New Product, page-39

So, the first new Nanosonics product of particular consequence is the digital traceability product - Auditpro. It's not something that really stirs the imagination, but if it starts to contribute to the bottom line, that's all that really matters.

What has stirred my imagination for some time is the possibility that Nanosonics might at some point launch a new product for automated cleaning of most types of endoscopes. That possibility remains conjecture, but is reinforced by at least four factors:

1) There are tens of millions (if not hundreds of millions) of different types of endoscopic procedures undertaken throughout the world each year and a recurring concern with most endoscopic procedures is whether the reprocessing of individual endoscopes has been subject to an effective cleaning regime such that caked on biocontaminants are consistently removed prior to high level disinfection. Nanosonics itself has previously noted on this subject in a patent application for an automated endoscopic cleaning process, that between 2010 and 2015, more than 41 hospitals worldwide, but mostly in the US, have reported bacterial infections linked to endoscopes affecting 300 to 350 patients.

2) Nanosonics has made at least 6 patent applications in recent years in relation to different automated cleaning processes for various types of endoscopes. When looking at the number of Nanosonics employees involved in developing some of those automated endoscope cleaning inventions and in preparing associated patent application documentation, it's clear that this has consumed a sizeable component of the Nanosonics R&D spend. So, it might be presumed that this has not been done without a very strategic commercial end in mind.

3) The most comprehensive analyst report I have seen on Nanosonics was undertaken by UBS and published in June 2019. Following consultation with medical industry bodies and review of patent databases, UBS concluded that it was likely that one of the next two new Nanosonics products would most likely be a product associated with endoscope cleaning.

4) The CEO of Nanosonics has stated on several occasions in recent years that one of the new products under development by the company has the potential to be as big or bigger than trophon and that the associated platform for that potential new product was not trophon related. This is consistent with the various endoscope cleaning processes for which Nanosonics has sought patents.

One of the conclusions that might be reached from all this is that reliable and effective cleaning regimes for endoscopes remains a major challenge for the medical community and that the commercial delivery of an effective and reliable cleaning regime for endoscopes could indeed have the potential to match or exceed the size of the market that is presently unfolding for trophon in the high level disinfection of ultrasound transducers.

Against that background, and noting that no other companies appear to be developing new methods for ensuring effective and reliable cleaning of endoscopes, a relevant question might be: are there other solutions to the problem of cross infection from inadequate endoscope reprocessing, which may be causing Nanosonics to be cautious and circumspect about commercial development of an automated endoscope cleaning process?

Well, one possible solution that hasn't really been canvassed on this forum is the growth in the market for single use endoscopes.

Single use endoscopes appear to have become an increasing feature of the endoscope market over the last decade precisely because of the concern in the medical community about the potential for bacterial cross infection between patients due to inadequate cleaning (and therefore ineffective high level disinfection) of reprocessed endoscopes.

The following link is to the web site of Ambu which is a Danish company at the forefront of development and commercialisation of single use endoscopes: https://www.ambuaustralia.com.au/the-future-of-endoscopy. The site is interesting because it provides an insight into the range of endoscopic procedures for which the company is seeking to create and/or consolidate a market for single use endoscopes. There is also some interesting comparative tables purporting to show cost differentials between single use and reprocessed endoscopes.

What's not addressed is:
a) the level of functionality that can be economically provided in single use endoscopes compared to sophisticated multi-use endoscopes and the consequent limitations that might apply across a range of specialist endoscopic procedures;

b) the economics and likely strategic role of single use endoscopes if the cleaning challenges presently associated with the reprocessing of multi-use endoscopes are overcome; and,

c) the environmental issues associated with creating a massive new waste stream of used single-use endoscopes.

No doubt if Nanosonics is indeed mulling over the commercialisation of an automated endoscope cleaning process, the single use endoscope market will be one of the strategic competitive threats that will be getting careful attention.

zeno9