We burn fat

Ultrashape CEO Rodger Stewart on the FDA, an IPO, and fat.

"When I met Ultrashape it was not love at first sight. I didn't know a lot about medical progress in Israel, and I had no experience of the market, but the basic criterion fitted, and love followed soon after. I've had experience with a number of cultures, especially Italian and Swedish, and when they told me that Israelis are very direct, I liked it. It's the exact opposite of the Italians," says Rodger Stewart, the fairly new CEO at aesthetic medical device company UltraShape Ltd. (since January 2007), surprisingly. Stewart is a former engineer who began working at medical device companies and subsequently found himself drawn into marketing and business development roles. He previously served as president and CEO of COBE Cardiovascular, Inc. which reached almost $200 million sales and was later acquired by Italy's Sorin Group.

Stewart recalls that the UltraShape board didn't fall over themselves the moment he took up his post. "They were worried about the fact that I didn't have any experience with a start-up. I do, however, have experience with FDA regulatory requirements and medical product marketing in the US. Eventually they understood that large companies also have activity whose goal is to grow new product sales, and that the requisite skills in both instances were very much the same."

UltraShape received approval to market its product in Europe in 2005, and immediately began sales to Europe and everywhere else, save for North America. The company has expanded further since Stewart took over with sales in Europe growing from one quarter to the next. UltraShape now has sales in 47 countries, around half of which are to countries in Europe, and the rest divided equally between countries in Latin America and in the Far East. Sales for 2007 are expected to total $16 million ;the company has recorded a total of $35 million in sales since it was founded.

UltraShape recently received approval to market its device in Canada by the country's regulatory authority, Health Canada, which is considered a bit more stringent than Europe, but not as strict as the US Food and Drug Administration (FDA). "We hope to benefit not just from the contribution that the Canadian approval will make to our chances of gaining approval in the US, but also from the movement by US residents, principally those in the northern states, heading for Canada to have treatment there. Medical tourism on both sides of this border is very popular." All that's still missing is FDA approval. The US will probably be UltraShape's leading market, in terms of prices and numbers of users and so, while it is waiting for FDA approval, it is launching a mega marketing and PR campaigns aimed at customers and opinion makers. "We already have a list of 100 doctors who are just waiting for the approval so that they can install our device," declares Stewart.

But the approval is taking longer than the company hoped, and it has decided to focus in the interim on the next move on the horizon - a listing on Nasdaq. "We filed the trial results last August, and the FDA got back to us several times with requests for clarifications. We eventually decided that it would be easier to do it verbally. We hired the same regulatory expert that won us renewed approval for the use of silicon in breasts. Our last meeting with the FDA was a few weeks ago, and we're now waiting for them to get back to us.

"In principle, an FDA approval opens the door to an issue, but we don't have to have it if we want to float, if the technology's good, the market's big, and we've already had sales even before we reached the cherry on the cake - the US market. Another advantage is that we're not dependent on insurance reimbursement. We've also had acquisition offers, but none of them were serious. We believe that a listing will also open the door to a more serious dialogue with buyers. There have already been quite a few medical device companies that floated and were acquired not long after."

Vibrating and exploding fat

What exactly does UltraShape do? Like many of the new generation of medical aesthetic device companies, it has a device which is run over the body, leaving it smoother, firmer, and shapelier. But what is the difference between this device and the others?

The company has developed a product that uses ultrasound waves to exert a mechanical force on fat cells, causing them to break down. The fat cell content, primarily comprised of triglycerides, is dispersed into the fluid between the cells and then processed out of the body. The product is designed in such a way so that the ultrasound energy produced by the device focuses on the cells, but is not absorbed, in order not to heat them. This means that the damage is limited to the fat cells, and does not extend to other neighboring structures such as muscle, nerves and bones. "The energy causes the fat cell to vibrate very strongly until it can't take it any more and explodes," says Stewart. A bit like an opera singer shattering a glass.

UltraShape has a patent on the technology itself and on a number of improvements to it, one of which is a guided system that documents every place where energy pulses have been applied. This aims to ensure that the result is uniform, meaning that no craters have been created in the skin, one of the problems with some of the rival procedures. The system enables the doctor to hand over part of the procedure to a technician or nurse, once he himself has marked the areas for treatment. This allows him to turn his attention to more complicated procedures, such as liposuction.

"A device like this is a source of growth for a doctor, because it brings new customers to the aesthetic medicine clinic, who wouldn't have considered liposuction, and for whom there is currently no designated treatment. This is a non-invasive product whose treatment is sold at the price of invasive treatment, and also achieves similar results. The invasive aesthetic treatment market has about 7% growth a year, compared with 27% growth in the non-invasive treatment market. Sometimes patients who come to clinics because they've heard about our product but are not suitable for treatment with it themselves, are suitable for liposuction and the doctor can give them a referral for it."

Who are the suitable candidates for treatment? Surprisingly, those who need it the least.

"We need candidates that do a reasonable amount of physical exercise, so that they can easily work off the surplus fat that is expelled from the cells we destroy," explains Stewart. "The treatment is suitable principally for people that are slightly overweight, and have an accumulation of fat in a certain area."

Globes: Like, for instance, a very thin person who has just a potbelly?

Stewart: "Actually, a potbelly is not a good example, because it consists largely of fat that has accumulated around the internal organs, and we treat fat which is immediately under the skin, so we can only reduce a potbelly slightly. We're more suitable for people with fat deposits in the back, and excess fat in the arms or legs."

Who are your competitors?

"We're the only ones with a product that actually destroys fat cells. There are products that use radio energy, deep massage, or laser to move fat cells from place to place, something that gives a more shapely feeling, or encourages the lymphatic system to break down the fat cells' content. This creates firming for a short time, but does not affect size and does not leave long-lasting results.

"Science shows that we're born with almost all the fat cells we'll ever have. Weight gain or loss is merely an increase or reduction in the quantity of fat in each of these cells. We're the first procedure in the world that reduces the number of fat cells."

So if someone has this treatment many times, and gains weight again after each session, is he likely to be left with one, huge fat cell?

Stewart laughs. "We only undertake to treat people that have at least a 15 millimeter fat layer under their skin."

Published by Globes [online], Israel business news - www.globes.co.il - on August 23, 2007

© Copyright of Globes Publisher Itonut (1983) Ltd. 2007

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