ITEM 4. INFORMATION ON THE COMPANY
A. History and development of the company
ART Advanced Research Technologies Inc. ("ART" or the "Company") was
incorporated under the Canada Business Corporations Act on July 13, 1993 under
the name ART Aerospace Research Technologies Inc. On June 22, 1999, the
Company's articles were amended to change the name of the Company to its current
name, ART Advanced Research Technologies Inc./ART Recherches et Technologies
Avancees Inc. The Company has two wholly-owned subsidiaries: SAMI System Inc.,
which was incorporated under the Canada Business Corporations Act on March 30,
1998, and ART Aerospace Research Technologies U.S., Inc., a Delaware corporation
incorporated on July 2, 1997.
ART's shares are traded on the Toronto Stock Exchange under the trading symbol
"ARA".
The Company's head office and principal place of business is located at 2300
Alfred-Nobel Boulevard, Saint-Laurent, Quebec, Canada H4S 2A4. The Company's
phone number is (514) 832-0777 and its facsimile number is (514) 832-0778. ART's
website is located at www.art.ca. The information contained in this website is
not part of this Report.
Since inception, the Company has devoted most of its efforts to the research and
development of innovative technologies, primarily in the field of optical
imaging. Today, ART possesses a powerful and unique multiproduct platform, a
strong intellectual property portfolio and a strategic alliance with GE
Healthcare. The principal milestones that characterize the development of the
Company's business are listed below.
In 1996, ART completed a series of private placements, which resulted in gross
proceeds of US$2.0 million to the Company.
Also in 1996, ART entered into the first of a series of agreements with the
National Optics Institute, a leading privately funded Canadian based research
and development organization in the fields of optics and photonics, in
conjunction with the development of a laser-based optical imaging device.
In August 1997, ART completed an additional private placement, which resulted in
gross proceeds of US$3.4 million to the Company.
In 1998, ART completed the pre-clinical stage testing of its SoftScan(R) optical
breast imaging device. (In September 1998, ART completed an additional series of
private placements, which resulted in gross proceeds of US$7.0 million to the
Company.
In 1999, ART successfully completed its first pilot study of SoftScan(R) and
entered into a research agreement with Massachusetts General Hospital ("MGH"), a
teaching hospital affiliated with Harvard Medical School.
In March 1999, a share exchange took place with the former shareholders of SPEQ
Aerospace Research Technologies Inc. ("SPEQ") whereby 3,748,060 shares of the
Company were issued to former shareholders of SPEQ in exchange for the shares of
SPEQ held by such shareholders. As
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a result of this corporate reorganization, the Company became the sole
shareholder of SPEQ and SPEQ was subsequently liquidated and dissolved.
In July 1999, ART changed its name to its current name, ART Advanced Research
Technologies Inc./ART Recherches et Technologies Avancees Inc.
In March 2000, ART entered into a scientific collaboration agreement with GE
Medical Systems, a division of General Electric Company and a market leader in
the development and distribution of medical diagnostics imaging devices. In
October 2000, this scientific collaboration agreement was renewed for an
additional six-month period.
In the spring of 2000, the Company began its second pilot (controlled) study for
the testing of SoftScan(R). The purpose of this trial was to assess the safety
of SoftScan(R) and its effectiveness in detecting abnormalities that were
detected by X-ray mammography.
In April 2000, ART established a Scientific Advisory Board composed of leading
members of the medical and scientific community. The Scientific Advisory Board
provides advice and scientific expertise to the Company on an ongoing basis. ART
currently has eight (8) members on its Scientific Advisory Board.
Also in April 2000, ART completed an additional series of private placements,
which resulted in gross proceeds of approximately US$11.4 million to the
Company.
On May 5, 2000, the Company held an annual and special shareholders' meeting at
which shareholders approved, among other matters, amendments to the articles of
the Company to: (i) change its share capital so that its authorized capital now
consists of two classes of shares: an unlimited number of common shares (the
"Common Shares") and an unlimited number of preferred shares (the "Preferred
Shares"); (ii) convert all of its previously issued and outstanding class B
shares to Common Shares of the Company; and (iii) cancel the class A, B, C, D,
E, F and G shares in the share capital of the Company.
On June 21, 2000 the Company effected a two-for-one stock split by declaring and
paying to its shareholders a stock dividend of one Common Share for each issued
and outstanding Common Share.
On June 29, 2000, ART completed an initial public offering of 1,850,000 Common
Shares and the listing of its Common Shares on the Toronto Stock Exchange. The
transaction yielded gross proceeds to ART of US$11.2 million. The Company used
the proceeds to fund SoftScan(R)'s research and development and selling, general
and administrative expenses, and to fund ISIS(R)'s research and development and
selling, general and administrative activities.
In September 2000, ART successfully completed its second pilot study of the
SoftScan(R) optical breast imaging device.
On November 9, 2000, the results of the second pilot study of the SoftScan(R)
optical breast imaging device were announced. The results confirmed the
technological potential for SoftScan(R) as a breast cancer detection device. The
study also revealed that SoftScan(R) is a safe and non-invasive technology,
which involves and a more comfortable procedure for the patient than X-ray
mammography.
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On April 11, 2001, ART acquired an exclusive worldwide licence with respect to
an important patent portfolio developed by Emeritus Professor Dr. Britton Chance
and owned by Non-Invasive Technology Inc., which pertains to the imaging of
tissue using time domain technology.
