About eight years ago, Ryan Shelton was doing postdoctoral research at the University of Illinois at Urbana-Champaign, focusing on medical optics and imaging. He was also the father of Jack, a one-year-old who suffered from constant, painful ear infections that, eventually, led to permanent partial hearing loss.
At the same time, a colleague, Dr. Stephen Allen Boppart, was assembling a team to find additional commercial applications for a technology that uses light waves to take cross-section pictures of the retina. Shelton ended up signing on to lead the team and investigate five or six possible uses.
That’s when Shelton’s personal experience came into play. He knew the otoscope, the equipment used to diagnose middle-ear infections, was not only highly inexact, but also hadn’t changed for more than a century. “We decided to look at where the management of this disease was falling down,” he says. “And was there an opportunity to solve this problem in a commercially viable way.”
Shelton and Boppart, who was heading the Biophotonics Imaging Laboratory at the University, ended up developing a hand-held device called the TOMi™ Scope, which uses optical coherence tomography (OCT) to build a three-dimensional image of the middle ear. The device beams light into the tissue. An image of which is reflected back, thereby avoiding the ear drum. Back in 2015, the two men, along with Ryan Nolan, formed PhotoniCare. Two months ago, it began selling the invention in doctors’ offices.
Their invention, say outside experts, could revolutionize the diagnosis of ear infections, saving millions of children from courses of antibiotics they don’t need and parents from unnecessary doctor’s visits. Potential demand is sizeable. Suspected ear infections are the most common reason parents bring their child to a doctor, according to the National Institutes of Health, and approximately 650,000 tympanostomies are performed each year, according to the National Center for Health Statistics. Shelton estimates there are about 400,000 pediatricians and other users of the device and a more than $1 billion market in the U.S. alone–quite a big deal for pediatric devices, an area where technological innovation has typically been slow. That’s largely because most companies regard the potential rewards to be low, since the target population—children—is relatively limited and healthy.
Avoiding The Medical Coin Toss
Investors are betting they’re right. The company recently closed a $5.2 million Series A round, along with a $2.2 million small business innovation grant from the NIH. That followed a $250,000 friends and family round in 2015 and $1.7 million seed round in 2017, plus $5 million in other government funding for small company commercialization of cutting-edge inventions. The 10-employee company is still exploring business models, so, says Shelton, “It’s too early to report revenues.”
The team has also produced reams of peer-reviewed research analyzing the TOMi Scope’s efficacy. For example, one recent study conducted by Boppart, Shelton and other researchers showed the accuracy of detecting fluid through the ear drum using the device to be about 90%. That’s compared to studies of otoscope use demonstrating a misdiagnosis rate of about 50% of the time–what amounts to a medical coin toss.
Now, the company is building out what Shelton calls its “early adopter program”. He expects to have 15 clinics, urgent care facilities and others in place by year-end, with plans to launch the device officially in 2021.
Getting Technology to the Bedside
Shelton and Boppart’s partnership shows just how critical support is for startup founders in science innovation, especially in areas outside the usual entrepreneurial hotbeds of New York, Boston and Silicon Valley.
In 2011, the two met at a symposium held at Texas A&M, where Shelton was getting a PhD in bioengineering. Boppart, who, among many other titles, is director of the Center for Optical Molecular Imaging, had a long track record of developing technologies with the potential for commercial use, as well as forming startups to do so. “I wanted to work on getting technology to the bedside, not just in a lab,” says Shelton. He ended up deciding to do his post-doc working under Boppart.
The University of Illinois was a prime location for pursuing their goals. With a 20-year focus on building an entrepreneurial ecosystem in the region, it has a 43,000- square-foot-incubator with 24 labs, where startups can work for three to five years, along with an 18-building research park with space for more-established companies. (PhotoniCare’s office is just on the outskirts, in space owned by an angel investor who also was a developer of the park).
llinois Ventures, an $80 million venture fund formed in 2003, provides early-stage funding to startups formed by faculty and students. And a designer-in-residence program works with entrepreneurs on industrial product design. “When you’re at a university in the Midwest, you have to try harder to provide the resources needed to launch these companies,” says Laura Appenzeller Frerichs, executive director of the University of Illinois Research Park. “There isn’t that more-established ecosystem.” About 300 startups have gone through the incubator, raising about $1.1 billion in venture capital.
