Angiotech Pharmaceuticals, Inc. 1 Hal Schroeder, University of Lethbridge Abstract Dr. Bill Hunter, co-founder and Chief Executive Officer of Angiotech Pharmaceuticals, Inc. had discovered the application of a drug to help prevent the buildup of scar tissue in arteries after angioplasty. The drug was coated onto a medical device placed in the artery to prevent it from renarrowing. The overall product was thus a combination of a medical device and a Pharmaceutical agent, areas which had traditionally been viewed as distinctly different segments of health care. The product was still in its development stages and had not yet received government approval for commercial use. Thus, while Angiotech had no revenues from product sales, it had contracts with two device producers for research and testing who covered product development costs provided milestone revenue payments and were expected to become the source of royalty payments after government approval. Angiotech had also succeeded in raising considerable equity funding, first from private sources and then with public issues of common shares. These sold for $10 in its Initial Public Offering in 1997, but by 2000 they were selling for over $78 in a third offering. After some fluctuations, the stock traded in the $85 to $90 range in early 2002. Introduction Early in the year 2002 Dr. Bill Hunter, co-founder, chairman and chief executive officer of Angiotech Pharmaceuticals, Inc. in Vancouver, British Columbia, experienced a pleasant surprise. Several years earlier he had discovered a drug which, when coated onto medical devices inserted into arteries during angioplasty, helped to prevent the re-narrowing of arteries after angioplasty. The devices, called stents, when coated, were thus a combination of a medical device and a pharmaceutical agent, areas which had traditionally been viewed as distinctly different segments of health care. Like most health care products, this new product required extensive testing before government approval to place it on the market could be granted. Since it was a combination of two quite different products, testing involved some unusual complexities. On the one hand, medical devices included items like prostheses and other artificial objects used by patients as well as various apparatuses used by physicians in surgical and other medical procedures. The focus and expertise here were in the areas of engineering and design. The area of pharmaceuticals, on the other hand, included drugs and medications taken internally or applied externally by patients. The focus here was clinical and the development and production of these products involved chemistry rather than engineering. Pharmaceutical companies, including Angiotech, were therefore generally not involved in medical device production and device producers generally not involved with pharmaceuticals. 1. The author gratefully acknowledges the cooperation of William L. Hunter, M. Sc., M. D., Chairman and CEO of Angiotech Pharmaceuticals, Inc., in providing information for this case. Copyright the author - all rights reserved. 1 To facilitate testing, Angiotech had contracts with two device producers who covered product development costs and provided milestone revenue payments when different stages of testing were successfully completed. The agreements also stipulated that they would provide royalty payments when the product went to market after government approval was obtained. By January, 2002 there were indications that these producers might receive approval to market their drug-coated stents in Europe by the second or third quarter of the year. Approval in parts of Asia was expected later in the year and in North America some time in 2003. Angioplasty and Stenting At the turn of the century cardiovascular disease was considered the number one cause of disability and death in the developed world, accounting for about 38 percent of deaths in Canada and an even higher percentage in the U. S. One of the most frequent forms was coronary artery disease (CAD), sometimes referred to as hardening of the arteries. With this disease, deposits of fatty materials or cholesterol, referred to as plaque, build up on the inner walls of the arteries creating a blockage which prevented free blood flow to the heart and caused problems ranging from chest pains or angina to heart attacks. For some years the only available method to correct this condition was bypass surgery in which a section of artery was grafted so as to allow the blood flow to pass by the blockage. This surgery was a complicated procedure involving high costs and weeks or even months of recuperation. It continued to be used, especially for patients with severe and/or numerous blockages, but angioplasty, a more recently developed form of treatment for CAD, had increasingly been used for other patients in recent years. In this procedure under local anesthesia, a catheter with a balloon tip was inserted into the artery and directed to the area of the blockage. The balloon was then inflated so as to compress the plaque against the wall of the artery thereby widening the passage for easier blood flow after the balloon was removed. This procedure was considerably quicker and less costly than by-pass surgery and required a much shorter recuperation period. Patients were required to rest for some time after the procedure, but were able