A Letter from President Andrew J. Whelan

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October 24, 2013

Dear Fellow Shareholders:

I want to report on the progress we’re making on the four-part growth strategy I articulated in my last letter to shareholders.   I said that the path to success for BioElectronics would focus on the following four ongoing efforts:

1) Executing an aggressive marketing and sales program in the large European markets and select other global markets;
2) Developing political and public support to compel the US FDA to recognize our therapeutic solution to the dire need for an alternative to the devastating side effects and addictions of OTC and prescription drugs;
3) Continuing clinical research to develop new products and substantiate our efficacy in more indications; and,
4) Lowering our cost of capital to finance expansion.

 

First – Global Marketing Program

Earlier this year we engaged the Gro-International team to position our products for European sales and despite the slow global recovery they have made progress.   We shipped our ActiPatch® Therapy product this month to Boots, the leading pharmacy chain in the United Kingdom and a role model in the industry.  Boots pharmacies are a strategic member of the Boots-Alliance, the world’s first global pharmacy-led health and well-being enterprise.  Walgreens, the largest drugstore chain in the US, acquired 45% of Alliance-Boots in August.  ActiPatch will be available to UK customers on Boots.com on November 1, and will be on store shelves around the country starting next week.  We are using the Gro-International team and the UK firm, Fuel PR International to facilitate this launch.

The innovation award we won from OTC Bulletin in March has yielded more than a good-looking plaque.   Our products caught the attention of several interested parties including three of Europe’s largest pharmaceutical companies.   We are actively exploring distribution and co-branding licensing proposals with all three. In each case these proposals offer significant potential advantages to the company.  The most immediate would be product sales to companies with well-established, funded marketing and sales channels, and licensing agreements with royalty income.   This strategy maintains our first-to-market advantage while giving us access to a good income stream and marketing power and access to capital (without further dilution). Another advantage would be the spill-over affect associated with this co-branding alliance on our other brands and obtaining additional distribution in other regions.

 

Second – Developing political and public support to compel the US FDA to recognize our therapeutic solution

The Obama administration has tasked the FDA to deal with two critical situations.  The first is the CDC declared “epidemic of prescription drug abuse” that is killing about 43 Americans each day – or about 16,000 annually.   The second is the anticipated demand for physician services from the 47 million new patients who could potentially enter the systems as a result of the Affordable Healthcare Act.  (50% of the visits to emergency rooms are prompted by pain complaints and our research shows that at least 60% of all adults over the age of 45 indicate treating pain one way or another in the last three months).

We think this is an opportunity for us to change our dynamic with the agency.  Both of these issues can be mitigated by OTC availability of our safe, effective Bioelectroceutical™ technology.   We’ve taken the following steps to increase both awareness by the FDA and political pressure on the agency to rethink their outdated approach.   There seems to be a change in attitude as evidenced by the May 2013 Public Advisory Committee and the FDA recommended reclassification of Pulsed RF electromagnetic devices from Class III to Class II for postoperative pain and edema.   This reclassification should help us get ActiPatch Therapy an indication of use and OTC market clearance for the relief of musculoskeletal pain.

Bioelectroceutical healing and pain relief is a safe and effective analgesic and a viable alternative to the vicious cycle of drug therapy; that is, the cycle wherein marginally efficacious therapy leads to increasing dosage and therapeutic agent demands, particularly in the challenging cases of back and other musculoskeletal pain. Systemic drugs only mask the pain and do not accelerate the healing process, resulting in long-term use at increasing dosages, which increases the risks of hazardous side effects. This vicious cycle also asserts a significant additional demand for physicians’ services and a corresponding increase in healthcare costs.

We’ve launched a program, “I’m SMART About Drugs,” to create public, physician, press, and administration pressure for resolution of the prescription drug abuse problem.   We engaged Dr. Christine Dumas as the patient advocate and educator to promote awareness of our drug-free solution to pain management.   Jay Geer of Miller Geer & Associates, a leading health care PR firm is placing Dr. Dumas and getting our message into print, TV, web and radio outlets.  We are collaborating with drug-free.org and other community organizations to get the message out to the general public.

In the U.S. we are pointing consumers to a new web site which you can reach through both http://www.smartAboutDrugs.org and http://www.find-relief.com which explains the program and includes a locator service to allow U.S. consumers to find licensed medical professionals who use our product and can write a prescription for consumers.  We sponsored a special issue of USA Today on pain management and have scheduled public speaking engagements on TV, radio, press and the web.   There is a Medical News feature on ActiPatch and an Empowher.com by-lined article by Dr. Dumas scheduled to publish this week.  We are recruiting health bloggers to get out the message. The objective is to generate demand that compels the FDA to release this technology to the American public – a technology that is clinically proven and readily available in all other parts of the world.

