Opportunities for Scottish Business

July 2011blueAid Limited

Commissioned by Wellness and Health Innovation, Scotland’s national initiative designed to support Scottish companies developing innovative products or services for the wellness and health sector. www.wellnesshealthinnovation.org

A WHI White Paper

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Opportunities for Scottish Business

A WHI White Paper

CONTENTS

1 Introduction2 Executive Summary3 Assisted Living

3.1 Staying outside the outer circle3.2 Care in Place3.3 Sheltered Accommodation3.4 Nursing Homes3.5 Hospitals

4 Survey of 12 start-up companies in the medical technology area4.1 Alere Technologies4.2 Ambicare Health4.3 Mobisante4.4 Mode Diagnostics4.5 Ohmedics4.6 Pixic4.7 PWB Health4.8 Research in Motion4.9 Smart Acoustics/Knowledge Economy Developments4.10 Sure Sensors4.11 Touch Bionics4.12 Ulsys

5 Data Analysis5.1 Common traits across all stages5.1.1 Areas of Expertise5.1.2 Sources of Funding5.2 Stage of Progression5.2.1 Embryonic/early start-up:5.2.2 Early start-up/pre-product5.2.3 Later start-up/first-product5.2.4 Established start-up/multiple-products

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1. INTRODUCTION

This is a white paper for the WellnessHealth Innovations organization looking atopportunities for technologies for ScottishBusiness in preventative andIndependent/Assistive Living, in particularlooking at Sensors, Wireless (M-Health),Electronic and Cloud computing.

With an aim to articulate the implicationsfor SMEs (Small to Medium Enterprises) inScotland entering or competing in thesenew markets, in relation to the technologyareas as above.

Healthcare when viewed as an end to end service hasmany quite separate tracks that amount to quite separatebusiness areas and markets, in which such products areused. For the purposes of this conclusion we will not beconsidering the pharmaceuticals sector or products for in-hospital use.

The most economically important markets are those whichinvolve the consumer/patient directly. Many leading analysts are predicting these markets to become huge. We believe however that some fundamental changes musthappen to consumer behaviour first, such as attitudes toself-care, maintaining good health and avoiding illness (i.e. preventative care). Human nature being what it is, we often seek to take the path of least resistance toachieving any task (for instance our dependency on cars,supermarkets, consumer gadgets etc), rather than what’sgood for us. And as technology makes things ever moreefficient and cost effective it will get even easier to doeverything sitting in the armchair, whilst neglecting ourneed for healthy exercise.

In the UK common prevailing views are that the Governmentwill take care of us when we are ill, and as a result manypeople move first towards a state of being unhealthy andthen finally into preventable, lifestyle-induced illness. This model will have to change as it is not sustainable inthe long run. Harsh as it may sound when it gets to a pointwhere the hospitals can’t cope and sick people are beingturned away – people faced with a crisis may finally dosomething about taking responsibility for their own health.Human nature of course doesn’t like change, but willchange out of necessity or when in sufficient adversity.Despite all of the medical knowledge and technology available, basic human nature has remained unchanged,and this is one, but quite significant factor for the rise inchronic illnesses earlier in life.

The following 3 areas represent the most promising oppor-tunities for small start-ups:

• Elderly care• Care of the chronically ill• Preventative care

The elderly care market will of course always occur naturallydue to ageing, and with the advent of life extending medicaland nutritional care life expectancy has risen, and can be expected to continue to rise. In contrast, due to socio-ecominc and cultural reasons, there are less newpeople being born and we face an ageing population. This ageing population will need to be cared for, and canbe expected to have ever-rising care needs.

The cost of care from home, hospital and all stages inbetween is likely to increase rapidly and presents anopportunity for remote monitoring. Despite many advancesin the area of remote monitoring, it is still in it’s infancy withmany companies trying to innovate and create profitablebusiness models. In essence it often comes down to who pays!

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A WHI White Paper

Many elderly people believe that they should be cared forin their own homes and are reluctant to move to nursinghomes and other care establishments. There is often also asense of family support being a difficult or contentious areadue to generation gaps and younger generations beingvery busy in their own lives and today’s society. Children of elderly parents can often only afford some contribution,based on incomes, to the real costs of care, rather thanmeeting the true underlying cost. Again, most elderly people actually want person to person care rather than atechnology-based solution, and this costs considerablymor money due to all the necessary safety and trainingprotocols that have to be adhered to.

