A South African Revolution in Breast Imaging Technology

Interview with Christopher ‘Kit’ Vaughan, CEO & Founder of CapeRay Medical

What has been happening since February?

We have been very busy and a couple of important things have happened in terms of milestones. One is that we’ve just had a paper published in an international journal called Clinical Imaging. That paper describes our product as well as our initial results in a clinical trial that we ran in May of 2014. That’s been important scientifically to establish the validity of our system but also from a marketing point of view, it means we can now share copies of that paper with future customers.

Is it a peer reviewed journal?

Yes, it is a peer reviewed journal. It took us about 6 months of submitting, resubmitting, polishing, changing and updating but we are delighted with the quality of the paper and the way in which it has turned out, as well as the response we have been getting. Just as with social media you can also establish what sort of response there has been within the scientific community to a paper coming out. In fact, as a result of the paper, I have been getting invitations to present our work at international meetings. This of course is quite flattering but I think it also shows that people are sitting up and taking notice.

Is this the premier journal in your field?

It’s one of the premier journals. It’s not the only one but it is an important one that people recognize as having a decent standard. We are pleased with that. Another exciting development is that we have been shortlisted for the Innovation Prize for Africa. There were over nine hundred applications for this prize. They narrowed it after a first round to about a 100 and from there down to 18 and yesterday I had a fairly lengthy telephone interview with the judges and we are optimistic that within the next couple of weeks we will hear the good news that we have been shortlisted to the final 10. The finals take place Gaborone in Botswana in June and if we win the first prize we will receive US $100,000. One of the things which the judges asked me yesterday as part of the evaluation process is how important would it be for CapeRay to win the first prize and what would we do with the money. I said it would be hugely important, it would give us real credibility but also the funds would go towards developing an exciting new product that we have in the pipeline. The third development is that we have taken the plunge and we will be exhibiting at a national meeting. It’s the Breast Imaging Society of South Africa, or BISSA for short, that takes place in Stellenbosch on the 6th, 7th and 8th of May. Two of us will be there with our stand competing against the big guys: Siemens, Philips, and Hologic and this will be exciting because it will be an opportunity to showcase our technology to the local radiology community. We have exhibited internationally in Europe but never here in South Africa so we are feeling really positive about that and particularly since we are now very close to getting the necessary approvals and certification. Another positive development since late January is that we have been audited by our notified body for our ISO 13485 certification and that went extraordinarily well. We passed with flying colours and have had our ISO certification renewed for another year. We are in the final stages of getting our system ready to be taken off to the United States for independent testing. We have been talking to a number of companies, getting quotations and putting all the paperwork together. That’s been pulling the team together and is a positive move in the right direction.

Have you had any interest from potential distributors or partners in the United States or Europe? Last time you mentioned looking into franchising and licensing the technology.

Yes. That brings me to more of our developments. I met with two people from Denmark late in March who are both very keen to serve as our distributors in countries like Denmark and Norway. We haven’t signed an agreement with them yet but they were able to see our product, talk to me face-to-face here in South Africa and that was a real plus.

Perhaps one of the most exciting developments in the last couple of months is the discussions we have been having with a man called Professor Daniel Kopans who is one of the world’s leading authorities in the field of breast imaging.

You mentioned Central and Eastern Europe as well.

Yes. I have had discussions with a gentleman from a company called Arch Venture in Sofia, who is keen to represent us in Bulgaria, Romania and possibly even Greece. But perhaps one of the most exciting developments in the last couple of months is the discussions we have been having with a man called Professor Daniel Kopans who is one of the world’s leading authorities in the field of breast imaging. He is based at Harvard University and the Massachusetts General Hospital where he has been for the last thirty years, and he is a real pioneer in breast imaging and in screening for breast cancer. He is extremely enthusiastic about collaborating with CapeRay and testing our technology that combines x-ray and ultrasound in a single platform. He’s been a pioneer in the field of 3D x-rays and he wants us to develop a system to combine 3D x-rays with 3D ultrasound. At the moment we combine 2D x-rays with 3D ultrasound and Professor Kopans wants us to go one step further.

So that could square it?

It could square it. He says this new system would be the ultimate in breast screening technology and if we can develop such a system with his input and with his cooperation he would be the first one to test it in Boston. We are looking to raise the funds to do the development and testing of this new technology, 3D x-rays with 3D ultrasound. That is something that has really galvanized me at the moment, to raise those funds. We are talking to potential partners, companies that might want to take a punt on something like that. I believe getting an endorsement from such a high profile figure in our industry as Professor Kopans, is one of the most significant accomplishments of the last few months for us.

And in terms of actually identifying or finalizing any investors?

We are still talking. This is a slow process. I gave a lecture yesterday to the students at the University of Cape Town, a new venture planning course for engineering students and it was about pitching to investors. There are some lessons that I have learnt over the last few years and I mentioned my ten lessons to them.  What I’ve learnt is that patience is a virtue. You just have to be persistent and patient and eventually success will come. So I am forever optimistic. I have a very positive attitude about the business and about what we have developed here. I’m certain that we are going to get there in the end. The major investor hasn’t yet signed up but we are still talking.

