Auris Solutions, LLC

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Hearing Testing Systems Business Plan

Market Analysis Summary

The US hearing care industry is composed of more than 105,000 practitioners (94,000 speech pathologists, comprehensive and 11,000 audiologists) providing hearing care products and services. This market class includes specialists that offer services to hearing impaired patients. These services include several segments:

  • Hearing rehabilitation, including the evaluation and rehabilitation of hearing-impaired individuals.
  • Advanced audio-diagnostic services, including the neuro-audiological evaluation and non-medical diagnosis of hearing and balance disorders.
  • Industrial and preventive audiological services, including noise level measurements, dosimetry, and hearing screenings.

The CRISP test is expected to be offered to patients by all 3 service segments.

Typical Hearing Test Process

Typically, an individual undergoes the following process for hearing testing:

  1. The patient or family makes an appointment with an audiologist or speech therapist at the hospital or independent audiology clinic.
  2. The patient is tested for hearing using a tone test delivered through an audiometer. The patient will raise their right or left hand signaling to the clinician that the subject hears the tone in that particular ear; in some cases an electronic method is used where the patient will simply push a button when hearing the tone.
  3. Based on the collected result, the clinician makes a clinical assessment of the individual's ability to hear. If the individual is defined to have hearing loss, then the audiologist will administer a tympanogram in order to test the mobility of patient's eardrum. The audiologist will also deliver a brainstem auditory evoked response to evaluate the health of the cochlea.
  4. The clinician then makes a recommendation as to whether or not the patient needs a hearing aid or cochlear implant.
  5. After installation, the settings on the hearing aid or cochlear implant are adjusted based on trial and error.

Where Does the CRISP Test Fit into the Hearing Test Process?

After installing and adjusting the settings on the medical device, the clinician has no way to know if the specific settings will actually be ideal for the patient to hear in the real world. The CRISP test will allow the clinician to make specific adjustments to the hearing aid or cochlear implant that best optimizes the patient's ability to hear. In this capacity, the CRISP test will fit in just after step 5 of the above process; clinicians will be able to charge for this service.

In addition to testing hearing in patients who have no hearing devices, many patients seek hearing care professionals to determine if another hearing aid or cochlear implant on the other ear would benefit them. Currently, clinicians have no test that will assess the benefit of adding another hearing device to the patient's regimen. Therefore, in this capacity, the CRISP test would fall into steps 2 and 3. The CRISP would allow the clinician to definitively make a recommendation to the patient regarding the addition of another medical hearing device. Clinicians can also charge for this service.

4.1 Market Segmentation

Auris Solutions will focus its marketing efforts towards the 105,000 audiologists and speech pathologists who work in the organizations described below.

Customer Segments [1]

SegmentDescriptionBenefit Sought
Independent speech therapists and audiologistsHealth practitioners primarily engaged in diagnosing and treating hearing speech, language, or relevant hearing problems.Functional and emotional
HMO medical centersOrganizations with physicians and other medical staff primarily engaged in providing a range of outpatient medical services to the health maintenance organization (HMO) subscribers.Functional and emotional
Hospitals (non-HMO)Facilities which provide medical, diagnostic, and treatment services that include physician, nursing, and other health services to inpatients.Functional and emotional
Hearing test service-based firms[2]Establishments of health practitioners primarily engaged in diagnosing and treating hearing speech, language, or relevant hearing problems.Functional
Hearing aid and cochlear implant manufacturersCompanies that manufacture cochlear implants and/or hearing aids. Many of these companies also offer hearing tests in addition to their medical devices.Functional

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[1] 2000 U.S. Census

[2] D&B Million Dollar Database (search of SIC 8099), 2003.

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Audiologists 21% 11,000 13,310 16,105 19,487 23,579 21.00%
Speech Pathologists 21% 94,000 113,740 137,625 166,526 201,496 21.00%
Total 21.00% 105,000 127,050 153,730 186,013 225,075 21.00%

4.2 Industry Analysis

Auris Solutions' product offerings fall under the healthcare industry category, with a Standard Industry code (SIC) 8099, and secondarily as part of the electromedical equipment industry, with SIC 3845. Even during economic downturns, these markets have remained sheltered from decreased spending.[1] Worldwide market growth for medical equipment and products is estimated to be 12% as of 2003. U.S. companies are benefiting from sales of new technology products, which are currently commanding a significant price premium. We feel that Auris Solutions' product offerings will benefit from these trends, as CRISP is a highly technical product, and it appears that the market will support a price premium.