In some families it will be the Alpha son (or more usually,daughter) that the majority of the responsibility will fall tofor looking after elderly parents. These people may chooseto, or be compelled by circumstances to resort to carepackages and technology. A most interesting example ofthis, that we have seen incorporated into a business model,is one that uses supermarket loyalty points and allows thechildren of elderly parents to purchase monitoring solutionsand build personal care models from the supermarket’srange of off the shelf solutions. We believe that the rightsolution is one that doesn’t change daily habits, but layerson top of it – the grocery delivery will still happen twice a week, and combined with a low-cost care solution, provides healthcare benefits very cost effectively.

In most developed nations the levels of chronic illness isreaching epidemic levels and is primarily attributed to poordiet and lack of exercise. Whilst in some cases it can beheredity or naturally occurring, these form a very small percentage of the overall recent changes. There is a greatdeal of research being done in the area of detection andcure by universities and Pharmas, and this indicates apotential growth area for both investments and for start-up opportunities (estimated $1bn market by 2012).The challenge for diagnosing and treating possible lifestyle-related illness is that it needs to be done in a way thatdoesn’t change a person’s normal everyday habits and is an non-invasive as possible. For example diagnostics as you brush your teeth (and we already know about

Lloos in Japan that do this sort of thing!). There is also apsychological barrier here (and that barrier changes basedon age) – with many people choosing to rather not knowabout such looming health issues and to carry on livingwith no worries, whilst others want to know everything and to some extent are paranoid.

Preventative management is all about a person takingactive steps not to get ill by taking care of what they eat,how much exercise and how they monitor their own basichealth parameters by using self-administered tests. This is touted to be the largest growth-area market in thepreventative healthcare sector as it gives the consumercontrol of their lives. But it is as yet only a small percentageof people who make up the worried well, and the take uphas not as yet been so promising. We believe this is due tofundamental human nature of people who want to continueto take the path of least resistance until forced to do otherwise.

In summary, the market with the greatest opportunities iselder care, and is an area that many businesses are currentlymoving or expanding into. In order to be successful, it isvery important to get the business model right, and introducechange very slowly – or to make your product or service anatural part of a person’s daily routine. The next challengeis getting marketing access to elderly people or their carers.Care institutions may help in promotion, but it will still be a competitive landscape with the larger companiesattempting to dominate.

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2. EXECUTIVE SUMMARY

This paper presents an analysis based upon 12 case studies.

Particularly promising areas for SME companies are sensors, specialist computing areas that require particularlyheavy-duty processing (e.g. ultrasound image processing/analysis, ECG interpretation), and specialist provision ofcloud-computing services (e.g. to meet the requirements of local regulations and being interoperable with localhealthcare infrastructure).

BlueAid’s recent consultancy work for Continua has shown2 key areas that a number of members are pursuing. Firstly “diagnostic toolkits” aimed at healthcare professionalsworking in the field, and secondly comprehensive staffwellness programs. The latter in many ways pioneerstrends likely to be reflected in consumer health purchasesin home diagnostics and monitoring.

Several Continua members are in the process of developinga complete “wireless medical equipment toolkit”, to bemarketed as a complete solution with all interoperabilityissues resolved. It is apparent however that in all cases themanufacturer is lacking in in-house expertise in someareas, and either has or will outsource significant parts of their product offering. Opportunities abound for consumer-friendly devices suitable for inclusion.

Likewise, staff wellness programs need to embrace healthyeating, fitness, early detection of many common healthconditions, and in the rapidly changing legislative landscape– effective support for staff with disabilities and long-term,and in some cases serious health problems. This extrademand on employers again creates many opportunitiesfor consumer-friendly healthcare technology, including testing and monitoring a wide variety of conditions. This in turn is likely to raise consumer awareness of healthcare technology, and in turn consumer demand.

The core of this report will consists of a 12 case studies.Although these case studies are focused more towardsScottish companies, outstanding examples of good practiceare drawn from wherever they occur. Also, to ensure a balanced representation at all stages of the start-up company process, some “cherry picking” of notable examples has been included. It is also valuable to comparethe obstacles faced by start-ups in different regulatoryregimes and varying investment cultures. Most of thesecompanies show success, or the strong likelihood of success, while at least one example is included to showthe dangers of poor market research.

The companies profiles here are selected to be illustrativeof every stage of the start-up process. At the earliest stage,an exciting and potentially very significant postgraduateuniversity research project is reviewed. Several companiesin the various stages of product development are reviewed,and more with new-to-market first product offerings. Finally start-ups that are in the process of becoming well-established are reviewed.

Across all these companies, several common measures areabstracted and presented in graphical form. These includeanalysis of sources of funding, profiles of the skill-set ofsenior staff, characterising product areas in relation to necessary standards, approvals and compliance issues,and examining each companies links with relevant medicalprofessionals.

