The price of medical technology varies widely, from the cheapest blood glucose test strips to multi-million-dollar imaging machines, for example. Proton therapy may qualify as the most expensive of all, as it requires the construction of a new facility every time a system is ordered. But Belgian company IBA is aiming to change this with a new system that could see proton therapy reach a whole new customer base – and is a cornerstone of IBA’s growth strategy.
IBA – the initials stand for Ion Beam Applications – is the leader in proton therapy, a form of radiotherapy used to treat cancer, with more than 50% of the $425m global proton therapy market. But it is expanding fast, and with a strategy based on playing to its strengths, it could outpace its less committed competitors.
Proton therapy has one huge advantage over conventional radiotherapy: protons release most of their destructive energy at a specific depth, which can be precisely calculated as a function of the beam’s energy. When X-rays are trained on a patient, the beam will damage the healthy tissue in front of and behind the tumour. With proton therapy, the beam can be adjusted so that it stops immediately after the tumour, sparing the tissue beyond, and because most of the protons’ cytotoxic activity occurs at a particular depth, the tissue on front of the tumour is largely unaffected as well.
“The physics behind proton therapy allows a very accurate targeting of the tumour,” says Olivier Legrain, IBA’s chief executive. “The advantages of the ballistic properties of the proton technology are higher dose to the tumour, fewer side effects and less damage to healthy tissue.”
The technique is particularly effective on ocular, CNS and head and neck cancers, as well as thoracic, GI and pelvic malignancies. “Every time a tumour is very close to an important organ, it makes sense to use proton therapy,” says Mr Legrain. It is also very useful as a treatment for children, in whom it has been proven to cause lower rates of lung disease, growth abnormalities and reductions in IQ compared with X-ray radiotherapy. “For paediatric patients, when they have to go to radiation therapy, it’s a no-brainer,” Mr Legrain says.
“We believe that almost 30% of cancer patients treated with radiation therapy could benefit from the use of proton therapy. Our mission is to grow the niche market of proton therapy,” says Mr Legrain.
Growing the niche
IBA plans to do this by mitigating the main drawback of proton therapy systems: their size, and therefore their expense. “The typical proton therapy configuration is quite big. It has a cyclotron to accelerate the beam, and then delivery rooms where the patients are positioned and the beam is delivered. The treatment itself is delivered very fast, proton therapy treat takes between 15 and 20 minutes – beam time is maybe one or two minutes,” Mr Legrain explains.
Such a facility, with four treatment rooms and a cyclotron – the particle accelerator that produces the beam – costs around €140m ($184m). It can only be afforded by the largest hospitals and universities in the richest countries. But IBA is now developing a smaller, one-room facility which could be afforded by smaller, community hospitals, for the bargain price of €30m. “It lowers the entry ticket. It’s more affordable for community hospitals or smaller hospitals,” Mr Legrain says.
And like all expensive gadgets, the facilities come with a guarantee. IBA offers a ten-year operation and maintenance contract, included in the price. “Every time we come up with an innovation, we have upgradeable kits. We invest a lot into R&D and every time we develop a new feature we try to have it retrofittable, so ten years after you have started operating your proton machine, it’s still up to date.”
“If you look at the investment case, you could treat, with a four room system, up to 1200 patients [per year] and if you finance it 30% equity, 70% debt, your internal rate of return will be approximately 25%.” The compact system cannot treat as many patients: 250-300 per year, but, says Mr Legrain, the investment case will probably be as good when it comes to internal rate of return.
As well as aiming to make its customers profitable, IBA is shaping its own businesses to streamline its operations. In April IBA spun out its radiopharmaceuticals division into a joint venture with US-based private investment firm SK Capital, called IBA Molecular. This saw IBA receive revenue of €50m in the first half of 2012.
Now the company plans to divest another subsidiary, Cisbio Bioassays, which includes IVD assay kits, as well as products for drug discovery. “It’s a niche business, but as it is not synergistic with the rest of IBA we’re looking at going to market,” says Mr Legrain. As for buyers, “It could be a financial investor, but there’s a very good expertise in this company in bioassays. A strategic partner, with plans to develop technologies or products using bioassays could definitely be interested by this acquisition.”
The side businesses IBA has, and intends to keep, fit better with its central interest in proton therapy. Its dosimetry business is worth about €45m top-line, and represents about 30% of IBA’s total business. Says Mr Legrain: “It’s quality assurance equipment for radiation therapy. It includes detectors and software in order to allow good commissioning of the machine. During treatment we make sure that the machine is doing what it is supposed to do.”
IBA also produces particle accelerators for other applications: one for medical imaging, to produce radiopharmaceuticals and radioisotopes, and industrial accelerators. “There’s a lot of technology synergy with our proton therapy business.”
IBA’s revenues grew 12.9% in the first half of this year, driven largely by the proton therapy business, and its reorganisation is already having an effect on its profits, Mr Legrain says. “You can see the first effect of our initiative as our profitability has improved from 5% last year to 6.4% in the first half of this year. We are guiding the market towards 10% profitability by 2014.”
IBA’s competitors in proton therapy include Japanese conglomerates Hitachi, Mitsubishi and Sumitomo. Mr Legrain says that though their equipment is sometimes cheaper than IBA’s, “we question their commitment to the market” – their emphasis on their proton therapy technology waxes and wanes.
Another competing company is US-based Varian. “Varian is the biggest conventional radiation therapy company. I think proton therapy is a kind of a side business for them. It’s not the same – it’s not true that because you’re good with linacs you’re going to be good with proton therapy.”
“Then you have a small start-up company, Mevion. They haven’t treated their first patient yet.” Mr Legrain says that Mevion offer to build a proton therapy system to the exact specifications of their client, but whether they can deliver this remains to be seen. “On paper they have a lot of technology advantages, but one day they will have to deliver it, and in the meantime we will have treated 100,000 patients.”
Mr Legrain says that the future of proton therapy belongs to IBA. “Proteus One is coming – we will treat the first patient end of the year, beginning of 2014. This could be a game-changer in the industry as it will allow more people to invest in proton therapy. That’s why we are very confident that we can grow 5-10% per year and achieve a 10% return on sales in the next 24 months. That’s our strategy: to deliver proton therapy to more patients all over the world, making it more accessible and more affordable to the community.”
To contact the writer of this story email Elizabeth Cairns in London at firstname.lastname@example.org