bio electronics report (biel)- sizing the opportunity
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AAllqquueemmiiee PPaarrttnneerrss,,LLC
Report on BioElectronics, Corp. Sizing theMarket Opportunity and Assessing PossibleOutcomes for the Company
BioElectronics Corp., which trades under the ticker symbol BIEL is themaker of disposable, inexpensive, drug-free, anti-inflammatory medical
devices and patches. Our six-month target price for these shares is $0.30
to $0.50, assuming FDA actions take place as we expect.
The Company was recently awarded a U.S. patent that protects itsintellectual property and revolutionary product design for a portable PEMF
device that is worn against the skin.
Consumers now have the choice of an effective drug-free therapy-aid inBioElectronics Corporations PEMF patches for managing pain, promoting
healing and speeding surgical recovery. The recent FDA panel
recommendations regarding the potential dangers of acetaminophen, and
their corresponding recommendation to remove Extra Strength Tylenol
from store shelves, has damaged Tylenols brand equity and is beginning
to focus a meaningful amount of attention on BioElectronics.
We believe the market opportunity for the Company's products issignificant, especially as related to the treatment of back pain, menstrual
pain and general musculoskeletal complaints.
The review of multiple FDA clearances is highly probable. Data from arecently announced heel and foot pain study shows a high degree of
efficacy and was produced by a very prominent surgeon. We expect this
to lead to rapid FDA clearance. We also believe the AllayTM product will
receive FDA clearance.
In our view, it would not be unreasonable to see the total marketcapitalization of the Company rise to between $300 million and $500
million, if events take place as outlined above.
Alquemie
Partners, LLC
Quality
Independent
Research
6-Month Share
Target Price:
$0.30 to $0.50
Our Analyst
Certification:
I, Carrie Snyder,independent analyst,hereby certify (1) thatthe views expressedin this researchCompany reportaccurately reflect mypersonal views aboutany or all of thesubject securities orissues reflected in this
Companyreport, and (2) nopart of mycompensation was, is,or will be directly orindirectly related tospecificrecommendations orviews expressed inthis Company report.
Please see importantdisclosures and
Analyst Bio at the endof this report
Email Address:
csnyder@alquemiepartners.com
August 3, 2009
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BioElectronics Corp. Sizing the Market Opportunity
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BIOELECTRONICS,COPORATIONBioElectronics Corp., which trades under the
ticker symbol BIEL, is the maker of
disposable, inexpensive, drug-free, anti-
inflammatory medical devices and patches.
The Company's products contain an
embedded microchip and battery that deliver
pulsed electromagnetic field therapy (PEMF)
directly to the targeted body region. PEMF is
a clinically proven and widely accepted anti-
inflammatory and pain relief therapy that
traditionally has only been obtainable from
very large machines located in clinical
settings or hospitals. BioElectronics was
recently awarded a U.S. patent that protects
the Companys intellectual property and
revolutionary product design for a portable
PEMF device worn against the skin.
Over the past few decades, the medical
industry has made only limited strides in
developing effective drugs and
methodologies for the management of pain.
Several years ago, the U.S. governmentsFood and Drug Administration (FDA)
removed many non-steroidal anti-
inflammatory drugs (NSAIDs) from the
marketplace and an FDA panel recently made
a similar recommendation relative to Extra
Strength Tylenol, citing that acetaminophen
is the leading cause of liver failure in the
United States. Throughout most of the
western world, many consumers have been
conditioned to reach for a pill when
seeking to alleviate pain.
Through the use of BioElectronics
Corporations PEMF patches, however
consumers now have an effective non-drug
choice for managing pain, promoting healing
and speeding surgical recovery.
The Company's PEMF technologies target
multiple applications for both human and animal
use including surgical recovery, healing of
chronic wounds, menstrual pain relief,
musculoskeletal complaints such as back pain,
chronic repetitive stress injuries, heel pain, carpal
tunnel syndrome, and dental and oral surgery
recovery, among other applications. The
Company has developed four main brands to
target these markets: ActiPatchTM, AllayTM,
RecoveryRxTM and HealFastTM.
We believe the market opportunity for the
Company's products is significant and have
examined several scenarios for market size within
various key segments, as outlined in this report.
Given that this report analyzes only a few of the
main market opportunities the Company currently
faces, we would consider this forecast to be
moderately conservative.
Overall, however, we believe the largest market
opportunity for the Company is the treatment of
back pain, followed by the market for treating
dysmenorrhea (menstrual pain) which is also
significantly sized albeit somewhat smaller.Another substantial market opportunity is that for
treating other musculoskeletal complaints as well
as the market for pet and animal therapy
treatments.
We would also note that BioElectronics is
somewhat of a restart Company in that it
experienced product quality problems several
years ago, which have now been solved. New
international distribution has also been
established, clinical studies are quickly coming toa close, and the Company recently filed an FDA
remarketing application and has commented that
several more will be forthcoming.
We believe its very possible the Company could
gain multiple FDA clearances, especially given
the recently completed heel/foot pain study which
could likely lead to indications for heel/foot pain,
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BioElectronics Corp. Sizing the Market Opportunity
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plantar fasciitis and, quite possibly, a wide scale
indication for general musculoskeletal complaints. This
would enable the Company to market its entire
ActiPatchTM product line over the counter (OTC) in the
lucrative grocery and drug store chain markets. We also
believe clearance for the AllayTM Period Relief Patch is
highly likely, as the related data has shown strong
advocacy and 100% user safety.
We also believe it is very important that the Company's
balance sheet has recently been improved through the
elimination of nearly all convertible debentures. One
year ago, convertible debenture balances exceeded
$900,000. Today, balances are likely less than $50,000
and could even go to zero over the next few weeks.
While paying off this convertible debt was expensivefrom a shareholder dilution standpoint, we believe the
vast majority of this delusion is now behind the
Company.
Also, a recent guarantee by the U.S. Export-Import Bank
should enable the Company to meaningfully enhance its
working capital position and allow for further expansion
of its international distribution capabilities.
BioElectronics is also working to expand both its board
and management team, as the Company recently added a
new chairman and several marketing managers to furtherdevelop its brands.
We do not currently hold any concerns regarding the
Companys liquidity, as BioElectronics cost of capital
has fallen significantly since its convertible debt has
been eliminated and replaced by bank financing, made
possible by the Export-Import Bank guarantee, now a
viable option.
While the price of the Company's shares has risen
substantially over the past few months, as clinical trialshave come to a conclusion and an FDA filing has been
made, we believe further upward appreciation is highly
likely as additional trials are completed, more FDA
filings are submitted and as FDA clearances are granted.
With approximately one billion shares outstanding,
BioElectronics market capitalization is approximately
$55 million.
While it is difficult to ascertain the precise value
of multiple FDA indications in two of the key
markets that we believe could be worth perhaps as
much as hundreds of millions of dollars per year
to the Company, we believe it would not be
unreasonable to see the total market capitalization
of BioElectronics rise to between $300 million
and $500 million, if certain key events take place
as outlined above.
We also believe the Company could be a highly
attractive future partner or acquisition candidate
for one of the major consumer products or
pharmaceutical corporations.
Within our targeted potential market capitalization
range, BioElectronics shares could be valued
between $0.30 and $0.50, again assuming these
multiple FDA indications are granted.
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BioElectronics Corporation Sizing theMarket Opportunity and Assessing
Future Stock ValuationThe Company
BioElectronics Corp., headquartered in Frederick, Maryland, is the
maker of inexpensive, drug-free, anti-inflammatory medical devices
and patches. The Company's wafer thin patches contain an embedded
microchip and battery that deliver pulsed electromagnetic field therapy
(PEMF), a clinically proven and widely accepted anti-inflammatory
and pain relief therapy that traditionally has only been possible to
obtain from very large machines located in clinical settings or hospitals.
The Company was recently awarded a U.S. patent that protects its
intellectual property and revolutionary product design for a portable
PEMF device worn against the skin. Furthermore, BioElectronics has
applied for an additional patent, which is currently pending, to further
protect its intellectual property.
