A smart medical device: G Medical Innovations
Alan Kohler
A smart medical device: G Medical Innovations
Dr Yacov Geva is the CEO of G Medical Innovations, GMV on the ASX. It’s an Israeli company that is incorporated in the Cayman Islands for tax reasons and I’m talking to Yacov from New York where most of the business is, so it’s all over the place. He’s got business in China and the US; they’re the main markets for the products and the products are medical devices for diagnostics. There’s one that goes on the iPhone or a smartphone which does ECG and heart rate, body temperature, oxygen and stress. That sells for US$249 and they’ve started to sell them, but only just.
They’re getting FDA approvals. It’s a sort of a high level – not like a Fitbit, but a proper medical device, approved by the FDA, clinical trials, all that. The other thing is what they call a Patch which is given to doctors and hospitals, which goes on the chest and does remote monitoring of all those things for the doctor and the hospitals and also there’s a thing that goes on your wrist that does blood pressure. They’re also proposing to add something to the device later this year on the smartphone device that pricks the finger and takes blood glucose and a whole lot of other chemical analysis.
It’s a really interesting idea, this. The story about Yacov is also interesting. He is 68 years old, so he’s been around a long time. He spent 24 years running a business called LifeWatch which he started and was CEO, which was another medical device business, it doesn’t do as much as the new thing, and he was kicked out in a coup in 2014 by a bunch of Swiss business people who took over the business and booted him out. I haven’t researched this separately, but he says they ran the company into the ground and ended up having to sell it to one of the competitors.
He’s got form, he lives in Israel, he’s done this before, he knows what he’s doing and now he owns 57% of the company so he can’t be kicked out. Whether he can hang onto the 57%, I don’t know, it depends on whether they need to raise more money. He reckons they’ve got enough money to get to breakeven. They’ll really start to ramp up sales of the products in 2019. They’ve got $14 million in the bank. They’re burning, he says, less than $1 million a month, which is still quite a lot, but if they can start to make some sales in 2019 maybe they will get to breakeven before raising any more money, but I think that will be touch and go.
A very interesting business and clearly a part of the future of medicine is remote monitoring to cut down the number of staff and the number of costs in hospitals and also to enable people to take control of their own diagnoses.
Here’s Yacov Geva, the CEO of G Medical Innovations.
Yacov, I just wondered if I could start by asking what happened with LifeWatch, your previous company, the one you started? You left that in 2014 and now they’ve been bought by BioTelemetry. Why did you leave and did they have a similar device to what you’ve now created in G Medical Innovations?
No. I will start maybe from why did I leave LifeWatch and what happened with LifeWatch and about the product. I left LifeWatch in January of 2014 after basically 24 years of managing from scratch, from zero, the company, from zero dollars to $130 million dollars in revenue, a very profitable company mainly active in R&D in Israel and all the revenues in the US from services. The company has been managed, after I left, by a group of Swiss financial guys, small, little financial guys that thought they would manage the company much better.
Did they kick you out?
They kicked me out. On an AGM they were able to takeover the board.
Oh, so you obviously didn’t own enough of it?
[Laughs] No. I didn’t have enough votes to continue, that was two years of – I would call a fight between me, the board and this group which became very active. They were busy to accumulate more and more shareholders that would vote against me, I was busy to do business for the company. I was not spending my time on doing PR…
And politics?
And politics, you’re right. The end result is that they’ve taken the company to hell. After two years – sorry, even less than two years – they had to raise $50 million dollars to pay penalties and to continue surviving and basically put the company on the shelf for sale. Last July there was a bid which BioTelemetry, one of the competitors I had, acquired the company.
What was LifeWatch’s business?
Service; we were doing monitoring services for heart patients.
LifeWatch didn’t have a device?
Oh yes, LifeWatch had a device that we had developed in 2007 and this device brought LifeWatch hundreds of millions of dollars in revenues from monitoring the patients. The name of the device was the ACT.
Perhaps it’s interesting to know what lessons you’d learnt in LifeWatch, apart from owning more of the company – I see that you own 57% of G Medical, so you’ll make sure you hang onto that.
