Samuel M. Khamis, the CEO of a new tech start-up, is building a chip that can be embedded in your smartphone and will be able to smell your breath. With just a whiff, the “electric nose” sensor, which Khamis is developing at Adamant Technologies, can provide information about a person’s current metabolic state and detail how many calories he or she is burning in real time.

For those looking to lose weight, this would be potentially invaluable. The invention is also being refined to warn users well in advance if they’re about to have an asthma attack. Khamis expects his new sensor technology will eventually be used for many other real-time health care applications, with developers testing all different kinds of possibilities around breath analysis.

Adamant has been growing quickly, securing venture capital financing along the way, and Khamis is hopeful his product will be available to the masses within the next few years. The ultimate goal is to help people manage their health more effectively and give doctors and health care professionals in-depth information about their patients.

Knowledge at Wharton sat down with Khamis to discuss the technology and its growth prospects. The interview was conducted jointly with Hoag Levins, editor of LDI Health Economist Magazine.

An edited version of the transcript appears below.

Hoag Levins: Sam, how did you get interested in this subject in the first place?

Samuel M. Khamis: I’ve always been interested in the idea of using advanced technology to help the general population, and it became a personal mission of mine before I went to grad school. When I went to grad school at UPenn back in 2004, I started working on novel nanotechnology.

After roughly a year of experimentation, we created a next-generation sensor that had the potential to do things that previous technology had not been able to accomplish. I spent the rest of my time at Penn developing that system and building up the blocks that would make it into a real technology. I realized you could build a great company based on that technology, though at the beginning I wasn’t specifically considering medical uses and mobile health. But I definitely knew we had something.

I graduated in 2009 and moved out to Silicon Valley because I had always wanted to do the whole start-up thing, but I didn’t know much about the start-up world. So, I worked in another company making a different kind of sensor and then tried to make some money through consulting work. Then, in 2011, I founded Adamant Technologies, planning to use the core technology developed at UPenn in the mobile health space.

The mobile health market is very hot right now, but it’s very fragmented. It’s also worth noting that everything you see today in the market is based on 30- to 40-year-old technology. To bridge that gap, you need a new, novel, core technology. So, we were really primed for that opportunity.

Levins: In terms of the device itself, tell us about this chip. What is it? Does it involve nanotechnology? What makes it so new and so dramatically different from everything else in the sensor market?

Khamis: For years, people have been trying to make an “electronic nose” — a device that can detect things in the same way as a human nose or a dog nose — but with artificial sensors. But people have approached the problem incorrectly. The idea that you can make a really good sensor is only the start. People traditionally try to create this kind of device and plan for it to sense 100 different chemicals and 100 different odors. They try to make sensors for each element and each smell. But this doesn’t scale because you need to create 100 different sensors for 100 different signals, and there was no real crosstalk between [them].

We engineered our chip, which is completely based on nanotechnology, to be able to work just like a human nose. In a human nose, you have roughly 400 different types of olfactory receptor proteins. So when you or I smell something, our brain is seeing a 400-dimensional fingerprint, which uniquely identifies a smell. We can store that fingerprint and differentiate that fingerprint from others. So when you smell two different things in the same room at the same time, you know both of them are there, and you’re not just interpreting the mixture.

We developed our sensor chip to combine a little array of nano-sensors, and each sensor is capable of detecting everything. In other words, it will respond to any chemical it encounters, and each node will respond slightly differently. We get a fingerprint that has the same dimensionality as our sensor array, and [it] gives a slightly different fingerprint to every chemical. So, we’re able to do the exact same kind of thing that the human nose can do — both detecting and interpreting things that we smell.

“The mobile health market is very hot right now, but it’s very fragmented.”

Levins: Is this unique, patented technology? Do you own this technology and this concept?

