Message from the President
May 1, 2009
Dear Shareholders,
By several measures 2008 was another important year as we continue to build Novadaq. We met challenges and achieved new and significant milestones, and I couldn’t be more proud of the team’s overall performance.
I cannot think of a time when I have personally been more certain of our direction or confident about our future. We have never waivered from our vision to be the imaging company for the operating room. Not surprisingly, our path to get there has not always been perfectly straight and our pace of progress has not gone without an occasional interruption. SPY® enables surgeons across multiple specialties to visualize blood flow in vessels, tissue perfusion, tumors, tumor margins, and the lymphatic system in real-time. Before SPY, surgeons never saw those things in the operating room. But, aside from the obvious, what does that capability really mean? What does SPY allow surgeons to do that they couldn’t do before? What does SPY deliver in terms of economic value to hospitals? How do patients benefit? Will payers respond and, if so, when and to what extent? Those questions and their answers are the winds that we have been navigating in order to get where we are right now – at the forefront of what I believe is the next big wave in surgery.
Cardiac surgery was the initial market for SPY. But, in a way, cardiac surgery chose us instead of the other way around. It is the area where the majority of surgeries performed are highly complex. SPY’s value proposition for cardiac surgery is immediately clear. The presence of intra-operative imaging to guide and confirm success at the point of care improves the overall quality of outcomes of bypass surgery as it enables surgeons to perform the best possible procedure for each individual patient. It also allows surgeons to make critical decisions and address any issues before closing the chest incision. The improvements in clinical outcomes that result from the use of SPY also drive significant cost savings, which, in today’s environment, are important to all hospitals.
As SPY increasingly won the hearts and minds of cardiac surgeons, they started to spread the word about its advantages as a cross-specialty surgical imaging platform. Over the past year, interest amongst plastic reconstruction surgeons in particular has been building at an incredible pace. Breast reconstruction is clearly an area where adequate tissue perfusion is critical to achieving optimal outcomes and reducing the potential for costly and emotionally devastating post-operative complications. So, once again, plastic surgeons performing complicated reconstructive procedures really found SPY as opposed to SPY finding it.
All of this has resulted in Novadaq reporting solid growth for 2008. SPY disposable revenues were up 76% year-over-year and 50 new units were placed – providing Novadaq with a very solid foundation upon which to further grow. We also entered into our first major technology alliance with Intuitive Surgical subsequent to year-end. Nevertheless, in response to an uncertain economy, we decided it would be prudent to adjust our cost structure in parallel with that. While we did reduce our numbers of staff, we were careful to concentrate them in administrative and support areas so as to avoid any material impact on our research and development or sales functions. By reducing expenses, we have extended our cash runway and can continue to work toward achieving net profitability through our direct sales and technology alliances.
Our vision is clear. With each day, I am more energized as our strategy gels and we continue to build a great company. As you will see in the coming pages, our focus has been and will remain on the four A’s of all successful new medical technology rollouts – Awareness, Acceptance, Adoption and Acceleration. I look forward to updating you next year on our progress with respect to each one of those.
Arun Menawat, Ph.D, MBA President and Chief Executive Officer