Company Presentation

Report
November 2013
Safe Harbor Statement
Statements made in this presentation regarding VeriTeQ Corporation (“VeriTeQ” or “Company”) and VeriTeQ that
are not historical facts are forward-looking statements based on our current expectations, assumptions, estimates
and projections about VeriTeQ and our industry. These forward-looking statements are subject to risks and
uncertainties that could cause actual future events or results to differ materially from such statements. These
forward-looking statements include, without limitation, statements about our proposed name change and reverse
stock split, our commercialization activities, market opportunities, our strategy, our competition, FDA regulation,
partnership opportunities, market penetration, and all other forward-looking statements. You should not place
undue reliance on any of the forward-looking statements made in this presentation. Our actual results could differ
materially from those expressed or implied by these forward-looking statements as a result of various factors,
including risks and uncertainties related to the timing or successful completion of our product commercialization
activities, VeriTeQ’s ability to raise capital, and other various risks and uncertainties. Additional information about
these and other factors that could affect VeriTeQ’s business is set forth in its various filings with the Securities and
Exchange Commission, including those set forth in its Form 10-K filed on June 28, 2013, and Form 10-Q filed on
July 16, 2013, under the caption "Risk Factors." The Company undertakes no obligation to update publicly any
forward-looking statements for any reason, even if new information becomes available or other events occur in the
future.
This presentation does not constitute a prospectus or form part of any offer or invitation to sell or issue, or any
solicitation of any offer to purchase or subscribe for, or any offer to underwrite or otherwise acquire any shares in
the Company or any other securities, nor shall they or any part of them nor the fact of their distribution or
communication form the basis of, or be relied on in connection with, any contract, commitment or investment
decision in relation thereto, nor does it constitute a recommendation regarding the securities of the Company.
2
Company Background
VeriTeQ originated as a private company founded
in 2011 to acquire and develop core implantable
RFID intellectual property for healthcare
Acquired/licensed/developed 100+ patents (issued or
pending)
Multiple regulatory clearances: FDA and CE Mark
Completed share exchange agreement with
Digital Angel Corporation on July 8, 2013;
company changed its name to VeriTeQ
VeriTeQ shareholders own ~88% of resulting company
Currently trading as OTC: DIGAD following 1:30
reverse stock split
Ticker to change to “VTEQ” on Nov. 19
3
Unique Value Position
In July 2012, the President signed into law the Healthcare Safety and
Innovation Act and in Sept. 2013, the FDA issued a Final Rule, that requires
all medical devices distributed in the U.S. that are intended to be used more
than once and intended to undergo any form of reprocessing before each use
to carry a UDI with a direct part marking
VeriTeQ’s FDA cleared UDI, which can serve as a direct part marking to
meet the AIDC portion of the FDA Final Rule, can also identify an
implantable medical device, in vivo, on demand
VeriTeQ’s UDI, called “Q Inside Safety Technology,” goes beyond pure
identification to help device manufacturers comply with the FDA Final Rule;
Q Inside Safety Technology provides clinical and healthcare benefits
4
Company Overview
VeriTeQ provides proprietary, innovative healthcare solutions for
Unique Device Identification and Bio-Sensing applications
Core Technology: implantable radio frequency (RF) microchip technology
Cleared by the FDA as the Predicate Class II medical device in the industry
UDI products enable access to UDI information, in-situ, on demand, at the
point of use
A leading industry position to enable compliance with FDA Final Rule
Branding VeriTeQ UDI as “Q Inside Safety Technology”
Q Inside Safety Technology product launch in silicon-filled breast implants
targeted for Q4 2013; vascular ports to quickly follow
Partnership with Establishment Labs (“Motiva” brand name); additional
partnerships pending
Partnership with Medcomp and initial launch targeted for 1H 2014
Bio-sensing technologies for radiation dosimetry provide real-time
measurements of received radiation dose from the patient, not the machine
External and internal product applications
5
Lead Business Areas
Medical Device
UDI/Q Inside
Safety Technology
BioSensing/Radiation
Dosimeter
Technologies
Breast Implants
and Breast
Implant Sizers
External
Radiation
Dosimeter
