Originally Published MDDI October 2004

Cover Story

Patience Pays Off

Aspect Medical Systems Inc. has made anesthetic delivery safer for millions of patients. But only after 18 years has it been able to reap the rewards of its efforts.

Erik Swain

One of most important characteristics of a successful medical device company is persistence, and few firms exemplify that more than Aspect Medical Systems Inc. (Newton, MA). It has taken almost 18 years, numerous clinical trials, and countless fund-raising efforts for Aspect's technology to become widely accepted and for the firm to become profitable.

“I was 25 when I founded the company,” says Nassib G. Chamoun, Aspect's president and CEO. “If someone had come to me back then and said ‘You have a great idea, but you'll take 18 years to make a profit, spend about $250 million, and go through multiple FDA cycles,' I think I would have run away.”

How, then, has the company been able to survive and prosper despite all the setbacks? The answer lies in its personnel, its technology, and the faith that its personnel and investors have in the technology.

Almost no device company begun from scratch gets to take that long to prove itself. But Aspect is an exceptional case. Its core technology, Bispectral Index (BIS), has revolutionized anesthesia by allowing its effects on the brain to be measured accurately. Ultimately, this makes the anesthetic much safer to administer. Aspect's management team, many of whom were present during or just after the company's founding, has never wavered in its belief in the technology, despite a number of bumps on its road to acceptance. Today, the company's products have been used on more than 9 million patients. There is increasing interest in the company as an investment, and it has formed partnerships with a number of monitoring-technology firms. All these accomplishments indicate that the company is having a tremendous effect on healthcare. For these and other qualities, MD&DI has named Aspect Medical Systems one of its Medical Manufacturers of the Year.

Humble Beginnings

Aspect's story began 18 years ago when Chamoun was a graduate student in biomedical engineering research at the Harvard University School of Public Health (Cambridge, MA). His research centered on the heart until an adviser encouraged him to consider studying the brain. One trip to the operating room at Massachusetts General Hospital was enough for Chamoun not only to change his focus to the brain, but also to pursue improvements to anesthetic delivery.

“I learned that anesthetics were administered every day with no idea of how the brain would be affected,” he says. “I had always assumed, as many do, that levels of consciousness were tracked clearly and accurately.” Instead, surgeons relied on heart rate or other vital signs not directly related to the brain to determine consciousness.

“That trip to the OR fascinated me and presented me with an opportunity,” Chamoun says. “First, to pursue an understanding of the brain on a universal scale. Second, to track changes of levels of consciousness.” He plunged into research with the help of two mentors from seemingly contradictory backgrounds. One was Harvard physician Bernard Lown, whose International Physicians for the Prevention of Nuclear War won the 1985 Nobel Peace Prize. The other was Harvard/Northeastern engineer Charles Zraket, the CEO of Mitre Corp. (Bedford, MA) and a NASA adviser who was one of the architects of the Reagan administration's Strategic Defense Initiative.

Chamoun was so taken with this path, and so emboldened by his promising work with sensors, that he decided to drop out of Harvard and form a company that would bring his research to life. In October 1987, with funding from his two mentors, angel investors, and his own credit cards, he founded Aspect. The new company operated under the assumption that it would take $2 million to develop and commercialize a technology that would measure the brain's level of consciousness during anesthesia. It turned out to be only about $250 million off.

Learning from Setbacks

Word spread of the promising research, and the company was able to attract a fair amount of venture capital and begin clinical development. This proved more arduous than expected because the firm soon learned it would need to demonstrate the technology's effectiveness across a variety of surgical and anesthesia techniques. It also learned that it would need to measure a different end point than expected. But by 1992, Aspect had created a system that would take a “fingerprint of brain waves” and convert those findings into an index indicating level of cnsciousness. At that point FDA allowed it to begin investigational device exemption (IDE) trials.

And the trials failed.

“The results almost put us out of business,” Chamoun says. “But interestingly, they contained a key finding—that, in fact, consciousness can be tracked, and it can be measured more consistently than other vital signs. So we decided to focus more directly on consciousness and sedation. We designed another set of trials and raised more money.”

