to launch some time in the 3rd quarter.
The CardioCel 3D is a 60 degree shaped collagen product designed for complex neonatal arch and pulmonary artery repair designed for use in cases in which a flat, single dimension patch material won’t work. The device won FDA clearance earlier this year.
The company now has ambitious targets as it comes out of the restricting, Paterson said, looking to bring in $21 million after 12 months. Admedus also had its 1st cashflow neutral quarter during the last quarter, Paterson said.
“That’s historical, that we had the same money in the bank in March as what we had in December, meaning that we’ve got cashflow and sales at a balancing point. Now, that won’t be the case consistently until we get right through all of this, but it shows that the right systems and processes in place give you much better control of the company. I think our commercial operations are now moving in a way that I would like,” Paterson said. “At this pace of development I am comfortable that we will get the profitability metrics,” Paterson said.
In addition to a scheduled release of the CardioCel 3D in the coming quarter, the company is also working on a transcatheter aortic valve replacement device using the company’s existing tissue technology – which Paterson said will give it an edge against the competition.
“I started to hear anecdotally that the current TAVR devices were calcifying. They’ve been around for about 5 years, so doctors are starting to see that these in situ valves are having some issues, as you would expect, as they’re made from tissues that calcify,” Paterson said. “That led me to think, ‘Well if we already have that part of the problem solved what do we do next?'”
Paterson said the company, which has facilities in Minneapolis, was able to assemble a team of specialists who had worked on previous TAVR projects. The location of the office was essential in being able to add the talent, he added.
“We were able to marshal together quite a few engineers who had worked on currently marketed TAVR’s – people who had previously been employees at some of those companies,” Paterson said. “It’s the only city where you can actually assemble 4, 5 or 6 of these guys together and say, “What can we do here?”
With the team assembled, the project has “progressed quite significantly,” Paterson said. With the tissue development already done, the group has a leg-up on the process, with a working prototype already assembled alongside a wealth of IP related to the device.
“They’ve built a better mouse trap, for want of a better term. Clearly one that won’t calcify. We’re in a bit of a perfect storm right now,” Paterson said. “When I have a decent amount of IP lodged, I will then be looking to talk to 1 or 2 of the big 4, to look to a co-development deal.”
Paterson said that while he’s happy with the company’s momentum and direction, he’s still cautious.
“We’re doing things sensibly. We’re measuring. We’re monitoring. We’re applying lessons I’ve learned at larger healthcare companies to a smaller company and making sure that we survive, firstly, from a cash point of view. Secondly, we’re making sensible decisions around our portfolio and development. With the 4 products we have in the tissue space there is probably 7 or 8 more products behind that, and really it’s just a matter of prioritizing that in a way that doesn’t break the organization if we bring these things to market,” Paterson said. “The story right now is a marathon not a sprint, and then we’re taking cautious steps to make sure the company is viable moving forwards, and we can bring these products to market.”