On June 19, 2001, ART completed a private placement with OppenheimerFunds, Inc.
(U.S.), which resulted in gross proceeds of US$7.5 million to the Company.
On July 10, 2001, ART completed an additional private placement with BioCapital
Biotechnology and Healthcare Fund (Canada), which resulted in gross proceeds of
US$2 million to the Company.
On October 18, 2001, Mr. Serge Huot became the new President and Chief Executive
Officer of ART.
In November 2001, ART reorganized its activities in order to focus on the
bio-medical sector and reduce its operating costs.
In May 2002, ART began clinical testing in collaboration with the McGill
University Health Center ("MUHC") in order to validate the recent changes made
to the configuration of the SoftScan(R) device.
In June 2002, ART signed a research agreement with the Center for Subsurface
Sensing and Imaging Systems ("CenSSIS") of Northeastern University in Boston,
giving ART complete access to core research results from CenSSIS.
In July 2002, ART concluded the sale of its ISIS(R) division to Photon Dynamics,
Inc. for US$5.5 million.
On September 3, 2002, Ms. Micheline Bouchard succeeded Mr. Serge Huot as
President and Chief Executive Officer of ART.
On October 22, 2002, ART concluded a strategic alliance with GE Medical Systems
consisting of an equity investment, an agreement for the development of new
applications in the field of molecular imaging, as well as an agreement for the
marketing, manufacture and distribution of SoftScan(R).
On October 23, 2002, ART held an annual and special meeting of its shareholders.
The shareholders voted in favor of the adoption of a resolution, which approved
an amendment to the stock option plan of the Company so as to increase the
maximum number of Common Shares available for issuance from 1,770,462 to
2,650,000 Common Shares. ART's shareholders also gave their advance approval for
the issuance by the Board of Directors of a number of Common Shares by private
placement that exceeded 25 % of the Company's issued and outstanding share
capital.
Between November 8 and November 15, 2002, ART closed a total of US $7.5 million
by way of a private placement (US$2.5 million with OppenheimerFunds, Inc.,
US$2.0 million with former President and Chief Executive Officer Serge Huot and
US$3.0 million with General Electric Company).
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On June 9, 2003, ART announced the start of a multi-centre clinical trial for
SoftScan(R) with Sunnybrook and Women's College Health Sciences Centre as the
first approved clinical site.
On June 18, 2003, ART announced the official commercial launch of SAMI(TM),
ART's pre-clinical molecular imager.
In August 2003, ART concluded an agreement under which GE Medical Systems, a
unit of General Electric Company, acts as exclusive worldwide distributor for
SAMI(TM).
On September 12, 2003 ART announced the change in its financial year-end from
April 30 to December 31, effective as of December 31, 2003, to be aligned with
most other companies in the bio-optical imaging sector.
On September 18, 2003, ART announced the start of a multi-centre clinical trial
for SoftScan(R) with the Ottawa Regional Women's Breast Health Centre at the
Civic Campus of The Ottawa Hospital as one of the approved clinical site.
On September 19, 2003, ART and GE Medical Systems, acting as worldwide
distributor for ART's pre-clinical optical molecular imager, announced the first
sale of a SAMI(TM) to the U.S. National Institutes of Health (NIH).
On September 23, 2003, ART announced the completion of a private placement of
more than US$10.3 million.
On October 20, 2003, the day of ART's annual shareholders' meeting, ART and GE
Medical Systems announced the second sale of a SAMI(TM) pre-clinical optical
molecular imager to Novartis Pharma AG.
On December 8, 2003, ART announced the continued success of its
commercialization efforts with additional sales of its SAMI(TM) pre-clinical
optical molecular imager to the pharmaceutical and academic research sectors,
and a change in the name under which the SAMI(TM) product will be distributed to
"eXplore Optix(TM)".
On December 15, 2003, ART announced that it acquired exclusive worldwide
licensing rights to the extensive optical molecular imaging patent portfolio of
Dr. Joseph Lakowicz, a world renowned biochemist and molecular biologist as well
as a pioneer in the field of fluorescence spectroscopy.
On December 22, 2003, ART completed a private placement of US$ 658,395.
On January 12, 2004, ART announced the strengthening of its senior executive
team by the appointment of Mr. Warren Baker as Chief Operating Officer and Dr.
Joseph Kozikowski as Chief Medical Officer of ART.
On January 26, 2004, ART announced the engagement of Biosector 2, an integrated
healthcare communications agency, to lead ART's worldwide public and investor
relations programs in 2004.
On March 10, 2004, the Company closed a treasury offering of 7,500,000 Common
Shares representing gross proceeds of US$11.3 million, followed by the partial
exercise of the over-
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allotment option on March 19, 2004, which resulted in the issuance of 920,000
additional Common Shares representing gross proceeds of US$1.4 million.
On March 28, 2004, the Company presented results of in vivo studies
demonstrating the high quantitation and high sensitivity capabilities of eXplore
Optix(TM) in the nanomolar range at the Annual Meeting of the American
Association for Cancer Research. These in vivo studies demonstrated subnanomole
fluorophore quantity detection capabilities at a depth of between 10 and 15 mm.
Furthermore, volumetric reconstruction of this time-domain data was also
achieved.