The Company's PEMF technologies target multiple applications for
both human and animal use including surgical recovery, healing of
chronic wounds, menstrual pain relief, musculoskeletal complaints such
as back pain, chronic repetitive stress injuries, heel pain, carpal tunnel
syndrome, and dental and oral surgery recovery, among otherapplications. The Company has developed four main brands to target
these markets: ActiPatchTM, AllayTM, RecoveryRxTM and HealFastTM.
Company History and Current Product Development
Status
The management team of BioElectronics acquired its core technology
in the 1990s, after the Companys predecessor firm invested $5 million
in electronic engineering prototypes, production runs and additional
confirming clinical studies. In late 2002, the Company was granted its
first clearance by the FDA. Over the past few years, the management
team has redesigned the offering to reduce product size and
manufacturing costs, while developing new applications for the
technology. In fact, new manufacturing partners have been secured,
enabling the Company to further reduce manufacturing costs and
realize strong margins on product sales.
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Over the past few years, considerable corporate resources have been
expended on domestic and international certifications and clearances.
BioElectronics now has ISO and European Common Market
certification as well as Health Canada approval for the relief of pain in
musculoskeletal complaints.
During 2009, significant progress has been made on clinical studies,
which has recently enabled the Company to file for pre-marketing
clearance from the FDA. On June 15, 2009, BioElectronics applied for
clearance to market its AllayTM Menstrual Pain Therapy product and
the Company has indicated it will also be filing at least two additional
FDA applications over the coming weeks, likely for general surgical
recovery treatment and general musculoskeletal complaints.
Significant corporate resources are also being directed at completing
several ongoing clinical studies, with multiple others currently being
organized. The heel and foot pain study, for example, was recently
completed and initial data from Dr. David Genecov was reported on the
Companys conference call last week. At present, ongoing studies
include cesarean section surgical recovery, breast augmentation
surgical recovery, uveitis (the second leading cause of blindness in the
United States) and hernia surgical recovery, among others.
Furthermore, the BioElectronics management team indicated there are
numerous requests from physicians and healthcare organizations for
additional clinical studies.
BioElectronics is somewhat of a restart company. The Companyexperienced product quality problems several years ago, which have
now been resolved. Our research indicates that the newer versions of
the Companys product are sound and durable, with battery life
duration that easily exceeds the rated capability of 720 hours.
Over the past year, the management team has taken some important
steps that have enabled the Company to remain viable. Specifically,
products lines have been organized into several categories in order to
target specific applications in the areas of surgical recovery, treatment
of musculoskeletal complaints, menstrual pain, and animal related pain
and surgical recovery. BioElectronics has also significantly reducedstaff and expenses while moving core manufacturing offshore, with
final assembly, testing and packaging remaining at the Companys
Frederick, Maryland headquarters.
These actions have allowed the Company to significantly reduce its
losses to where it is now operating at a virtual break even point.
Moving its manufacturing operations offshore and partially redesigning
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the technology packaging, which resulted in reduced costs, has allowed
the Company generate solid gross margin results, similar to those of
other pharmaceutical and medical device companies.
BioElectronics has also taken significant action regarding product
distribution, signing-up new and much higher quality distributors toservice several important markets including Canada, Western Europe,
Korea and the Middle East. Active negotiations are currently underway
for distribution in other markets such as Japan, China and Latin
America, among others.
The Company has also made meaningful progress in improving its
balance sheet. In December 2005, BioElectronics issued $750,000 in
convertible notes with additional notes issued in 2006 for $100,000.
The terms of these borrowing could be characterized as very
unfavorable to both the corporate entity and its shareholders, with
significant company resources having gone toward repayment.
BioElectronics recently announced that virtually all of these notes have
now been eliminated and we expect the balance could be at zero over
the next few weeks.
The elimination of these notes is a major event for the Company and its
shareholders, enabling BioElectronics to significantly reduce its cost of
capital and thereby attract new investors. Another major development
was the recent guarantee by the U.S. Export-Import Bank, which will
allow the Company to greatly improve its working capital position and
augment its ability to service its growing international distributionnetwork.
We believe investors have responded very positively to these
developments, taking up shares at a rapid rate, which has resulted in a
meaningfully higher valuation for the Company and higher daily
trading share volumes that place BioElectronics among the top
traders on the pink sheets.
What We Are Expecting in the Future
The Company has stated its primary corporate objective is thecompletion of clinical trials and the subsequent filing of FDA
applications in order to receive clearance for marketing its products
over the counter in the United States. Additionally, we are expecting
the Company to announce a financial audit and movement off of the
pink sheets and onto the over-the-counter market. It appears
BioElectronics is also strengthening its management team and the
Company has indicated it hired several brand managers to help build its
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marketing programs.
We believe BioElectronics will continue to see resistance among
surgeons relative to the use of its RecoveryRxTM product line. The
management team seems to understand this position, however, and is
appropriately focusing its corporate resources on other areas.Nevertheless, we believe the Company will soon file an application
with the FDA to market its products to the U.S. surgical recovery and
pain relief market.
We believe BioElectronics will likely be successful with its FDA
filings over the coming months. Of particular interest to us is the
recently completed study on heel and foot pain. While the Company
initially indicated it would use this data to file for an indication related
directly to heal and foot pain, it now appears BioElectronics will use
the data to file for a more significant indication of general
musculoskeletal complaints, which would likely allow the Company to
sell its products in the lucrative U.S. grocery and drug store channels.
We believe the FDA will likely find the data from this clinical study to
be very strong and, with this expectation, we believe clearance will be
granted.
We also like the probability of the Company receiving an indication for
menstrual pain, as the recently completed study resulted in 100% user
safety and a very high efficacy rate. We believe BioElectronics
AllayTM product could also be a big winner for the Company, second
only perhaps to a PEMF product specifically targeting the back pain
market.
In our view, an FDA clearance for either the AllayTM product or for
general musculoskeletal complaints opens a world of possibilities for
distribution, strategic alliances or even an acquisition of the Company.
We believe it is possible, for example, that a scenario could develop
where one of the major consumer goods manufacturers seeks to acquire
either the AllayTM or ActiPatchTM products for mass consumer
distribution, with a full acquisition of BioElectronics and its
technologies also a distinct possibility, again assuming all FDAclearances are granted.
We are also expecting the Company to move off of the pink sheets and
onto the OTC market by the end of the year. We expect this could
happen either via a direct application for trading on the OTC market
following completion of a financial audit, or via an acquisition by a
publicly traded OTC company.
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Our Market Capitalization and Stock Value Predictions
Based on the approximately one billion shares outstanding, the current
market capitalization of BioElectronics is approximately $55 million
dollars. We believe this market valuation, and even a higher market
valuation, is supportable based on the substantial market opportunities
currently facing the Company.
We see many internal and external factors currently favoring a
strengthening of BioElectronics. Specifically, the Company has
meaningfully strengthened its balance sheet by paying off of its
convertible debt and, in addition, its working capital position will be
improved as a result of the U.S. Export-Import Bank guarantee. Its
product quality is up significantly and its international distribution
network is growing rapidly. FDA panel recommendations relative to
acetaminophen usage and the adverse impact on the brand perception ofTylenol are also serving to spotlight the Companys drug-free product
advantages.
Clinical studies are quickly coming to a close, and we believe FDA
clearance for one or more of the Companys products is almost
inevitable. Additionally, we are excited about BioElectronics near
breakeven status and what appears to be very strong gross margins, all
of which leads us to believe the Company can be highly profitable even
at modest revenue growth levels. Likewise, accelerated revenue
growth could generate extraordinary profitability. We also do not hold
concerns about the Companys continued viability. It appears multiple
financing sources are currently available to BioElectronics as a result of
a significant reduction in the Companys cost of capital, as its
convertible debt has been paid off, its working capital position has
improved meaningfully and shareholder dilution is quickly
decelerating.
