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CEOCFO Monthly Analyst |
SpectRx – with biophotonic
technology ready to impact the cancer diagnostic
Healthcare SpectRx, Inc. 6025A Unity Dr Mark A. Samuels Interview conducted by: CEOCFOinterviews,com BIO OF CEO
Mr. Samuels is Chairman of the Board of Directors and Chief Executive
Officer of SpectRx, Inc. Mr. Samuels has degrees in Physics and Electrical Engineering
from the Georgia Institute of Technology. He holds 11 granted patents in medical and
commercial applications of electro-optics and has founded two successful companies. After
spending several years in the defense industry developing electro-optic sensors, Mr.
Samuels founded Laser Atlanta Optics, Inc. In 1992, he co-founded SpectRx,
capitalized the Company in early 1993 and in 1997 took SpectRx public. In addition
to his corporate duties, Mr. Samuels founded the Atlanta Chapter of the IEEE Laser and
Electro-Optics Society and was Vice-Chairman of the Georgia BioMedical Partnership. About SpectRx, Inc. SpectRx
(NASDAQ: SPRX), a specialty point-of-care medical technology company, develops and
manufactures non-invasive and minimally invasive diagnostic and monitoring systems.
The company employs leading-edge biophotonics, or the use of light and spectral energies,
to develop painless point-of-care alternatives to blood- and tissue-based procedures.
Biophotonic technology uses light and other forms of energy to interrogate or gain unique
access to the human body to determine if a disease is present or likely to form in the
future. Just as physicians use their eyesight subjectively to aid in diagnosis,
biophotonics studies human tissue objectively at the cellular and molecular level to
detect, diagnose and monitor disease. Through internal product development and
partnerships with major health care companies, SpectRx focuses on key niche and large
diagnostic markets. SpectRx has development partnerships with Abbott Laboratories
(NYSE: ABT), Respironics (NASDAQ: RESP), Roche Diagnostics and Welch Allyn. Two large-market products: The
continuous glucose monitoring product is a sensor, worn on top of the skin, that
offers the promise of allowing people with diabetes to continuously monitor their glucose
levels without the pain and inconvenience of fingerstick blood tests or implanting a
sensor. Prototypes of the device have shown the capability of providing
readings once a minute. The technology measures glucose levels in interstitial fluid (ISF)
rather than blood. A stream of ISF is collected through an array of microscopic
holes or micropores created with a laser in the outer layer of skin, and measured in a
patch containing a glucose sensor. It is envisioned that the final design sensor
patch would be used for up to three days. SpectRx is developing the product with Abbott
Laboratories. The
non-invasive cervical cancer detection device being developed by SpectRx and its
partner Welch Allyn, use SpectRx’s proprietary biophotonic technology to locate
cancers and precancers painlessly and non-invasively by analyzing light reflected from the
cervix. The reflected light creates an image
of the cervix indicating the location and severity of disease. The technology
distinguishes between normal and diseased tissue by detecting biochemical and
morphological changes at the cellular level. Unlike
Pap or HPV tests, the SpectRx/Welch Allyn prototypes do not require a tissue sample or
laboratory analysis and work across the entire adult population. CEOCFOinterviews - Mr.Samuels, can you give us a brief history of SpectRx? Mr.Samuels: "SpectRx is a research and development company that is developing medical diagnostic and monitoring products based on biophotonic technology. We have one product in the marketplace, a completely non-invasive monitor of infant jaundice replacing the blood test, called the BiliChek. We are now doing research and development on some major new products in cancer diagnostics and glucose monitoring. We have a technology platform using light and laser energy to provide painless, non-invasive and minimally invasive alternatives to conventional blood tests or tissue testing. In the glucose monitoring product that we are working on with Abbott Laboratories, we use a laser beam to make a tiny hole in the uppermost layer of the skin, and draw interstitial fluid out through the hole. That allows us to test for glucose levels in the body without drawing blood or having a very painful finger stick, which is what people for the most part use today to test sugar, or glucose, levels in their body to treat diabetes. Today, if you want to monitor how much sugar you have in your body you stick your finger 4-5 times a day, to draw blood and measure it. You have to do that in order to adjust your diet, exercise, and medication. The problem with that approach is that it is painful and inconvenient, and very difficult to use with children who have diabetes. Moreover, when you are sleeping there is absolutely no way for you to find out whether you may be having a critical low blood sugar episode. Our device is intended to provide a continuous read-out of how much sugar you have in your body by testing the sugar in interstitial fluid rather than in the blood. In addition, we can do this painlessly and provide an alarm to warn the user of low or high readings. Eventually we believe we will be able to connect this type of device to an insulin delivery system and create an artificial pancreas. Everyone who is working on continuous glucose monitoring systems has in mind the idea of eventually linking with insulin delivery system to make an artificial pancreas. We do not have a large amount of activity in this area at this time, because we think it is premature. First we need to get our continuous glucose monitoring system on the market and make sure it is proven and well understood, before it is connected to the insulin delivery system. This technology is enormously exciting and, I think that it will provide a great deal of value to the people who have diabetes.” CEOCFOinterviews - How close are you to getting your product for glucose monitoring to the market. Mr.Samuels: "We are working in conjunction with Abbott Laboratories on our continuous glucose monitoring system and we expect to have the filing before the FDA in the year 2002. It is up to Abbott as to whether to launch it overseas or to wait for the approval in the United States. Abbott Laboratories has exclusive distribution rights to the product worldwide. We will receive a royalty on the disposables' sales and will manufacture a portion of the hardware for the system." CEOCFOinterviews - Can you tell us about the product with regards to cancer project? Mr.Samuels: "It was always our intention to provide non-invasive diagnostics to replace blood and tissue tests. Cancer is a disease that will potentially affect a large number of us in our lifetime, and I think almost everyone has known someone who has had cancer. We believe that our biophotonic technology can provide