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[1] Standard & Poor's Industry Review, 2003.

4.2.1 Industry Participants

Companies in the hearing-care-testing industry generated approximately $200M of sales in 2003,[1] and the market is expected to grow in the range of 21% to 35% annually. Based on our research, there are only 3 dominant players in this industry; collectively, they possess 52% of the market share:

  • HearUSA (29.5%)
  • Bio-Logic (13%)
  • National Hearing Centers (9%)

None of Auris Solutions' products will compete directly against the current hearing test techniques, products or services offered by the above companies. Thus the Company is an attractive potential strategic partner or acquisition target for the above listed companies.

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[1] D&B Million Dollar Database (search of SIC 8099 limited to hearing care products)

4.2.2 Competition and Buying Patterns

Direct competitors of the Company include companies that offer software-based hearing tests instead.  We performed a thorough search using proprietary market research software and found only a few companies that would compete directly against CRISP, although no companies offer products comparable to the CRISP test. The results of our search are shown in the table below.

Competition Analysis

Company

Test

Cost

Benefit

Problem

Auditec

Speech in noise (SIN)

$200

12 one-minute tests for estimating signal/noise (SNR) loss with high frequency emphasis (HFE) to assess SNR loss and HFE/low-pass filtered list to assess hearing aid effectiveness in noise

Not ideal for children and can't quickly calculate hearing threshold.

Auditec

(Quick SIN)

$500

Scaled down version of SIN. Used to determine how much hearing aids help patient to hear; uses calibrated signal/noise ratio

Not ideal for children and can't quickly calculate hearing threshold.

Digital Recordings

AUDIO-CD

$25

Can use in your own home

Does not mimic real-world. Not designed for children.

Phoenix Instruments

Pilot-Game Hearing Test

$150

Tests hearing and speech using a CD game

Pure tone. Does not mimic real world.

Benson

Tone test

$50

For home use and clinical use. Used with Windows.

Pure tone only. Does not mimic real world. Not made for children.

Biotronic

Hearing aid fitting software

$2,420

Helps to assess hearing aid regimen.

Does not mimic real world. Not made for children.

A typical private audiologist or hearing care professional sees approximately 10-12 patients per day. These professionals purchase related hearing products based on reliability and the perceived benefits for their patients. Based on our research, hearing care clinicians are relatively price insensitive because they want to offer the best possible care for their patients. In addition, our preliminary research revealed that hearing care professionals often purchase from $500 up to $20,000 in related software/systems for conducting related hearing loss tests. In addition, these individuals frequently become aware of new products from the following mediums:

  • Direct Mail Advertising
  • Journal Publications
  • Web searches and company websites
  • Conferences & Trade Shows
  • Direct Sales

4.3 Target Market Segment Strategy

We plan to engage these potential customers principally through referrals, trade shows, publications and direct advertising as well as through a small regional sales force. The Independent Speech Therapists and Audiologists segment, as well as birthing hospitals (non-HMO), are most likely to buy our products based on their superior functional benefits and potential for new revenue generation by charging end-users for per test runs. Additionally, some audiologists and speech therapists will be motivated to buy CRISP based on the intangible benefits of feeling confident about their audiology clinic's services, if they are offering the most comprehensive and innovative tests available to market.

In preparation for our marketing efforts, we have created a full contact list for all of our targeted customers. In addition, although we will initially focus on customers in the U.S., we will consider an opportunity to grow abroad upon international patent approval.[1] Indeed, just recently, MED-EL,[2] an Austrian cochlear implant manufacturer, approached Auris to build an alliance with Auris in order to create the German version of CRISP. Another company in South Africa has requested to become a beta test site, and an Afrikaans version of CRISP is currently in development.

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[1] Auris Solutions has applied for patent approval in Europe and Asia.