[Laughs] Thank you for the advice, but you are right. Never lose control of the company, that’s clear.
What other lessons did you learn in LifeWatch that you’re now applying in G Medical Innovations?
Well, first of all, as I said 25 years ago when I started the healthcare business, being involved in the healthcare business I said I have nothing, more than zero knowhow in the healthcare business, but I have 25 years still to try. Now I have 25 years of experience, but I don’t have 25 years of trying. This is the first thing that I took from LifeWatch. The other thing is strategically what is really what the world needs to make better healthcare, better medicine for the people? Because, as I said on many occasions, we are still doing medicine like we have done 2,000 years ago.
In today’s world we should do medicine where we the people, the patients should take care of themselves, developing technologies that they can stay at home, stay in their normal facilities in their normal environment and take care of themselves. Because, as we know, a hospital is not exactly the place we want to be and visiting doctors is not exactly what we want to do every day. This is my goal, developing technologies that will keep us away from hospitals and doctor visits. I know that the doctors will not like it but this is facts of life, the world is changing and we are changing the world.
But you’re also selling stuff to doctors, aren’t you?
Pardon me?
You’re also making devices and services for doctors, not just patients?
Exactly. We are doing it to help the doctors to achieve quicker diagnoses as opposed to the way it is done. Because just from your experience probably – what is the usual procedure when you visit the doctor? He will probably spend two minutes with you and almost do nothing and will give you a prescription, as opposed to something that can do it and much more without going to do the visit.
You have two devices, as I understand it. One is called the Prizma, which fits on your iPhone…?
Yes.
And…
One is the Patch.
Before we get into exactly what they are, did you invent these yourself? Tell us about the history of how they were invented and what the patent protection is.
When we established G Medical we were thinking, what are the products that the industry needs? What are the technologies that people need? And what are the platforms available today that will make life easier and make diagnoses easier? So we embarked on two ideas. One is, everyone of us has smartphone regardless whether it’s an iPhone or Samsung or Huawei or LG, it doesn’t matter for that sake. The other is, we are visiting hospitals and what do we see? We see a bedside monitor box, a big box with wires all over on the patient. The patient cannot move from his bed. The box costs $20,000, the wires have to be replaced once in a while and the patient cannot move.
So we have a smartphone, what do we do with the smartphone? We have a thousand applications on our smartphone but none of them is really the one that we want to have that will not only give us games but something which will protect our life. So we put a piece of plastic to protect our phone but we don’t put anything to protect our life. That was the goal, that was the idea and this is from where we derived and developed all those sensors which are not applications, but rather sensors that we can measure a handful of measurements, which is an ECG and oxygen saturation and body temperature and stress analysis and the heart rate, and coming in 2018 we’ll have chemical tests that we will do on the same device.
Okay, that’s very interesting. But essentially, of the things you mentioned then, the ECG is the big thing because ECG is hard to do and the other things, heart rate, body temperature and so on, they’re all done by the Fitbit or something else?
No, no, no. Alan, let me explain. This is the first device that is FDA cleared. None of the devices that you would call them gadgets, which are looking very nice I must say, they are very attractive, none of them has FDA clearance, any regulations, so you don’t really know what you’re measuring. They don’t have body temperature, they have heart rate, this is what they have. They will tell you that they have oxygen saturation. Believe me, this doesn’t measure oxygen separation. In any case, if you asked me as an engineer who is really involved in those developments for almost 30 years, I wouldn’t put those devices on my wrist because of one reason, they have never been tested and approved by the regulator. So I don’t really know what they are measuring. I’m not saying, people don’t buy it! It’s a nice device, you want to buy it, but I would not count on the measurement that they are measuring.
Are you going through three phase clinical trials, the full clinical trials that drugs go through?
Our device FDA 510(k) class 2, so we are doing clinical trials, we are submitting a file to the FDA with all the technical tests that we have done in an approved lab by the FDA. The lab will test all the technical sides of the device and we will submit the technical trial including the clinical trials that we have done in hospitals that are approved by the FDA and it’s upon documentation. Then you know there will be a back and forth questionnaire between us and the FDA until we are approved by the FDA. And by the way, just in brackets, this was my 47th FDA clearance which I’ve done during the years that I’m involved in healthcare, in the healthcare industry.
