Ten years ago, a cycling accident ended Stéphane Bédard’s dream of making the Canadian national mountain biking team, and sent him to a rehabilitation clinic for treatment. Mr. Bédard, a graduate student in electrical engineering, noticed how amputees at the clinic struggled with their prostheses, and wondered why technology hadn’t played a larger role in helping them adapt.

He decided to put his background in robotics to use. After a decade toiling away in a lab, the result of his efforts is the Power Knee, the world’s first motorized artificial leg. It’s an invention that Mr. Bédard’s company, Victhom Human Bionics, hopes will propel it into a role as a major player in the emerging field of human bionics.

Although the Power Knee has yet to enter the marketplace—the launch is expected this autumn—the Quebec city-based company has raised over $25 million of financing in the past three years, thanks to its success with the bionic leg and its development of a promising new nerve interface technology. Using this new technology, which integrates neurosensors and neurostimulators, Victhom is developing devices to treat a variety of physical dysfunctions ranging from urinary incontinence to chronic pain to sleep apnea. If Victhom can deliver on all that promise, the big players in the medical devices world, like Boston Scientific, Johnson & Johnson, and Medtronic, are certain to sit up and take notice.

By 1999, Mr. Bédard had the bionic leg working on paper. He approached Benoit Côte, a marketing consultant with experience in the healthcare sector. “Stéphane called me out of the blue,” recalls Mr. Côte. “He said, ‘I want to build a bionic leg and I need 3 million bucks.’” The two met for breakfast, where Mr. Bédard explained his invention. Unlike conventional prostheses, which are passive and must be dragged along by the user, his bionic leg would move on its own, powered by a battery-operated motor. Using software developed by Mr. Bédard, a microprocessor inside the prosthesis would interpret data relayed from sensors attached to the user’s sound leg to determine what the amputee wanted to do, and then issue instructions to the motor, which would move the leg accordingly.

If Mr. Bédard could succeed where previous attempts had failed, the Power Knee would be a qualitative step up on the competition. A 1988 attempt by two Hungarian scientists to develop a motorized knee had been stymied by a variety of mechanical challenges. Not only would his bionic leg reduce the fatigue and postural problems associated with passive prostheses, it would help users walk with a more natural gait and would dramatically improve mobility—most strikingly by allowing them to climb stairs without having to place both feet on the same step. It also promised better balance and stability, thanks to intelligent software that instantly recognizes and adjusts to a change in the user’s weight or weight distribution, as happens when the user dons a heavy winter coat, or switches a suitcase from his left hand to his right.

After the breakfast meeting, Mr. Côte took Mr. Bédard’s blueprints to his network of scientific-minded investors. “I asked them to take 15 minutes to look over the material and tell me if this guy was dreaming, or if this was really tangible,” says Mr. Côte. The verdict was unanimous. Mr. Bédard got his $3 million, and Mr. Côte was so enthused about Victhom’s prospects that he signed on as president and CEO, leaving Mr. Bédard free to concentrate on managing the company’s R&D.

Backers and Skeptics

Mr. Côte’s interest in the company went beyond the bionic leg. “What excited me was the potential play in human bionics globally,” he says. “The big trend is the convergence between biotech and IT, and I saw the potential to enlarge the business plan and look at different markets that could fit under the umbrella of human bionics.”

However, the journey of a neurotech giant begins with a single product. Mr. Côte and Mr. Bédard focused on getting the Power Knee to market. In the past five years, the Power Knee has gone from an idea to a commercial product that is ready to go to market, and Victhom has grown into a company listed on the Toronto Stock Exchange (VHB) with a market capitalization of $60 million and a work force of 76, 80 percent of whom are in R&D.

In May 2003, Victhom signed a partnership deal with Ossur, an Icelandic company that’s the world’s second-largest manufacturer of prosthetic devices. In exchange for an upfront payment of $2 million and a double-digit royalty on sales, Ossur received the rights to manufacture and distribute the Power Knee. Ossur is currently completing final pre-market testing and a full-scale market launch is expected this autumn.

“The Power Knee is ready to go,” says Simon Bouchard, a Quebec City student who lost a leg to cancer in 2002 and has used the Power Knee on a daily basis for the past eight months. “The motor lets me walk much more easily, and allows me to conserve my energy,” he says. “It’s like the difference between a bicycle and a motorcycle.” Thanks to its clever software, the Power Knee can adjust to a change of pace in real time, without the delay and jerkiness of a passive prosthesis. “I don’t have to think about what I’m doing. I just walk normally and the prosthesis does what I want it to do.”

Quebec City

A video available on the Victhom web site shows Mr. Bouchard putting the Power Knee through its paces, and the footage of him walking normally up stairs has impressed even the competition. “The big advantage of the motorized knee is the ability to walk up stairs one at a time, something that’s normally very tiring,” says Karen Lundquist, director of communications for Otto Bock US. The company manufactures the C-Leg, a microprocessor-controlled, but passive, prosthesis that was the most advanced product in the marketplace until the Power Knee emerged.

US

Others show more skepticism. Dave McGill, chairman of the board of the Amputee Coalition of America and executive director of a Long Island prosthetics clinic, has also seen the video. “This aspect is very exciting,” he says. “But I’m hesitant to anoint it as the next best thing.” One of his concerns is battery life. According to the specs, users can go eight to ten hours without recharging. Mr. McGill, himself an amputee, uses the C-Leg, with a battery that lasts 20 to 30 hours before it needs a recharge. “I don’t have the time, energy, or desire to stop in the middle of the day to recharge the battery,” he says.

