superDimension: Navigating Interventional Pulmonology

Ever since the transformative success of interventional cardiology, the emergence of new interventional subspecialties seems to come at ever quicker paces. One of the latest clinical spaces to embrace the interventional revolution is pulmonology, which over the past couple of years has seen a host of new procedures and devices transforming traditional procedures. Indeed, the pace at which interventional cardiology evolved now seems almost leisurely compared with that at which interventional pulmonology companies are now moving. Thus, many of the companies in the space face an interesting dilemma: how to establish a foundation in this new specialty and, at the same time, how to refine that technology to keep pace with the field as it grows. That's the challenge facing superDimension, whose executives believe they own not just the road map, but the road itself.

In the fast-growing field of interventional pulmonology, superDimension executives believe they own not just the road map, but the road itself.

by David Cassak

Having started out as a manufacturer of high-tech toys, superDimension has changed strategies a number of times and is now targeting the emerging interventional pulmonology market.

Used primarily in the detection of lung cancer lesions, the superDimension system works like a GPS device, using sensor and navigation technology to locate lesions, particularly those too small to be effectively located by other means, and to assess whether they’re malignant.

The company received CE mark and FDA clearance a while ago, but it had trouble early on executing on its commercialization strategy; a product recall and a down financing round haven’t helped.

For CEO Dan Sullivan, a veteran of both SciMed and USCI in their early days, the emergence of interventional pulmonology naturally recalls the early days of interventional cardiology, but with important differences because of the model cardiology has established.

Over the past 20 years, the rise of interventional procedures, combined perhaps with a parallel movement toward minimally invasive surgery, has transformed not just clinical medicine, but business models for the medical device companies that serve those clinical areas. With percutaneous and MIS techniques finding their way even into less-than-obvious clinical spaces like orthopedic joint replacement and spine surgery, there doesn’t seem to be anywhere that interventional approaches can’t go.

One of the latest clinical spaces to embrace the interventional revolution: pulmonology, which over the past couple of years has seen a host of new procedures and devices transforming traditional procedures, such as lung reduction surgery and lung biopsies, all of which are heralding a new subspecialty, interventional pulmonology. For device companies hoping to, at once, promote and capitalize on the trend toward interventional medicine in these new clinical spaces, the emergence of a new interventional market can seem both familiar and unsettling—familiar because there are common technologies and expertise to all interventional medicine, unsettling because since the transformative success of interventional cardiology, the emergence of all subsequent interventional subspecialties seems to come at ever quicker paces.

Indeed, the pace at which interventional cardiology evolved now seems almost leisurely compared with that at which interventional pulmonology companies are now adapting catheter-based technologies and promoting the new subspecialty influenced by cardiology-based business models. Thus, many of the companies in the space face an interesting dilemma: how, at once, to establish a foundation in this new specialty, building and promoting interventional techniques in pulmonology by gaining a foothold for their specific technology, and, at the same time, and perhaps more important, how to refine and even obsolete that technology to keep pace with the field as it grows.That’s the challenge facing Israeli-born and Minneapolis-based superDimension Ltd., with its innovative sensor and navigation technology to detect lung cancer, which hopes to shake off its fitful start and early commercialization problems under the guidance of a new CEO, angioplasty veteran Dan Sullivan.

Getting Close to the Customer

Dan Sullivan has a background deep in interventional technology. After short stints in sales at American Hospital Supply Corp. and dialysis leader Gambro AB in the early 1980s, Sullivan in 1984 joined the USCI division of CR Bard Inc., at the time virtually the only company selling angioplasty balloons and catheters. "Nobody had even heard of angioplasty at the time, and we had 99% of the market," he recalls.

Sullivan saw immediately the explosive potential of interventional cardiology—in fact, he took a step back from sales manager to field rep to join USCI--but he soon lost confidence that USCI was the company to realize that potential. In the early 1980s, a number of small start-ups were being launched, all of which hoped to develop the next generation of angioplasty technology—including Advanced Cardiovascular Systems Inc. (ACS), which would form the core of Guidant Corp. (now part of Boston Scientific Corp.), and Minneapolis-based SciMed Life Systems Inc., which as a fast follower would quickly establish itself among the new market leaders.

