Sphere Medical: What do you want - blood?

Sphere Medical enjoyed a successful IPO in November and the company is now set fair for a dazzling future. But this is after years of uncertainty, and even just a few months ago the company was within days of running out of money. Jenny Chapman of Cambridge Business went to see founder and chief executive Stuart Hendry to hear the gory details.

Dedication doesn’t get much more impressive than this: the staff at Sphere Medical (LON:SPHR) not only deferred their salaries but gave their blood.

This is one of those great Cambridge stories where everything teetered on the edge, the company was, on more than one occasion within days of closing down, and yet it ended 2011 as one of the highlights of the year, having floated on AIM and raised enough to take its amazing products to market.

Quite simply, what Sphere does can make the difference between life and death, let alone save huge sums worldwide in healthcare. 

Among its products is something which stands out as a significant leap forward in patient care – it is a tiny silicon chip which means blood can be tested at the bedside without it truly leaving the body. 

It all began way back with Dr Stuart Hendry, Sphere chief executive, but a specialist in bio-sensing who spent a decade with mighty Pfizer researching intravascular sensors which would make sure critically ill patients had the right amount of oxygen.

His work took him all over the world running trials, but Pfizer decided it wanted to concentrate on being a drugs company rather than medical instruments, so they sold the division.

 Stuart then spent a couple of years with PowderJect before becoming head of life sciences at what was then Scientific Generics at Harston, today Sagentia.

He found himself working with Siemens, looking to do something with non-core IP which had become orphaned, and spent a lot of time developing chip technology for measurement.

“I looked at it and I thought `crumbs, it looks like what I was doing at Pfizer’, but having it on silicon instead of fibre optics made the difference. It was too early when I was at Pfizer, but the big clinical need remained, closer monitoring so that fewer people would die.

“Fibre optics were very expensive, fragile and did not measure enough things, plus they had to be put into an artery. With our chip you can measure lots of different things, it costs £100 and is very robust. Plus you can use it as many times as you like on one patient – say up to 50 times — and then throw it away.”

This may still sound quite expensive, but it is nothing when you look at the associated factors. The average stay in intensive care is three days. The patient will be on “a line” via a needle inserted into a vein in the wrist.

At the moment, whenever a blood sample needs to be taken – which is quite often – it has to be extracted with a syringe, sealed in a container and sent off for analysis.

This can mean a journey of up to half a mile at the bigger hospitals – more of this later and a brilliant quote – and in the process of sending off the sample the medic has to leave the patient and get someone else to stand in.

Now, there are, on average, 12 million intensive care patients each year around the world and, again, on average, it costs $3,000 a day to look after them: “So anything which can get people out quicker, even by half-an-hour per bed, is worth it,” Stuart says.

He is now demonstrating to me what Sphere’s clever technology can do, using a prosthetic arm which looks as if it’s been well-used as a prop in Silent Witness.

“Now you can get a blood reading without the nurse having to leave the bedside, and without taking any blood from the patient.” The thing is, it sort of leaves the patient, takes a bypass into a small device, but never meets the air and so goes straight back into the body.

This may not seem all that important when you think about how much blood is taken for a sample, a Tony Hancock amount, but it can be hugely important if the patient is a premature baby, whose total blood volume is 40ml which doesn’t leave any spare.

“Some premature babies have to have transfusions six or eight times. They can’t afford to lose any blood.”

Not only does Sphere’s product, called Proxima, avoid taking blood, it minimises the risk of infection, and negates the possibility of mixing up samples. 

And you can understand how this might happen if we return to the quote promised above: “The chairman of our medical advisory board, John Ultawoski, is head of anaesthesiology and critical care at John Hopkins, America’s leading hospital, which makes Addensbrooke’s look like a cottage hospital. Oh, I better not say that, but it is huge, acres and acres.”

This is the sort of setting where blood samples have to travel half a mile for testing, which is half a mile of opportunity to get muddled up.