to go home in a few days unless there were complications. Although angioplasty was not suitable for all patients, it had become as widely used as by-pass surgery. One of the problems associated with angioplasty was that it served as only a temporary solution for some patients, especially those with high stress levels, insufficient exercise or diets with high levels of fat or cholesterol. An estimated 30 to 40 percent of angioplasty patients experienced restenosis, a re-narrowing of their arteries, after they had been widened by angioplasty, some as early as six months after the procedure. The process of stenting was developed to address this problem and, combined with angioplasty, could be used as an alternative to by-pass surgery. In this process, the stent, an expandable mesh wire tube, was reduced to a small diameter and inserted into the artery with a balloon catheter inside the stent. The catheter and stent would be directed to the area of the plaque and then expanded to compress the plaque and thereby widen the artery. When the balloon was removed the stent remained permanently expanded to allow freer blood flow through the artery. Although the probability of restenosis occurring after stenting was lower than with balloon angioplasty alone, some chances of blockage (20 to 25 percent) remained even though the stents 2 were permanently expanded. There were instances in which the balloon or stent would damage the artery wall causing inflammation and growth of scar tissue which created blockages or partial blockages some time after the stents were installed. Radiation was sometimes used to prevent such re-narrowing but this was a lengthy and expensive process. A preferred approach involved medication and recent experiments had been conducted in coating stents with a drug which was gradually released into the cells of artery walls to reduce the chances of restenosis after angioplasty. Such drug-eluting stents were still in experimental stages and had not yet received government approval to be marketed.1 Angiotech Pharmaceuticals, Inc. - Historical Highlights Hunter and two other scientists founded the company then known as Angiogenesis Technologies, Inc. in 1992. They discovered that paclitaxel, a highly successful drug used in chemotherapy treatment of cancer, when reformulated, served as an inhibitor of some chronic inflammatory diseases, including rheumatoid arthritis, psoriasis, and multiple sclerosis, as well as the inflammation caused by stenting. Later that year Angiotech raised $340,000 in seed funding to begin research and development. In 1993 pre-clinical studies of a paclitaxel-coated stent were begun and the company received its first government funding for the program in 1994. Later that year $500,000 was raised in private funding followed by another $1.4 million in 1995 after pre-clinical studies for rheumatoid arthritis had been initiated. In 1996 pre-clinical studies for secondary progressive multiple sclerosis (SPMS) and psoriasis were initiated and the company raised more funds including $3.4 million in private financing, $3.2 million in venture financing followed by a further $7.4 million in private funding. The company's name was changed to Angiotech Pharmaceuticals, Inc. In 1997 Angiotech signed agreements with two major stent producers, granting them the rights to use paclitaxel for coating their stents during the testing required to gain government approval. In return, the two producers, Boston Scientific Corp. (BSC) and Cook, Inc., agreed to provide Angiotech with milestone payments upon the successful completion of different stages of testing until government approval was received and royalty payments based on sales of coated stents after approval was granted. With significant agreements in place, Angiotech placed an Initial Public Offering of 2.45 million shares at $10 per share and was listed on the Toronto Stock Exchange with the letters ANP. In 1998 further studies on rheumatoid arthritis, SPMS and psoriasis were undertaken. That year, Angiotech also signed an agreement with C. R. Bard, Inc. for the development of a paclitaxel-loaded wrap designed to be applied to the outside of an artery during by-pass surgery and so reduce the possibility of restenosis after grafting. In 1999 it closed a second public offering of 1.49 million shares at $11.50 per share for over $17.1 million. The year 2000 was highly significant for the company. Angiotech was listed on the NASDAQ stock exchange with the letters ANPI and later that year collected $137.8 million with a public offering of 1.75 million shares at $78.77 per share. In addition, Angiotech received $1.8 million milestone payments from both BSC and Cook for their respective paclitaxel-coated stent programs. Preliminary results of the studies were encouraging and a pilot project for phase two of the psoriasis 3 study was initiated in late 2000. That year and again in 2001, Angiotech placed 20th on Profit Magazine's list of the 100 fastest growing companies in Canada.2 Finance With its products still in development stages, Angiotech financed its cash requirements in two primary ways. Payments from its research collaborators, other contracts and government grants constituted its revenue. As shown in the Consolidated Statements of Loss for fiscal years ending on September 30, 1999 to 2001 in Appendix 1, a large percentage of this