In late 1986, Sullivan left USCI to join SciMed. At the time, the company had about 25 people working on its angioplasty product line, mostly in R&D. It had no approved products—and hence no sales—but Sullivan joined Dale Spencer, SciMed’s CEO, and Brian Mandeville, who headed manufacturing, as head of sales and, ultimately head of sales and marketing, making him the person responsible for positioning SciMed to challenge interventional cardiology’s established players.

In part, says Sullivan, SciMed’s success was built on its ability to innovate quickly. "We had some very good R&D guys and a woman who was great at getting FDA approvals," he recalls. But it was SciMed’s closeness to the customer, a lesson learned from his days at AHSC and a hallmark of the sales and marketing team that Sullivan built, that many point to as SciMed’s distinguishing feature. While other angioplasty companies tended to build close relationships with one or two thought leaders—USCI had signed angioplasty pioneer Andreas Gruentzig, MD, to an exclusive contract, while ACS worked closely with Geoffrey Hartzler, MD, another early innovator--SciMed took the opposite tack. It went deep in the market, getting feedback from a large number of interventionalists, and then it incorporated their suggestions into product designs. "We were very methodical," says Sullivan. "We purposely talked to everybody."

The approach worked. Within a decade, SciMed was among the market leaders in a field that had, indeed, exploded. Sullivan stayed with SciMed through its 1994 acquisition by Boston Scientific Corp., and then he retired, young and very wealthy. [See Deal]

A Miss and then a Hit

"I didn’t have to leave—I just thought I’d give it [i.e., retirement] a try," recalls Sullivan, who for a while did, in fact, retire. (A pilot of light aircraft, he moved to Lake Tahoe and spent some time learning to fly MiG fighters.) But within a year and a half, he had grown bored.

Sullivan spent the late 1990s and early 2000s working on a number of device start-ups, either as a founder or a board member. By 1997, he had moved back to Minneapolis where he started Vascular Science Inc., developer of an innovative coronary anastomosis device that could be used in percutaneous coronary bypass, on either still or beating hearts. Having raised $10 million, Vascular Science was acquired two years later by St. Jude Medical Inc., in a deal with a potential value of $100 million (including a $20 million earn-out). [See Deal] He also served on the boards of a number of other companies, including Acist Medical Systems, later sold to Bracco Diagnostics Inc. [See Deal]; NeoVision Inc., a manufacturer of a 3-D ultrasound biopsy system, later sold to United States Surgical (now part of Covidien) [See Deal]; a biodegradable suture company, Incisive Surgical Inc.; NeuroVASx Inc., an aneurysm company that had just completed clinical trials, and an early drug-eluting stent play, Quanam Medical Corp., that was sold to Boston Scientific. [See Deal] Finally, Sullivan was also a co-founder of Atritech Inc., a left atrial appendage company currently in the last stages of a significant clinical trial.

It was while he was at SRTI (Sinus Rhythm Technologies Inc.), a company he co-founded to develop an innovative approach to atrial fibrillation, utilizing a stent-like technology that would wrap around the pulmonary arteries, that Sullivan got a call from a recruiter about superDimension. SRTI "was the only company I’ve been with that didn’t hit," says Sullivan. "We recognized it early and shut it down." Not only was SRTI clearly not working—"It was a neat design, but we just couldn’t get it to work consistently," says Sullivan—but superDimension proved to be a story too intriguing to pass up.

Founded in 1995 by an Israeli engineer, Pinhas Gilboa, superDimension’s technology was actually originally intended to be used in children’s toys. Gilboa had spent part of his earlier career working on electromagnetic navigation systems for Elbit Systems Ltd., the Israeli defense contractor, and he sought to deploy an enhanced version of the technology in computer-active toys and video games. When that effort didn’t pan out, superDimension decided to shift gears, focusing on interventional cardiology applications and, specifically, on image-guided systems to be used in locating devices used in revascularization and electrophysiology procedures.

The company needed to do some tinkering with its technology, most notably reducing its sensor from one inch to 1mm; it also needed to develop a number of other components that would be necessary for its cardiovascular applications, though not for its toys. More important, it needed to beef up its marketing efforts—the superDimension team could do product engineering, but they didn’t have the background or expertise to launch the product themselves.

