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February 11, 1997

Neurokinetics Case Study


Background 2

The Bionic Glove 2
Details 2
Development 3
Commercialization 4

The Issues 4
Intellectual Property 4
The Market 5
Distribution 7
Clinical Trials 7
Product Development 9
Regulatory Considerations 10
Sales Projections 11
Financing 12
Commercial and Technical Risks 13

The Researcher's Dilemma 15

Appendix A: Competition 16
Markets 16
Glove Competitors 16
Indirect Competition 18


This case was prepared by Beth Graham under the direction of Dr. Jim
Graham, director of Venture Development at the University of Calgary, with
the support of a grant from the Alberta Heritage Foundation for Medical
Research to encourage discussion and learning about technology
commercialization. The case is based on interviews with some but not all of
the mentioned participants and while it is believed to be reasonably
accurate, may not represent all the facts or views of the participants.

Background


The time is the fall of 1995. Dr. Arthur Prochazka's spin-off company,
Neurokinetics Inc., was demanding much more time than he expected or
wanted. He had started up the company in 1994 as a vehicle for the
commercialization of his research at the University of Alberta.

Prochazka was a well-respected neuroscience professor, an expert in the
development of electrical stimulation therapy for paralyzed individuals.
Neurokinetics' first objective was the commercialization of the Bionic
Glove, a device developed in Prochazka's lab. It allows a motion-impaired
individual to grip an object.

At the same time as he was developing the Bionic Glove, Prochazka was
continuing and initiating further research projects. He took a great deal
of pride in the high quality of research done by his team. The business
side of Neurokinetics took him away from the lab.

Prochazka found these time constraints stressful and wondered how he might
find a balance between his research and the commercialization of the Bionic
Glove.


The Bionic Glove


Details


The main start-up product for Neurokinetics was the Bionic Glove, which is
based on FES (Functional Electrical Stimulation). It is an electric device
that allows a motion-impaired individual to grip an object. When worn by
quadriplegics who still have some movement in their wrist, the Glove senses
wrist movement, and electrically stimulates different muscles in the
forearm, causing the paralyzed thumb and fingers to form a pinch grip.

The Glove powers three sets of muscles:
muscles which bring the fingers in (i.e. picking up a can of pop)
muscles which to open the hand
muscles which bring the thumb and the index finger together (i.e. holding a
paintbrush)

The Glove is fingerless and made from a stretchy neoprene material, similar
to a skin diver's wetsuit. Electrodes are attached to the Glove and
positioned strategically on the individual's arm to stimulate the muscles
required to perform the task. The current is monitored by a control box,
which allows the grip to be adjusted.

During clinical trials, patients using the Glove were able to regain skills
such as lifting heavy objects, using a hammer, opening doors with round
smooth knobs, and eating finger foods. They also showed increased
efficiency in performing tasks that they could already do with the aid of
other devices. These tasks included writing, using cutlery, toothbrushes,
keys, and drinking from a cup or glass.

Development


Development work on the Bionic Glove began in 1989. Prochazka's research
team developed the product with the input of quadriplegic patients to
ensure that users' needs were kept in mind right from the start. As the
team worked in conjunction with patients, Prochazka recognized the Glove's
"liberating" potential in helping motion-impaired individuals achieve a
more independent lifestyle.

Preliminary tests performed in Edmonton involved a bench prototype
comprised of a glove attached by wires to a separate control box. Users
found the wires to be a nuisance. Eliminating the wires became an important
goal in developing a marketable product.

Prochazka wondered whether the Glove could be commercialized in order to
reach a greater number of quadriplegics. He wondered if the Glove could
make a profit, and whether that profit would be enough to fund further
research. Prochazka applied for and received funding from the Technology
Commercialization Program of the Alberta Heritage Foundation for Medical
Research (AHFMR) to explore the market potential of the Bionic Glove.

Three University of Calgary MBA students (Emily Collins, Mark Levac, and
Doris Murphy) were hired to conduct a preliminary market survey. Their
findings confirmed that if the Glove was marketed in both Canada and the
United States, sales would indeed be great enough to support a commercial
venture. As well, the supply of replacement electrodes for the product
represented a business opportunity that was comparable to that of selling
the Glove.

