"2013 was a year marked by several important accomplishments for our company as we continued to realize our vision of building the most advanced, smart and implantable pump. Buoyed by our achievements, our vision is further strengthened: We believe our smart pump will improve the lives of many patients with chronic diseases and provide solutions to physicians seeking better treatment methods for their patients. Equally important, we expect our smart pump to bring costs down, reduce patient visits to physicians and clinics, and improve the efficacy of the healthcare system, all through harnessing the power of our innovation and technology.
PKC began by asking this fundamental question: Why spend over a trillion dollars globally on research to improve the cure rate of cancer when the results in terms of curing most cancers are insignificant? The amount spent is equal to 1.5% of the world’s GDP. Yet, year after year we know this situation could be greatly improved. We decided to do something about it, and that is how our journey started.
Today, as we say farewell to 2013, I am pleased to report that as the result of our common vision and your continuing support, we are close to realizing the PKC solutions.
2013 Challenges 2013 was a pivotal year in the brief history of our company. We faced major challenges in the areas of financial resources and allocation, product development, quality control and regulatory affairs as we prepare the company and our flagship product, the Metronomic Biofeedback Pump, for first-in-man clinical trials and entry into the EU commercial market.
Milestones Achieved –
Among the major milestones that we were able to accomplish were:
- Resources – A significant portion of our capital and human resources were focused on our ongoing program to finalize development of our flagship product, the Metronomic Biofeedback Pump (MBP). We are progressing in bringing the product from its current stage to one that will meet technical and regulatory requirements.
- Closing Round C – We closed Round C in October 31, 2013. We raised over $6 million from the $10.5 million that Round C offered.
- Audited Financial Report – We completed the 2012 audited financial statements, which has been submitted to you.
- First-in-Man Clinical Trials Principal Investigator – We selected the Principal Investigator to conduct and oversee upcoming clinical trials in Germany. Dr. Manfred Westphal, who is among the world’s renowned neurosurgeons, has been commissioned to be our Principal Investigator in charge of conducting these trials.
- Selection of Sites for the Human Clinical Trials – Six sites are in the process of being selected in Germany for the clinical trials. In addition, we are anticipating to have one site in Switzerland, one in the Netherlands, and one in the United Kingdom.
- Number of Patients to Participate in the Human Clinical Trials – Completion of a biostatistician report determined and confirmed that twenty-four (24) patients are required for the first in man human clinical trials for indication of patients with LC.
- Assembling Our Technical Team to Meet Upcoming Challenges – We have been diligently recruiting our technical team, which now has top talent from the medical device industry. These individuals will be able to meet the technical and regulatory challenges that need to be implemented and executed in order to ensure that the MBP meets industry standards both in terms of quality control and regulatory requirements. Among other major milestones will be to continue hiring top level talent from the industry to ensure that our product meets all stringent regulatory and industry standards.
- Biosensor Project – We were able to produce the first chip that is capable of measuring VEGF-165 from a clinical sample consisting of spinal fluid from a patient. The NIB chip was able to measure the amount of VEGF-165 with an accuracy in the range of 10 Pico gm/ml to 70 Pico gm/ml. This is an extraordinary technical achievement. This milestone was also recognized by the NIH, NA, and SBIR, and as the result, was part of the deliverables that awarded us the final payment of the final Phase I of the VEGF-165 grant by these three agencies. In addition, this accomplishment provides us with the opportunity to be qualified to apply for the $1 million second phase of this grant.
- First Commercial Market – We have decided to enter the EU commercial market first. This entails a product upgrade with quality control and regulatory preparation until the design freeze that is considered a significant milestone. We expect to achieve this design freeze in the first Q4 2014.
- Revenue Strategy – Since PKC began, we recognized that the time to realize revenue from our flagship product, the MBP, may be take longer than anticipated. The MBP falls in the Class III implantable pump category, which requires meeting the most stringent regulatory approval. The approval process in general will be dictated and controlled by the Notified Body in the EU and by the FDA in the U.S.
We look forward to meeting and overcoming the considerable challenges that lie ahead...and in doing so, we intend to continue to enhance the value of PKC for its shareholders while bringing to market products that will alleviate the suffering of patients throughout the world.