Vascular Ports
Implantable
Radiation
Dosimeter
Other Reusable
and Implantable
Medical Devices
6
The VeriTeQ UDI System
Medical Devices with
Inside
Safety Technology
7
FDA Final Rule
The Final Rule requires devices intended to be used more than once and intended to undergo any
form of reprocessing before each use, i.e. re-useable/reprocessed medical devices to have a direct
part marking (vs. basic labeling on device packaging)
Requires the direct part marking to be provided through either or both of the following:
Easily readable plain text;
Automatic Identification and Data Capture (AIDC), or an alternative technology, that will provide the UDI
of the device on demand
Benefits of a UDI System
Allows more accurate reporting and analysis of adverse events to quickly identify problem devices
Reduces medical errors by quickly and accurately identifying a device and its characteristics
Provides a standardized identifier that allows manufacturers, distributors and healthcare facilities
to more effectively manage medical device recalls
Provides a consistent way to enter information about devices in electronic health records and
clinical information systems
Provides a foundation for a global, secure distribution chain, helping to address counterfeiting and
diversion and prepare for medical emergencies
8
VeriTeQ’s UDI System:
 Implantable RFID
 Pocket Readers
Microchips
 Patented and FDA
 Patented and FDA
cleared
 Provides the primary
key information
Cleared
 Pocket Reader
 Pocket Reader EX
Inside
 Database
 Customization
for device
manufacturer
 Informatics
 Integration with
FDA database
9
Target Markets
Implantable Medical Devices
Reprocessed Medical Devices
Breast implants
Breast implant sizers
Vascular ports
Artificial joint sizers
Artificial joints
Heart valve sizers
Traumatic fracture repair
devices
Endoscopy equipment
Surgical instrumentation
10
Regulatory Strategy
VeriTeQ’s Q Inside Safety Technology is the Predicate Class II medical
device in its class
FDA published Class II Special Controls Guidance Document: Implantable
Radiofrequency Transponder System for Patient Identification and Health Information
based on its clearance of Q Inside (document drafted by VeriTeQ as requested
by FDA)
Guidance creates a standard for any future human implantable RFID
microchips based on VeriTeQ’s technology
Creates a barrier to entry for competing technologies
Adherence to the FDA guidance document may cause a competitor to violate
VeriTeQ’s intellectual property
Gives VeriTeQ first-mover advantage
VeriTeQ’s Radiation Dosimetry IP/products have multiple patents and FDA
clearances/CE Marks
DVS® implantable chip for prostate and breast cancer
OneDose® skin-adhesive product for external photon beam radiation
11
Clinical and Industry Benefits
The use of Q Inside Safety Technology by medical device
manufacturers provides the gold-standard in device identification
Helps reduce medical errors
Allows for rapid and accurate data retrieval and recording
Quickly and accurately identifies a problem device in the event of
a recall or other adverse event
Timely identification of problem devices can manage costs for manufacturers
Helps improve inventory management
Wide acceptance of RFID in healthcare industry
Can be link to patients’ electronic medical records and personal
health records
Enables more effective post-market surveillance and evaluation
studies to improve evidence-based medicine
12
UDI Business Model
VeriTeQ acts primarily as a supplier of its proprietary microchips and readers to
medical device manufacturers
Manufacturers incorporate VeriTeQ’s products into their manufacturing
processes/distribution strategy (to hospitals, physicians, etc.)
Price per chip = $10-12; gross margin per chip = 65 - 75% margins
Price per reader = $300-500; gross margin per reader = 40 – 60% margins
VeriTeQ also provides development services to medical device manufacturers
Primary development areas include design and manufacturing process to include chip
in their medical device, i.e. new encasement technologies such as special polymers
and heat resistant microchips
Avg. price for development per manufacturer = $250,000; gross margin = 50%
Data services include database connectivity to manufactured microchips,
application software to collect microchip/medical device model implanted,
FDA data base registry and informatics analytics. Priced on per project
development ranging from $25,000 to several hundred thousand dollars
13
Targeted Customers
Breast Implant
Manufacturers
Vascular Port
Manufacturers
Artificial Joint
Manufacturers
Other
Manufacturers
14
Breast Implants
VeriTeQ’s Q Inside Safety Technology can be embedded within
breast implants and sizers to automatically identify the medical
device in situ or after re-sterilization.
