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In a recent announcement, AI developers Caption Health and Ultromics revealed that they were entering into a strategic partnership. The move, which will bring together the two firms’ expertise in AI-assisted image acquisition and interpretation, will, according to the vendors, grant more providers the opportunity to perform ultrasound examinations and help them automatically calculate key indicators of heart function. This should facilitate the earlier and more accurate identification of heart disease. The vendors say the partnership will also help bridge the gap between acquisition and diagnosis, with the solutions, alongside hardware from Caption Health partner Butterfly Network, strengthening the capabilities of a greater range of clinicians.
The Signify View
As Butterfly Network, and other handheld ultrasound vendors seek growth, they are casting their eyes away from established imaging markets and radiology departments and targeting new customers. These companies are looking to introduce ultrasound into both new geographies and to new clinical settings. In doing so, these handheld systems will, for many users represent their first-time using ultrasound, or indeed, any medical imaging system at all.
These new users require support and guidance, vendors and providers have a role in providing this market education, but AI tools can also play their part, helping inexperienced users capture and interpret diagnostic images. This, as Signify Research wrote in August, was the rationale behind Butterfly Network’s partnership with Caption Health. However, given that ultrasound is much more of a ‘real-time’ modality, than others whose images are typically reviewed after acquisition, the ability to capture images alone is of limited clinical value. Caption Health’s partnership with Ultromics aims to address this gap, by allowing those with the Butterfy iQ+ to not only capture images, but also to discern several key cardiac measurements from them.
The partnership improves the clinical value of both developers, as well as that of Butterfly Network, as an entire package comprised of a device, acquisition and analysis tool, the product is arguably more attractive to a new user than any individual component individually.
A Tough Sell?
While the capabilities of these partners are well aligned, there are some commercial challenges that must be considered. One of these centres on Ultromics and Caption Health’s revenues. If the two vendors’ products are to be sold alongside Butterfly Network’s handheld systems then there is little room for all three vendors to raise reasonable revenues from a device that, according to the IQ+’s webpage, costs customers $102 per month on a 36 month payment plan, including a three year subscription to Butterfly Network’s ‘Pro’ service. The ability to raise these prices is also limited, as doing so will undermine the scanner’s value proposition, one of its key selling points. Providers’ ability to claim the CMS’ new technology add-on payment (NTAP) for the use of Caption Health’s software will sweeten this deal somewhat, but would still leave them having to pay for the devices initially.
Selling the solutions individually could allow the developers to charge higher prices for the tools, but sales would be lower, and these additional costs for the AI tool’s capture and analysis capability would reduce their appeal in the new markets that handheld ultrasound looks to target. Instead, these vendors must rely on high volumes to be successful. This is possible. Butterfly Network’s most recent financial results, for Q3 2021 show product revenue for the quarter of $10.8m. Although there is some ambiguity brought in by products such as cases and straps, the majority of this revenue will come from the vendor’s iQ+ devices, suggesting sales of around 4,500 units for the quarter. With Signify Research forecasting a CAGR of more than 25% for the sector in its latest Ultrasound Equipment report between 2020 and 2025, Butterfly Network could yet be on track to deliver high sales volume.
A Preference for Portfolio
This is one area where larger vendors, which offer a full range of ultrasound products could hold an advantage over the handheld specialist vendors. GE and Philips, for example, have both formed partnerships with DiA Imaging Analysis, currently focused on their point of care offerings. However, these vendors could, in future, also open up the partnerships to their broader ultrasound ranges, potentially offering opportunities across a wider range of devices, rather than relying on handheld ultrasound growth. With handheld devices forecasted to account for just 6% of the total ultrasound market by 2025, in the long term this could prove to be a useful option.
A further challenge will be adding further capability to the software tools. The use of Caption Health’s tools to enable new users to capture cardiac ultrasound images will be of limited benefit if those same users don’t have a fully fledged suite of analysis tools. The partnership with Ultromics, and its EchoGo solution brings analysis of ejection fraction, left ventricular volumes and cardiac strain, but the vendor will need to continue to develop its toolkit if it is to make echocardiography truly accessible.
A Marathon not a Sprint
These challenges, however, don’t take away from the significance of the partnership between Caption Health and Ultromics. The former’s ties to Butterfly Network means that if all works as it should, an inexperienced user can purchase an affordable ultrasound system, perform an examination of a patient’s heart and almost instantaneously garner certain key metrics. Hardware and software has aligned to offer new diagnostic capabilities to whole swathes of new users. Whether this can be done profitably is another matter.
Butterfly Network’s original approach was to develop the majority of its software, as it does with its hardware, in house. The vendor’s partnership with Caption Health signalled an end to this approach, and the use of Ultromics EchoGo system emphasises it. While these moves significantly add to the vendor’s capability and keep it in step with some competitor vendors such as EchoNous, which has recently partnered with US2.ai for cardiac analysis, it does mean sharing revenues with third parties, which, for a vendor focused on affordability, could prove difficult if sales don’t live up to expectations. Moreover, Butterfly Network is potentially losing out on the opportunity to upsell AI software applications and services compared with competitors such as Clarius who have a stronger focus on developing their own applications.
Despite this, the move remains sound for the AI developers. Sales of relatively narrow AI solutions directly to providers could prove challenging, and direct sales to users in new markets doubly so. By partnering to create a package that is more clinically valuable, the vendors are able to strengthen Butterfly Network’s commercial proposition whilst leveraging it as a potentially far-reaching sales channel.
For handheld vendors such as Butterfly Network and imaging AI developers alike, this increasingly collaborative approach is not a magic bullet. This seems well understood by Ultromics in particular, which, unlike Caption Health, did not enter into an exclusive partnership, suggesting that the vendor sees the handheld market as an additional, rather than integral revenue stream.
As such, collaboration will not completely solve all the issues that the relatively young segment is facing. Despite the AI assistance, market education is still a hurdle to adoption, technical barriers remain with image quality potentially hindering the usefulness of the tools, and other factors, such as the inability of a provider to act upon the results of an exam could undermine the utility of AI-equipped handheld systems in new settings.
But, as the value of the solutions is bolstered by developments such as Ultromics’ and Caption Health’s partnership, the motivation to address the other challenges will increase. The first pieces are being laid, now the rest of the puzzle can start to fall into place.
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This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. This content is only available to individuals with an active account for this paid-for service and is the copyright of Signify Research. Content cannot be shared or distributed to non-subscribers or other third parties without express written consent from Signify Research. To view other recent Premium Insights that are part of the service please click here