The students prepared a report of their findings, outlining the first steps
to be taken in order to commercialize the Glove. They believed that the
company could be launched with a minimum of corporate infrastructure -- a
president, a physiotherapist, a senior administrative assistant, and a
technician. Research staff would provide market and applications assistance
in the very early stages of the company's development.


Commercialization


In 1994, Prochazka established Neurokinetics Inc. The objective of the new
company was "to get as many motion-impaired patients as possible using the
Bionic Glove in everyday life".

Realizing that he lacked the time and expertise to commercialize the Glove,
Prochazka hired a business manager to oversee the commercialization
process. In 1994, with funds from AHFMR, Tricia Cisakowski was hired. She
had extensive expertise in both the research and commercialization aspects
of a product.

Cisakowski set up headquarters in a small room at the back of Prochazka's
lab. Her job included pursuing regulatory approval, setting up clinical
trials, gaining financial backing and drawing up a business plan.


The Issues


Intellectual Property


Prior to developing the Bionic Glove, Prochazka had developed another FES
(Functional Electrical Stimulation) technology -- a tremor attenuation
system. Once fully developed, this system would control essential and
cerebellar tremor caused by multiple sclerosis.

Prochazka published a paper in a medical research journal detailing the
merits of the tremor attenuation system. Unfortunately, a patent was not
obtained for the technology and Prochazka lost exclusive rights to the
system. He was determined that the Bionic Glove technology would not endure
the same fate.

Prochazka had assigned rights for the Glove to the University of Alberta.
The University in turn licensed the Glove back to Neurokinetics. If the
Bionic Glove was to be commercialized, a patent had to be obtained. A
patent provides a limited exclusive right to the manufacture, sale and use
of an invention in return for the disclosure of that invention in a patent
specification. Patenting is a lengthy, costly and complex process.

A patent agent was consulted and a search conducted in order to assess the
patentability of the Glove. Existing patents in Canada and other countries
were checked to ensure that the idea was unique.

A patent specification was then filed. The specification consisted of a
descriptive portion, an abstract and claims. It had to be completed within
a relatively short time frame as the Canadian system operates on a first-to-
file basis -- the first person who files a patent application for a
particular invention is entitled to be granted a patent for that invention.


In October 1994, the Bionic Glove was protected worldwide by a PCT patent.
This protection of intellectual property was critical if investors were to
be encouraged to invest in Neurokinetics. Once the Glove had been patented,
financial and marketing support had to be found in order to commercialize
the innovation.

The Market


The preliminary market survey done by the University of Calgary MBA
students described the industry, target markets, lead times, competition
and regulatory restrictions.

They identified the Bionic Glove's target market as the quadriplegic
segment of the medical equipment supply market. A certain amount of wrist
movement was required to operate the Glove. Research indicated that the
target market for Canada and the United States combined was approximately
76,850 existing patients with 2,850 new patients anticipated each year.

Allowing for disqualifying factors such as physical, psychological, and
financial constraints, potential sales for the North American market
totaled 4,617 existing quadriplegics and 172 anticipated new quadriplegics.
This represented a total market share of approximately 6% of the total
expected market for quadriplegics.

The number of annual injuries was not expected to undergo any drastic
changes in the next few years indicating that the market would continue to
grow at a constant rate. The study also indicated that stroke patients
were another market to which the Glove may be made available. At that
point, Prochazka had not conducted testing in this area, therefore it was
difficult to define the stroke patient market.

The students determined that an acceptable price for the Glove was between
$1000-$1500. The pricing of the Glove was dependent on three factors:

Most quadriplegics relied on fixed incomes of less than $1,000 per month.
Medical coverage was generally only provided for essential components.
Some patients had access to the Motor Vehicles Claims Fund, which provides
vehicle accident victims with a lifetime fund of $95,000. Patients must
budget in all of their future needs (i.e. wheelchair components) out of
this money.

The cost of replacing the customized electrodes in the Bionic Glove was
identified as an additional source of revenue. The electrodes would retail
for $10 per package of four, including shipping and handling. The electrode
replacement rate was estimated to be 8 per month (2 packages), so that
electrode sales for one glove would total $240 per year. Wear and tear
meant the Glove fabric would need to be replaced approximately once every
year. The students assumed this would be done at a nominal charge, if
charged at all.