Ex-US: Agreement with Establishment Labs/Motiva
Leading global breast, body and facial aesthetic company that
manufactures advanced silicone-filled breast implants, marketed
under the Motiva Implant Matrix brand name
Manufacturing completed and CE Mark certification achieved
Expected launch: Q4-2013 (LA; Europe; Asia)
US: Market leading breast implant manufacturer is testing
feasibility to integrate the Q Inside in its silicone implants and
sizers
Discussions ongoing with the two leading global breast implant
manufacturers regarding need to identify their sizers to comply
with FDA Final Rule
Company estimates sizer market at 600,000 devices annually
15
Vascular Ports
Partnership with Medcomp (a leading manufacturer of vascular
ports) to utilize Q Inside for Medcomp’s FDA-cleared vascular
ports
$3 million initial contractual PO commitment from Medcomp
Enables accurate device identification and medication dosage
Hospital studies expected to begin at:
Northwestern Memorial in Chicago
New York-Presbyterian – University Hospital of Columbia and Cornell in
NY
Cleveland Clinic in Cleveland, OH or MD Anderson Cancer Center in
Houston, TX
Medcomp /VeriTeQ targeting to set clinical UDI standard to
incentivize other port manufacturers to use Q Inside – e.g. C.R.
Bard, Smiths Medical, etc.
16
Artificial Joints and Sizers
Identification of implantable and reusable medical devices such as
sizers used in joint replacements (subject to Final Rule)
Artificial hips in the U.S.:
Number of procedures: 230,000
Total annual expenditure: $10.5 billion
Average cost per procedure: $45,000
Major manufacturers: Zimmer (24%), Stryker, DePuy/J&J, Biomet, Wright
Medical
Artificial knees in the U.S.
Number of procedures: 543,000
Total annual expenditure: $12 billion
Average cost per procedure: $22,000
Major manufacturers: Zimmer (24%), Depuy/J&J, Stryker, Biomet, Smith &
Nephew
Active initial meetings/dialog with lead target device
manufacturers
Clinical benefits: Q Inside Safety Technology allows for immediate data
retrieval; can help quickly resolve adverse event reporting and recalls
As published on July 18, 2011 in 24/7 Wall St.’s Eleven Most Implanted Medical Devices In America
17
Inside Global Market Opportunity
5 Years
Year 1
Year 2
Year 3
Year 4
Year 5
11,542,602
4,963,800
2,088,800
18,595,202
16,485,205
5,613,120
3,101,600
25,199,925
39,188,930
12,395,920
6,568,160
58,153,010
45,224,971
14,413,395
7,988,180
67,626,546
46,566,446
15,293,395
8,362,589
70,222,430
159,008,154
52,679,630
28,109,329
239,797,113
Breast Implants
Artificial Joints
Vascular Ports
Total Cost of Sales
4,530,173
3,271,993
915,680
8,717,846
6,420,347
3,512,782
1,185,760
11,118,889
13,930,715
6,138,912
2,522,976
22,592,603
15,803,926
5,813,572
2,931,888
24,549,386
16,390,516
6,253,572
3,063,483
25,707,570
57,075,676
24,990,831
10,619,787
92,686,293
GROSS PROFIT
9,877,357
14,081,036
35,560,407
43,077,160
44,514,860
147,110,821
Revenue
Breast Implants
Artificial Joints
Vascular Ports
Total Revenue
Cost of Sales
Average Gross Profit Margin53%
56%
61%
64%
63%
61%
Industry data based on 1,205,251 breast procedures performed globally every year1. The Company estimates 600,000 breast
implant sizers annually. There are 33,000 plastic surgeons worldwide and two US major manufacturers. This opportunity assumes a
unit price of $12 per VeriTeQ Q Inside (two per procedure) and$500 per scanner, at market penetrations of 10% for Year 1, 20% for
Year 2, and 40% for Year 3 and 50% thereafter based on government mandates. Assumptions include estimates of 1,546,000
artificial joints implanted globally every year with a unit price of $12 for the VeriTeQ UDI, and 844,000 vascular ports implanted
globally every year with a unit price of $10 for VeriTeQ’s Q Inside.
