Hi Rick,
Have taken a small position in Proterion Corp. (ASE: PRC) and thought you might know something about their new spectrometer, which is supposed to facilitate research involving G-protein-coupled receptors.
Below is a copy of the WST interview with PRC's President.
Wall Street Transcript Interview with Paul Mangano, President of Proterion Corporation (PRC)
PAUL MANGANO is President of Proterion Corporation. He
joined Proterion when it was known as Rheometric Scientific
Inc., in August 2001. He has over 20 years of management
experience in high technology and industrial businesses. During
his career, he has held senior management positions
with AlliedSignal, Smiths Industries, Northrop Corporation and
L-3 Communications. His experience and accomplishments
include growing mature businesses, forging strategic alliances,
entering new markets, introducing new products and improving customer
satisfaction. He received a BA in Economics from Harvard University and holds an
MBA in High Technology from Northeastern University.
TWST: Please give us an overview
and a short history of your company.
Mr. Mangano: We basically restarted as
Proterion this past January when we sold our core
rheology instruments and services business to
Waters Corporation so that we could focus exclusively
on the life sciences business. We took this
strategic action because we believe that the life sciences
have much more growth potential than the
business we sold. We also changed the name of the
company because the name “Rheometric
Scientific” went along with the assets to Waters
Corporation. Today we are a publicly traded
micro-cap company on the American Stock
Exchange with approximately $6 million in revenues,
30 employees, relatively little debt and a
very strong product and technology portfolio.
TWST: Could you describe your product
and give us some insight into your portfolio
of products?
Mr. Mangano: Yes.We have three product
lines which all use optics to help measure the physical
properties of biomolecules or proteins. One of
the devices is our dynamic laser light scattering
product or DynaPro, which is the trade name. It
measures the size and molecular weight of protein
molecules. The second is a circular dichroism
spectrometer (CD) or, as we call it, the Aviv 215.
The Aviv 215 measures protein folding. It so happens
that protein folding or unfolding is a common
problem in a number of major diseases. Our instrument
allows researchers to understand this
folding or unfolding so that they can develop drugs
that counter these effects. Alzheimer’s,
Parkinson’s, Mad Cow disease, and cystic fibrosis
are examples of illnesses that are caused by improper
protein folding or unfolding. Finally, our
third product is our plasmon- waveguide resonance
(PWR) spectrometer, which allows research
scientists to measure the binding affinity and the
conformation changes that exist between a protein
and a cell membrane. The PWR technology is used
in the study of G-protein-coupled receptors
(GPCRs), a class of membrane proteins involved
in cell signaling and regulation. GPCRs play a sig-
nificant role in many physiological activities that
are potential areas for therapeutic drug candidates.
This technology was licensed from the University
of Arizona on a royalty basis. We have an exclusive
license to this technology and we are currently
in the process of beta testing the device with several
customers. We plan to fully commercialize the
instrument early next year after we obtain the beta
customer feedback.
TWST: Who would you consider as your
closest competition and what will you consider
as your strengths and advantages?
Mr. Mangano: Malvern, which is a division
of Spectris, Wyatt Technologies, Precision
Detectors, Jasco and Biacore represent our most
formidable competitors. What sets Proterion apart
in all of our product areas is technology leadership,
our ability to generate customer loyalty and our
track record of anticipating market and customer
trends. We also devote a lot of attention to customer
problem solving and solution selling — it’s
not just selling them an instrument. We want to
make sure that the instrument that they purchase
from us allows them to increase their productivity
and improve the research results from their laboratory.
So we spend a lot of time on applications, as
well as interfacing with the customers to make sure
that the product and the application are suited to
their needs. These are the factors that separate us
the most from the competition.
TWST: How many customers do you have
currently? Are they mostly commercial companies?
Do you have any government clients? And
of the three products that you have described,
which one seems to have the most potential?
Mr. Mangano: The dynamic light scattering
product and the circular dichroism spectrometer
are basic analytical tools that have been used in
the research labs of government, academia, pharmaceutical
and biotechnology concerns for a number
of years. We have delivered over 750
instruments to this community. But in terms of
customers, we sell principally to government institutions,
academic research laboratories as well as
the major pharmaceutical and the major biotech.
So you name a major pharmaceutical or biotech —
Pfizer, Eli Lilly, Merck, Biogen, Amgen,
Amersham Biosciences — they are key customers.
On the academic side, the same applies: University
of California, Michigan, City College of New
York, MIT, Princeton, University of Pennsylvania
are all Proterion customers. Over the years, a
greater proportion of our instruments have gone
into government and academia. We’re doing a
number of things on the sales and marketing front
to even out distribution between government and
academia on the one hand and pharma and biotech
on the other. As we see it, the PWR instrument can
serve as the big growth engine for our company,
serving both the needs of academia and industry
depending on the product configuration.
TWST: Tell me a little more about
PWR. When do you intend to mass produce
this product?
Mr. Mangano: We have a little bit more
work to do. We are looking at a couple of different
variants of the technology depending upon the particular
customer — whether it be academia or
pharmaceutical/biotech. But we plan to have a
commercial variant in production late this year or
early next, although the current beta configuration
is a saleable instrument in its present form. In fact,
we’ve already sold one and have five other proposals
that have been submitted to major pharma
for them to not only test out, but to purchase. To
strengthen the PWR beta instrument, we will add a
number of software enhancements, as well as improvements
in the area of sample preparation to
make the instrument easier to use.
TWST: What would you consider as the
possible market size for PWR?
Mr. Mangano: It varies. If you look
strictly at the pure academic research market, you
could be looking at a market of approximately $30
million annually. If you add in pharma and the various
configurations of the product that they would
need, we anticipate that it could grow to over $500
million annually over the next several years.