Cisakowski followed up with an in-depth market study. She explored the
quadriplegic and stroke markets and suggested that the Glove might also be
used for brain injured patients or patients suffering from multiple
sclerosis. More data was needed in both of these areas to estimate the
potential market.

According to Cisakowski's research, there were about 200,000 individuals in
the United States with spinal cord injury. The incidence of injury was
10,000 cases per year. In order to be able to use the Bionic Glove, people
with quadriplegia had to have residual voluntary wrist extension with weak
or absent thumb and finger movement. Typically, people with an injury at
C6 or C7 fell into this category. When factors such as physical
suitability and acceptance were taken into account, the estimate of
potential users in the United States was approximately 17,000. Of the
10,000 new cases per year, there were approximately 900 potential new
users.

Some of the disparity in the market estimate done by the students and the
one done by Cisakowski was attributed to the growing market and the
development of the Glove. Further studies were needed to take into account
costs and margins, user benefits, reimbursement frameworks, user acceptance
and marketing and distribution strategies.

Cisakowski also examined the stroke patient market. In the United States
there are approximately 2.1 million stroke survivors, many with residual
hemiplegia (paralysis of one side of the body). The motor deficits ranged
from mild weakness in the affected arm to complete paralysis and spastic
rigidity. To be a candidate for the Bionic Glove, stroke patients had to
have good shoulder and elbow control. Clinical opinion differed on the
exact percentage who could use the Glove but it was probably in the range
of 5 to 10%, which conservatively translated to approximately 22,000
individuals.

Plans to implement the tremor attenuation system into the Glove's design
were made in order to reach people with multiple sclerosis. However, the
system was still in the initial stages of development and it was too early
to be able to estimate the potential market.

Another aspect of the preliminary study that Cisakowski reconsidered was
the pricing of the customized electrodes and fabric. She estimated that 100-
200 customized electrodes sold at $1.50 apiece would be purchased each year
by the Bionic Glove user. Replacements for the Glove's shell/lining,
available in a variety of colours, would be sold for $200.

Distribution


Because the product was leading edge, it would be difficult to find a
suitable distributor. Neurokinetics would have to approach the market
directly.

Sales to spinal cord injured individuals are usually channeled through
occupational therapists and physiotherapists involved in the rehabilitation
process. For example, an occupational therapist might call a medical
equipment sales operator and request demonstrations of equipment to best
meet the needs of the patient. The sales representative would then bring a
few products to the patient to try. The decision to buy would be influenced
by the occupational therapist.

The Bionic Glove was already gaining exposure through clinical trials on
patients in Edmonton. Neurokinetics believed it was beneficial to launch
trials in other major centres. Because the trials involved the therapists
as well as the patients, the Glove would penetrate the market even before
it was ready for distribution. In this way, commercialization and research
would occur at the same time.

Clinical Trials


Prochazka had worldwide connections to major rehabilitation centres.
Neurokinetics initiated clinical trials at many of these centres to create
an awareness of the Bionic Glove and establish channels of distribution.
The clinical trials not only introduced Bionic Glove to the market, they
also generated a list of recommendations geared towards its improvement and
the reduction of overall medical costs.

The patient profile detailing the eligibility requirements for the Glove
clinical trials was:


|Level of injury |C5 (no wrist extension) |
| |C6 (wrist extension) |
| |C7 (wrist extension, some finger action) |
|Nerve damage |Minimal; healthy nerves must be intact for |
| |effective FES |
|Age of injury |Less than one year; more than one year: as |
| |soon after rehabilitation as possible |
|Age of patient |Statistics suggest most are 18-25 yrs. at |
| |time of injury, but all ages qualify |
|Psychological factors |Willing to accept the Glove cosmetically |
| |Accept the Glove instead of "tricks" |


Over 80 control boxes were manufactured and distributed to clinics
worldwide and 23 individuals with spinal cord injury were enrolled in the
clinical trials (Edmonton: 5, Miami: 5, Zurich: 6, Toronto: 4, and Chicago:
3). There were plans for 20 more devices to be manufactured and supplied
to proposed Australian and Vancouver sites.

To ensure that the Glove was tested properly and the best results were
achieved, clinicians were trained in the fitting and operation of the
Glove. The clinicians then trained the users.

