Our Company Overview
HDC is a pattern recognition company that uses advanced mathematical techniques to analyze large amounts of data to uncover patterns that might otherwise be undetectable. The Company operates primarily in the field of molecular diagnostics where such tools are critical to scientific discovery. The terms artificial
intelligence and machine learning are sometimes used to describe pattern recognition tools.
HDC’s mission is to use its patents, intellectual prowess, and clinical partnerships principally to identify patterns that can advance the science of medicine, as well as to advance the effective use of our technology in other diverse business disciplines, including the high-tech, financial, and healthcare technology markets.
Our historical foundation lies in the molecular diagnostics field where we have made a number of discoveries that may play a critical role in developing more personalized approaches to the diagnosis and treatment of certain diseases. However, our SVM assets in particular have broad applicability in many other fields. Intelligently applied, HDC’s pattern recognition technology can be a portal between enormous amounts of otherwise undecipherable data and truly meaningful discovery.
Our Company’s principal asset is its intellectual property which includes advanced mathematical algorithms called Support Vector Machines (SVM) and Fractal Genomic Modeling (FGM), as well as biomarkers that we discovered by applying our SVM and FGM techniques to complex genetic and proteomic data. Biomarkers are biological indicators or genetic expression signatures of certain disease states. Our intellectual property is protected by more than 90 patents that have been issued or are currently pending around the world.
Our business model has evolved over time to respond to business trends that intersect with our technological expertise and our capacity to professionally manage these opportunities. In the beginning, we sought only to use our SVMs internally in order to discover and license our biomarker signatures to various diagnostic and pharmaceutical companies. Today, our commercialization efforts include: utilization of our discoveries and knowledge to help develop diagnostic and prognostic predictive tests; licensure of the SVM and FGM technologies directly to diagnostic companies; and, the formation of new ventures with domain experts in other fields where our pattern recognition technology holds commercial promise.
Our Technology
HDC owns a patent portfolio of machine learning technology, including certain pioneer patents on SVM. We also have consulting arrangements with clinical specialists and mathematicians responsible for developing our SVM patents for the analysis of data.
The Company’s SVM technology is commonly considered within the context of artificial intelligence. This is a branch of computer science concerned with giving computers the ability to perform functions normally associated with human intelligence, such as reasoning and optimization through experience. Machine learning is a type of artificial intelligence that enables the development of algorithms and techniques that allow computers to learn. Pattern recognition is machine learning with a wide spectrum of applications including medical diagnosis, bioinformatics, classifying DNA sequences, detecting credit card fraud, stock market analysis, object recognition in computer vision, and robotics.
Support Vector Machines Overview
Support Vector Machines (“SVMs”) are mathematical algorithms that allow computers to sift through large, complex datasets to identify patterns. SVMs are known for their ability to discover hidden relationships in these complex datasets. With the ability to handle what is known as infinite dimensional space, SVMs are broadly considered to be an improvement to neural networks and other mathematical techniques. SVM is a core machine learning technology with strong theoretical foundations and excellent empirical successes.
With their introduction in 1992, SVMs marked the beginning of a new era in the learning from examples paradigm in artificial intelligence. Rooted in the Statistical Learning Theory developed by Professor Vladimir Vapnik, SVMs quickly gained attention from the math and science communities due to a number of theoretical and computational merits. This development advanced a new framework for modeling learning algorithms. Within this framework, the fields of machine learning and statistics were merged introducing powerful algorithms designed to handle the difficulties of prior computational techniques.
The generation of learning algorithms that were developed based on this theory has proved to be remarkably resistant to the problems imposed by noisy data and high dimensionality. They are computationally efficient, have an inherent modular design that simplifies their implementation and analysis and allows the insertion of domain knowledge, and, more importantly, they have theoretical guarantees about their generalization ability. SVMs have been validated in hundreds of independent academic publications and presentations. In recognition for his work, Professor Vapnik received the prestigious Alexander von Humboldt Prize from the German government honoring foreign scientists and scholars for lifetime achievement.
SVMs have become widely established as one of the leading approaches to pattern recognition and machine learning worldwide and are replacing neural networks in a variety of fields, including engineering, information retrieval and bioinformatics. This technology has been incorporated into product and research applications by many biomedical, pharmaceutical, software, computer and financial companies. Educational and research institutions throughout the world have successfully applied SVMs to a wide array of applications, including gene and protein expression analysis, medical image analysis, flow cytometry, and mass spectrometry.
Recursive Feature Elimination - Support Vector Machine Overview
Recursive Feature Elimination (RFE-SVM) is an application of SVM that was created by members of HDC’s science team to find discriminate relationships within clinical datasets, as well as within gene expression and proteomic datasets created from micro-arrays of tumor versus normal tissues. In general, SVMs identify patterns – for instance, a biomarker/genetic expression signature of a disease. The RFE-SVM utilizes this pattern recognition capability to identify and rank order the data points that contribute most to the desired results. The Company believes that its six RFE-SVM patents are currently the only RFE patents properly issued in the world.
Using RFE-SVM, we have been able to access information in micro-array datasets that the most advanced bioinformatics techniques missed. In one micro-array experiment, RFE-SVMs were able to filter irrelevant tissue-specific genes from those related to the malignancy. RFE-SVM has also been used to determine gene expression patterns that correlate to the severity of a disease, not just its existence. It has been shown to improve both diagnosis and prognosis by providing physicians with an enhanced decision tool. HDC scientists believe that these analytic methods are effective for finding genes and proteins implicated in several cancers, as well as in assisting with the pharmacogenetic and toxicological profiling of patients. The RFE-SVM method is also capable of finding those specific genes and proteins that are unhindered by ever-increasing patent protection.
Fractal Genomic Modeling Overview
On September 30, 2003, we acquired the assets of Fractal Genomics, LLC, a company with patented FGM software. The fractal technology is used to find discriminate relationships within clinical datasets as well as within gene expression datasets created from micro-arrays of disease versus normal tissues.
The Fractal Genomic Modeling (“FGM”) data analysis technique has been shown to improve the mapping of genetic pathways involved in the diagnosis and prevention of certain diseases. HDC scientists believe that these analytic methods are effective for finding genes implicated in several cancers, HIV infection, lymphedema, Down’s syndrome, and a host of other diseases, as well as the pharmacogenetic profiling of patients.
FGM technology is designed to study complex networks. A complex network can be made up of genes inside a living organism, web pages on the Internet, stocks within a financial market, or any group of objects or processes that appear to be connected together in some intricate way. FGM uses a new approach toward modeling network behavior to rapidly generate diagrams and software simulations that facilitate prediction and analysis of whatever process is your particular object of study. Two important concepts behind FGM technology are the notions of scale-free networks and self-similarity.
Our Business Activity
NeoGenomics License
On January 6, 2012, we entered into a Master License Agreement (the “NeoGenomics License”) with NeoGenomics Laboratories, Inc. (“NeoGenomics Laboratories”), a wholly-owned subsidiary of NeoGenomics, Inc. (“NeoGenomics”). Pursuant to the terms of the NeoGenomics License, we granted to NeoGenomics Laboratories and its affiliates an exclusive worldwide license to certain of our patents and know-how to use, develop and sell products in the fields of laboratory testing, molecular diagnostics, clinical pathology, anatomic pathology and digital image analysis (excluding non-pathology-related radiologic and photographic image analysis) relating to the development, marketing production or sale of any “Laboratory Developed Tests” or LDTs or other products used for diagnosing, ruling out, predicting a response to treatment, and/or monitoring treatment of any or all hematopoietic and solid tumor cancers excluding cancers affecting the retina and breast cancer. We retain all rights to in-vitro diagnostic (IVD) test kit development.
Upon execution of the NeoGenomics License, NeoGenomics Laboratories paid us $1,000,000 in cash and NeoGenomics issued to us 1,360,000 shares of NeoGenomic’s common stock, par value $0.001 per share, which had a market value of $1,945,000 using the closing price of $1.43 per share for NeoGenomic’s common stock on the OTC Bulletin Board on January 6, 2012. In addition, the NeoGenomics License provides for milestone payments in cash or stock, based on sublicensing revenue and revenue generated from products and services developed as a result of the NeoGenomics License. Milestone payments will be in increments of $500,000 for every $2,000,000 in GAAP revenue recognized by NeoGenomics Laboratories up to a total of $5,000,000 in potential milestone payments. After $20,000,000 in cumulative GAAP revenue has been recognized by NeoGenomics Laboratories, we will receive a royalty of (i) 6.5% (subject to adjustment under certain circumstances) on net revenue generated from all Licensed Uses except for the Cytogenetics Interpretation System and the Flow Cytometry Interpretation System and (ii) a royalty of 50% of net revenue (after the recoupment of certain development and commercialization costs) that NeoGenomics Laboratories derives from any sublicensing arrangements it may put in place for the Cytogenetics Interpretation System and the Flow Cytometry Interpretation System.
