CHROMATICS COLOR SCIENCES RESPONDS TO FALSE ALLEGATIONS PART 2
CCSI PATENT
CCSI's U.S. Patent No. 5,671,735 is directed to processes for detecting conditions in persons involving a symptomatic detectable change in the subjects coloration, such as a process of detecting the jaundice caused by hyperbilirubinemia in an infant. Any color measuring instrument performing the claimed process would infringe that patent. Each of the five prior art patents referred to by Asensio were considered by the U.S. Patent and Trademark Office along with over fifty other prior art patents and publications before granting U.S. Patent No. 5,671,735 as claiming inventions that were new and not obvious to those skilled in the art.
Additionally, Dr. Fred W. Billmeyer, Jr., Professor Emeritus of Rensselaer Polytechnic Institute, an internationally recognized expert in the field of color science who has written textbooks on Color Science is one of the inventors of record in the four U.S. color science technology patents CCSI has been granted. Dr. Billmeyer was the President of the International Color Council Society for years and published an article in its Newsletter acclaiming the breakthrough in color science technology achieved by the Colormate(TM) TLc-BiliTest(TM) system.
SIZE OF MARKET ALLEGATION: Asensio & Co. states that "CCSI claims that U.S. Hospitals spend approximately $330 million to $510 million per year on monitoring infant jaundice."
FACTS: CCSI's publicly released estimates of the existing size of market stated that 15,000,000 individual laboratory serum bilirubin tests were conducted in the United States annually for monitoring bilirubin infant jaundice. These estimates were based on publications by the World Health Organization, the American Academy of Pediatrics and the average market estimates included in business proposals from potential marketing partners, who used these market size estimates in calculating their annual performance proposals to CCSI. Additionally, Asensio omits reference to existing size of markets throughout the rest of the world where bilirubin infant jaundice is monitored globally. In Southern China alone there are over 20,000,000 births annually. The Company additionally stated that the hospitals charged between $22-$34 per test in the United States for reimbursement by third party insurance carriers.
ALLEGATION: Asensio & Co. cites a "1995 market research report titled "World Clinical Lab Analytical Instrument Markets" by Frost and Sullivan estimated that the world bilirubinometer market was less than $2.5 million.
FACTS: This is one of the most misleading statements by Asensio & Co. Mr. Asensio's irrelevant citing of the "World Clinical Lab Analytical Instrument Markets," refers only to the laboratory spectrophotometer instruments used in the Hospital laboratories for bilirubin blood tests, and he conveniently neglects to mention that each of these instruments has an additional charge for each test performed, for the reagent kit used for each test conducted, for the cost of each test or a disposable tip for each test. Each test is charged to the patient and billed by the hospital, clinic, etc. Advanced Instruments, cited by Asensio as accounting for "approximately 65% of the world market share for bilirubinometers, states in its web-site that "Low initial and per test costs made the Advanced BR2 (Advanced(TM) Bilirubin Stat Analyzer for blood samples) affordable." These costs per test are in addition to the cost of the instruments which is the subject of the cited Frost & Sullivan's report. Leica Inc. which is stated by Asensio as "the second- leading competitor and has about 18% of the world market" publishes in its instruction manual that "only Leica catalog number 10214 disposable cuvettes may be used with the Unistat bilirubinometer. 10214 cuvettes are for one-time use only and are never to be reused. Fill the cuvette with serum. The cuvette holds approximately 20 UL of serum.
Further, included in the Company's 510(k) submission to the FDA was a sworn affidavit from the Director of Clinical Chemistry of the Mt. Sinai Hospital Laboratory, Laszlo Sarkozi, Ph.D. and Director of the Stat Laboratory of the Mt. Sinai Hospital Laboratory, Ellis Jacobs, Ph.D. since 1975 stating "During the period of Chromatics clinical trials, 1988-1996, the Mt. Sinai Chemical Laboratory employed the following instruments to measure total serum bilirubin." The Beckman CX7, the Bayer Chem-1 and the IL-Monarch laboratory instruments for detection of hyperbilirubinemia in pediatric blood samples are "in vitro chemical analyzers which employ reagent kits and monitors the change in absorbency of Azobilirubin to determine the concentration of total bilirubin in the blood sample. The majority of the blood samples involved in Chromatics clinical trials were taken from 1992-1996. During this time period, there was no change in clinical laboratory equipment."
