Chairman of BioElectronics Corporation Letter to Shareholders

Chairman of BioElectronics Corporation Letter to Shareholders

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The following is a letter from the Chairman of BioElectronics Corporation (OTC Pink: BIEL) to shareholders:

October 22, 2015

Dear Biel Shareholders:

This has been a busy last few months that has resulted in some very positive news for BIEL shareholders and I want to take a few minutes to put these events in perspective.

It has been about three years since Andrew Whelan and the BioElectronics management team put together and communicated to you our four strategic initiatives which were:

1. Execute an aggressive marketing and sales program in large European markets and select other global markets;
2. Develop political and public support to compel the US FDA to recognize our therapeutic solution to provide an alternative to the devastating side effects and addictions of OTC and prescription drugs;
3. Continue high quality clinical research to further substantiate clinical efficacy and establish more indications of use; and,
4. Lower our cost of capital to finance expansion.

Let me briefly discuss each of these.

As a Marketing Professor at the Fuqua School of Business at Duke University, I continually tell my students that launching a new product is never an easy task. For BIEL the hurdle was particularly high. Not only are we a small firm with constrained resources and limited access to working capital, but our product had almost no brand awareness or market acceptance. At that time our distributors in Europe were working through the medical profession to establish some limited distribution. Although this approach was working to some extent, we decided that we needed to take a new, bold approach and try to market our product ourselves and to do this through over the counter (OTC) channels. This led us to look for one or more retail chains that would carry our product. Just about two years ago we were able to get limited distribution in Boots UK Limited, the largest and most well-known pharmacy chain in the UK. Our next task was to generate sales even though we had no brand awareness and Boots was not willing to aggressively market ActiPatch®. This coupled with the fact that our prior marketing research indicated that consumers were skeptical of the efficacy of our product and thus were not likely to buy it just because they saw it on the retail shelf, told us that we had a tough road ahead unless we came up with a creative approach. Our challenge, then, was to show Boots and the world that our product would sell and we needed to do this by first making consumers aware of the benefits of our innovative product and then getting them to try it and spread the word about its efficacy. And we had to do this with a limited marketing budget. Clearly this was a daunting task, but one that I am happy to report was executed successfully.

Our approach was unique and innovative. We first settled on targeting chronic pain sufferers versus going after those with acute pain. Next, we used a combination of public relations, Boots customer reviews, charities websites, and social media to generate some initial buzz about our product. However, the key marketing initiative was to offer potential customers a trial product that lasted seven days at a price of about $5. We knew that if the pain sufferer tried the product for this amount of time that a clear majority would find substantial and sustained relief. We started this sampling program about 15 months ago and since then we have sold over 80,000 7-day trial devices. Another major benefit of obtaining these trial users has been the establishment of a massive email data base allowing us to survey them and in the process gain substantial amounts of data about how much ActiPatch® impacts their baseline pain, how they use ActiPatch®, how likely it is to improve their quality of life, and their purchase and repurchase behavior of our commercially available 720-hour product at the retailer’s regular price. The net of all this is that we can show retailers that by offering “skeptical” potential buyers the option of buying the 7-day trial product initially, the majority of triers find clinically significant pain relief and consequently will continue to buy the 720 hour product for years to come. Current estimates are that use of a 7-day trial product will result in about 50-60% of the triers purchasing the 720 hour retail ActiPatch® and over the next year these users will purchase another 2-3 devices. Thus, the life-time value of this newly acquired customer is substantial. We continue to track the sampling and the resulting sales and feel confident that this innovative marketing approach will continue to result in ever growing sales volumes.

Due to the success of this approach Boots positioned ActiPatch® more prominently in their stores and nearly doubled the number of their pharmacy’s carrying ActiPatch®. Not surprisingly ActiPatch® is currently their largest selling analgesic on their website. Building on this achievement, we just received an order from the second largest retail chain in the UK, Lloyds Pharmacy Limited, to stock 1,077 of their outlets and another one from Gordon Chemists who have over 60 outlets. In addition, we have received several inquiries from other retail chains who are looking to stock and sell ActiPatch® in their stores. The bottom line of all this is that we have found an economical way of launching our product into new markets and it is gratifying to see the resulting positive customer response after they try our product. This is because for the first time there is a solution available to them that enables the majority of the chronic pain sufferers to get substantial and sustained pain relief with no adverse side effects. All this leads to strong brand loyalty, great word of mouth promotion and multiple repeat purchases. It also means that these chronic pain suffers are able to improve the quality of their lives and decrease their use in systemic analgesic pain medications, including reductions in opioid-based analgesics.

Given this success we are now leveraging our newly gained experience in other markets. Thus, in Canada we have recently launched the sale of ActiPatch® through a distributor using the same “Try and Tell” program and this distributor is finding similar success. We expect to have some very large sales coming soon. More info will be announced when the ink dries on the purchase orders.

Needless to say, a marketing campaign is only as good as the product that is being marketed. The market is telling us that ActiPatch® is a great product. It represents a paradigm shift in pain management behavior. It is clear from our customer survey data that the majority of chronic pain sufferers are getting lasting relief. The net result is a strong and loyal customer base that will continue to grow over time. We see this approach of getting trial and then preference as the backbone of being able to successfully launch our product not only in the UK, but also in numerous other countries.

With respect to point 2, we previously put out a brief press release noting that last week’s announcement from the FDA was very good news for BIEL. The U.S. Food and Drug Administration’s final rule 890.5290 on nonthermal pulsed shortwave devices will assist our efforts to win clearance to market over-the-counter in the US as it is already allowed in the majority of countries around the world. I expect that the good clinical data resulting from our third strategic initiative, continuing high quality clinical research, coupled with our strong consumer survey data and the hard work by our management and legal team will push that ball over the goal line and allow us to finally win OTC clearance in the US for ActiPatch® Therapy.

Results of our clinical studies have continued to be very positive and are generating more interest in trying our technology on new indications. We will have more to say on this at a later date.

I wish I could report substantial gains on our fourth strategic initiative, i.e., to reduce the cost of capital. We had hoped to have more success in building interest in funding our ongoing work. With this noted as our sales results continue to improve we believe we have a more complete and compelling story. We continue to seek substantial partners either though equity or distribution agreements.

We are poised to move out of the development stage with this company and fulfill its potential as we change the way people heal and successfully manage their chronic pain. I thank you for your continued support.

Richard Staelin
Chairman of the Board
BioElectronics

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Contact: Paul Knopick, 940.262.3584, pknopick@eandecommunications.com