On March 29, 2004, ART presented at the Annual Meeting of the Academy of
Molecular Imaging the results of a study demonstrating the high quantitation,
precise three-dimensional localization, and fluorescence lifetime in vivo
capabilities of the eXplore Optix(TM) system in the murine animal model. The
results of a second study were also presented which demonstrated the system's
abilities to localize and discriminate between multiple endogenous and exogenous
molecules. Time-domain resolution of fluorescent lifetimes as small as 0.2
nanoseconds was achieved.
On April 29, 2004, ART received the Health Technology Entrepreneurship Award at
the 4th edition of the Genesis Awards during the Biomedex conference-exhibition,
in Montreal, Canada.
On April 30, 2004, ART announced positive clinical study results from product
research and development with ART's SoftScan(R) breast imaging system. Those
results confirmed SoftScan(R)'s ability to discriminate between normal and
malignant tissue.
On May 13, 2004, ART announced - following discussions with the U.S. Food and
Drug Administration (FDA) - that it will participate in the FDA's STED Pilot
Program with a submission to have its SoftScan(R) breast imaging system reviewed
and approved under a harmonized format. ART expects that this
globally-harmonized regulatory review process will bring added efficiency to
SoftScan(R)'s review process, enable ART to gain market entry with SoftScan(R)
in a more cost-effective manner and enable SoftScan(R) to be available more
quickly to the international community.
On June 2, 2004, ART and LAB Preclinical Research International Inc., a
preclinical contract research organization based in Laval, Canada, announced the
signing of an agreement under which LAB Preclinical Research International Inc.
will act as a preclinical demonstration site and provide real-time testing and
evaluation of ART's eXplore Optix(TM) time-domain small animal molecular imaging
system.
On June 17, 2004, ART received the Armand-Frappier Foundation 2004 Award in the
"Innovation" category.
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B. Business Overview
Industry Overview
The Company's principal goal is to become a leading provider of optical imaging
solutions to the biomedical sector.
Medical Diagnostic Imaging Devices
Diagnostic imaging devices create images of body organs and tissues, in order to
assist in the detection and diagnosis of diseases and injuries. These devices
represent an important component of health care expenditures and are
encountering solid market growth because age-related diseases are increasing.
According to the Frost & Sullivan market study "World Diagnostic Imaging
Equipment Markets", world-wide revenues for diagnostic imaging systems amounted
to US$10.1 billion in 1998 and are expected to reach US$14.7 billion in 2004,
representing a compound annual growth rate of 6.2%. Within this market, certain
segments are expected to grow much more rapidly than the overall market. For
example, Frost & Sullivan has estimated that the market for digital X-ray
devices that are able to detect and diagnose breast cancer is expected to reach
1,300 units in 2004, representing a compound annual growth rate of 79.4% over
five years or a compound annual growth rate in revenue of 60.7% over the same
period. This growth is expected to be fuelled by the need to replace outdated
detection systems and an increased emphasis on early detection of breast cancer
in order to avoid the significant costs associated with long-term treatment. As
imaging is still primarily used to diagnose, the technology is also increasingly
being deployed for early detection, and for intermittent use between treatments
to make sure a specific treatment plan is efficacious. According to Frost &
Sullivan, the U.S. medical imaging market grew at an average annual growth rate
(AAGR) of 11.5% in 2003 to US$11.5 billion in revenues, with imaging modalities
representing 51% of total sales. In 2004, revenues are expected to double from
1998 market revenues and reach US$12.6 billion.
Cancer Facts and Figures
According to the National Cancer Institute of Canada ("NCIC"), an estimated
145,500 new cases of cancer and 68,300 deaths from cancer will occur in Canada
in 2004. Cancer is the leading cause of premature death in Canada, being
responsible of almost 31% of all potential years of life lost. Comparable
statistics can be found with respect to the United States. The American Cancer
Society ("ACS") expects that about 1,368,030 new cancer cases will be diagnosed
in 2004. (These estimates do not include carcinoma in situ - non-invasive cancer
- of any site except urinary bladder, and do not include basal and squamous cell
skin cancers.) This year about 563,700 Americans are expected to die of cancer,
which represents more than 1,500 people a day. Cancer is the second leading
cause of death in the U.S., exceeded only by heart disease. The National
Institutes of Health in the U.S. estimates overall costs for cancer in 2003 at
$189.5 billion: $64.2 billion for direct medical costs (total of all health
expenditures); $16.3 billion of indirect morbidity costs (costs of lost
productivity due to illness); and $109 billion for indirect mortality costs
(costs of lost productivity due to premature death).
In 2004 the most frequently diagnosed cancers in Canada will continue to be
breast cancer for women and prostate cancer for men. According to the World
Health Organization ("WHO"), breast cancer is the most common form of cancer
among women worldwide. Breast cancer
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accounts for 29.9% of all new cancer cases in Canadian women and 32.3% in
American women and ranks second among cancer deaths in women in Canada and ranks
third in the U.S. In the United States, an estimated 215,990 new invasive cases
of breast cancer are expected to occur among women during 2004 and about 1,450
new cases are expected in men in 2004. An estimated 40,580 deaths (40,110 women,
470 men) are anticipated from breast cancer in 2004 in the U.S. In addition to
invasive breast cancer, 59,390 new cases of in situ breast cancer are expected
to occur among women during 2004. Likewise in Canada, an estimated 21,200 new
cases of breast cancer are expected to occur among women and about 145 new cases
are expected in men in 2004. The NCIC estimates that during their lifetimes, 1
in 9 women are expected to develop breast cancer and 1 in 27 women are expected
to die from it.