One of Boppart’s projects was taking OCT, the gold standard of imaging technology used by ophthalmologists, and figuring out a way to make it more accessible to primary care doctors. Shelton and his team understood that the otoscopes physicians were using to diagnose kids like Jack—really, a penlight and a magnifying glass—could only see the surface of the ear drum. That left physicians mostly making an educated guess about whether a patient really had an ear infection.
Perhaps, they reasoned, a device using OCT would produce better results.
So, in 2015, the team worked with the University of Illinois technology transfer office, which applied for a patent that was then licensed to PhotoniCare. Shelton is CEO, colleague Ryan Nolan is vice president of clinical operations and Boppart is chief medical officer.
Pivot to a Handheld Device
Their work had already received a significant boost when, in 2013 and 2014, Boppart and Shelton got grants from the NSF’s Innovation Corps program, which aims to help scientists and engineers working in academia to develop technology solving real-world challenges. For 10 weeks each time, they interviewed 50 to 100 physicians, parents and others, focusing on using imaging technology to diagnose middle-ear infections. “The technology won’t be adopted unless we’re solving a real problem,” says Boppart.
Those insights, plus more research, led to some substantial changes. Whereas their focus originally had been on high-performance, costly equipment used by specialists, the team pivoted to designing a product more attuned to the needs of primary care physicians and other front-line medical practitioners with considerably smaller budgets for capital equipment. While devices with OCT typically cost $50,000 to $100,000, according to Shelton, their new offering would be much smaller and potentially be sold for free, with physicians paying a fee per each use—either by tracking usage if connected to a network or through software in the device. By 2016, the team decided they’d found a viable way to make their pivot happen.
Of course, launching a new medical device requires a lot more than research and product development. For example, there’s the matter of getting clearance from the FDA. For help navigating that process, PhotoniCare worked closely with regulatory consultants at Washington, DC-based Children’s National Hospital; In 2015, the founders won a competition run by the National Capital Consortium for Pediatric Device Innovation Competition, a joint effort of the Sheik Zayed Institute for Pediatric Surgical Innovation at the Children’s National Health System and the University of Maryland A. James Clark School of Engineering. The competition is aimed at encouraging more technological invention in pediatric devices. FDA clearance came through earlier this year.
Treacherous Areas For Medical Device Companies
Another treacherous area for medical startups is winning approval from insurers for reimbursement. To that end, the team spent three years working with the American Medical Association and several medical academies to establish new codes for PhotoniCare’s technology. “Reimbursement for pediatric devices is tricky, requiring an understanding of what private payers need to see in order to be willing to reimburse use,” says Kolaleh Eskandanian, vice president and chief innovation officer at Children’s National Hospital. In fact, even clearance from the FDA does not automatically mean a device will receive coverage from insurance companies under existing reimbursement codes.
There was another benefit: The traditional otoscope has no reimbursement codes, according to Shelton, giving the company a big advantage, since the TOMi Scope can generate additional revenue through the new codes.
In fact, medical device experts point to the combination of technological innovation and the methodical navigation of the complicated healthcare regulatory maze as the company’s secret sauce. “More than developing a novel solution, what PhotoniCare also has done right is the execution,” says Eskandanian. Plus, according to Mayank Taneja, director of Venture Investments at OSF Ventures, a division of OSF Healthcare, a 14-hospital, Peoria, Ill-based healthcare system, that participated in the Series A round,, the company should benefit from the healthcare industry’s current emphasis on “value-based” care, which rewards doctors for both efficiency and effectiveness, vs. traditional fee for service models.
The company also doesn’t face a lot of competition. Eskandanian points to less than a handful of other startups aimed at using different technologies for diagnosing and treating ear infections. But they haven’t all received FDA clearance.
“It was an area ripe for innovation,” says Taneja. Three or so OSF urgent care clinics will take part in PhotoniCare’s early adopter trial.
Shelton was on the verge of going to market with the device just before Covid-19 hit. But he put those plans on hold when it became clear the time was wrong for introducing new technology to hard-hit front-line medical practitioners. They spent March through July, instead, refining the product. “If we’d ended up going to market before, it would have been hard,” says Shelton.
Now Shelton is looking forward to getting his device on the market and helping more children like his son. At age nine, Jack is doing fine, although he’s developed some learning disabilities as a result of his hearing loss. “If our device had been available, I believe it would have had a drastic impact on his treatment,” he says.