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Wednesday, 05/30/2012 11:16:07 AM

Wednesday, May 30, 2012 11:16:07 AM

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recent 10Q filing for FDA : The determination by the FDA that our CTLM® imaging technology will now be recognized as a DOT device and that there are no other DOT devices known to the FDA, presents us with a unique technological opportunity. Essentially, IDSI could be the first medical imaging company to file a PMA application for a Diffuse Optical Tomography breast imaging device. Since the FDA has identified CTLM® as a class III device, a formal clinical study will be required to obtain PMA approval. We have begun the PMA process and plan to use clinical studies previously collected from 2006 to 2010, if permitted to do so by the FDA, in addition to new studies we plan to collect over the next several months.

Essentially, the FDA has stated that the CTLM® technology will require a full PMA application based on a DOT clinical imaging format. Previously collected patient data from 2006 to 2010 was based on a protocol identifying CTLM® as an “adjunct to mammography”. We believe that our technology has always been based on a DOT scientific principle, that our


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patient collection technique will not change with a future DOT protocol, and that the patient inclusion/exclusion criteria for the new study will not change. Consequently, it is our belief that previously collected and non-analyzed patient data may be allowed by the FDA to be included in a future DOT protocol. This belief will either be accepted or rejected during the official pre- IDE meeting, which is a pre-clinical meeting, to be held at the FDA.

Although we have collected substantial clinical data from 2006 to 2010, it is very likely that additional cases will be needed to support the statistical analysis protocol devised to demonstrate safety and efficacy of the CTLM® system. Ultimately, the FDA must decide as to how many patient cases will need to be bio-statistically analyzed to support the CTLM® “intended use” claims. We would rely on our independent bio-statistician regarding the actual number of case studies required; however, the FDA has the ultimate authority to determine the number of clinical cases needed for the PMA application. Like other governmental institutions, the FDA prefers to reserve the right to make bio-statistical determinations on an individual case-by-case basis. Therefore, it is very likely that a clinical trial will need to begin again, which will require approval by an IRB (Institutional Review Board - an organization required to review and approve clinical protocols outlining the study to be conducted at the hospital or imaging sites). In addition, after the collection of clinical data is completed, a “radiologist reading study” of the clinical cases will be required and a statistical analysis of the results of the “reading study” will have to be performed in order to support the "Intended Use" and demonstrate safety and efficacy of the CTLM® system prior to PMA submission.

We need to secure funding to continue with the PMA process. If funding is obtained, then we can begin to: contract with the FDA regulatory consultants, contract with the identified clinical sites (hospitals and imaging centers) to collect the clinical data, seek an IRB approval of the clinical protocol, which could take up to 30 to 120 days, place the CTLM® system at the selected sites, train the clinical staff on the CTLM® system and the clinical protocol at the selected sites, and recruit patients to volunteer for the clinical study.

Our main hurdle for completion of the PMA application is our lack of financial resources. Historically, we have contracted with outside FDA consultants both for guidance and to ensure that our FDA related submissions meet FDA requirements, as we did not have sufficient resources to hire qualified full-time FDA clinical staff. Further, this approach is more cost effective than employing full time FDA experienced staff that will not be required once FDA marketing clearance has been obtained. Our management has identified FDA regulatory consultants who have proven ability in achieving FDA marketing clearance for diagnostic imaging devices. We cannot move forward until such time as we secure sufficient financing to engage these FDA regulatory consultants.

In previous filings, management had disclosed the potential to have our CTLM® device approved through the FDA “De Novo” process. This process would only become an option to us if the FDA did not approve our 510(k) premarket notification of intent to market the device. While waiting for a ruling from the FDA on our 510(k) premarket notification of intent to market the CTLM®, management continued to research the advantages and disadvantages regarding the potential option to initiate a De Novo application if the FDA determined our traditional 510(k) application to be “Not Substantially Equivalent”. Our research identified several articles illustrating the potential pitfalls of going down the De Novo pathway. One such article from Medical Device Consultants (MDCI), a full service contract research organization and consulting firm that helps emerging and established firms commercialize novel and innovative medical devices, dated March 21, 2011( included below ) best summarizes the issues that we would face if we choose the De Novo pathway.

“The De Novo process has been around since the implementation of the FDA Modernization Act of 1997 (FDAMA). The FDAMA was intended to help improve the efficiency of bringing low-risk medical devices to market, allowing for simpler reclassification of devices that were classified as Class III due to the lack of a suitable predicate. The section of the FDAMA that handled this aspect of medical device classification (Section 513(f)(2)) became known as the De Novo process.

