Tokos to Seek $30 Million in Stock Offering : Investments: The Santa Ana-based developer of a still-unapproved device that detects the onset of premature labor says it needs funds to maintain growth.
Tokos Parent Co., a home health-care company struggling to obtain federal approval of its device for detecting the onset of premature labor in pregnant women, said it intends to make an initial public stock offering next month in hope of raising about $30 million.
Tokos Medical Corp., the Santa Ana company’s 7-year-old subsidiary, built its business by providing a monitoring device worn by pregnant women who are at high risk for premature deliveries.
The Tokos monitor, a miniaturized version of a monitor commonly used in hospital labor rooms, is used in the home to detect contractions that can signal the onset of pre-term labor, enabling drugs to be administered to stall the birth process.
Tokos experienced three years of rapid growth in which it rebounded from a $2.1-million loss in 1985 to earnings of almost $1.7 million in 1988. In the same period, its revenue expanded to $45.8 million from $2.35 million. But, last year, although the company’s revenue continued to rise to $58.8 million, its earnings fell to $616,000.
Company officials said the earnings decline reflected an $800,000 accounting set-aside for the nonpayment of receivables by insurance companies and health maintenance organizations that went broke or disallowed payment for Tokos’ monitoring services.
In its prospectus, the company acknowledged that “since late 1988, questions regarding the independent clinical value” of (the company’s contraction monitoring device) have had an adverse impact on the growth in the number of pre-term labor management patients served by the company.”
Tokos for three years has been trying to obtain the U.S. Food and Drug Administration’s approval to promote use of its device for monitoring pre-term labor. An FDA advisory panel has questioned the effectiveness of the monitoring device as distinguished from the nursing component of the monitoring procedure.
Also, in November, 1989, the American College of Obstetricians and Gynecologists issued an opinion that because the clinical effectiveness of devices like the Tokos monitor had not yet been proven, their use should remain investigational.
Tokos began diversifying its business in mid-1988, providing skilled perinatal nursing services, clinical pharmacy services and specialized therapies for women in risk of pre-term labor or who have other complicated gynecological or obstetrical conditions.
The company serves patients in 57 locations throughout the country and has a professional staff of about 625 registered nurses and clinical pharmacists with expertise in obstetrics and gynecology.
Tokos officials said the company will go public with an initial offering of about 2 million common shares that will be underwritten by Robertson, Stephens & Co. and Donaldson, Lufkin & Jenrette Securities Corp. “We are going public now because we think we need to continue to finance the company’s growth,” said Robert Byrnes, the company chairman and chief executive.
The prospectus said money raised by the stock sale will be used to repay the company’s bank debt ($9.65 million as of Dec. 31), for working capital and possibly to acquire companies or products that complement the company’s business.