Khamis: We filed a lot of [intellectual property (IP)] on this while I was at UPenn, and the Charlie Johnson Group in the UPenn physics department continues to develop some of this technology from a research standpoint. But I’ve now exclusively licensed the IP around this technology from the University of Pennsylvania — for all usage cases — and we’ve spun that into our company. And, of course, along the way we’ve developed new IP for this technology. We have a pretty broad IP stance as far as this technology’s concerned. As for the type of devices we want to make, we have a pretty broad IP stance on that, too.

Levins: Now let’s talk about devices. In laymen’s terms, I’m assuming that this is a chip that you put in a smartphone. Or does there need to be a new generation of smartphones before it would work? Tell me about the current technical status?

Khamis: We’re developing a product right now that would be able to interface with any of the recent smartphones, including the iPhone 5S and the Samsung Galaxy S3 and Samsung Galaxy S4. We’re developing a device that is going to talk via Bluetooth or through a USB connector. The reason we’re using this everyday technology is to help people incorporate our invention into their daily routine. It’s not going to be a stand-alone device, because people don’t want too many devices to carry around. People want to have one thing that they can pick up and carry with them and doesn’t require any habit changes. That makes it easy.

I think the failure of a lot of the current-generation devices stems from the fact that that they require the user to remember something else and to change their daily habits.

By developing a device … that would plug into your cell phone, it’s easy because I’m naturally breathing out when I’m talking on my cellphone. I can talk, and it can pull in my breath, analyze it on our chip and then you don’t even have to think about looking at the data. You can look at it down the road somewhere and it will be catalogued. This will not be invasive.

Levins: It sounds like you have this really neat technology that has lots of potential, but how far are you from turning Adamant Technologies into a sustainable business? How many years do you think it will take before the device can be sold across the country? Tell us about the business plan and how, ultimately, you hope this will become a successful product.

Khamis: We’ve looked at a wide range of diseases and different conditions that we could work on. For example, we can track the human metabolic state and gauge how many calories a person is burning and what types of calories those are. This could be a simple, powerful application.

Approaching this from a business standpoint, we’ve targeted two applications to focus on. First of all, we’re focusing on asthmatic monitoring, which is being able to tell an asthmatic person that an attack is about to happen 45 minutes in advance. If you have an early warning, you can do all sorts of things to avoid the attack.

We’re also working on monitoring the human metabolic state. This is a good tool for people who are trying to lose weight. We can tell you: Are you in a fat-burning state? Are you in a carb-burning state? Are you in a fat-storage state? People don’t have direct, real-time feedback for weight loss right now. This technology will let people know if their immediate actions are having a direct impact on their weight. This could lead to even more impactful things, like monitoring people for pre-diabetes and telling someone whether they’re about to cross into a state where their insulin is not in balance.

Right now we’re approximately 18 months from completing a metabolic state device. We need a bit more R&D, some product development and a trial. By the middle of next year, we’re hoping to launch a very large study with about 1,000 devices and 1,000 participants who will use our prototype devices for three months and track their breath about ten times a day. This trial will provide us with user feedback and then we will have one of the biggest databases of human breath that has ever been collected. And because of the high dimensional detection system we’ve created, we’ll have more information about the human breath than anyone has ever had before. We’ll be able to correlate new biomarkers with this data and, ultimately, go much farther than what’s been done in the past. That’s how we’re rolling out the business right now.

Knowledge at Wharton: Who are the main competitors in this space? How do you plan to position Adamant?

Khamis: Competitors fall into a number of different buckets. First, there are the competitors with old technologies. But everything they do is an estimate. Once we’re able to tell people their actual metabolic rate and calorie burn, there’s really no comparison.

In the second bucket are the companies that are only attacking one or two verticals at a time, not a range of issues like us. A lot of those guys have sensors, but they may only detect one type of chemical or one type of signal.

“Until very recently, investors were very risk averse and avoided new technologies. Now I’m seeing that attitude begin to change.”

