06 Aug NovaScan faces crossroads in commercialization
Milwaukee, Wis.—NovaScan, a medical technology company spun out of the University of Wisconsin-Milwaukee, has reached its latest milestone – the commercialization of products – but the milestone also feels like a crossroads.
The firm is developing technology for electrical property enhanced tomography (EPET), which measures the electrical properties of materials and identifies types of tissues. Using patents licensed from WiSys Technology Foundation, NovaScan’s work is based on scientific evidence that the electrical properties of tissues are related to tissue type and health. As a result, EPET holds the promise for earlier detection of diseases like breast cancer. But it can be applied in different ways, and the company has reached the point where it has to decide which applications should be developed first.
Bill Gregory, professor of electrical engineering at UWM and chief science officer for NovaScan, declined to characterize the decision as make or break, but he admitted a “really dumb” decision could be a killer.
The company’s choices are being ranked in terms of immediate market potential. Some applications will be faster to market; others face regulatory hurdles and will be developed for the long haul.
“We have to figure out where the biggest bang for the buck is going to be,” said CEO Larry Wells.
Of its nine applications, NovaScan’s market research points to four as the most promising in the short term. However, management is leaning toward a two-pronged approach that would create an initial revenue stream and keep long-term options open.
The first device, for use in pathology labs, would generate short-term revenue for the company while the second alternative is pursued. The device could be a hand-held probe or a machine that electrically examines tissue to give pathologists more information about the extent of disease and the margins of tumors.
NovaScan would simultaneously develop a hybrid to integrate EPET with a 3-dimensional digital device such as tomosynthesis or ultrasound, which suggests a partnership with an original equipment manufacturer. In that case, NovaScan’s technology would be used in hybrid fashion with an established technology of the OEM, providing additional diagnostic information.
NovaScan’s most likely exit is an acquisition by another medical device company or a larger partner that agrees to integrate one of its products. If a product is not at the top of NovaScan’s list but of interest to a company with a significant market presence, Wells said commercialization would be seriously considered if it provides a strategic benefit.
NovaScan’s potential market is sizeable. There are about 200,000 new breast cancer cases each year in the United States and one million worldwide, with death tolls of 40,000 and 465,000, respectively. More than 33 million mammograms are conducted annually, and 25 percent are diagnostic mammograms that Wells thinks EPET could eliminate.
“The idea is to skip one step by providing enough information at the screening stage, and the physician can make that call,” Wells said.
For breast cancer patients, collecting enough information at the screening stage would reduce the number of procedures. It could prevent another round of uncomfortable compressions and eliminate the need for biopsies, which can cause scarring. According to Wells, current systems aren’t accurate enough and women are having unnecessary biopsies.
Based on in vitro studies for EPET I and an in vivo study for its successor, EPET II, NovaScan has a high level of confidence in the technology’s ability to discriminate between benign breast tissue and cancerous breast tissue. EPET I uncovered pre-cancerous conditions that can’t be seen under a microscope, and EPET II showed a direct correlation between the condition of scanned tissue and pathology reports from subsequent biopsies, Wells said.
The technology could eliminate the need for the diagnostic mammogram step, which follows the initial screening in a breast cancer detection workflow. This could save providers and insurers millions of dollars, which has currency in an era when healthcare entities cannot ignore inefficiencies in their clinical processes, Wells noted.
There are competitors for each NovaScan application – either established ones or up-and-comers with new technology. For breast cancer screening, clinicians now use X-ray mammography, but magnetic resonance and ultrasound are making inroads, and CT and PET have entered the picture.
NovaScan’s original business plan called for raising $8 to $10 million overall, with various sums captured at key milestones. So far, it has raised $300,000 in angel funding.
Due in part to the uncertainty involving an OEM partner, NovaScan has not determined how much it would need in the next round. “If we end up in a partnership with a large company, they would provide in-kind support,” Wells said. “They might have a clinical site at which they’d want to test the technology. Under that scenario, we’d have to raise less money to reach the next milestone.”
Wells is in contact with venture capitalists, but finding venture funding could be a challenge because typically they don’t invest in platform technology, he said. Like other technology start-ups, NovaScan likely would have to wait for its products to mature before venture investors consider them.
Wells said NovaScan’s product development situation is fluid, and he believes it’s important to be open to opportunities that arise from market research and presentations before potential buyers.
“In a lot of cases, people don’t know that they need something or that there’s an issue, and it’s up to you to figure out that there’s an opportunity,” he said. “There is a bunch of technology that comes online that people didn’t really know they needed, and now they can’t live without it.”