Based on our belief that multiple FDA clearances are likely
forthcoming, we believe a market valuation of several hundred million
dollars is not unreasonable over the shorter term, as FDA clearances are
provided.
We also thus believe it is reasonable to anticipate the market
capitalization of BioElectronics will continue to move higher under
these conditions. If we were to assume a market capitalization of $400
million, for example, following FDA clearance and a probable
distribution agreement with a major consumer goods manufacturer or
distributor, we could expect the shares to be valued at approximately
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$0.40.
History of PEMF TechnologyThe use of magnetic fields in therapy has a long history, with
physicians from ancient Greece, China, Japan and Europe whosuccessfully applied natural magnetic materials in their daily practice.
In fact, 500 years ago, a Swiss physician and alchemist named
Paracelsus questioned whether diseases could be manipulated by
magnets and he experimented to test his theory using lodestones, or
naturally magnetized pieces of the mineral magnetite, as the best
available magnets during that time. However, given that natural
lodestones are quite weak in their magnetic capabilities, few people
paid much attention to his ideas until the discovery of carbonsteel
magnets in the 1700s. Later, during the 1800s, most of the discoveries
relating electricity to magnetism were made by the early pioneers of themodern technical world such as men including Gauss, Weber, Faraday
and Maxwell, among others.
Regarding some of the industrys early scientists, in 1791, Luigi
Galvani demonstrated he could cause a frog's leg muscle to contract
simply by applying an electric current. Later, in 1830, Carlos
Matteucci, an Italian physicist and neurophysiologist who was a
pioneer in the study of bioelectricity, proved that injured tissues
generate an electric current in a series of experiments he pursued until
his death in 1865. Specifically, using a sensitive galvanometer, he was
able to prove that injured, excitable biological tissues generated directelectrical currents.
For the past two hundred years, it has been possible to build magnets,
aptly called electromagnets, from coils of wire powered by electricity.
Given that such devices can be pulsed to produce magnetic fields that
change very rapidly, their discovery served to open a whole new world
of medical applications since changing magnetic fields can induce tiny
electrical currents in human tissue. Historically, as far back as 1890,
the American Electro-Therapeutic Association held annual conferences
on the therapeutic use of electricity and electrical devices by physicians
on ailing patients.
References suggest that Nicola Tesla, the genius inventor and father of
modern physics," first observed the effects of electromagnetic fields on
cells and that cells responded favorably to energy. Specifically, around
1895, Teslas high voltage coil devices, powered by alternating current
(AC) started to become widely known and applied within the energy
power transmission industry in New York. Shortly thereafter, in 1898,
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Tesla published a paper that he read at the eighth annual meeting of the
American Electro-Therapeutic Association in New York in which he
stated that one of the early observed and remarkable features of pulsed
magnetism was its apparent harmlessness, which made it possible to
pass relatively great amounts of electrical energy through the body of a
person. In those early days of PEMF therapy, coils up to three feet in
diameter were used for magnetically treating the body without contact.
In his 1898 paper, Tesla concluded that bodily "tissues are condensers,"
which are the basic component (dielectric, or a non-conducting
substance) for an equivalent circuit only recently developed for the
human body. This unique property of the human body indicates an
inherent adaptation and perhaps innate compatibility toward the
presence of high-voltage electric fields, possibly due to the high trans-
membrane potential already present in cellular tissue. Tesla also
indicated that the after-effects to patients from his coil treatment were
certainly beneficial. Tesla is best known for his plasma energy work
starting around the turn of the century. The original Tesla therapy
devices, called pulsed diathermy devices, were in common use in
hospitals until the 1950s. These devices were dramatically successful,
as are their modern day successors, in treating a wide range of
conditions.
A later theory by Georges Lakhovsky (1869-1942) held that each cell
in the body of an organism, whether plant, animal or a human being, is
in itself a little radio receiver and works on its own unique little
frequency. He considered that each cell, in addition to being tissue as
well as biology, was also electricity. Within this theory, Lakhovsky
held that pathology was a not matter of biological concern or
intervention, but one of electrical concern and intervention.
His philosophy was that "the amplitude of cell oscillations must reach a
certain value, in order that for the organism to be strong enough to
repulse the destructive vibrations from certain microbes." He went on
to say, "the remedy in my opinion, is not to kill the microbes in contact
with the healthy cells but to reinforce the oscillations of the cell either
directly by reinforcing the activity of the blood or in producing on the
cells a direct action by means of the proper rays." The record of histreatment of degenerative disease with what amounts to an early
"energy-medicine" device, Lakhovskys Radio-Cellulo-Oscillator, was
deemed remarkable.
While electrical devices had been in widespread use to manage pain
and cure everything from cancer to impotency, in the early part of the
20th century electromedical current therapy fell into a period of
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disrepute by the medical profession due to its unrefined early electrical
technologies. There was even a period where electrotherapy devices
had become abolished "...and academics frowned upon anyone who
even brought up the subject of electromagnetic therapy.
Fortunately, immediately after World War II, contemporary
magnetotherapy really began when the technology of both magnetic
and electromagnetic fields, generated by various waveshapes of the
supplying currents, was introduced. Starting in Japan, this modality
quickly moved to Europe, beginning in Romania and the former Soviet
Union. During the period 1960 to 1985, nearly all European countries
designed and manufactured their own magnetotherapeutic systems. In
fact, the first book on magnetotherapy, written in 1982 by N. Todorov,
was published in Bulgaria and summarizes the experience of utilizing
magnetic fields for the treatment of 2,700 patients who had 33 different
pathologies.
Furthermore, following the War, from 1944 to 1945, Antoine Priore, an
electrical engineer and inventor, immediately began work to develop an
electromagnetic device which cured cancer. During the 1960s and
early 1970s, his electromagnetic therapy machine was perfected as a
team of leading French scientists demonstrated conclusive, total
remissions of terminal tumors and infectious diseases in hundreds of
laboratory animals. In addition, and remarkably, the animals immune
systems were also restored to normal.
By 1961, it was noted that pulsed radio frequency treatment of a
surgical incision in a dog resulted in less severe edema (swelling) thenin an untreated control group (Cameron, 1961). It was reasoned that if
pulsed electromagnetic energy reduces edema and so accelerates the
acute inflammatory phase of wound healing, it should also enhance the
second and third phases of recovery. Also in the 1960s, a pioneering
medical doctor named Robert Becker established that the Chinese
meridians of the body, or channels along which the energy of the
psychophysical system is considered to flow, are skin pathways of
decreased electrical resistance. He also discovered a host of other
bioelectric effects within the body as well and worked on electrically
stimulating bone growth with Dr. Andrew Bassett, who along with Dr.Arthur Pilla, developed a very effective PEMF generator to stimulate
bone fracture healing later approved by the FDA. By the end of the
decade in 1969, Wolcott, et al. applied electrical stimulation in the
range of 200-800 microamps to a variety of wounds and found that
treated wounds showed a 200% to 500% faster healing rate, with
stronger tensile strength of scar tissue and antibacterial effects on
infected wounds versus the untreated control group.
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One of the more modern and interesting magnetic theories is "Magnetic
Field Deficiency Syndrome" postulated by Dr. Kyochi Nakagawa of
Japan in 1976. Dr. Nakagawa offered it as an explanation of
biomagnetic effects in which he reasoned the earths magnetic field is
not fixed in position or strength but rather, in the last hundred years, it
has weakened on the average by about 6.0% and, in the last thousand
years, it has fallen nearly 30%. Dr. Nakagawa argued that since
humans evolved in a magnetic field, maintaining that magnetic balance
and environment is necessary for proper health. In other words, a
falling magnetic field puts all living beings at risk and magnetic therapy
can serve as a solution to help make up the deficit.
During the 1970s, Andrew Bassett and his team introduced a new
approach for the treatment of delayed fractures, a technique that
employed a very specific biphasic low frequency signal (Bassett et al.,
1974,1977) approved by the FDA to be applied in the United States for
non-union/delayed fractures only. The very effective PEMF generator
developed by Bassett and Dr. Arthur Pilla to stimulate bone fracture
healing holds an 80% success rate. Similar PEMF signals have recently
been used effectively to prevent osteoporosis, even in patients with an
ovariectomy or surgical removal of an ovary(ies).
