Novoste's cash burn rate of about $1 mil. per month puts pressure on management either to acquire a growth platform to augment flagging Beta-Cath vascular brachytherapy revenue or sell the company.

The firm's cash and short-term investments totaled $30.1 mil. as of Sept. 30.

"The decision we are facing comes down to this: can the declining [vascular brachytherapy] business be managed in such a way that a relevant technology can be distributed, bought, licensed or developed in a timeframe that insures our cash reserves are not depleted and provides a new growth platform for Novoste?" President & CEO Al Novak remarked during a Nov. 3 earnings call.

Alternatively, "can we find a buyer for the business, and if we can, will that buyer find our existing business, with its declining revenue and anticipated cash consumption, to be a net liability, and value the company at less than the value of its cash position?"

The Norcross, Ga. firm predicts its cash burn will total $3 mil. in Q4 as vascular brachytherapy (VBT) sales slip to $4.5 mil.-$5 mil. (compared to $6 mil. in Q3) and the "quick payback" from filling contracts obtained in its April purchase of Guidant's VBT business begins to dissipate (¹ Also see "Guidant Transfers Accounts To Novoste, Exits Vascular Brachytherapy" - Medtech Insight, 26 April, 2004., p. 7).

Novoste's board retained investment banking and consulting firm Asante Partners LLC in April to assist in strategy development (² 'The Gray Sheet' Oct. 18, 2004, In Brief). "We would hope to present...our conclusions in the next several months," Novak said.

The exec acknowledged several unsuccessful attempts to pursue acquisition and merger opportunities since drug-eluting stents began replacing VBT as the preferred method of treating in-stent restenosis. Meanwhile, the firm has begun "very early-stage testing" of a new device to treat chronic total occlusions, Novak noted.

However, "I do not believe, as a public company, we have the appropriate corporate structure for what is in essence, and would be, a single-product venture business. Nor do I believe this is the kind of investment our shareholders intended," Novak remarked.

Novoste CEO’s Challenge: Stabilize Brachy Biz Or Ink Merger While Cash Lasts

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