Initial reactions to the Glove were very encouraging. The test patients
regained the ability to perform certain tasks independently such as:
lifting heavy objects, using a hammer, opening doors with round smooth
knobs, and eating finger foods. Users also demonstrated an increased
efficiency in performing tasks they could already do with the aid of other
devices (splints or orthoses) such as writing, using cutlery, toothbrushes,
keys, and drinking from a cup or glass.

After using the Glove for a period of time, the patients had a number of
suggestions for its improvement.

The lack of aesthetic appeal was an area of concern. Cosmetically, users
wanted a compact device that could be concealed under a shirt sleeve. The
patients were also hesitant about having electrode placement marks tattooed
on their skin.

Patients encountered another difficulty when fixing the electrodes to their
skin. The electrodes were held in place by an adhesive strip much like a
Band-Aid. The electrode had to be peeled off a protective covering and
placed accurately on an small area marked by a tattoo -- precision that is
very difficult for most motion-impaired individuals to achieve. Most
patients used their mouths to perform this task, and it was frustrating to
place the sticky electrodes in this way.

The Glove needed to be comfortable if it were to be used for daily living.
The fabric had to be durable and breathable and above all the Glove had to
fit properly.

Patients found that they weren't wearing the Gloves outside because they
couldn't get enough grip on their wheelchairs and they were afraid of
damaging the material with rough movements.

The trials revealed that the patients were only using the Glove for one or
two purposes because it was time consuming to adjust. Re-adjustment meant a
series of wrist movements and button punches until a suitable grip was
found.

The clinical trials also found that only 60% of the patients used the
Bionic Glove throughout the entire test period. Many patients returned to
the methods they were accustomed to rather than incorporating the Glove
into daily living. Continued development of the Glove aimed to improve
these results.

Product Development


Feedback from the clinical trials changed the design of the Bionic Glove.
It progressed from a prototype comprised of a glove made from a tensor
bandage with wires leading to a separate control box, to a sleek, neoprene
glove with a simple, compact control box attached to the arm of the glove
by a neoprene pocket.

To make the Glove more commercially viable, a Windows-based program was
developed so that the clinician could easily set parameters for the range
and intensity of the patient's movement. Once these parameters were set
with the aid of a computer, the Glove functioned on its own to meet the
patient's needs. A system of calibration was invented so that adjusting
for a new task was done simply by pushing a button and moving the wrist to
indicate in which fashion the fingers were required to move. A calibration
system was also being developed to scale the range and intensity of the
grip.

The cosmetic appearance of the Glove was greatly improved when the two
components of the device (the glove and the control box) were joined.
Using miniature electronics, the control box was reduced in size so that it
could fit into a pocket attached to the arm of the Glove. Research
continued on reducing the size of the control box. The device had not yet
reached the stage where a shirt sleeve could be easily pulled over it.

The neoprene fabric allowed for more wear and tear, a better look, and a
more comfortable fit. Neoprene is a breathable fabric that can be
stretched to enable a better fit. Later versions of the Glove used a
combination of mesh, leather and neoprene. The mesh prevented the Glove
from being too hot and it allowed the user to see the electrode placement
mark in order to adjust the electrodes without having to remove the Glove.
Leather patches sewn to the neoprene in high stress areas of the hand,
increased durability and allowed for a better grip so that maneuvering a
wheelchair while wearing the Glove was possible.

The sixth generation Glove had a constant current output stage, which
provided more consistent stimulation and reduced possible electrode
discomfort. To conform to CSA standards, modifications were made to the
charging connector and the circuit board was refined to improve reliability
and tolerances. The circuitry that transformed stimulating pulses to high
voltages was upgraded to increase energy efficiency and reduce transducer
noise. A battery low light was installed. There were also plans to install
a watch and a TV remote control. The researchers estimated that the Glove
would be ready for market in about a year.

Regulatory Considerations


Before the Bionic Glove could be sold, it had to meet certain regulatory
requirements. The initial design and prototype had to pass a rigorous
approval process to be accepted and recognized in the medical field. The
costs involved for receiving regulatory approval included testing,
labeling, safety inspections, and filing and reporting costs needed for
submission to the Medical Devices Bureau.

