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Lung Cancer Medical Breakthrough (OTC:BMOD)

Biomoda, Inc.

(Public, OTC:BMOD)

StocksHaven Investments profiles one of the most promising up and coming small cap biotech companies, Biomoda Inc, which has established a medical breakthrough for early lung cancer detection. It is a development-stage company. The Company is an invitro diagnostics company that develops assays, or tests, to detect cancer. These assays are performed in clinical reference laboratories using body-fluid samples. This technology is based on a licensed patent from Los Alamos National Laboratories. The technology is based on a molecule that has an affinity to bind with cancer cells and it fluoresces red under ultra violet light. It is a porphyrin molecule. This technology works with a range of cell types. The Company is in the process of developing a line of assays for a variety of cancers based on adaptations of this technology. Biomoda’s first product is an assay for lung cancer.

Before reading this analysis, it is important to note that there currently is no commercial early stage lung cancer diagnostic of proven effectiveness. The proprietary test developed by Biomoda is truly without peer. Of the few known alternatives, none embody the elements of high sensitivity and accuracy at the cellular level, simple noninvasive use and very affordable cost – all key to rapid and broad commercial acceptance. Their process is truly revolutionary.

In other words, there is no competition for Biomoda.

Lung Cancer Statistics

  • According to the American Cancer Society, lung cancer kills approximately 1 million people worldwide and is the leading cause of cancer deaths in the U.S.
  • Smoking is responsible for nearly 90% of the cancer deaths
  • The incidence of lung cancer continues to rise. It is currently the most fatal cancer malignancy found among men and women in the U.S. and was the most common cause of death in both sexes in 1995 (157,400 deaths).
  • Lung cancer kills women at a rate of 11:1 when compared to the number of women who die from cervical cancer each year.
  • Lung cancer primarily strikes people over age 45, and due to a lack of effective screening, is usually spread by the time that it is diagnosed.
  • Global cigarette production during the past 20 years has increased an average of 2.2% per year.
  • The majority of new cigarette consumers are U.S. minorities such as Hispanics, African-Americans and Native Americans, and people in Third-World developing countries.

The need for early diagnosis and prevention for cancer is now, as World Health Organization (WHO) predicts a 50% rise in cancer incidence by year 2020. As this epidemic continues to expand, new and innovative technologies will be needed which will triumph their predecessors. As is the case with Biomoda’s unique product, CyPath. CyPath is a product developed from technology licensed by Biomoda from the University of California and from Biomoda’s own patented technology. This is a cytology assay with the ability to differentiate normal cells from abnormal cells. CyPath’s initial cancer target is lung cancer; additional R&D is focused on addressing bladder and cervical cancers.

CyPath Clinical Studies & FDA Application

Internal validation testing results have shown near 100% accuracy of the assay with no false positives or false negatives.  Eventu al commercial level accuracy in the 90% range is to be reasonably expected compared to PAP staining which is 64% accurate.  Biomoda submitted a Pre-IDE to the FDA who responded favorably. Our  Phase Two Clinical Trial is underway as part of our larger screening program in partnership with the  screening program in partnership with the  New Mexico Department of Veterans Services (NMDVS) and  New Mexico Tech (NYSE:NMT) to screen veterans for lung cancer in New Mexico. Biomoda has currently enrolled over 500 participants in the program and have run more than 90 through the collection procedure. Results of this 300+ patient study are expected in the fall of 2009.

The study will be expanded to 3500 patients thereafter as a Phase III Pivotal Clinical Trial, with results of the larger study expected in 2010. Biomoda and NMT are developing an automated technology to support large-population screening for cancer. Results from these studies will be sufficient to submit to FDA for final approval as a Class III PMA IVO device.This is expected in 2011.

International Interest & Potential Markets

International interest has led to discussions that focus on establishing clinical trials in Europe with researchers at  Institute Gustave Roussy and  Institute Pasteur in Paris, the most prestigious cancer research facilities in Europe. Data developed can be incorporated thus into Biomoda’s submission to FDA. It would also be the basis for a CE European submission (equivalent to FDA approval).  The global in vitro cancer detection product market grew from $3.15 billion in 2001 to $4.28 billion in 2007 with projected annual growth of 8% through 2010 according to Biotechnology Associates.

Industrialized nations account for approximately 650,000 new lung cancer cases each year.  Without early diagnosis five-year survival rates are approximately 15 percent. However, early detection increases the survival rate to approximately 92 percent, according to a study conducted by the International Early Lung Cancer Action Project (I-ELCAP) and published in the New England Journal of Medicine.  This is a truly significant market driver.