A Re-Re-Start

In 2001, the company signed a deal with Boston Scientific to apply its sensor technology to Boston’s EP catheters. Though non-exclusive, the deal was worth millions to superDimension and provided an important source of financing. The Boston arrangement also left superDimension free to enter into negotiations with other companies, and it soon progressed far along in talks with General Electric Co. and CR Bard. But when Boston Scientific bought Cardiac Pathways Corp. in June of 2001, everything fell apart for superDimension. Boston no longer needed superDimension’s technology—Cardiac Pathway’s EP mapping technology could do the job just as well and was also already FDA-approved. And with Boston out of the picture, GE dropped its negotiations because BSC’s catheter was critical to its initiative. Finally, it was just at that time that Tyco International Ltd. (now Covidien) announced plans to acquire Bard—and though the deal would later fall through, Bard was no longer in play as a partner for superDimension.

With its commercialization plans in ruins, superDimension scuttled plans for a cardiovascular program. Within months, the company had settled on a new area of focus for its localization and navigation devices: interventional pulmonology, for which it would soon develop its s uperDimension Bronchus device. Pulmonology was an appealing target—a growing market that was adapting widely accepted interventional approaches and technology; it was still far less crowded and competitive than cardiology, with huge unmet needs and few good devices serving the market.

More to the point, superDimension executives wanted an opportunity the company could tap into quickly and could do so by selling products itself. Company engineers went to work once again, this time adding a steerable catheter, 3-D image processing, and an image-to-body algorithmic registration to its core technologies. It also set out to raise some capital—and after 15 months and discussions with scores of VCs, the company closed a round of financing in late 2002 [See Deal], raising $13 million on the promise of its interventional pulmonology opportunity from an investor group that included Oxford Bioscience Partners, among others (see below). If all went well, superDimension officials believed, the company would do an IPO in late 2006.

But all did not go well. The interventional pulmonology play was appealing, but it took much longer to take off than the company had anticipated. superDimension received FDA clearance of its device in 2004, an event that company officials at the time saw as a validation of the technology, and it had set up US operations in Minneapolis, coincidentally, Dan Sullivan’s home town. (It had earlier received CE mark and began marketing in Europe, also in 2004, through a small, direct sales effort in Germany, where it established a subsidiary, and a network of independent distributors in 12 other European countries.)

But the initial marketing launch stalled. The company had hoped to have 50 systems placed by the end of 2005, 20 of them in the US, but it fell far short of this goal. By late 2005, superDimension’s CEO had resigned and the company’s board was looking for a new CEO to re-start the company once again. By mid 2006, they found their candidate in Dan Sullivan.

Catching Cancer Early

You don’t have to be a physician to grasp the scope of the lung cancer problem in the US. The number one cause of cancer deaths, lung cancer is second only to heart disease in mortality statistics in the US; deaths due to lung cancer will reach 160,000 this year, more than the next four types of cancers combined, with another 213,000 new cases diagnosed. Moreover, with 90% of lung cancer cases smoking-related, the end of the tunnel seems mighty far away: there are 45 million smokers in the US and just under another 45 million ex-smokers. According to a landmark study published in the New England Journal of Medicine in October, 2006, 13% of high-risk patients have a lesion that needs management. This study, which included 31,567 asymptomatic persons over 12 years old, estimated that patients who have their lung cancer diagnosed in Stage I can have an 88% survival rate. The study’s authors concluded that the cost of low-dose CT screening is below $200, and surgery for Stage I lung cancer is less than half the cost of late-stage treatment.

For superDimension, which embarked upon an interventional pulmonology strategy but which is as much a cancer diagnostic company, the grim statistics on lung cancer have a bright spot: if you catch a lung cancer lesion early, long-term survival rates are around 88%; if you catch it too late, survival rates plummet to 15%. And those late-stage, long-term survival rates are virtually unchanged over the past 30 years. In 1974, the long-term survival rate for late-stage diagnosis was 12%. In short, for all of the advances in cancer therapy over the past three decades, nothing’s really working for those diagnosed too late.

That’s because, says Dan Sullivan, "it is difficult to diagnose lung cancer patients." These patients also have an unclear referral pattern, he says: some go to their primary care doctor early on and may have some intuitive symptoms—a history of smoking and labored breathing or a husky voice. But diagnosing methods aren’t clear: some will go for lung biopsies, others for chest x-rays, still others for conventional bronchoscopies—but many of these will only detect the cancer after the lesion is large or widespread. "There’s no good method for detecting [lung] cancer early on," says Sullivan. "So there’s been a lot of watchful waiting."