Similarly, Asensio further neglected to mention that CCSI's Colormate(TM) TLc-BiliTest(TM) requires a proprietary disposable calibration standard which is used for each test performed to prevent cross contamination between patients and ensure the accuracy of each reading. There will be a charge for each test performed by the Colormate(TM) TLc-BiliTest(TM) device, in addition to the instrument cost. Without this charge per test, CCSI would only be selling instruments which CCSI has never considered to be the major income potential for this market, nor even included in the existing market estimates stated by CCSI. Mr. Asensio's statement that the potential market for all bilirubinometers is extremely limited is misleading as he is referring here to the laboratory invasive blood serum test instrument market study for the instrument alone without the charge for each test again.
OTHER CCSI MARKETING EFFORTS/AVON PRODUCTS ALLEGATION: Mr. Asensio states the CCSI medical device was developed over 10 years ago for a failed Avon cosmetics sales program.
FACT: The CCSI medical device was not developed for any cosmetic sales program. However, rather than being a failure, Avon acknowledged that "CCSI's color measurement technology enabled Avon to develop a scientifically measured, 100% color accurate line of color-coordinated cosmetics." -- Avon Color. Additionally in Avon's 1988 Annual Report, Avon stated that Avon Color was a success throughout the country and sales of color cosmetics increased 11 percent!!
Between 1984 and 1986 CCSI licensed its color science technology intellectual property and leased its Colormate Systems to Hanes, Clairol and Avon. In October of 1987 Avon signed an exclusive U.S. license for CCSI's color science technology intellectual properties and leased 2000 Colormate Systems from CCSI for a total payment of over $5.5 million over 3 years, with options for renewal and international licenses. During 1990 Avon shipped its new Avon Color line internationally in what CCSI claimed was a violation of its U.S. license. CCSI filed a formal complaint in Federal Court. Avon withheld payment of its annual licensing fee, and CCSI and Avon were engaged in a patent infringement and breach of contract lawsuit until 1993. CCSI's principals Darby and David Macfarlane financed the majority of this litigation personally until 1992. The Company's 1993 IPO financed the next levels of clinical trials at Mt. Sinai and the Avon lawsuit.
After settlement of the Avon lawsuit, CCSI was in discussions with a few beauty product and Jaffra. P & G conducted consumer studies with positive results and Clairol and CCSI signed a joint development agreement for hair color technology, including testing in some of their salons. Other licensing agreements were done with IMS Cosmetics in Israel and Regis Salons all of which is detailed in the Company's public filings.
The Company spent proceeds from private placements and warrant exercise on R & D to develop an inexpensive color measurement instrument and has since completed an inexpensive proprietary hand-held LED color measurement instrument to industry standard specifications and is in the process of developing the mass manufacturing prototype of this instrument. The Company believes this will enhance its efforts in marketing applications in the beauty, health and dentistry fields.
THE CCSI Colormate(TM) TLc-BiliTest(TM)
Dr. Ian Holzman, Chief Newborn Medicine, Mt. Sinai Hospital, states "The Colormate(TM) TLc-BiliTest(TM) medical device for non-invasive detection and monitoring of bilirubin (infant jaundice) has performed in extensive clinical trials in my nurseries for nine years and in additional hospital clinical studies to a high level of accuracy with an excellent linear correlation to the blood serum results for infants of all races, premature and full term, even under phototherapy. No such level of accuracy has been performed to date by any other non-invasive transcutaneous bilirubinometer. It is the only non-invasive device which has FDA clearance for commercial marketing and which can also maintain a high accuracy result for infants of all races, even under phototherapy treatment. The Colormate(TM) TLc-BiliTest(TM) device includes proprietary software, processes and a proprietary calibration standard for each use which ensures this accuracy."
"The CCSI device's high level of accuracy broadens even the existing market for bilirubin testing as it can be easily used at the site of patient care in hospitals and clinics and after the infant is discharged by home health care professionals and in pediatrician's offices. It can replace many costly and relatively difficult blood tests, eliminate trauma, pain and risk of infection for each baby."
"Mr. Asensio's statement that direct or indirect bilirubin test results are necessary for patient management is incorrect. There are rare cases when direct bilirubin count is needed, but the large majority of cases require only the total bilirubin results, which the Colormate(TM) TLc-BiliTest(TM) provides. In fact the Leica instrument cited by Asensio as having 18% of the market for blood serum assays only provides the total bilirubin result."