was license and option revenue and research contract fees in the form of milestone payments. The other means of financing was issuing shares as described above. The Balance Sheets as at the end of the same years are shown in Appendix 2 and include the accounts of the company and its wholly-owned subsidiary Angiotech Pharmaceuticals (US), Inc., incorporated in Washington State. The company had 200,000,000 nopar value common shares and 50,000,000 no-par value class I preference shares which had been authorized on March 20, 2000. As at September 30, 2001, 15,530,754 common shares had been issued. Cook and BSC owned about two percent of the shares at the time of the Initial Public Offering, but by the end of 2002 this percentage had decreased considerably. Not having achieved any profits to date, the company had a deficit of just over $40 million. However, some warrants to acquire common shares were not exercisable until after November 2, 2001 and were therefore shown as contributed surplus on the September 31, 2001 balance sheet in the amount of $1.723 million. Funds collected were invested until required to cover expenses. Short term investments with an original maturity of three months or less were listed on the balance sheets as cash equivalents while those with maturity greater than three months were listed as short term investments. At the end of fiscal year 2001 these included mainly commercial debts with an average interest rate of 5.7 percent. A breakdown of capital asset costs, accumulated amortization and net book value is shown in Appendix 3. The cost, accumulated amortization and net book value of medical technologies are shown in Appendix 4. Although the company formally had no long term debt at the end of fiscal 2001, it had lease agreements for office and laboratory space; rent expense for the year was $552,576. Angiotech also was committed to future expenses related to research and development for collaborating companies with which it had agreements. Human Resource Management and Organizational Culture Although Angiotech used traditional employee recruitment methods like interviews to some extent, early in its development the company often used universities for recruitment purposes. The company sponsored a chair in the Faculty of Pharmaceutical Sciences at The University of British Columbia and also funded some laboratories there and at other universities with graduate studies in the area. Financial awards were given to students working on projects similar to Angiotech's research. During their three year Ph.D. programs the students and company personnel would become familiar with each other, so these universities served as effective sources of future 4 employees. Several criteria were considered vital to the selection process. Potential employees must be team players who would cooperate with others and function effectively in project teams. Another highly valued characteristic was creativity in seeking solutions to problems or other challenges. The organizational structure and culture were instrumental in achieving the potential and facilitating employee development to a maximum. According to Hunter, the company used a flat organizational structure, an open door policy and tried to foster a collaborative, innovative and creative culture. With the heavy focus on research and development, the chances of experiment failure were high and only a small percentage of projects were successful. In such an environment, a major organizational objective was not only to fail as inexpensively as possible, but also to accelerate failure by recognizing that you learn from failures and that failed experiments provide vital information for projects which are ultimately successful. In 2001 the company had 61 employees who received benefits including life insurance, disability insurance as well as medical and dental coverage. Ad hoc bonuses of up to $500 were sometimes paid for exceptional performances. The company also offered employees incentive stock options which were vested over four years. When these reached 75 percent of potential, they were re-vested over another four years. Hunter considered this stock option plan vital to the retention of highly educated employees. Although employee turnover in similar firms was generally quite high, Angiotech=s averaged at only 1 to 2 percent per year. Marketing Angiotech's product line consisted of two segments. The larger of these was research and development related to drug-loaded coatings for medical devices such as stents and drug-loaded medical implants. In 2001 this segment accounted for over 99 percent of Angiotech=s total revenue ($1,123 thousand of $1,131 thousand). The other category was research and development related to pharmaceuticals for the treatment of chronic inflammatory diseases including psoriasis, multiple sclerosis and rheumatoid arthritis. All of the company=s revenues came from its collaborating companies which were both located in the U. S. Marketing in the pharmaceutical and medical device industries included some unusual features generally not found in other industries. First, it was generally not the ultimate consumer, namely the patient, him or herself, who decided whether or not the product would be purchased. It was, instead, the surgeon who generally decided what he or she considered most suitable for each individual patient. Promotion was thus largely physician driven rather than customer driven as was common in various other industries. An important feature of marketing stents thus was the heavy focus on medical doctors and particularly presentations of research findings at conferences attended by doctors. To confirm authenticity of the results it was important that the research involve scientific methods like random sampling where possible, control groups for purposes of comparison and blind reviews by peers. 