Worcester Business Journal

www.wbjournal.com September 28, 2015 • Worcester Business Journal 13 >> M A N U FAC T U R I N G What do you want for your son's high school experience? ✓ Challenging academics that inform a student's mind. ✓ A teaching community that forms a student's character. ✓ The high school experience that transforms a student into a young man. Open House October 18, 2015 October 25, 2015 Entrance Exam October 31, 2015 Call Admissions at 508-842-8934 ext. 266 or email admissions@stjohnshigh.org for more information. Saint John's High School... more than a great education It's been a long journey for Mevion, which spent $150 million and many years developing its Littleton manufac- turing site, which employs 170 people. The company plans to add another 60 workers over the next year and eventu- ally expand the plant. Incorporated in 2004, the company didn't sell its first system until 2011 and installed it in late 2013. The lead time between order placement and a typical delivery timeline is 36 months. Customer purchases are influenced by zoning, determination of need certification, and financial considerations. Each system sold accounts for a significant portion of the company's revenue and manufactur- ing capability. In September 2014, the company filed for a $69 million initial public offering, which it subsequently withdrew. The prospectus for the IPO cited $7.6 million in revenue for three months of its fiscal year 2014 and $4.3 million in losses over that time period. The company has incurred losses since its inception and, according to the 2014 prospectus, expects to run a loss through the end of fiscal 2016. Its cumulative losses in fiscal years 2012 through sec- ond quarter 2014 totaled $120.5 million. Years of losses are not unusual for early-stage commercial development companies, particularly those bringing new medical technologies to market. In addition to lengthy sales cycles, new devices require market approval from the Food and Drug Administration, and big customers, such as hospitals, must often obtain a certificate of need from the state agencies that regulate them. To finance its expansion and ramped- up sales and marketing costs, Mevion recently entered into a joint venture in China through which it expects to secure up to $200 million in financing to support its global commercialization strategy. "We raised more money in this financing than we likely would have raised in an IPO," said Joseph K. Jachinowski, Mevion president and CEO. Additionally, the venture opened up the Chinese market, which couldn't have been done with an IPO, and having partners "very well versed in the nuanc- es" of operating in China presented a big opportunity, according to Jachinowski. Jachinowski cites increased demand for the product. The company marked the installation of two additional sys- tems this past spring, with three or four more under installation in the U.S. Another advantage of staying private, he says, is that "you don't have to con- tinuously disclose the state of your busi- ness," to competitors as well as investors. In addition to eliminating compliance costs, privately held companies can set longer-range goals. "You can undertake projects that might not have an impact on the next quarter." Mevion will focus on sales and mar- keting in China, Jachinowski said. China is at least the second biggest market in the world, and in five years it could out- strip the U.S., he said. Mevion will con- tinue to make core-technology compo- nents of the system in Massachusetts rather than overseas. Jachinowski com- mended the talent and education level of the company's Massachusetts workforce. Over time, he said, it will add some capacity in China, directed exclusively to supplying the Chinese market, but will manufacture "a large portion" of its China-market systems in the U.S. "Many leading Chinese institutions in health care are trying to secure the latest U.S. technology to support delivery of health care," Jachinowski said. "It's somewhat analogous to how Third World countries skipped past hardwired [telephony] right to wireless." What about trade secrets? China is notorious for appropriating intellectual property. "It's always a concern any- where," he said. "We do think having Chinese financial investors helps in that regard because they have a vested inter- est in Mevion doing well." n A physician's-eye view of the cancer field allows precise positioning of the proton beam (staged photo courtesy Mevion Medical Systems Inc.) P H O T O / C O U R T E S Y

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