There are also people looking at similar sorts of problems, but not with breath. Others may be working on detecting health issues through blood, urine or sweat. But this can be invasive. Our offering is far more convenient and far cheaper. Plus, the most important thing is that our product is reusable. You don’t have to use cartridges like you might with our competitors. The goal is that you can use our device for thousands of cycles without any kind of issue. That’s a snapshot of the competition right now.

We have positioned ourselves as the only high dimensional, low-powered, lightweight device, which is also cheap to make and therefore cheap for the user to purchase. Our product will be able to do some powerful things in a very non-invasive, non-habit changing way.

Levins: In about 18 months you could have a product, but it could be another 18 months before it’s on the market. Can you tell us about the capital you’ve raised so far? Do you have the funds to run this business for another three years before it pays off? How is your fundraising going?

Khamis: I funded the company with my own money in the first year. In 2012, we started looking for institutional capital and we raised our first round of funding with Khosla Ventures. This money has helped … develop our technology to the point where we can have a prototype that can be mass-produced. We’re now in the middle of another fundraising round, and we’re looking to raise enough money to get us through the rest of our trials and get to full productization. There’s significant interest in this kind of novel technology. I’m not too concerned about raising the capital we need, especially given our progress.

I would like to point out that there has been a real attitude shift recently in the investment community. Until very recently, investors were very risk averse and avoided new technologies. Now I’m seeing that attitude begin to change.

Levins: You’re talking about providing an early warning system for serious health issues and diseases. Do you consider this to be a medical device, and do you expect to have Food and Drug Administration (FDA) involvement down the line? The FDA has been taking increasingly aggressive action related to regulating health care apps.

Khamis: Adamant Technologies aims to make a consumer health device. We will absolutely need some FDA approval for many of our apps. But we’re going to start with one that doesn’t require FDA approval: the human metabolic rate device. Later on down the line with other apps we will absolutely need FDA approval.

The mobile phone market grew almost exponentially with the onset of new smartphones and new technologies, which was not expected at the start. I think we’re going to see something very similar.”

Levins: You also mentioned the technology could help with the management of chronic diseases, which is a gigantic issue for baby boomers. In terms of diabetes, give us a vision of how your chip and device will work for patients and provide help in completing a task that can’t be completed now or can’t be completed well right now. How would this fit into managing full-blown diabetes?

Khamis: The non-invasive management of diabetes is like a Holy Grail for many in the health care industry. But if you look at the landscape of companies that have tried to help, it’s become a graveyard of good intentions. Meanwhile, keep in mind that the basic research has not yet clearly identified a biomarker from the breath that represents blood glucose content. So our product can’t yet be used to help with true blood glucose management. But the product can tell you when you’re in a high blood glucose state or in a low blood glucose state, which will be helpful for people who are in the pre-diabetic stage. You can look for peaks and troughs in people’s breath content, and it gives you a clear way to tell them when they’re reacting adversely to the things they eat or the way they work out. That’s one thing we can do.

My hope is that, as we gain more insight into what is in people’s breath and the correlation between the things they do, we will discover a biomarker for blood glucose, or some combination of biomarkers that have been missed before. So, while today I can’t tell you that we’ll have a non-invasive blood glucose monitoring device any time in the near future, I think that the chances are good that someday we will. At that point, the idea would be to allow you to manage your blood glucose through non-invasive means, without having to prick your finger all the time.

Levins: Why will your product succeed over the “big guys,” who could try to swoop in and steal your ideas?

Khamis: We work in cutting-edge nanotechnology, and that alone will likely stop anybody from reverse engineering this for quite some time. Only the people with the absolute most money and most resources at their disposal might be able to try. But there are very few people in the world who are experts in this area, and people will have difficulty recreating our technology and “scooping” us. From a technology standpoint, we’re very well positioned.

