InSightec's founders call their company "a geriatric start-up": “Age is a necessary condition in this field. There are many disciplines, and people with experience and a lot of bandwidth are needed.” In the case of InSightec, this means CEO Dr. Jackob (Kobi) Vortman served as president of Elbit Medical Imaging (EMITF), and CFO Oded Tamir served 18 years at Elbit Systems (Nasdaq: ESLTF). Together, they founded Diasonics, which joined Elbit Medical Imagery and was sold to General Electric Medical Systems in 1998 for $230 million in shares.
Today, they have InSightec, 75% of which is held by Elbit Medical Imagery, purchased for $25 million. The founders swear that they have complete autonomy. So far, the close relationship with Elbit senior executives has helped more than hurt. Besides the inherited pleasant offices in Tirat Hacarmel outside of Haifa, Elbit Systems carries out the electro-mechanical manufacturing and Elbit manufacturers the robotics. In addition to InSightec’s staff of 50, 50 people from the Elbit group work on its behalf.
In March 1999, Elron (Nasdaq: ELRNF) sold its holdings in Elbit Medical Imagery to the Europa Israel group, and the control of InSightec was effectively transferred to Motti Zisser, of whom it was said that he would empty the group of its technologies in favor of hotel development.
“Globes”: How do you manage in the House of Zisser?
Tamir: “We have a daily relationship with him. His support is extraordinary.”
It is said that he is into real estate and hotels.
“That is his specialization, but we enjoy his support and we have freedom of action. This is a facet of him that nobody knows.”
Dr. Vortman says, “It is a fact that following the Elron acquisition, Europa Israel had 60 days to sell 50% of its Elbit holding. But after learning about the company, Zisser refused to sell.”
Why did Zisser refuse to sell? The answer to the question is found in the turkey the company entrepreneurs roasted in front of him. A slice of meat (from the supermarket, so don’t worry) was placed in a device developed by InSightec, which fired focused ultrasound directed at a marked “tumor”. Following a few minutes of firing at an average 80 degrees Celsius, the meat was cut open to show the results. Within the cold piece of turkey, at a few centimeters’ depth, there was precisely delineated burn mark. “Roast turkey” marked the spot of a destroyed carcinogenic tumor.
“Within a few years, this method can replace many types of surgery,” is the understatement used at InSightec.
In September, a Moritz-Tuchler analysts estimated InSightec at $90 million. However, it may be assumed that if and when its systems are used, all questions about market share or company value will become irrelevant. They will be sky high.
“I think that we have now crossed the $100 million mark,” says Tamir, “but my estimate must meet the investors’ test.” Since the company has cash reserves, the test is not expected before the end of next year, and the investor may then well be Elbit Medical Imagery.
An important investor is GE Medical Systems, which acquired just under 5% of InSightec, in a strategic investment. Tamir says, “Our product will be a “plug-and-play” for GE’s current systems. GE is the leader in the MRI market. GE is already presenting our product’s capabilities, which are not yet on the market, as the future advantages for their systems.”
GE invests and opens doors, but will not market InSightec’s systems. Vortman explains that GE’s strategy does not include entering the treatment field. “It is a strategic partner and there is close cooperation in the area of product assistance. All our research sites are GE’s.”
InSightec’s systems use high-power focused ultrasound, which reach cell-destroying temperatures. They are not very hot – just enough to burn. Cells begin to die at 60 degrees Celsius. The heating is controlled to an accuracy of millimeters so as to destroy only the carcinogenic cells, without damaging surrounding tissue. The systems works on the same principle of a magnifying glass that focuses sunlight to burn a precise circle on a piece of paper.
The procedure takes a few minutes. It does not require cuts, surgery, anaesthetics or scars. It is a direct internal bulls-eye, what is termed “non-invasive ablative surgery”. InSightec calls it, “a virtual thermal surgical knife”. Because the system is heat sensitive, it can show the doctor the precise hit and how much of the tumor remains. Unlike surgery, if not everything is removed, one can always tell the patient, “Come back next month, and we’ll get the rest of it.”