TWST: Tell us about the challenges that
lie ahead for you. What is your strategy for
growth as you look ahead?
Mr. Mangano: The biggest challenge right
now is liquidity. There were some legacy issues
that consumed some of our cash after the sales
transaction with Waters that have had an impact on
our working capital. Recently, we secured a $1
million factoring agreement with KBK Financial
of Houston, Texas. We are in the process of trying
to secure some additional debt financing as well as
some additional equity financing. What really prevents
us from growing right now is the cash to put
more money in R&D to come out with some new
generation products: a new CD and a commercial
variant of the PWR. So cash right now is the
biggest constraint to growth. We think we can generate
better than average industry growth with the
CD and our DynaPro product because of our technical
leadership and as long as we continue to invest
to maintain the technical edge. As for the
PWR, the technology is truly unique and does provide
high information content over competing devices
so we expect that the real growth in our
business is likely to come from the PWR.
TWST: How confident are you that you
will be able to address the issue of liquidity in
an efficient manner?
Mr. Mangano: We have a three-phased
plan. The phase one financing was complete when
we secured the factoring agreement with KBK. For
phase two, we are looking to obtain a full assetbased
facility that will include borrowings against
our inventory. We are currently in discussions with
a few lenders on this type of arrangement and hope
to close on such a deal within the next few months.
Phase three, which we hope to complete later this
year or early next, involves additional equity financing.
We are quite confident that when potential
investors see the business plan we have laid out
and how focused and well poised we are for
growth in the life sciences, that they will want to
participate in that growth.
TWST: Have you received any interest?
Mr. Mangano: We are in the process of
moving out more aggressively in this direction. To be
honest, most of the last five months of 2002 was tied
up in selling the core rheology business. This year,
we have basically restarted Proterion because, again,
we went from being a publicly traded manufacturing
company with 150 employees down to a publicly
traded development company with 30 employees. So
our needs and the complexion of the company have
changed. We are now starting to focus on getting that
message out to see if we can attract some equity capital
in an appropriate time frame.
TWST: What should investors expect
from you in terms of financial performance in
the very near term?
Mr. Mangano: In the near term, obviously,
the first priority is to improve our working capital.
The second is to grow the top line. I think investors
recognize that we’re about as lean as we can be for
a development company, but with an infusion of
additional capital we can then do what is necessary
on the product development front to leverage our
business position. We are also starting to see results
from the improvements we have made in
sales and marketing to help drive the top line. Top
line growth is what is going to drive our profitability
and we believe we are turning the corner. I hope
that the investment community and our shareholders
will start to see progress in these two areas in
the not too distant future.
TWST: Could you give us a frank assessment
of your management team?
Mr. Mangano: We are a very good team.
That’s one of the things I focused on for almost the
two years that I have been here. We have hired a
new Vice President of Engineering and
Operations, a new Vice President of Sales and
Marketing and a new CFO whose background,
skills and capabilities are a good match for a development
company. We have also appointed a
key, experienced individual to the position of Vice
President, Product Management to manage and direct
this strategically important function to the
growth of the company. I am pleased with the
management team that we currently have in place.
TWST: Are you happy where your stock
is trading?
Mr. Mangano: No, not really. Like others,
we have had some appreciation lately due to the
run up in the biotechnology stock area. However, I
like to believe that it is a function of the rheology
business being sold and that we did some good
things in the first quarter. While we still lost
money, we improved our gross profit margins, reduced
costs and generated new business. I think
people are starting to see that we’ve stabilized the
company, are turning the corner and that the company
is poised for growth in the life sciences sector.
My management team focuses on execution of
the plan, not how the stock is trading. The former
will take care of the latter.
TWST: What are your investor relations
objectives and what sort of programs do you
have in place to get your message out to shareholders
and potential shareholders?
Mr. Mangano: We are a smaller company
now, so that sort of falls into my hands and the
CFO’s hands to basically do this. But it’s primarily
to issue press releases on substantive accomplishments
or developments to get the message out. We
can do a much better job at this. We haven’t focused
as much attention on this in the first half of
the year but plan to turn it up a notch in the second
half. As long as we execute, we expect there will
be things to announce. We don’t have a formal investor
relations program right now. We only have
172 shareholders of record, but we hope that will
change as we start to focus more attention on this.
TWST: Give us two or three reasons that
you consider most important for why investors
should be buying shares in Proterion.
Mr. Mangano: One is that we are poised
for growth. With the rheology business sold, we
can really focus our full attention on life sciences.
We have good strong product positions in dynamic
light scattering and circular dichroism. It’s basically
product enhancements and upgrades to improve
ease of use to help our customers be more
productive in their laboratories. We’ve got nice
plans laid out for each of our products as to what
needs to be done by when and how it is to be done.
As for the PWR, the reaction we are getting from
the beta test customers and some of the major
pharma that are looking at the technology is that
they see real value in the information that the instrument
provides. They are saying that it provides
much more valuable information to their secondary
screening process than just surface plasmon-waveguide
resonance (SPR) technology, and we feel that
we’ll be able to command a nice premium over
other alternate instrument approaches in the marketplace
for secondary screening at major pharma.
Although nobody can know the future, we believe
after a moderate investment that sales of PWR
alone can exceed $45 million per year. So, a strong
product and technology portfolio, coupled with the
new management team and new sources of cash, if
they come to fruition, is the recipe that’s going to
allow us to do some great things. We also see a lot
of opportunity for some very nice strategic relationships
and alliances that we hope will allow us
to expand our customer and market base with some
new and different value offerings.
TWST: Thank you. (WT)
PAUL MANGANO
President & COO
Proterion Corporation
1 Possumtown Road
Piscataway, NJ 08854
(732) 987-8200
(732) 987-8199
www.proterion.com
e-mail: info@proterion.com |