Dr. Holzman goes on to state "Mr. Asensio claims that hundreds of studies on other non-invasive transcutaneous bilirubinometers conclude that an accurate determination of serum bilirubin concentration is not obtainable. This has indeed been the problem with transcutaneous bilirubinometry until the Colormate(TM) TLc-BiliTest(TM), which has obtained a 95% accuracy in determining serum bilirubin concentration. That is the reason it is such an advance over prior technology and instruments and utterly refutes Asensio's statement that the Colormate does not contain any new technology and can be easily duplicated."
CCSI MEDICAL DEVICE MARKETING
Prior to FDA clearance, CCSI disclosed in its public filings that the Company intended to market its Colormate(TM) TLc-BiliTest(TM) by way of strategic alliance with regional distributors, since the preliminary terms proposed by larger medical distributors were not as beneficial to the Company.
However, after FDA clearance, CCSI was given business proposals from a number of large international medical companies with global distribution and was offered better terms. CCSI discussed these earlier proposals and many of them included manufacturing capabilities by the distribution partner. Various structures, some very complex, were involved.
In late November, 1997, CCSI signed an agreement retaining Mr. Fred Frank, Vice Chairman of Lehman Brothers to assist in the distribution negotiations. After Mr. Frank's involvement, additional, larger medical companies made offers to CCSI, and certain of these companies then commenced due diligence and entered negotiations. However, the later companies' business proposals proved significantly more attractive than the earlier proposals. CCSI also began the process of preparing the necessary manufacturing regulatory and other manufacturing related activities that are required to deliver medical devices.
In April CCSI announced that it was in late-stage negotiations to reach definitive agreements for global distribution and that it would be launching the Colormate(TM) TLc-BiliTest(TM) at the Pediatric Academic Societies annual conference and exhibition where Dr. Ian Holzman was invited to present his medical paper on the Colormate(TM) TLc-BiliTest(TM) clinical studies. Over 4000 participants attend this conference annually. The response to the Colormate(TM) TLc-BiliTest(TM) launch at the P.A.S. was unusually high. Over 486 written responses at the P.A.S. and over 100 since the P.A.S. have been received by the Company, many requesting information on ordering the device. CCSI has continued negotiations over the past month.
CONCLUSION
In summary, it is the FDA, the United States Patent and Trademark Office, published medical research, a world recognized medical expert on bilirubin, a world recognized color scientist author and professor, international medical companies, the babies throughout the world who would benefit from the company's product and the truth, against Mr. Asensio and his ill-informed report.
Chromatics Color Sciences is in the business of color science and has developed technologies and intellectual properties which it believes have medical applications involving the detection and monitoring of certain chromogenic diseases or disorders such as bilirubin infant jaundice. The Company defines chromogenic diseases or disorders as those diagnosed or monitored by the coloration of the human skin, tissue or fluid being affected. In this regard, the Company has received Food and Drug Administration (FDA) clearance for commercial marketing of its medical device for detection and monitoring of bilirubin infant jaundice.
Other medical applications will require additional clinical trials and FDA clearance. The Company's technologies and intellectual properties also have other applications, including the scientific color measurement and classification of human skin, certain color-sensitive consumer products, and in determining the color compatibility of such skin and product color classification for use in a variety of industries including the cosmetic, beauty-aid and fashion industries.
Certain of the matters discussed in this announcement contain forward-looking statements that involve material risks to and uncertainties in the Company's business which may cause actual results to differ materially from those anticipated by the statements made herein. Such risks and uncertainties include, among other things, the availability of any needed financing, the Company's ability to implement its long range business plan for various applications for its technologies, the impact of competition, the obtaining of further regulatory clearances applicable to proposed new applications of the Company's technology, management of growth and other risks and uncertainties that may be detailed from time to time in the Company's reports filed with the Securities and Exchange Commission, including those set forth in its annual report on Form 10-K for the year ended December 31, 1997.
(1) Gutman S.I. Director, Division of Clinical Laboratory Devices, Office of Device Evaluation, Center for Devices and Radiological health, Food and Drug Administration, July 24, 1997).
(2,3) Holzman, IR, Non-invasive estimation of serum bilirubin, Pediatric Res. 1998;43:176A), Tayaba R. et. al., Non-invasive estimation of serum bilirubin, Pediatrics 2998 (in press).
(4) American Academy of Pediatrics Practice Parameter: Management of hyperbilirubinemia in the healthy term newborn, Pediatrics 1994;94:5582562.)
(5) Moyer V.A., et. al., Accuracy of clinical Judgment in neonatal jaundice 38th Meeting of the Ambulatory Pediatric Association, program and abstracts, p. 47, May 1-5, 1998).
SOURCE Chromatics Color Sciences International, Inc. |
