Injeq – Smart needle which knows where its tip is

Product and demand

The company’s first product will be IQ-Tip™ spinal needle that allows for collecting diagnostic samples of cerebrospinal fluid (CSF) and for administering intrathecal drugs into the CSF e.g. as part of leukemia treatment. These lumbar punctures are especially demanding when treating small children. Nordic pediatric hospitals in particular have expressed their interest in starting to use the product as soon as possible. Treatment of acute lymphoblastic leukemia (ALL), the most common cancer type in children, typically includes at least 20 lumbar punctures per patient. The procedure includes risks that can cause injuries and additional suffering, and make the treatment more complicated. According to an extensive Canadian study [Shaikh et al. 2014], punctures cause tissue damage in 18 percent of leukemia patients. This is directly linked to a lower survival rate: in other words, traditional needles can cause tissue damage reducing the chances of recovery.

Apart from leukemia treatments, other typical reasons for lumbar punctures include suspected meningitis, where a CSF sample is required to confirm the diagnosis. While collecting such a sample from very young patients with a traditional needle is problematic, completing the procedure with the Injeq IQ-Tip™ smart needle is easy. According to surveys [Baxter et al. 2006; Nigrovic et al. 2007; Greenberg et al. 2008; Glatstein et al. 2011], 24–40 % of punctures performed on newborn babies fail or result in tissue damage. In addition to suffering, failed punctures, consequent delays, and poor quality bloody samples cause expenses, as the intensive care of these children is unnecessarily prolonged. On the other hand, meningitis that is left untreated or is not diagnosed because of a poor-quality sample is always life-threatening. It is also among the most significant acquired causes of death of newborn and prematurely born babies.

Our product also has benefits regarding procedures carried out on adult patients. These include a reduced infection risk and less unsuccessful punctures, which improve patient safety. The aim is that once the smart needle has become an established method of lumbar puncture on child patients, it will also be taken into use in similar procedures performed on adults, as these are not easy or risk-free either.

Business model

The estimated annual market potential in European pediatric hospitals is 51 million euros. The estimate is based on patient and procedure volumes, number and types of hospitals, and expected sales prices (28 EU member states, Norway, and Switzerland). The greatest need for the product is in the treatment of childhood leukemia and also in diagnostic punctures in intensive care of newborns and prematurely born babies. These specialized fields account for around 60% of medical procedures carried out on children. The sales strategy is that the transition to using the smart needle for all lumbar punctures will be completed simultaneously throughout each individual pediatric hospital to ensure coherent operating methods.

Our total available market (TAM) can be considered to be the global combined consumption of hypodermic needles in all applications. This, naturally, would be in the region of billions of euros. As using a smart needle is unnecessary on majority of routine punctures, the serviceable available market (SAM) is naturally substantially smaller. Still, when targeting for global market in applications where IQ-Tip™ technology can provide substantial added value in the procedure, we estimate the serviceable obtainable market (SOM) to be in the region of 2 billion euros, depending on price erosion of the technology.

The sales method and pricing model will be adapted to each market. The most common model will be one-off sales of tissue analyzers. This will generate a quick income flow, while also kicking off the sales of smart needles as disposable items. Depending on the target market and the financing model, the analyzers can also be sold using a leasing contract or the needle-as-a-service model. In the latter case, the customer will be charged for the needles based on use or number of patients. The business and pricing models suited to each market and the relative prices of the components will be discussed with customers and distributor partners. The aim is that the price will not constitute a barrier to buying the products.

Sales, production, and distribution

The sale and delivery of the products require EC-certification in the EU. The company expects to receive EC-certification and EU market approval during first half of 2020. The first target market is European pediatric hospitals, where our product will enhance the precision and safety of lumbar punctures. Pediatric hospitals operate either in conjunction with university hospitals or maternity hospitals, or as individual units. In the early stages, the sales operations will focus on the leading university hospitals in particular, which will serve as references and help boost Injeq’s products as the new European standard in clinical practice.

