Interview by JIM STOMMEN,

BB&T Contributing Editor

Rick Randall is chairman and CEO of Avantis Medical (Sunnyvale, California), developer of the Third Eye Retroscope device as an adjunctive part of traditional colonoscopies. He joined the company in April, bringing with him more than 20 years of management experience in the medical device field.

RICK RANDALL

CEO of Avantis Medical

Prior to taking the top executive posts at Avantis, he served as CEO of TranS1 from 2002 until January of this year; CEO of Innovasive Devices from 1994 to 2000; and Target Therapeutics from 1989 to 1993.

Randall talked with BB&T Contributing Editor Jim Stommen in early May, only a little more than a month after joining the company, discussing Avantis Medical's coming-out party at Digestive Disease Week in Chicago and its future prospects in the colon cancer detection space.

BB&T: You've been on board for just a few weeks now. What are your early impressions of your new company?

Randall: My early impressions are even more positive than when I joined the company, and I would say that's atypical of any new venture you get involved with. Usually you're sold the story and then you get involved and then you find out what the issues are and you start to work through them. But here, especially culminating in what I've learned over the last few days here at Digestive Disease Week, I'm very optimistic about the opportunity. That has been reinforced by the clinical users who I have met this week and the interaction I have had with people who are taking a look at the technology for the first time at our exhibit. So I'm very excited about the opportunity.

BB&T: How about a quick primer on how the Third Eye differs from traditional colonoscopy?

Randall: Traditional colonoscopy, which is the gold standard for the early detection and diagnosis of precancerous colorectal cancer or precancerous adenomas, the technology is the single-plane view; you advance the colonoscope and then with the withdrawal technique, you inspect the inside of the colon. There are numerous folds and ledges that exist inside the colon, so with a single-plane view, a forward view, we only can see with great accuracy and precision the adenomas and polyps that exist on the sides of the folds that you're looking at. On the other side of the folds, there are various techniques one could employ to try to manipulate the folds in a way so they can visualize things around the corner, but that's not a precise art – it's more of an art than a science.

We know from various studies that have taken place over the last decade that there is at least a 25% miss rate in the general population of precancerous lesions in the colon from standard colonoscopies. Our technology, the Third Eye, is a device that is advanced through the working channel of the traditional colonoscope that advances out past the tip of the colonoscope and then it turns and looks back using a catheter-based camera. You advance the colonoscope as you normally would, then when you reach the end of the colon, you advance our device and you do the withdrawal technique in a similar fashion. You don't have to pay as much attention to manipulating the tissues, but on the withdrawal you now have two images – one coming from the colonoscope, forward looking, and one coming from our Third Eye Rectoscope, looking back, and now you're visualizing both sides of a fold simultaneously.

This device now has been studied with multiple studies in over 1,000 patients, and we found a detection rate of about 23% to 25% of additional precancerous adenomas.

BB&T: Clinical studies such as the one whose results you folks released the results of in March show improved detection rates with use of the Third Eye. I'm presuming that's a point of emphasis for you while you're there at DDW.

Randall: Yes it is. We're now using this technology in about 15 centers located throughout the country and within each of those centers these are multiple gastroenterologists who are using the Third Eye. This is the first physicians meeting since the publication of that seminal article that disclosed the results of the TERRACE study, so this is an important meeting for us. That article has created a higher level of awareness, and we also have a number of physicians now who can interact with non-users on our behalf at the booth and also at a hands-on training session that we've been sponsoring the last few days here that they accommodate at this meeting. So this is an important meeting for us to kind of come out of the closet a little bit more, with good, valid Level 1 data.

BB&T: What is your commercialization plan? When you go out to gastroenterologists with the statistics on improved detection, is that the thrust of your story all the way?

Randall: Yes it is, and fortunately there have been numerous articles that have shown up in the literature, most of them just in the last six to eight years, and authored by some of the world's most renowned endoscopists, who say that even in their hands they have seen a 25% or so miss rate. It's not a secret anymore; everyone now recognizes that they're missing these. If the best are missing them, then the rest are missing them as well. So our marketing strategy is to make physicians aware of that via the data. We have five peer-reviewed journal articles now, culminating in this most recent TERRACE study publication, and we make them aware of the technology and then also expose them to folks who can tell them how easy it is to adopt this technology and show them how they can do that – kind of provide them the pearls, the tricks of the trade that one must learn in order to master this technique.

BB&T: I'm presuming also that the fact that you now have a second-generation product, that's the other half of your marketing message.

Randall: Yes. As is typical with new technology, we had a device that delivered very good results but perhaps was not as user-friendly as we would like it to be, and had some limitations. We learned from that early experience and went back to the drawing board and have recently released the second-generation device, which allows it to be used with basically any colonoscope that the physician may utilize today. We can see this technology adopted in any practice in the U.S., although our release is a controlled release for a variety of reasons. We won't be into a full release mode until much later in 2011.

BB&T: I'm presuming that has to do a lot with setting up your organization. Are you going direct in the U.S.?