The opportunity presented for Healthcare is huge and there are many cited examples from leading analysts. In blueAid’s observations there has been a almost 10xincrease in number of start-up companies in the field ofConsumer Healthcare – but none of them are making history in millions yet. The conclusion is that the conditionsare not right yet – the business models do not yield hugeprofits, people’s attitudes towards health are very flippantand ease of use is still to be achieved.

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3. ASSISTED LIVING

This section highlights the opportunity of Assisted Livingfrom a different perspective – what is interesting about thisand not depicted is that money is controlled by differentorganizations and this is part of the reason why many businesses have not been successful.

The figures for the cost of care are quoted in UK poundsbut are roughly in line with the equivalent costs of care inthe US and rest of Europe. The figures are quoted to givean indication of the relative costs of different types of care.

The diagram is a representation of the healthcare market.At the centre is the hospital and beyond the outer ring(green) is the region occupied by people who, while notnecessarily fit and well do not require any form of treatment.

The outer circle (Care in Place) is crossed by who requiresome form of care and who receive it in their own homethe cost of this care is usually restricted to a fee paid to acarer – around £125 per week or £6,000 pa.

The next circle (Sheltered Accomodation) the patientcrosses is the move from their own home into shelteredaccommodation. This will cost £360 per week or £20,000per annum. In some cases the person receiving care mayalso still pay the £125 per week nursing care.

If the patient’s health deteriorates still further they will betransferred to a nursing home – costs £840 per week or£42,000 pa.

The inner circle is the hospital itself – a stay here willcost £3000 per week or £150,000 pa. A decade ago therewere cases where elderly people moved straight from theouter circle to the hospital and, after it was discovered theywere unable to return to return to their own homes, wheretrapped in hospital due to a lack of capacity in CareHomes. This is, at present, no longer an issue in the UK.

39.5 million people in the US are aged 65 or over. In Europe this figure is 76.7 million. There is a 70% chancethat a person over 65 will need some form of long termcare. There is a 40% chance they will need care in a CareHome. There is a 20% chance that they will need long term care for 5 years. So there could be up to 4 millioncare home years being paid for in the US and 8 million carehome years being paid for in Europe.

The basic rule is to attempt to stay in the space outsidethe outer circle and if you do find yourself (or my likely your elderly parent) being drawn into the circles towards the hospital do everything possible to slow the rate of travel – or, if possible reverse the direction of travel.

Luckily both the parent and healthcare provider are playingto the same rules as costs fall on both sets of players.Increasingly patients are expected to contribute to the costof their own care, usually by realising assets, such as thefamily home, or using savings. The dependents of thepatient will be reluctant to see their inheritance used to payfor care and are proving willing to contribute to that careand purchase equipment to simplify that care.

Fitness Zone16 million devices$2B device market

56 millionPotential mHealthusers in EU

28 millionPotentialmHealth

usersin USHospital

£3,000/week

Nursing Home£840/week

ShelteredAccommodation

£360/week

Care in Place (at home)£125/week

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The closer the patient gets to the centre of the healthcarelandscape the less mobile is relevant. Each circle thepatient crosses on their journey from fitness to hospitalisationsees a high concentration of patients. If the patient is in anursing home there is less need for a domiciliary healthworker – one of the key users of mobile devices. This meansthat the 120 million potential users of mobile medical deviceswill be concentrated at the outer edges of the healthcarelandscape. The key drivers and, possibly the people whowill actually purchase the devices will be family memberscaring for elderly parents and there will be 28 million ofthese in the US and 56 million in Europe.

3.1 Staying outside the outer circle.

People are willing to purchase devices to help them stayfit. Polar and Garmin sell pedometers and cardio monitorsthat are used by people who cycle or run to stay fit. Mostlythese devices are purchased by young people who are, by nature, competitive. However older people who haveseen their parents enter the care system are showing an increasing interest in prolonging their active life. The marketfor fitness devices is over 16 million devices per annumand revenues are $4 billion of which half is in the form oversubscriptions and services not directly related to the deviceitself. While currently wireless connectivity is an option onmost devices it is likely it will become standard as chip pricesfall and the services built around fitness devices, such asreal-time data collection, become more common. Manydevices have the same functionality as in car GPS units.

Other devices to consider are those which go beyondphysical activity to encompass lifestyle management.Devices such as FitBug are fitted with wireless as standardas connectivity is required for data collection and feedback.