Following a small but steady annual increase over three decades, breast cancer
incidence among women levelled off in 1993 in Canada. Mortality rates for breast
cancer have declined steadily since 1990. This pattern of divergent trends is
consistent with the benefits being achieved through screening programs and
improved treatments. Similar trends have also been reported in the U.S. by the
National Cancer Institute ("NCI").
However, the NCI also concluded that although death rates for all cancers
combined continued to decline, the number of cancer cases can be expected to
increase because of the growth and aging of the population in coming decades.
The report, "Annual Report to the Nation on the Status of Cancer, 1973-1999",
was published in May 2002 by the NCI, ACS, the North American Association of
Central Cancer Registries, the National Institute on Aging ("NIA"), the Centers
for Disease Control and Prevention, the National Center for Health Statistics,
and the National Center for Chronic Disease Prevention and Health Promotion. The
report concludes that the most important risk factor for cancer is age. Because
the U.S. population is both growing and aging, the authors focused on how, even
if rates of cancer remain constant, the number of people diagnosed with cancer
will increase. The authors projected the cancer burden in about 50 years from
now by applying U.S. Census Bureau population projections to current cancer
incidence rates. The authors anticipate a doubling from 1.3 million people to
2.6 million diagnosed with cancer. NIA Director Richard J. Hodes, M.D. notes
that, "The data presented in the report underscore a critical need for expanded
and coordinated cancer control efforts to serve an aging population and reduce
the burden of cancer in the elderly."
Such findings - combined with pressure from a variety of sources including
women's action groups - have led health care systems across the globe to put
more emphasis on early detection and screening. A woman's chances of surviving
breast cancer improve tremendously with early diagnosis. According to the ACS,
the five-year survival rate decreases from 97% to 79% after the cancer has
spread to the lymph nodes, and to 23 % after it has spread to other organs such
as the lung, liver, or brain. As well, early detection can reduce the need for
biopsies and surgery, reduce the debilitating effects of therapy and reduce the
cost of treatment. However, according to the ACS, traditional mammography
devices do not detect, on an average, 10-15% of breast cancers. Therefore, the
demand for more effective diagnostic devices, as well as for more screening is
expected to grow. The WHO states that if facilities are available, screening by
mammography alone - with or without physical examination of the breasts, plus
follow-up of individuals with positive or suspicious findings - will reduce
mortality from breast cancer by up to one-third among women aged 50-69 years.
Breast cancer screening is generally recommended as a routine part of preventive
healthcare for
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women over 20 (approximately 90 million women in the United States). For these
women, ACS has published guidelines for breast cancer screening including: (i)
monthly breast self-examinations for all women over 20; (ii) clinical breast
examination every three years for women 20-39, annually for women 40 and older;
and (iii) an annual mammogram for women age 40 or older. As a result of family
medical histories and other factors, certain women are considered at "high risk"
of developing breast cancer during their lifetimes. For these women, physicians
often recommend close monitoring, particularly if an abnormality involving an
increased risk of developing breast cancer has been detected.
Spending in the health care sector has risen dramatically in recent years.
According to the U.S. Centers for Medicare & Medicaid Services, health care
expenditures in the United States increased more than six times between 1980 and
2002, increasing from US$245.8 billion to approximately US$1,55 trillion. The
United States and Canada are estimated to be among the world's top five per
capita spenders on health care. As a result, purchasers of medical diagnostic
imaging devices in North America, which include hospitals, group purchasing
organizations, specialized imaging centers, research institutes and medical
clinics, are striving to reduce costs while offering superior service to
patients. They are demanding devices that provide the most complete information
possible, that are reliable and that are safe for both patient and doctor.
Diagnostic Mammography Devices
Current methods of detecting breast cancer typically include physical
examination by the patient or a medical professional and conventional X-ray
mammography. Conventional X-ray mammography is commonly used for both routine
breast cancer screening and as a diagnostic tool. A mammogram based on this
technology produces an image on film of the internal structure of the breast
that is intended to display lesions as white spots against the black and/or
white background of normal tissue. If a suspicious lesion is identified, or if
other breast cancer symptoms are present, an additional diagnostic mammography
is typically ordered. In a diagnostic mammogram, radiologists seek to analyze
suspicious lesions. However, a conventional X-ray mammogram has only a limited
ability to identify early stage tumors or tumors in women with radiodense breast
tissues (most women have radiologically dense breast tissues). The limitations
to conventional X-ray technology means that radiologists frequently have
difficulty in differentiating between malignant and benign tumors.
If a radiologist cannot reach a conclusion on the nature of the lesion or tumor,
an ultrasound exam is often required. To determine if a lesion is malignant or
benign, a breast biopsy will typically be performed on the potentially malignant
tissue. In the United States there are approximately 30 million screening
mammography procedures conducted annually, of which some three million require
additional testing and 8% to 10% of these will require a biopsy. A biopsy
involves the use of a needle or surgery in order to remove fluid or fragments of
tissue. Patients who are referred to biopsy are usually required to schedule the
procedure in advance and generally must wait up to 48 hours for their biopsy
results. Only one fifth of biopsies reveal cancer. This means that in a majority
of cases a patient without cancer has undergone an expensive procedure, which is
often painful, can result in scarring and gives rise to considerable anxiety.
Moreover, X-ray mammography exposes patients to potentially harmful ionizing
radiation and requires painful procedures designed to compress the breast in
order to produce a clearer image.