a significant advantage in screening for and diagnosing certain types of cancer. We do that by shining a beam of light on a tissue, then looking at the reflected light that comes back from the tissue and determining if cancer or precancer is present. The first area we decided to apply this technology to in the cancer market is cervical cancer detection. This is important because cervical cancer and the ability to detect it are big problems worldwide. Cervical cancer annually kills almost 200,000 women in the world and the efforts to try to detect cervical cancer drive about 90 million Pap tests each year. However, the Pap test is a notoriously inaccurate test, missing about 30% of the cancers. Moreover, it refers a large number of women that do not have cancer on for additional testing. Therefore we can potentially make a huge difference in this area by delivering a product that can provide an answer as to whether a woman has a cancerous or a pre-cancerous condition, right there, at that moment, while they are still in the doctor's office. Our device works without having to take any tissue sample, without having to send anything to the lab, without having to wait 3 to 4 days to find out whether you have a problem. Having to wait for an answer is a problem in many medical diagnostics areas. What is common to all of our products is that you do not have to wait for the results. This is especially important in cervical cancer detection and infant jaundice monitoring. A steady flow of real-time glucose information is what people with diabetes say they need to successfully manage their disease. CEOCFOinterviews – In the cancer diagnostic area, how close to the market are you? Mr.Samuels: "This year we are putting some advanced prototypes in clinical testing and working on the engineering of the of the final commercial version of the device as well. We expect to start next year with products being put into FDA pivotal trials, plus trying to get into position to launch in Europe either late next year or early in 2003." CEOCFOinterviews – Will you also bring the cancer diagnostic product to market through partnering? Mr.Samuels: "In today's environment we have found that it has been very advantageous for us to partner with large, successful companies that have either technical, regulatory or marketing expertise in the marketplaces where we are applying our technology. For the cancer diagnostic area, we are partnered with Welch Allyn. If you visit your doctor and look at the wall in the examining room, most likely Welch Allyn products will be there. They have a very significant presence in OB/GYN practices, having devices already designed to assist in detecting cervical cancer. Our partnership with Welch Allyn is a 50-50 joined venture the way it is structured, we each share equally in the cost of developing the product and we will each share equally in the rewards of putting the product in the market." CEOCFOinterviews - Tell us a little about the BiliChek™, your product in monitoring for infant jaundice? Mr.Samuels: "The BiliChek™ is the first device that really proves that SpectRx could research, develop and manufacture a biophotonic product and replace the blood test with a non-invasive test that has the ability to provide useful information to a physician. The BiliChek™ works by shining a beam of light on the infant's forehead and in a matter of a few seconds getting an answer, determining whether or not the baby is likely to have a high level of jaundice or harmful bilirubin in its tissue." CEOCFOinterviews – What is your approach to marketing for the BiliChek™? Mr.Samuels: "We have a strong role in marketing this product. We have a network of about 60 distributors worldwide that bring the product into the international market. Then we have Respironics that distributes for us in the United States and Canada." CEOCFOinterviews - How big is that market and currently, what is your market share? Mr.Samuels: "We really have just gotten started on the
penetrating this market, so we still have plenty of upside in this space. We believe that
market is about $120 million a year for stand-alone infant jaundice blood tests. It is the
available market, which we are going after. Recently, we achieved a very important
milestone in this program. We obtained FDA clearance to market the device for use during
and after phototherapy treatment for high levels of infant jaundice. This will, I think,
energize the United States market and help our partner, Respironics. I think it will make a huge difference in starting
to realize a significant share of that $120 million market." CEOCFOinterviews - Which do you think will be the biggest market for you? Mr.Samuels: "Historically people have focused on glucose monitoring as being the biggest opportunity for SpectRx. That is because we have a large partner, Abbott Laboratories and because of the size of the market, about $3.7 billion. That will be a huge opportunity with royalty revenues coming to us, potentially reaching the $20 to $30 million level. However, in the long term, I think that the cancer diagnostic area has the potential to be larger, because of the size of the cervical cancer market, around $1.6 billion dollars, and because of the structure of our partnership. For us, cervical cancer is just the beginning. After it, we expect to move into skin cancer and after that on other cancers that can be accessed from outside of the body." CEOCFOinterviews - What percentage of your revenue goes towards research and development? Mr.Samuels: "We are at a stage, where we are still losing money because of the research and development activities that we are putting forward. We probably spend about $6 million a year, which is more than we bring in from revenues. However, Abbott Laboratories has now assumed financial responsibility for the continuous glucose monitoring program, and we are highly focused on building our BiliChekTM sales now that we have additional FDA clearances. We hope to build those sales and take a significant portion of that $120 million worldwide market. That along with the products that should get FDA clearance over the next year or so will help us reach our goal of profitability. We are highly focused on getting to profitability in the near future." CEOCFOinterviews - What final thoughts would you like to leave with your shareholders or potential investors? Mr.Samuels: "SpectRx has been working to bring these products to market and the work is beginning to bear fruit. We have the BiliChekTM in the marketplace, and have the FDA approval we need to penetrate the US market, which will be a significant contributor to our revenue. We are also getting very close to being able to take our cancer product and our glucose monitoring product into the marketplace, either late next year or early 2003. We have got very good technology, some great partners, a great team here, and I am extraordinarily optimistic about the future for SpectRx."
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