3.2 Care in Place.

If an elderly person does require care the cheapest placeto provide it is in his or her own home. If nursing support isrequired then this will cost between £125 and £150 per week.Devices by companies such as Docobo, which supportsthe Doc@Home service costs far less than £125 per week

and can be used by the patient or a supporting familymember to delay the point at which professional nursingcare is required. The healthcare provider can also use thedevice to reduce the cost of the nursing care by makingthe nurse more effective in their management of patients.Services such as web based RememberItNow.com combine a patient record system with day to day caremanagement, medication reminders and appointmentscheduling. This service is accessed from a standardmobile device. The Docobo system is based on a centralserver with periodic connection to the terminals in the home.

It can be assumed that many of the 56 Million people inEurope and 28 Million people in the US who will passthrough the care system in during the coming decade willinitially be cared for at home and this will drive the marketfor devices such as Docobo’s health hub. Five years agothe Docobo device transferred data to a central server after it was docked with a modem. Today the device has awireless chipset and communication is via a web interface.

3.3 Sheltered Accommodation

Every week that a move to sheltered accommodation canbe delayed will save the elderly person’s family £360.Devices and services are in the UK is dominated byTunstall who provide a range of services, some of whichare based on wireless communication.

3.4 Nursing Homes

Elderly people enter nursing homes from two directions of travel. Either they have had to leave sheltered accommodation because their health has deteriorated orthey are recovering from a stay in hospital and are beingkept under observation for the medium term. There areseveral mobile based services that can be used as analternative to observing the patient in a nursing home. One is Vitaphone (www.vitaphone.de) which is a service usedby patients recovering from heart conditions and offers analternative to monitoring in a nursing home (cost £840 per week) with patients either returning to shelteredaccommodation or, in some cases, their own homes.

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3.5 Hospitals

The use of mobile devices in hospitals is less concernedwith patient monitoring and focuses more on mobileaccess to patient data and specialist voice communicationand paging services (such as Vocera) and devices such asthe Motion C5 Tablet PC.

4. SURVEY OF 12 START-UP COMPANIESIN THE MEDICAL TECHNOLOGY AREA

This survey looks at 8 Scottish companies, 2 English companies and 2 US companies. Each individual companysurvey looks at their product area, the company’s seniorstaff and the company’s sources of funding. Additionallycompliance issues, awards, and links with clinical care and academia are described. In 1 case, a forced productwithdrawal and negative publicity is described.

These 12 companies are then analysed by grouping theminto one of four stages, i) embryonic/early start-up, ii) early start-up/pre-product, iii) later start-up/first-product,iv) established start-up/multiple-products. At each stagethe common characteristics of the companies are identified,and the changes typical of each stage of progression ofsuch start-up companies described. Finally the commoncharacteristics likely to be important or essential to successful businesses in this sector are considered, and any differences between Scottish and non-Scottishcompanies examined.

Alere Technologieswww.aleretechnologies.co.ukAlere Technologies (formerly Stirling Medical Innovations) is a research and development biomedical company, and currently a single-product company with a handheld blood-analysis device, detecting peptides to gauge theseverity of heart failure. Their analyser provides accurateresults from a blood sample, within a few minutes. Thesystem is designed to aid in the diagnosis of heart failureand assess the severity of heart failure. Heart failure maybe confused with other conditions, such as lung disease,making an accurate diagnosis important to ensure themost appropriate treatment.

Alere’s MD has a strong career in medical technology andbackground in electrical engineering, one director has atrack record of patents in the biosensor area, and anotherin both biosensors and environmental technology.

The company, established in 2005, and has a publicly-quoted parent company Alere Inc in the US. AlereTechnologies have received investment from the parentcompany, and are currently privately owned.

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Ambicare Healthwww.ambicarehealth.comAmbicare Health was founded in 2004 and has developeda light-emitting plaster for the treatment of skin cancer. The plasters are a CE marked medical device, and werelaunched in 2010. They are used as an alternative to surgeryfor many forms of skin cancer. Ambulight is designed as atwo-part disposable dressing, with the ability to deliver asingle treatment. The first part contains the batteries and themicrocontroller whilst the second part contains a wearablelight source. The company also has plans for products inacne and anti-wrinkle treatment.

Ambicare has a well-balanced board with representationfrom pharmaceuticals, semiconductors, photonics, dermatology and clinical areas. The chairman has a background including a major pharmaceutical company.The CEO’s background includes university spin-out technology companies and has extensive experience semiconductors and photonics. The principal scientist hasa PhD in molecular electronic devices and a post-doctoralresearcher in the area of phototherapy. The sales & marketing director has a background in life sciences andconsumer healthcare markets with a strong focus andexpertise in dermatology. One founding director is a consultant dermatologist and his thesis was on the subjectof drug-induced photosensitivity. Another founding directorhas a background in organic semiconductors, with emphasis on light-emission and measurement.

