Bioelectronics Corp (BIEL)

[N_B]

Management Report to Investors - Wednesday, February 26, 2014

Impact of FDA’s New Regulations (Docket # FDA-2012-N-0378) and related topics

BioElectronics management developed this report to inform our investors about the latest FDA announcement and how we expect to move forward. We are pleased that the FDA is reclassifying this technology to reflect its safety and efficacy. We believe that the FDA’s recommendation makes scientific evidence the determinant for additional market clearances.

This report covers the following topics:

Background on the technology and the change in FDA approach reflected by the latest publication
Our continuing Public Education Program to developing public support and accelerate reviews at the FDA and NIH
Strategic initiatives to capture new markets
Ongoing negotiations for license agreements to drive device sales in medical markets
Continuing clinical studies and development of the new product pipeline.


As always we will provide weekly updates on these subjects as progress is made.

Background

The genesis of pulsed shortwave therapy was medical diathermy which puts a continuous stream of energy deep into the body to create heat, assuming that heat was the mechanism of action. Pulsing of the energy was introduced to preclude the accumulation of heat to negate the risk of burning the patient. In the absence of the accumulated heat, as the therapeutic agent, the FDA could not explain the physiological mechanism of action. Over the years, pulsed versus continuous therapy has become the preferred mode of treatment.

Given the context of their old categorization, the FDA could not rationalize the mechanism of action or concur that the pulsed devices were safe and effective in the absence of accumulated heat. The proposed regulations eliminate the heat argument and make scientific evidence the determinant for additional market clearances. We have current adequate evidence, see Exhibit “A” attached, and additional studies completed and near completion

BioElectronics has created a miniaturized version of a traditional pulsed wave therapy device, lowered the power level and honed the signal to provide low cost superior 24-hour extended duration relief. Our miniaturized devices operate on a power level that is the pulsing: equivalent to two-hundredths of the amount of power produced by a cell-phone. The mechanism of action is not heat: it is the pulsing that activates the blood flow that reduces the pain and accelerates the healing. These devices are safer than Class I heating pads, particularly for use by diabetics and the mobility compromised.

We will be responding to the call for new 510K applications with our extensive published clinical data and with new clinical trial data generated from, randomized, placebo controlled studies conducted at some of the world’s leading medical institutions. We are confident that our scientific and clinical data will enable us to obtain equivalent US market clearances to those we have earned in Canada, the European Common Market and much of the rest of the world.

Developing political and public support to accelerate US FDA and the NIH actions

Our drug-free therapeutic pain treatment is one solution to the pain and drug abuse epidemic our nation is facing. The President’s administration has tasked the National Institute of Health and the FDA to deal with two critical situations. The first dire situation is the CDC declared “epidemic of prescription drug abuse” that is killing about 43 Americans each day – or about 16,000 annually. The second problem is the anticipated demand for physician services from the 47 million new patients who will enter the system as a result of the Affordable Healthcare Act. (50% of the visits to emergency rooms are prompted by pain complaints). Pain accounts for 20% of healthcare costs.

Bioelectroceutical™ healing and pain relief is a safe and effective analgesic and a viable alternative to the vicious cycle of drug therapy; that is, the cycle wherein marginally efficacious therapy leads to increasing dosage and therapeutic agent demands, particularly in the challenging cases of back and other musculoskeletal pain. Systemic drugs only mask the pain and do not accelerate the healing process, resulting in long-term use at increasing dosages, which increases the risks of hazardous side effects. This vicious cycle also asserts a significant additional demand for physicians’ services and a corresponding increase in healthcare costs.

We think this is an opportunity for us to change our dynamic with the collective Health & Human Services agencies. Both of these issues can be mitigated by OTC availability of our safe, effective Bioelectroceutical™ technology.

We’ve retained the public relations firm of Miller Geer and Associates to lead our public education and awareness program to educate the public about our new innovative solution to pain therapy. This week we presented a discussion of drug-free pain relief to a world-wide audience on the Google Plus News platform. Other such discussions on the Google Plus platform are planned.

Jay Geer has arranged for interviews with one of the leading orthopaedic journals, Beckers Review. The San Francisco Examiner has asked for a series of by-lined articles on bioelectroceutical treatments. The women’s health website, Empowher is running a series of articles on various treatment options with our technology. The articles are reporting on real world experiences in using our drug-free treatments. The next article is about a hospital that is using our products to treat the pain of c-sections eliminating drugs that interfere with nursing.

Strategic Initiatives to Capture the Market

BioElectronics is executing strategic initiatives to ensure that it captures a significant portion of the world-wide market space for bioelectroceutical therapy. The company is doing the following:

Executing an aggressive marketing and sales program in the large European markets and select other global markets;
Continuing high quality clinical research, to further substantiate clinical efficacy and establish more indications of use.