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Some companies in the X-ray mammography field are developing digital X-ray
systems that are expected to overcome some of the limitations inherent in
conventional X-ray technology. Digital X-ray does not print images on
photographic film. Instead, images are captured electronically and viewed on a
computer monitor. This permits the radiologist to change magnification,
brightness and contrast after the image is produced in order to show cancers
more clearly. It also means that the image can be transmitted electronically and
does not require costly processing associated with film. While digital X-ray
systems represent an improvement over conventional X-ray and are therefore
likely to gain market acceptance, they will not eliminate all of the limitations
associated with X-ray technology. For example, digital X-ray still requires
ionizing radiation and painful compression, and has a limited ability to image
dense breast tissue. This is because digital X-ray systems are only an enhanced
version of the existing conventional X-ray technology. In order to reduce costs
and the pain and suffering of patients along with improving the early detection
of cancer, a new technology is needed. The Company believes that its time domain
based imaging solution, SoftScan(R), offers an improved solution that will
address the limitations of both conventional and digital X-ray systems.
New Technologies
Until recently, light-based imaging techniques were not sophisticated enough to
detect anomalies in human tissue. The scattering effect of human tissue on
optical signals, the insensitivity of existing instrumentation and the
difficulties of analyzing the image captured by the existing technology have
been the major obstacles to using light-based techniques in breast cancer
detection.
Recent advances in laser technologies and semiconductor detectors, coupled with
powerful new software algorithms, now permit the development of more accurate
detection and diagnostic systems. These next generation optical digital systems
are not limited to providing a two-dimensional image that is dependent on the
processing of film, but are instead able to produce a computer generated image
of human tissue. The new technologies that underlie optical digital imaging
include: continuous wave imaging, frequency domain imaging and time domain
imaging. Continuous wave imaging uses a laser source with a continuous output
and a solid state detector which monitors signal strength. Frequency domain
imaging uses the same type of laser source but an alternating signal modulates
the intensity of the laser's output. Time domain based digital imaging
technology uses a laser to produce high peak energy pulses of very short
duration with a high repetition rate and a detector to measure signal strength
over time.
Since time domain optical imaging technology has the capacity to measure a
larger bandwidth than either frequency domain or continuous wave optical imaging
technologies, it is fully expected that the additional information will result
in the superior performance of time domain optical imaging for the diagnosis and
detection of breast cancer.
Since its inception, the Company has concentrated on developing time domain
technology. The Company believes that it is an industry leader in the
development of applications of this technology to the medical diagnostic imaging
sector. To the Company's knowledge, no company other than ART has publicly
acknowledged that it is currently working with time domain based imaging
technology.
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BUSINESS OF THE COMPANY
Corporate Strategy
The Company's principal goal is to become a leading provider of optical imaging
solutions to the biomedical sector. In order to achieve this goal, the Company's
strategy is to:
Maintain and Extend its Technology Leadership Position
The Company has established and will continue to extend its leadership position
in the design, development and application of optical imaging solutions for the
biomedical sector based on the Company's time domain technology. To this end,
the Company has put in place a management team with the skills and experience
required to build on its technology leadership position and to sustain the
accelerated growth that the Company anticipates will flow from market acceptance
of its products. The Company will also continue to add to the team of scientists
and specialists that drive its in-house research and development program. The
Company believes that its in-house research and development capabilities will
provide it with a competitive advantage in the speed with which it can develop
and convert its proprietary technology into products targeting high growth
market segments.
Pursue High Growth Segments within the Diagnostic Imaging Market
The overall markets for diagnostic imaging devices and small animal laboratory
instruments are already large and are expected to continue growing in the
future. Within these markets there are segments, such as digital mammography and
molecular imaging, that have substantially higher growth rates than other
segments. The Company's strategy is to focus on product development efforts to
meet the needs of these high growth market segments, and to deliver products
quickly and efficiently with a view to maximizing ART's growth and
profitability. In order to bring its products to market rapidly and establish a
"first to market" presence, the Company pursues strategies designed to secure,
when applicable, regulatory approval for its products as quickly and efficiently
as possible.
Leverage its Technology to Develop New Products
By leveraging its knowledge and expertise with respect to medical and
bio-optical applications for its technology, the Company will continue to
develop new applications, which complement or add to its existing product line.
ART may also acquire technologies that will allow the Company to complement or
expand its existing product line. At the same time, the Company will exploit
opportunities to develop applications of its proprietary technology to the small
animal molecular imaging sector, which will not require regulatory approval from
the health authorities thus allowing a faster time-to-market. In the longer
term, the Company intends to pursue opportunities to apply its optical imaging
technology to challenges beyond breast cancer and drug development. These
challenges include new possible applications of the SoftScan(R) technology to
the fields of neurology and cardiology, and with respect to prostate cancer.
Through continuous market data gathering and analysis, ART will ensure that its
"quick to market" capability is focused on products with identified needs in
market segments which are attractive to the Company.
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Expand Strategic Relationships and Alliances with Industry Leaders
To facilitate early entry into its target markets, ART is actively pursuing
strategic relationships with leading organizations. This is particularly
important in the biomedical sector because strategic relationships can prove
instrumental in ensuring that a new product gains broad market acceptance,
bringing a company's product to market through a well-developed and extensive
service and distribution network. Developing strategic relationships can also
help ensure that the Company complements its in-house research and development
with knowledge gained from leading research organizations working in the same
field. The Company will also continue to expand other relationships in order to
secure market acceptance of its products, including relationships with
hospitals, group purchasing organizations, imaging centres, research institutes
and medical clinics, while maintaining and developing relationships with other
biomedical technology industry leaders.