1
International Society of Aesthetic Plastic Surgeons performed in 2012
18
VeriTeQ BioSensors
In Situ Measurement of
Radiation Dosages
19
Sensing Technologies
VeriTeQ owns Patent 7,125,382 for an “Embedded Bio-Sensor
System,” a biological sensor on the end of a radio frequency chip
Temperature (current)
Radiation levels (current)
Blood oxygen (future)
Pulse (future)
Medication levels (future)
i.e. post surgery
Glucose (licensed to a third party)
Others
20
VeriTeQ Dosimetry
Radiation Dose Verification
External Technology
Implantable Technology
21
Patient Safety & Radiation Overdose
According to the ECRI Institute, radiation or CT overdose make the list of the Top
10 Technology Hazards each year going back at least five years
2013: #3 Unnecessary exposures and
radiation burns from diagnostic
radiology procedures
2012: #2 Exposure hazards from
radiation therapy and CT
2011: #1 Radiation overdose and
other errors during radiation therapy
2009-10: #4 CT radiation dose
2008: #8 CT radiation dose
2007: #5 Radiation therapy errors
22
VeriTeQ OneDose
®
OneDose® is an FDA-cleared single-use, external dosimetry system used in
the radiation oncology suite to verify radiation dose quickly and conveniently
at the skin level
Significant IP protection
CE Mark to market products in the E.U.
OneDose is the only wireless, pre-calibrated, disposable, surface sensor on
the market that provides an instant readout of the dose delivered
Current reimbursement rate per patient (4-6 dosimeters used during
treatment) ranges between $260 and $380
In 2010, 1.1 million patients received radiation therapy in the U.S.* with
new indications for use in CT and fluoroscopy markets
Researchers at the National Cancer Institute estimate that 29,000 future cancer
cases could be attributed to the 72 million CT scans performed in the country in
2007
Over 5 million fluoroscopic procedures performed annually in the U.S.**
* According to a study published by IMV Medical Information Division
**National Council on Radiation Protection and Measurements, report No. 168 (2010)
23
Internal Radiation Sensing
World’s first and only implantable wireless radiation dosimeter; FDA
cleared for use in prostate and breast cancer radiotherapy
Enables radiation oncologists to immediately measure the dose of radiation
penetrating a tumor or tumor area
Cleared for use in photon external beam and hypo-fractionated treatment protocols
Potential additional new indications for use include lung, colorectal and pancreatic
cancer
Only device that confirms radiation dose delivered to tumor
Can also be used as a fiducial marker
Device is reimbursable by both Medicare and private insurance
FDA cleared & CE mark; significant patent protection
Approximately 81,580 patients receive seed implants per year in the U.S. and
more than 425,000 patients are diagnosed with prostate and breast cancers
total each year in the U.S.*
*Source = ASTRO, American Society of Radiation Oncology
24
BioSensor Business Model
To be sold to radiation oncology centers in the U.S. and E.U.