The company is an independent venture capital backed,spin-out of Ninewells Hospital, Tayside Health Board andDundee and St Andrews University in Scotland. St AndrewsUniversity and Tayside Health Board (through ScottishHealth Innovations Ltd, SHIL) are equity stakeholders inAmbicare. Longbow Capital and Scottish Enterprise haveinvested in Ambicare

Mobisantehttp://mobisante.comMobisante have built a smart phone based ultrasoundimaging system. They are using off the shelf ultrasoundtransducers that connect to the phone via the USB. Thesedevices are brought to the patient instead of bringing thepatient to them, and are able to provide basic functionalityat a fraction of the cost of conventional ultrasound equipment. Mobisante’s technology moves one step closer to the “ultrasound stethoscope.” The hope is that by putting ultrasound in a lightweight, convenient package,healthcare professionals will be able to detect ailments that would otherwise go unnoticed in a routine exam. This highly innovative product has the potential to make avery real difference in healthcare to many disadvantagedgroups. Whilst the system does lack the sophisticatedimage processing that is widely employed in modern, dedicated ultrasound imaging equipment, and the imagequality resembles 1980’s technology, the difference thataccess to even the most basic medical managing can bringto the developing world can hardly be underestimated.Mobisante has received FDA approval for its device, and wonbest m-health innovation at Mobile World Congress 2011.

The startup is in talks with venture capital investors, but sofar it’s been 40 percent self-funded and 60 percent fundedby potential customers. Mobisante also raised seed financing from WRF Capital, but has decline to reveal theamount. The startup began R&D work in 2007.

The CEO was until recently a senior director in commercialsoftware development (Microsoft), and has executed successful turnarounds. The CTO has 18 years experiencein various aspects of ultrasound hardware and softwaredesign and development, and a co-founder of two start-ups.He has written device drivers, user applications, as well asdesigned hardware used in ultrasound imaging.

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Mode Diagnosticswww.modedx.comMode Diagnostics is a Glasgow-based provider of consumerdiagnostic products for health and lifestyle markets. The company’s first product, is a home test for bowel health.The product uses blood sensor technology to test for occult(hidden) blood in the stool. This is an accepted proxy forbowel cancer and general bowel health. This product hasbeen purpose-designed to give the home user the bestavailable test for bowel health. There are plans for a follow-on product to detect markers for prostate disease.Mode’s initial product has been validated, and is now in the development phase.

Mode has a strong management and advisory team withextensive experience in developing and commercialisingpioneering diagnostic products. The business developmentdirector has held various positions in biotechnology companies, and has played a key role in the success of 2 previous biotech start-ups. The CEO has extensive commercial experience in both the life sciences and start-upsectors, including raising funding and the drive towardssuccessful exits. The business development manager hasworked on the creation of more than 10 spin-out venturesin the life sciences, electronics and software fields. The R&D Manager has worked on the technological development of biosensors, biochips and microarrays.Advisors include a speciaist in regulatory matters, and an MD with research focused on biomarkers relevant tocolorectal cancer.

Mode secured £600,000 funding in 2010, supplied by theIP Group of London and Scottish Enterprise’s Co-investmentFund. The company has in-licensed and developed a suiteof technologies comprising assay development techniques,biosensing capabilities, microfabrication, electronics andwireless communications. They are in the process of securing IP for several of these applications. Mode has

also entered into a three year co-development agreementwith an established diagnostics company. This partner willalso fund the primary R&D. Mode will have rights to sellproducts into the consumer market, while the partner willfocus on professional markets. Mode claims to operatewith a small core team with low-overheads.

Ohmedicswww.ohmedics.comOhmedics is a spin-out from the University of Strathclydeand has a unique sensor technology for monitoring moisture in wound dressings without disturbing the dressing.Their first product is a sterile, single-use, disposable sensor,suitable for use with any wound dressing. Markets are beingdeveloped in the hospital sector, community healthcare and pharmacy. Ohmedics has obtained a CE mark for theirproduct, which is currently on sale in the UK and MiddleEast, and due to be available in the rest of the EU in 2011.The product is a Class II Medical Device, and has receivedawards from Nexxus and the University of Strathclyde.