NeoGenomics Laboratories agreed to use it best efforts to commercialize certain products within one year of the date of the license, subject to two one-year extensions per product if needed, including a “Plasma Prostate Cancer Test”, a “Pancreatic Cancer Test”, a “Colon Cancer Test”, a “Cytogenetics Interpretation System”, and a “Flow Cytometry Interpretation System.” In January 2013, NeoGenomics informed the Company of its intent to continue under the terms of the license and therefore extend the license for the first of its one-year extensions discussed above.
If NeoGenomics Laboratories has not generated $5.0 million of net revenue from products, services and sublicensing arrangements within five years, we may, at our option, revoke the exclusivity with respect to any one or more of the initial licensed products, subject to certain conditions.
The Company believes our relationship with NeoGenomics is instrumental in our medical and diagnostic testing development. We further believe the majority, if not all, of our applications in the medical field will be done in conjunction with NeoGenomics.
Prostate Cancer
HDC has identified, patent-protected and licensed a genetic biomarker signature that identifies clinically significant high grade prostate cancer cells based on analysis of tissue samples. Upon the achievement of successful validation, the Company’s test may be used to analyze patients with elevated PSA or abnormal rectal exams, with negative biopsy results to determine if there is genomic evidence of grade three or higher cancer cells present in biopsy tissue, indicating the presence of a cancer potentially missed by the biopsy.
On July 31, 2007, we entered into an alliance and licensing agreement with Clarient, Inc. (acquired by GE Healthcare) for development of a new molecular diagnostic test for prostate cancer based on our discovered prostate cancer biomarker signature. During 2008, the Company and Clarient successfully completed all phases of the clinical trial process with the hope of achieving the statistical significance necessary to validate the ability to commercialize a test. Results from the Phase I, Phase II and Phase III double-blinded clinical validation studies were completed at Clarient and published in the peer reviewed journal UroToday International. These results demonstrated a high success rate for identifying the presence of Grade 3 or higher prostate cancer cells (clinically significant cancer), as well as normal BPH (benign prostatic hyperplasia) cells. Clarient has not yet reported any commercial sales with this test. Clarient has not been actively marketing the 4-gene prostate cancer test. While the agreement currently remains in effect, the Company does not anticipate any commercialization from this licensing agreement with Clarient.
On January 30, 2009, we entered into a license agreement with Abbott Molecular Inc. (“Abbott”), pursuant to which, among other things, the Company granted Abbott a worldwide, exclusive, royalty-bearing license for in-vitro diagnostic rights to develop and commercialize reagent test kits for the Company’s prostate cancer molecular diagnostic tests in both biopsy tissue and urine. We also granted Abbott a worldwide royalty bearing, co-exclusive license (co-exclusive with Quest Diagnostics Incorporated “Quest”) for developing and commercializing a laboratory developed urine based molecular diagnostic test (“LDT”) for clinically significant prostate cancer.
We completed the Abbott clinical trial for Phase 1 and 2 of the urine prostate cancer test validation process. However, Abbott did not pay the corresponding $250,000 milestone payment and the Company has subsequently relinquished any rights to this milestone payment. In addition, we completed all clinical laboratory genomic testing on the clinical trial specimens at MD Anderson Cancer Center. We met with and submitted all of our results to Abbott for their independent analysis. Abbott asked to see additional study results from other testing sites. The Company attempted to gather this information for Abbott. Due to confidentiality issues, the Company was unable to share this clinical data with Abbott. Abbott decided to not proceed with the development of the test. As a result, the Company terminated the agreement effective September 28, 2012.
On January 30, 2009, we entered into a license agreement with Quest pursuant to which the Company granted to Quest a non-exclusive, royalty bearing license for developing and commercializing a urine-based LDT for clinically significant prostate cancer.
Quest completed the urine prostate cancer test clinical trial and all clinical laboratory genomic testing on the clinical trial specimens. The clinical trial was un-blinded and the patient information has been supplied to Quest. Quest did not respond to our repeated requests to move forward on the LDT development of the 4-gene urine test. As a result, the Company terminated the agreement effective September 28, 2012.
Breast Cancer
HDC licensed its two breast cancer diagnostic technologies (
MammoSIGHT,
for detecting malignancy in mammograms and
MetastaSIGHT,
for identifying circulating tumor cells in the blood) to Smart Personalized Medicine, LLC (“SPM”) pursuant to a license agreement in exchange for a 15% equity interest in SPM and a per test royalty up to 7.5% based on net proceeds received from the sale of a breast cancer prognostic test other than by Quest. HDC’s patented technology can be used within all diagnostic imaging radiology techniques, including PET scans, CT scans, and MRIs.
On March 11, 2010, the Company, Quest and SPM entered into a Development Agreement (the “Quest Development Agreement”) pursuant to which the Company and SPM was to assist Quest in the development of new laboratory tests for aiding in the selection of breast cancer therapies. The Company, SPM and Quest also entered a related Licensing Agreement (the “Quest License”).
Pursuant to the Quest License, SPM granted to Quest a co-exclusive (with SPM) sublicense to utilize the licensed patent rights to the extent necessary to enable Quest to develop products and perform the validation work under the Quest Development Agreement. Quest has the right to use SPM’s Breast Cancer Database developed in association with an academic cancer center (the “Database”). In consideration for the license, Quest has separately made payments to SPM and HDC. The payments included a $500,000 “License Fee”, which has been paid in full.
In consideration for our efforts under the Quest Development Agreement, Quest also agreed to pay us $375,000 in development fees of which $291,662 was received by HDC, with $83,338 remaining unpaid. The Company has subsequently relinquished any rights to this remaining unpaid balance.
Under the terms of the Quest Development Agreement, SPM was to provide the Database containing certain specific sample requirements within the Database. SPM was unable to deliver the Database required by Quest. A collaborative effort between SPM and HDC was undertaken at the MD Anderson Cancer Center (“MDACC”) in Houston, Texas. The Principal Investigator at MDACC completed the review of the breast cancer tissue blocks maintained in the tissue repository, to identify those subjects who meet the inclusion criteria for the study. The Company entered into discussions with SPM regarding its plans for the development of this test and the outstanding issues related to the agreement. The Company decided there was not a way to proceed forward with Quest and terminated the Quest License and Quest Development Agreement effective September 28, 2012.
Pancreatic Cancer
In February 2010, the Company entered into an agreement with the Pancreas, Biliary and Liver Surgery Center of New York (the “Pancreas Center”) to develop new molecular diagnostic tests for the early detection of pancreatic cancer. The Pancreas Center is under the leadership of Drs. Michael Wayne, Franklin Kassim and Avram Cooperman. Under the terms of the agreement, the Pancreas Center was to provide all specimens from their collected specimen banks, specimens on all new patients and all associated clinical and outcomes data. The specimens were to include tissue, blood and urine.
At the conclusion of the agreement term, approximately 30 paraffin block samples were collected. Those samples have been forwarded to NeoGenomics Laboratories as a part of the NeoGenomics License. In addition, the Company has licensed final development rights to the pancreatic cancer test to NeoGenomics Laboratories.
Benign Prostatic Hyperplasia (BPH)
BPH is a non-cancerous enlargement of the prostate gland that occurs as men age. The enlargement often leads to obstruction in the flow of urine through the urethra that passes through the prostate gland. BPH is a common condition, representing a global treatment market of almost $4 billion annually growing by 12% per year in fixed-rate US dollar terms. According to the National Institutes of Health (NIH), BPH affects more than 50% of men over age 60 and as many as 90% of men over the age of 70. While BPH does not cause prostate cancer, both may be found together.
HDC has identified and described in a pending patent application a subset of genes that separates benign prostatic hyperplasia (BPH) from prostate cancer with a high degree of accuracy. This same set of genes also separated BPH from normal tissue patterns, indicating that BPH is a disease with molecular characteristics of its own. This discovery could be used to develop a new non-invasive diagnostic test for BPH, which does not currently exist, as well as a completely new type of therapy for patients with this disease.
We have identified fifty gene biomarkers representing 5 gene pathways involved with the development of benign prostatic hypertrophic disease (BPH). All of these protein products of the genes are known to be secreted into the circulation or are highly likely to be secreted proteins from prostatic cells. This blood protein test may be useful as companion diagnostic for use in clinical trials of new drug treatments. The Company may attempt to license this BPH test to a third party diagnostic or pharmaceutical company.
Colon Cancer
HDC has identified and patent-protected colon cancer-specific biomarkers that can be used in the development of diagnostic assays for cancer detection, disease discrimination, and even a potential vaccine. The aim of this early biomarker discovery project was to define the gene expression patterns associated with colon cancer. Our RFE-SVM served as an effective tool for sifting through the voluminous data of thousands of measurements to highlight only those genes that optimally contributed to the study focus. The Company has licensed final development rights to the colon cancer test to NeoGenomics.