Will the device be an over the counter sale or will it go through a doctor?
So far in the US it’s a doctor prescription but we have also submitted over the counter and we are waiting to get a clearance on that.
And how does it work, does it pierce the skin or you just stick your finger in it?
No, if you’re talking about the ECG you will put the two fingers on sensors and you will see on the screen your ECG running for 32 seconds. The smart algorithms that can detect 19 arrhythmias and if there is any arrhythmia appearing then it will tell you and it will give you some comments.
Okay, and what about the other things, body temperature and so on?
The same. Alan, one of the important tests that we are doing is stress analysis. We are checking your mental stress and it is a very, very interesting test.
How does it do that?
We are using a very smart algorithm including heart rate variability and we are looking on the sympathetic and the past sympathetic system.
It’s based on heart rate, not moisture on the body?
No, no, no. Heart rate variability, not heart rate.
I see, okay. You mentioned you’re going to add chemical analysis to it, how will that work?
We will add sensors that are in the device where you will be able to measure your glucose level, your cholesterol, your triglyceride, total cholesterol, uric acid and others.
Will it do this just on the surface without piercing your skin?
You will have to prick your finger for one small drop of blood and it will test all those tests that I have mentioned.
That is fantastic, I’m impressed!
This is – we call it one to three and one to eight, so we will have between three to eight chemical tests and different models, and we will have more and more other sensors that we will be adding to the device like dehydration, which is very important especially in countries where it’s hot. People don’t know that they’re dehydrated and the end result is not very good.
How far off is that chemical analysis?
We would be having the device ready towards the end of 2018 and it will be in the market in 2019.
How much do you think it will cost?
It will not add dramatically more to what we are selling today, our device.
No, but what are you selling your device – I didn’t even know you’re selling it now, you’re selling it now?
We started our sales, yes. Not yet in big numbers because we are very careful in going out to the market, so we are doing it in a very careful approach into the market.
How much do you sell them for now?
We are selling for $249, the device.
Is that through a doctor or over the counter?
No, no, over the counter. As I said, only in the US it’s through a doctor’s prescription and as I mentioned, we have submitted already the file to request an over the counter.
Where are they on sale?
Pardon?
Where are they on sale?
Where are they on sale? You mean, what?
Where do you sell them, in Europe, and in America?
Oh, we have a series of agreements in China, in India, Taiwan, Europe, South America, and we will start also the sales in the US very shortly, not over the counter but through a doctor’s prescription. Then, later on when we get the clearance on over the counter we’ll be ready to go ahead with that.
So how many have you sold?
A couple of thousand.
I’m just looking at the most recent quarterly I’ve got is for September 30 obviously, the receipts from customers line said zero?
Of course.
But so, since then you’ve been selling, you’ve sold 2,000?
We started at the end of 2017.
Which market looks the best? I see you’ve got a joint venture in China?
Alan, on a couple of occasions we said the two most important markets for us is the US and China. But eventually we are not avoiding any market that will be interested in it and we are signing agreements in other countries. But China, yes, we have a joint venture with a Chinese fund, government Chinese money. We own 70% of the joint venture, they own 30%. We are expecting CFDA clearance sometime around end of March-April, then we can start our sales in China. In China we have very large agreements.
How much do the things cost to make?
No, I cannot say. I don’t have to help my competitors, wherever they are.
Right, fair enough.
But you will be able to derive from our financial reports on the gross margins, and the gross margins are very nice.
Tell me what we are, because we’ll be able to see what they are. What do you expect the gross margin to be?
Around 70%.
Right. This is all for the Prizma, you have another device called the Patch, tell us what that is.
