BIOMODA, INC. 
By In the July 2011 President’s Column, Biomoda President John Cousins gives investors some insight on recent activities at the Company, including an important patent development in Asia, and discusses the disappointing stock price.
What is Biomoda working on these days?
We continue to strengthen and expand Biomoda’s portfolio of intellectual property. Our announcement last week that Japan’s patent office granted Biomoda its patent application related to our method of using CyPath® to detect cancer comes just a few weeks after the U.S. Patent and Trademark Office granted Biomoda a new patent that expands the use of the CyPath® assay to include patient response to cancer therapy during the treatment phase of the disease.
We see Japan, with more than 30 million smokers, as a major market for the technology. Similar to the United States and other industrialized countries, lung cancer is the leading cause of cancer deaths in Japan. Nearly half of all men and 14% of all women smoke in Japan, and lung cancer represents 20% of all cancers in that country. We also have a patent pending in the European Union, and expect to hear shortly from the European Patent Office. There are 10 million smokers in the United Kingdom alone, and nearly 29% of adults in Europe smoke, according to the World Health Organization. With an estimated 46 million current smokers in the U.S., according to the Centers for Disease Control, we know that the market for CyPath® is truly global. We are pleased with the success of our strategy to secure patents worldwide.
With regard to the clinical trial, we are working on final edits to the paper with Dr. Tom Bauer, Chief of Thoracic Surgery at the Helen F. Graham Cancer Center, Christiana Care Health System, in Newark, Delaware, and the national Principal Investigator of the Biomoda pilot study. Dr. Bauer, as the lead author, will determine where the paper will be published. Earlier this summer, we also conducted limited research on optimization of the assay. The results were promising, and I believe we have a clear understanding of the work required to improve the sensitivity and specificity necessary for commercialization.
We continue to be bullish on the technology. Biomoda’s CyPath® holds the promise of a breakthrough in cancer diagnosis. And as last week’s New York Times’ front page story on the failure of genomic diagnostics points out, there are few other cancer diagnostics on the horizon. The July 7 NYT article, “How Bright Promise in Cancer Testing Fell Apart,” highlighted the need to conduct thorough and transparent research – a priority at Biomoda – and not rush to market without a strong foundation. Unlike the complicated and costly genomic technology discussed in the article, Biomoda’s technology is simple and lends itself to automation that will keep cost down and accuracy high. The article also supports Biomoda’s selected path to market. We are taking the time and putting in the research effort to get FDA approval as a Class III Premarket Approval (PMA) medical device, something the unsuccessful technologies that went too quickly into the commercial laboratory did not do. Many of these companies claimed their tests could go forward without further FDA approval as long as they were performed in a laboratory that met the requirements of the Clinical Laboratory Improvement Amendments (CLIA) and nothing more. According to the New York Times, the FDA is cracking down on the CLIA route for commercialization.
Biomoda continues to strengthen its technology and patent portfolio as the foundation for our continued efforts to transform the bright promise of our technology into worldwide commercialization of CyPath®.
There are many rumors on the blogs and in the chat rooms about recent stock performance. What’s going on?
Biomoda’s first quarterly report for 2011 that was filed on Form 10-Q with the Securities and Exchange Commission (SEC) provided a detailed description of our financial situation, which we believe has hindered stock performance despite strong technological and operational advancements. Our status as an R&D company poses challenges in securing adequate capital for the development of our technology. We have had success in several venues, including a federal grant from the Qualifying Therapeutic Discovery Project and an appropriation from the State of New Mexico which funded a significant portion of our pilot trial by providing screening to New Mexico veterans at high-risk for developing lung cancer. One of the many positive aspects of grants and public appropriations is that they are non-dilutive to our shareholders. The non-dilutive benefit of government funding is one of the reasons we are partnering with the University of Texas Health Science Center in San Antonio to find research grants for our optimization and clinical work going forward.
We also need to raise funds in the public market through investment by institutional funds. In March and September 2010, we received funding from various institutional investors in return for stock and the issuance of warrants and a convertible note that could be exercised for stock at a later date. The terms of the two securities purchase agreements have been disclosed in our public filings. Shortly after the news of the top-line results of our clinical trial, some of our investors opted to convert warrants and the note into shares. The price of their conversion is at the volume weighted average trading price established by the terms of the securities purchase agreement, which has resulted in the price of warrants dropping significantly and the added deleterious effect of significantly increasing the number of warrants obligated to the March investors. Those warrants must be accounted for in the number of authorized shares, and we are now in the difficult position of having more shares obligated than the authorized amount of 150 million.
The March and September investors have indicated their willingness to negotiate, and we are in discussions with other parties as well to find a solution that will move the Company forward and bring the technology to market. Management currently is not being paid, and many of our consultants continue to work with us based on their knowledge of the technology and its promise. Our team is deeply committed – well beyond a paycheck – to Biomoda and its technology. I can also dispel one rumor out there regarding insider trading. Neither the Company nor any of its employees, including management, are currently trading Biomoda shares.
And finally, we have heard from several investors that you missed the June President’s Column. We were working full time on securing funding on the most favorable terms possible for both Biomoda and our shareholders. It’s gratifying to know the President’s Column was missed, and we will continue to make every effort to publish it on a scheduled basis from now on. We will also continue to respond directly to shareholders and release news via our newsletter, news releases and social media. We look forward to hearing from you.