In 1982, Dr. Bentall, a surgeon, and Timothy Cox, D. Phil., an
electrical engineer, developed the first miniaturized pulsed
electromagnetic device in the form of the Portic Electronic Bandage.
This device and subsequent clinical studies on over 2,000 subjects
helped establish the clinical effectiveness of low power pulsed
electromagnetic energy using a 3-volt lithium battery. Later, the
existence and importance of small electrical charges in the membrane
of all cells was firmly established in 1991 when the Nobel Prize in
Physiology or Medicine was awarded to two German cell physiologists,
namely Erwin Neher and Bert Sakmann, for their discoveries
concerning "the function of single ion channels in cells," as they
successfully measured the incredibly small electrical charge of the cell
membrane.
It is now commonly accepted that weak electromagnetic fields (EMF)
are capable of initiating various healing processes including delayedfractures, pain relief, multiple sclerosis and Parkinsons disease.
(Rosch, Markov, 2004). The FDA has also allowed the use of pulsed
radiofrequency electromagnetic fields for the treatment of pain and
edema in superficial soft tissues and has approved several products for
use in various treatments.
In the year 2000, the New Technology Committee of the American
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Society of Aesthetic Plastic Surgeons evaluated and approved PEMF
treatments for edema reduction, accelerated healing and post operative
surgical pain. Two years later in 2002, the U.S. FDA approved low
dose, extended duration ActiPatchTM Therapy by BioElectronics
Corporation for the treatment of edema following blepharoplasty. The
European Common Market later followed in 2004 when it approved
low dose ActiPatchTM Therapy as a Class II medical device, allowing
sales without a prescription, for all pulsed electromagnetic therapy
indications and retail sales. Importantly, that same year, U.S. Medicare
and Medicaid agreed to reimburse for electromagnetic treatment of
chronic Stage III and IV wounds.
To date, there have been many basic research studies and many clinical
trials of pulsed electromagnetic field therapy. Pulsed electromagnetic
therapy has been used on over 500,000 patients in the United States for
aiding non-fusion bone growth stimulation and other applications.
Powerful electromagnets have also been used in brain and muscle
research to generate currents strong enough to fire nerves that trigger
sensations and flex muscles.
Since the pioneering work of these many early scientists and inventors
over the centuries, PEMF therapeutic applications have been reported
for a wide variety ailments including the reduction of post-traumatic
and post-operative pain and edema in soft tissues, wound healing, burn
treatment and nerve regeneration, among others. Magnetic and
electromagnetic fields are now recognized by 21st century medicine as
real physical entities that promise the healing of various health
problems even when and where conventional medicine has failed.
The Mechanics of Cell Healing and The Benefits of PEMFTechnologyPulsed electromagnetic (PEMF) therapy is a type of healing treatment
that uses electrical energy to direct a series of magnetic pulses through
injured tissue whereby each magnetic pulse induces a tiny electrical
signal that stimulates cellular repair. For decades, physicians and
therapists around the world have used pulsed electromagnetic field
therapy to relieve a host of ailments including to reduce swelling(edema) and inflammation, muscle pulls and strains, to relieve pain and
accelerate the healing of bone fractures, for surgical injuries and
recovery, osteoarthritis, sprains, cuts and bruises and to help heal
chronic wounds, among others.
It is now widely accepted within plastic surgery, orthopedics, sports
and physical medicine and chronic wound care that weak, non-ionizing
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electromagnetic fields exert a wide range of beneficial effects. With
the inexpensive, self-administered micro-technology becoming
increasingly available, other branches of medicine are also beginning to
recognize and utilize the curative benefits of radio frequency (RF)
therapy. In fact, more than half a million patients with chronically un-
united fractures have benefited from the surgically non-invasive
method of PEMF therapy without risk, discomfort or the comparatively
high costs of operative repair.
PEMF therapy is also increasing in recognition and acceptance within
the established health industry. Pulsed electromagnetic therapy is
considered a form of standard care and is a reimbursable treatment in
the United Kingdom and the European Common Market. In the United
States, Medicare and Medicaid will reimburse for the treatment of
chronic stage III and IV wounds. The technology is also currently
being evaluated by major pharmaceutical manufacturers for several
new products. Additionally, the New Technology Committee of the
American Society of Aesthetic Plastic Surgeons has evaluated and
approved PEMF treatments for edema reduction, accelerated healing
and post-operative surgical pain.
Normal, Healthy Cell Function
At the individual cell level, every normal, healthy skin cell or muscle
cell is comprised of an outer membrane layer that encloses the cell,
encasing and separating its inside contents from its outside
environment. The cell membrane monitors and controls the cellsmetabolism by taking in nutrients carried to it by blood vessels and
expelling the resulting waste into the lymph fluid which surround the
outside of the cell. Importantly, to regulate and effect this process, the
trans-membrane charge of a normal healthy cell maintains an electrical
potential in the range of 70 millivolts to 110 millivolts.
Schematic of a Normal, Healthy Cell:
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Source: Bioelectronics, Corp
In order to maintain healthy tissue, normal cells also need to be able tointeract with one another at the cell population or cell network level, a
situation that requires maintaining the integrity of an individual cells
membrane and its effective electrical potential. Specifically, in healthy
tissue, normal cells manage the functions of the body by acting in
groups at the system or population level. In this regard, normal tissue
is characterized by both well connected cells and clear communication
channels among cell populations. In other words, tissues are composed
of cell networks in which healthy cell-to-cell communication relies
extensively on effective cell-to-cell contact. Furthermore, the actions
of these cell populations are very dependent upon the communicationchannels established among the cells in order to create synchronization
among the population. This is important for normal tissue maintenance
and repair, which requires the coordinated activity of multiple cell
types such as in the transport of oxygen and nutrients to a cell via blood
flow and the flushing of toxins out of the cell - crucial under normal
circumstances and of significant importance in the sequence of healing
a wounded cell.
Injured Cells Act Differently
Unlike healthy body tissue, injured tissue is characterized by edema
(swelling). Inflammation can occur following a variety of widely
experienced soft tissue injuries such as cuts, surgical incisions, sprains
and strains (including those in the lower back region), and repetitive
stress injuries such as plantar fasciitis (heel pain), carpal tunnel
syndrome (hand and arms) and so-called tennis elbow, among others.
When soft tissue is damaged, cells in the injured area respond by
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leaking fluid and cellular components break down. Specifically,
following mechanical or other tissue injury, the inflammatory process
initiates a tissue destruction phase in which rapid dilation of blood
vessels and increased vessel leakiness leads to tissue edema (swelling),
which can inhibit the process of wound healing.
Importantly, the damaged cells electrical charge is diminished, causing
normal cell functions and operations to shut down. Unlike healthy
cells, damaged or diseased cells demonstrate an abnormally low
membrane potential of only 40 millivolts to 50+ millivolts, well below
that of normal cells. At these levels, the cell is unable to carry out its
complex metabolic functions. The diminished electrical potential of an
unhealthy cells membrane results in impairment of the cells ionic
pumping activity, as regulated by its membrane, and consequently the
normal speed of cellular metabolism is greatly reduced. Thus, when
injury or disease destroys the normal electrical balance of the
membrane, and metabolism is consequently slowed, causing the
removal of waste to back-up inside the cell, the injured or diseased cells
release chemical signals that cause inflammation, resulting in swelling
(edema) and pain.
Schematic of a Damaged or Diseased Cell:
Source: BioElectronics, Corp.