De Novo is a two-step process that requires a company to submit a 510(k) and complete a standard review, including an analysis of the risk to the patient and operator associate with the use of the device and the substantial equivalence rationale. Once that has been accomplished, and the medical device in question has been determined to be Not Substantially Equivalent (NSE) by the FDA, the product is automatically


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classified as a Class III device. The manufacturer can then submit a request for evaluation of Automatic Class III designation to have the product reclassified from Class III into Class I or Class II. The FDA will review the device classification proposal and either recommend special controls to create a new Class I or II device classification or determine that the product is a Class III device. If FDA determines that the level of risk associated with the use of the device is appropriate for a Class II or Class I designation, then the product can be cleared as a 510(k) and FDA will issue a new classification regulation and product code. This also adds the device in question to the predicate pool, which in turn broadens the market for other medical device companies considering products in a similar therapeutic area. If the device is not approved through De Novo, then it must go through the standard premarket approval (PMA) process for Class III devices.

The number of FDA NSE determinations due to the lack of a suitable predicate is very low for those low risk medical devices that have the potential for reaching the market via the De Novo process. Medical device manufacturers are attracted to the cost efficiencies associated with the De Novo process when compared against the investment and post-market FDA oversight associated with a PMA. Unfortunately, the time to market for devices eligible for the De Novo process can be very long.

FDAMA calls for the FDA to review and return a decision on a De Novo reclassification submission within 60 days of receipt (the initial submission must be sent by the manufacturer within 30 days of receiving NSE notification). In practice, however, the amount of time taken to review De Novo requests by the FDA and issue the special controls guidance has risen from 62 days in 2006 to 241 days since 2007. Tacked on to the 510(k) review times, devices traveling the De Novo pathway average 482 days of review time from beginning to end.

Further compounding the delays associated with De Novo is the fact that the entire process resembles a procedural “black hole.” The FDA is not required to provide any updates concerning the status of a De Novo application, nor is there any simple way for medical device manufacturers to track a De Novo submission on their own.

De Novo is rare in the realm of low-risk medical devices – a mere 54 products took this particular route between 1998 and 2009. Given the extensive delays associated with the process, MDCI advises medical device companies to consider all other market approval pathways before deciding on to pursue a De Novo reclassification.”

Prepared by Benjamin Hunting, Cindy Nolte, and Helen Mayfield
MDCI Blogging Team”

Understanding that the above statements were a fair representation of the regulatory industry's general feelings towards the FDA De Novo process, management decided to accept and heed the FDA's letter (received on August 2, 2011) detailing their decision of CTLM® being “not substantially equivalent” and furthermore, accepting their recommendation that CTLM® is a class III device that would require a PMA submission. Other considerations such as comparing time frames between De Novo and the PMA process were taken into account. The average De Novo application took 482 days to be reviewed compared to the average PMA review of 284 days. In addition, upon further review, both the De Novo and PMA process require virtually identical clinical safety and efficacy data; therefore, the PMA path was chosen. Management has identified potential FDA regulatory consultants who can guide us through the complete PMA application process and is presently in contract negotiations with several prospective consulting firms.

In summary, our management team believes that the more structured and proven PMA application approach with its semi-rigid timetable for mandatory responses would provide us with the best route to achieve marketing clearance for our innovative new imaging modality that in the future will be classified as Diffuse Optical Tomography.

The CTLM® system is a Diffuse Optical Tomography (DOT) CT-like scanner. Its energy source is a laser beam and not ionizing radiation such as is used in conventional x-ray


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mammography or CT scanners. The advantages of imaging without ionizing radiation may be significant in our markets. CTLM® is an emerging new imaging modality offering the potential of functional molecular imaging, which can visualize the process of angiogenesis which may be used by the radiologist to distinguish between benign and malignant tissue. X-ray mammography is a well-established method of imaging the breast but has limitations especially in dense breast cases. While x-ray mammography and ultrasound produce two dimensional images (2D) of the breast, the CTLM® produces 3D images. Ultrasound is often used as an adjunct to mammography to help differentiate tumors from cysts or to localize a biopsy site. We believe the CTLM® will be used to provide the radiologist with additional information to manage the clinical case; help diagnose breast cancer earlier; reduce diagnostic uncertainty especially in mammographically dense breast cases; and may help decrease the number of biopsies performed on benign lesions. Because breast cancers nearly always develop in the dense tissue of the breast (not in the fatty tissue), older women who have mostly dense tissue on a mammogram are at an increased risk of breast cancer. Abnormalities in dense breasts can be more difficult to detect on a mammogram. The CTLM® technology is unique and patented. We intend to develop our technology into a family of related products. We believe these technologies and clinical benefits constitute substantial markets for our products well into the future.

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http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=8632452


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