The company’s first product IQ-Tip™ needle has been clinically tested in feasibility studies at Finnish university hospitals. While the studies showed that the product works as expected, the study design failed to comply with the new requirements. Now, our pivotal clinical investigation (IQ-LP-03) of the IQ-Tip™ system prior to EU market approval will be conducted in Tampere, Turku and Helsinki University Hospitals. Its goal is to show the clinical benefit in the form of the first puncture success rate along with the safety of the final system, ie. to provide the final clinical evidence needed for the EU market approval under the new Medical Device Regulation. The study is planned to start in August-September 2019. The study group comprises about 150 pediatric leukemia or neurological punctures. Our goal is to have the pre-market clinical studies completed by the end of this year.

Injeq Oy owns the key rights to its products. As the manufacturer of the products, the company is also responsible for their safety. The needles will be manufactured in the company’s own production facilities in Tampere using components from various manufacturers. We are relocating our facilities right now in May-June 2019. This brings us more potential to grow and robustness for future changes as the new premises will include larger production facilities and room to expand within the same building. It will be relatively easy to expand the production as the sale volumes increase. The sterilization will be carried out by a specialized European operator. The analyzer manufacture will be procured from a Nordic contract manufacturer.

Sales will be based on local distributors, with preference of local companies with existing customer relations with pediatric hospitals. Injeq has identified around 450 distributor candidates globally, and from that list distributors in Europe have been selected. The distributorship contract has been signed in three countries and agreed in five more countries. Our aim is to have European distributorships completed when we are able to start selling and shipping the products. The distributors selected so far prove that the basis on which we have built our selection is right and our candidate list is valid. Domestically initial plan is that the company will use its own organization to manage the sales in Finland, and also co-operate with Nordic university hospitals, as well as to provide support to its distributors. Negotiations have been underway with the leading Nordic university hospitals. The clinical co-operation with various hospitals in the past years has provided an excellent foundation for starting the sales operations.

Competition

Spinal needles designed for lumbar punctures are used widely all over the world. Lumbar puncture has been used in medicine for over a century. Today, around 100 million lumbar punctures are performed on patients every year. The present practice is both a competitive constraint and an opportunity. Injeq opportunity arise from the commonness of the procedure and from the problems and risks inherent to the present method. These problems and risks can be mitigated by the use of the Injeq IQ-Tip™ needle. The competitive constraint, on the other hand, derives from the view of medical professionals that the present method is sufficiently efficient. However, pediatricians are not satisfied with the present solutions, because a lumbar puncture is a demanding procedure especially when performed on children and also the risks are higher than in case of adults. For this reason, the company will start by focusing on their needs, as we find it likely that the use of the smart needle will spread at a later stage and become a standard method also in procedures performed on adults.

There is no existing market segment for a smart lumbar needle, as no similar products can be found on the market. Therefore, we foresee that Injeq will become the technology leader. The established needle manufacturers know our company, and are keenly monitoring its development. There is a good reason for this, as the company’s vision is to revolutionize the present treatment practice. This may be reflected in the profitability of at least some of the current needle manufacturers. As we get closer to our goal, we foresee the demand of the traditional needles disappearing, one hospital ward at a time. On the other hand, there is room on the global market for partnerships with conventional needle manufacturers. This would give us access to their logistics as well as their sales and distribution channels.

Problems inherent to lumbar punctures are widely recognized. Attempts have been made to develop competitive solutions based e.g. on measuring the pressure on the needle tip, or the light reflected from the tip. However, the technologies based on pressure are impractical for wider use and the light-based solutions have not yet reached the commercialization phase. All in all, according to our analysis, it can be stated that there are no competing products on the market with corresponding functionality, and that the development and commercialization of such competing products is far behind Injeq.

Requirements of the customers and the authorities

Development of new medical devices is not easy but once on the market, they often acquire a stable market position. Regulatory approvals required for medical devices are a key barrier to sales operations. An already highly regulated industry is now getting greater demands from 2020. The EU regulatory framework goes from directives (MDD) to regulations (MDR) and becomes directly applicable affecting legislation in all member states. The transition period from Medical Device Directive to Medical Device Regulation will end in May 2020. The transition itself means that the certification process becomes more demanding. Only two notified bodies (TÜV SÜD alongside BSI UK) has so far been cleared for MDR compliance, and many will cease auditing Class 3 devices as they consider it too demanding task in MDR domain. Potential Brexit will not help the situation either, as roughly 30% of regulatory resources are based in the UK. All this may lead to substantial queues for clients of the European notified bodies.