Melanoma
In July 2011, we announced the launch of our melanoma/skin cancer mobile phone application, MelApp, which enables customers to take a picture of a mole, lesion or birthmark, send it to HDC, and receive a risk assessment for melanoma and other skin cancer on their mobile phone. This first-ever melanoma/skin cancer mobile phone application using our SVM technology employs sophisticated image analysis techniques using patent protected algorithms for evaluating moles, lesions and birthmarks. We selected Apple’s iPhone as our initial mobile platform and focused on tuning image capture and analysis capabilities for skin lesions and moles for that platform. In early 2012, the Company expanded to the Android platform. The Company receives a portion of revenue from the download fee charged by Apple and Google, however the revenue from MelApp has been negligible to date.
Furthermore, the Company does not expect to realize any significant revenue in the future from selling MelApp via Apple or Google.
Flow Cytometry, Cytogenetics, and Pap smear Imaging
Management believes that our efforts to develop an SVM-based diagnostic test to help interpret flow cell cytometry data for myelodysplastic syndrome (pre-leukemia) has resulted in a successful proof of concept. The Company is pleased with the development progress to date, and the Company, along with NeoGenomics, is now capable of completing development, final validation and commercialization of the new diagnostic test for the interpretation of flow cytometry data. This test has been licensed to NeoGenomics for final development.
The Company, along with NeoGenomics, is currently developing a software tool for the computer assisted analysis of chromosome abnormalities, referred to as cytogenetic analysis, using pattern recognition combined with image analysis techniques. Innovative techniques for image processing are being developed to address the challenges in the cytogenetics product, which is to properly accommodate the variability of the chromosome images while retaining sensitivity to recognize subtle abnormalities in the chromosomes. The preprocessing techniques are designed to improve the performance of the subsequent SVM learning system. Performance data from the test will be collected and analyzed to guide the further improvements of the system. The Company has licensed final development rights to the flow cytometry and cytogenetics tests to NeoGenomics. The Company is working with NeoGenomics for development, validation and commercialization of this new image analysis tool for cytogenetic analysis.
We have developed a set of sophisticated image processing operations to isolate the potentially abnormal cells in a high resolution digitized Pap smear image. Features relevant to the recognition problem can be extracted from the segmented cells. A set of fundamental geometrical, statistical, and topological features have been defined. These features can be used to facilitate SVM training, with other high level classification systems. The data generated to date supports the development a laboratory developed test (LDT) for the interpretation of Pap smear images. The Company has licensed final development rights to the pap smear imaging test to NeoGenomics.
SVM Capital, LLC
In January 2007, SVM Capital, LLC (“SVM Capital”) was formed as a joint venture between HDC and Atlantic Alpha Strategies, LLC (“Atlantic Alpha”) to explore and exploit the potential applicability of our SVM technology to quantitative investment management techniques. Atlantic Alpha’s management has over thirty years of experience in commodity and futures trading. Atlantic Alpha reports that the SVM technology is now working well in two distinct investment areas.
First, it is being applied to price data. Utilizing open, high, close, low and volume SVM utilizes an 85 dimensional space to make future predictions. This price driven model is using fifty exchange traded funds (ETFs) which give it a global perspective. Much testing and refinement of this model has been accomplished and is being used for trading by Atlantic Alpha.
Second, Atlantic Alpha is applying SVM technology to quarterly fundamental corporate data such as sales, earning and projected earnings. SVM is utilized to separate stocks which should outperform and underperform in the next quarter based on current data. This application of SVM technology allows the creation of four equity portfolios: Large Capital, Mid Capital, Small Capital, and a Large Capital Long & Short. Atlantic Alpha has hired Kurt Kaltreider, Ph.D., who is regarded as one of the best fundamental analyst of his generation. We have taken Dr. Kaltreider’s formulas for examining fundamental data and refined them with SVM technology. The result of this marriage of two distinct technologies has a strong proforma history and is currently being used for trading by Atlantic Alpha.
Employees
On December 31, 2012, we had 5 full time employees.
Website Address
Our corporate website address is www.HealthDiscoveryCorp.com. To view our public filings from the home page, select the “Display SEC Filings” tab followed by “SEC Filings.” This is a direct link to our filings with the Securities and Exchange Commission (“SEC”), including but not limited to our Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to these reports. These reports are accessible soon after we file them with the SEC.
Governmental Regulation
Our business plan involves
Biomarker Discovery
in the field of molecular diagnostics. This early discovery process does not involve any governmental regulations or approvals. If we are successful in licensing our discoveries to other companies, FDA approvals may be required before the ultimate product may be sold to consumers. Our current plan is to require the companies licensing our discoveries or technologies to be responsible for the costs involved in such approvals. If we are not successful in licensing these discoveries on these terms or choose to take these discoveries to market ourselves, we may then be subject to applicable FDA regulations and would then bear the costs of such approvals.
We know of no current governmental regulations that will materially affect the Company’s current operations or products. However, if the FDA changes its current position, and decides to regulate laboratory developed tests (LDT’s) currently regulated by CLIA certification, this could materially affect the development costs and commercialization timelines for our products.
Intellectual Property
In connection with the SVM Acquisition, we obtained rights to the intellectual property within the “SVM portfolio” that currently consists of fifty-seven (57) patents which were or have since issued as well as twenty-one (21) other patent applications that are pending in the U.S. and elsewhere in the world. The issued patents and pending applications in the SVM portfolio to date, including new applications that we have filed since acquiring the original intellectual property are:
|
Patent/Application No.
|
|
Title
|
|
Expiration Date
|
|
|
|
|
|
|
|
U.S. Patent No. 6,128,608
|
|
Enhancing Knowledge Discovery Using Multiple Support Vector Machines
|
|
05/01/2019
|
|
|
|
|
|
|
|
U.S. Patent No. 6,157,921
|
|
Enhancing Knowledge Discovery Using Support Vector Machines in a Distributed Network Environment
|
|
05/01/2019
|
|
|
|
|
|
|
|
U.S. Patent No. 6,427,141
|
|
Enhancing Knowledge Discovery Using Multiple Support Vector Machines.
|
|
05/01/2019
|
|
|
|
|
|
|
|
U.S. Patent No. 6,658,395
|
|
Enhancing Knowledge Discovery from Multiple Data Sets Using Multiple Support Vector Machines.
|
|
05/01/2019
|
|
|
|
|
|
|
|
U.S. Patent No. 6,714,925
|
|
System for Identifying Patterns in Biological Data Using a Distributed Network.
|
|
05/01/2019
|
|
|
|
|
|
|
|
U.S. Patent No. 6,760,715
|
|
Enhancing Biological Knowledge Discovery Using Multiple Support Vector Machines.
|
|
05/01/2019
|
|
|
|
|
|
|
|
U.S. Patent No. 6,789,069
|
|
Method of Identifying Patterns in Biological Systems and Method of Uses.
|
|
05/01/2019
|
|
|
|
|
|
|
|
U.S. Patent No. 6,882,990
|
|
Method of Identifying Biological Patterns Using Multiple Data Sets.
|
|
05/01/2019
|
|
|
|
|
|
|
|
U.S. Patent No. 6,944,602
|
|
Spectral Kernels for Learning Machines
|
|
02/19/2023
|
|
|
|
|
|
|
|
U.S. Patent No. 6,996,542
|
|
Computer-Aided Image Analysis
|
|
04/21/2021
|
|
|
|
|
|
|
|
U.S. Patent No. 7,117,188
|
|
Methods of Identifying Patterns in Biological Systems and Uses Thereof
|
|
05/01/2019
|
|
|
|
|
|
|
|
U.S. Patent No. 7,299,213
|
|
Method of Using Kernel Alignment to Extract Significant Features from a Large Dataset
|
|
03/01/2022
|
|
|
|
|
|
|
|
U.S. Patent No. 7,318,051
|
|
Methods for Feature Selection in a Learning Machine
|
|
02/25/2021
|
|
|
|
|
|
|
|
U.S. Patent No. 7,353,215
|
|
Kernels and Methods for Selecting Kernels for Use in a Learning Machine
|
|
05/07/2022
|
|
Patent/Application No.