One of the themes that comes up time and again is that making that transition between the laboratory and the commercial realm is difficult, especially for the STEM (science, technology, engineering and medicine) graduates. As we understand it they have to specialize at the tertiary level quite early on as opposed to what happens in the United States where they teach them transferable business skills and how to transition their products and their ideas into a commercially viable product or entity and that seems to be lacking in South Africa. I imagine that your first-hand experience in having taken that leap is probably very beneficial to them.

I would say so. What was really interesting about the presentation that I gave yesterday was that one of my own staff members, Josh Perry, who has been with us for a few months came along. It turns out that I had given a similar lecture a year ago and Josh Perry was one of the students that attended my lecture and he had become very excited about CapeRay. When he heard there was a job available at the end of last year he applied and we appointed him. He is the kind of young person you want to attract into the industry. He is enthusiastic. He came to the lecture yesterday and got up at the end and delivered a very stirring commentary to the students. He said, “This is your opportunity. Don’t go and work for some big boring company doing something that doesn’t really matter. Do something entrepreneurial. If you don’t start your own company at least try to work for a start up and do something interesting.”

Have you had many of your former alumni approaching you to work for you? And have you thought about moving the company overseas?

No, to be honest with you. This is my second career, after all. My first career was as an academic for thirty years and for the last six years I have been an entrepreneur and I think I can do this for another four or five years. That would be about enough. I am not at all tempted to go and work in the United States or in Europe. I am happy to remain here in Cape Town, and I am energized by the opportunities to do novel and interesting and worthwhile things here in this country.

So in four or five years, if it all goes according to plan, what is the end game for you?

I think the end game for CapeRay and for me would be that CapeRay continues to exist, perhaps as a research and development enterprise where we develop new products that we ultimately license off or that get incorporated into other businesses. I would imagine we would not become this large company that’s manufacturing many hundreds of systems every year but we would be an R&D facility where there will be an opportunity for graduates from universities here in the Cape Town area to come and work for us and to do interesting things and to continue to make a difference.

I guess that might well come to fruition if you sign this agreement with the Professor at Harvard.

Yes, although there is nothing concrete as yet, but if that collaboration does come to fruition then that could be a fantastic link for us. One of the things that I did when I was previously in academia as a professor of biomedical engineering was to spend ten years in the United States so I know how the system works and have made many connections. My research group at the University of Cape Town is continuing and has been very successful, particularly in establishing those links with other leaders in their field. Some of the collaborators are in the United States, at Harvard or at Vanderbilt University in Tennessee and some of them are at European universities like University College London and the University of Delft in the Netherlands. We also have strong links with Imperial College and Oxford as well as with Cambridge. There are all sorts of opportunities.

And you taught at a university in Dublin?

Yes, I taught at University College Dublin in 2003 so there are strong links with Irish academic institutions as well. I think that’s the beauty of academics. We can all make those linkages. We share students who spend time in each other’s laboratories. Certainly that is something I will be able to build on.

To come back to the commercial possibilities for CapeRay, you probably have done some pretty extensive due diligence, business intelligence and feasibility into what the potential size, scope and depth of the market may be. Can you tell us how big you think the market can be and what sort of proportion CapeRay can potentially have?

We’ve done a very careful analysis of the global breast imaging market and now in 2016 it’s worth about 5 billion US dollars, broken down by various segments. For example, there’s full field digital mammography that is one of the technologies we have. There’s magnetic resonance imaging which is not something we do. There’s ultrasound and there’s digital breast tomosynthesis, which is 3D x-ray imaging and then there are a few other technologies that are used in breast imaging. But altogether they make up this market of five billion dollars per annum. Market research companies anticipate that the compound annual growth rate will be anywhere between eight and ten per cent per annum for the next five or six years, and the global market will grow to eight billion dollars by the years 2020-2021.

And that is as a consequence of demographic trends?

It’s partly demographic but it’s also partly the fact that the other countries such as China, India and Japan are using screening on an increasingly frequest basis. We see the market growing in the United States and it’s still growing at a healthy rate in Europe. To come back to the question about CapeRay, we have a conservative business model that we have put together, and we have estimated that we only need to capture approximately three per cent of the global market to be an extraordinarily successful company.

Of the five or eight billion dollars in the market, what portion of that would be for your dual-modality technology?

The part that we are in is approximately seventy-five per cent of that five to eight billion dollars. The x-rays, ultrasound and tomosynthesis segments.

How long will it take you to get to that three per cent?

We have estimated that it would take us five years. In a dollar value, that would be a little over 250 million US dollars. There is the potential for the business to grow at that rate, but we have to be sensible about it. We are a small company based in Cape Town and to scale to that level we cannot do it on our own. We will need to partner with a large company that already has a well-established footprint around the world. A company that has distribution offices in these distant places would be ideal.  Realistically, we probably couldn’t do all the manufacturing here in South Africa either. From a logistics point of view we will need to look carefully at where these systems will be manufactured, but that’s something for us to negotiate and discuss with our major investors when they come along.

So you would license the IP?

Yes, we would be prepared to license the IP. That’s another thing that has happened in the last week. We have had very good news for one of our patent applications, which has just come back from the Patent Cooperation Treaty (PCT) office.

Is that a South African office?

No. It’s an international office that’s based in Geneva. They have informed us that they see absolutely no problems from a novelty or inventiveness point of view. So we are confident we will secure another patent in this key area of dual-modality imaging.

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