The senior management include a chairman with experienceas an investment manager, and a non-exec director who isalso a corporate finance partner in a commercial law firm.The CEO is a chartered engineer with academic and medical-industry experience in the commercialisation ofR&D. She has a background in medical diagnosticsresearch projects aimed at creating new and less invasivediagnostic devices, and experience of the medical regulatory environment. The finance director has experiencein financial consultancy, the sales director worldwide experience in medical products, and the technical directorhas filed several medical-device patents.

The shareholders are the originating investors, includingthe University of Strathclyde, and a small number of experienced investors.

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PixicPixic is a design and technology consultancy companylocated in north west of Scotland. Established in 2008,Pixic is privately owned and financed, and in receipt of aSMART feasibility grant to research a proposed technology.Their proposed product is a “low-cost fall detection technology working in the audio domain”. Pixic aims tobecome a major supplier of telecare monitoring productsfor the assisted living market.

Falls are leading cause of death from injury in the UK forover 75s , most of which happen in the home. Although avariety of approaches to fall detection have been evaluatedby health services, none are ideal. Panic buttons are oftennot carried on the person, so are unavailable when needed,or are simply not used – even in a crisis – because of variously-motivated patient reticence to summon help andalert others to their condition. Video detection is seen astoo intrusive in the home, and as yet accelerometer-baseddevices are unable to offer an acceptable solution – as wellas suffering the personal-carry drawbacks of panic buttons.The Pixic solution is unobtrusive, autonomous in operation,and does not require the user to wear any form of sensor. Pixic draw attention to the following quote “There are todate 1.6 million users of community alarm equipment within the UK the vast majority of which are “simple” pendant alarm systems. The vast majority of these systemsprovided to support older people.”, and set their target ascapturing 20% of this market.

Company management has very strong software, electronics hardware a technology design experience. The company’s two founders are experienced in semiconductor design, particularly in the field of signal processing. In 2010, Pixic received a Smart Scotland award.

PWB Healthwww.breastlight.comPWB Health Ltd was founded in 2007 to develop and market a range of innovative personal well-being productsthat have been designed for home use. Their first productwas Breastlight, an aid for breast awareness designed tobe used by women at home. PWB Health launchedBreastlight globally in 2008 / 2009.

PWB Health’s initialy raised £1.25 million in venture capital,£750,000 from Edinburgh venture capital firm Longbow and£500,000 from the Scottish Enterprise Co-InvestmentFund.

Initial successes included Most Promising Life SciencesCompany - Life Sciences Scotland (2008), and MostPromising Young Life Science Company of the Year -Nexxus Life Science Awards (2007).

However in 2010, Health Canada issued a recall for thebreastlight device, stating that there is no clinical evidencethat the device works.

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Research in Motion(Project write-up http://uk.blackberry.com/newsroom/success/portsmouth_hospitals_nhs_trust.jsp)RIM can hardly be thought of as a start up company, yet itwasn’t until 1998 that the company went from being anSME, and into rapid expansion. Given that a project suchas the one described below is a very small part of thecommercial activity of a large company, expertise of seniormanagement, sources of funding, and the other indicatorsof the capabilities and resources of start-ups aren’t reallyrelevant. However, this example is included to show that a)start-ups must continuously aware that large commercialoperations may still be interested in niche-product markets,and b) that all the in-house resources needed probablyalready exist – small start-ups must find other ways of protecting their territory.

To reduce the administration burden of at-home patientcare, a PHT needed a more efficient way for midwives totake notes. By using BlackBerry smartphones and PaperIQ’stechnology, midwives were able to electronically transmitnotes back to the hospital’s clinical system. When the midwife filled out a form, the electronic pen captured whatwas written, automatically encrypted it and sent the data tothe BlackBerry smartphone via Bluetooth, which was thensent to the maternity unit’s patient records system.

From the viewpoint of the technology, this application ishardly innovative or novel. Essentially it just does data capture using an ePen product (captures form filling ofconventional paper notes held by the patient), and ishooked to a mobile phone (which could be any smartphone).But from a business perspective it is yet another exampleof simple ideas winning. There was an urgent need for atechnology based solution, combined with considerableresistance to new technology.

The solution to have Midwives make medical notes duringconsultation, and send notes to a database, is limited. It doesn’t allow browsing of other medical history – only

patient-held copy of maternity notes. Overall it’s just anentirely standard application for the the PaperIQ device,however as a cheap, not-very-techy solution – it works.Take-up at frontline care was rapid, and mindsets aboutnew technology changed.