The advent of CT scans has helped in diagnosing because scans can detect lesions even when small, but even these scans can’t determine whether the lesion is malignant. So, the patient and his or her physician are left with less-than-ideal second options. A transthoracic needle biopsy can detect malignancy, but the needles are difficult to place and have a high risk of puncturing the lung—clinical studies estimate that 30 to 50% of needle biopsies run the risk of lung collapse. And, given that many patients suspected of having lung cancer are already health compromised—they’re likely suffering from emphysema or some other ailment--the collapsed lung creates a major complication and lands them in the hospital for a week or so. Exploratory surgery with a wedge procedure is another possibility, but it’s a "messy, very difficult open-chest" procedure, Sullivan points out, something like looking for a needle in a haystack. (For early-stage cancer, this procedure requires the surgeon to enter the lung through a long incision, looking for a lesion often only the size of a pencil eraser.)

A GPS for the Lungs

Given the difficulty and uncertainty of both procedures, some physicians choose watchful waiting, until more obvious symptoms emerge. But not only does such an approach lead to a lengthy, anxiety-filled episode for a patient—the patient returns to the hospital for more tests every six or 12 months until something definitive shows up when a conventional bronschoscopy can detect malignancy—but there’s a self-defeating aspect to the strategy: by its very nature, you’re delaying therapy until it’s almost too late for the therapy to work. As a result, says Sullivan, "These patients are kind of lost: the physician doesn’t know what to do for them and the hospital doesn’t know what to do for them."

Of the many patients who have a lung lesion, most do not get diagnosed or treated. "The reason they’re not getting diagnosed and then treated is because their doctor doesn’t really know what to recommend," he says. "It’s a chicken-and-egg situation": more would be treated if therapies improve, but therapies can’t improve until we start treating more patients.

superDimension’s solution: a sophisticated computer algorithm that converts a CT scan into a three-dimensional image that Sullivan likens to a GPS system on the dashboard of a car. Suddenly, physicians have a much clearer sense of where the lesion is and, more important, what it is. With the patient lying on a board, sensors are placed on his or her chest, which allows for the navigation of a specially designed catheter that looks very much like an EP catheter. Using the company’s proprietary sensor and navigation technology, the catheter is steered through the airways of the lungs while the physician watches its progress in real time and 3-D on a nearby screen.

Once a lesion is discovered, the sensor tip is withdrawn and a small needle is deployed to take a biopsy. (The biopsy tool is not proprietary, and hospitals can use the same biopsy instruments they now use.) The catheter is then removed and the biopsy is sent to a lab, though superDimension says that in many hospitals the pathologist examines the tissue right outside the pulmonary suite allowing for a direct procedure diagnosis. (Hospitals purchase both a console, relatively inexpensive at $130,000, and disposable catheters, connectors, and adaptors, in a kit that costs around $1,000, which represent the company’s real revenue stream.)

"Think of your airways as the roads on a city map and the lesion as the restaurant you want to go to," says Dan Sullivan. "What we have is the roadway and the technology that gets you where you want to go." As noted, the superDimenion system acts like a GPS system, giving the physician guidance to the location of the sensor tip along the roadways of the bronchia until the lesion is found and a biopsy taken. If the patient tests negative for cancer, the physician may determine that the lesion was caused by an infection that can be treated or the lesion may continue to be watched over time to insure that it is not a malignant tumor.

If the test comes back positive for a malignancy, a treatment plan is embarked upon. Most important, superDimension allows for "a definitive diagnosis without morbidity, surgery, or transthoracic needle," Sullivan explains. But although the superDimension system is used primarily as a diagnostic, it also has the ability to become a therapeutic tool. Sullivan notes that in a couple of cases in the US and Germany, some physicians have actually applied radiation oncology therapy on the spot and some surgeons are injecting contrast agent into the lungs through the superDimension catheter. In addition, superDimension believes the catheter technology can also be designed to deliver drugs and other chemotherapeutic agents later—and in fact, it had entered into discussions with pharmaceutical companies earlier in its history.