Corporate Objectives
ART's mission is to be recognized a market leader in the development and
commercialization of optical molecular imaging systems for the medical and
pharmaceutical sectors. The Company has set short, medium and long-term
objectives in order to reach its goal of becoming a leading provider of optical
imaging solutions to the biomedical sector. In the short-term, the Company
intends to complete clinical trials for SoftScan(R) in accordance with its
regulatory strategy which seeks to obtain approval for SoftScan(R) as an adjunct
diagnostic device to X-ray mammography as a first clinical indication. At the
same time, the Company will pursue the commercialization of its eXplore
Optix(TM) device through its exclusive worldwide distributor, GE Healthcare. Its
pre-clinical optical imaging technology has been brought to market quickly
because it is not used on humans and did not require regulatory approvals by
health authorities. The Company anticipates that revenues generated from this
first commercial application for small animals could assist in funding further
research to adapt optical molecular imaging for human applications. In the
medium-term, the Company plans to secure regulatory approval for SoftScan(R) in
Canada and in the United States, and thereafter in Europe. The Company will
proceed to commercialize SoftScan(R) as soon as it has obtained approval for its
first indication.
The Company will continue its research and development program with the
long-term objective of developing and commercializing new technologies and
additional products that fit with the Company's vision and mission and that
complement or add to its product line.
The Company's Products
SoftScan(R)
Overview
ART has developed SoftScan(R), a device used for detecting, characterizing
and diagnosing breast diseases. SoftScan(R) uses time domain optical imaging
technology, which the Company believes is the most promising technology for
purposes of detecting, characterizing and diagnosing breast cancer. SoftScan(R)
is designed to help address a critical and unmet need in breast tissue analysis:
the need for a device that provides functional information about a tumor.
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Furthermore, SoftScan(R) is also expected to be effective for imaging and
diagnosing diseases in radiologically dense breasts, which represent a large
population, particularly of young women, which also comprises a large proportion
of pre-menopausal women. It is essential to be able to provide an effective
imaging solution for this segment of the population since the younger a woman,
the more devastating breast cancer will be if undetected.
Using SoftScan(R), the Company believes that medical practitioners will be able
to obtain data about key aspects of breast cancer which were not previously
available simultaneously, such as angiogenesis and hypermetabolism. Time domain
optical imaging technology provides a more realistic description of the tissue
being imaged by allowing the separation of light which is scattered in the
tissue from light that is absorbed. This approach should lead to a more accurate
measure of blood volume and oxygen saturation levels within the breast. For
example, an active tumor would have high metabolism and would require a high
level of tissue perfusion, which is an indicator of angiogenesis, to survive and
metastasize (spread).
The Company anticipates that SoftScan(R) will have several advantages over other
breast imaging devices for a number of different groups, including patients,
medical practitioners and health care providers (i.e. governments, insurance
companies and health management organizations that pay for such devices).
Some of the key anticipated advantages are set out below.
GROUP ANTICIPATED ADVANTAGES
Patients o No painful compression of breast.
o No harmful ionizing radiation.
o Early detection of anomalies.
o Improved diagnosis and quality of care; and
o Reduction in need for painful biopsies.
Medical Practitioners o Higher degree of precision in diagnosis and
treatment.
o Ability to image the breast and the axillary
area (area between the breast and armpit).
o Ability to image patients as many times as
needed, without ionization.
o Ability to image patients (i) with
radio-dense breast tissue, (ii) who have had
breast surgery, (iii) and who are on
hormonal replacement therapy.
o Ability to distinguish malignant tumors from
benign tumors.
o Ability to monitor breast cancer treatments;
and
o Ability to tailor treatment to individual
needs.
Health Care Providers o Increased overall productivity.
o Decrease in treatment costs and operational
costs; and
o Low operating costs.
- 23 -
Technology
SoftScan(R), which is based on time domain optical imaging technology,
represents the first generation of a computerized time-resolved optical breast
imaging system. This system measures photon migration through the breast at many
optical wavelengths, selected to be sensitive to clinically significant
physiological parameters in breast tissue. The technique consists of launching
brief pulses of near-infrared energy into the breast and measuring the temporal
distribution of the emerging photons on the far side of the breast. The temporal
point spread function ("TPSF") of the photons is used to mathematically derive
the absorption and scattering coefficients for the pixel or scanner position
imaged.
The SoftScan(R) system is comprised of an optical acquisition unit, a patient
table, scanning accessories and a processing and display workstation installed
on a separate mobile table. In a clinical setting, the SoftScan(R) system can be
located and installed in any type of space similar in size to an X-ray
mammography suite. The laser emitter and the detectors of the SoftScan(R) system
are located opposite each other, on the outside of the stabilizing plates. These
two components travel together in a raster pattern over the breast.
The data collected by the detection module during the sweep is channelled to the
computer for processing by SoftScan(R) proprietary algorithms. Once the scan is
complete, the raw data are saved on CD-ROM and transferred to an inspection
station where the data is analyzed with the help of the SoftScan(R) algorithms.
The program proceeds to reconstruct a curve representing the intensity of
captured photons as a function of time for each point in the scan. From this
curve, the optical parameters (absorption and scattering) of the tissue scanned
at each point are extracted.