Long Island

Mr. Bouchard doesn’t think this is a problem. He says that by turning off the battery when he doesn’t need it, he can use the leg all day. But turning the battery off converts the leg into a passive prosthesis, and with a weight of 10 pounds—more than double that of a standard prosthesis—that could pose a problem for some users. The Power Knee also has a noticeable hum from the motor, which might embarrass some users. According to Mr. Bouchard, who is the kind of young, active amputee most likely to be an early adopter of the Power Knee, this is a non-issue, an insignificant trade-off in exchange for the benefits of a motorized knee.

The Marketplace

Although Victhom has no direct competitors in the field of motorized prosthetics, both Moffett Field, California-based Tibion and Massachusetts Institute of Technology spin-off Yobotics are developing motorized knee braces with somewhat similar technology to assist limbed patients who have trouble standing or walking. Unlike Victhom, however, both these companies are still in development stages and have yet to convince funders that they can succeed in the marketplace.

The Power Knee is targeted at the premium end of the market, a niche currently dominated by Otto Bock US’ C-Leg. Victhom would do well to match its rival’s sales, an estimated 4,000 units last year worldwide, with roughly two-thirds to three-quarters sold in the United States. The Power Knee will be marketed worldwide but most sales are expected to come from the U.S., where the company is relying on its competitive price—it’s expected to retail in the $50,000 range, about $5,000 more than the C-Leg—and technological superiority.

United States

Even if the Power Knee delivers as promised, it will be some time before it reaches its sales target. Victhom will have to apply to Medicare and private insurance companies, the two main potential sources of funding for the Power Knee, to raise reimbursement levels to those of the C-Leg. That process will take at least a year.

The hoped-for sales of 4,000 represent roughly 1 percent of the worldwide number of above-knee amputees and 2 percent of the U.S. market. But Victhom will likely find it difficult to dramatically increase sales beyond this level. Deeper market penetration in the U.S. would depend on a loosening of the purse strings by private insurers, and that is unlikely to happen, according to Paddy Rossbach, president and CEO of the Amputee Coalition of America.

U.S.

“We are facing a crisis of reimbursement for even the simplest prosthesis,” she says. Although a few major employers offer Cadillac plans that provide full reimbursement, annual financial caps on prosthetics ranging from $500 to $10,000 are becoming increasingly common, putting the Power Knee out of reach for the vast majority of amputees.

.

Beyond Prosthetics

The development of the world’s first bionic leg is an attention-grabber, but Victhom’s long-term success depends on a new nerve interface technology platform the company is developing that can be applied to treat a variety of physiological dysfunctions. “The prosthetics market is a good market, but it’s a niche market,” says Mr. Côte. “The big market that will bring us to another level in terms of profitability is the neuromodulation market”—altering the nervous system through implanted devices.

Victhom plans to enter this market with a urinary implant designed to help people suffering from urinary incontinence, or who have bladder dysfunctions due to spinal cord injuries. Triggered by remote control, the implant, about three-quarters the size of a credit card, and two-fifths of an inch thick, stimulates the peripheral nerves that control the bladder and the sphincter, the two muscles involved in urination.

“The Victhom implant is unique,” says David Martin, a healthcare and biotech analyst at Dundee Securities in Toronto. “It sends two signals out of the same stimulator to accomplish two separate tasks, making it a better product than what’s currently on the market.” In addition to improved functionality, no nerves have to be cut when the implant is inserted, which means the procedure is reversible, unlike that of the competition. This is particularly appealing to spinal cord injury patients who believe a miracle cure is on the horizon, and are resistant to irreversible procedures.

Toronto

The implant has been successfully tested on dogs, whose physiology closely resembles ours, and will be tested on humans early next year. Assuming all goes well, the product could be on the market as early as 2007 if the U.S. Food and Drug Administration fast tracks the approval process, or a couple of years later if it doesn’t. Victhom hopes to partner with a larger player in the medical devices field to manufacture and distribute the implant, using the same model as it did with Ossur and the Power Knee. “We want to cut deals with the best players in every single vertical market we’re targeting,” says Mr. Côte.

Users of this first generation of urinary implant will trigger the implant’s neurostimulators at regular intervals. The next generation of implant will have neurosensors that will sense when the bladder is full, and send a signal to the user telling him it is time to go.

This bidirectional system, the Bionic Closed Loop System (CLS), can theoretically be used for chronic pain management, obesity, and sleep apnea. Using this platform to create products is Victhom’s biggest challenge, according to Mr. Martin. “There’s a lot of ‘proof of concept’ with the Power Knee, and most of its value is in the stock,” he says. “Now they have to take their neurosensing and neurostimulation technologies and actually create a product.”

Developing products with the CLS platform may be Victhom’s biggest challenge, but it’s also where the company’s upside lies. If Victhom succeeds, larger players will be more interested in looking at it as an acquisition target, rather than as a licensor of technology. “It’s more profitable as an acquisition than as a royalty play because you’d be buying the top-line revenue potential,” says Mr. Martin.

Mr. Côte agrees that Victhom’s future depends on getting products into the marketplace. Thus far, he says, the company has met every milestone in its production schedule, and he is confident it will continue to do so. “If we stick to the business plan, Victhom doesn’t need to go to the market,” says Mr. Côte. If it can indeed stick to its business plan, the market may come to Victhom.