The Patch is, in a way, a patch as it sounds that you put on your chest. This will provide you with a six-channel ECG, respiration, body positioning, location. Furthermore, it will provide you with oxygen saturation and body temperature with a [unique lens] that looks like a hearing aid with the gateway that is on your wrist and blood pressure. All this will be provided to the doctor free and they would pay us a service fee. Basically, the patch has three approaches from a professional as well as a commercial approach. One is pre-hospitalisation, where the physician would put on the patient, a Patch, because the patient complains of some type of palpitation, dizziness or other symptoms. We will monitor the patient for 14 to 30 days and the reimbursement so far in the US is between $320 to $1,000 for 14 days up to 30 days.
It’s hard to understand that. That’s the money that you make from that, is that right? Is that what you’re saying?
Yes.
When you say it’s a patch, is it on your chest, is it a sort of piece of adhesive patch that goes on your chest?
Exactly.
And does that also do the blood pressure?
Not the patch, we have a blood pressure which is on the wrist, but it’s a blood pressure which has all the electronics on the wrist as well. There is no tubes, no any other accessories, just a cuff with everything on the cuff.
Does the cuff expand with the normal blood pressure monitor expands and comes down again like the one that goes on your bicep?
Exactly, but it is controlled by the Gateway which is the watch on your wrist, this is programmed. The blood pressure and all other tests will be done by pre-program by the physician or the nurse, so you will not have to do anything, it’s all automatic. If the physician wants to see 10 times a day, every hour or every two hours, your blood pressure, the cuff will inflate as the program that is being done.
Just explain the business model again. Are you saying that the device goes free to the doctor and the doctor then pays a subscription?
Exactly. The doctor or eventually the patient, but we have to deal with the doctor, we don’t have to deal with the patient. We will monitor the patient for the doctor.
I see.
We will provide the doctor with a daily report, a weekly report and an end of session report. The doctor, when he enrols the patient, he will give us his instructions, what he is expecting from us to do with the patient.
This patch and wrist blood pressure monitor, is that entirely separate from the smartphone devices? They’re two completely different things, is that right?
Completely different things but I will explain in a minute what are the synergies between those two products, because it sounds like what is the relation between the two products.
Yes.
I told you about the pre-hospitalisation, now we are coming to the hospital. The patient is hospitalised, the Patch goes on the patient and will assist them, and again free to the hospital because they don’t have money for capex. They will pay us on a daily service. Now, in the US at least, every bed that is monitored, the insurance company will pay more than a regular bed. Because they don’t have the money to buy the big boxes, it’s 5%, 8%, 10% of the beds in the hospital are monitored. With the Patch, theoretically they can monitor all the patients in the hospital, it’s automatic. We release the nurses from doing all these jobs every few hours, going and testing the patients, measuring the patients.
Starting the measurements at 6 o’clock in the morning, pushing your telemeter in your mouth, all these things will be eliminated, there is not any more a need for it and the patient would be free to walk around because he’s not connected to any wires. If something happens to the patient, he falls in the toilet or anywhere else, we will see immediately what happened with the patient and where is he and we can rescue the patient. It is a well-known phenomena, patients are dying in hospitals, a place where they should not, at least the ones that don’t have to.
They arrive to the hospital on their legs, they leave in another position because nobody knew that, 3 o’clock in the morning Mrs Jones just had a drop in her blood pressure and she left. And 6 o’clock in the morning when the shift is changing, they found the body. This is something which is known, I’m not telling you anything that’s not known. At any given moment you will see – and those are statistics that are published in the US. There are $50 billion dollars of law cases against hospitals in the US on those cases.
Now we have the third phase which is the discharge of the patients from hospitals. Again, in the US if the patient arrives to the hospital post discharge, within the 30 days after readmission of the patient, the hospital will pay penalties. Again, it’s now nothing new which I’m telling you. This is also billions of dollars because of readmissions. We can prevent a big percentage of those patients that have been discharged from readmission. The reason is simple. Patients are in fear after they’ve been discharged from hospitals, everything they feel they run to the hospital. There is no need for it. So if a patient goes for 30 days with the Patch, home, we continue to monitor the patient and when the patient is discharged totally, we offer the patient the Prizma to continue his life with something which provides the patient with a lot of security. This is something that physicians want to offer the patients.