The result is a functional map that provides information about tissue perfusion
and blood oxygen content that traditional anatomical imaging modalities do not
generate. Moreover SoftScan(R)'s time domain optical technology captures a
greater amount and quality of data than other optical imaging technologies,
including those based on continuous wave technology. Continuous wave optical
technology is not able to separate light scattering and absorption coefficients
because it predominantly provides surface tissue information, as opposed to time
domain optical technology which obtains information from deeper tissue. The
Company believes that SoftScan(R)'s ability to determine whether lesions are
malignant or benign at an earlier stage through functional imaging will offer a
solution to the limitations inherent in other technologies.
The addition of functional information in the clinical process is an important
development. This is because functional data provided by SoftScan(R) enables a
medical practitioner to see two of the features which often accompany cancer:
increased tissue blood supply due to angiogenesis, which is the formation of new
small blood vessels; and the low oxygen saturation of this blood due to a
localized increase in metabolic activity generated by a cancer's rapid growth.
SoftScan(R) will therefore enable practitioners to identify key aspects of
breast cancer simultaneously, thereby facilitating the determination of whether
a tumor is malignant or benign.
In addition, unlike conventional and digital X-ray, SoftScan(R)'s imaging
technique will not subject the breast to invasive procedures or harmful ionizing
radiation and will not require painful compression of the breast during the
imaging procedure.
The Company believes that this technology will improve diagnostic and treatment
practices, thereby helping to save lives and, in turn, saving the medical system
millions of dollars in patient
- 24 -
work-up, treatment and post-treatment costs. Due to its functional imaging
capability, the Company believes that SoftScan(R) has the potential to assist
the medical community at two levels: (i) by being a significantly different
option chosen by practitioners to assist in diagnosis and treatment decision
making; and (ii) by permitting monitoring and repeated follow-up imaging (due to
the absence of ionizing radiation) that will assist in monitoring the success of
the selected treatment.
Strategic Alliances
To facilitate early market entry, the Company seeks strategic alliances with
market leaders who could be instrumental in bringing the Company's product to
market quickly and efficiently through a well developed and extensive
distribution capability. The Company expects that global medical market leaders
offering a range of screening and diagnostic devices will wish to enhance their
own competitive position by being able to offer cutting edge diagnostic devices
that complement new detection devices such as digital X-ray.
The Company has signed a research agreement with MGH, a teaching hospital
affiliated with Harvard Medical School, which has one of the largest
hospital-based research programs in the United States. In addition, the Company
has benefited through agreements with the INO, which employs more than 185
scientists and technologists focused on pursuing innovative research in the
optics field. ART will also have the opportunity to benefit from GE Healthcare's
expertise through its strategic alliance with this company. ART and GE
Healthcare have signed multi-year agreements in which GE Healthcare will develop
with ART new optical molecular imaging applications and help market, manufacture
and distribute SoftScan(R).
Regulatory Process
Most countries, including the United States, Canada and countries in the
European Union, require regulatory approval prior to the commercial distribution
of medical devices. Sales of medical devices in Canada are subject to regulation
principally by Health Canada's Therapeutics Products Directorate (TPD). To
secure TPD approval, the Company must demonstrate that: (i) as a diagnostic
device, the device provides information that measurably contributes to a
diagnosis of a disease or condition, (ii) the device is safe, and (iii) the
device has been designed, developed and manufactured in compliance with
appropriate quality standards. In the Canadian context for most medical devices,
it is estimated that Health Canada's TPD review process may take up to 120 days
once the medical device license application has been submitted.
In the United States, the FDA classifies medical devices intended for human use
into three classes: Class I; Class II; and Class III. In general, Class I
devices are products with respect to which the FDA can determine that safety and
effectiveness can be reasonably assured by general controls relating to such
matters as permitted changes to the product, misbranding, registration,
notification, records and reports, and good manufacturing practices ("GMP").
Class II devices are products with respect to which the FDA determines that
these general controls are insufficient to provide reasonable assurance of
safety and effectiveness, and that therefore require special controls such as
the promulgation of performance standards, post-market surveillance, patient
registries, or such other actions as the FDA deems necessary. Class III devices
are devices with respect to which the FDA has insufficient information to
conclude that either general controls or special controls would be sufficient to
assure safety and effectiveness, and which are life-supporting, life-sustaining,
of substantial importance in preventing
- 25 -
impairment of human health (e.g. a diagnostic device to detect a
life-threatening disease), or which present a potential unreasonable risk of
illness or injury. Devices in Class III, such as SoftScan(R), require pre-market
approval ("PMA") before they can be sold and distributed as a medical device.
Pre-market approval by the FDA is a process of regulatory and scientific review
to ensure the safety and effectiveness of a medical device.
To obtain FDA approval to market a medical device such as SoftScan(R), the FDA
requires, among other information, proof of safety and efficacy obtained as a
result of human clinical trials, sometimes performed under an Investigational
Device Exemption ("IDE"). An IDE application must contain pre-clinical test
data, information on manufacturing processes and procedures, and proposed
clinical protocols. If the FDA approves the application, and upon approval from
an Institutional Review Board ("IRB"), human clinical trials may begin in the
United States. The results obtained from these and any other trials, if
satisfactory, are accumulated and are submitted together with other information
on the device to the FDA in support of a PMA application.
