Pictures of the Future    Spring 2007

Healthy Investment

Identifying pioneering innovations is a little like hunting for truffles," says Dr. Ralf Schnell, head of Siemens Venture Capital. "You need a highly developed startup scene in which new technologies thrive, and the skills to ferret out at an early stage new trends that can be successfully marketed." For this, Schnell relies on the venture capital experts on his team, who are well aware of what’s going on at Siemens Corporate Technology, and also keep tabs on new trends. The health care sector is particularly innovative; that’s why Schnell put together a team that analyzes startup companies in the sector and regularly identifies technologies to add to the Siemens R&D portfolio.

U-Systems is one such pick. The California-based startup has developed a method for improving mammography examinations through the use of ultrasound. Doctors usually conduct preventive breast cancer examinations using X-rays. However, when thick breast tissue is involved, which roughly 40 % of all women have, the resulting images display poor resolution. Siemens Medical Solutions (Med) did in fact examine possibilities for combining an X-ray machine with ultrasound, but the costs seemed prohibitively high.

"We got lucky when we found out about U-Systems in 2003," says Dr. Andrew Jay, head of SVC’s Medical Solutions Fund in Boston. The startup’s X-ray-free ultrasound technique fit right into Siemens’ plans. The system images the breast from the front, rather than from the side as mammography does, which means it can also be used to examine small breasts. And the ultrasound source used by U-Systems was actually a system from Siemens. "So we were delighted with the company’s approach right from the start," says Jay. The 3D ultrasound image (sonogram) can be compared directly with a conventional mammograph to improve the diagnosis.

At the time Siemens encountered U-Systems, it was unclear if the technology would function properly in everyday use. Based on experience, SVC’s experts are well aware that a lot can go wrong in the process of creating a marketable product. After U-Systems’ developers had solved a few problems in 2006, the first functional unit of the product called SomoVu was delivered that fall. The devices have since proved themselves in clinical applications, and many hospitals have ordered additional units. They’ve been so successful that SVC significantly boosted Siemens’ financial interest in U-Systems, and Med signed a worldwide distribution agreement.

"Our investments safeguard our access to the most advanced expertise from outside of Siemens —and that ultimately helps Siemens to maintain its leading position in medical technology," Schnell explains. SVC is now expanding its search for startups in the medical systems sector, where the pace of development has picked up substantially in recent years, not least due to the IT revolution and advances in genetic and molecular engineering. This explains why experts at the venture capital company now evaluate between 400 and 500 startups per year worldwide. The Medical Solutions Fund focuses on molecular imaging, in vitro diagnoses, and IT applications. Many startups actually approach Siemens themselves. "They’d like to become partners in our global high-tech company," says Jay with a measure of pride.

One company that contacted Siemens was Cylex, a startup that developed a test that measures the intensity of immune system reactions prior to organ transplants. The test helps doctors better assess whether a transplanted organ will be rejected. The test which can significantly reduce treatment costs has already received clearance by the U.S. Food and Drug Administration. The current post-transplant procedure involves administering medications that suppress defensive reactions. But excessive doses of such medications can weaken the immune system and lead to further complications, including infection. Until now, there has been no way to know in advance how the body will react to a transplant, resulting in medication doses that are either too high or too low. Jay estimates annual expenditure on transplant-related medications currently totals between $15,000 and $20,000 per patient. He thinks immune tests could cut this figure by between 30 and 50 %. Siemens is exploring the possibility of developing an automated version of the Cylex test.

SVC’s activities aren’t limited to investments; establishing direct links with the technology scene is just as important. "We help our colleagues in the Siemens business areas to establish personal contacts with leading experts, by providing a suitable platform for dialogue," Schnell says.

SVC organizes and conducts several specialized Innovation Circles yearly, as well as a Siemens Venture Summit —all designed to bring together internal and external experts. These meetings are valuable for Jay and Schnell because they generate new ideas. But, "there’s always a certain risk involved. Not every idea works in practice, or maybe there’s no market for a given application," says Schnell. "That’s why you often need a kind of sixth sense when choosing investments."
                                                                                                    Harald Hassenmüller