Smart Acoustics/Knowledge EconomyDevelopmentswww.cabume.co.uk/medtech/cambridge-imaging-venture-part-of-a-bigger-vision.html andhttp://mi.eng.cam.ac.uk/research/projects/Deconvolution_Of_3D_Ultrasound/index.htmlThe following example is at the very earliest stages ofdevelopment of commercial opportunities, making it ratherdifficult to analyse in the terms used with the other examples here. Of necessity it somewhat relies on mediareporting. Nevertheless, it can be seen that several of thefactors common to successful start-ups are present.

At the very start of the start-up company process, is thisexample of research carried out at Cambridge UniversityEngineering Department (CUED). Smart Acoustics, a software innovation that improves the images generatedby low-cost, portable ultrasound equipment, potentiallyopening up untapped markets and dramatically increasingthe number of clinical applications for ultrasound imaging.The inventor says of his PhD work, “I have lost count of the number of times I have talked to colleagues at theengineering department about Smart Acoustics and hearda response something along the lines of: ‘That’s brilliant.I wish I could do something like that’.

Smart Acoustics is being commercialised with KED, a partnership between the inventor, his father (himself aserial entrepreneur), and a former senior exec from withinthe consumer electronics sector. The team are seeking soft investment, without giving up equity, to fund the development of the proof of concept. Legal and licensingissues are being handled in partnership with CambridgeUniversity, and the work funded by ESPRC.

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Sure Sensorswww.suresensors.co.ukSure sensors, based near Inverness, Scotland, areengaged in the development of several diagnostic systemsusing their biosensor technology, for application in themedical device market. Sure sensors use this low-costelectrochemical biosensor for the glucose testing, in theirself-test diabetes diagnostic and monitoring system, andalso carry out sensor design work for other manufacturers.They published their primary patent in 2011.

The founders of Sure sensors have both extensive experience in home-use diagnostic systems, and of previous successful start-up technology companies. The MD was a founder employee of previous a start-up(that grew to be the largest private sector employer in theHighlands of Scotland) and served as their R&D Directorfor a number of years, and has developed a number ofproducts within the industry. The CFO, also a founderemployee of the same previous start-up, was the financedirector and company secretary for 10 years.

In 2007 Sure sensors was awarded a grant of £165,000 by Highlands and Island Enterprise to help with the development of their first glucose monitoring system. In 2010 SMART SCOTLAND approved a SMART award toSure sensors, to assist with the further development oftheir home glucose biosensor.

Touch Bionicswww.touchbionics.comTouch Bionics, based in Livingston, have their origins inhospital research carried out in 1963, into prosthetics forchildren affected by thalidomide, however it wasn’t until1988, that work began on electronic limbs. Touch Bionicshave three key products, a prosthetic hand, prosthetic fingers, and a synthetic skin product for use with prostheses. The prosthetic hand was the world’s first commercially available, multi-articulating, bionic hand, with five individually powered digits.

The skill set of the senior staff include a chairman who is a chartered accountant and has held a number of directorships, including 25 years in the banking sector, and a chief executive who has a 23-year history in biotechindustries. One non-exec director is also a charteredaccountant, with a senior role in a variety of SME’s over the last 30 years, and the chief technical officer has over35 years experience in high technology companies. One vice president has over 9 years experience in theprosthetics industry, and more than 30 years experience as a prosthetist. The UK sales manager is also a qualifiedprosthetist. The head of international sales has 14 yearsexperience in pharmaceutical sales and marketing, and thevice president of global operations, 38 years manufacturingmanagement experience.

In early 2003, the company was spun out from the NHS,with significant shareholding held by Scottish HealthInnovations Ltd. An initial SMART award from ScottishEnterprise got the company going, followed by newinvestors, including Archangel Informal Investments andthe Scottish Co-investment Fund. Recently Touch Bionicsacquired “living skin” for use with their prosthetics, andopened a “centre of excellence” offering clinical andresearch services to international clients.

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Ulsyswww.ulsys.co.ukUlsys Ltd is a start-up medical device company, based inWest Yorkshire. Ulsys has developed a prototype bandage/pressure-monitor for use in the monitoring pressures appliedby compression bandaging in the treatment of venous legulcers. Ulsys was formed by a group of 14 companiesmaking use of a European grant award for the initial development of the bandage technology.

Ulsys plans a training aid as their first product. They claimtheir technology is proven, and that the training aid does nothave to be registered as a medical device. Once sufficientclinical data has been generated, their intention is to releasethe “smart bandage” to provide an early revenue stream, andovercome any resistance to new technology within the NHS.

The make up of the senior management team includes amanaging director with a career as a serial entrepreneur, andresponsible for a range of products in the healthcare sector,and a sales and marketing director with over 20 years experience in the medical device sector, and extensive contactsin the wound healing sector. The finance director is a charteredaccountant, with experience of the smaller scale venturecapital environment. Their technical advisor has previouslybeen successful in raising over five million pounds in grantfunding for SMEs to assist with research and development.