Recalling Angioplasty’s Early Days

As noted, conventional CT can identify lesions, but it can’t tell if they’re cancerous or not. CT "tells you that something’s there, but you’ve still got to figure out whether it warrants further attention," says Sullivan. Using the superDimension system, pulmonologists will get a definite diagnosis somewhere between 67 and 74% of the time for peripheral lesions and 94% and 100% in lymph nodes. It’s not 100% in the periphery, Sullivan concedes, but it’s better than what’s currently available. "Our baseline comparison is 0% because we start where the bronchoscope leaves off," he says. (Patients who test negative go back into the watchful waiting pool.) The goal is earlier detection of small lesions and better location of larger or more developed lesions, leading to earlier and more effective therapies. That’s obviously good for patients and their physicians, but it’s also good for the payors—Sullivan argues that though superDimension hasn’t documented it yet, the system could "take billions out of the health care system" because it could, through early intervention and therapy, eliminate the need for a lot of later-stage procedures.

To date, the superDimension system is in 77 centers, half in the US and half in Europe, including some leading sites like the Cleveland Clinic and St. Vincent’s Medical Center in New York, and it has been used in around 2,000 cases. The company’s target customer is the pulmonologist, though some surgeons are using the system as well. In addition, the company hopes to play a leading role in providing tools to a new, emerging subspecialty, the interventional pulmonologist—a field that is attracting a host of new companies, including Spiration Inc., Emphasys Medical Inc., Pulmonx Inc., PneumRx Inc., and others. ( See "Lung Cancer: An Up and Coming Device Market," START-UP , November 2006 (Also see "Lung Cancer: An Up and Coming Device Market" - Medtech Insight, 1 Nov, 2006.) and "Devices Fill the Lung Space," START-UP , January 2006 (Also see "Devices Fill The Lung Space " - Medtech Insight, 1 Jan, 2006.).)

For Dan Sullivan, the development of interventional pulmonology has a familiar feel. "We’re doing in pulmonology what we did in cardiology with angioplasty," says the SciMed veteran. Thus, building the customer base and defining the referral pattern is one of superDimension’s main challenges. Sullivan notes that superDimension has specifically held back on some of its marketing development efforts, such as the launch of its web site, precisely because a lot of this is so new. "The referral pattern in the hospital will change dramatically over the next two years as the technology becomes more mainstream," he says. "We’re already beginning to see that."

In fact, it’s the evolution of the market and clinical space, as much as the development of the technology, that resonates most with Sullivan when he recalls his SciMed experience. "When I first got to the angioplasty industry, there had been around 30,000 cases, and there were still a lot of cardiologists who had never heard of the procedure," he says. "Over a period of time, we watched as therapies evolved, opinion leaders emerged, a whole way of life evolved." He’s betting superDimension can help promote a similar evolution in pulmonolgy, he says, "but much more efficiently because the model already exists."

Tapping a Fast Growing Market

Sullivan notes that superDimension’s procedure "starts where the bronchoscope leaves off." Thus, analogous to the cardiac cath lab, interventional pulmonology can be done wherever there are bronchoscopy suites, an established department in many hospitals. But whereas there were few cardiac cath labs in the early 1980s, there are currently around 2,600 bronchoscopy suites in the US. Moreover, as angioplasty began to catch on, a select group of cardiologists carved out a new sub-specialty as interventionalists, and "the exact same thing is occurring in pulmonology today," Sullivan notes.

As new clinical disciplines take hold, similarly, and in a parallel way, companies evolve, Sullivan goes on. Most grow organically, following the development of their technology in a stable market, hitting key milestones such as the first million dollars in sales, then $10 million, then $50 million, and so on. But as interventional cardiology has shown, industries in clinical spaces that are exploding grow on a very different trajectory—and so do the companies that can tap into the market appropriately. "Most companies don’t grow at that pace," says Sullivan. "If you’re going to be driving the shift, you have to be out in front of everyone else."

Sullivan notes that superDimension’s prior management team "had done some pretty smart things," most notably lining up key opinion leaders, including Tom Gildea, MD, and Atul Mehta, MD, of the Cleveland Clinic who are willing to champion the technology. To date, there have been more than a dozen articles published in peer-review journals on the company’s technology, "with more in the works," says Sullivan, who notes, "We’re the standard of care at a lot of well-known institutions."

But by themselves, such efforts weren’t going to be enough to propel superDimension to keep pace with this fast growing space. Talking about his first days at the company, Sullivan notes, "As I peeled back the onion, what I found was a company with great core technology that didn’t know how to commercialize for a full-blown US or European launch." More important, a product recall in 2006, just before Sullivan joined the company, led to another stall in superDimension’s efforts to gain market adoption.

