Diagnostics & Imaging Week European Editor and Staff Reports

The tightening turns of the economic downturn has pushed SPO Medical (Kfar Saba, Israel/ Woodland Hills, California) into a tailspin.

The company's story, grimly described in filings with the Securities and Exchange Commission, provides insights into the desperation beginning to grip start-up medical device companies.

A maker of biosensors for portable monitoring devices based on technologies developed in Israel, SPO reported a 45% drop in sales, with gross revenue of $2.8 million in 2008, down from $5 million in 2007.

The company lost $3.2 million that it attributed to the lost sales, though it also lost $1.6 million in 2007 on strong sales as it continued to burn cash to push the sales curve higher with product line extensions.

In its SEC reporting, SPO said it needs to "raise additional funds on an immediate basis in order to meet our on-going operating requirements," and that it has stopped non-essential product development.

The company reported an aggressive 35% growth in sales in 2007 as it expanded its PulseOx line of monitors that use a unique reflective detector capable of reading blood saturation level from a single side of the skin using a light emitter that picks up the intensity of blood flow from just a few millimeters of light penetration.

"As with many companies in our market sector, the current worldwide economic financial crisis has negatively impacted the potential purchasing decisions of our customers, leading to a decrease in revenues for fiscal 2008," explained President/CEO Michael Braunold.

"If the global economic environment continues to be weak or deteriorates further, there will likely be a negative effect on our revenues and earnings for the remainder of the current fiscal year and continuing into fiscal 2010," SPO reported to the SEC.

The company, with principal executive offices in Israel, is stepping up its bet on the U.S., saying it has taken on an independent sales representative group specialized in the medical market, a move SPO said is designed to intensify the sales in it what it considers its primary market.

"With continued increasing challenges in worldwide markets, we seek to extend our reach in the United States," Braunold said. "We hope our newly appointed sales representatives will vastly extend our distribution capability to medical facilities we could not reach before and strengthen our overall presence and penetration in the territory."

The competitive environment for patient monitoring equipment is fierce, with SPO, which employed 13 people as of March 31, facing the much larger and more well-established Nonin Medical (Plymouth, Minnesota) and Smiths Medical PM (Waukesha, Wisconsin) in its product segment.

The company said this price-sensitive market was further eroded in 2008 by the entry of several Chinese based medical device manufacturers who have extended their share of the homecare market and have become direct competitors.

"Their pricing models have significantly impacted this market and in particular under the current economic conditions," SPO said.

Braunold said, "In parallel to our existing medical market products, we continue to pursue strategic relationships with major players in non-medical markets who seek to license our technology for a number of mass-market consumer wellness applications".

SPO Medical has not returned a profit since its founding in 1997, and in a statement said if expects to incur losses for the immediate future requiring the need to raise additional funds.

The company went public in 2005 but has been quoted on the over-the-counter Bulletin Board since October, 2007 and in its filing with the SEC, SPO reports "there is no established market for our common stock and none may develop or be sustained."

"These conditions raise substantial doubt about our ability to continue as a going concern," the company concludes in its SEC report.

Roche MRSA test garners CE mark

Roche (Basel, Switzerland) reported receiving the CE mark for its new LightCycler test for the detection of methicillin-resistant Staphylococcus aureus (MRSA).

The LightCycler MRSA Advanced Test is a qualitative in vitro diagnostic test for the direct detection of nasal colonization with MRSA.

"As more guidelines recommend or require aggressive screening, it is important that healthcare professionals have access to fast, reliable products that can help improve medical outcomes," said Daniel O'Day Head of Roche Molecular Diagnostics. "This new test will aid infection control programs, and ultimately result in better patient care."

Healthcare-associated infections caused by MRSA have recently become an important issue for healthcare facilities worldwide due to high rates of infection, mortality, and high costs of treatment. In addition, community-associated MRSA (CA-MRSA) has spread in the past few years, feeding the pipeline of infection in hospitals, and underscoring the need for comprehensive infection control programs.

The LightCycler MRSA Advanced Test is performed on Roche's LightCycler 2.0 Instrument with nasal swab specimens from patients suspected of colonization, using Roche's patented real-time polymerase chain reaction technology.

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