5 Publication of findings in reputable medical journals also served to inform physicians on the stages of development. In some instances where research findings were publicized in newspapers or non-medical magazines, the patients themselves would become more aware of new developments. With the abundance of material on the Internet, many patients were becoming increasingly informed about their particular conditions and the available remedies. The Internet was thus generating a new trend in that more highly educated patients were increasingly influencing physicians' decision making on what products to use in their particular circumstances. For Angiotech, however, it was neither the patients nor the physicians that were the company=s immediate customers who provided revenue for the company. Rather, its revenue was primarily in the form of milestone payments from its collaborators until government approval was achieved and royalties after approval would be granted. Formulating these agreements had thus been a major feature of Angiotech's marketing efforts to date. While agreements of this nature were not unusual, these particular two had a highly unique feature. Agreements granting rights to a patent to another party generally extended those rights exclusively to one organization. In contrast, Angiotech=s agreements granted co-exclusive rights to BSC and Cook. According to Hunter, such co-exclusive rights had no precedent in intervential cardiology. In addition to BSC and Cook, there were several other stent producers who did not have agreements with Angiotech. Major Stent Manufacturers Boston Scientific Corporation was one of the world=s largest medical device producers with subsidiaries in Europe and Japan and dealers in about fifty other countries. In 2001 it employed about 13,500 people and used six divisions to market over 10,000 products including devices like catheters and stents to expand arteries as well as catheters, balloons and vascular grafts used in bypassing or sealing arteries.3 From its early years the company placed a high priority on organizational growth through the development of new products for clearly focused markets. It remained committed to the improvement of healthcare through the development of minimally invasive products and services at the lowest possible cost. Cook Incorporated was headquartered in Bloomington, Indiana and produced over 50,000 different products available anywhere in the world. In addition to numerous other items, this product line included catheters, stents, grafts and various other devices necessary for angioplasty and by-pass surgery. Cook was in the process of completing the construction of an 800,000 square foot facility4 which would bring together its various arms including product development, manufacturing, administration, shipping and storage. From the outset, Cook's commitment was to quality and innovative development of minimally invasive products which maximized satisfaction of patients. Guidant Corporation was involved in the development, production and distribution of products for heart and vascular conditions. Its head office was in Indianapolis and there were also several other 6 major facilities in the U. S. and others in Ireland and Puerto Rico. Although the company was just founded in 1994 when it was spun out of Eli Lily, it had grown quickly and had over 9,000 employees by 2001.5 Its product line included several types of catheters, stents and related devices and services for angioplasty. It was organized into four units so as to maintain the innovative and entrepreneurial spirit of smaller organizations to fulfill its mission of providing state-of-the-art technology to surgeons to extend or save the lives of patients. Guidant's sales force was particularly well known for its service to customers and high level of clinical expertise. Medtronic, Inc. had its head office near Minneapolis and a European headquarters in Switzerland. With approximately 25,000 employees in development and manufacturing centres in several countries and sales forces capable of doing business in about 120 countries,6 it was considerably larger than the three mentioned above. Its product line was divided into six categories including devices required for by-pass surgery, stents, balloons, catheters, etc. for angioplasty as well as devices to regulate the rhythm of a patient's heart and therapies used to treat diabetes. Medtronic's overriding objective was to provide leadership in medical technology and offer devices and services which made it possible for surgeons to ease the pain, improve the health and perhaps lengthen the life expectancy of patients, even in difficult circumstances. Johnson and Johnson was a widely-known producer of a very extensive line of healthcare products and related services ranging from baby products to orthopedics available to customers, pharmaceutical