A Down Round

The product recall was, for superDimension’s new management team, "an easy decision," says Sullivan. Although the company had been successful in placing units at some leading institutions, it had begun to receive some complaints that the new management team couldn’t answer. "And if we couldn’t answer them, we decided we’d pull the system," he goes on. "You have to protect the patient and you have to protect the physician." In the end, the complaints had nothing to do with problems with the system, says Sullivan. But the recall was "a blessing in disguise," he says, because it gave the new management team "a chance to catch our breath and make sure all of our systems were top-notch."

In fact, superDimension engineers took the opportunity of the recall to redesign one of the company’s catheters, more as part of a continuous improvement exercise than because of design problems, says Sullivan. By August of this year, superDimension had launched its most recent re-start. Manufacturing started from scratch in Tel Aviv in the spring, with the first full output in August. Production in September tripled—which is good because superDimension currently has a huge back order, approximately half in consoles and half in disposable catheters totaling more than $3 million.

Financially, too, superDimension faced a kind of re-start. To date, the company has raised $75 million in three rounds, the most recent this past July, when it raised $21 million, all from insiders. But the round was a significant down round, and Sullivan notes that although "it was technically our C round, it was more like a kind of series A," as the company essentially did a re-capitalization. (SuperDimension is currently raising more money as it seeks to complete commercialization of the technology.)

Jeff Barnes, who heads the medical device practice at Oxford Bioscience Partners, was an early backer of superDimension and an investor in the company’s first real financing round in 2002. Barnes notes that he had followed the company for about a year and a half before that and liked what he saw, particularly its re-direction from cardiology to pulmonology. "That change alone was one of the compelling factors in our decision to invest," says Barnes.

Barnes disagrees with the characterization of superDimension as a re-start, calling the characterization "too dramatic." "When I think of re-starts, the company usually has the wrong technology for the right application or the right application but the wrong technology and it has to make a major adjustment," he notes.

But with the switch to pulmonology, Barnes says, it was clear that superDimension had the right technology and was targeting the right market. "We didn’t really need to re-start anything," he says. "We’re still using the same technology, implementing it the same way, on the same platform, and we’re still focused on interventional pulmonology," he says.

Rather, the product recall led to a lengthy delay in the system’s launch just at the time when the company had both CE mark and FDA clearance--"We had some quality assurance issues that we had to address that were significant enough to prevent us from manufacturing and shipping the product," says Barnes—and as a result, revenues that the company was anticipating to fund continuing operations weren’t going to come.

But precisely because superDimension’s core technology was set and its market application clear, Barnes argues that the down round wasn’t really a big thing. "From an insider’s perspective, it wasn’t an issue," he says. The company needed some additional funding that wasn’t part of its original plan, he goes on. "When you haven’t shipped products for a while, it tends to compromise your finances," he notes. But because superDimension’s existing investors were confident the company would soon be manufacturing again, "we didn’t want to go out and secure an outside investor" to fund the company. "We just wanted to fix some things that had gone wrong," he says.

Oxford and superDimension’s other investors, OrbiMed, CIBC World Markets, and Pfizer Strategic Investments Group, brought on two outside consultants to set the valuation—with no new investors to price the round, the investors wanted an independent opinion—who set the series C price below the Series B. Barnes notes that if the insiders set the price, there was a concern that "there might be some unnecessary exposure." But because the round was, for the most part, a pro rata financing by the existing investors, "regardless of the valuation, we weren’t compromising our ownership," he says. But the price itself wasn’t really all that important, says Barnes. "If the consultants had come up with a higher price, we probably would have put that value on it."

A New Management Team

Dan Sullivan agrees that superDimension’s down round didn’t carry the same stigma that a normal down round does. He notes that most small companies experience financial difficulties and are forced to do down rounds because they simply realize too late any problems with their technology or limits to its market potential. Senior management’s head is in the sand, "and they continue to drag things out," he says, until the down round becomes inevitable. But superDimension’s problems were just the opposite: the technology was extremely strong and the market opportunity is, Sullivan believes, "off the charts." The company’s problem: "our execution in the market just wasn’t working," he says.

For one thing, superDimension wasn’t getting to enough of the right physicians with its limited sales force. Today, of the 20,000 pulmonologists, fewer than half do approximately 500,000 bronchoscope procedures a year, a group constituting superDimension’s target customer base.