|
|
Title
|
|
Expiration Date
|
|
|
|
|
|
|
|
U.S. Patent No. 7,383,237
|
|
Computer-Aided Image Analysis
|
|
11/04/2019
|
|
|
|
|
|
|
|
U.S. Patent No. 7,444,308
|
|
Data Mining Platform for Bioinformatics
|
|
08/07/2020
|
|
|
|
|
|
|
|
U.S. Patent No. 7,475,048
|
|
Pre-Processed Feature Ranking for a Support Vector Machine
|
|
08/07/2020
|
|
|
|
|
|
|
|
U.S. Patent No. 7,542,947
|
|
Data Mining Platform for Bioinformatics and Other Knowledge Discovery
|
|
08/07/2020
|
|
|
|
|
|
|
|
U.S. Patent No. 7,542,959
|
|
Feature Selection Using Support Vector Machine Classifier
|
|
05/01/2019
|
|
|
|
|
|
|
|
U.S. Patent No. 7,617,163
|
|
Kernels and Kernel Methods for Spectral Data
|
|
11/9/2021
|
|
|
|
|
|
|
|
U.S. Patent No. 7,624,074
|
|
Methods for Feature Selection in a Learning Machine
|
|
08/07/2020
|
|
|
|
|
|
|
|
U.S. Patent No. 7,676,442
|
|
Selection of Features Predictive of Biological Conditions Using Protein Mass Spectrographic Data
|
|
08/07/2020
|
|
|
|
|
|
|
|
U.S. Patent No. 7,778,193
|
|
Kernels and Methods for Selecting Kernels for Use in a Learning Machine
|
|
05/07/2022
|
|
|
|
|
|
|
|
U.S. Patent No. 7,797,257
|
|
System for Providing Data Analysis Services Using a Support Vector Machine for Processing Data Received from a Remote Source
|
|
05/01/2019
|
|
|
|
|
|
|
|
U.S. Patent No. 7,805,388
|
|
Method for Feature Selection in a Support Vector Machine Using Feature Ranking
|
|
08/07/2020
|
|
|
|
|
|
|
|
U.S. Patent No. 7,890,445
|
|
Model Selection for Cluster Data Analysis
|
|
06/08/2024
|
|
|
|
|
|
|
|
U.S. Patent No. 7,921,068
|
|
Data Mining Platform for Knowledge Discovery from Heterogeneous Data Types and/or Heterogeneous Data Sources
|
|
05/20/2022
|
|
|
|
|
|
|
|
U.S. Patent No. 7,970,718
|
|
Feature Selection and for Evaluating Features Identified as Significant for Classifying Data
|
|
08/07/2020
|
|
|
|
|
|
|
|
U.S. Patent No. 8,008,012
|
|
Biomarkers Downregulated in Prostate Cancer
|
|
01/24/2022
|
|
|
|
|
|
|
|
U.S. Patent No. 8,095,483
|
|
Support Vector Machine-Recursive Feature Elimination (SVM-RFE)
|
|
08/07/2020
|
|
|
|
|
|
|
|
U.S. Patent No. 8,126,825
|
|
Method for Visualizing Feature Ranking of a Subset of Features for Classifying Data Using a Support Vector
|
|
05/20/2022
|
|
|
|
|
|
|
|
U.S. Patent No. 8,209,269
|
|
Kernels for Identifying Patterns in Datasets Containing Noise or Transformation Invariance
|
|
05/07/2022
|
|
|
|
|
|
|
|
U.S. Patent No. 8,275,723
|
|
System for Providing Data Analysis Services Using a Support Vector Machine for Processing Data Received from a Remote Source
|
|
05/01/2019
|
|
|
|
|
|
|
|
U.S. Patent No. 8,293,461
|
|
Biomarkers Downregulated in Prostate Cancer
|
|
01/24/2022
|
|
|
|
|
|
|
|
Australian Patent No. 764897
|
|
Pre-processing and Post-processing for Enhancing Knowledge Discovery Using Support Vector Machines.
|
|
05/01/2019
|
|
|
|
|
|
|
|
Canadian Patent No. 2,330,878
|
|
Pre-Processing and Post-Processing for Enhancing Knowledge Discovery Using Support Vector Machines
|
|
05/01/2019
|
|
|
|
|
|
|
|
European Patent No. 1082646
|
|
Pre-Processing and Post-Processing for Enhancing Knowledge Discovery Using Support Vector Machines
|
|
05/01/2019
|
|
|
|
|
|
|
|
German Patent No. 69943664.8
|
|
Pre-Processing and Post-Processing for Enhancing Knowledge Discovery Using Support Vector Machines
|
|
05/01/2019
|
|
Patent/Application No.
|
|
Title
|
|
Expiration Date
|
|
|
|
|
|
|
|
Indian Patent No. 212978
|
|
Pre-Processing and Post-Processing for Enhancing Knowledge Discovery Using Support Vector Machines
|
|
05/01/2019
|
|
|
|
|
|
|
|
South African Patent No. 00/7122
|
|
Pre-processing and Post-processing for Enhancing Knowledge Discovery Using Support Vector Machines.
|
|
05/01/2019
|
|
|
|
|
|
|
|
Australian Patent No. 780050
|
|
Enhancing Knowledge Discovery from Multiple Data Sets Using Multiple Support Vector Machines.
|
|
05/24/2020
|
|
|
|
|
|
|
|
Canadian Patent No. 2,371,240
|
|
Enhancing Knowledge Discovery from Multiple Data Sets Using Multiple Support Vector Machines
|
|
05/24/2020
|
|
|
|
|
|
|
|
Chinese Patent No. ZL00808062.3
|
|
Enhancing Knowledge Discovery from Multiple Data Sets Using Multiple Support Vector Machines.
|
|
05/24/2020
|
|
|
|
|
|
|
|
European Patent No. 1192595
|
|
Enhancing Knowledge Discovery from Multiple Data Sets Using Multiple Support Vector Machines.
|
|
05/24/2020
|
|
|
|
|
|
|
|
German Patent No. DE60024452.0-08
|
|
Enhancing Knowledge Discovery from Multiple Data Sets Using Multiple Support Vector Machines.
|
|
05/24/2020
|
|
|
|
|
|
|
|
Australian Patent No. 779635
|
|
Method of Identifying Patterns in Biological Systems and Method of Uses.
|
|
10/27/2020
|
|
|
|
|
|
|
|
Canadian Patent No. 2,388,595
|
|
Method of Identifying Patterns in Biological Systems and Method of Uses
|
|
08/07/2020
|
|
|
|
|
|
|
|
Australian Patent No. 2002243783
|
|
Computer Aided Image Analysis
|
|
01/23/2022
|
|
|
|
|
|
|
|
Canadian Patent No. 2,435,290
|
|
Computer Aided Image Analysis
|
|
01/23/2022
|
|
|
|
|
|
|
|
European Patent No.1356421
|
|
Computer Aided Image Analysis
|
|
01/23/2022
|
|
|
|
|
|
|
|
Japanese Patent No. 3947109
|
|
Computer Aided Image Analysis
|
|
01/23/2022
|
|
|
|
|
|
|
|
Australian Patent No. 2002253879
|
|
Methods of Identifying Patterns in Biological Systems and Uses Thereof
|
|
01/24/2022
|
|
|
|
|
|
|
|
Canadian Patent No. 2,435,254
|
|
Methods of Identifying Patterns in Biological Systems and Uses Thereof
|
|
01/24/2022
|
|
|
|
|
|
|
|
Japanese Patent No. 4138486
|
|
Methods of Identifying Patterns in Biological Systems and Uses Thereof
|
|
01/24/2022
|
|
|
|
|
|
|
|
European Patent No. 1459235
|
|
Methods of Identifying Patterns in Biological Systems and Uses Thereof
|
|
01/24/2022
|
|
|
|
|
|
|
|
European Patent No. 2296105
|
|
Pre-Processing and Post-Processing for Enhancing Knowledge Discovery Using Support Vector Machines
|
|
05/01/2019
|
|
|
|
|
|
|
|
German Patent No. 69943664.8
|
|
Pre-Processing and Post-Processing for Enhancing Knowledge Discovery Using Support Vector Machines
|
|
05/01/2019
|
|
|
|
|
|
|
|
European Publication No. 1236173
|
|
Method of Identifying Patterns in Biological Systems and Method of Uses
|
|
08/07/2020
|
|
|
|
|
|
|
|
European Publication No. 2357582
|
|
Method of Identifying Patterns in Biological Systems and Method of Uses
|
|
08/07/2020
|
|
|
|
|
|
|
|
Japanese Application No. 2001-534088
|
|
Method of Identifying Patterns in Biological Systems and Methods of Uses
|
|
08/07/2020
|
|
|
|
|
|
|
|
U.S. Patent Publication No. 2005/0165556
|
|
Colon Cancer-Specific Markers
|
|
05/01/2019
|
|
|
|
|
|
|
|
U.S. Patent Publication No. 2011/0106735
|
|
Recursive Feature Elimination Method Using Support Vector Machines
|
|
05/01/2019
|
|
Patent/Application No.
|
|
Title
|
|
Expiration Date
|
|
|
|
|
|
|
|
U.S. Patent Publication No.
