June 21 Conference Call Transcript (Part 3)
DARBY MACFARLANE
Okay, going on to market size. As far as size of market for all these three markets, the Hospitals, Pediatrician's Offices and Home Health Care Markets and then in the 4 geographic locations of U.S. and Canada, Europe, not including Eastern Europe, South America and Asia and the related pricing of Products. It is a sizable undertaking to address the size of these markets, and the many assumptions, variables and issues related to each of the market segments. Accordingly, while the Company has released certain information on the existing market at this time, we also will be releasing further market information subsequently as additional determinations are made during the marketing and distribution process.
The Company has released its analysis of the existing United States market for bilirubin blood tests on newborn infants, and the approximate size of the same market in the developed countries of Europe, South America and Canada combined, and parts of Asia.
The World Health Organization published the current annual birthrate of approximately 4,000,000 births in the United States, with approximately 10% of these births being premature infants. Using numbers of individual bilirubin tests on newborn infants (heelsticks), the Company has estimated there are approximately 15,000,000 bilirubin blood tests currently performed annually, in monitoring Bilirubin infant jaundice in the United States.
In making this conservative estimate, the Company assumed averages of one test for full term infants in hospitals before discharge and one test at or after discharge, and an average of 1-2 (or 1.5) tests per day for premature infants in hospitals during an average length of hospital stay of 11 days (or 16.5 tests), with the remaining tests representing infants treated after discharge in the Home Health Care market. These assumptions were based on publications by the World Health Organization, the American Academy of Pediatrics, and may business proposals from potential marketing partners.
In marketing plans developed with our current distributor, for purposes of even setting the annual minimum performance criteria to be met by the distributor contractually, these existing market numbers were even more conservatively estimated for contractual reasons and still were set at approximately 12,000,000 tests per year.
Although the Company and its U.S. distribution partner believe that future frequency of testing may significantly increase to the extent the noninvasive device may revolutionize the current standard patient care for hyperbilirubinemia and will introduce noninvasive monitoring tests into the emerging Home Health Care market, these conservative assumptions are not based on any increased frequency of bilirubin testing in hospitals or pediatrician offices, nor do they reflect parents' use in the home.
Internationally, using the World Health Organization birthrates, independent market studies and research obtained from companies currently marketing neonatal medical devices in foreign countries, the Company estimates that the current European market for infant bilirubin tests is approximately the same size as the U.S., South America and Canada combined and the Southern Chinese and entire Japanese markets combined represent approximately the same size of market as the United States. These markets will be the focus of our next distribution negotiations.
Based on the Company's existing U.S. distribution agreement and initial business discussions with medical device companies having international distribution presence and marketing capabilities and who are interested in such distribution rights for the Company's noninvasive bilirubin monitoring medical device for newborns, the Company anticipates, under this marketing structure, to achieve significant penetration over approximately 3-4 years from the start of commercial distribution with a ramp up over the first 2 years. Significant means in all cases a range between 35-60%.
Regarding pricing of CCSI's medical device, the Company itself has introduced prices of $3,000-$6,000 for the TLc-BiliTest™ Unit and $10 per TLc-Lensette single patient use but is not able at this time to disclose the customer pricing structure currently being finalized with our distribution partner. At a later date very soon the distribution pricing structure for the TLc-BiliTest™ medical system will be made available as it will be being offered for sale to customers by our Distributor. The key terms and features of the Company's and its distributor's 5 year Agreement has been made available in the Company's 8-K filing of the Agreement.
As far as marketing our other medical applications, I am focused almost entirely on fulfilling our obligations under our U.S. medical distribution agreement and then consummating one or more contracts for opening up our medial distribution internationally.
A few updates:
The Ministry of Health has now completed its studies for our noninvasive systems market in China and is in the process of tabulating the results.
Nordstrom's test was delayed by Nordstrom due to redoing their packaging for the new line. The 6 month exclusive license has in the interim expired and other potential exclusive licensing agreements with larger cosmetic companies may be the preferred direction for the Company to take at this time.
In parallel we are working on completing the smaller less expensive Colormate LED Device because in addition to contractually required development for the medical applications subject to FDA marketing clearances, this new unit is what most of our potential licensees in other markets want to see prior to further business discussions, especially in the cosmetics, hair color and dentistry areas.
I will be resuming next steps in our business plans for the beauty and dental industry marketing. In this regard, the dental industry opportunities appear to offer another, perhaps even larger, market for our technology than the medical application for bilirubin and as it will be one of the next markets we expect to commercialize, it deserves a summary.
As you know the beauty of our technology is that we can measure the color spectrum quickly, easily, and with a high degree of accuracy and reproducibility under a wide variety of ambient light conditions. This is particularly applicable in dentistry where matching the color of crowns, bridges, dentures, fillings, and veneers to those of existing teeth constitutes a critical part of the restorative process.
At present this is accomplished by using a plastic shade guide placed next to the patient's tooth and then comparing the tooth to the guide visually. This is a subjective and unscientific process at best, and has led to a very high incidence of lab returns, as the patient walks outside to a different lighting environment and concludes that the match was not acceptable. Preventing this kind of patient dissatisfaction as well as eliminating the cost of returning the offending product to the dental lab and replacing it, often repeatably, cutting down the time required for reaching an acceptable match, and providing an easy, and scientific way to match tooth color is what dentists want and we believe that is precisely what our technology is capable of providing.
According to the latest study done by The American Dental Association there are more than 50,000,000 procedures done in the United States annually which involve matching the color of existing teeth and it's growing. There are approximately 150,000 U.S. dentists and an equal number in Europe.
There are 3 competitors in this dental application arena but none to our knowledge beyond initial testing domestically as of yet, and like the bilirubin monitor the Company believes that the Company's proprietary technology could provide benefits beyond those of any such competitors. This is a very large and lucrative market that fits quite well with our technology.
Although I can't give you a timeline for commercializing this dental market today, what I can say is the following:
unlike bilirubin there is no FDA or governmental approval required for the dental product, and secondly
we have already narrowed down our potential partners to a small number.
Therefore the process should be much more streamlined, and as you have just heard we have already started it. We need a dedicated senior level executive to spearhead this application such as we set up with Sheila in the Medical Division.
It will also be during this next phase that we intend to start bringing in the much needed management to implement our strategy for a whole new era of expanding operations.
In summary, I believed there were three things I had to accomplish to attract the caliber of upper-echelon management that we want to take the Company forward into its next phase of being a successful operating Company.
First, get Regulatory clearances.
Second, sign medical distribution contracts, and
Third, finish the small hand-held instrument.
Then the Company would be credible in its goals, operational, and have the tools necessary to expand its many applications, hopefully very profitably. Well, Number one is done, Number two is now done for the United States, with international contracts and the consumer markets yet to be completed. Three is well in progress. So, Number four will be to now bring in additional management to commercialize these other mass market applications and to take us into this new era. That's where we are and that's our plan. We are very excited and very proud to be at this juncture in our Company's development. It took a lot of hard work to get here. At this point I would like to open up the floor for questions.
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