Ulsys has been very successful in achieving grant fundingfor development work, with a recent SMART award of£250,000, and an earlier combination of micro and feasibilityawards for product development (an initial £30k from RisingStars Growth Fund in 2004 and further seed corn fundingof £150k from South Yorkshire Investment Fund in 2008).These follow on from an earlier EU co-operative researchaward of €1,000,000 (approx £650,000), to a consortium ofcompanies working, including Ulsys, to initially develop thepressure sensing technology. Ulsys is now looking for afurther £250k to bring a training aid to market.

5. DATA ANALYSIS

The data derived form the 12 companies has beenanalysed in 2 different ways, firstly in terms of generaltrends across all the companies surveyed, and secondly bycategorising the businesses into groups in terms of theirstage of progression and looking at trends common toeach group.

All data derived from the 12 company write-ups is alsoincluded here as a spreadsheet, and some data derivedfrom the spreadsheet presented as graphs.

5.1 Common traits across all stages

It is noticeable across all stages of progression that thestart ups reviewed all have secured or are securing intellectual property (only those that have already securedIP appear in the spreadsheet), virtually all have been ableto obtain initial seed investment without giving up equity at too early a stage (mostly commonly from competitiveawards), and a large proportion have considerable in-house financial and legal expertise as well as outstandingtechnical skills.

There is also one example company, amongst the twelvereviewed, that suffered a forced product withdrawal, thatshould perhaps be borne in mind in showing how essentialit is to have in-house skills related to clinical and productapproval areas, and to put in early and continuing efforts to ensure compliance.

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5.1.1 Areas of Expertise

It is also very apparent that all those companies with aproduct that is classed as a medical device, have had toput a lot of resources into the approvals process, andunsurprisingly have clinical expertise within the senior staff,and have built strong links with appropriate medical practitioners in that area (the survey differentiates “medicalexpertise” that is knowledge of medical technology, and“clinical expertise”, knowledge of patient-care (see figure 1).

5.1.2 Sources of Funding

The greatest area of consistency in sources of funding,particularly in the early life of all the companies surveyed,was obtaining public money via competitive awards. In some cases more than one award, and in cone caseawards led to the formation of the company from a consortium, which then went on to win further awards tocontinue its development.

Figure1: Areas of Expertise of Senior Staff

Other public money came second, mostly through localschemes designed to encourage the local economy, followed by venture capital funding in third place. Howeverit should be borne in mind that other start-up companies inthe sector, making use of private resources, may be “off theradar”. As many start-ups wish to keep as low a profile aspossible until their technology is well-developed, it is perhaps necessary to assume that companies not drawingon public funds may have little or no visibility whenresearching start-ups.

Finally, many of the companies have drawn on severalsources of funding, and played on their unique assets toavoid early or excessive trading of equity for investment(see figure 2).

Figure2: Start-up Company Sources of Funding

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©2011 Wellness and Health Innovation

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5.2 Stage of Progression

An alternative approach to the analysis of the 12 companiessurveyed is to categorise them into one of four sections,depending on their stage of development. In this viewcompany evolution becomes more apparent, as theyprogress from a relatively narrow range of technical expertise, into wider business expertise and gathering awider spectrum of sources of funding.

5.2.1 Embryonic/early start-up:Smart Acoustics/KEDMobisantePixic

These companies are predominantly characterised by notcurrently having the financial means to launch their product.Most are in the process of securing intellectual property, or have already done so. Most are still composed of onlythe technical experts working on a proof-of-concept.

5.2.2 Early start-up/pre-productMode DiagnosticsOhmedicsSure SensorUlsys

These companies are all in the run-up to their first productlaunch, and it is noticeable that senior staff expertise hasexpanded to cover many more areas, particularly accountancy, legal and regulatory expertise.

5.2.3 Later start-up/first-productAlere TechnologiesAmbicarePWB Health

Here the pattern is one of established finances, intellectualproperty, a wide spectrum of appropriate expertiseamongst the senior staff – and the process of making thenecessary adjustments to ensure that initial success canbe repeated in follow-on products. None of these companies was in a static state.

5.2.4 Established start-up/multiple-productsResearch In MotionTouch Bionics

These two rather different examples of established companies illustrate two key aspects of maintaining theirposition. RIM is still willing to go after niche applications,whilst Touch Bionics are working on securing their pre-eminence through establishing networks of guidanceand expertise in their sector.