Buffalo Niagara Medical Campus | Clinical, Research, and Academic Excellence

Move easy to swallow for SmartPill Corp.

By Annemarie Franczyk
Business First of Buffalo
April 11, 2008

SmartPill Corp. expects to move component assembly to Buffalo from Los Angeles later this year, becoming the first medical device company to manufacture on the Buffalo Niagara Medical Campus.

The move will cut labor expenses and put the company in better control of production, which will reduce the cost of the capsule by 60 percent, said David Barthel, president and CEO.

Plans are to hire about eight assemblers and technicians this year and six more next year to work in SmartPill's headquarters at Main and Virginia streets, at the edge of the medical campus. About 1,500 of the pills are expected to be made this year and triple to 7,000 by 2010. The company spent $575,000 on a "clean room" that guarantees a level of purity for production of the ingestible medical device.

The SmartPill system detects signs of disease in the digestive tract by measuring acidity and pressure through a sensor-loaded capsule swallowed by the patients. The data is transmitted to a receiver worn by the patients while they go about their daily activities. It then is downloaded to a computer in the doctor's office at the end of the study, which can last a couple days to a week. The capsule replaces a process that exposes patients to radioactivity and requires hours-long stays in the hospital.

The SmartPill system runs $20,000 and includes a Windows-based laptop computer, a docking station, an activation feature, the data receiver, software, user manuals and a package of 10 capsules. Since the pill went on the market 15 months ago, 50 systems have been sold to doctors across the country including at the University of Chicago, Brigham and Women's and the VA hospitals in Boston, Weill Cornell and Montefiore medical centers in New York City and University of California-Davis.

The capsules are the company's "revenue assurance" at a current $500 apiece to reorder. Barthel said the price should drop to about $199 once assembly is fully installed in Buffalo during the next two years.

The manufacturing process will become semiautomated when production volume hits about 10,000 and fully automated at 100,000 units, he said. Individuals hired for hand assembly will be retained for quality assurance and other tasks, he added.

The company's current employment is 27, including seven sales representatives throughout the country. The assemblers to be hired will earn between $15 and $20 an hour, technicians will be paid $40,000 and salary for manufacturing engineers wil reach $60,000 a year.

Last year's revenues were $650,000, a number that is expected to reach $2.3 million this year. Barthel expects to break even by the first quarter of 2011.

The SmartPill has been designed to diagnose gastroparesis, the stomach-emptying ailment common in diabetics. At the same time, the company is pursuing the testing and approval process to apply the SmartPill in pediatrics, diabetes care, veterinary science and other specialty areas. Barthel bought the concept and patent for SmartPill from the University at Buffalo and in 2003 merged it into Appro Healthcare Inc., developer of infusion therapy products. The Appro company and its products were sidelined in favor of the SmartPill technology.

SmartPill is located at the edge of the Buffalo Niagara Medical Campus, which is expected to be the birthplace of other such medical technology ventures. About 15 companies are located on the campus right now.

"Having SmartPill bring manufacturing to this campus is a true sign that the investment being made here is a good investment for the community," said Matthew Enstice, executive director.