Meanwhile, the volume of blood sampling is rising all the time: “More people are turning up in intensive care and they are sicker. This is because we are all living longer.”

Sphere has been doing much of its testing at the Queen Elizabeth Hospital in Birmingham, which does actually have the largest single floor intensive care unit in the world, with 100 beds. It’s where the wounded soldiers are often taken.

Sphere, a joint venture between Scientific Generics and Sagentia, and Stuart, was formed as a spin-out at Harston in 2002, with just Stuart and Gavin Troughton, today the company has 43 people.

“The first significant funding came in 2005 when we raised £4m, which was when we could really start developing the project.”

Four million pounds doesn’t sound too bad, but then he tells me that it costs between £30m and £50m to develop a medical instrument to pre-market approval stage, and quite a lot more to get it to the point where it can be allowed in contact with patients and relied upon in treatment.

So £4 million wasn’t going to keep them going very long? “Many times it has seemed as if we could not carry on. This year alone has been quite challenging. We are a typical medical device company, we have synergy with chips, but there is not a really established cluster in Cambridge, compared with places in the US, for medical devices.

“Since 2002 it has been rather difficult to get funding, and since 2008 it has been nearly impossible, to the point where 85% of my job has been raising money.”

Even so, in total Sphere raised £28m before last year’s flotation on AIM, which brought in a further £14m, enough to commercialise the product range, although the company is relying on working with the right partners for sales and marketing as it has no intention of hiring its own team in that department.

At the moment everything is done at Harston, apart from the chips, made by Olivetti and then sent to Sphere for all the clever additions. The team there are more than dedicated, having deferred their salaries as recently as last year to see the company through, and given their blood, as mentioned at the beginning. 

There’s a lot of testing going on at Harston and the blood has to come from somewhere.

Testing with Proxima involves the by-passing blood being passed over the chip on which there are nano sensors capable of a range of tests which allow medics to maintain careful control of physiology. 

Sphere, over the years, has shrunk it from a huge device to today’s tiny chip, and the expectation is that before long Proxima will be at every intensive care bedside throughout the world, ready to be popped on to the patient’s arm and linked to the Sphere monitor which displays the test results.

Proxima has no competitors and can Sphere be pretty certain of that as its medical advisory board is drawn from all over the world. And the three big industrial shareholders are Siemens, Sorin – the world leader in cardio pulmonary bypass, and Edwards Life Sciences, world leader in critical care.

As well as Proxima, Sphere has a cardiopulmonary bypass monitor for continuous monitoring during bypass surgery, and Pelorus, for controlling sedation (“It’s also a very good wine from New Zealand”).

This gives a nice spread and avoids the precarious life of many a tech firm where everything relies on one product. Stuart seems more than happy with this state of affairs, especially as he has been to the brink: “Last year we got very close to running out of money. One comfort is that all big success stories seem to have the same theme – being within a day or two of having to close down.”

What about the bank?

“We don’t appear to qualify for any particular help from the bank, but HMRC “time to pay” really helped.”

This year will be very different. By the end of 2012 all the products should be out there, on the market; trial results published towards the end of 2011 revealed that Proxima definitely works, and now the net for many other medical applications is spreading, for instance, renal units.

As to revenue from the initial applications: £100 a unit, 12 million patients a year for Proxima; then there are 20 million patients already being given Propofol, the anaesthetic which Peloris measures in the body, and more bypass surgery than you might think.

Dr Hendry looks relaxed and fit when we meet. I didn’t see him earlier last year, so don’t know if he always looks this way. He avoids becoming a patient himself by cycling and playing squash, activities he says are very important as a release. He and his wife live near Melbourn and have a nine-year-old daughter.

Sphere was one of only two Cambridge companies to float last year. Ubisense went public in June, while Sphere hit the market in November, quickly commanding a premium and with the company valued at around £35m. One to watch.

The article appears in this month's edition of Cambridge Business.