Therefore, in order to give ourselves other options for generating revenue during the approval process of the MBP, and in order to sustain our monthly burn rate and shorten the time to generate revenue, in 2010 we made a strategic decision to develop a proprietary state-of-the-art Nano-Impedance Biosensor (NIB) that uses nano technology to identify and measure specific markers associated with diseases that include cancers, pathogens, RNA, DNA, mRNA and genetic markers. The NIB is important to PKC for many reasons. It is an integral part of the MBP. Its function is to notify the physician on demand and in real-time regarding specific expressions of cancer cell biomarkers that indicate the status of a tumor. But, beside this important application, the NIB has versatility in several other applications, such as food and water safety and homeland security, by detecting pathogens, bacteria, and explosives. This strategic move was presented to you in my 2011 annual report.
Today, we believe this strategy is about to pay off. Several of the major applications do not require approval by regulatory agencies. This means that the NIB could directly become part of a commercial product with a short horizon to the commercial market.
Strategic Partnership – Since 2010 we have been in discussion with several major industry leaders in the food and cosmetic industry who indicated interest in either forming strategic partnerships with PKC or in acquiring the global exclusive rights to the NIB. One potential strategic partner has gone further and engaged with us in a joint collaborative pilot project whereby PKC will develop a biosensor for their specific needs as proof that the technology is commercially viable. Currently, we are in the process of finishing this project for a multinational industry player with annual revenues of 2 billion Euro. We are also in preliminary discussion with a U.S. public company in the field of technology solutions for the detection of pathogens and food safety. This company has a presence in the fast-food, restaurant, and supermarket industries and has indicated an interest in collaborating with us in utilizing the NIB to introduce a new device for the detection of pathogens in these markets.
Infusion of Capital – I am hopeful that in 2014, one of these opportunities will bear fruit, providing an infusion of capital towards further commercial development of NIB technology. We will certainly keep you abreast of strategic partnerships as they are realized, whether for specific products or for exclusive global rights to the technology.
Looking Forward 2014-2016
In 2014 we are gearing up for the major endeavor of submitting our Class III implantable pump to gain CE-Mark clearance. Obtaining CE-Mark certification for a Class III device is a major task and usually requires that the device meet the most stringent technical, design functionality specifications and software and hardware safety risk management. We have been planning to face this challenge in the preceding years and are confident in our ability to complete this task. Among our major upcoming milestones are:
- Complete MBP commercial product quality and standard by Q2 2014.
- Conduct two acute large animal studies by Q3 2014.
- Validation and in parallel, qualification of ISO 13485 by Q3 2014.
- Design Freeze by Q4 2014
- Start of First-in-Man Clinical Trials Q1 2015.
- CE-Mark Certification Q1 2016.
Going forward, we will be entering a challenging phase of development in which we intend to gain regulatory clearance and subsequent commercialization of our implantable smart pump technology while pursuing the related NIB technology with the primary additional application of pathogen detection. In addition, we are developing two related nascent technologies in the fields of nano-combinational drugs and smart therapeutic devices for brain and spinal injuries. We are exploring the potential of organizational changes that will enhance the value to our shareholders for these technologies and facilitate further capital formation.
We look forward to meeting and overcoming the considerable challenges that lie ahead in order to fund, develop, clear the regulatory hurdles and commercialize the market-leading products in PKC’s portfolio. In doing so, we intend to continue to enhance the value of PKC for its shareholders while bringing to market products that will alleviate the suffering of patients throughout the world.
2013 Annual Shareholders Meeting I would like to add to this report our invitation to the upcoming PKC Annual Shareholders Meeting scheduled for Friday, December 13, 2013. During the preceding weeks you have received related information regarding your participation in the meeting. This is the most important event of our company as its sole purpose is for the management to report to you with our score card. I am looking forward to seeing you at the meeting. Sincerely, Frank Adell Chief Executive Officer
Chief Executive Officer
December 9, 2013
Forward-looking statements are based on the expectations and opinions of the Company's management on the date the statements are made. The assumptions used in the preparation of such statements, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. The Company expressly disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.