For another, though the learning curve for adoption isn’t steep, the company hadn’t invested in any training programs. Perhaps most important, though it got FDA clearance on a 510(k), the company did not initially pursue a reimbursement strategy. superDimension’s system is currently covered under temporary reimbursement codes that more than cover costs for the hospital and physician. But the company has an aggressive CPT code strategy underway, and if all goes well it will have a new CPT code by early 2010.

And, of course, there wasn’t much in the way of an effective sales and marketing effort, even post CE mark and FDA clearance. That kind of market development "simply wasn’t being done," says Sullivan, who says that his first task at superDimension was to change the company’s culture to become more market-oriented and less technology-driven. In addition, the manufacturing processes were "sub-par" and below necessary capacity—superDimension will be opening a new manufacturing plant in Minneapolis this fall to complement its existing facility in Israel. "That’s really a more conventional approach for a company that’s growing," says Sullivan. "Most medical device companies have one plant in the US and one in Europe—we’ll have one in the US and one in Tel Aviv."

Indeed, one of superDimension’s problems was that it couldn’t have produced enough devices even if the company had been successful in achieving an aggressive launch of its products, argues Sullivan, who expects the company’s revenues to reach "substantial double digits" next year. Focused on developing the technology, it simply hadn’t paid much attention to actually producing the systems or selling them. superDimension "is one of the few medical device plays I’ve seen that has $1,000 worth of high margin disposables and the potential to build a several hundred million-dollar revenue company relatively quickly," Sullivan goes on. But it wasn’t moving fast enough to realize that potential.

As noted, as part of its re-start, Sullivan had to rebuild the company’s senior management team, hiring a number of executives with whom he had worked in the past, including VP of sales, Tom Borillo, who helped Sullivan build the SciMed sales team in the western United States and who then became VP of marketing at SciMed and, more recently, CEO of atrial fibrillation company Atritech Inc. In addition, Sullivan hired Noreen Thompson, who had formerly worked at Medtronic and was, most recently at Acorn, to be VP of marketing, and Rick Buchholz, formerly with Ernst & Young and CFO of Vascular Solutions Inc., joined as CFO. Sullivan recently hired Dan Bulver, another SciMed veteran, who has helped build manufacturing for several start-up companies, as the VP of worldwide operations at superDimension. Much of superDimension’s management makeover entailed re-locating the headquarters from Tel Aviv to Minneapolis, but the net result is that the company’s senior management has completely turned over—there isn’t a single senior manager who remains from the team that ran the company in early 2006.

Replacing the senior management team was made doubly difficult by the fact that virtually all of superDimension’s senior managers were more than 6,000 miles away in Tel Aviv. Assessing competencies and expertise in the Israeli office, while planning to re-locate headquarters in the US, required some juggling.

Still, Sullivan says the senior management turnover wasn’t as traumatic as might be expected. After all, he joined after the former CEO left. For the rank and file employees who stayed on, he believes the new management team brings an end to the frustration they felt as they saw opportunities drain away. Of the superDimension employees who remained, Sullivan says, "They were desperate for organized leadership. They didn’t really know what was going on, and they responded well when we told them what we were going to do and told them how they could participate." And superDimension plans to grow its small team of people in Israel, even as it builds up its Minneapolis-based management team.

A Momentum Generator

Indeed, the changes that have taken place at superDimension really couldn’t have been put off any longer. It’s not just that superDimension had been working on its technology for a long time and through several different applications, or that it had failed to launch effectively following approvals in Europe and the US. The marketplace itself won’t allow superDimension to continue to lag.

As noted, interventional pulmonology is hot right now—though Sullivan argues that the other companies playing in this space aren’t really competitors: although the technology and clinical procedures are similar, he says, the applications of those technologies are different. That said, he knows that this fall is a critical time for superDimension—a time when the company has to capitalize on a commercial opportunity that has eluded it. "It’s really been in the last six months that our technology has become a well-recognized procedure in the pulmonology community," he says. "This fall should be our momentum-generator."

