A capsule worth $15b a year

Given Imaging failed to receive U.S. regulatory approval for its colon scanning pill, but Check Cap thinks it can succeed where its rival failed.

The IDB Group has been less than successful in the field of technology since the Dankner-Livnat-Manor group took control of it in May 2003. Elron Electronic Industries, IDB's technology investment arm, was absorbed into Discount Investment Corporation after it booked heavy losses and generated too few concrete profits.

Given Imaging, which developed the Pillcam Platform to diagnose irregularities in the digestive system, is one of Elron's most promising companies. However, nine years after its IPO, Given has yet to live up to expectations. The company is trading at $15 a share, which reflects a company valuation of $445 million, or just 25% more than its market cap at its initial public offering on the Nasdaq in October 2001, and a full 53% below the market cap reflected in its stock offering in June 2004.

One of Given Imaging's stumbling blocks is that it hasn't gotten approval from the U.S. Food and Drug Administration for PillCam Colon, the capsule it developed to detect irregularities in the lower colon. The FDA rejected its application on the grounds that it did not meet the accuracy standards demanded for colonoscopies.

Since then, Given Imaging has developed a more advanced model and is preparing to launch clinical trials by the end of the year, after which it will submit a new request for FDA approval.

The offices in Isfiya

	Check Cap's CEO Guy Neev
	Photo by: Nir Keidar

Another company, Check Cap, believes it can succeed where Given Imaging has thus far failed. The company, founded in 2005 and based in Isfiya, wants to raise $10 million to $15 million, at a company valuation of $100 million, in an IPO on the Tel Aviv Stock Exchange. The underwriters for the offering will be Clal Finance Underwriting, Leumi Partners and Meitav Investment House.

One of Check Cap's main shareholders is Eli Hurvitz, Teva's former CEO and chairman, so the IPO will put him in direct competition with his former employee, Given Imaging chairman Israel Makov.

Check Cap claims it has a substantial technological advantage over all other tools used to diagnose colon cancer. Colorectal cancer is very common, and is treatable if caught early enough. This is the weak point in medical treatment for the disease.

Early diagnosis of colon cancer requires a colonoscopy, an unpleasant and intrusive procedure that carries a risk of perforating the bowel. As a result, despite high awareness, only a small percentage of adults at risk get checked. Fifty percent of Americans over age 50 do not undergo any diagnostic screening whatsoever for colon cancer. As a result, 59% to 64% of colon cancer cases are diagnosed only at an advanced stage, and of those, only 5% to 50% of patients are still alive five years after the diagnosis.

Check Cap thinks its product will boost the low check-up statistics. The company bills its product as the first non-intrusive colon cancer diagnostic tool that requires no preparatory procedures, and believes it will become the disease's leading diagnostic tool.

The company's product, like Given Imaging's product, is a capsule that the patient swallows. It passes naturally through the patient's digestive system. The pill contains a tiny "sonar-like" device that transmits x-rays to the intestinal wall and back. The transmitter turns around inside the capsule, generating a series of scans at different angles and enabling a virtual reconstruction of the bowel and any polyps.

Polyps are fleshy growths that appear on the colon lining, growing slowly and silently. Once they reach 10 millimeters, they have a 10% chance of turning cancerous.

The capsule transmits its data to an external recording device that the patient can carry or wear. The physician then downloads the data and analyzes it with Check Cap's software, and can examine the images of the patient's intestines.

The great advantage of this capsule is that patients do not have to clean out their bowels in preparation, since its x-rays can see through the contents of the bowel to the colon lining. However, if it finds a potential case of cancer, the patient will have to undergo a standard colonoscopy.

Check Cap expects its device will be as accurate as a standard colonoscopy and substantially better than fecal occult blood tests or fecal DNA tests.

Clinical trials early in 2011

The company says its potential market in the United States is worth $4.7 billion annually, based on the assumption that each of the 94 million Americans over age 50 will take the test at least once a decade and that the capsule will cost $500, much like Given Imaging's capsule. The potential market outside the U.S., principally in Europe and Japan, is $9.8 billion a year, it predicts.

Check Cap plans to apply to begin European clinical trials in the last quarter of 2010, and to start them in early 2011. The trials will last six to nine months, it says. Therefore, it may be able to start selling the capsule by late 2011 or early 2012 if it receives European regulatory approval. It is planning to start U.S. clinical trials by the end of 2011 or the beginning of 2012.

Check Cap has raised $15 million in capital so far, including $12 million in its most recent round of fund-raising in March 2008. The company was valued at $25 million after fund-raising. Check Cap's CEO is Guy Neev, formerly CEO of Cappella and business unit manager at Boston Scientific.