Radiation oncologists, therapists, physicists, dosimetrists
Over 4,400 radiation oncologists in the U.S., with 4 states representing 33% of the
U.S. market
To be sold through direct sales, worldwide distribution partners, product
specific website, trade associations
Price for One Dose Reader Kit = $499; gross margin = 80%
Price for DVS Kit = $1,200; gross margin = 80%
Potential distribution partners:
25
VeriTeQ Market Opportunity
Year 1
Year 2
Year 3
Year 4
Year 5
5 Years
One Dose Reader Kit
One Dose Standard Dosimeter Kit
One Dose Revenue Subtotal
0
0
0
69,860
8,782,400
8,852,260
139,720
35,129,600
35,269,320
279,440
87,824,000
88,103,440
449,100
131,736,000
132,185,100
938,120
263,472,000
264,410,120
DVS Dosimeters Kit
DVS - Reader
DVS Revenue Subtotal
0
0
0
0
0
0
4,894,800
375,000
5,269,800
9,789,600
1,125,000
10,914,600
19,579,200
2,250,000
21,829,200
34,263,600
3,750,000
38,013,600
Total Revenue
0
8,852,260
40,539,120
99,018,040
154,014,300
302,423,720
One Dose CT Revenue Potential
0
46,781,250
233,906,250
467,812,500
701,718,750
1,450,218,750
Cost of Sales:
One Dose
Total Cost of Sales One Dose
0
0
1,770,452
1,770,452
7,053,864
7,053,864
17,620,688
17,620,688
26,437,020
26,437,020
52,882,024
52,882,024
0
0
0
0
1,053,960
1,053,960
2,182,920
2,182,920
4,365,840
4,365,840
7,602,720
7,602,720
Overhead Costs
0
885,226
4,053,912
9,901,804
15,401,430
30,242,372
Total Cost of Sales
0
2,655,678
12,161,736
29,705,412
46,204,290
90,727,116
Gross Profit
0
6,196,582
28,377,384
69,312,628
107,810,010
211,696,604
DVS
Total Cost of Sales DVS
One Dose industry data based on 1,000,000 patients with 88% receiving radiation treatments using external beam treatments. Assumed market share of 2% (Yr 2), 8% (Yr 3), 20% (Yr 4) and 30% (Yr
5). Unit Price for One Dose of $499. One Dose CT based on industry data showing 75mm treatments per year in US. Assumed market shares of 1% (Yr 2), 5% (Yr 3), 10% (Yr 4) and 15% (Yr 5).
DVS Industry data showing 81,580 patients received seed implant treatments. Assumed market shares of 5% (Yr 3), 10% (Yr 4) and 20% in (Yr 5). Unit price for DVS is $1200 per kit and $25,000 per
reader.
Source: American Society for Radiation Oncology and Archives of Internal Medicine , Spelic D. Nationwide of Evaluation of X-Ray Trends: NEXT 2005-2006
26
Intellectual Property
VeriTeQ has a robust portfolio of more than 100 patents, patents pending and licenses in the U.S.
and abroad. VeriTeQ’s foundation patents are an Embedded Bio-Sensor System on the end of a RF
microchip (Patent 7,125,382 issued in 2006), and the use of implantable sensors for monitoring
tumors in oncology applications (Patent 6,402,689 issued in 2002). A partial list of the Company’s
key patents follows.
Patent No.
Title
7,125,382
Embedded Bio-Sensor System
6,402,689
Methods, Systems and Associated Implantable Devices for Dynamic Monitoring of Physiological and Biological Properties of Tumors
7,378,056
Methods, Circuits, and Compositions of Matter for In Vivo Detection of Biomolecule Concentrations Using Fluorescent Tags
7,011,814
Systems, Methods And Devices For In Vivo Monitoring Of A Localized Response Via A Radiolabeled Analyte In A Subject
7,479,108
Implantable Sensor Housing, Sensor Unit And Methods For Forming And Using The Same
7,495,224
Disposable Single-Use External Dosimeters For Use In Radiation Therapies
7,966,054
Disposable Single-Use External Dosimeters For Detecting Radiation In Fluoroscopy And Other Medical Procedures/Therapies
7,491,942
Disposable Single-Use Internal Dosimeters For Detecting Radiation In Medical Procedures/Therapies
7,010,340
Methods, Systems, and Computer Program Products for Providing Dynamic Data of Positional Localization of Target Implants
7,510,699
In Vivo Fluorescence Sensors, Systems, And Related Methods Operating In Conjunction with Fluorescently Labeled Materials
7,557,353
Single-Use External Dosimeters for Use in Radiation Therapies and Related Methods, Systems and Computer Program Products
27
Leadership Team
Scott R. Silverman
Chairman & CEO
Mr. Silverman has been Chairman and CEO of VeriTeQ since its inception in Dec. 2011. He served as Chairman and CEO of
PositiveID Corp. (OTC:PSID) from 2008 to Aug. 2011, and Chairman and CEO of VeriChip Corp. (NASDAQ:CHIP) from
Dec. 2006 to Jul. 2008. He was Chairman of Digital Angel Corp. from 2003 to 2007. From 2003 to 2006, Mr. Silverman
served as Chairman and CEO of Applied Digital Solutions (NASDAQ:ADSX). Mr. Silverman is an attorney licensed to practice
in NJ and PA, and has more than 15 years of executive experience with technology companies. He is a graduate of the
University of Pennsylvania and Villanova School of Law.
