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“The Model Startup” by Chet Bridger – The Buffalo News A new company called Appro Healthcare will launch its line of medical devices this week, serving as a textbook case for the commercial development that could be spawned in the Buffalo Niagara Medical Campus. Appro took a medical product developed locally, raised about $1.8 million of venture capital in upstate New York and gave a manufacturing contract to an Orchard Park company. Local business leaders cite Appro as a model for navigating the path from idea to revenue-generating product. “That’s the perfect model,” said Ange Fatta, president of BuffLink. “That’s a model that we want to see followed more and more in Western New York, whether it’s for drug design or for medical devices.” Fatta is the founder and former president of ACTS Testing Labs in Amherst, which was bought by a French company in 1998. He now heads a team of veteran business executives running BuffLink, a non-profit organization trying to help local researchers commercialize new technology. Although Appro raised the equity investment it needed to get to the revenue generation stage, access to venture capital remains a key issue as regional leaders try to create jobs by commercializing medical technology. Companies in upstate New York attracted $41 million of venture investment during the first quarter, according to research done by the accounting firm PriceWaterhouseCoopers. Upstate investment ranked 16th out of 18 regions tracked by the firm. Appro, headquartered at 847 Main St. in the medical campus, will begin selling a single-use, intravenous flow controller to the growing nursing home and home health care market. Polymer Conversions, an injection-molded plastics company with 75 employees in Orchard Park, started manufacturing the product for Appro last week. “We kept the manufacturing here in Buffalo, rather than going out to Mexico or California, where it is traditionally cheaper to manufacture medical devices,” said Appro President David Barthel. “Once we get to the larger volumes, we’ll be as competitive as products manufactured overseas. Per-piece cost drops on larger volumes because you get into an automated assembly process.” Polymer Conversions President Jack Bertsch said the contract is well timed for his company because the recession has been tough on small plastics manufacturers. Larger contracts, such as making plastic parts for computers and printers, have been going overseas, Bertsch said. The loss of business forces bigger U.S. plastics companies to start competing for the customers of smaller companies, he said. “The food chain gets smaller and the fish get bigger and bigger,” Bertsch said. The IV flow controller is just the first step for Appro. The company is finalizing a joint venture agreement with two Buffalo researchers to commercialize a new diagnostic capsule Barthel believes could have “huge market potential.” The computer-monitored capsule is currently in FDA clinical trials at a Rochester hospital. Appro is considered a medical technology process company, meaning it takes products other people invented and brings them to market. The company has seven employees, but expects to grow along with its product line. Other technologies Appro either has the rights to, or is negotiating for, include a medication cassette reservoir, an air pressurized infusion pump and an over-the-needle catheter system. The company hopes to launch those products by the first quarter of 2003. The primary use for Appro’s flow controller would be for IV delivery of drugs, such as pain killers and antibiotics. The device will be marketed by Alliance Medical, a Texas-based distributor which sells nationally to the nursing home and home health care market. “It’s an elegant business model that reduces your monthly burn rate and maximizes your partnership relationships. When you ask how to build a start up in Buffalo, well, you do it through partners,” said Barthel, 44, the former chief operating officer for a New Jersey-based water chemistry instrument company called Waltron. Appro “burns” expenses of about $70,000 a month. Holding expenses down is a key factor in trying to generate venture capital. Investors hesitate to put up money if they fear high expenses will impede the company from becoming profitable. Appro almost shut down last October, after the Sept. 11 terrorist attack deepened the recession and made raising capital even tougher. The Buffalo Economic Renaissance Corp. kept the company in business with a $100,000 bridge loan. Barthel eventually landed a $400,000 investment from Exponential Business Development of Syracuse, which has since been acquired by Newtek Securities of New York City. “We had stayed away from Buffalo in the past, but we saw some great possibilities for this company,” said Jeff Solomon of Newtek, who became chairman of Appro’s board of directors after making the investment.
"“The Model Startup”"