Jeff Barnes notes that Dan Sullivan was brought on to effectively commercialize the superDimension technology, not to deal with the product quality issues, though that soon became his first challenge. "He wasn’t brought in to fix the problem," says Barnes. "This was a company that was transitioning to a commercialization stage, and we were looking for a marketing-driven CEO." More to the point, he notes, because interventional pulmonology was still a relatively new concept in 2006, "ours was a device that needed a missionary sale," Barnes goes on. "This wasn’t your typical medical device, a second- or third-generation device. We needed a guy who had done it [i.e., led the introduction of a new technology concept] before."

It’s impossible for Dan Sullivan to think—or talk—about superDimension’s opportunities and challenges without hearkening back to his early experience in angioplasty. "Our challenge is to not make the same mistakes as the big guys did in the early days of angioplasty," he says. Thus, one of SciMed’s marketing and development coups was to reach out more deeply into the interventional cardiology community, talking not just to a select group of eager early adopters and thought leaders, but to the rank and file interventionalists in their product development and sales and marketing efforts. SciMed went head-to-head with the early market leaders, USCI and ACS, developing its own line of balloons and catheters—two product areas already becoming crowded—but winning because "we were making improvements better and faster than anyone else," he argues.

For Sullivan, the lesson is clear: today, even as superDimension is helping to establish a base of key opinion leaders, "we’re simultaneously and very proactively broadening our net to the mass group of pulmonologists so that we don’t make the mistake of only listening to those opinion leaders," says Sullivan. But it may be lessons learned at USCI, rather than SciMed, that resonate most for Sullivan. The early leader in angioplasty, USCI would later run into serious product problems before losing its leadership to a group of start-ups and eventually being sold to AVE (now part of Medtronic).

But USCI’s demise, says Sullivan "had nothing to do with wire tips breaking off in patients." Rather, he suggests, the company grew complacent and took its early market and technology lead for granted. "Well before I got there in 1984, everyone there had their feet up on their desks, their hands behind their heads, smoking cigars, congratulating themselves because sales were going up," Sullivan says. Sales were going up because the market was exploding; what USCI officials didn’t realize was that while their sales were increasing, their market share was going down. "And when those two lines crossed, it was a catastrophe that couldn’t be stopped," he contends.

Continuous Improvement

USCI’s problem wasn’t just that it stopped talking to customers, though that was certainly part of it. It was that because it no longer talked with customers, it stopped innovating. Sullivan argues that the key to sustaining market leadership in medical technology is "to continuously innovate and obsolete yourself with your own technology." Companies that listen to their customers "don’t get carried away with themselves," he says.

Thus, a large part of Sullivan’s message is, as he puts it, "preaching continuous improvement, continuous improvement, continuous improvement." That’s particularly important in a field such as interventional pulmonology because it’s so new. The market’s not mature enough to know now exactly what the final technology will be or how it will evolve, so iteration and enhancement are critical.

But it’s also important for superDimension, Sullivan insists, because the company has what he calls "a platform technology," one that can easily move into areas of pulmonology other than lung cancer detection. "There’s no question we own the railroad track into the lungs because we get to the distal lungs," he says. "If you can get to the distal lungs, you can get to the proximal lungs." Thus, Sullivan says that while superDimension doesn’t compete in, say, lung reduction surgery with Pulmonx or in emphysema with Emphasys, its technology can be adapted to those other sub-specialties.

Moreover, he goes on, it’s a platform because the core sensing and navigational technology can be adapted to other clinical spaces beyond pulmonology, including GI, neurology, and even cardiology, while the primary diagnostic modality can become versatile in delivering therapies as the navigational technology is used not just to detect lesions but to place or implant other things. (To look at these kinds of opportunities, the company will have R&D operations in both Minneapolis and Tel Aviv, tapping into both the catheter expertise resident in the former and the software expertise in the latter.)

And, interestingly, when Sullivan talks about superDimension’s promise, the angioplasty predicate he uses isn’t SciMed, it’s USCI. He argues that superDimension’s opportunity lies in the fact that "we own the platform the way USCI did in the initial days of angioplasty." The fact that other companies are now filling interventional pulmonology "isn’t a bad thing," Sullivan reasons because it will force the company to continue to look for new opportunities. The company’s challenge: at once to establish a kind of baseline, building and promoting interventional techniques in pulmonology by gaining a foothold for its technology, and, at the same time, and perhaps more important, to refine and even obsolete that technology--"to stay ahead of ourselves," says Sullivan—to keep pace with the field as it continues to grow. If that doesn’t sound like interventional cardiology, writ small, nothing does.