Randolph K. Geissler
President
Mr. Geissler has been President of VeriTeQ since July 2012. He developed the implantable microchip, with more than 150
million microchips implanted in animals for identification and tracking. He previously served as CEO of Geissler Technologies
(2004 - 2008) when he sold the company's product development pipeline. Prior to that, he served as CEO of Digital Angel
Corp. (Amex: DOC) (2000 - 2003) and Destron Fearing (Nasdaq: DFCO) (1993 - 1999), a company he founded. He has taken
companies public and has broad experience in product development, electronic miniaturization, application of advanced
technologies in new markets, and extensive experience in establishing strategic intellectual property and patent portfolios.
Lorraine Breece
CFO
Ms. Breece has been CFO of Digital Angel since Aug. 1, 2011. Ms. Breece worked as a consultant for Digital Angel from July
2010 until July 2011. Prior to that time, she served as Digital Angel’s CFO from March 2008 to June 2010, and acting CFO
since March 2007. Prior to joining Digital Angel, from 1991 to 1999, Ms. Breece served as director of finance and chief
accounting officer of Nabi BioPharmaceuticals. Ms. Breece began her career as an auditor with PricewaterhouseCoopers LLP.
Allison Tomek
Sr. VP IR &
Corporate
Communications
Ms. Tomek has served as Sr. VP of VeriTeQ since its inception and has served as Sr. VP, IR and Corp Comm of PositiveID since
January 2007. From Jan. 2007 to Jun. 2008 she was also VP of IR at Applied Digital Solutions and Digital Angel. From 2003 to
2006, Ms. Tomek was Director of IR and Corp Comm at Andrx Corp. (NASDAQ:ADRX). Ms. Tomek is the former President
of the National Investor Relations Institute, South Florida chapter and a current member of its Board.
28
Capital Strategy
Completion of Private Financing of $3 to $5 million
Dawson James Securities, Inc. providing advisory service and exclusive
placement agent
Bridge financing of $1,500,000; targeted for completion in October
Initiate active Investor Relations program
Leveraged from the new FDA Rule for reusable medical devices
Target additional financing following Establishment
Labs product launch and others
Consider concurrent move to national exchange
29
Capitalization
S/O at July
8, 2013
DIGA
VTEQ Series
C Preferred
TOTAL
Fully diluted
Post 1:30
RSS and
conversion
of Series C
Percent
ownership
33,624,685
1,120,823
12%
4,107,492
8,215,184
88%
9,336,007
100%
12,417,684
30
Upcoming Milestones
Next 30-60 days:
Complete bridge financing
Vascular Port partner Medcomp expected to file 510k,
triggering contractual commitment to buy Q Inside
Q4 2013
Initiate first product release: marketing of Motiva breast implants
with Q Inside Safety Technology in EU
Complete registered offering
Enter into more partnership/supply agreements post Final Rule
Enter into partnership with UPMC for data analytics platform
development
First half of 2014
Continued expansion of patent portfolio surrounding Q Inside
Safety Technology for medical devices
Additional future partnerships
31
Investment Highlights
Unique industry technology and market position for its Q Inside Safety
Technology unique device identification products
FDA cleared device that meets the UDI direct marking portion for
reusable medical devices under the FDA Final Rule provides for “first to market”
capability
IP provides strong competitive position for long term strategic advantage
Launch of Q Inside breast implants targeted in Q4 2013
Commercial partnership with Establishment Labs/Motiva for ex-US markets
Major US manufacturer currently in prototype stage
Preparing for immediate expansion into markets for Vascular Ports and
Orthopedic Implants
Commercial partnership with MedComp in place
Second product line – VeriTeQ Biosensors – ready to move into
commercialization
Radiation dosimeters to diagnose and treat cancer
Unique patented technologies with multiple regulatory approvals provide
competitive advantage in respective markets
32
Q&A
Thank you!

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