2010/0205124
|
|
Support Vector Machine-Based Method for Analysis of Spectral Data
|
|
08/07/2020
|
|
|
|
|
|
|
|
U.S. Patent Publication No. 2011/0125683
|
|
Identification of Co-Regulation Patterns by Unsupervised Cluster Analysis of Gene Expression Data
|
|
05/17/2022
|
|
|
|
|
|
|
|
U.S. Patent Publication No. 2010/0256988
|
|
System for Providing Data Analysis Services Using a Support Vector Machine for Processing Data Received from a Remote Source
|
|
05/01/2019
|
|
|
|
|
|
|
|
U.S. Application No. 13/418,291
|
|
Biomarkers for Screening, Predicting, and Monitoring Benign Prostate Hyperplasia
|
|
01/24/2022
|
|
|
|
|
|
|
|
U.S. Patent Publication No. 2009/0215024
|
|
Biomarkers Upregulated in Prostate Cancer
|
|
01/24/2022
|
|
|
|
|
|
|
|
U.S. Patent Publication No. 2009/0286240
|
|
Biomarkers Overexpressed in Prostate Cancer
|
|
01/24/2022
|
|
|
|
|
|
|
|
U.S. Patent Publication No. 2009/0215058
|
|
Methods for Screening, Predicting and Monitoring Prostate Cancer
|
|
01/24/2022
|
|
|
|
|
|
|
|
European Publication No. 2373816
|
|
Methods for Screening, Predicting and Monitoring Prostate Cancer
|
|
12/04/2029
|
|
|
|
|
|
|
|
U.S. Patent Publication No. 2009/0226915
|
|
Methods for Screening, Predicting and Monitoring Prostate Cancer
|
|
01/24/2022
|
|
|
|
|
|
|
|
U.S. Patent Publication No. 2009/0204557
|
|
Method and System for Analysis of Flow Cytometry Data Using Support Vector Machines
|
|
02/08/2029
|
|
|
|
|
|
|
|
Australian Application No. 2009212193
|
|
Method and System for Analysis of Flow Cytometry Data Using Support Vector Machines
|
|
02/08/2029
|
|
|
|
|
|
|
|
Chinese Application No. 200980110847.2
|
|
Method and System for Analysis of Flow Cytometry Data Using Support Vector Machines
|
|
02/08/2029
|
|
|
|
|
|
|
|
European Application No. 09709037.7
|
|
Method and System for Analysis of Flow Cytometry Data Using Support Vector Machines
|
|
02/08/2029
|
|
|
|
|
|
|
|
Indian Application No. 5526/CHENP/2010
|
|
Method and System for Analysis of Flow Cytometry Data Using Support Vector Machines
|
|
02/08/2029
|
|
|
|
|
|
|
|
Japanese Application No. 2010-546084
|
|
Method and System for Analysis of Flow Cytometry Data Using Support Vector Machines
|
|
02/08/2029
|
|
|
|
|
|
|
|
U.S. Patent Publication No. 2012/0008838
|
|
System and Method for Remote Melanoma Screening
|
|
05/01/2019
|
HDC also owns intellectual property rights in U.S. patents covering the FGM technology. The FGM portfolio includes two issued patents, which are:
|
Patent/Application No.
|
|
Title
|
|
Expiration Date
|
|
|
|
|
|
|
|
U.S. Patent No. 6,920,451
|
|
Method for the Manipulation, Storage, Modeling, Visualization and Quantification of Datasets.
|
|
01/19/2021
|
|
|
|
|
|
|
|
U.S. Patent No. 7,366,719
|
|
Method for the Manipulation, Storage, Modeling, Visualization and Quantification of Datasets
|
|
01/19/2021
|
Our Competition
HDC conducts its business principally in the diagnostics industry in the field of
Biomarker Discovery and image analysis
. The diagnostics industry is highly fragmented, competitive and evolving. There is intense competition among countless healthcare, biotechnology and diagnostics companies attempting to discover potential new diagnostic products. These companies may:
|
|
●
|
develop new diagnostic products before we or our collaborators;
|
|
|
●
|
develop diagnostic products that are more effective or cost-effective than those developed by us or our collaborators; or
|
|
|
●
|
obtain patent protection or other intellectual property rights that would limit the ability to develop and commercialize, or a customers’ ability to use, our or our collaborators’ diagnostic products.
|
The Company competes with companies in the United States and abroad that are engaged in the development and commercialization of diagnostic tests that utilize biomarker discovery and CAD image analysis techniques. These companies may develop products that are competitive with and/or perform the same or similar to the products offered by us or our collaborators. Also, clinical laboratories may offer testing services that are competitive with the products sold by us or our collaborators. The testing services offered by clinical laboratories may be easier to develop and market than test kits developed by us or our collaborators because the testing services are not subject to the same clinical validation requirements that are applicable to FDA-cleared or approved diagnostic test kits.
While a number of companies perform biomarker discovery, we believe that our SVM and FGM technologies give us a distinct advantage over competing technologies. Neither classical statistical analysis nor neural networks (the competing technologies) can effectively handle the large amounts of inputs necessary to produce fully validated biomarkers like the Company’s technology.
Customers and Licensees
On January 6, 2012, we entered into the NeoGenomics License pursuant to which we granted to NeoGenomics Laboratories and its affiliates an exclusive worldwide license to certain of our patents and know-how to use, develop and sell products in the fields of laboratory testing, molecular diagnostics, clinical pathology, anatomic pathology and digital image analysis (excluding non-pathology-related radiologic and photographic image analysis) relating to the development, marketing production or sale of any “Laboratory Developed Tests” or LDTs or other products used for diagnosing, ruling out, predicting a response to treatment, and/or monitoring treatment of any or all hematopoietic and solid tumor cancers excluding cancers affecting the retina and breast cancer. See Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional disclosure regarding our activities with NeoGenomics.
We have produced sales, licensing, and developmental revenue since 2005 through agreements with several customers and licensees. In 2009, we entered into strategic alliance and licensing agreements with Abbott and Quest for commercialization of a new molecular diagnostic test for prostate cancer based on our discovered prostate cancer biomarker signature. The Company cancelled these license agreements in September 2012. In July 2008, we entered into a development and license agreement for the collaborative development and commercialization of SVM-based computer assisted diagnostic tests with DCL Laboratories (“DCL”) for the independent detection of ovarian, cervical and endometrial cancers. However, in the first quarter of 2010, due to a shift in strategic direction, we mutually terminated the license with DCL. In March 2010, we licensed the use of our SVM technology to SPM to develop a superior breast cancer prognostic test. See Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional disclosure regarding these licensing activities.
This annual report on Form 10-K contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, without limitation, all statements, other than statements of historical facts, that address activities, events or developments that we expect or anticipate will or may occur in the future, including but not limited to statements regarding the successful implementation of our services, business strategies and measures to implement such strategies, competitive strengths, expansion and growth of our business and operations, references to future success, the ability of the Company to utilize its SVM and FGM assets and other intellectual property to identify biomarkers which can be used in diagnostic tests, the ability to enter into agreements with strategic partners for the development and commercialization of diagnostic tests, the ability of the Company to develop a product line, the ability to achieve profitability, about anticipated size of the market for diagnostic tests, the capabilities of molecular diagnostic tests, regarding working with our collaborators resulting in revenue for the Company, the sufficiency of our liquidity and capital resources, and other such matters. All such statements are forward-looking statements and are based on the beliefs of, assumptions made by and information currently available to our management. The words “expect,” “estimate,” “anticipate,” “believe,” “intend,” “plan” and similar expressions and variations thereof are intended to identify forward-looking statements. Such forward-looking statements may involve uncertainties and other factors that may cause the actual results and performance of our company to be materially different from future results or performance expressed or implied by such statements.
The cautionary statements set forth in this “Risk Factors” section and elsewhere in this annual report identify important factors with respect to such forward-looking statements, including certain risks and uncertainties, which could cause actual results to differ materially from those expressed in or implied by such forward-looking statements. Among others, factors that could adversely affect actual results and performance include failure to successfully develop a profitable business, delays in identifying and enrolling customers, the inability to retain a significant number of customers, effectiveness and execution of licensing efforts, our ability to employ and retain key employees and experienced scientists, our access to tissue samples, loss of the ability to use certain patent rights, the inability to continue to protect our proprietary information, competitive conditions, our ability to remain competitive in a rapidly changing technological environment, acceptance of our products by the market, volatility in U.S. and global stock markets generally and in our stock price specifically, potential shareholder claims which could result in substantial dilution to our shareholders, economic conditions generally, the effect of current difficulties in the credit markets on our business, factors beyond our control, including, but not limited to, catastrophes (both natural and man-made), earthquakes, floods, fires, explosions, acts or terrorism or war, and the risks identified elsewhere in this report. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by the foregoing cautionary statement. All forward looking statements and cautionary statements included in this report are made as of the date hereof based on information available to us, and we assume no obligation to update any forward looking statement or cautionary statement.
Risks Related to Our Business
Our financial statements have been prepared on a going concern basis.
We have prepared our financial statements on a “going concern” basis which presumes that we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future.
Our ability to continue as a going concern is dependent upon our licensing arrangements with third parties, achieving profitable operations, obtaining additional financing and successfully bringing our technologies to the market. The outcome of these matters cannot be predicted at this time. Our financial statements have been prepared on a going concern basis and do not include any adjustments to the amounts and classifications of the assets and liabilities that might be necessary should we be unable to continue in business.
If the going concern assumption was not appropriate for our financial statements then adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used. Such adjustments may be material.
At December 31, 2012 we had $171,424 cash on hand along with NeoGenomics Stock for sale worth $1,716,160 and our current monthly cash expenses were approximately $185,000. As a result, the Company believes cash will be depleted by the end of 2013. See Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional disclosure regarding our liquidity and capital resources.
We are a developing business and a high-risk company.
We are a high-risk company in a volatile industry. In September 2003, we completely changed the focus of our business from wireless telecommunications to biotechnology. Investors should recognize that an investment in our company is risky and highly speculative. We are a developing business, and our prospects must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in their early stages of development. Failure to implement and execute our business and marketing strategy successfully, to provide superior customer service, to respond to competitive developments and to integrate, retain and motivate qualified personnel could have a material adverse effect on our business, results of operations and financial condition. We must successfully overcome these and other business risks.
