ATH Microtechnologies
ATH Microtechnologies
• evolution of an innovative,
entrepreneurial firm in the medical
technology industry
• Success and failures of a firm depend
on the management’s attempt to
design and use formal control systems
to achieve profit and performance goals
Founding
Dr.Charles Casper and John Frost founded ATH in
1997
Purpose - sell a new medical imaging product
In 1998 received approval to market its first
product
Group of doctors convinced to invest in the
venture
Deal struck with Alumni Capital Partners, a
venture capital firm
All investment in- product development, tooling
and marketing
Managers, scientists and marketing personnel
hired
Selling ATH to Scepter
ATH acquired by Scepter
Purpose- offer profitable to all . Scepter would add a
new product , venture capital firms could cash out
profitably , ATH would have access to cash to
finance faster growth , Sceptor could increase its
presence in the market segment
ATH acquired in 2001 by Scepter
Earn-out clause – if new product currently being
developed by ATH approved by FDA Scepter will
pay it $30million , $35million if ATH’s technology
proved superior to other existing ones and
$120million over a 3 yr period if sales goals and
earnings goals were met
ATH’s 10 equity-holding managers who chose to stay
with Scepter could receive b/w $15million and
$7.5million additional payout from the sale of the
company
Growth Phase : 2001-2002
Original ATH Management team decided to
stay with the business
FDA approved the new product and initial
earn-out was paid
New technology in Europe could challenge
ATH so next earn-out not paid
Profit performance was very disappointing
for 2001 and 2002
This was due to heavy investment in
development costs
For the pay-out of $120million , senior
management had to turn around bottom
line for 2003…….
Push to Profitability : 2003
Motivate employees, to break through in
2003
Each employee would get a cash bonus of
20% of their salary and a free trip to
Hawaii
The results outstripped expectations; sales
quadrupled and profits were $10.6million
Euphoria did not last …..
Customer complaints increased , product
returns …
FDA paid a surprise visit and issued a
warning letter
Refocus on Process:2004-
2005
Focus on :-
•1)Develop a vision and belief system where
quality , customer
•value and investment for the future are
emphasized
•2)Develop a more balanced incentive system ,
Product Defects
Customer Contact Errors
Backorders
New Product Delays
New Management :2006-2007
Growth came to a halt
Senior managers began to leave the division
after cashing the earn-out
New management joined
Focus to reduce costs to 90% of their 2005
levels , focus on new product development
, attention on customer measures and
departmental objectives ….
Business met product quality requirements
to obtain ISO 9001 quality certificate and
customer service target but missed 2 …
Two new products withdrawn.
New labels ….
Product quality ( Product defects)
Customer service ( Customer contact errors)
On time shipments ( Backorders)
New releases(New product delays)