But I am concerned about market acceptance. The one thing that always weighs on my mind is that breath diagnostics is not something that people are accustomed to. On a limited scale, people may look at lung functions in a pulmonologist’s office. Or asthmatics sometimes breathe into a spirometer to assess their lung volume. Some people are used to it. But we’re looking for broad market acceptance when it comes to diagnosing your health by using your breath. This is a little bit of a concern, but I think it can be solved through easing people into it by using apps that are a lot less scary. That means starting with learning about your metabolic state through breath technology, or doing even simpler things like assessing if someone has bad breath with the technology. Then we can really move into this space more smoothly, offering a monitoring device that lets you take control of your health in a real-time, non-invasive way.

Levins: How many employees do you have now? Give us a sense of what is actually going on in the company.

Khamis: We’re based in South San Francisco. We just hired our 10th employee to work in our sensor testing facility where we complete all our product development work. We also work off-site with a semi-conductor lab where they make our chips. We maintain a seven- or eight-person outsource team there, with one of my team members coordinating between both groups. That indicates our current scale. We’re really poised to grow a lot more in the next year. I anticipate hiring another 15 people in the next nine months to continue building the business.

Knowledge at Wharton: You estimate that the mobile health and fitness market will be worth roughly $25 billion by 2017. How do you estimate the growth prospects for Adamant? What is your strategy to achieve that growth?

Khamis: I actually think we’re going to see a little bit stronger growth than that. The reason is that the market relies on the kinds of devices and apps that exist today to make future projections and forecasts. But keep in mind that the mobile phone market grew almost exponentially with the onset of new smartphones and new technologies, which was not expected at the start. I think we’re going to see something very similar.

In terms of our growth, this is a platform device, and we’re always going to be able to add new applications and new types of detection services. Even if we only start in the health and fitness area, we can later grow in other areas. We’re well poised for growth in various sectors. That’s a nice advantage. As the markets grow, we will grow too.

Knowledge at Wharton: What are some of the major risks for your business? How are you addressing them?

Khamis: As I mentioned before, one key risk is getting consumers to accept the idea of a breath diagnostic device. We’ll deal with that by conducting trials with patients and consumers. We are planning for a large 1,000-person study next year, but we’re already starting much smaller studies now with different physicians. We also plan to start working with gurus in the field — trainers who can use and recommend our product to consumers. The biggest challenge is ensuring that the market accepts the device and that it’s marketed correctly so that people want it.

Another obvious risk is regulatory risk and our involvement with the FDA, which we discussed before.

Knowledge at Wharton: You’ve mentioned that you’re building up the largest ever database on human breath. What are some of the other things that you can do with this database?

Khamis: We’re interested in sensor aggregation, which involves taking data from our sensors and aggregating that with all the data from other sensors that are inside today’s mobile phones. A typical smartphone would have a GPS chip, a gyroscope and a magnetometer — there’s all this other data that you can collect and aggregate, as well as information that you can bring in wirelessly from the network. This will help make our offering even more powerful, telling you about your health in certain places, under certain temperatures, etc. This gives you further insight into how to manage your health. If you always have an asthma attack at a particular location, that’s a good indication that something is wrong in that area or there is some sort of allergen. That could help other people in the health industry and even the advertising industry. The potential is infinite because we’ve never had this kind of granular data about people’s health before. This will be valuable to our company and many other people.

Knowledge at Wharton: What is your long-term vision for Adamant?

Khamis: My vision is that someday, everybody will have a device that they can hold in their hand and see an overall health score. People can see what is going on with their body throughout the day, and that gives them control and power over their health. That is going to help consumers, patients and doctors, too, because the data will help doctors get a fuller picture of a person’s health.

I hope that our technology will help decrease the onset of certain kinds of diseases. I hope we can increase the efficacy of treatments, decrease the frequency of hospital visits and decrease the need for certain medications. That’s my vision.

From a business perspective, we’re looking to partner as soon as possible with other like-minded people in the industry who want to help us accelerate our work, get our devices in the hands of consumers and make this a reality very quickly.