We may incur future losses, and we may never achieve or sustain profitability.
Our expenses are expected to exceed our income until we successfully complete transactions resulting in significant revenue. Accordingly, our capital will be decreased to pay these operating expenses. If we ever become profitable, of which there is no assurance that we can, from time to time our operating expenses could exceed our income and thus our capital will be decreased to pay these operating expenses. We may never achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability.
We may need additional financing.
If we are unable to generate sufficient revenue, additional proceeds may be required to finance our activities. We cannot assure prospective investors that we will not need to raise additional capital or that we would be able to raise sufficient additional capital on favorable terms, if at all. There can be no assurance that additional financing will be available, if required, on terms acceptable to us. If we fail to raise sufficient funds or do not increase our revenues from licensing our technology or performing services, we may have to cease operations or materially curtail our business operations. If we raise additional capital by issuing equity securities, our stockholders may experience dilution. If we raise additional funds through collaboration and licensing arrangements, we may be required to relinquish some rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us.
A significant portion of our net revenues will be paid as either a Special Dividend to the holders of the Series B Preferred Stock or to our senior management in bonuses.
Subject to the limitations set forth in the Amended and Restated Articles of Amendment to Articles of Incorporation and applicable law, as long as the Series B Preferred Stock (the “Series B Preferred Stock”) remain outstanding, the Company must pay the holders of the Series B Preferred Stock a special dividend (the “Special Dividend”) equal to 15% of the Company’s “Net Revenues.” Company Net Revenues will include, but not be limited to, revenue derived from development fees, license fees and royalties paid to the Company and revenue collected as a result of the sale of any asset of the Company or distributions from SVM Capital, LLC, but will not include the proceeds of any capital infusions from the exercise of outstanding options or warrants or as a result of any capital raise undertaken by the Company. At any time following the issuance of the Series B Preferred Stock, the Company may satisfy the Special Dividend in its entirety if the aggregate payments made to the Series B Holders are equal to that value which provides an internal annual rate of return of twenty percent (20%) on the Series B Preferred Stock. The maximum Special Dividend to be paid each year shall be the aggregate Series B Original Issue Price, and no amounts in excess of such amount shall accrue or carry-over to subsequent years. The shares of our Series B Preferred Stock also accrue dividends at the rate of 10% per year, which must be paid by the fifth anniversary of the issuance of such shares either by the Company’s issuance of the number of shares of Common Stock equal to such accrued dividends divided by the average closing price of the Company’s Common Stock during the prior ten business days or by the payment of cash, as the Company may determine in its sole discretion.
Additionally, the Company may pay additional bonuses out of such revenue to senior management. The payment of the Special Dividend and any bonuses to management will reduce the amount of cash able to be used to fund our operations, to pay dividends to holders of our Common Stock and to otherwise distribute to holders of our Common Stock upon a sale or liquidation. The payment of the Special Dividend and any bonuses to management will reduce the amount of cash able to be used to fund our operations, to pay dividends to holders of our common stock and to otherwise distribute to holders of our common stock upon a sale or liquidation.
Our operating results are unpredictable and may fluctuate significantly from period to period, which may cause our stock price to decline and result in losses to investors.
Our operating results may vary from period to period due to numerous factors, many of which are outside our control, including the number, timing and acceptance of our services. Factors that may cause our results to vary by period include:
|
●
|
payments of milestones, license fees or research payments under the terms of our increasing number of external alliances;
|
|
●
|
changes in the demand for our products and services;
|
|
●
|
the nature, pricing and timing of products and services provided to our collaborators;
|
|
●
|
acquisition, licensing and other costs related to the expansion of our operations;
|
|
●
|
reduced capital investment for extended periods;
|
|
●
|
losses and expenses related to our investments in joint ventures and businesses;
|
|
●
|
regulatory developments or changes in public perceptions relating to the use of genetic information and the diagnosis and treatment of disease based on genetic information; and
|
|
●
|
changes in intellectual property laws that affect our rights in genetic information that we sell and license.
|
Advisory and personnel costs, marketing programs and overhead account for a substantial portion of our operating expenses. Some of these expenses cannot be adjusted quickly in the short term. If revenues of the business decline or do not grow as anticipated, we may not be able to reduce our operating expenses accordingly. Failure to achieve anticipated levels of revenue could therefore significantly harm our operating results for a particular period.
Because we do not intend to pay dividends on our Common Stock, holders of our Common Stock will benefit from an investment in our Company only if it appreciates in value.
We have never declared or paid any cash dividends on our Common Stock. We currently intend to retain the Company’s future earnings, if any, to finance the expansion of the Company’s business and do not expect to pay any cash dividends in the foreseeable future. As a result, the success of an investment in our Common Stock will depend entirely upon any future appreciation. There is no guarantee that our Common Stock will appreciate in value or even maintain the price at which its investors purchased their shares.
Our stock price has been, and is likely to continue to be, highly volatile
.
Our stock price has, since September 1, 2003, traded as high as $0.60 and as low as $0.03. Our stock price could fluctuate significantly due to a number of factors beyond our control, including:
|
●
|
variations in our actual or anticipated operating results;
|
|
●
|
sales of substantial amounts of our stock;
|
|
●
|
announcements about us or about our competitors, including technological innovation or new products or services;
|
|
●
|
litigation and other developments related to our patents or other proprietary rights or those of our competitors;
|
|
●
|
conditions in the life sciences, pharmaceuticals or genomics industries; and
|
|
●
|
Governmental regulation and legislation.
|
In addition, the stock market in general, and the market for life sciences and technology companies in particular, have experienced extreme price and volume fluctuations historically. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. These broad market and industry factors may decrease the market price of our Common Stock, regardless of our actual operating performance.
In the past, companies that have experienced volatility in the market prices of their stock have been the objects of securities class action litigation. If we became the object of securities class action litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could affect our profitability.
Our approach of incorporating ideas and methods from mathematics, computer science and physics into the disciplines of biology, organic chemistry and medicine is relatively new and may not be accepted by our potential customers or collaborators.
We intend to create a fully integrated biomarker discovery company to provide pharmaceutical and diagnostic companies worldwide with new, clinically relevant and economically significant biomarkers. Our potential customers and collaborators may be reluctant to accept our new, unproven technologies, and our customers may prefer to use traditional services. In addition, our approach may prove to be ineffective or not as effective as other methods. For example, our products and technologies may prove to be ineffective if, for instance, they fail to account for the complexity of the life processes that we are now attempting to model. If our customers or collaborators do not accept our products or technologies and/or if our technologies prove to be ineffective, our business may fail or we may never become profitable.
Even if our computational technologies are effective as research tools, our customers or we may be unable to develop or commercialize new drugs, therapies or other products based on them.
Even if our computational technologies perform their intended functions as research tools, our customers may be unable to use the discoveries resulting from them to produce new drugs, therapies, diagnostic products or other life science products. Despite recent scientific advances in the life sciences and our improved understanding of biology, the roles of genes and proteins and their involvement in diseases and in other life processes is not well understood. Only a few therapeutic products based on the study of and discoveries relating to genes or proteins have been developed and commercialized. If our customers are unable to use our discoveries to make new drugs or other life science products, our business may fail or we may never become profitable.
Our SVM Portfolio utilizes technology that may be covered by an earlier-issued patent, and if we lose the rights to use that patent, our ability to exploit certain aspects of our SVM technology will be impaired.
Our SVM Portfolio utilizes technology that may be covered by the original hyperplane patent (Pat. No. 5,649,068) owned by Lucent Technologies GRL Corporation (“Lucent”). We have obtained an assignment of a pre-existing patent license from Lucent. If Lucent were to terminate the license, it is possible that we would not be able to use portions of the SVM technology.
The industries in which we are active are evolving rapidly, and we may be unable to keep pace with changes in technology.
The pharmaceutical and biotechnology industries are characterized by rapid technological change. This is especially true of the data-intensive areas of such technologies. Our future success will largely depend on maintaining a competitive position in the field of drug, therapeutics and diagnostic products discovery. If we fail to keep pace with changes in technology, our business will be materially harmed. Rapid technological development may result in our products or technologies becoming obsolete. This may occur even before we recover the expenses that we incurred in connection with developing those products and technologies. Products or services offered by us could become obsolete due to the development of less expensive or more effective drug or diagnostics discovery technologies. We may not be able to make the necessary enhancements to our technologies to compete successfully with newly emerging technologies.
We face intense competition, and if we are unable to compete successfully we may never achieve profitability.
The markets for our products and services are very competitive, and we expect our competition to increase in the future. Although we have not identified specific companies that provide the full suite of services that we do, we compete with entities in the U.S. and worldwide that provide products and services for the analysis of genomic information and information relating to the study of proteins (proteomic information) or that commercializes novel genes and proteins. These include genomics, pharmaceutical and biotechnology companies, academic and research institutions and government and other publicly funded agencies. We may not be able to successfully compete with current and future competitors. Many of our competitors have substantially greater capital resources, research and development staffs, facilities, manufacturing and marketing experience, distribution channels and human resources than we do. This may allow these competitors to discover or to develop products in advance of us or of our customers.