Global Retail Sales and Marketing Program, ActiPatch, Smart Insole, and Allay

Last year, we engaged the Gro-International team (retail brand managers) to position our products for European sales and despite the slow global recovery they have made some significant progress. Our ActiPatch® Therapy product is on the shelves at Boots, the leading pharmacy chain in the United Kingdom and a role model in the industry. Boots is a strategic member of the Boots-Alliance the world’s first global pharmacy-led health and well-being enterprise. Walgreens, the largest drugstore chain in the US, acquired 45% of Alliance-Boots.

The ActiPatch® brand is supported by public relations activity, co-marketing initiatives with Boots and product sampling. Fuel PR International (www.fuelrefuel.com) is a leading European based PR & Advertising firm that is providing support of the launch of ActiPatch in Boots stores and online by:

Positioning ActiPatch as the cost-effective, drug free solution to musculoskeletal pain
Build brand credibility & awareness with consumers in the UK
Conduct public relations campaigns using clinical evidence, expert knowledge and internal experts to establish trust and reinforce credentials of ActiPatch
Drive expert recognition to reinforce product credentials via credible journalists to stimulate a new and more authoritative perspective on ActiPatch
Recruit brand ambassadors – sports performance people and bloggers – introduce them to the product & the concept
This year the company’s new Smart Insole product has been nominated for Most Innovative New Product in the UK’s OTC Bulletin’s awards. ActiPatch® was the runner-up for Most Innovative New Product last year and its new packaging has been nominated this year for Most Creative Packaging in this year’s contest.

Our products caught the attention of several leading interested parties including three of Europe’s largest pharmaceutical companies. We are actively exploring distribution and co-branding licensing proposals with all three.

Retail sales expansion is being addressed with Territorial Distribution Agreements wherein we sell the distributor finished package product and Licensing and Supply Agreements to large over-the-counter (“OTC”) pharmaceutical companies with existing manufacturing and sales and marketing, which we sell only the electronics and collect a royalty. The larger OTC pharmaceutical companies’ sales and distribution are concentrated key markets, which necessitate several license and supply agreements augmented with territorial distribution agreements.

Licensing Agreements can Drive Device Sales in Huge Medical Markets

The licensing and supply agreements proposals offer significant potential advantages to the Company. The most immediate would be product sales to companies with well-established, funded marketing and sales channels, and licensing agreements with royalty income. This strategy maintains our first-to-market advantage while giving us access to a good income stream and marketing power and access to capital (without further dilution). Another advantage would be the spill-over affect associated with this co-branding alliance on our other brands and obtaining additional distribution in other regions.

BioElectronics has developed the devices to maintain the cost of goods below 20%. This cost advantage provides the basis for good up-front fees and royalty payments.

The key to marketing to physicians and other health care professionals is existing relationships and clinical evidence. We are identifying key companies in the following sales channels:

Wound Care dressing manufacturers as an advanced therapy for chronic wounds and post-operative pain.
Manufacturers of orthopedic surgical implants for the treatment of post-operative pain and inflammation.
Sports medicine suppliers of medical wraps and braces.
Negative Pressure Vacuum manufacturers to use our inexpensive device as an adjunctive treatment to negate pain, accelerate healing, and close the wound after removal of the device.
Diabetic wound product suppliers to stimulate healing.
Dental instrument and implant manufacturers.
Physical therapy, chiropractors, podiatrists and other medical specialty suppliers.


Continuing clinical research and development of our pipeline of new products

Continuing high quality clinical research, to further substantiate clinical efficacy and establish more indications of use. Significant progress has been made on this front, with clinical trials on three musculoskeletal pain conditions, plantar fasciitis, acute lower back and osteoarthritis of the knee. Two studies are being conducted on postoperative pain, hernia recovery and 3rd molar extraction. An independent study is also being conducted on venous stasis ulcer wound healing and pain management. All the clinical research is being conducted by well respected, and widely published clinical researchers. At this time the plantar fasciitis study has just been completed. The primary end point of this study was disability and pain at six months after ActiPatch therapy. The results show excellent improvement at the 6 month time point, indicative of tissue remodeling and healing. The subjects had chronic plantar fasciitis presenting with symptoms for an average of 29 months prior to joining the study with high levels of pain and disability.

Rapid progress has also been made on the acute lower back pain and osteoarthritis of the knee studies. Interim results for the acute lower back pain study were very promising.

Ongoing clinical research:

Tufts Dental and Medical Schools (3rd Molar Extraction, Pain & Edema, Myofascial Pain, and Chronic Wounds);
Univ. of Chicago, Medical School (Osteoprogenitor);
Aarhus Univ. Hospital, Denmark (Venous Ulcer Wound Healing);
Univ. Hospital Ghent, Belgium (Bilateral Hernia Surgical Recovery);
Univ. Hospital G. Martin, Messina, Italy (Osteoarthritis); and
Univ. of Otago, Dunedin, New Zealand (Lower Back Pain)


Mechanism of Action Science Defined

There is significant new research being done at the New York State University, Binghamton Clinical Science and Engineering Research Centers. They are conducting research and testing to confirm and explain the mechanism of action of the BioElectronics devices. They have made a significant development in understanding why and how BioElectronics products work so effectively with relatively low power. They have determined that the mechanism of pain relief and increase in tissue healing can be explained due to the phenomena of stochastic resonance – in which a weak period signal is amplified by the noise naturally occurring in the signal. In this case pulsed/periodic signal emitted by the medical device was shown to activate sensory nerves, feedback loop activation of motor nerves and increased blood flow into the treatment area. These measurable changes in the tissue explain why BioElectronics devices reduce swelling and pain so quickly and effectively.

