Making the cut
Boulder surgical device firm inching toward profit
CUTTING EDGE
Lee Xiong, a senior technician at Encision Inc.,
assembles surgical equipment at the Boulder company.
By Deborah J. Myers
For the Camera
Last year, Encision changed its name from Electroscope to reflect its expanded product line. The new moniker may have foreshadowed another change for the 5-year old Boulder company: It's moving closer to turning a profit.
The surgical equipment company recently released its financial data for the first fiscal quarter, which ended June 30. For the first time, the company reported positive cash flow from its operations.
James A. Bowman, president and CEO, credited the company's recent financial boost to product acceptance in the market.
"We completed the full product line so hospitals are able to implement our products, he said. "Now we can satisfy the surgeon's demand."
Since its founding in 1991, the publicly traded company (OTC Bulletin Board: ECSN) has been in the red. However, the company has shown significant improvement since January and especially April through June.
The revenues for the first fiscal 2002 quarter were more than $1 million -- a 101 percent increase over the previous fiscal year.
Since January, the 25-employee company has been quickly closing the gap between loss and profit. At the end of fiscal year 2000, Encision's net loss was $1.96 million, compared with this year's loss of $990,452.
Encision's AEM Laparoscopic Instruments minimize patients' risks by regulating the flow of electrosurgical current during surgery, the company said. This current is used to make incisions and limit bleeding.
Surgeons do not require extra training to use the AEM equipment because their techniques remain the same. Safety is the reason behind Longmont United Hospital's switch to AEM two years ago.
"We've been using them as a safety measure for surgical patients," said facility administrator Shirley Torwirt. "It has a safety mechanism built in that sounds an alarm if there's a problem with the equipment during surgery. It shuts down the machine so you can use the backup equipment."
The product line completion also coincided with clinical endorsements from the medical community, Bowman said.
"It has really brought us visibility in the field and an increase in hospital conversion to our company," he said.
Another reason for the sudden popularity of AEM is a change in Joint Committee on Accreditation of Healthcare (JCAHO) standards, Bowman said. JCAHO certifies health care providers in a similar fashion that accreditation boards give colleges their stamp of approval.
"Beginning in July, JCAHO standards specified that hospitals must have proactive measures to improve patients' safety," Bowman said.
Hospitals must prove that they are taking these measures or else they could lose their JCAHO accreditation.
The accreditation is difficult to achieve and maintain because its statutes regulate and monitor every aspect of running a hospital, from record-keeping to cleaning procedures. Representatives of JCAHO routinely perform detailed audits on healthcare facilities they accredit, looking for departures from the massive JCAHO standards book.
"Recent hospital conversions to our products is a perfect indication to JCAHO (auditors) that you have substantial interested in patient safety," Bowman said.
Endorsements in medical publications have also garnered more attention to Encision. Articles about the company recently appeared in Surgical Services Management magazine and Outpatient Surgery magazine.
Most of Encision's employees are at the company's only office, in Boulder; a few sales managers are spread out nationwide. The company markets itself through direct sales to hospitals.
Encision has also started selling its products in Europe.
"It's a large market, and most of the companies are large, like Johnson & Johnson," Bowman said. "It's like David vs. Goliath in some respects, but our technology is patented and proprietary."