Some of our competitors, especially academic and research institutions and government and other publicly funded agencies, may provide for free services or data similar to the services and data that we provide for a fee. Moreover, our competitors may obtain patent and other intellectual property protection that would limit our rights or our customers’ and partners’ ability to use or commercialize our discoveries, products and services. If we are unable to compete successfully against existing or potential competitors, we may never achieve profitability.
Our management may be unable to address future growth.
We anticipate that if we experience a period of growth in our customer base and market opportunities, a period of significant expansion of the Company will be required. This expansion will place a significant strain on our management, operational and financial resources. To manage future growth of our operations, if any, we will be required to improve existing and implement new operational systems, procedures and controls, and to expand, train and manage our employee base. There can be no assurance that our current and planned personnel, systems, procedures and controls will be adequate to support our future operations, that management will be able to hire, train, retain, motivate and manage the required personnel or that we will be able to identify, manage and exploit existing and potential strategic relationships and market opportunities. Our failure to manage growth effectively could have a material adverse effect on our business, results of operations and financial condition.
If our business does not keep up with rapid technological change or continue to introduce new products, we may be unable to maintain market share or recover investments in our technologies.
Technologies in the biomarker industry have undergone, and are expected to continue to undergo, rapid and significant change. We may not be able to keep pace with the rapid rate of change and introduce new products that will adequately meet the requirements of the marketplace or achieve market acceptance. If we fail to introduce new and innovative products, we could lose market share to our competitors, limit our growth and damage our reputation and business.
The future success of our business will depend in large part on our ability to maintain a competitive position with respect to these technologies. We believe that successful new product introductions provide a significant competitive advantage because customers make an investment of time in selecting and learning to use a new product and are reluctant to switch to a competing product after making their initial selection. However, our business or others may make rapid technological developments, which could result in our technologies, products or services becoming obsolete before we are able to recover the expenses incurred to develop them.
If our business cannot enter into strategic alliances or licensing agreements, we may be unable to develop and commercialize our technologies into new products and services or continue to commercialize existing products or services.
We may be unable to maintain or expand existing strategic alliances or establish additional alliances or licensing arrangements necessary to continue to develop and commercialize products, and any of those arrangements may not be on terms favorable to the business. In addition, current or any future arrangements may be unsuccessful. If we are unable to obtain or maintain any third party license required to sell or develop our products or product enhancements, we may choose to obtain substitute technology either through licensing from another third party or by developing the necessary technology ourselves. Any substitute technology may be of lower quality or may involve increased cost, either of which could adversely affect our ability to provide our products competitively and harm our business.
We also depend on collaborators for the development and manufacture of complex instrument systems and chemicals and other materials that are used in laboratory experiments. We cannot control the amount and timing of resources our collaborators devote to our products. We may not be able to enter into or satisfactorily retain these research, development and manufacturing collaborations and licensing agreements, which could reduce our growth and harm our competitive position.
We may not be able to find business partners to develop and commercialize product candidates derived from our discovery activities.
Our strategy for the development and commercialization of diagnostic biomarkers and therapeutic proteins depends on the formation of collaborations or licensing relationships with third parties that have complementary capabilities in relevant fields. Potential third parties include pharmaceutical and biotechnology companies, diagnostic companies, academic institutions and other entities. We cannot assure you that we will be able to form these collaborations or license our discoveries or that these collaborations and licenses will be successful.
Our dependence on licensing and other collaboration agreements makes us heavily dependent on our collaborators.
We may not be able to enter into licensing or other collaboration agreements on terms favorable to us. Even if we do enter into an acceptable agreement, collaborators typically may be afforded significant discretion in electing whether to pursue any of the planned activities. In most cases, our collaborators will have responsibility for formulating and implementing key strategic or operational plans. Decisions by our collaborators on these key plans, which may include development, clinical, regulatory, marketing (including pricing), inventory management and other issues, may prevent successful commercialization of the product or otherwise affect our profitability.
In addition, we may not be able to control the amount and timing of resources our collaborators devote to the product candidates and collaborators may not perform their obligations as expected. Additionally, business combinations or changes in a collaborator’s business strategy may negatively affect its willingness or ability to complete its obligations under the arrangement with us. Furthermore, our rights in any intellectual property or products that may result from our collaborations may depend on additional investment of money that we may not be able or willing to make.
Potential or future collaborators may also pursue alternative technologies, including those of our competitors. Disputes may arise with respect to the ownership of rights to any technology or product developed with any future collaborator. Lengthy negotiations with potential collaborators or disagreements between us and our collaborators may lead to delays or termination in the research, development or commercialization of product candidates or result in time-consuming and expensive litigation or arbitration. If our collaborators pursue alternative technologies or fail to develop or commercialize successfully any product candidate to which they have obtained rights from us, our business, financial condition and results of operations may be significantly harmed.
If we are unable to hire or retain key personnel or sufficient qualified employees, we may be unable to successfully operate our business.
Our business is highly dependent upon the continued services of our executive team and board of directors. While certain members of our senior management are parties to employment or consulting agreements and non-competition and non-disclosure agreements, we cannot assure you that these key personnel and others will not leave us or compete with us, which could materially harm our financial results and our ability to compete. The loss, incapacity or unavailability for any reason of any of these individuals could have a material adverse effect upon our business, as well as our relationships with our potential customers. We do not carry key person life insurance on any member of our senior management. Furthermore, competition for highly qualified personnel in our industry and geographic locations is intense. Our business would be seriously harmed if we were unable to retain our key employees, or to attract, integrate or retain other highly qualified personnel in the future.
We may not be able to employ and retain experienced scientists, mathematicians and management.
Technologies in our industry have undergone, and are expected to continue to undergo, rapid and significant change. A highly skilled staff is integral to developing, marketing and supporting new products that will meet or exceed the expectations of the marketplace and achieve market acceptance. Without experienced staff, our business may be unable to maintain or grow market share, which could result in lower than expected revenues and earnings.
If our access to tissue samples or to genomic data or other information is restricted, or if this data is faulty, our business may suffer.
To continue to build our technologies and related products and services, we need access to third parties’ scientific and other data and information. We also need access to normal and diseased human and other tissue samples and biological materials. We may not be able to obtain or maintain such access on commercially acceptable terms. Some of our suppliers could become our competitors and discontinue selling supplies to us. Information and data from these suppliers could contain errors or defects that could corrupt our databases or the results of our analysis of the information and data. In addition, government regulation in the United States and other countries could result in restricted access to, or use of, human and other tissue samples. Although currently we do not face significant problems in obtaining access to tissues, if we lose access to sufficient numbers or sources of tissue samples, or if tighter restrictions are imposed on our use of the information generated from tissue samples, our business may suffer.
The sales cycle for some of our products and services is lengthy. We expend substantial funds and management effort with no assurance of successfully selling our products or services.
Our ability to obtain customers for our platforms, tools and services depends in large part upon the perception that our technologies can help accelerate their efforts in drug and diagnostics discovery. Our ability to obtain customers for our therapeutic or diagnostic product candidates significantly depends on our ability to validate and prove that each such product candidate is suitable for our claimed therapeutic or diagnostic purposes. Our ability to obtain customers will also depend on our ability to successfully negotiate terms and conditions for such arrangements. The sales cycle for our therapeutic and diagnostic product candidates is typically lengthy and may take more than 12 months.
An inability to protect our proprietary data, technology or products may harm our competitive position.
If we do not adequately protect the intellectual property underlying our products and services, competitors may be able to develop and market the same or similar products and services. This would erode our competitive advantage. In addition, the laws of some countries do not protect or enable the enforcement of intellectual property to the same extent as the laws of the United States.
We use contractual obligations to protect a significant portion of our confidential and proprietary information and know-how. This includes a substantial portion of the knowledge base from which we develop a large portion of our proprietary products and services. However, these measures may not provide adequate protection for our trade secrets or other proprietary information and know-how. Customers, employees, scientific advisors, collaborators or consultants may still disclose our proprietary information in violation of their agreements with us, and we may not be able to meaningfully protect our trade secrets against this disclosure.
In addition, we have applied for patents covering some aspects of some of our technologies and biomarker subsets of genes and proteins we have discovered using these technologies. We plan to continue to apply for patents covering parts of our technologies and discoveries as we deem appropriate, but cannot assure you that we will be able to obtain any patents or that the patents will be upheld if challenged. The patent positions of biotechnology related companies are generally uncertain and involve complex legal and factual questions. Legislative changes and/or changes in the examination guidelines of governmental patents offices may negatively affect our ability to obtain patent protection for certain aspects of our intellectual property, especially with respect to genetic discoveries, and may negatively impact the enforceability of one or more of our patents. In contrast to recent court decisions invalidating claims directed to individual human genes and proteins, our focus has been directed to identifying relationships between small groups of genes and proteins that are useful for diagnosing, treating and prognosing diseases and other conditions.