companies and doctors in over 175 countries. With about 100,000 employees the company was a collection of 195 relatively small and highly autonomous subsidiary business units (sometimes referred to as Johnson and Johnson companies) located in 51 countries.7 One of these companies was Cordis Corporation, a cardiology unit which produced coronary artery stents and related products used in angioplasty. Johnson and Johnson's head office was located in New Jersey and provided subsidiary companies with staff services in areas like legal matters, human resource management, financing and some aspects of marketing. A major aim was to be a company known and trusted by customers, with a commitment to fulfilling its responsibilities to all stakeholders and a strategy of growth by innovation. To Market, To Market As the prospect of having these drug-eluting stents on the market seemed to be drawing closer, approximately 100,000 U. S. patients were experiencing recurring restenosis and an estimated 500,000 angioplasties were performed each year in the U. S. with a population of about 284 million. It was expected that the estimated $2.4 billion (U.S. $) stent market would double with the introduction of drug-coated stents, which would sell at a premium. While un-coated stents had been marketed between $1,200 and $1,500, the coated stents would be priced about double that at approximately $3,000 (both prices U.S. $) Other parts of the more developed world were experiencing similar rates of angioplasties and recurring restenosis, including Canada with a population of about 31 million and western, northern and southern Europe with 184, 96 and 145 million respectively.8 Rates in other parts of the world were not as well known, but their medical communities similarly looked forward to a solution to the problem of restenosis. Getting government approval to market drug-coated stents would be a highly significant event in the 7 development of the medical technology in the industry. In Hunter's words, the drug-coated stent has been ... one of the most important medical events of 2001. Having been there from its inception, we are gratified to see the culmination of our collective work on the verge of revolutionizing the practice of cardiology. It would also provide a notable business opportunity for most of the stent producers. Since it would receive a royalty of 5 to 10 percent on sales of paclitaxel-coated stents, Angiotech obviously had an interest in getting them onto the market and gaining market share. Although Medtronic, the second largest stent producer, was not known to be involved in the development of coated stents, three other producers were also eager for the paclitaxel-coated stents to receive government approval. However, Johnson and Johnson's Cordis Corporation had been conducting tests on stents coated with an antibiotic called rapamune, which still required further testing, but showed considerable promise. This coating had a similar effect as paclitaxel, but used a different drug compound. With an earlier non-coated stent patent having been licensed to Johnson and Johnson in the early 1990s, it had a market share of about 95 percent in the U. S. at that time. However this license was not applicable in other countries, so stent providers were scrambling for market share in Europe and with the introduction of other uncoated stents in the U. S., its market share had declined considerably by 2001. With the goal of being first to market, it planned to launch the rapamune-coated stent in Europe in April, 2002. On the other hand Angiotech's collaborators were also determined to establish market share in Europe; BSC and Cook were both committed to Angiotech for the 17-year lifetime of its patent beginning in 1998. On January 17, 2002, BSC announced that, after nine months, its patient clinical trials showed results of zero restenosis, as had also been the case at six months. With these promising results, BSC was expected to launch its coated stent in the European Community and Asia during the third or fourth quarter of 2002. On January 18, Cook announced that it had submitted a formal application for approval to market its coated stent in the European Community. It was expected that its stent would be launched in this market some time in the second quarter and in Asia during the third quarter of 2002. Both Cook and BSC were expected to receive the Food and Drug Administration approval to launch their products in the U. S. in 2003. Approval from the Health Protection Branch for marketing in Canada was also expected at about that time. Guidant, another stent producer, was also interested in gaining access to the paclitaxel coating technology, but did not have an agreement with Angiotech. It therefore made arrangements with Cook, under which Guidant would send the components to Cook who assembled, packaged and sold the product to Guidant who would then resell it under its name. This arrangement with Guidant provided an opportunity for Cook to increase its sales volume and market share. According to Hunter, the chances of a pharmaceutical agent like paclitaxel being instrumental in achieving such a technological breakthrough were approximately one in ten million at the time experimentation was begun. With the promising results after several phases of research, Hunter now considered the probability of success in