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Exhibit “A”

Summary of Evidence and Effectiveness

The Company has presented the following summary of evidence of safety and effectiveness:

1. US FDA market clearance for the treatment of edema following blepharoplasty (approved for over the eye and brain)
2. US FDA advisory panel meeting May 2103 recommended re-classification to class II for postoperative pain and edema. Musculoskeletal pain was disregarded. No ruling has currently been made. http://www.fda.gov/AdvisoryCommittees/Calendar/ucm346715.htm
3. Over the counter Class IIa market clearance in Canada, European Union (CE Mark) and multiple countries worldwide for the treatment of musculoskeletal, postoperative and menstrual pain.

4. Randomized, Double Blind Placebo Controlled Trials (published):

Plantar Fasciitis: plantar-study-pdf The American College of Foot and Ankle Surgeons in The Journal of Foot & Ankle Surgery stated, “… worn on a nightly basis appears to offer a simple, drug-free, noninvasive therapy to reduce the pain associated with plantar fasciitis.” (p.18) *
Breast Augmentation (Pectoral Muscle Pain Relief) Aesthetics Plastic Surgery – official journal of the European Assoc. of Societies of Aesthetic Plastic Surgery (EASAPS) and Sociedade Brasileira de Cirurgia Plastica (SBCP) BioElectronics-Postoperative-Pain.pdf The CDRH Medical Devices Advisory Committee and Orthopaedic and Rehabilitation Devices Panel’s review of the literature on 5/21/13 noted that the “study did use valid pain assessments and report a reduction in post-operative pain, an effect that was supported by a reduction in the use of analgesic medications”. (p.85)
Blepharoplasty: Aesthetics Plastic Surgery accepted by the former Directors of the Office of Device Evaluation, FDA, Bernard Statland, MD, Ph. D. and Daniel Schultz, MD. (p.82)
5. Randomized, Double Blind Placebo Controlled Trials (not published)

Delayed Onset Muscle Soreness in Marathon Runners (independent study) (p.60)
Menstrual Pain Study (p.64)
Delayed Onset Muscle Soreness bicep muscle compared to acetaminophen (Tylenol) (p.52)
A confirming clinical study (University British Columbia) on subjects with recalcitrant Plantar Fasciitis (average 29 months), with 6 month follow up showed significant improvements in pain and function (foot and ankle disability index) publication 2014.
6. Well-documented case histories (published)

Wound healing of Recalcitrant Ulcers http://www.bielcorp.com/biel/wp-content/uploads/2013/03/ BioElectronics-Chronic-Wound-Case-Series.pdf: (published) International Wound Journal (p.118)
7. Significant human experience with a marketed device

ActiPatch® Consumer Survey – average pain reduction 50% (3.5 VAS points) with ActiPatch® use (p.23)
ActiPatch Marketed in 57 countries – 500,000 units sold; 40+ million treatments
This form of therapy has been used for 80+ years to reduce pain, inflammation and to accelerate healing (over 600 published studies)
6. In Vitro cell studies

Studies on human dermal fibroblasts show increased cell migration to close a “wound” in the cell monolayer. Indicative of a direct action of the electromagnetic field produced by the device to enhance tissue healing.
7. New York State University, Binghamton Clinical Science and Engineering Research Centers research, testing and confirming a physiological response in human soft tissue. A significant development as it has been found that the mechanism of pain relief and promotion of tissue healing is due to the phenomena of Stochastic Resonance – where a weak period signal is elevated by noise, in this case the medical device pulsed/periodic signal has been shown to activate sensory nerves, feedback loop activation of motor nerves and enhanced blood flow into the treatment area. Stochastic Resonance is being utilized in a growing number of medical applications e.g. cochlear ear implants

8. Ongoing clinical research: Tufts Dental and Medical Schools (3rd Molar Extraction, Pain & Edema, Myofascial Pain, and Chronic Wounds); Univ. of Chicago, Medical School (osteoprogenitor); Univ. of British Columbia (Plantar Fasciitis recovery at 26 weeks); Aarhus Univ. Hospital, Denmark (Venous Ulcer Wound Healing); Univ. Hospital Ghent, Belgium (Bilateral Hernia Surgical Recovery); Univ. Hospital G. Martin, Messina, Italy (Osteoarthritis); and Univ. of Otago, Dunedin, New Zealand (Lower Back Pain)

* Mechanism of Action & Clinical Evidence (URL: http://www.bielcorp.com/biel/wp-content/uploads/2014/01/Bioelectroceuticals-Mechanism-of-Action-Clinical-Evidence-Version-16.pdf)



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