[2] http://www.comprehensive.com/ENG/us/us_home.asp

Every day, 33 babies are born in the U.S. with profound hearing loss, with another 66 babies born with partial hearing loss. This makes hearing loss the number one birth defect in America. Consequently, nearly every state in the U.S. has recently passed a law requiring that infants be screened for hearing loss.[1] It is estimated that if children with hearing loss do not receive early intervention, special education for a child with hearing loss will cost an additional $420,000 in special education costs, and has a lifetime cost of approximately $1 million per child to society.[2] The costs to society of untreated hearing loss are estimated to amount to $56 billion per year in the US, and $92 billion per year in Europe.[3] For adults, lack of early intervention can lead to loss of jobs, emotional distress and even the inability to cope with cognitive disorders such as Alzheimer's. This is important since hearing loss can begin as early as age 50. In addition, since life expectancy can nowadays realistically reach to age 90 and beyond, an individual could potentially be affected by hearing loss for half his/her entire life. Additionally, as baby boomers reach retirement age, the number of Americans with hearing loss is expected to reach nearly 60 million by 2030. Consequently, hearing care providers have a growing need for tests that will assess hearing in a realistic environment in order to provide effective intervention.

Technological advances – As technology evolves we will see advances in the way hearing tests are conducted. For instance, Starkey Laboratories, a hearing instruments developer, is launching what it claims is the first Web-based hearing check. It is doing so because it believes such a move would drive hearing aid sales.[4] This online hearing-test method asks prospective customers to answer a series of questions before listening to different tonal sounds. Once this individual has been checked, they are given a diagnosis and, if required, a recommendation to seek professional assistance. However, this test and similar ones are merely methods devised by hearing aid manufacturers to assist consumers to perform preliminary self-diagnoses, with the ultimate goal of encouraging the individual to seek the help of a hearing professional.

Laws and Regulations – Another important development within this market is that audiologists are now able to offer their services directly to Medicare beneficiaries. Previously, Medicare required that beneficiaries with hearing loss or balance disorders obtain a physician referral before seeing an audiologist. However, as of January 1, 2004, Medicare now recognizes audiologists as autonomous health care providers. This is the result of the introduction of the "Hearing-Health Accessibility Act of 2003" (S. 1647) by the U.S. Senate. We believe that this regulation will enable audiologists to increase customer traffic. Consequently, these audiologists will continue to search for more accurate and faster ways to serve their customers. For example, the CRISP hearing test contributes to speeding the testing process to 2-3 times faster than current ones (i.e. HINT test).

Nearly every state in the U.S. has recently passed a law requiring that infants be screened for hearing loss.[5] Screening and monitoring infant and childhood hearing loss is a growing concern as children with hearing loss often have slowed development with speech and lack of early intervention can be very costly. Consequently, these laws have generated an overall increased awareness and increased efforts to test and monitor children with hearing loss. Based on these trends, we believe that Auris Solutions' CRISP will be an integral part of monitoring the ability of children to hear and learn in a realistic environment.

Employment Growth – In order to keep up with the increased hearing testing in infants and children, our research indicated that the number of speech-language pathology positions and audiology positions are growing by 39% and 45% respectively, from 2000-2010,[6] making these professions among the fastest growing in the country, ranked among the top 30 out of 700 professions. This is an important trend, as speech-language pathologists and therapists and audiologists make up our primary customers.

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[1] Murphy, L. "New Laws a Boon for Diagnostic Firm: Bio-Logic Focusing on Hearing Tests." Crain's Chicago Business: 60, Sep. 27, 1999.
[2] http://trfn.clpgh.org/shhh/Factsheet.html#r1
[3] Source: Better Hearing Institute in the USA (http://www.hear-it.org/page.dsp?forside=yes&area=138)
[4] Hearing test goes online; New Media Age: 10(1), July 18, 2002.
[5] Murphy, L. "New Laws a Boon for Diagnostic Firm: Bio-Logic Focusing on Hearing Tests." Crain's Chicago Business: 60, Sep. 27, 1999.

