Q3 of 2004
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Radvaks message from the report:
Shareholder, During the third quarter of 2004, the interest in the commercial applications of our RAMP System was clearly heightened. This is due primarily to the diagnostic industry having digested the June peer-reviewed publication of the data from our FDA cardiac clinical trial that definitively supports that we have raised the precision of lateral flow immunoassays to an entirely new level of excellence. This is a subtle yet very important inflection point. This independent evidence is convincing potential partners, customers and even competitors of our longstanding claim that RAMP delivers true lab quality performance in a portable point-of-care system. The Company is leveraging this recognition to solidify strategically advantageous long-term relationships with capable partners to accelerate market adoption of current products and broaden the RAMP product portfolio. This increased profile has had three primarily results: · New interest from top tier marketing and distribution partners for our cardiac products, · An expansion of the cardiovascular product line with the initiation of development of a test for congestive heart failure, and · Initiation of discussions with prospective partners for the commercialization of entirely new clinical product lines. One example of the increased credibility is the very recent appointment of Dr. Michael Groves as our VP, Sales and Marketing. We are very encouraged by our ability to attract a high caliber sales executive with such valuable experience, having recently left his position as VP, International Sales & Marketing at Abbott Point-of-Care. We look forward to Dr. Groves being an integral part of consolidating the marketing and sales distribution network in the coming weeks and months. During the quarter, the Company generated revenue of $658,000 and also significantly improved its balance sheet by completing a $3 million private placement. The Company subsequently reduced its credit facility by more than US$500,000 and paid off the outstanding balance of $1,000,000. Cardiac Sales and Distribution We have experienced new and increased interest from multiple multinational marketing companies interested in ratifying agreements and exploiting near-term sales opportunities for the three FDA cleared RAMP Cardiac Marker Tests. These new opportunities have been put in parallel tracks with current priority prospects for US and European distribution. One side effect is that we have refrained from entering into pending distribution arrangements while assessing broader reaching marketing options. Another event to positively impact our cardiac sales plan has been the initiation of a development program for a congestive heart failure test. This strategic opportunity has also increased the interest in the marketing and sales of the whole cardiovascular line. Although the Company had set a goal of finalizing its marketing and distribution network for cardiac applications during the third quarter, we elected to forego some early revenue in favor of pursuing a significantly stronger and far-reaching distribution network for an expanded cardiovascular line. BNP (Congestive Heart Failure) Program The Company has completed feasibility and, subsequent to the third quarter, announced a collaboration with Shionogi & Co. Ltd. for the development of a RAMP BNP (B-type natriuretic peptide) Test for the Japanese market. Given that there is currently no point-of-care competition for the BNP test in Japan, this important market could eventually result in revenue of $10 million per year. Furthermore, this collaboration has facilitated initiatives to position the Company as a leader in the important congestive heart failure market in the rest of the world. Shionogi will fund development and will be responsible for regulatory affairs, marketing and distribution of the RAMP BNP Test in the Japanese market. Response is targeting commercial launch at the end of 2005, pending Japanese regulatory clearance.
Congestive heart failure (CHF) is a life-threatening condition, characterized by insufficient blood flow to vital organs including the brain, liver and kidneys, attributable to a weak or impaired heart. It is extremely difficult to diagnose because the symptoms are non-specific and include shortness of breath, fatigue, and swelling. CHF often goes undetected in the early stages because conventional diagnostics are inconclusive. Early detection of this progressive disease has profound positive impact on patient outcomes, and in recent years, BNP is gaining recognition as the definitive cardiovascular marker for CHF. In 2004, the annualized market for BNP testing is estimated to be US$500 million, and growing. With 550,000 new cases diagnosed each year, and increasing adoption by the international medical community of BNP diagnostics, the worldwide market could soon exceed the billion dollar mark. BNP was discovered by Scios, now a subsidiary of Johnson & Johnson. In 1997, Shionogi acquired from Scios the exclusive rights to BNP diagnostics in Japan and non-exclusive worldwide rights. In 2001, Shionogi granted a license to Bayer Corp. to commercialize BNP tests outside of Japan. Other leading international diagnostics companies have also recently introduced BNP tests on lab-based analyzers including Abbott and Beckman Coulter. Currently, the only commercially available point-of-care assay is the Triage Ò BNP Test manufactured by Biosite Inc. (Nasdaq: BSTE). Biosite does not have a license to sell in Japan. The Triage BNP Test is expected to have sales exceeding $150 million in 2004, having generated approximately $100 million in sales during 2003. Having demonstrated significant performance advantages over the market leading POC system particularly with respect to the troponin I assay at low concentrations, the Company is confident in its ability to commercialize a RAMP BNP Test with market-leading performance for the same end users. Additional New Product Development Initiatives The Company has completed feasibility for its first clinical infectious disease test, and is exploring related development opportunities with potential partners. The Company has completed development of a RAMP Test to identify biotech-enhanced traits in the agricultural food and grain testing market, funded by a leading international biotechnology company. Several RAMP Systems have been purchased and are currently under evaluation in field use, for possible commercial launch mid 2005. Sales and Revenue During the third quarter, the Company recorded revenue of $658,000 as compared to $256,000 for the same period last year, bringing the total revenue for the first nine-months to more than $2.2 million. By comparison, this represents an increase of more than $1.3 million or 145% over the same period last year. Revenue exclusively from product sales during Q3 2004 was approximately $516,000 compared to $103,000 for the same period last year. Revenue from product sales for the first nine months of the year was approximately $1.64 million, compared to approximately $498,000 for the same period last year. For the three months ended Sept 31, 2004 sales of the RAMP West Nile Virus Test exceeded $250,000 bringing the total year to date revenue from West Nile product to $638,000. Revenue from biodefense sales of more than $176,000 during the third quarter reflected a significant increase over the comparative quarter last year of $46,000. Revenue of more than $744,000 for the first nine months of the year reflect a considerable increase from approximately $411,000 over the same period last year.
Third quarter revenue of $89,000 from cardiac sales showed modest growth over $57,000 for the same period last year. Revenue for the nine months was almost $262,000 as compared to $88,000 for the corresponding period in 2003. Corporate Finance In July, the Company received gross proceeds of $3,000,000 and closed the non-brokered private placement announced on June 18, 2004. At the same time, the Company reduced the revolving demand credit facility with TD Canada Trust from US$1,515,000 to US $1,000,000. Resources continue being directed toward increasing our sales, enhancing manufacturing scale-up to support our current product lines, and expediting new product development opportunities in several potential large market opportunities. After receiving US FDA clearance to market two additional RAMP cardiac marker tests for detecting troponin I and CK-MB, it was rewarding as a Canadian company to receive similar clearances from Health Canada s Therapeutic Products Directorate. I am also proud of the Company s Quality Management System (QMS) that became registered to ISO 1999; 2000 under the Canadian Medical Devices Conformity Assessment System (CMDCAS). On behalf of management and staff, I would like to acknowledge your continued support as we make significant advances commercializing locally developed and world-class technology that positively impacts human health and safety. Sincerely, Bill Radvak President & Chief Executive Officer November 9, 2004 Response Biomedical Corp. |