Again, there is even a very strong movement in the US by the hospitals to reduce the number of hospitalisation days and provide the patients with the Prizma for long term monitoring, which they will make money. Eventually they will make money on it.
Because they make a margin on the device?
Eventually, of course. So this is how the synergy between the Patch and the Prizma ends up.
Can we talk now about the competitive environment? Your old company, LifeWatch, now owned by BioTelemetry, are they doing anything similar to this? Is anybody making stuff like you’re making?
No. And I’m saying it not very happily because I always add that I don’t have to be the first in market with a product, I’d rather be the second with something that somebody else paved the way to open the market. But there is nobody today that is doing what we are doing and in a way it helps you but I would be rather happy that one of the big boys would open and pave the way.
Do you have patent protection at this point or is that pending?
Yeah, we have patents, we have pending.
The other thing I noticed is you’re incorporated in the Cayman Islands, is that just for tax? Is that another lesson you learned from LifeWatch, to not pay tax?
No, no, nothing to do with LifeWatch. It’s a tax decision.
And you’re also obviously listed on the ASX, has that worked out well for you, are you happy with that?
Relatively happy. I think we have been accepted very nicely by the market. It’s not a big market but it’s okay. I think that the Australian market which traditionally is known as investors that are going into oil and gas and gold and whatever, it’s below the ground. We’re looking after the crisis for healthcare technology and other technologies. And now we see again a movement back to the old traditional investment as this recovers. But in general I can say that I’m happy with the Australian market.
Keeping more than 50% of the company, will that limit how much money you can raise?
No. First of all, I’ve never said that I will not keep less than 50%. I said that I will try my best to keep the majority of the shares so I’m not going through another episode that I had in LifeWatch. But first of all it’s the company and the needs of the company and if the company needs to raise more money, we’ll raise more money. Eventually that will be diluted like other shareholders. As I said, I never manage a company by share price and I never make decision of what is good for Yacov first and then what is good for the company. It’s, first what is good for the company and it derives from what is good for the shareholders. Because the shareholders are my partners, they’ve invested money in the company.
Will you need to raise more money? How much cash have you got now and how much are you burning?
We have today about $14 million dollars on hand and we are burning today less than $1 million dollars a month.
Okay. What’s your pipeline of sales look like? Do you think you’re going to be able to get to breakeven without raising money or not?
Yeah, we will not raise money in the very near future. Our forecast of sales both with the Prizma and the Patch, and our business in the US…that we have acquired, we believe that we will be able to do the take off that is based on our business plan.
Can you share with us your long term thinking of the business, what sort of five year plan you might have?
Alan, I will tell you the truth, nobody can do five year plans in these days and the reason is very simple, we are not anymore in the old industries of five years or ten years business plans, we are in a very dynamic industry. Even though the healthcare business is a very conservative traditional business, things are developing and evolving very quick. It’s very difficult to give a forecast for five years, but giving you what I think will be in the next two to three years, the company will grow into very nice numbers, given the fact that the company has from the Chairman through the CEO and C-level people, all of them are very experienced people in this industry. As you understood, we are coming from this industry, so we feel very well and very strong that we will be able to maintain a very strong revenue stream for the company.
You’re not the young man you were when you started LifeWatch of course, what’s your plan personally? Is the plan to sell the business after a while or what?
No, no, no. I will take Warren Buffett’s answer, probably this will give you a good take up. One of the analysts asked Warren Buffett, ‘You know you’re already 86 years old, when are you planning to retire?’ And Warren Buffett who is a very, very smart and successful businessman as everybody knows, looked at the young analyst and said, ‘Young man, I will retire 10 years after I will die.’ So that was that.
[Laughs]
I’m not planning to retire 10 years after I will die, but probably five years after I will die. As long as I can provide the company with my experience, as long as I’m able to do what I’m doing, I will stay. The day I will feel that I cannot do it anymore, I will call the board and I will tell them, ‘Guys, take it over.’
Excellent to talk to you, Yacov. Thank you.
Thank you very much.
That was Yacov Geva, the CEO of G Medical Innovations, the Israeli based ASX listed medical company.