Furthermore, when the electrical balance of the cell membrane is
comprised due to cell injury and swelling, crucial cell-to-cell contact
channels and cell-to-cell communications necessary for synchronization
amongst the population, and thus healing, are destroyed. When the
body receives an injury during surgery, or from trauma such as a sprain,
the danger of infection is minimal. Nevertheless, the body will respond
to the injury by swelling, in order to prevent an infection. Swelling, in
turn, separates the cells to prevent the transmission of potential
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infection. Likewise, under infectious conditions, tissue edema serves to
disconnect the adjacent cells within the surrounding tissue in order to
prevent the spread of infection. This response is known as the
inflammatory process and consists of a rapid tissue destruction phase
followed by a longer duration tissue repair phase. The initial
destruction phase is evidenced by redness, heat, swelling and pain in
the tissue. Unlike infections conditions, however, in the case of non-
infected trauma or aseptic surgical procedures, inflammatory responses
cause discomfort and pain without contributing to the healing process.
In viewing a wounded skin cell with edema, it is possible to see how
the cells have been pushed apart into a chaotic pattern with interstitial
fluid interrupting the normal synchronized cellular communication,
which adversely affects the healing process as disconnected cells
cannot heal. Edematous tissue is characterized by disconnected cells
and a build-up of noxious agents as well as the release of dilation
agents like nitric oxide.
View of a Wounded Cell:
Source: BioElectronics, Corp.
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The Three Phases of Healing
Inflammation Phase
The healing process actually begins at the moment of injury, as the
bodys repair response is initiated immediately. Under a biological
phenomenon known as the inflammatory cascade, the presence of tissue
injury or pathogens in the bloodstream elicits an inflammatory response
and results in edema in the area of injury which is responsible for the
onset of pain and swelling.
The main function of the inflammatory phase is phagocytosis of
bacteria, which is the process used by the human body to destroy dead
or foreign cells. It is important to note that phagocytosis is not
essential for aseptic, non-invasive or normal wound healing.
Proliferation Phase
The proliferation phase is characterized by the migration of new cells
and the formation of granulation tissue, or the perfused, fibrous
connective tissue that replaces a fibrin clot in healing wounds. It is
during the proliferation phase, around the third day following an injury,
that collagen is first detected in the wound. Large quantities ofcollagen serve to form the extra-cellular matrix (ECM) that is
responsible for imparting tensile strength to the wounds or injured
areas scar tissue.
As a side note, most of the cells in multi-cellular organisms are
surrounded by a complex mixture of nonliving material that makes up
the extra-cellular matrix. This matrix is secreted by the cells and
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consists of protein fibers embedded in an amorphous mixture of huge
protein-polysaccharide ("proteoglycan") molecules and, in the case of
bone, mineral deposits. In biology, the extra-cellular matrix is the
extra-cellular part of tissue in humans and certain animals that usually
provides structural support to cells in addition to performing various
other important functions. The extra-cellular matrix is the defining
feature of connective tissue whose cells are embedded in a great
amount of extra-cellular material.
Maturation Phase
Almost as soon as the extra-cellular matrix is established, its
reorganization begins. In a process known as remodeling, there is a
gradual change in the cellular composition and vascularity of the
reparative tissue. Wound contraction, or inward movement, is another
important step in the healing process. Early inflammatory reduction,
such as that delivered via PEMF therapy, and wound closure can help
reduce scarring and increase the healed areas tensile strength.
Untreated Cells Heal in a Random, Chaotic Pattern
There are many factors that can influence the course of healing
including appropriate blood flow to an injured area, transport of oxygen
to the wound, edema and the inflammatory reaction of damaged cells as
well as the bodys overall nutritional status in which vitamins A, B, C
and D are all essential, as are proteins. Additionally, the use of drugs
such as steroids, among others, and any underlying pathologies(diabetes, renal failure etc.) clearly impact the bodys ability to heal
well.
Just as healthy tissue maintenance and repair requires the coordinated
activity of multiple cell types, while damaged cells are under repair,
and the electrical potential of their membranes are deficient, the normal
cell-to-cell communication and cell-to-cell alignment activity that
would otherwise take place between healthy cells fails to occur, thereby
inhibiting healing. The effects of this deficit can be seen in the
micrograph below contrasting healthy cells with injured, swollen cells.
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View of a Healthy Cell View of a Swollen Cell
Source: BioElectronics, Corp.
If untreated, the formation of new extra-cellular matrix can be random,
haphazard and chaotic, as occurs under the normal healing process.
That is, without PEMF therapy, the natural, untreated healing process
can be slower and the tensile strength of the healed skin can be lower
than under PEMF administered therapy.
If, on the other hand, formation of the new matrix is able to take place
via a facilitated and more organized process, the healed wound tends to
be stronger and requires less remodeling. PEMF therapy works to
restore healthy membrane electrical potential, resulting in enhancedlymphatic flow that facilitates a cleaning-up of the wounded area.
Dead cells and interstitial proteins are more rapidly removed from the
injured cells and tissue area, enabling wounds to heal stronger and scar
less than PEMF-untreated cells. In fact, PEMF treatment can improve
a wounds appearance 50% faster than untreated wounds.
The micrograph below shows actual skin treated by PEMF solutions
from BioElectronics product line in order to ensure the physical
alignment of the cells, necessary for effective cell-to-cell
communication in the healing process, in the newly formed extra-
cellular matrix.
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View of Skin Treated by BioElectronics PEMF
Therapy Products
Source: BioElectronics, Corp.
PEMF Therapy Accelerates Natural Healing in Cells
Effective PEMF treatment, such as that delivered by the Companys
product line, has been shown to have a therapeutic effect when used in
the treatment of connective tissue injury in humans.
In swollen tissues, cell-to-cell communication is greatly reduced and/or
impaired, resulting in poor coordination between cells involved in the
repair process and delayed healing. In the absence of normal cell
contact, induced electric fields can be used as a coordinating signal to
synchronize the activity of the cells within the damaged tissue area,thereby returning cells and the tissues they comprise to a normal level
of functioning within a shorter period of time than if left untreated.
BioElectronics PEMF therapy solutions use an ELF (extremely low
field) system to project an indiscernible electrical current into damaged
cells at a frequency that recharges them to their normal level of electric
potential. This system is able to target only the swollen cells and apply
an induced electro-medicating field across their cell membrane, with
the effect of restoring the energy, or electric potential, of the swollen
cells membrane to its normal, healthy state so that the cells own
natural healing process can work better toward a full recovery of thetotal cell.
By restoring the normal charge of the cell membrane, PEMF therapy is
able to stop the cells release of inflammatory mediators and reestablish
normal cell interaction. PEMF therapy facilitates improved micro-
vascular perfusion of damaged tissue, resulting in a faster clearing of
edema fluid and a more rapid elimination of many of the noxious
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agents such as nitrous oxide and histamine, among others, released into
tissue following an injury. These mechanisms provide an environment
in which cell-to-cell communication in the involved tissue area is re-
established. By helping to re-establish coordinated cell activity in
injured tissue, PEMF therapy can induce an immediate reduction in
swelling and inflammation of the damaged tissue, and decrease the
associated pain of tissue injury, and contribute to a beneficial
acceleration in the bodys normal the healing process.
Schematic of a Cell Treated with Effective PEMF Therapy:
Source: BioElectronics, Corp.
Thus, to enhance the healing of non-infected injuries, the therapeutic
goal of PEMF therapy is to induce the tissue to rapidly pass through, orby-pass, the tissue-damaging phase of the inflammatory process and
move to the tissue repair mode. In the case of BioElectronics, the
Companys PEMF solutions have the benefit of boosting the natural
healing process in injured or swollen cells by:
Penetrating through the skin in a non-invasive manner to reachand deliver treatment to muscles and tendons;
Increasing lymph flow around the injured cell, therebyreducing swelling;
Reducing bruising by helping the lymph fluid remove wasteproducts faster;
Restoring synchronization among the injured tissue cells and; Accelerating the migration of new skin cells.
Additional benefits include the rapidly improved appearance and
increased tensile strength, and hence an improved quality, of newly
formed skin as well as the reduced risk of infection. Importantly to
Effect ive PEMF
Therapy Res tores
Cel l Membrane
Elec t r ica l Potent ia l
to Normal Levels
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many patients and medical professionals, PEMF therapy also represents
a drug-free solution to pain relief and healing.