getting government approval to be greater than the probability of failure. He could thus look to the future with some degree of confidence and decide 8 how Angiotech should respond to these developments. Glossary of Terms Angina an attack of spasms or pressure, often in the chest, sometimes accompanied by a feeling of suffocation. Angioplasty a procedure by which veins or arteries with blockages are widened by inserting and inflating a balloon to compress the build-up of plaque which was causing blockage and allow freer blood flow sometimes also called percutaneous transluminal coronary angioplasty (PTCA). By-pass surgery a surgical procedure in which a section of vein or artery is grafted so it can carry blood to or from the heart by by-passing a blockage caused by a build-up of plaque. Catheter a thin flexible tube placed into body cavities to remove or insert fluids or to insert other instruments through it during medical procedures. Coronary Artery Disease a disease in which plaque builds up on the inside walls of coronary arteries causing blockages which reduce the free flow of blood. Sometimes referred to as CAD or hardening of the arteries. Paclitaxel a drug used in chemotherapy treatment of cancer which, when reformulated, serves as an inhibitor of inflammatory diseases and the development of scar tissue on artery walls after stenting. Developed by Angiotech for coating stents. Plaque fatty deposits, cholesterol or debris which build up on the inside walls of arteries or veins and block the free flow of blood to or from the heart. Rapamune an immuno-suppressive drug which prevents cell replication used in treatments to prevent the rejection of transplants and as a coating for stents developed by Cordis Corporation, a wholly-owned subsidiary of Johnson and Johnson. Sometimes referred to as sirolimus. Restenosis the re-narrowing of an artery after it has been opened more widely by angioplasty or after grafting in by-pass surgery. 9 Stent a wire mesh tube placed in an artery to prevent it from re-narrowing (restenosis) after it has been widened using angioplasty.9 10 APPENDIX 1 Angiotech Pharmaceuticals, Inc. Consolidated Statements of Loss For Years ended September 30, 2001, 2000 and 1999 Thousands of Canadian Dollars* 2001 2000 1999 REVENUE License, option & research contract $ 1,123 $ 4,765 8 6 16 1,131 4,771 705 Research & Development 15,122 9,614 9,503 General & administration 7,336 4,357 3,543 Amortization 2,112 1,655 1,158 TOTAL EXPENSES 24,570 15,626 14,204 OPERATING LOSS (23,439) (10,855) (13,499) Foreign exchange gain (loss) 5,976 3,285 (153) Investment & other income 9,136 5,925 1,200 TOTAL OTHER INCOME 15,112 9,210 1,047 LOSS FOR THE YEAR (8,327) (1,645) (12,452) Deficit, beginning of year (31,799) (30,154) (17,702) DEFICIT, END OF YEAR $(40,126) $ (31,799) $ (30,154) Number of common shares outstanding# 15,414 14,332 12,106 Loss per common share (not in 000s) (0.54) (0.11) (1.03) Government grants TOTAL REVENUE $ 689 EXPENSES OTHER INCOME (EXPENSE) * Except for per share information Source: Angiotech Pharmaceuticals Financial Statements APPENDIX 2 11 # Weighted average, in thousands Angiotech Pharmaceuticals, Inc. Consolidated Balance Sheets as at Sept. 30, 2001, 2000 and 1999 Thousands of Canadian Dollars 2001 2000 1999 ASSETS Current assets Cash & cash equivalents $ Short-term investments 3,210 $ 4,109 $ 6,087 152,884 156,186 25,230 Accounts Receivable 180 36 95 Prepaid expenses & deposits 511 127 142 156,785 160,478 31,554 Capital assets - net* 1,429 1,192 1,044 Medical technologies - net** 4,489 4,259 2,766 162,703 165,929 35,364 Accounts payable & accrued liabilities 4,173 2,381 1,010 Total current liabilities 4,173 2,381 1,010 Deferred revenue 1,602 2,292 - TOTAL LIABILITIES 5 ,775 4,673 1,010 195,331 192,981 60,981 1,723 74 963 Total current assets TOTAL ASSETS LIABILITIES AND SHAREHOLDERS= EQUITY Current liabilities SHAREHOLDERS= EQUITY Share capital Contributed surplus Deficit (40,126) (31,799) TOTAL SHAREHOLDERS= EQUITY 156,928 161,256 162,703 $ 165,929 TOTAL LIABILITIES & EQUITY $ * See Appendix 3 for breakdown of cost, accumulated amortization and net book values ** See Appendix 4 for cost, accumulated amortization and net book value Source: Angiotech Pharmaceuticals Financial Statements APPENDIX 3 Angiotech Pharmaceuticals, Inc. 12 (27,590) 34,354 $ 35,364 Breakdown of Capital Assets and Accumulated Amortization (thousands of Canadian Dollars) Accumulated Cost Amortization Value 2001 Computer equipment $ Computer equipment 1,342 $ 790 Net Book $ 552 1,792 770 442 338 104 58 Office furniture & equipment 1,022 55 3 Leasehold improvements 2001 TOTALS $ 3,634 $ 2,205 $ 1,429 2000 Computer equipment 933 564 369 Computer equipment 1,485 769 716 370 275 95 58 46 12 Office furniture & equipment Leasehold improvements 2000 TOTALS $ 2,846 $ 1,654 $ 1,192 Source: Angiotech Pharmaceuticals Annual Reports APPENDIX 4 Angiotech Pharmaceuticals, Inc. Accumulated Amortization of Medical Technologies (thousands of Canadian Dollars) 2001 Medical technologies - cost $ Less: accumulated amortization 7,944 2000 $ (3,455) Net book value $ 4,489 6,181 (1,922) $ 4,259 Source: Angiotech Pharmaceuticals Annual Reports References Angiotech Pharmaceuticals, Inc. website www.angiotech.com. Boston Scientific Inc. website www.bsci.com. Canada's Fastest-Growing Companies 2000, Profit -The Magazine for