First Warning Systems, Inc.
Breast Cancer Early Detection System
US
EU/UK & Russia
Executive Summary
1.
EXECUTIVE SUMMARY
1.1
FIRST WARNING SYSTEM INTRODUCTION
First Warning System™ (FWS) is a novel, disruptive breast health screening device and method based on tissue health biology measured by Predictive Analytics software technology. The FWS is the first non-invasive breast physiology screening system, with much more sensitivity and cost effectiveness than mammography for screening.
The goal of the FWS is not to replace diagnostic mammography, but to provide a means for more accurate, efficient, and improved early detection when used as part of the annual physical exam and/or the monthly breast self-exam (BSE), as well as use in therapeutics monitoring and screening for those subjects outside the current screening recommendations.
The technology platform has applications for hospitals, women’s health clinics, research centers and the target markets of the OB/GYN and primary care in-office use, as well as potential use as an over-the-counter (OTC) screening system. Three clinical studies including more than 650 women have been completed yielding compelling results, demonstrating an average accuracy of 92.1% (percentage of correct classification), an average sensitivity of 94.7% (true positive cases), and an average specificity of 91.1% (true negative cases). In comparison, the specificity and sensitivity of the gold standard mammogram averages 70%.
Independent primary market research1 with physicians, patients and managed care executives indicates FWS addresses an unmet need to identify breast tissue abnormalities, as part of the annual physical, more reliably and much earlier than other screening modalities.
1.2
BUSINESS STRATEGY
Finalize the development of state-of-the-art hardware with analytic software integration and bring to market the first non-invasive, non-radiogenic early cancer screening system using Predictive Analytics software to report an objective breast tissue profile as a Clinical Decision Support System (CDSS), addressing an $11B capturable annual market.
1.3
ADDRESSABLE MARKET PROBLEM
• 70% accurate published statistic for mammography is for a limited population ages (40-70) • Not Effective: < age 40 because of dense tissue
• 6.4% of women under age 44 (NCI data) die from breast cancer • 37.5% of women over 70 (NCI data) die from breast cancer
• Uncomfortable/Compression: 33% do not take test in annual physical • Toxic: repetitive use screening causes excessive radiation exposure
• 750,000 potentially unnecessary biopsies annually US that are negative but mammography results
recommended a biopsy
• Mammography compression busts cancer cells releasing into body (Lawrence Livermore,
November, 2011 paper
• Mammography is not effective as a frequent screening protocol
1.4
SITUATION SUMMARY & ACCOMPLISHMENTS
First Warning Systems is a medical device and software company which has completed a robust proof of concept with plans to launch marketing and sales operations in early 2013. To date, FWS’ accomplishments include:
Independent Primary Market Research
1. Market research results place current value of company (pre-revenue) at $23M (US Market Only), by LSSG
2. Market research results project future value of company (post revenue) at $160M (US Market Only ), by LSSG
3. Market research results show 83% of women will use the system
4. Market research results show 60% acceptance, on average by Clinicians, 87% for high risk patients-See Section detailing consultants conclusions regarding clinician acquisition rate
Accomplishments include:
1. Raised over $13M of capital investment
2. Completed three clinical trials demonstrating proof of concept
3. Achieved product accuracy up to 90% as compared to 70% of mammography
4. Demonstrated effectiveness for women under age 40 and those with dense breast tissue where mammography is not recommended because of ineffectiveness
5. Awarded four patents
6. Completed and awarded a 510 (k) for marketing clearance in the U.S. on the hardware device 7. Completed design of the fourth generation of the system, prototyping underway
8. Developing a strategic, interested go-to-market partner for EU/UK and Russian markets 9. Closing on Series A of $1,000,000 at $0.50 per share
10. Planning Series B for $5M at no less than $1.50 per share
11. Developed a strategic plan to achieve an estimated $17.01 per share by 2016
1.5
TOTAL ADDRESSABLE & TOTAL AVAILABLE MARKET
12.38% of US women born today will be diagnosed with cancer of the breast at some time during their lifetime.250,000 US women living with the disease are under the age of 40.