Today, most electro-therapies utilize induced electric fields in the
extremely low frequency (ELF) range of 3Hz-3000Hz. The earliest
demonstrations of induction of cell coordination by induced ELF
electric fields (Wachtel, 1979) showed that electric fields at intensities
in the range of 100-1000 V/cm2 were sufficient to initiate
synchronous cell activity within seconds of application. Subsequent
studies by McLeod et al, 1987, showed that cell ensemble activity
could be influenced by induced electric fields as low as 30 V/cm, as
long as exposures extended for four hours or more. More recent studies
(McLeod, et al., 2000) indicate that cell ensemble activity can be
significantly influenced by induced electric fields as low as 1 V/cm
when using continuous exposures as applied over several days.
BIOELECTRONICS PRODUCT OFFERING
BioElectronics Corporation is in the business of putting proven medical
technology into advanced miniaturized electronics to create convenient,
efficacious and cost-effective therapies to help change the way people
heal. PEMF therapy is a proven safe, effective alternative for many
musculoskeletal disorders and there is a growing body of research
evidence showing its effectiveness in speeding surgical recovery and in
reducing, or completely eliminating, the amount of pain medication
required, with no known side effects.
Specifically, BioElectronics Corporation is the maker of patented,
inexpensive, drugfree, anti-inflammatory medical devices and patches
as developed and based upon underlying, and proven-to-be-theraputic,
PEMF technology. The Company's wafer thin patches are applied
directly to the skin and contain an embedded microchip and micro-
battery that deliver pulsed electromagnetic energy, a clinically proven
and widely accepted anti-inflammatory and pain relief therapy that
heretofore has only been possible to obtain from large, facility-based
equipment. Furthermore, product testing has shown that this
wearable technology is easy to apply, comfortable to next to the skin
and, most importantly, has been shown to be highly effective.
While PEMF technology has been proven safe and effective in
hundreds of peer-reviewed scientific studies, historically it has not been
made widely available to the individual consumer or even to smaller,
more economically conscientious medical practitioners due mainly to
the size of delivery mechanisms and cost. Until recently, and with the
advent of the BioElectronics product line launched several years ago,
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PEMF devices have been very expensive, large-scale devices and/or
high-powered machines that administer the therapy in limited sessions,
usually based in clinical settings such as clinics or hospitals. Now,
however, BioElectronics is making the product available to the general
public for home use.
Through the use of advanced micro-circuitry established over the past
decade of research and development, engineers at BioElectronics have
successfully shrunk or down-sized this technology into a portable,
wafer-thin device that can be worn directly on the skin as a patch in
order to relieve pain, swelling and speed healing, often cutting the
healing time of cuts, bruises and soft tissue injuries by more than half.
Furthermore, as consumers and the U.S. Food and Drug Administration
become more aware of the potential dangers of drugs such as
acetaminophen, the main ingredient in many well known pain killers
including the Tylenol brand, consumers are increasingly searching foralternatives, including non-drug options. BioElectronics portable, self-
administrable PEMF technology-containing patches represent an
interesting and sought-after solution for many consumers, patients and
medical community members.
BioElectronics Significant Patent Holding
In June 2009, BioElectronics received a significant new patent from the
United States Patent and Trademark Office, representing an important
event for the Company. This patent protects BioElectronics
Corporation's systems and techniques for applying an electromagnetic
field to bodily tissue, including a self-contained and, importantly,
portable electromagnetic field generating device disposed over a
surface of body tissue, such as the Companys skin patch delivery
format.
This key patent, which relates specifically to a portable PEMF device
that is worn next to the skin, including a patch of any size or shape for
example, represents broad, exclusive protection for the very
fundamental portable technology of BioElectronics unique PEMF
therapy line and covers a wide variety of product opportunities. By
being granted this critical patent, the Companys existing products and
many new future product opportunities are protected from imitation and
would-be competitors.
The Companys new patent ensures BioElectronics ability to be the
sole provider of this PEMF technology in a wearable and portable form
factor, likely increasing the value of the Company significantly as
consumer awareness about the benefits of PEMF therapy grows and
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future product lines become available from the Company.
BioElectronics has also applied for an additional patent to further
protect its intellectual property. While it is difficult at present to
predict when the U.S. government patent office will issue its
determination, should the Company be granted a patent as requested, it
would mean significant further intellectual property protection for
BioElectronics in this important field.
While the management team at the Company has done a good job in
protecting its intellectual property rights in the U.S. market thus far, we
would note there may be some issues relating to international
protections. Internationally, intellectual property protection is an
expensive process requiring resources that are currently beyond the
capabilities of this Company. As BioElectronics progresses in its
business growth, however, we would expect the management team to
take steps to gain any needed international intellectual propertyprotections.
Market Opportunity
The market potential for PEMF therapy products is significant and
growing substantially, likely representing a possible market opportunity
of hundreds of millions of dollars per year on a worldwide basis.
For decades, physicians and therapists around the world have used
pulsed electromagnetic field therapy to relieve a host of ailments and
accelerate healing, including use for reducing swelling (edema) and
inflammation, muscle pulls and strains, relieving pain, accelerating
bone fracture repair, facilitating surgical injury recovery, osteoarthritis,
sprains, cuts and bruises and to help heal chronic wounds, among other
applications. Over the past few years, it is now becoming more
generally accepted within plastic surgery, orthopedics, sports and
physical medicine and chronic wound care areas that using electrical
energy to direct a series of magnetic pulses through injured tissue
exerts a range of beneficial effects, as each magnetic pulse induces a
tiny electrical signal to stimulate cellular repair and accelerate patient
healing. Nonetheless, despite the technologys long-time existence and
more modern day introduction into the field of healing, the actual
addressable markets that could benefit from PEMF therapy remain both
under-informed and underserved.
While many people suffering from injury, recovering from surgery and
even enduring general physical discomforts could likely benefit from
PEMF treatment, much of the consumer/patient population as well as
the medical community at large are either unaware or do not often
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recognize the opportunity to consider use of effective PEMF therapy as
an option or solution. Likewise, until recently, most forms of
delivering PEMF therapy have been limited to very expensive, large-
scale devices/high-powered machines that administer the therapy in
limited sessions, usually based in clinical settings such as clinics or
hospitals. This situation has had the effect of making beneficial PEMF
treatment cost prohibitive and relatively unavailable to the public at
large, even potentially excluding those would-be users with the
foresight to recognize its advantages.
Today, however, all this is beginning to change, representing an
exciting opportunity for PEMF therapies in the field of healing and pain
treatment. Specifically, as the general public and the U.S. Food and
Drug Administration become more aware of the potential dangers of
drugs such as acetaminophen, the main ingredient in many well known
pain killers including Tylenol, medical providers and
patients/consumers are increasingly searching for alternatives. As these
groups look for effective alternatives to traditional pain killers and
medications of all types, and as information about PEMF therapy and
its effects become increasingly available, including through many
currently important ongoing clinical studies, both awareness and
demand for PEMF solutions will likely rise. This in turn is expected to
lead to substantial increased market penetration of affordable and
convenient PEMF products in both the pain medication and injury
healing markets.
Cost effective and widely available PEMF therapy products, such as the
Companys portable ActiPatchTM, Allay, RecoveryRxTM brands, face
a significant global opportunity to address the growth in demand for
solutions to alleviate pain and provide injury/post-surgery healing,
particularly as awareness of PEMF solutions increases, as people look
for effective non-drug alternatives to pain killers and as the absolute
number of patients and surgical procedures rise with a growing
population and, in the United States, the aging and increasing medical
needs of the baby boom generation.
Below we examine the value potential of just a few of the very large
and growing market segments for which PEMF therapy, and henceBioElectronics products, are applicable.
