EQUITY RESEARCH
April 30, 2002 Paul J. Resnik, CFA
UPDATE
Biophan Technologies, Inc. (BIPH)
Setting the Pace in Implantable Device Technology
Market Data
Current Price (O-T-C BB): 1.12 Common Shares Outstanding: 29.6 million
52-Week Price Range: 7.25-0.75 Market Capitalization: $33.2 million
Company Description
Biophan Technologies, Inc. is a development stage company that seeks to redesign pacemakers and other implantable medical devices to be MRI (magnetic resonance imaging) compatible and unaffected by other forms of electromagnetic interference as well. The Company owns the rights to a proprietary technology developed by a team including Wilson Greatbatch, the inventor of the original implantable pacemaker and its lithium battery. Mr. Greatbatch is Chairman of Biophan’s Scientific Advisory Board and a member of the Board of Directors as well as a major shareholder. Biophan currently has forty technology patents pending, including one for the first implantable semiconductor laser for diagnostics and electrostimulation (pacing the heart). Additionally, Biophan has acquired the rights, along with the patents, to develop a treatment for AIDS using “antisense” technology, also invented by Mr. Greatbatch.
Recent Developments
Management
Biophan announced the appointment of Dr. Guenter H. Jaensch as Chairman of the Board on March 13th. Dr. Jaensch previously headed Siemens Pacesetter, Inc., (now St. Jude, the third largest manufacturer of pacemakers), as Chairman and CEO from 1991 to 1994. In this position, he negotiated a major cross-licensing agreement with Medtronic, Inc. (MDT-46) and played a key role in the sale of this business to St. Jude Medical (STJ-80) in 1994. We believe the addition of Dr. Jaensch to the management team brings important operating expertise and industry contacts to BIPH and represents a major positive development.
Patents
On February 13th, BIPH announced the filing of four additional patent applications, bringing the total number of pending patents to 16. The new patents cover both traditional metal leads and the Company’s new fiber optic leads. The improvements covered in the new patent filings include catheter design, electrode materials, and hermetic sealing of components. On March 26th, BIPH announced the filing of an additional 22 patents containing over 1,000 claims covering over one dozen medical devices. It is BIPH’s intention to offer a strategic advantage to companies it will partner with by broadly covering the field with intellectual property.
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In reviewing, BIPH’s patent strategy, it is clear that the Company is developing a broadly applicable technology platform and that temporary and implantable pacemakers represent only the first application of this platform. Importantly, FDA approval of the initial application would validate the platform so that many more products could be developed with the modest incremental investment of different electrode design. BIPH would then be in a position to claim “substantial equivalence” for what are inherently less risky devices which would simplify FDA approval requirements.
Testing
BIPH is currently formulating a plan for trials of its pacemaker technology to prove safety, MRI-compatibility and equivalent performance with existing pacemakers for submission to the Food & Drug Administration. Testing on animals may commence as early as the second quarter.
Financing
During, the November quarter, BIPH raised $3,326,250 sale of restricted stock at $1.00 per share in a private placement ($425,000 was received during December) and the conversion of a bridge loan. The Company is currently engaged in a $3,000,000 private placement.
Financial Releases
BIPH released its third (November) quarter financial report on January 15th. In the quarter, the Company posted a $1,146,169 million loss. At the end of November, BIPH’s cash and marketable securities position stood at $1,065,588 reflecting its recently completed financing (not including the $485,000 received in the February quarter). Quarterly losses are expected to average $500,000 during the remainder of the year.
Liquidity
Liquidity has improved for this issue. Average daily trading volume has increased to over 30,000 shares, with activity spiking to over 100,000 shares on several occasions.
Other Developments
- BIPH has discovered that its core technology is also applicable to several interventional devices that are contraindicated for MRI. As an example, “transluminal coils” are inserted in body cavities such as the esophagus to provide a much richer image by having the MRI receiving coil closer to the tissue. There are complex procedures needed to keep the wire from heating up and this limits the image quality and bandwidth. BIPH’s fiber-optic solution can be applied to improve transluminal coils, and its patents cover this. It is also difficult to see exactly where a catheter tip is in an MRI machine. BIPH’s technology can be applied here as well. Almost any time there is a need to power a sensor or stimulating device, temporary or implantable, BIPH’s technology can make it MRI safe.
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- On February 5th, BIPH announced that Raymond Damadian, M.D., inventor of magnetic resonance imaging (MRI) diagnostics, would work with Wilson Greatbatch, inventor of the pacemaker, on the development of an MRI-compatible pacemaker. Dr. Damadian, CEO of FONAR Corporation, a manufacturer of MRI diagnostic equipment, will offer its equipment, labs and staff to assist the Biophan team.
Updated Projected Milestones
2002
Develop temporary pacemaker
Get FDA approval on protocols
Commence animal testing
2003
Commence human testing of temporary pacemaker
Commence sales of temporary pacemaker
2004
Develop MRI safe/compatible pacemaker and commence clinical trials
Summary and Investment Conclusion
Biophan Technologies is developing technologies and devices that address multi-billion dollar markets. The need for these technologies and devices is well documented and compelling. The existing risk of the MRI procedure to patients who have pacemakers and other devices is substantial. Deaths have been reported. In addition, we believe the inability to properly diagnose with pacemakers because of precluding of MRI procedures results in significant additional costs to the health care system.
The Company’s portfolio of patents and patents pending is based on work done by a respected inventor with an impressive track record. Recognizing the risks inherent in any development stage company, particularly one in the health care field where extensive testing and eventual government product approval is required, we believe that Biophan represents an exciting investment opportunity for investors for which these risks can be accepted.
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This study is not a complete analysis of every material fact respecting any company, industry, security or investment. Opinions expressed are subject to change without notice. Statements of fact have been obtained from sources considered reliable but no representation is made by the author as to their completeness or accuracy. The author may own or have a position in any securities or investments mentioned in this study, which position may change at any time and may, from time to time, sell or buy such securities or investments. The author of this study has received remuneration from Biophan Technologies for consulting services. Neither this study, nor any opinion expressed herein, should be construed as an offer to sell or a solicitation of an offer to acquire any securities or other investments mentioned herein.
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Resnik Research Services
Resnik Research Services provides research reports on and advisory services to emerging growth companies. Paul Resnik, its principal, has over thirty years of experience in the investment industry. Mr. Resnik is also the President of Resnik Asset Management Co., Inc. (RAMCO), a registered investment advisor. Prior to founding RAMCO, he held executive positions at major investment firms including Merrill Lynch, Paine Webber, E.F. Hutton, Shearson Lehman Brothers and Smith Barney.
Mr. Resnik’s career has been a blend of portfolio and security analysis and investment strategy. At E.F. Hutton, he created the firm’s Equity Research Marketing Department. In this position, he provided investment guidance to the firm’s representatives and, at public seminars across the country, to individual investors. At Lehman Brothers, he was a member of the highly rated Equity Research Department’s Investment Policy Committee, which, in addition to working with security analysts in determining common stock investment rating, selected the firm’s well-known annual “Uncommon Values” list.
He has trained thousands of industry professionals in economic relationships, portfolio management, and stock analysis and selection. Many people who have worked for him have gone on to become top-rated analysts.
His professional designations include Chartered Financial Analyst and Registered Supervisory Analyst. He is a member of the Association for Investment Management and Research (AIMR).
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