Canadian Entrepreneurs, June, 2000, vol. 19, no. 4, pp. 48-57. Canada's Fastest-Growing Companies 2001, Profit - The Magazine for Canadian Entrepreneurs, June, 2001, vol. 20, no. 4, pp. 32-41. Cardiology Associates website www.cardioassoc.com. 13 Cardiovascular Institute of the South website www.icorp.net. Cook, Inc. website www.cook-inc.com. Guidant Corporation website http:/guidant.com. Hunter, William L., M. Sc., M. D., personal interviews with the author. Johnson & Johnson website www.jnj.com. Medfacts/TeleVisual/Communications website www.medfacts.com. Medtronic Inc. website www.medtronic.com. Percutaneous transluminal coronary angioplasty website www.ptca.org. Plainsense website www.plainsense.com/health/heart/angioplasty.htm, Population Reference Bureau website, www.prb.org. Endnotes 1. This section adapted from Angiotech Pharmaceuticals, Inc. website www.angiotech.com, Boston Scientific Inc. website www.bsci.com, Cardiology Associates website www.cardioassoc.com, Cardiovascular Institute of the South website www.icorp.net, Cook, Inc. website www.cook-inc.com , Johnson & Johnson website www.jnj.com., Medfacts/TeleVisual/Communications website www.medfacts.com, Percutaneous transluminal coronary angioplasty website www.ptca.org, and Plainsense website www.plainsense.com/health/heart/angioplasty.htm, 2. Canada's Fastest-Growing Companies 2000,@ Profit -The Magazine for Canadian Entrepreneurs, June, 2000, vol. 19, no. 4, pp. 48-57 and Canada's Fastest-Growing Companies 2001,@ Profit - The Magazine for Canadian Entrepreneurs, June, 2001, vol. 20, no. 4, pp. 32-41. 3. Boston Scientific Inc. website www.bsci.com, Jan., 2002. 4.Cook, Inc. website www.cook-inc.com, Jan., 2002. 5.Guidant Corporation website http://guidant.com., Jan., 2002. 6.Medtronic Inc. website www.medtronic.com., Jan., 2002. 7.Johnson & Johnson website www.jnj.com., Jan., 2002. 8. Population Reference Bureau website, www.prb.org,, Jan., 2002. 9.This section adapted from sources listed in endnote 1. 14 \f\fWestJet Airlines Strengths They use a bottom-up approach to management Low turnover Lowest cost airline for short flights in Canada 75 people required to run operations as opposed to 140 in most other airlines The mechanics will know the airplanes very well because the airplanes are mostly the same planes Got rid of the cleaning crew and had their own people clean the planes which saved WestJet 2.5 million per year Canada 3000, one of WestJet's competitors, filed for bankruptcy They use almost all the same planes, so their mechanics are most likely proficient in all the problems these planes could develop Weaknesses No meals on the plane $5 sandwiches are served in the terminal that can be brought on the plane No real long flights WestJet's competitive advantage lies in the short flights because they can keep them low priced Not enough workers if some start quitting or calling in sick workers can be transferred over to different airports because they all have very similar operations Opportunities Develop better Customer Service than their competitors so that they can mitigate possible complaints or concerns from low income passengers They are able to do this because of the dedication of their employee team Develop a great customer experience on the flights in particular with great customer service Expand into different areas because of the cookie-cutter system they have set up for all of their operations They would be able to buy the same aircraft and develop great teams more efficiently because they already have a system that works in other places For new operations, they could have already-trained employees transferred to the facilities just to get them started up and to train incoming employees Threats Another low cost leader entering the market Not a good enough flight experience Their customer service is beyond that of other flights because of their employees feeling invested in the company Travel distance is not extremely far, and only goes between mostly places in Canada Low income people might mean more rude customers They may have difficulty finding replacement help if workers start quitting or calling because of their already low number of workers on each operation Recommendations Stick with the low-cost leader strategy. Continue to refrain from serving meals on the flights and stick with the optional $5 sandwiches sold at the terminals because this is where one of their competitive advantages comes from. No one else is able to do this because people would complain if they were not paying such a low price and if the customer service was not great. Continue to refrain from developing routes for long flights. This is their dominant market and they know how to do well in this situation. The one thing WestJet could do to grow their business is to expand into other markets, such as the US market and even overseas markets, developing operations in other countries in the same way they set up operations in Canada. Also, WestJet should develop a great customer service team just to deal with any issues customers may have regarding their flights. WestJet should also look for ways to reduce costs while maintaining their competitive advantages. They should keep their bottom-up approach, which will allow them to look at their business as a whole and ensure every part of their team has the resources necessary to complete their objectives