Tests had to indicate that the claimed benefit and performance
characteristics were justified. The clinical trials would help to prove the
Glove's benefits and the first steps for receiving regulatory approval were
under way.

Four main regulatory requirements categories had to be addressed:
Electrical accreditation - UL (USA), CE (Europe), and CSA (Canada)
FDA approval
GMP - For manufacturing (FDA monitored)
ISO 9001 - Also for manufacturing; necessary for European sales.


Sales Projections


Sales projections were based on the following assumptions:

The company would begin operations on July 1, 1994.
A president, physiotherapist, technician, and senior administrative
assistant would be in place at that date.
There would already be a total of seven units at beta test sites.
Fifty units would be manufactured to order and sold within the first year
of operations.
The Glove would be sold for an average price of $1,200 retail ($840 to
distributors).

The projected sales of the Bionic Glove were:


| |Year 1 |Year 2 |Year 3 |Year 4 |Year 5 |
|No. of |40 |2,000 |1,400 |3,200 |4,000 |
|units sold| | | | | |
|to | | | | | |
|existing | | | | | |
|patients | | | | | |
|in that | | | | | |
|year | | | | | |
|No. of |10 |100 |500 |800 |1,000 |
|units sold| | | | | |
|to new | | | | | |
|patients | | | | | |
|in that | | | | | |
|year | | | | | |
|Total year|50 |1,500 |2,500 |4,000 |5,000 |
|sales in | | | | | |
|units | | | | | |
|Cumulative|50 |1,550 |4,050 |8,050 |13,050 |
|unit sales| | | | | |
| | | | | | |
|Total |$42,000 |$1,260,000|$2,100,000|$3,360,000|$4,200,000|
|annual | | | | | |
|sales | | | | | |



The cumulative total of 13,050 Gloves sold by the end of year 5 assumed
both a significant replacement cost and market penetration beyond North
America.

Electrodes would be sold at the rate of eight electrodes per month per
Glove at a retail price of $10/pkg. of four electrodes, of which
Neurokinetics would receive $8/pkg. The sales forecast for electrodes was:


| |Year 1 |Year 2 |Year 3 |Year 4 |Year 5 |
|No. of |50 |1,500 |4,050 |8,050 |13,050 |
|Gloves in | | | | | |
|use at end| | | | | |
|of year. | | | | | |
|No. of |492 |15,374 |71,560 |193,200 |313,200 |
|pkgs. sold| | | | | |
|during | | | | | |
|year. | | | | | |
|Yearly $ |$3,936 |$122,992 |$572,480 |$1,545,600|$2,505,000|
|sales of | | | | | |
|electrodes| | | | | |
|. | | | | | |


Financing


A suggested seed capital investment of $500,000 was required to launch
Neurokinetics. This capital was obtained through private investment
($300,000), the Neuroscience Network of Centres of Excellence
($125,000), and the Alberta Heritage Foundation for Medical Research
($75,000).

The development of innovative medical devices is a costly enterprise and
required considerable financial backing. Initially, this backing was
provided by the Neuroscience Network of Centres of Excellence (NNCE). The
Neuroscience division at the University of Alberta was a member of NNCE.

Other assistance came from the Alberta Heritage Foundation for Medical
Research. AHFMR's Technology Commercialization Program assists Alberta
innovators with the transfer of new ideas and scientific findings into
successful commercial health-related products and processes. Phase I
funding requirements include:

a clear, concise description of the technology, device or process
familiarity with literature in the field, and current competitive or
emerging technologies
qualifications/training/experience of individuals associated with the
project
a convincing argument regarding potential for commercial success
a general idea of the market size and characteristics
potential strategy to bring the project to market
a work plan with milestones related to the use of Phase I funds

Neurokinetics received a Phase I $25,000 award to assess and strengthen the
technical aspects of the project, verify its uniqueness and explore the
potential for commercialization.

