ATL spin-off firm will promote FirstSight handheld sonography

March 18, 1998

New firm may get boost from military purchasingThe Holy Grail of ultrasound is a scanner that can deliver high-quality images, yet is so portable that physicians can carry it like a stethoscope. ATL Ultrasound is about to take a giant step in that

New firm may get boost from military purchasing

The Holy Grail of ultrasound is a scanner that can deliver high-quality images, yet is so portable that physicians can carry it like a stethoscope. ATL Ultrasound is about to take a giant step in that direction. The Bothell, WA, company is in the final stages of developing a handheld ultrasound unit that promises to deliver diagnostic information at the examination table, bedside, or even in the field, such as at the scene of an accident.

"We expect it will break the paradigm of small systems meaning less quality or less resolution," said Kevin Goodwin, vice president and general manager of ATL's Handheld Systems Business Division. "The basic ultrasound performance will be substantial enough that it will be a valuable clinical product."

The first prototype of the unit, called FirstSight, is expected within the next few months, and the launch of a commercial product is scheduled for 1999. ATL is preparing to apply to the Food and Drug Administration for clearance to market a FirstSight system designed for the women's health market. The absence of a working prototype is not expected to be a problem, Goodwin said.

"We've already done preliminary work with the FDA to understand the submission requirements, and we are confident that we're going to have a normal approval cycle, based on predicate devices," he said.

Just as these new devices will change the setting in which ultrasound-based diagnoses are rendered, the maturation of the technology will soon lead to a change of venue for Goodwin and his staff. Best known for premium products such as HDI 5000, ATL this spring plans to spin off the handheld ultrasound division into a freestanding, publicly held company. The new company will remain in the Bothell area, near its parent, but will occupy a separate building away from the ATL campus.

The two companies will continue to work together, however. Various services, possibly including manufacturing, will be transferred from parent to spin-off. When the spin-off takes place, ATL will transfer $15 million to the fledgling company, followed by a second $15 million payment in January 1999. ATL shareholders will get one share of the new company as a tax-free stock dividend for every three they hold in ATL. Goodwin will become CEO and president of the newly formed company.

The women's health system to be released next year will be the first of a family of handheld products. Other devices in the product family will be developed for use by specialists of internal medicine and for emergency medical applications. The finished products are expected to weigh less than five pounds and sell for less than $20,000.

"We found through research that there appears to be a place for very high quality, ultra-portable, hand-carried ultrasound tools, and (this technology) has the potential to cross a broad range of clinical segments in a useful way," Goodwin said. "We've seen positive responses from virtually every segment, including the traditional users of ultrasound, such as radiology. So it would appear that the need for such a mix (of devices) is out there."

These devices will not look like any existing ultrasound scanners. The images will be displayed using LCD technology, framed in a mount that could be placed on a table or held in one hand while performing the examination with the other. The probe and display will be connected by wires that will convey the signal as processed by ASICs (application-specific integrated circuits) incorporated into the body of the handheld probe.

"The only way we could accomplish building a very miniaturized yet powerful ultrasound device is to make ASICs a critical part of the product," Goodwin said.

Similarly, the high reliability of ASICs should make service virtually unnecessary. If a system does malfunction, Goodwin said, the owner will be able to simply pack up the unit and mail it back for replacement.

Details about the physical appearance of these probes, how they will process data, and the formats in which these data will appear were not released by the company. It is known, however, that operators will have a choice of scanheads offering different capabilities. The scanheads, which will be interchangeable by virtue of a plug-and-play design, will feature the broadband beamformer technology found in ATL's HDI series of scanners.

Overcoming limitations. Leveraging the company's beamformer technology will overcome the frequency limitations that have beset portable systems in the past, Goodwin said. Although the clinical capabilities of the new products could make them of interest to radiologists, they will be marketed largely outside the traditional mainstream of radiology.

"We will be using distribution partners to access specific clinical segments," Goodwin said. "Another possibility is to use mid-size to large partners who have the kind of distribution capacity and quality that we would look for in our particular case."

Specialty distributors will address ob/gyn doctors, family practitioners, and specialists of internal medicine or emergency medicine, depending on how the device is tailored.

"That's one of the reasons why the spin-off makes strategic sense, because there are significant differences in the business model of this company from that of a high-performance ultrasound company like ATL," Goodwin said.

Along the way to these new markets, the company must fulfill contractual responsibilities to build a prototype for military use. Funds from the Department of Defense (DOD) got the project rolling in 1996 as part of a consortium directed by ATL and consisting of VLSI Technology, Harris Semiconductor, and the University of Washington in Seattle (SCAN 3/13/96).

Specifically, the U.S. Advanced Research Projects Agency provided matching funds totaling some $6.3 million to underwrite the early stages of development of a handheld unit. The military is interested in handheld scanners because they could prove valuable in battlefield medicine, such as for triaging wounded soldiers.

A large purchase order from the military could give the ATL spin-off the cash flow needed to become a viable stand-alone company. The military to date has not committed to purchase any of the resulting products, but there is a strong possibility that such sales will happen, if the prototype meets military expectations. The DOD commonly provides seed money for the private-sector development of core technology deemed to be of strategic importance, then contracts with the developer of the equipment to provide quantities of the finished device.