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Global Pain Pharmaceutical Market
According to certain estimates, the global pain pharmaceutical marketis set to become a serious growth area, experiencing a compoundannual growth rate of 4.56% to 2012. With the world market currentlyvalued at approximately $34.0 billion in 2009, revenues are forecastedto increase to just under $40.0 billion in 2012. Specifically, the non-narcotics market alone is set to dominate the pain relief market over theforecast period 2007-2012, accounting for almost 36.8% of marketrevenues by 2012 and well set for growth through the next 15 years.
Currently, the major market areas for drug-related options to treat avariety of sources of pain include the anti-migraine market, the anti-rheumatics (medical problems affecting the joints and connectivetissue) non-steroidal market, the narcotics market and, of course, thenon-narcotics market. We believe that as there are clearly R&D
opportunities for new-comer industry players to the painpharmaceutical market, PEMF therapy and all its associated benefitsalso has a distinct opportunity to participate meaningfully in thistherapeutics growth sector going forward, a role which is already onlyjust beginning to take place today.
Below is a brief analysis of the global pain pharmaceutical market andthe potential value to the PEMF industry, and BioElectronics, ofacquiring a modest market share stake by replacing the drug-relatedtreatment with an alternative PEMF solution.
2009 2010 2011 2012
Industry Compound Annual Growth Rate: 4.56% 4.56% 4.56% 4.56%
Global Pain Pharmaceutical Market (millions of $'s) $33,892 $35,437 $37,053 $38,743
PEMF Market Share Analysis:
Value of a 0.25% market share stake $84.7 $88.6 $92.6 $96.9
Value of a 0.50% market share stake 169.5 177.2 185.3 193.7
Value of a 0.75% market share stake 254.2 265.8 277.9 290.6
Value of a 1.00% market share stake 338.9 354.4 370.5 387.4
Value of a 1.50% market share stake 508.4 531.6 555.8 581.1
Value of a 2.00% market share stake 677.8 708.7 741.1 774.9
Value of a 2.50% market share stake 847.3 885.9 926.3 968.6
Value of a 5.00% market share stake 1,694.6 1,771.9 1,852.7 1,937.1
C-Section Market
In 2006, the last year for which data is available, the rate of U.S. birthsby C-section hit an all-time high of 31.1%, or 1.34 million births via c-
section out of a total 4.3 million births that year. America leads the
world with one of the highest percentage rates of C-sections performed
per births, in addition to Italy and Australia.
To target this market, BioElectronics has developed a Caesarian
Section Recovery Kit for drug free pain relief and accelerated healing.
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The product is designed to treat cesarean section surgery pain without
the use of drugs and to speed healing of the incision. The use of drugs
after a cesarean section is a major concern to both obstetricians and
new mothers, as many pain medications can be transferred via breast
milk with unknown consequences to the newborn.
The analysis below demonstrates the approximate value to the
Company of participating in the U.S. C-section surgery market. With
1.34 million procedures performed per year and a product sales price of
$40.00 for BioElectronics Caesarian Section Recovery Kit, inclusion
in this market segment alone could become of significant value to the
Company. As a side note, these estimates are conservative as we are
using a price point here of only $40.00 for the purpose of this analysis,
whereas BioElectronics is currently charging $50.00 per unit.
Total C-Section Surgeries Performed in the U.S. 1,340,000Sales Price of BioElectronics PEMF Product
$40.0
PEMF Market Share Analysis:
Market Share
Stake
Market Share
Value
1.0% market share stake 13,400 $536,000
1.5% market share stake 20,100 $804,000
2.0% market share stake 26,800 $1,072,000
2.5% market share stake 33,500 $1,340,000
5.0% market share stake 67,000 $2,680,000
10.0% market share stake 134,000 $5,360,000
15.0% market share stake 201,000 $8,040,000
20.0% market share stake 268,000 $10,720,000
25.0% market share stake 335,000 $13,400,000
Market for Cosmetic Procedures & Surgeries
In 2008, the American Society of Plastic Surgeons reported a total of
12.1 million cosmetic procedures. Of these, 1.7 million were cosmetic
surgical procedures with the top five being breast augmentations, eyelid
surgery (blepharoplasty), liposuction, nose reshaping (rhinoplasty) and
tummy tucks (abdominoplasty). In addition to the millions of cosmetic
procedures performed last year in the United States, there were 4.9
million reconstructive procedures performed for breast reduction, hand
surgery, laceration repair, scar revision and tumor removal, amongothers.
The table below outlines the approximate value to the Company of
participating in the U.S. cosmetic surgery and reconstructive
procedures market, with a combined total of approximately 6.6 million
such procedures performed last year. At a product sale price of $40.00
for its RecoveryRx line of PEMF therapies for the medical market,
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BioElectronics inclusion in this sector could also become of significant
value to the Company. The size of this market may also be
underestimated, as we are again using only a $40.00 price point for the
product where as BioElectronics currently prices each unit targeting
this area at $50.00.
Total U.S. Cosmetic Surgical Procedures: 1,700,000
Total U.S. Surgical Reconstructive Procedures: 4,900,000
Total 6,600,000
Sales Price of BioElectronics PEMF Product $40.0
PEMF Market Share Analysis:
Market Share
Stake
Market Share
Value
1.0% market share stake 66,000 $2,640,000
1.5% market share stake 99,000 $3,960,000
2.0% market share stake 132,000 $5,280,000
2.5% market share stake 165,000 $6,600,000
5.0% market share stake 330,000 $13,200,000
10.0% market share stake 660,000 $26,400,000
15.0% market share stake 990,000 $39,600,00020.0% market share stake 1,320,000 $52,800,000
25.0% market share stake 1,650,000 $66,000,000
The obsession of Americans to look young drives demand for cosmetic
surgery and the large and growing market for cosmetic surgery
procedures is projected continue to grow in the United States going
forward, reaching $15.13 billion by 2012. In Europe, the second
largest market for cosmetic procedures, cosmetic surgery is a $2.2
billion business and growing. These trends should continue to drive the
need for post-operative care products, presenting an excitingopportunity for PEMF therapy solutions such as those supplied by
BioElectronics. This market is clearly a significant opportunity for the
Company and, importantly for BioElectronics, it could perhaps
represent a field in which there would be few competitors due to the
Companys strong intellectual-property protections on portable PEMF
technology therapy.
Back Pain Market
While there is clearly a meaningfully sized market for cosmetic and
reconstructive surgery recovery therapy, potentially worth tens of
millions of dollars per year to the Company, it pales in comparison to
the significant opportunity presented by one of the most common
human ailments, namely, musculoskeletal complaints. While this is
especially true regarding the substantial market for treating back pain,
additional opportunities exist in other types of musculoskeletal
complaints such as sore knees, tennis elbow, heal and foot pain, plantar
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fasciitis and a host of other similar types of conditions.
Due to the difficulties in sizing all of these markets, this report will
focus on what we believe is the largest of these - the market for treating
back pain.
According to the U.S. National Institute for Occupational Safely andHealth (NIOSH), back pain is one of the most common and significant
musculoskeletal medical problems in the world. In fact, some 80% of
adults seek professional care at some point for low back pain, and one
third of all disability costs in the United States are due to lower back
disorders. A surprisingly high 16.2 million office visits result from
back pain conditions each year.
Other notable statistics that make the back pain sector of particular
importance as a large business opportunity to the injury and healing
products market include the following facts:
Back injuries are the leading cause of disability in the UnitedStates for people younger than 45 years of age and representthe most expensive health care problem for people between 20years and 50 year old;
Approximately 1.0% of the United States population ischronically disabled due to back pain and an additional 1% istemporarily disabled and;
Each year, two percent of the United States work force hascompensable back injuries each year.
Patients suffering from back pain consume more that $90 billion
annually in health-care expenses, with approximately $26 billion of that
amount directly attributable to treating back pain. Furthermore, a study
by Duke University found the annual per capita expenditures for
patients with back pain were 1.6 times higher than those without back
pain. These increased expenditures were found in all categories
including inpatient charges, office visits, prescription drugs, outpatient
care, home health care and emergency room care. Back pain is
classified into three categories, based on the duration of symptoms, as
acute (pain that has been present for six weeks or less), sub acute (a six-
to 12-week duration) and chronic (longer than 12 weeks).
