Advanced Medical Technology Corporation Essay
Harvard Business School
9-287-028
Rev. December 1, 1991
Advanced Medical Technology Corporation
Early in April 1986, Tom Winter, vice president and loan officer of the Western National Bank of San Francisco, California, was reviewing a loan request for $8 million from Peter Haskins, president of Advanced Medical Technology Corporation. Advanced Medical Technology Corporation (AMT) developed, manufactured, and sold scientific medical instruments, needles and catheters that allowed rapid and less invasive access to a number of different organs and vessels. These products represented an alternative to traditional surgical procedures and allowed analysis or corrective treatment with less risk and trauma and at lower cost. An example of the products were catheters that could be introduced into a blood vessel and then manipulated through partially closed arteries or into the heart itself. AMT had experienced extraordinary growth, fueled by heavy spending on research and development and a rapid expansion of its sales force. Its technical staff was very well regarded at developing new products with a wide range of applications. The combination of state-of-the-art products and a rapidly expanding market resulted in sales growth in excess of 30% per year. Mr. Haskins believed that industry sales would continue to grow at this rate and that any failure to maintain AMT’s market position would be damaging in terms of competitive position and internal morale. Sales volume, which had grown continuously from the start, was always large in relation to the available capital. The situation was exacerbated by large operating losses as AMT entered new markets aggressively. Management met the financing pressures by heavy reliance on short-term credit, by leasing some manufacturing facilities, and by establishing a connection with Biological Labs, Inc., a leading pharmaceutical firm. Biological Labs had been eager to participate in the large and rapidly expanding medical
9-287-028
Rev. December 1, 1991
Advanced Medical Technology Corporation
Early in April 1986, Tom Winter, vice president and loan officer of the Western National Bank of San Francisco, California, was reviewing a loan request for $8 million from Peter Haskins, president of Advanced Medical Technology Corporation. Advanced Medical Technology Corporation (AMT) developed, manufactured, and sold scientific medical instruments, needles and catheters that allowed rapid and less invasive access to a number of different organs and vessels. These products represented an alternative to traditional surgical procedures and allowed analysis or corrective treatment with less risk and trauma and at lower cost. An example of the products were catheters that could be introduced into a blood vessel and then manipulated through partially closed arteries or into the heart itself. AMT had experienced extraordinary growth, fueled by heavy spending on research and development and a rapid expansion of its sales force. Its technical staff was very well regarded at developing new products with a wide range of applications. The combination of state-of-the-art products and a rapidly expanding market resulted in sales growth in excess of 30% per year. Mr. Haskins believed that industry sales would continue to grow at this rate and that any failure to maintain AMT’s market position would be damaging in terms of competitive position and internal morale. Sales volume, which had grown continuously from the start, was always large in relation to the available capital. The situation was exacerbated by large operating losses as AMT entered new markets aggressively. Management met the financing pressures by heavy reliance on short-term credit, by leasing some manufacturing facilities, and by establishing a connection with Biological Labs, Inc., a leading pharmaceutical firm. Biological Labs had been eager to participate in the large and rapidly expanding medical