[6] BLS, November 2001-Monthly Labor Review

4.3.2 Market Needs

The majority of hearing-impaired individuals that use hearing-aids or that undergo surgery to receive cochlear implants expect to hear well. However, the reality is that tens of thousand of patients continue to experience severe difficulty hearing in the real world, away from the clinical setting. This is primarily due to a clinician incorrectly adjusting the settings on the medical device. Consequently, there is a large need by audiologists and speech therapists for a hearing test that can quickly and accurately predict how well individuals, with either a cochlear implant or a hearing aid, can hear in a noisy "real world" environment following installation of the medical device. Such a test is especially important for children, as early intervention can reduce slowed learning. It is estimated that if children with hearing loss do not receive early intervention, special education for a child with hearing loss will cost an additional $420,000 in special education costs and result in a lifetime cost of approximately $1 million per child.[1] In adults, hearing loss can begin as early as age 50 and lack of early intervention can lead to loss of jobs, emotional distress and even cognitive disorders. In addition, since life expectancy can realistically reach to age 90 and beyond, an individual could potentially be affected by hearing loss for half of his/her lifetime.

Pure tone hearing tests, which require audiometers and sound proof booths to deliver the tone, are currently used to evaluate hearing loss. These tests evaluate fundamental hearing loss, but cannot predict how well an individual will understand words and sentences in a realistic environment. Current tests also cannot asses whether or not a second cochlear implant or second hearing aid would significantly improve the hearing of a patient. This is important to patients and their families as cochlear implants and hearing aids cost approximately $40,000 and $5,000, respectively, and are often not covered by insurance companies.

Key Benefits of Auris Solutions' CRISP Test for our Target Market

Based on our analysis of the industry, competing tests, and competitors, the key benefits to audiologists that the CRISP hearing test can offer are listed in the table below.

  • Can be used with young children
  • Allows for 4 different types of noise sources that evaluate different types of masking signals
  • Can quickly calculate speech reception thresholds, or percent correct scores for signal to noise ratio. This process is considered intellectual property and is presently patented to the Wisconsin Alumni Research Foundation (WARF).
  • Tests patient's performance hearing speech in noise
  • Mimics Real-world environment
  • Can be used an unlimited number of times
  • Can help to fine-tune hearing aid settings
  • Tests cochlear implant efficacy
  • Can help to fine-tune and evaluate the effectiveness of a cochlear implant + hearing aid

For the patient, this is anticipated to become a must-have test, since it will more accurately refine his/her hearing device settings and optimize the patient's hearing in a noisy environment. After spending nearly $5,000 for a hearing aid and/or more than $40,000 for a cochlear implant, the patient would likely expect that s/he would be able to utilize his/her hearing device to its utmost capacity in all real-world situations such as a ballgame, a concert, a cocktail party, and especially the workplace or classroom setting. Additionally, this test will also determine the efficacy of a second cochlear implant or hearing aid, or the benefits of a combination of the two. The differences between the optimal and non-optimal setting of the hearing device for the patient is stark; it can mean the difference between having emotional and mental problems associated with hearing ineffectively and the ability to enjoy a worry-free life.

Hearing Aids – The CRISP hearing test will allow audiologists to make recommendations for a hearing aid regimen; that is, specific recommendations with respect to microphone direction and noise suppression. The test can also assess whether or not a patient needs one or two hearing aids. Hearing aids typically cost $5,000 each, so this is an important decision for many patients, especially since many insurance companies do not cover this device.

Cochlear Implants – The CRISP hearing test can help with recommendations about whether a hearing aid is needed in one ear, given that there is a cochlear implant in the other ear. The test can also assess whether or not the patient needs two cochlear implants. This is a very important decision as cochlear implants cost about $25,000 on average.

Audiogram results – Sometimes an audiogram is normal, but the patient still has poor speech and understanding. Auris Solutions' CRISP hearing test can pin-point whether or not this problem is related to competing noises or the location of noises, which may help the patient develop better speech and understanding.

Additional revenues for hearing care providers – The CRISP hearing test will also allow hearing care professionals to charge for administering the CRISP test. Typically, hearing care clinics and hospitals charge $35 to $200 per test. Therefore, we believe that audiologists and speech therapists will view this test as a value-added product.

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[1] http://trfn.clpgh.org/shhh/Factsheet.html#r1