Luckily, Injeq has manufactured devices for research use that have met the European requirements for years and has been in process for EC-certification with TÜV SÜD since April 2018. We will be moving our production to production-scale facilities during 2Q2019 implementing a required quality system from the start. As the final clinical evidence is provided by IQ-LP-03 clinical investigation, which is planned to be completed in 4Q2019, we should be able to complete the tests and audits required by European regulatory practices. After the EU market approval, the company will seek for further approvals in other geographical areas in due course.

Sustainable competitive advantage

The company’s products cannot easily be copied by competitors. The product entity includes a tissue analyzer, disposable needles, and a cable that connects the two. Neither the needle nor the analyzer can be easily copied or replaced. To protect its rights, the company has either acquired or applied for patents on four different technologies. While these patents protect the company’s business operations to a certain extent, also non-patentable information collected through research and clinical trials contribute to the sustainable competitive advantage. Competitors must complete corresponding clinical trials, giving Injeq a clear head start on the market.

The company’s tissue identification algorithms are proprietary and confidential. New tissue identification measuring data is collected when the products are used. This facilitates continuous development of the products and the optimization of the algorithms. The company’s goal is that Injeq smart needle will become the most popular treatment practice in the field.

Growth paths

The company’s first market will cover pediatric lumbar punctures performed at European hospitals, especially in the treatment of acute lymphoblastic leukemia (ALL). Success on this market is a central goal and main focus of the company. Preparatory operations to establish distributors and sales have already been started in Europe and first distributor agreements signed. As soon as the EC-certification is obtained our aim is to quickly expand operations to cover the countries acknowledging the EC-certification. This provides Injeq substantial initial market potential.

When this primary beachhead is secured, there are several further growth path options. Investments in these will be considered case-specifically. The main growth path options identified are as follows:

1. Lumbar punctures of adult patients. Focusing on limited-size segment with high importance such as pediatric care is a sensible way to enter the market. Still, lumbar punctures and spinal anesthesia are performed more often to adults than children. For example cerebrospinal fluid (CSF) biomarkers are increasingly being used to support a diagnosis of Alzheimer's disease [Paterson et al. 2018]. Population aging and increased prevalence of Alzheimer's disease increase the amount of diagnostic lumbar punctures used to support diagnosis of the disease. As soon as proper foothold in pediatric market has been established and the technology proven in the eyes of the practitioners, the aim is to use pediatric wards as references and to emphasize the benefits of the technology and the reduced risks in order to extend operations from pediatric wards to adult wards. Once the barriers are crossed and IQ-Tip™ approach accepted, the transition is relatively easy: From company perspective, no new devices or distributors are needed, and no new skills are needed from the practitioners. The company expects that, given time, the smart needle will become part of normal diagnosis and treatment practices, as the ease and enhanced safety facilitated by digital technology are valued highly. The smart needle can be used in training of new medical professionals as well.
2. Applying for FDA approval and extending sales to the United States. The application process may be initiated after the EU market approval has been granted for the IQ-Tip™ product. The United States offers significant opportunities.
3. Leveraging EC-certification to sales in other parts of the world. Investments to the wellbeing of children are a growth area also outside Europe and the United States. The European EC-certification serves as a basis for the approval process of many countries outside Europe, and relatively few official requirements are made in addition to it. Pursuing further certifications and enlarging sales network to new areas will be considered once the EC-certification has been granted.
4. New applications for the IQ-Tip™. In addition to lumbar punctures, IQ-Tip™ technology can be used in many other demanding punctures such as joint and vein injections, biopsy, veterinary medicine and so on. The company will investigate these opportunities and revisit the work already done in these application areas as soon as the first application has entered the market.

Sketched estimate for revenue growth: