From: "Alice Jacobs" <

From: "Alice Jacobs" < › To: "Jeffrey Epstein" <jeevacation(kgmail.com> Subject: FDA Date: Mon, 15 Feb 2010 21:35:26 +0000 Shoot, you probably wanted a short answer. Short answer: FDA diagnostic products are the only way to build a valuable business. Why: If we sell laboratory testing services where doctors send samples to us for testing then we do not need FDA approval. We will obtain a license we anticipate by June to support on-site testing services. Reference testing requires a strong outreach program which we do not have the resources to develop currently. Even with resources, it would take until year end to build out the marketing campaign to realize any upside from outreach efforts. We view this as an opportunity for 2011 to provide testing services for which the FDA currently cannot provide an obtainable clinical trial strategy (such as the cancer causing viruses I was talking to Joe about) In the meantime, we can sell ingredients of a diagnostic test that another clinical lab can incorporate into a test for testing. We registered with the FDA this last week to be able to manufacture these ingredients. To get to the first point of sale my estimate is six months from today. We have a list of 160 hospital lab leads that have expressed interest in purchasing these ingredients. But hospital purchasing processes take a few months at best and setting up accounts takes time. Our intent is to generate $1-$2M from selling ingredients for diagnostic tests in 2010. (FWIW those ingredients are called analyte specific reagents ASR's. So the goal is to sell ASR's by September 2010) ASR's have limitations in terms of uptake (more work for the lab to get to a ready test, sometimes extra work to get reimbursed, relatively low price ceiling—labs pay more for FDA approved tests, and the fundamental barrier to adoption relates to risk—if the hospital buys an ASR and the test fails, the risk falls on the hospital; if the hospital buys an FDA approved test and the test fails, the risk falls on the manufacturer) Therefore ASR's are perceived as a less favorable product. Historically a company that sells ASR's only will be acquired for $20-$40M tops and in this market (FDA becoming more conservative and more reactive--not afraid to send a letter to tell a company that it will be shut down unless it complies, questionable whether or not it would induce an acquisition altogether) That said VC/private equity groups we spoken have all expressed that us obtaining $2M in revenue is their threshold for demonstration of commercial viability We have a number of large market tests that have developed to a stage that we could drop them into clinical trials tomorrow if we had the resources. This is not a huge hurdle financially but any hurdle is large when your just focused on cash conservation. As an example the hospital acquired infection testing I've described to you would probably cost $250k for us to manufacture and we estimate about $500-750k for the clinical trial. If time zero is the moment when we close on a VC round, we anticipate 3 months for clinical trial and 9 months (180 working day) to obtain FDA approval. So we are a year out from time zero to be able to sell an FDA approved product. If I do close on the $1M from this weekend I am tempted to launch into this as we will be perceived a lot more favorably to outside investors if we have already launched a major clinical trial. EFTA00763727 EFTA00763728