Neurokinetics then applied for a Phase II award from AHFMR. This funding is
intended for continued work on prototypes, intellectual property
protection, clinical trials, and development of a detailed business plan.
The award for Phase II development given to Neurokinetics was $75,000.
Requirements for Phase II funding include:

a clear, concise description of the technology, device or process
a working prototype of the product
the qualifications of those currently associated with the project and the
technical expertise which may be needed to complete the project
a detailed description of the technical requirements to move the project
towards commercialization
evidence of market interest and an assessment of competing technologies and
companies
assessment of potential for intellectual property protection
the qualifications of those currently associated with the project and the
business expertise which may be needed to complete the project
an outline of a business plan, including a strategy to bring the project to
market
a work plan with milestones related to the use of Phase II funds

Prochazka also received funding from the University of Alberta and various
research grants. As the project developed and crossed into the commercial
market, he feared that his research might not be eligible for this funding,
which remained vital to the development of the Glove.

Commercial and Technical Risks


Regulatory delay. In the medical device industry, one of the biggest
barriers to product commercialization is regulatory control. Any delays in
regulatory approval significantly increase the investment and time required
to commercialize the product.

Reimbursement. The increasing pressure to contain healthcare costs makes
the reimbursement process more difficult, especially for novel, innovative
devices such as the Bionic Glove.

Pricing. Healthcare cost containment causes managed care and other private
health purchasing systems to seek greater price concessions from medical
device manufacturers. Products must be priced competitively but cost
effectively, given other alternatives.

Financing. At the time of Neurokinetics' formation, it was becoming more
difficult for start-up companies to access venture capital. Investors were
concluding that the medical device industry was less financially attractive
due to expanded regulatory requirements and market pressures. These
pressures increased the cost of product development and commercialization,
and at the same time limited return on investment.

Delays in ISO 9001/GMP implementation. In order to sell medical devices,
manufacturing operations must comply with certain both quality assurance
and design standards. These standards are time consuming and expensive to
implement. Delays in certification resulting in delays in sales are a
serious risk.

Recruitment of management. The success of a company depends upon effective
and timely decisions made by its management team. For Neurokinetics,
recruitment of suitable individuals was difficult because management
expertise in the medical device area was scarce in Canada. As well, the
lower value of the Canadian dollar was a barrier to hiring the best talent
from other countries.

Research and development. Research-oriented institutions and academic
medical centres are the source of most medical technology. Reduced funding
of these institutions would affect Neurokinetics' ability to source new
innovations and products.


The Researcher's Dilemma


Arthur Prochazka's objective in establishing Neurokinetics was to assist as
many people as possible. He believed that the Bionic Glove would make
everyday life easier for motion-impaired individuals. In the process of
assisting a greater number of people, Prochazka hoped to generate more
money to further his research. And he remained curious to find out if the
Bionic Glove would make a successful commercial venture.

As a professor, Prochazka considered that his priorities were his students
and his research. The demands made on his time by Neurokinetics were
interfering with the time he spent with students and research projects
other than the Bionic Glove. He did not wish to risk the lab's learning
environment, which he had worked so hard to nurture and maintain. Prochazka
even attributed the loss of one of his graduate students to the time he
spent commercializing the Bionic Glove.

The way in which he was perceived by his colleagues was also important to
Prochazka. It concerned him that these perceptions were changing as a
result of his involvement with Neurokinetics. He had dedicated much of his
life to academia and wished to continue his research for at least another
15 years.

To maintain good relations with his colleagues, Prochazka tried to keep his
business dealings as open as possible. For example, he wrote letters to the
department head to advise him when any company business was being conducted
in the lab.

Prochazka was also concerned about how the views of his colleagues might
affect his research funding, since some of his colleagues were involved in
decisions on the allocation of research funding. If they thought that the
Glove would make money, would they assume that he did not need funding to
continue his research?

After the initial steps towards commercialization, Prochazka thought that
he would have more time to dedicate to his research. Neurokinetics was
intended to be secondary to his research, but this was proving not to be
the case. Instead, it appeared that more and more of his time was going to
be taken up by the company. Despite the time constraints placed on him by
Neurokinetics, Prochazka did not wish to abandon development of the Bionic
Glove. He wondered if there was some way to continue his research as well
as commercialize the Glove.


Appendix A: Competition


Markets


At the time of Neurokinetics' establishment, the quadriplegic segment of
the medical equipment supply market consisted of products that ranged in
price from $50 to $30,000. The complexity of this equipment depended on the
level of personalized fitting required.

There were two channels of distribution for these products: retail outlets
and physician-driven sales. Financing was diverse, as funds were available
through Workers' Compensation Boards, the Department of Motor Vehicles and
Accident Claims Fund and other insurance bodies.