US EU* Russia* Total
# of Women Ages 20-70 112M 95M 66M 273M
# of Doctors** 225,405 191,594 134,115 551,114
# of Uses (126)** per year-TAM 28.4M 24.1M 16.7M 69.2M
Interpretation Revenue TAM-$19 ea $540M $458M $321M $1.3B
Device Revenue TAM-$180 ea $5.1B $4.3B $2.1B $11.5B
Total Addressable Market $5.64B $4.76B $2.42B $12.8B
Total Available Market $4.85B $4.09B $2.08B $11.02B
• Projections are based on annual use. Additionally, if used monthly as a BSE, the usage rates and revenues could be 12x
• *EU estimated at 85% of US market of 150M women ages 20-70; Russia is 70% of EU.
• **Our Primary Market Research with Life Sciences Strategy Group states a clinician will use First Warning device 126 times per year in average practice in annual physical.
1.6
TOTAL CAPTURABLE MARKET:
REVENUE PROJECTIONS - 2016
Markets
Total ($-M) US, EU Russia
Sales
$ 539,783Expenses
$ 359,285EBITDA
$ 180,498• 33% EBITDA/Sales
• ** EU/UK sales start early ‘13 • *US Sales start in 2015
1.7
CLINICIAN US, EU/UK, RUSSIAN PENETRATION (NOTE: LSSG CAPTURE
RATE)
’13
’14
’15
‘16
# of EU Docs Captured 2,508 7,453 21,267 32,429
# of Russian Captured 1,755 5,217 14,887 22,700
% EU/Russia Capture Rate* 1.6% 5.2% 11.1% 14.7%
# of US Docs Captured 3,606 11,721
% US Capture* 1.6% 5.2%
Total # Uses (126 per Yr) 84,950 798,245 2,504,898 4,211,578
*
LSSG REPORT1.8
CAPITAL REQUIREMENTS
$5.1M ($0.5M raised in current Round A)1.9
RISK MANAGEMENT
Key Business Plan Variables
Risks 2013 2014 2015 2016
# of Clinicians
4,263 12,671 39,760 66,850
Clinician Acceptance Rate 1.60% 5.2% 12.7% 19.9%
Annual Interpretations 84,950 798,245 2,504,898 4,211,578
Daily Interpretations 337 3,168 9,940 16,713
Risk Management Strategies
Risk
Management Strategies
CE Mark Approval Partner with CE approval experience will manage EU/UK Clinician
Acceptance
EU/UK Localized Marketing will communicate appropriately for each culture. Key Opinion Leaders will reference product validity as will white papers from the CE approval testing. KOLs in place in London & Hungary.
Acceptance research says 60% will use. FDA US Approval
Sales Delay
Revenues from UK/EU, Russia, plus Developing Countries Predictive Analytics
Accuracy
Current results confirm minimum of 74%. Additional patient profiles increase Predictive Model Accuracy. NB: Mammography 70% accuracy is for ages 40-70; FWS accuracy is for ages 20-70
Product Acceptance by Women
Market research panels will provide product feedback to meet consumer needs Marketing Program
Acceptable to Women
Plan CEO & VP Marketing to be women Software Engineering
Expertise
Software engineering being led by a senior technologist with over 35 years of development experience
Product Liability Product Liability Insurance Operating Costs
Impact on Margins
Cloud computing model very scalable with increased operating efficiencies
Manufacturing Quality Will contract with experienced ISO/FDA facility who will follow FWS quality plan developed with Emergo medical device consultants
1.10
VALUATION
Current Valuation of $22.8M was independently established for the U.S. market only through primary market research conducted by Life Science Strategy Group (LSSG). With a much clearer path to revenue, the First Warning pre-market valuation from LSSG research needs updating to include EU/UK & Russian market opportunities.
First Warning Valuation (M)
2012 2016** US Market* $ 23 $ 160 EU/UK Market $ 19 $ 136 Russian Market $ 14 $ 95 $ 56 $ 391 # of Shares-est. 16.5 23
Estimated Per Share $2.42 $17.01
*Life Sciences Strategy Group, US Qualitative Market Opportunity Assessment of a Novel Breast Cancer Detection System Prospector Report, 6/10/2010
**Product completion for a 2 hour monitoring period
1.11
EXIT STRATEGY
Merger with strategic partner or acquisition for comprehensive markets or EU/UK and Russian markets only.