|
|
SpectRx, Inc. (SPRX) |
|
|
CEOCFO CEOCFO Monthly Analyst |
"To print this page go to file and left click on print" The launch of their new
SimpleChoice™ product line has SpectRx in position to show sales and revenue for 2003 Bio of CEO, CEOCFOinterviews:
Mr. Samuels, please give us a brief history of SpectRx. Mr. Samuels: “We started SpectRx based on technology we developed that provided a better way to diagnose disease, especially diabetes. Our technology, called biophotonics, allows us to non-invasively detect disease and measure parameters that improve medical treatment for people. We found that our technology had a number of applications in diabetes and cancer detection. As such, we have major business activities in diabetes with both glucose monitoring and insulin delivery devices. We have continued our original vision in non-invasive diagnostics with activities in cervical cancer and skin cancer detection using biophotonics.” CEOCFOinterviews: Please tell us about the product that you have on the market today and the product that you are developing for the detection of cervical cancer. Mr. Samuels: “The cervical cancer product is an out-growth of a product that we developed in the mid-nineties called the BiliCheck™ Non-invasive Bilirubin Analyzer. The BiliCheck™ is for detecting and monitoring infant jaundice, a common condition in newborns. Moving that type of technology forward, we are in the process of developing a cervical cancer detection platform that can significantly improve the detection of cervical cancer. We believe that the technology has the potential to replace Pap smears that miss about 30% of the disease that is present. Our device has been in pre-pivotal clinical trials. So far, we have tested about a thousand women with our device and are very pleased with the results. We are now in the process of preparing to go to FDA pivotal trials, which will hopefully, result in a product in the market in 04/05.” CEOCFOinterviews: Why is your technology applicable to cervical cancer as opposed to other types of cancer? Mr.
Samuels: “We looked at many different cancers to try to find the opportunity
where we could have the most impact. Cervical cancer is an area where we felt that we
could significantly improve upon the current methods of screening and diagnosis. The current Pap tests are really quite inaccurate
from the standpoint of their sensitivity, which is the ability to define the cancer, and
their specificity, which is the ability to avoid false positives. CEOCFOinterviews: What lead you to develop the BiliCheck™? Mr.
Samuels: “In 1993, I had my first child and she, like many other babies, had
infant jaundice, which is excess of a compound called bilirubin in the body. I noticed
that they were using a painful stick to draw blood from her heel for a blood test; this is
a three-day-old baby that is having a heal stick blood test done, and it was very
traumatic for the baby and for us. I knew there had to be a better way. Since you can see the yellow jaundice, we
developed BiliCheck™ so that it is now possible to make a test that provides the same
information by applying light on the forehead of the infant. The small hand-held device
acts like a flashlight, it puts a small light on the skin and from that reflected light,
we can tell what the infant’s jaundice level is. We shipped thousands of those
instruments into the worldwide market, and that gave us the basis of technology that we
needed to move forward into a significantly bigger market, which is cancer
detection.” CEOCFOinterviews: Is this proprietary technology? Mr. Samuels: “SpectRx has always focused on developing products in areas where we could get a competitive advantage. We have a lot of intellectual property in terms of patents and applications. All of our products are based on patent-protected technology.” CEOCFOinterviews: Why are you finding the diabetes area so exciting? Mr. Samuels: “Diabetes detection, monitoring and treatment are large and growing markets that have responded favorably to innovation. We launched our first two SimpleChoice™ products in December 2002. One is a reservoir, or insulin cartridge, for insulin pumps, the other is an over-the-counter test that people with diabetes should take at least four times a year. That product is called the A1c test. We think these and additional SimpleChoice™ products will take us down the road to significant revenue and eventual profitability. We are also working on
continuous glucose monitoring, research and development. Because of the time scale
involved in developing a continuous glucose-monitoring device, we elected in early 2002,
to purchase a small business that was involved in the other side of the diabetes business,
which is insulin delivery. This was the genesis for the SimpleChoice™ brand. The initial insulin delivery products target the
insulin pump segment. There are about 170,000 people in the United States, who use an
insulin pump. This is a small device the size of a pager, which pumps insulin into the
body through an insulin infusion set (tubing set). This allows them to have insulin on a
continual basis and to control their diabetes in a more normal manner. Mr.