The breast remains, the cancer is gone
InSightec is far from alone in this market. To the extent that its idea is innovative, it has competitors. Not just competitors, but all the major players in the medical imaging market: Siemens, Philips and Toshiba, as well as “numerous US start-ups”. InSightec estimates that it is 2-3 years ahead of the competition. Tamir says that the company’s edge is not just in time, but also in intellectual property. It has submitted 35 patent applications to date.
InSightec is now conducting phase II clinical trials for the treatment of breast cancer, at four hospitals in the US and Canada. In January, Tel Hashomer Hospital outside of Tel Aviv and London’s Imperial College will also begin trials. In the Canadian phase I trials, the entire cancer was successfully removed in 17 of 22 trials. With no chemotherapy and only some hormonal medication, there was an 80% success rate.
Why focus on breast cancer?
VP Marketing David Freundlich: “Breast cancer is a common disease. It is in an external organ, without internal tissues. It is simple for a device that is still in its primitive stages.”
There are other applications. An important application is the removal of uterine leiomyoma (fibroids). Although not malignant, 25-40% of women suffer from them, sometimes suffering severe side effects. In such cases, the usual current treatment is a hysterectomy or abdominal myomectomy (women may be chilled to read this). 200,000 hysterectomies a year in the US – a third – are due to non-malignant tumors. (This may be because gynecologists are paid per surgery).
Other uterine fibroid treatments are all invasive and sometimes painful (burning by lasers, heating the uterus, or blocking arteries in the area). InSightec is offering a non-invasive beam of ultrasound directed onto the tumor. The treatment is technically more complex, due to the relative depth of the infected uterine tissue, but relatively simple to receive Federal Drug Administration (FDA) safety approval.
InSightec is not yet ready for heart or arthritis for example. “There is a limit to what we can do; we are only 50 people.” Even so, the implications are enormous. “The device can cover the entire abdominal cavity, limbs, neck and other organs,” says InSightec. The company does not disclose what “the other organs” are, in order not to raise false hopes.
What InSightec is doing, in cooperation with the Hebrew University in Jerusalem, is to develop along the same lines a method for guiding drugs to a specific location on the body. If this sounds familiar, this is the idea of D-Pharm, although not from the field of biotechnology. Quite simply, a “wrapper” medication penetrates to the required point on the body and the ultrasound will melt the wrapper as needed. Another possible application is to “free” tissue and cells by means of ultrasound, which will ease the body’s absorption of medication thereby increasing its effectiveness.
After solving the problem of hysterectomies, maybe you’ll enter the plastic surgery field?
Freundlich : “We are seriously looking at aesthetic surgery.” At the moment, only three employees are being trained in the US for this purpose.
A pay-per-surgery method
What is InSightec’s business model? InSightec does not plan to build a marketing or distribution network. Because the system’s interface is user-friendly – somewhere between Window and a photo-shop – it is estimated that every hospital using the system will require support for only three weeks at the most. The intention is to market through a strategic partner, not GE, as noted above. The intention is to work with treatment and surgery equipment companies which will handle the marketing and distribution.
In 2001, InSightec will accumulate a clinical portfolio, which will help draw investors. “We will begin licensing procedures and talking with potential partners, who may also invest money,” says InSightec. Possibly more importantly, InSightec does not intend to sell its equipment and go home – they want a pay-per-use method.
“Globes”: A gold mine
Vortman : “I hope.”
What could prevent InSightec from conquering the world? They say they are not bothered by technical difficulties. “There may be regulatory delays, or difficulty in penetrating a new technology into the market, which may take another six months to a year. But it will be a delay, not an end,” says Vortman.
As might be expected, the real opposition may be the doctors themselves. InSightec represents a real threat, since they get paid per surgery. “We expect a power struggle within hospitals over control. But the patients themselves will tip the balance. Our alternative is so preferable that even if doctors try to prevent its use, the patients will fight to receive it. It depends on the public’s access to information. Women’s medical organizations are strong political force in the US, so we are not worried,” says Vortman.
But hold on a moment. Image the pharmaceutical giants waking up one morning to discover that their blockbusting cancer drugs have become superfluous. If the drug companies bare their fangs to prevent a market overthrow, not even a Motti Zisser can come to the rescue.
Published by Israel's Business Arena on 25 December 2000