Focus Surgery slashes work force by 40% as sales of Sonablate lag

Chief executive Driscoll stepped down in August

Focus Surgery last week laid off 20 employees in what appearsto be a cost-cutting move for a company that has been bleedingred ink. The layoff affects about 40% of the company's work force.

Focus Surgery of Fremont, CA, has reported a series of quarterlylosses since the firm was spun off from Diasonics in 1993 (SCAN8/25/93). For its 1995 second quarter (end-June), Focus Surgeryposted a net loss of $1.8 million on revenues of $166,000. Forthe first six months of 1995, the company had a net loss of $3.4million on $736,000 in revenues. In 1994, Focus Surgery had revenuesof $1.6 million and a net loss of $7.7 million.

Sales and marketing costs have increased as the firm commercializesits Sonablate 200 product, which uses high-frequency ultrasoundto treat benign prostatic hyperplasia (BPH). The device, whichsells for about $495,000, faces stiff competition from other formsof BPH treatment, including transurethral resection of the prostate(TURP), drugs, balloon dilation and stents, and other tissue ablationtechniques, such as lasers and thermal therapy. Focus Surgerysaid earlier this year that market acceptance of Sonablate 200has taken longer and has cost more than initially expected.

In addition, the company has been forced to look to internationalmarkets for sales of Sonablate 200 as it works on a premarketapproval (PMA) application for permission to market the devicein the U.S. (SCAN 9/28/94).

The lack of U.S. sales has taken its toll on the firm, whichbefore the split with OEC and Diasonics was able to rely on revenuesfrom those companies to stay afloat. A week before Focus Surgeryreported its second-quarter results in August, president and CEOEdward Driscoll resigned and was replaced by Daniel McNulty, whowas chief executive of Acoustic Imaging until 1991.

In announcing the layoffs this month, Focus Surgery said it"continues to examine all financing alternatives while maintainingits core technical capabilities." Focus Surgery executivesdeclined further comment on the company's financial health.