Our success depends in large part on our ability to patent our discoveries.
Our success depends, in large part, on our ability to obtain patents on biomarkers and pathways that we have discovered and are attempting to commercialize. We face intense competition from other biotechnology and pharmaceutical companies. These include customers who use our products and technologies and are pursuing patent protection for discoveries, which may be similar or identical to our discoveries. We cannot assure you that other parties have not sought patent protection relating to the biomarkers and pathways that we discovered or may discover in the future. Our patent applications may conflict with prior applications of third parties or with prior publications. They may not result in issued patents and, even if issued, our patents could be invalidated or may not be sufficiently broad to provide us with any competitive advantages. U.S. and other patent applications ordinarily remain confidential for 18 months from the date of filing. As a result, patent applications that we file which we believe are novel at the time of filing may be determined at a later stage to be inconsistent with earlier applications. Additionally, the scope of patents we receive may not provide us with adequate protection of our intellectual property, which would harm our competitive position. Any issued patents that cover our proprietary technologies may not provide us with substantial protection or be commercially beneficial to the business. The issuance of a patent is not conclusive as to its validity or its enforceability. Federal courts may invalidate these patents or find them unenforceable. Competitors may also be able to design around our patents. If we are unable to protect our patented technologies, we may not be able to commercialize our technologies, products or services and our competitors could commercialize our technologies. Any of these events could materially harm our business or financial results.
Litigation or other proceedings or third party claims of intellectual property infringement could prevent us, or our customers or collaborators, from using our discoveries or require us to spend time and money to modify our operations.
The technology that we use to develop our products, and the technology that we incorporate in our products, may be subject to claims that they infringe the patents or proprietary rights of others. The risk of this occurring will tend to increase as the genomics, biotechnology and software industries expand, more patents are issued and other companies engage in other genomic-related businesses. If we infringe patents or proprietary rights of third parties, or breach licenses that we have entered into with regard to our technologies and products, we could experience serious harm. If litigation is commenced against us alleging intellectual property rights infringement or if we initiate a lawsuit to assert claims of infringement, protect our trade secrets or know-how or to determine the enforceability, scope and validity of the proprietary rights of others, we may incur significant costs in litigating, whether or not we prevail in such litigation. Regardless of the outcome, litigation can be very costly. These costs would also include diversion of management and technical personnel to defend us against third parties or to enforce our patents (once issued) or other rights against others. In addition, parties making claims against us may be able to obtain injunctive or other equitable relief that could prevent us from being able to further develop or commercialize. Further, these lawsuits could result in the invalidation or limitation of the scope of our patents or the forfeiture of the rights associated with these patents. This could also result in the award of substantial damages against us. In the event of a successful claim of infringement against us, we may be required to pay damages and obtain one or more licenses from third parties. If we are not able to obtain these licenses at a reasonable cost, if at all, we could encounter delays in product introductions while we attempt to develop alternative methods or products. Defense of any lawsuit or failure to obtain any of these licenses could prevent us from commercializing available products, all of which could negatively impact our business, financial condition or results of operations. Moreover, during the course of these suits, there may be public announcements of the results of hearings, motions and other interim proceedings or developments in the litigation. Securities analysts or investors may perceive these announcements to be negative, which could cause the market price of our common stock to decline.
Many of our services will be based on complex, rapidly developing technologies. Although we will try to identify all relevant third party patents, these products could be developed by the business without knowledge of published or unpublished patent applications that cover some aspect of these technologies. The biomarker industry has experienced intensive enforcement of intellectual property rights by litigation and licensing. If we are found to be infringing the intellectual property of others, we could be required to stop the infringing activity, or we may be required to design around or license the intellectual property in question. If we are unable to obtain a required license on acceptable terms, or are unable to design around any third party patent, we may be unable to sell some of our services, which could result in reduced revenue.
We may acquire or make strategic investments in other businesses and technologies in the future, and these could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our operating results.
If opportunities arise, we may consider making acquisitions of or investments in businesses, technologies, services or products. These activities may involve significant cash expenditures, debt incurrence, additional operating losses and expenses that may have a material adverse effect on the operating results of our business. Moreover, even if we acquire complementary businesses or technologies, we may be unable to successfully integrate any additional personnel, operations or acquired technologies into our business.
Difficulties in integrating an acquired business or managing an investment could disrupt our business, distract our management and employees and increase our expenses. Future acquisitions could expose us to unforeseen liabilities and result in significant charges relating to intangible assets. Sizable acquisitions or investments may also divert senior management from focusing on our existing business plan. Finally, if we make acquisitions using convertible debt or equity securities, existing stockholders may be diluted, which could affect the market price of our stock.
We have identified a material weakness in our internal accounting control over financial reporting.
Management has concluded that our internal control over financial reporting was not effective as of December 31, 2012. Our Chief Executive Officer, who is also serving as our Principal Financial Officer and Principal Accounting Officer, concluded that we have material weaknesses in our internal control over financial reporting because we do not have an adequate segregation of duties due to a limited number of employees among whom duties can be allocated. The lack of segregation of duties is due to the limited nature and resources of the Company.
All internal control systems no matter how well designed have inherent limitations. Therefore, even those systems determined to be effective may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Risks Related to Our Industry
There are many risks of failure in the development of drugs, therapies, diagnostic products and other life science products. These risks are inherent to the development and commercialization of these types of products.
Risks of failure are inseparable from the process of developing and commercializing drugs, therapies, diagnostic products and other life science products. These risks include the possibility that any of these products will:
|
●
|
be found to be toxic or ineffective;
|
|
●
|
fail to receive necessary regulatory approvals;
|
|
●
|
be difficult or impossible to manufacture on a large scale;
|
|
●
|
be uneconomical to market;
|
|
●
|
fail to be developed prior to the successful marketing of similar products by competitors; or
|
|
●
|
be impossible to market because they infringe on the proprietary rights of third parties or compete with superior products marketed by third parties.
|
We are dependent on our customers’ commercialization of our discoveries. Any of these risks could materially harm our business and financial results.
The trend towards consolidation in the pharmaceutical and biotechnology industries may adversely affect us.
The trend towards consolidation in the pharmaceutical and biotechnology industries may negatively affect us in several ways. These consolidations usually involve larger companies acquiring smaller companies, which results in the remaining companies having greater financial resources and technological capabilities, thus strengthening competition in the industry. In addition, continued consolidation may result in fewer customers for our products and services.
We may be subject to product liability claims if products derived from our products or services harm people.
We may be held liable if any product that is made with the use, or incorporation of, any of our technologies or data causes harm or is found otherwise unsuitable. These risks are inherent in the development of genomics, functional genomics and pharmaceutical products. If we are sued for any harm or injury caused by products derived from our services or products, our liability could exceed our total assets. In addition, such claims could cause us to incur substantial costs, divert management’s attention from executing the Company’s business plan and subject us to negative publicity even if we prevail in our defense of such claims.
Our business and the products developed by our collaborators may be subject to governmental regulation.
New therapeutic or diagnostic products that may be developed by our collaborators will have to undergo a lengthy and expensive regulatory review process in the United States and other countries before it can be marketed. It may be several years, or longer, before any therapy or diagnostic product that is developed by using our technologies, will be sold or will provide us with any revenues. This may delay or prevent us from becoming profitable. Changes in policies of regulatory bodies in the United States and in other countries could increase the delay for each new therapy and diagnostic products.
Even if regulatory approval is obtained, a product on the market and its manufacturer are subject to continuing review. Discovery of previously unknown problems with a product may result in withdrawal of the product from the market.
Although we intend to become involved in the clinical phases in the future, we still expect to rely mainly on collaborators of our discovery activities to file regulatory approval applications and generally direct the regulatory review process. We cannot be certain whether they will be able to obtain marketing clearance for any product that may be developed on a timely basis, if at all. If they fail to obtain required governmental clearances, it will prevent them from marketing therapeutic or diagnostic products until clearance can be obtained, if at all. This will in turn reduce our chances of receiving various forms of payments, including those relating to sales of marketed therapeutic or diagnostic products by them.
The law applicable to us may change in a manner that negatively affects our prospects.
We must comply with various legal requirements, including requirements imposed by federal and state securities and tax laws. Should any of those laws change over the term of our existence, the legal requirements to which we may be subject could differ materially from current requirements, which could increase the cost of doing business or preclude us from undertaking certain parts of our business plan, would result in adverse consequences.
If ethical and other concerns surrounding the use of genetic information become widespread, there may be less demand for our products and services.
Genetic testing has raised ethical issues regarding confidentiality and the appropriate uses of the resulting information. For these reasons, governmental authorities may call for limits on or regulation of the use of genetic testing or prohibit testing for genetic predisposition to various conditions, particularly for those that have no known cure. Any of these scenarios could reduce the potential markets for our technologies in the field of predictive drug response, which could materially harm our business and financial results.
Register to chat with like-minded investors on our interactive forums.
Hot Features
Premium