Randall: Yes, we're direct, and we will continue to be direct. My career has been almost exclusively focused on bringing brand-new technologies and/or procedures to an existing marketplace, changing the gold standard, and what I learned a long time ago is that you need to own that training. You need to own the educational component, and borrowing someone else's sales force when they don't have the same conviction, the same amount of what's on the line as you do is not a formula for success, so we're reproducing that effort here. That was started well in advance of me coming on board, we have experienced representatives from this medical space, gastroenterology. We train them, they learn how to use this technique and they're probably the most critical people involved with the medical training as we spread the adoption to a variety of areas across the country.

BB&T: Getting your second-generation product is probably pretty important because gastroenterologists aren't exactly known as being the most rapid adopters of new technology. They probably fall more into the “Let me see it work for awhile before I commit to it“ camp.

Randall: That's interesting, because that was one of my concerns when I first looked at the company. I did have a prior experience in the GI area, and that was my assessment of the market. However, what I was told and what I am now experiencing, in this case it's a little different. I think one of the reasons why is that in adopting any technology, whether it's medical or us learning how to use a new computer or telephone, one of the push-backs is the complexity or the hassle factor of learning a whole new way of doing things. And when you consider that there's a patient at the other end of a medical technology, that's a strong reason not to change what you're currently doing. You're comfortable with it, you know how to do it, and maybe the result you're getting isn't the absolute best, but you get the result and it is predictable.

We haven't experienced that here, really, and I think the main reason is that we're not teaching a new technique; the device is used during a standard colonoscopy. You have to learn how to place the device through the scope and you have to learn how to interpret two images instead of one. We actually performed a study around this question that was published and we found that the learning curve is the first 15 cases; statistically, after the first 15 cases there was no additional adenoma detection, you were there. In most of our customers' practices, 15 cases can easily be reached in the first week of work. So this is not a prohibitive adoption curve; it's user-friendly because they using their comfortable colonoscope, the scope they've used for every case. I have not seen the resistance to adoption of this technology.

Some other factors come into play as well. Evidence-based medicine is here to stay. We're all now being judged and we all need to have evidence before we can bring a product to market. The next step in evidence-based medicine is that every practitioner's outcomes are going to be measured, and the insurance companies are watching it and the hospitals are watching it. So in this day and age, any device that lends to better outcomes, a higher success rate, is another reason to adopt, not a reason to avoid adoption. I hear what you say, and I agree with your general comment about this group as early or late adopters, but we have not really seen that in our adoption profile.

BB&T: It may be that things like capsule endoscopy having come along over the past decade is resulting in opening eyes and opening arms to be more welcoming of new technology.

Randall: Yes, and CT colonography too – there are new screening techniques that are available that are going to find more adenomas or polyps so the confirming tool will be colonoscopies. If you know something seems to be there, you need to be able to find them, and I think they're open to all the technology that is going to enhance that value proposition.

BB&T: That fits in with my next question. I was going to ask how your company can best take advantage of what you have found in terms of outcomes in providing improved detection.

Randall: There's more to come. Like a lot of good Level 1 research, there's a lot of data, and the TERRACE study was an important piece of that data. There is at least one more published cohort that is going to emanate from that work. I can't talk much about it, but it will further delineate the various patient types and how the Third Eye Retroscope is useful in finding precancerous adenomas in various types of patients. So stay tuned, I hope that before we exit the year there will be another publication that will add more information and education around the utility of this technology.

BB&T: How about numbers? What's your addressable market?

Randall: The addressable market in the U.S. alone is 15 million colonoscopies performed each year. That's a $4 billion market using our current average selling price. I feel the target market for this technology are the patients who are at higher risk for colon cancer, for precancerous adenomas – patients who perhaps had a prior positive colonoscopy or patients who are symptomatic of lower GI distress. That patient population is roughly half. I think there is going to be future data that is going to suggest that you'd really be missing the mark if you did not use this technology for those indications. So at a 50% rate, that's about 7.5 million patients in the U.S. annually or about a $2 billion market for the technology. I also believe that there's a percentage of the screening market that is going to be using the Third Eye Retroscope.

BB&T: What are your plans for the company moving forward in terms of any other products in the pipeline?

Randall: Right now we're solely focused on this product and enhancing this product. This is such a large opportunity that we want absolute focus on making this the best device we can for this market, so that's all I have on the radar screen at this moment – the next generation of what we have to make it a better and better product.

BB&T: You have headed up some highly innovative companies, so I'm wondering what your feelings are on the so-called innovation gap that many people say is developing in the U.S. due to regulatory and financing restrictions?

Randall: It's a concern of mine. I've made a career out of working with innovative companies and bringing some of the greatest procedures we have today to the market for the first time. I think this is increasingly difficult to do. Our financing system, the system that we've used over the years to finance these start-ups is broken, and it's broken because there are so many hurdles – regulatory being the largest, and reimbursement being an emerging, ever-larger hurdle. There are so many hurdles that start-ups face today that frankly the early-stage investor who takes all the risk has a difficult time even recouping their dollars, let alone making a profit on their investment. We need some reform; the system needs to be put back on track. We have created many, many jobs and a trade imbalance in our favor because of advanced medical technologies, and we have fallen off that track.