Samuels: “People with diabetes need to test frequently to determine if their
blood sugar level is too high or low. What the A1c test does is measure how much of the
hemoglobin in your blood has been bound with sugar. If you have an average blood glucose
level that is high, a higher percentage of your hemoglobin will be bound up with sugar
over a three-month period. The A1c test provides you with an indication of the percentage
of the hemoglobin that has been affected in this way. It is a good measure of how well you
are controlling your disease. If you have diabetes, the recommendation is to keep your
hemoglobin A1c component below 7%. CEOCFOinterviews: Is the diabetes market growing? Mr. Samuels: “It is getting larger. One of the factors is that there is more awareness now. It used to be common for someone to say, “you have a touch of diabetes, and there is nothing to worry about.” Today, that same physician would probably say “I’m diagnosing you with diabetes and you need to have daily monitoring of your glucose and take oral medications or insulin and have your A1c test.” There is more information on the Internet and people are more informed. In addition, as a nation, baby boomers are growing older and we are increasing in obesity, which is a contributor to diabetes.” CEOCFOinterviews: Is there competition on the insulin delivery products and what is it that sets SpectRx apart? Mr. Samuels: “Innovation and variety of choices is what sets us apart from the competition. Our products include a number of features that make them easier to use. We are also introducing totally new products into the market such as the SimpleChoice™ patch insulin pump infusion set. Our products are also more widely available, making them easier to buy. CEOCFOinterviews: How do you market your products? Mr. Samuels: “We decided not to go to the expense of building another diabetes sales force, when there are plenty of people eager to sell our products to their existing customers. We sell our products to diabetes product distributors, who in turn sell directly to consumers, or to medical equipment sales outlets. Many of these distributors were previously selling the competition’s products, but those products and profits were taken away when the competition went to direct marketing. CEOCFOinterviews: So they are glad to have this to sell. Mr. Samuels: “They are more than happy to sell our products. In addition to a high margin, we offer them innovative features that we think will help drive people toward accepting our products. With a $200 million to $250 million market, 10-20% of that market is significant for a company like SpectRx. If we can take 20% market share, that would be a $50 million a year business for us.” CEOCFOinterviews: Are you manufacturing these yourself? Mr. Samuels: “These are high-volume medical disposals. We don’t need to build the infrastructure here or sustain the capital needed to build manufacturing for that. We are working with several manufacturers to get the products to the market place. CEOCFOinterviews: What is your relationship with Abbott Laboratories? Mr.
Samuels: “We have had a long-standing collaboration with Abbott Laboratories
(NYSE: ABT) in the continuous glucose monitoring area. However, we decided it would be
faster for us to move forward on our own without Abbot in the near-term. CEOCFOinterviews: What is your current cash and credit position? Mr. Samuels: “With regard to cash, we are relying somewhat on the sale of our BiliCheck™ device because we don’t want to raise capital by selling our equity in this capital market. As you know, small companies like SpectRx have been really affected by the downturn in the market. We have seen our stock price drop from the pressures in the stock market and we did have some delays last year in terms of shipping some of these products that we are now starting to ship. We made the decision that we did not want to raise capital through equity in this sort of environment. That was part of our decision to sell our BiliCheck™ product line.” CEOCFOinterviews: How do you handle markets outside of the United States? Mr. Samuels: “We use established distribution channels in markets outside the U.S. and Canada. We have about 50 distributors worldwide for the BiliCheck™ product so we have some experience in dealing with distribution outside the United States. We will build from that network for distribution of our cervical cancer device because cervical cancer is a much bigger issue outside the U.S. There are about 190,000 thousand deaths annually worldwide. There are probably more deaths outside the US, because we are very aggressive and try to identify and treat cervical cancer here. We see a huge opportunity overseas for cervical cancer. That opportunity is increased because many countries do not have a pathology lab infrastructure set up. Pap smear tests are even less reliable overseas. We believe our product will be very well received by countries that haven’t established Pap labs.” CEOCFOinterviews: What do you see are the biggest challenges going forward? Mr.
Samuels: “SpectRx has been a research and development company and we have
worked on some very difficult projects. We are in a situation where our primary focus
right now is to get the company to a cash flow break-even, while maintaining our big
upside opportunities in glucose monitoring and cancer detection. In terms of challenges
for this year, we want to launch at least three more SimpleChoice™ products and build
our revenue. CEOCFOinterviews: In closing, what would you like to say to shareholders and potential investors? Mr. Samuels: “We are dedicated to improving peoples lives by bringing to market innovative products that address two of the most widespread diseases on earth, diabetes and cancer. We believe that these two large and growing markets present a unique opportunity for our shareholders. What investors should look for in 2003 are the signs that we are moving toward higher revenue and profitability. We plan on shipping a lot of product this year and making significant progress on our development programs.”disclaimers |