FDA's attitude toward the BIS technology also presented a challenge. The agency approved two simpler Aspect products—an electroencephalogram (EEG) monitor in 1992 and an EEG electrode in 1994—but support for BIS remained elusive. It was during a low point in FDA-industry relations, and Chamoun says the agency's attitude was “‘efficacy is not good enough; you also need utility.' They wanted to know the value of measuring consciousness.”

That meant doing even more research. By 1996, “we were able to prove that our technology would enable patients to get the exact amount of anesthetic they needed, which means they would have less of the drug administered, which would mean they would recover faster and better and ultimately go home sooner.”

And so that year, Aspect received the first-ever FDA clearance for measuring the effects of anesthetic on the brain, and the company went to market with its first-generation device. The basic technology was the same that Chamoun had been developing before he founded the company. It had, of course, been refined quite a bit by Aspect's ever-growing engineering staff by the time it came to market.

Obstacles remained, however, as acceptance was limited at first. “We were not ready for prime time, and we did not have the resources to develop another box,” Chamoun recalls. “But we began to conduct more trials, to expand its validation into other drugs, and to broaden the potential patient population. All technologies develop empirically. The only way to validate that ours worked was to test it prospectively in a variety of surgical situations, anesthetic combinations, and patient populations. That translated into a huge number of combinations, yet we were able to invest significant R&D dollars to prove efficacy and utility.”

The Path to Acceptance

Beginning in 1998, however, Aspect made significant clinical and financial progress and has never looked back. That year, it launched a new monitor, which a year later won an industrial design excellence award from the Industrial Designers Society of America (IDSA).

That began a period of significant growth. “We began to realize one major thing, which is that we had a value proposition based on lower cost, better quality, and efficient solutions,” Chamoun says. “That rang true with a lot of people. But to complement it, we needed data that would turn our technology into a must-have. Our focus began to shift to the safety value proposition.”

Thus a new set of trials began in 2000. Covering three years and 30,000 patients, the clinical study was one of the largest ever seen in the medical device industry. “It demonstrated two things,” Chamoun recalls. “One, that measurement of awareness in the United States was consistent with measurement of awareness internationally. Two, that BIS technology was able to reduce intraoperative awareness by 80%.”

Intraoperative awareness occurs when patients regain consciousness during surgery but are paralyzed and cannot alert anyone. In one-third of cases, victims feel the pain of surgery. About one-third of those also suffer some form of posttraumatic syndrome.

In October 2003, FDA granted Aspect clearance to indicate BIS for reducing the risk of intraoperative awareness. No longer could the technology only be promoted for monitoring purposes. There was now a therapeutic element to it. “This was a major advance in our ability to explain our value proposition,” Chamoun says. “Few devices used in the OR carry an indication to reduce adverse outcomes. That really gave us a shot in the arm.”

There was other recognition around that time as well. In 2002, Aspect won a Design & Business Catalyst Award from IDSA. The following year its A-2000 BIS Consciousness Monitor won a Medical Design Excellence Award. (That competition is sponsored and run by Canon Communications llc, parent company of MD&DI.)

Having proven that it can prevent too little anesthesic from being applied, Aspect is now working on gathering safety data on cases where too much anesthesic is applied. It appears, Chamoun says, that there is a correlation between receiving too much anesthesic and having an increase in long-term (one-year) mortality. These studies could provide further proof that use of the BIS technology is able to improve patient safety.

Despite all the breakthroughs on the clinical side, however, there remained challenges on the financial side. The new trials cost an incredible amount of money, and to fund them, Aspect went public in 2000. By raising funds privately for 13 years, and going public before having any sign of showing a profit, Aspect's growth pattern was more typical for the biotech industry than the device industry. The long research time and large amount of money spent to develop the product could only happen for a company whose investors and management had faith that the technology would be a “home run” clinically and financially.

Reshaping for the Future

Recent years also brought about a change in Aspect's business model. While it still sells stand-alone devices, it now earns more revenue from partnerships with other monitoring companies, in which Aspect integrates the BIS technology into partner firms' devices. There are now agreements with eight firms, including giants Dräger Medical Inc. (Telford, PA), GE Healthcare (Waukesha, WI), and Philips Medical Systems (Andover, MA).

Typically, with these arrangements, Aspect makes a disposable device that is placed on the forehead and feeds the consciousness data into the partner firm's monitoring system. “This is where our long-term growth will come from,” Chamoun predicts.

