Medtech growing by 35% a year
Firm rides to success on Y2K crisis
Boulder's Colorado Medtech checks hospitals' devices for bugs
ROCKY MOUNTAIN NEWS - Denver, CO, 12/07/98
SUBSIDIARIES OF COLORADO MEDTECH INC.
RELA Inc. -- Performs custom product development and
manufacturing services.
Novel Biomedical Inc. -- Designs and manufactures catheters used
in angioplasty and minimally invasive surgeries.
CMED Respiratory Products Division -- Develops, markets and
services respiratory diagnostics and care products.
Erbtec Engineering -- Develops and manufactures subsystems for
magnetic resonance imaging machines.
BioMed Y2k -- Provides year 2000 compliance management and
reporting for the health care industry.
When the clock strikes year 2000, it's one thing if your computer
conks out, but it's quite another if the heart-lung machine keeping
your body alive suddenly malfunctions.
Cardiac monitors, defibrillators, infusion pumps, nuclear
accelerators -- these and other medical devices must all be checked
for the year 2000 bug.
"I wouldn't even hazard a guess as to how life-threatening it can
be," said John V. Atanasoff II, chairman and chief executive officer
of Colorado Medtech Inc.
Six months ago, the Boulder-based medical device maker went into
the Y2K compliance business and now has contracts to check devices
at a handful of hospitals. The company aims to strike deals with as
many as 100 hospitals before the Y2K crisis is over.
"We find that about 11 percent of the devices are noncompliant,"
Atanasoff said. Of those 11 percent, about 3 percent are seriously
impaired."
Colorado Medtech finds the bugs and roots them out, usually
exchanging the chips that run the machines. Atanasoff expects the
year 2000 effort to account for 5 percent to 10 percent of his
company's $60 million in revenues in fiscal 1999.
A couple years after 2000, the business will disappear, but not
before getting Colorado Medtech's foot in the door for other
services.
"Almost every medical device manufacturer has a problem in one or
two of their devices," said Les Funtleyder, an analyst with Bigelow
& Co. in Denver.
By offering a solution to these problems, Colorado Medtech is
positioning itself for future sales of its proprietary products as
well as its manufacturing services, Funtleyder said.
Beyond fixing Y2K problems, Colorado Medtech is involved in more
pursuits than a lot of companies many times its size.
Under a five-year contract with E.I. duPont de Nemours and Co.,
Colorado Medtech designed and is manufacturing a diagnostic system
that detects bacteria in food.
Under a four-year contract with San Diego-based Gen-Probe Inc.,
Colorado Medtech is designing a DNA probe nos diagnostic system that
will detect the HIV virus in blood.
Colorado Medtech also makes catheters used in minimally invasive
surgical procedures, parts for magnetic resonance imaging machines
and several respiratory diagnostic and care products.
Most of the Colorado Medtech's revenues come from contract
manufacturing operations. In other words, larger companies take the
financial risk of building new medical devices, and they hire
Colorado Medtech to do the work. There is no waiting for regulatory
approvals or marketing plans.
The market for out-sourcing services in the U.S. medical device
industry is more than $2 billion per year and growing by 20 percent
per year, according to industry estimates. But Colorado Medtech is
growing by 35 percent a year.
Its revenues grew from $19 million in 1996 to more than $47
million in 1998, and the company anticipated more than $60 million
in revenues in 1999.
The company has an order backlog of $40 million, which is up from
$22 million last year. Its balance sheets are strong and, unlike
many small medical device manufacturers, it is turning a healthy
profit each year.
In October, Forbes magazine ranked Colorado Medtech 89th on its
list of the 200 best small companies.
"This is the horse to ride in the medical device out-sourcing
industry," said Funtleyder, who predicts the $9 stock will rise to
$15 per share over the next 12 months.
Another analyst, Thomas Moro of Hartford, Conn.-based Advest,
recently raised his 12-month price target to $14 for the stock,
which is up more than 30 percent this year.
"We think the business plan implemented by Colorado Medtech is
likely to be the most successful of any engineering services
company," he said.
(Copyright 1998) |