With the radical evolution of semi-conductors in general, the industry had
developed and refined technology. Medical researchers from different
countries were experimenting with computer-controlled devices to aid the
handicapped in different areas. The use of electrical stimulation in
general was gaining momentum and there were several established companies
supplying medical products to the market. Aside from FES (functional
electrical stimulation), companies had developed devices using
Transcutaneous Electrical Nerve Stimulation (TENS), and Neuromuscular
Electrical Stimulation (NES).

The risks involved in entering the FES market from scratch were high. If
the FES market really heated up, new entrants could become direct
competitors. However, the combined skills of the scientists and
physiotherapists made Neurokinetics unique. It was estimated that these
competitors would be two years behind Neurokinetics.

Glove Competitors


At the time of Neurokinetics' formation, the only closely competitive
technologies came from companies such as NESS and NeuroControl. Neither of
these companies were particularly strong financially and each of them had
products that were more complicated and more expensive than the Bionic
Glove.

The Handmaster, developed by NESS, was based on research conducted by Dr.
Roger Nathan at Ben Gurion University in Israel. The device rigidly
splinted the wrist and activated muscles according to a pre-stored pattern
when a button was pushed on the control box. The control box was separate
from the device. While the device was commercially available in Canada,
none had been sold and in the United States as FDA approval had not been
received. Some Handmasters had been sold in Europe. The cost of the entire
system was $3000 US.

The main drawbacks of the Handmaster were: the electrode placement not
being customized, the separate control box and wires, and the fact that it
was not suitable for patients with active wrist movement.

Prehension orthoses (wrist driven and ratchet orthosis) were devices that
had successfully been used by some quadriplegic people. However, many were
discarded because of problems in getting them on and off, pain caused by
ill-fitting devices and poor cosmetic acceptability. It was also difficult
to find an orthotist who would custom fit these devices. The cost of these
orthoses was approximately $1500 US.

The Free Hand System was developed by NeuroControl. It used implanted FES
technology and was not yet commercially available. It was a relatively
complex, invasive device requiring surgical implantation of electrodes and
a stimulating unit similar to a cardiac pacemaker. Following implantation,
there was a fairly extensive and complicated procedure to program an
effective hand grasp. Training was required to become proficient with the
system. The cost was approximately $30,000 US.

Potential users had to wait at least two years after their injury before
being considered for the implant. It was suggested that the Glove be used
in the interim, while the patient awaited surgery.

Tendon transfers had been performed by orthopedic or plastic surgeons in
some centres to improve upper extremity function following spinal cord
injury. Potential candidates had to wait at least one year after their
injury to be considered, and had to meet certain physical and psychological
criteria. This approach required a significant time and financial
commitment and the functional outcomes were unpredictable. As with the
Free Hand system, the Glove might have a role to play in the period
preceding tendon transfers.

The advantages of the Glove over the existing solutions were:

Easy to put on and take off
One self-contained unit, no wires or outside control boxes
Implantation and surgery not required
Easy to use
Comfortable, lightweight and breathable -- made of stretchy neoprene and
lycra mesh
Cosmetically acceptable
Reasonable cost: $1500
Users control the stimulation and the duration through wrist action, and
are not limited to preprogrammed stimulation
Users have the ability to perform tasks they could not otherwise perform:
manipulating heavy objects, picking up objects, and using tools
Washable

Indirect Competition


A major challenge to acceptance of the Glove was overcoming the established
system that patients had developed in order to cope in everyday life. The
greater the length of time since the patient's accident, the more difficult
it was to introduce the Bionic Glove. Some patients did not want to spend
the time and energy learning how to use this new technology. Instead they
relied on:

Other devices (splints, for example) used by rehabilitation centres to
assist quadriplegic patients.
Hand "tricks" developed by quadriplegic patients used to assist with basic
hand functions.
Personal assistants hired to help patients with daily living, and thus act
as substitutes for the patient's hands and feet.

The acceptance rate for the Glove was higher with recently injured patients
who had not yet developed a system. To curb indirect competition, the
Glove was introduced at an early stage of rehabilitation. It was also
necessary to explain exactly what the Glove was able to do so that
patients' expectations did not generate false hope.