In March 2004, FDA cleared Aspect's BISx system, which is the BIS processing technology embedded in a device the size of a hockey puck. It is compatible with a number of patient-monitoring systems, to which it transmits continuous consciousness-monitoring information. If a monitoring system is identified as “BIS-ready,” all that needs to be done is to plug in a BISx device. “It means you could use one set of sensors across the entire hospital, even if you have Philips equipment in some areas and GE equipment in others,” Chamoun says.

This compatibility will enable the technology to be used in the intensive-care unit, “where sedation management has significant benefits,” and in other settings outside the OR, he says. In these settings, the disposable portion of the technology would have to be changed every 24 hours.

In addition, and perhaps most significantly in the long run, Aspect entered into a financial and development partnership with industry behemoth Boston Scientific Corp. (Natick, MA) in 2002. This agreement allows Boston Scientific to purchase as much as 25% of Aspect's common stock. As a sign that Boston Scientific is optimistic about Aspect's future, this year it has made two stock purchases and increased its share in the company to about 23%. On the development side, the companies have been working together on products for the gastrointestinal (GI) suite and the cardiology suite, both of which could use better sedation management. The first of these could debut by the end of 2004.

“[Boston Scientific has] an interest in neurosciences, and this [partnership] gives them an opportunity to distribute a product in that setting,” Chamoun says. “Likewise, it gives us access to the GI market arena, which we did not have before.”

There appears to be reason for optimism financially. In recent years Aspect has experienced a growth rate of around 20% and a profit margin around 75%. Its losses have declined steadily, and in the second half of 2004, the firm expects to show a quarterly profit for the first time. It anticipates 2005 to be its first fully profitable year.

From a Product to a Platform
The technology, having been proven for use with sedatives, may eventually find its way into other areas of healthcare. Aspect is investigating two new paths right now.

One is for depression therapy management. Currently, clinicians have no way to tell whether an antidepressant is working for a patient until six to eight weeks into the medication regimen. “We've published preliminary results showing that by measuring brain waves within a week of administration, we can detect with 80% accuracy whether a patient will respond to an antidepressant six to eight weeks out, or even whether the dose should be increased,” Chamoun says. “If our data hold up, we will do a prospective trial, and if that is successful, there will be a much shorter time to determine whether a medication is working or whether the doctor should figure out how else to help the patient.”

A related application is measuring brain waves to assess the effect of antidepressants compared with placebos. This would help pharmaceutical companies better evaluate their antidepressants in development. It could not only indicate which ones work at all, but the kind of patients on which they work best. A clinical trial, cofunded by drug giants Pfizer (New York City) and Eli Lilly & Co. (Indianapolis), is currently under way. “The concept of a brain biomarker is extremely critical to the next generation of neurological drugs,” Chamoun says.

The other path that Aspect is exploring uses the technology to identify preclinical stages of cognitive conditions, including Alzheimer's disease. “That would allow us to identify subjects who need to be managed before the disease takes its toll,” Chamoun says. “We think it could be an early screening tool that could be applied broadly. The preliminary results are promising enough.”

The Talent behind the Technology

None of these accomplishments would have been possible without personnel who believed in the technology and were committed to seeing it through the development process to successful market entry regardless of what obstacles the company faced.

“A lot of our senior executives have been here almost from day one,” Chamoun says. “Not only are they very talented at what they do, but they see what we are trying to do as a mission. They all believe that consciousness monitoring will inevitably become an integral part of every anesthetic and sedative, and that there's no reason why this shouldn't be done.”

In addition, Aspect has been able to attract a number of executives from large medical device manufacturers. In many cases, these individuals have taken pay cuts because they have such a strong desire to work with the company's technology.

“If you look at the breadth and depth of the management team throughout the organization, it is truly exceptional,” says Bill Floyd, Aspect's vice president of sales and marketing, who previously worked for Boston Scientific. “The ability to attract talent and have it stay is one reason we have come this far. There is such clarity of focus, and a passion.”

It is this type of corporate culture that can make a device company truly exceptional. “If they were doing it for the money, a lot of our people wouldn't be here,” Chamoun says. “It is about doing things with high integrity and honesty and about operating like a family. Everyone who works here believes they can make a difference. They are committed and dedicated to what we do. It's in their DNA.”

Copyright ©2004 Medical Device & Diagnostic Industry