The chart below indicates the potential value of the Companys PEMF
therapy solutions for the U.S. back pain market based on the number of
office visits resulting from this condition each year.
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Total U.S. Office Visits from Back Pain: 16,200,000
Sales Price of BioElectronics PEMF Product $40.0
PEMF Market Share Analysis:
Market Share
Stake
Market
Share Value
1.0% market share stake 162,000 $6,480,000
2.0% market share stake 324,000 $12,960,000
5.0% market share stake 810,000 $32,400,00010.0% market share stake 1,620,000 $64,800,000
15.0% market share stake 2,430,000 $97,200,000
20.0% market share stake 3,240,000 $129,600,000
25.0% market share stake 4,050,000 $162,000,000
30.0% market share stake 4,860,000 $194,400,000
35.0% market share stake 5,670,000 $226,800,000
In Europe, the situation is no different. Lower back pain is a major
health and socio-economic problem throughout the region and the
second leading cause of sick leave. An EU Commission study recently
suggested that a very significant 67 million people suffered pain in their
lower or upper back in the previous week. The lifetime prevalence hasbeen estimated at anything between 59% to 90%, and in any one year,
the incidence of back pain is reported to be about 5.0% of the
population. Furthermore, while most episodes of low back pain settle
after a couple of weeks, many have a recurrent course with further
acute episodes affecting 20% to 44% of patients within one year in the
working population and lifetime recurrences of up to 85%, making
effective solutions to back pain and helping to aliviate back pain
suffering a very important market.
As can be seen from the analysis below of the European back pain
market, if only a fraction of those complaining of back pain at any
given time sought relief and treatment via PEMF therapy, the market
for BioElectronicss ActipatchTM could quickly become enormous.
Menstrual Pain and Market
Earlier this year, BioElectronics announced a revolutionary, drug-free
Total European Population Experiencing Back Pain: 67,000,000
Sales Price of BioElectronics PEMF Product $40.0
PEMF Market Share Analysis:
Market Share
Stake
Market
Share Value
1.0% market share stake 670,000 $26,800,000
2.0% market share stake 1,340,000 $53,600,000
5.0% market share stake 3,350,000 $134,000,000
10.0% market share stake 6,700,000 $268,000,000
15.0% market share stake 10,050,000 $402,000,000
20.0% market share stake 13,400,000 $536,000,000
25.0% market share stake 16,750,000 $670,000,000
30.0% market share stake 20,100,000 $804,000,000
35.0% market share stake 23,450,000 $938,000,000
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treatment for the pain and discomfort associated with menstruation, for
which we believe there is a significant market opportunity. Various
researchers estimate between 60% and 70% of women suffer from pain
during menstruation, with millions of women experiencing pain severe
enough to restrict their daily activities.
There are currently approximately 300 million people in the United
States with roughly half or about 150 million representing women.
Assuming approximately one third are of childbearing age, the total
potential addressable market for the Company's AllayTM product
becomes around 50 million women in the United States. Gaining only
a 5.0% market share of this segment would represent a significant
market opportunity for the Company of approximately 500,000 women.
Considering each AllayTM product lasts for approximately three periods
(over three months time), many women would likely purchase up to
four units per year. At $40.00 per unit and a 5% market share,BioElectronics could easily experience revenues of $80 million per
year in the United States, with the European market likely being
equivalently sized.
Below, we have speculated some possible market sizing scenarios
relative to the Company's Allay Period Relief Patch Product.
Menstrual Pain Market Opportunity
Total women in the U.S.A. (approx. half the 300MM population): 150,000,000
* 1/3rd are of childbearing age: 50,000,000
* Approx. 20.0% experience severe to moderate mentral pain: 10,000,000
Allay brand for menstrual pain (one patch good for 3 month duration) product price: $40.00
* Product sales per year (12 months): $160.00
PEMF Market Share Analysis:
Market
Share Stake
Market
Share Value
1.0% market share stake 100,000 $16,000,000
2.5% market share stake 250,000 $40,000,000
5.0% market share stake 500,000 $80,000,000
7.5% market share stake 750,000 $120,000,000
10.0% market share stake 1,000,000 $160,000,000
12.5% market share stake 1,250,000 $200,000,000
15.0% market share stake 1,500,000 $240,000,000
17.5% market share stake 1,750,000 $280,000,000
20.0% market share stake 2,000,000 $320,000,000
Veterinary Market
BioElectronics recently entered the veterinary care market in early
2009 when the Company launched its HealFast Therapy electro-
treatment line for dogs, cats and horses (equine). Based on the
Companys same ActiPatch technology, HealFast Therapy is a
drug-free line of wearable patches sized for pets to fit the wound or
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sore joint of the animal. HealFast helps rapidly restore normal cell
function and accelerate healing, speeding the healing of muscle and
tendon injuries in animals.
BioElectronics offers three separate product lines for dogs, cats and
horses (equine), with each product line comprised of three distinct
offerings:
HealFast Therapy Kit for chronic pain conditions, includingsore muscles, tendons or joint pain in which the patch can bedirectly positioned over the swollen location or joint withoutputting adhesive on the pet's fur;
HealFast Flex Loop Pet Patches for boosting the speed andstrength of healing following surgery where the patch can beapplied by veterinarians over surgical wounds using themedical tape of their choice and;
The HealFast Crescent Patch for sores or abrasions.In the United States, the veterinary services market is estimated to be
an approximate $28 billion per year industry. While animal hospitals
and clinics treat injuries and diseases, they derive most of their revenue
from animal health procedures like neutering and spaying, vaccinations
and regular checkups.
As further evidence of the importance of the U.S. market for veterinary
services and products, the United States has more dogs per capita than
any other country in the world. According to the American Pet
Products Manufacturers Association 2007-2008 National Pet Owners
Survey, there are approximately 74.8 million owned dogs in the UnitedStates, 75% of which are spayed or neutered, with dog owners spending
an average of about $219 on veterinary visits (vaccine, well visits)
annually.
Furthermore, there are approximately 88.3 million owned cats in the
United States, 87% of which are spayed or neutered, with cat owners
spending an average of about $175 on routine vet visits per year.
Additionally, there are approximately seven million prized animal
status horses owned in the United States. Owners and trainers of these
important animals spend a significant sum of money each year for their
care and treatment, likely in the range of several thousands of dollars or
more per year. We believe the equine market alone is very significant
and will likely be the sector in which the Company places the majority
of its emphasis.
We also believe there is a substantial market in the greyhound racing
industry. Within the greyhound racing industry, there is a strong
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emphasis on animal safety and a corresponding extensive screening
process to detect for performance enhancing drugs. Considering
HealFastTM is a drug-free and non-invasive treatment, we believe many
greyhound racing owners could be interested in using this treatment on
their animals. The BioElectronics management team is apparently
working with at least one greyhound racing association in Europe and
we expect information on this topic to be forthcoming.
The potential for participating the veterinary care market in the United
States alone is significant and this product line could easily be spun-off
into a separate publicly traded company. We believe BioElectronics
could best be served, however, by targeting its limited resources on the
equine and older pet canine markets, although other racing animals
such as greyhounds could also represent a meaningful market
opportunity.
As can be seen from the brief analysis below, if a modest percentage ofpet owners purchased products from the Companys HealFast
Therapy line in a given year, the revenue stream to the Company from
this market could quickly become relevant. In our analysis below, we
use an average HealFast product price of approximately $63.00.
Owned Dogs in the United States: 74,800,000
Owned Cats in the United States: 88,300,000
"Prized Horses" Owned in the United States: 7,000,000
Total 170,100,000
Average Price - All Product Lines $63.28
PEMF Market Share Analysis:Market Share
StakeMarket Share
Value
1.0% market share stake 1,701,000 $107,644,950
2.5% market share stake 4,252,500 $269,112,375
5.0% market share stake 8,505,000 $538,224,750
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Acetaminophen, also known as paracetamol, is
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