Stereotaxis, one of St. Louis’ pioneering medical technology firms, was a troubled company three years ago. Its shares had been delisted by Nasdaq, and debt was preventing the company from updating its once-cutting-edge robotic surgery system.
Where most of the world saw problems, David Fischel saw promise. His Los Angeles firm, DAFNA Capital Management, led a $24 million recapitalization in 2016 that let Stereotaxis pay off its debt and begin ramping up research and development.
“What we saw were three things you usually don’t see together in a company that’s struggling,” Fischel said last week. “We saw highly differentiated, futuristic technology that had substantial real world experience, and it had really good clinical data.”
The board installed Fischel as chief executive in February 2017. Since thenhe’s raised $35 million more from investors, nearly doubled research and development spending and, in May, unveiled an all-new version of the heart-surgery system the company first commercialized in 2003.
The heart-surgery system came out just before Stereotaxis raised $115 million in a 2004 initial public offering, the only one in recent memory by a St. Louis medical technology company. The shares soared above $140 a share before plunging to less than a dollar after the delisting.
This month, the company regained visibility and credibility when its shares started trading on the NYSE American exchange.
As one measure of the turnaround, the market now values Stereotaxis at $200 million, up from $14 million in 2016.
Fischel describes the rebuilding effort as a matter of investing in strengths and fixing shortcomings. “When you have a high-tech company that has not progressed or improved for many years, that just does not work,” he said. “There were a range of operational and strategic weaknesses that the company had not addressed.”
Bevil Hogg, Stereotaxis’ CEO from 1997 to 2008, recognized early on that the Niobe robotic surgery system, now installed in 110 hospitals around the world, had limitations from a business point of view.
The system is used to treat cardiac arrythmia, or irregular heartbeat. Using powerful magnets, a surgeon sitting in a control room threads a catheter through a patient’s blood vessels to burn or scar sections of heart tissue that are sending incorrect electrical signals.
Two bigger companies, Siemens and Phillips, make the imaging equipment that works with Niobe, and Johnson & Johnson makes the disposable catheters.
Those collaborations helped a tiny firm bring an innovative device to market, but they also directed much of the profit to the partner companies. Hogg says Stereotaxis was working on an updated system, with its own catheter and imaging equipment, when the recession hit in 2008.
“They ran into a brick wall where hospitals cut back on spending,” he said. “That’s a lot of stuff to do when your revenues are declining.”
Stereotaxis’ new system, called Genesis, comes with an integrated imaging system, and the company is working with a German company on a catheter that it hopes to introduce next year. Genesis has regulatory clearance in Europe and is awaiting approval in the U.S.
In addition to fixing Niobe’s business shortcomings, Genesis should cost less to install than the older system. “We’re trying to improve the clinical performance and make the technology more accessible and affordable,” Fischel said.
Hogg believes the company is on the right track. “To my way of looking at it, he (Fischel) has done everything right and appears to have the money to continue with the strategy,” he said.
Fischel takes no pay as CEO, so he profits only if his firm’s investment in Stereotaxis continues to increase in value. He says DAFNA doesn’t take a fix-and-flip approach. “The board always has to consider any option presented to it,” he said, “but our goal is to build a highly successful company.”
As a model, Fischel suggests, Stereotaxis can aspire to be the Intuitive Surgical of endovascular surgery. Intuitive, based in Sunnyvale, California, makes a robotic system used for hysterectomies and prostate cancer surgery and is valued at $60 billion.
Those are hopes nobody would have voiced for Stereotaxis three years ago. For a St. Louis-based team of about 125 people, they suddenly are beginning to seem possible.