Commercial Development

Commercial development and marketing efforts are underway.  Publication in research journals and medical presentations at large conferences are planned. “The opportunity to present the Biomoda technology to the top clinicians and scientists in our field is a big step forward for us,” said John Cousins, Biomoda President and CEO. “Since only 16 percent of lung cancers today are diagnosed early enough to be cured, this audience will understand the tremendous life-saving potential of an easy, non-invasive, inexpensive and, above all, accurate screening tool for lung cancer.” [ source ]

Biomoda intends to use contract sales agents to market to doctors.   A study of reimbursement codes and Medicare/Medicaid and private insurance billing codes confirms that codes exist to cover the cost of the assay.  Our business model is to run a centralized owned and operated clinical lab and perform all tests in-house and develop the lab function as a core competency and capture the revenues.

Subsequent product and market extensions will focus on diagnosis, screening and monitoring of other cancers including an early detection bladder cancer diagnostic assay.  While having a higher survival rate than lung cancer, bladder cancer has a 70 percent recurrence rate.  Breast, cervical, colo-rectal and oral cancer diagnostics are also being targeted for development.  The commercial viability of an inexpensive, highly accurate diagnostic test is a strong market driven opportunity.  Given the attractive cost/benefit profile of CyPath®, it is not unrealistic to plan it will become as accepted and prevalently used as PSA, colonoscopy, mammography and PAP tests are today.

Experienced Management Team
John J. Cousins, President and a Director, has 25 years experience starting as an electronics engineer up to his current role as executive and entrepreneur. He holds an MBA from The Wharton School and undergraduate degrees from Boston University and MIT. He has worked for ABC and Ampex, and owned and operated his own businesses. He also functions as CFO for Biomoda and has ten years experience as a public company CFO.

Constance Dorian, Vice President of Technical Operations, earned a B.S. in Biology from San Diego State University. She has 20 years experience in the design and development of In Vitro diagnostic assays, clinical studies, quality control, quality assurance, product support programs, product improvement programs, cost reduction programs, contract negotiations, inventory control, and production planning following FDA Guidelines.

Gordon Bennett, Fluorescence Microscopist, has a B.S. in physics as well as a J.D. from UNM. His background is in photonics and electronics. He has been adjunct faculty at the College of Santa Fe and has held the Chair in Photonics and Biophotonics at CNM. He is currently a member of the Optical Society of America and the New Mexico State Bar.

Angela Montoya, Lab Technician, earned a B.S. in Biology and a B.A. in Spanish from the University of New Mexico. She is currently working towards an M.S. in Health Education. Her experiences lie in the coordination, conduction, and analysis of environmental and clinical research.

Tim Zannes, General Counsel of Biomoda, previously ran a private investigation firm in New Mexico after leaving a position with the Albuquerque City Attorney’s Office. He also worked for the firm of Lambros and Lambros in Cleveland, Ohio. Mr. Zannes attended the University of North Carolina and the University of New Mexico where he earned his J.D. degree.

Verrity Gershin, Corporate Secretary and Director of Administration, has eleven years of experience in accounting, corporate filings and corporate administrative support. Ms. Gershin has worked with Biomoda for the last seven years helping the company successfully file for public status and maintaining compliance with the Securities and Exchange Commission. Ms. Gershin holds a bachelors degree from the University of New Mexico.

Overall Sentiment

With the ever increasing need for medical advances in the prevention and treatment of cancer, this company is bound to provide shareholders with the high growth value they’ve come to expect from the biotech market. Some investors will be quick to point out the company’s ongoing concerns issue. They will argue that the company’s financial position (due low liquid assets on hand) is in danger. From their 08/14/09 10-Q it states, “We have been in the development stage since we began operations on January 3, 1990. We have a continuing government contract for fiscal year ended June 30, 2009, of $1.3 million of which approximately $1,216,678 has been already reimbursed, leaving approximately $83,332 due as of the end of June 2009. As of June 30, 2009, we had an accumulated deficit of $7,736,235 and a working capital deficit of $520,789.” However, companies with promising technologies always have a way of seeking creative alternatives to funding, especially ones like Biomoda and their four patents. It is without question that the company has been extremely engaging this past year in 2009, releasing 9 new pieces of information through press releases. As eyes begin to open, more and more potential investors will take notice of these up and coming innovative companies. We can see this through the wayNM Tech presented a scientific abstract on the Biomoda diagnostic at the 13th World Conference on Lung Cancer in San Francisco, CA, on August 2, 2009. Lastly, with projected annual growth of 8% through 2010 according to Biotechnology Associates for the invitro cancer detection industry, and Biomoda’s 90% estimated commercial level accuracy, investing in Biomoda Inc. now could prove to be one of the top plays of the next few years.

Disclosure: Position in BMOD