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ENTERPRISE—Entreprenuer Sharpens Skills With a Laser

CARLSBAD , Fritz Brauer loves Southern California, because “as a boy from Hamburg, you like the sun.” The German native also once loved American venture capitalists, who, contrary to the stodgy bankers in his homeland, thrive on funding risky yet promising projects, he said. Back in the 1980s, venture capitalism was unheard of in Germany. The prospects of raising money for a risky venture, such as creating a miniaturized laser for medical surgeries, were practically nil, he said. When Brauer immigrated to Boston in 1982 to run a firm that developed lasers for medical use, he was thrilled with the new opportunities. “I was exposed to this unique business side of the American business world that you could practically have an idea, create a plan around this idea, prove there is a market for it and venture capital will give you money,” he said.

In 1986, Brauer persuaded venture capitalists to fund his dream of developing a laser that was small enough to be used in the private doctor’s office. The laser was already approved for marketing when it became apparent the laser was mechanically flawed.

When venture capitalists learned Brauer’s laser lost power over time, they pulled the plug on Brauer too. Disillusioned, Brauer realized, American business wasn’t so grand any more. ‘First Failure’ , “I got gray hair, I gained weight, and was desperate. I was very upset , it was the first failure of my life,” Brauer said. It took Brauer, a 30-year veteran of the medical laser business, seven years to rebound and create a new firm. In 1993, Brauer started Clinicon Corp. in Carlsbad with $390,000 in personal savings and $200,000 from four doctors at hand. His first firm, California Laboratories in San Marcos, catered to an ’80s trend of “Star Wars”-like surgery.

“The ’80s was the decade of the medical laser company, but doctors didn’t like Star Wars lasers,” Brauer said. “It took away their scalpel their paintbrush.” Realizing this, Brauer set out to develop a new kind of laser that would put the feel of a scalpel into the surgeon’s hands. To combine a laser with a scalpel was unheard of at the time, but Brauer believes his final product is cutting-edge technology. Clinicon’s “Sure-Blade,” a scalpel with a diamond edge driven by a laser, can cut 100 times faster than a conventional steel blade without bruising, scarring or burning the skin while promoting healing, Brauer said.

It also combines cutting and cauterization.


Private Financing

Brauer beams with excitement as he explains how the device took shape. Brauer, a feisty, yet charming character, to date has raised $12 million from private investors to fund the development. Three local physicians invested $2 million; $5 million came from private investors in Frankfurt, Germany. Brauer holds a 65 percent stake in Clinicon. But he hasn’t forgotten the bittersweet taste of venture capitalism. No investment banker or venture capitalist owns a cent of Clinicon, he said.

Brauer doesn’t recall how he came up with the idea to create a laser-based scalpel, but he remembers the obstacles well. The filing of a patent to use the technology in June 1997 went relatively smoothly compared to initiating talks with DeBeers, the world’s leading diamond company. “It took me three days to get (to) the right people and find their interest and a few more months get them to the table,” Brauer said. In September 1997, DeBeers’ Dutch unit, Drukker Intl., which specializes in polishing and shaping diamonds, agreed to supply Clinicon with the specially shaped diamonds. In January 1998, Brauer paid $2.4 million in cash and notes to buy Kaiser Medical Optics Inc., a Carlsbad-based medical laser fiber optics firm.


The Missing Piece

It was the last missing piece for the device.

“All of a sudden I could get the laser light coming out of the diamond,” Brauer said.

It also gave him access to a pool of scientists and engineers he needed to develop the new laser.


The rest was simple.

He moved into Kaiser’s headquarters, trimmed his inherited staff from 35 to 15, joined his scientists with those at DeBeers’ and the Sure-Blade was on its way. In November 1998, the U.S. Food and Drug Administration cleared the device for marketing. Last month, the device gained marketing approval in Europe and Japan. So far, the device has made it into 40 doctor’s offices, mostly plastic surgeons.

Brauer said the laser is particuarly useful for esthetic surgeries, such as face lifts and eye lid surgeries, because the scalpel is so sharp it allows for accurate incisions with minimal bleeding. Brauer hopes to add 100 installations of the laser by year-end and a whopping 1,500 more installations next year. This year, Brauer expects to make $5 million in revenues. For 2001, sales will be boosted to $30 million as a result of a contract with a major health care firm that will bring the laser to many more doctor’s offices, according to Brauer. He didn’t disclose details. Brauer also plans to go public next year. Brauer admits bringing a new medical device in today’s bottom-line driven health care environment is a challenge.

He hopes his business strategy of leasing the laser will pave the way into doctor’s offices: Under the leasing program, doctors sign a three-year contract paying $500 a month to get the laser installed and maintained in their offices. Clinicon charges no additional fees and replaces the scalpel for free after it’s worn out (after about 60 surgeries), Brauer said. He knew early on doctors wouldn’t pay $50,000 to buy the scalpel. Still, it remains to be seen if doctors will trade in the significantly lower-priced steel blades and electro-cautery pencils for the Sure-Blade. Dr. Dennis Nigro, a plastic surgeon in Encinitas who works with Clinicon to perfect the device, foresees two major hurdles on the horizon: Cost and acceptance. “A lot of doctors are more interested in money than in the patient’s safety,” Nigro said. “Real good surgeons are fussy about their equipment. Sometimes doctors are hesitant to change their equipment.” Nigro said Clinicon’s device is very good, but not perfect , yet.

Areas of improvement include the cable, so it mimics a scalpel with nothing on it, he said.

Another area is the depth of penetration into a vessel which presently is limited to three millimeters, he said. Nigro, who is widely known for his charity work, said he’s used the blade on some 200 patients within the last 18 months, reconstructing among others, abdominal walls and faces. He also said he owns stock in Clinicon, but couldn’t say how much. Nigro plans to help Clinicon refine the technology, so the blade can be used for a wide range of surgical procedures, including brain and heart surgery. Brauer plans to do just that. “Wherever there is a scalpel used and they want to minimize bleeding, this scalpel is going to be used,” he predicts.

The blade is designed to be attached to any type of laser. In 1999, Clinicon struck an agreement with two health care firms , Dallas-based surgical supply firm Sun Medical and the European division of Japanese-based Olympus, which makes endoscopy devices , to distribute Sure-Blade into doctors offices and hospitals. Brauer said an agreement with a major Massachusetts-based health care firm is in the works. He said a confidentiality agreement prohibits him from disclosing the name of the firm. The business model, Brauer said, is simple. His first target market is plastic surgery, followed by outpatient clinics and then neurosurgery, transplant surgery, and other surgical centers. Brauer, himself a baby boomer, welcomes the vanity of his generation. “Two generations ago at (age) 55, I would have been an old man,” he said. “I am as young as 35 , at least in spirit.” Brauer can only hope that the baby boomers’ desire to dig deep into their pockets to look young and attractive will last well into the century.

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