Central to this program is defining and explaining Bioelectroceutical technology.  Traditionally the FDA has maintained that pulsed RF electromagnetic therapeutic devices, which do not significantly raise the temperature of tissue, cannot be effective.  They focused only on heat as a therapeutic agent as to date there had been no reported physiological responses to non-thermal pulsed shortwave radiofrequency fields. However, we are now able to clearly demonstrate measurable physiological responses of human tissue to non-thermal RF fields. These measured responses were muscle activation, through nerve activation, and increased blood flow. This constitutes a major breakthrough as we have now clearly shown a physiological response – increased blood flow, that would result in decreased pain and improved injury recovery times. The discovery of the mechanism of activation, which is dependent on the pulsed signal rate of ActiPatch non-thermal RF field, will mitigate the FDA’s central argument in denying market clearance.

 

Third – Continuing high quality clinical research, to further substantiate clinical efficacy and establish more indications of use.

Significant progress has been made on this front, with clinical trials on three musculoskeletal pain conditions, plantar fasciitis, acute lower back and osteoarthritis of the knee. Two studies are being conducted on postoperative pain, hernia recovery and 3rd molar extraction. An independent study is also being conducted on venous stasis ulcer wound healing and pain management. All the clinical research is being conducted by well respected, and widely published clinical researchers. At this time the plantar fasciitis study has just been completed.  The primary end point of this study was disability and pain at six months after ActiPatch therapy. The results show excellent improvement at the 6 month time point, indicative of tissue remodeling and healing. The subjects had chronic plantar fasciitis presenting with symptoms for an average of 29 months prior to joining the study with high levels of pain and disability.

Rapid progress has also been made on the acute lower back pain and osteoarthritis of the knee studies. These studies will be wrapped up by the end of 2013. Interim results for the acute lower back pain study were very promising. We are hopeful that together the results from these three clinical trials as a series of diverse musculoskeletal pain conditions will allow us to compliment and support our continuing efforts with the US FDA to gain market clearance for ActiPatch. The two postoperative pain clinical studies will be completed in first half of 2014.

Supplementing these clinical studies are two peer reviewed publications which will be published in 2014.

  • “The Case for OTC Shortwave Therapy, Safe and Effective Devices for Pain Management” will be published in the January issue of Pain Management, author Ian Rawe, Ph.D. Director of Research, BioElectronics.
  • “Non-thermal Pulsed Shortwave Therapy”, authors: Kenneth McLeod, Ph.D. and Sree Koneru.  This paper will support our efforts to achieve the goal of ActIPatch market clearance from the  FDA as it provides physiological data in response to non-thermal pulsed shortwave therapy.

The Clinical studies are being conducted at excellent medical institutions: Tufts Dental School, University of Chicago Medical School, University of British Columbia, University Hospital Ghent, Belgium, University Hospital G. Martin, Messina, Italy and University of Otago, Dunedin, New Zealand.

 

Fourth — Lowering our cost of capital to finance expansion.

We expect that the combination of an initial license payment and royalty payments that would be associated with the above discussed potential licensing agreements will mitigate our need for immediate capital and allow us to rectify our market capitalization.   Moreover such licensing agreements would significantly reduce the demand for capital to finance advertising and sales efforts, permitting us to focus on new product development and related research.   There are a number of potential applications of our underlying technology that we have had to put on the back burner because of resource issues.

As you can see, all the elements of our four-pronged strategy are coming together. We already have secured distribution with the leading retailer in the UK and are talking to three of the largest pharmaceutical companies. We are actively pursuing a strategy to get FDA approval and we have a pipeline of new clinical studies that will support our claims of efficacy. All this will allow us to lower our cost of capital and to finally reach our growth potential. As before, the key BioElectronics advantage continues to be our outstanding product portfolio of proven, safe, and cost-effective pain products for the hundreds of millions of chronic pain sufferers.  On behalf of the board and management of BioElectronics, I want to thank all our long-term investors for their patience and faith in the future of our Company.  We will continue to expend every effort to fulfill its promise.

Sincerely,

Andrew J. Whelan
President

 

Contact:
Paul Knopick
940.262.3584
pknopick@eandecommunications.com