To obtain the FDA's approval in the case of a diagnostic device, the PMA
application must demonstrate that: (i) the device provides information that
measurably contributes to a diagnosis of a disease or condition; (ii) the device
is safe; and (iii) the device has been designed, developed and manufactured in
compliance with the Quality System Regulation ("QSR"). The QSRs include testing,
manufacturing and design controls and documentation requirements. Upon receipt
of the PMA application, the FDA makes a threshold determination as to whether
the application is sufficiently complete to permit a substantive review. If the
FDA determines that the PMA application is sufficiently complete to permit a
substantive review, the FDA will file the application. Once a PMA application
has been filed, the FDA has up to 180 days to conduct its review. The review
time may be extended by the FDA as it may request more information. During the
review period, an advisory committee may also evaluate the application and
provide recommendations to the FDA as to whether the device should be approved.
In addition, the FDA will inspect the manufacturing facility to ensure
compliance with the FDA's GMP requirements prior to approval of a PMA
application.
Sales of medical devices are also subject to foreign regulatory requirements
that vary widely from country to country. The time required to obtain approval
for sale in foreign countries may be longer or shorter than that required for
Health Canada and FDA clearance or approval, and the requirements may differ.
The laws of certain European and Asian countries may permit the Company to begin
marketing SoftScan(R) in Europe and Asia before marketing would be permitted in
the United States. In order to sell its products within Europe, the Company is
required to achieve compliance with requirements of the Medical Devices
Directive ("MDD") and affix a CE mark (Conformite Europeenne, French for
"European Conformity") on its products to attest such compliance.
The Company has selected a U.S. based contract research organization ("CRO")
with considerable experience in clinical programs in the field of imaging, to
help formulate its regulatory strategy and clinical plans in the United States
and Canada. The Company is also in the process of selecting its Notified Body
for Europe. A Notified Body is a certification body from the private sector,
which is authorized to assess a manufacturer's compliance with the MDD. Such
compliance will enable the Company to affix a CE mark on SoftScan(R).
- 26 -
The length and breadth of the clinical program that a medical diagnostic imaging
device must go through is dependent upon the claims (intended uses) that the
company seeking approval wishes to make with respect to its device. For
instance, if the device is intended to be used for general screening
mammography, the clinical program will most probably have to span several years,
as patients will have to be monitored for a lengthy period to assess screening
effectiveness, with a sample of thousands of patients being required. This
process would have to be completed before the Company could apply for and obtain
marketing approval for the device. If the device is instead intended to be used
as a diagnostic device complementary to X-ray mammography in a sub-population of
patients, for example, those who have dense breast tissue, then the clinical
program can be completed much more rapidly, follow-up monitoring will not be
required and the sample of patients that need to be studied will be
significantly smaller.
The Company is pursuing a strategy that will see SoftScan(R) proven safe and
effective as an adjunct diagnostic device to X-ray mammography in clinical
trials for certain targeted groups of women. Parallel clinical studies may also
be undertaken to prove that the device is safe and effective as a breast cancer
pre-operative chemotherapy-monitoring device for women. The Company believes
that the regulatory strategy adopted with respect to SoftScan(R) will ensure
that diffusion of the Company's technology occurs through well-conceived steps,
ensuring that SoftScan(R) gains broader acceptance within the medical community.
The PMA application process has in the past frequently been a lengthy and
expensive one for many companies. However, the Company will seek to take
advantage of reforms enacted in the FDA Modernization Act of 1997 ("FDAMA") in
order to file for expedited review of its PMA application. The FDAMA requires
the FDA to focus its resources on the regulation of those devices that pose the
greatest risk to the public and those that offer the most significant benefits
with the intention of accelerating the introduction of safe and effective
devices. The FDAMA reforms are designed to create a collaborative review process
that will reduce PMA application review times. The Company will seek to take
advantage of this new regulatory environment to obtain expedited review of
SoftScan(R). In particular, the Company will use the following approaches, which
are now permitted:
1. The Company will seek to eliminate having to submit an IDE application
prior to conducting its pivotal trial by establishing that the use of
SoftScan(R) represents no significant risk to the patient as an adjunct
diagnostic device to X-ray mammography.
2. The Company will seek to submit the PMA application using an approach that
permits blocks of data to be submitted as they become available (modular
approach). The Company expects that it will have available and will
therefore file product design data prior to the final clinical data
results becoming available. The FDA will review these data and, if
satisfied, will give its approval up to 90 days after the submission of
each module. The Company believes that it should therefore be able to
accelerate approval of its PMA.
3. The Company will work closely with the FDA to rapidly bring to resolution
issues that may be raised during the course of the approval process. The
Company intends to follow the FDA's guidance and meeting protocols to
thereby minimize the duration of the approval process.
The same pre-clinical and clinical data relating to SoftScan(R) will be used for
regulatory applications in the United States, Canada and Europe. Laboratory
studies and initial studies have
- 27 -
already been concluded. Pre-clinical trials have been successful in verifying a
methodology for constructing an image, which includes a method for acquiring
data and tools for composing an image with that data. In addition, all relevant
theoretical and simulation work was validated through the use of a simulated
biological system.
The Company has initiated informal discussions with the FDA and will continue to
do so, thus ensuring that the most efficient approach to regulatory approval is
agreed upon. In May 2004, the Company announced - following discussions with the
FDA - that it will participate in the FDA's STED Pilot Program with a submission
to have its SoftScan(R) breast imaging system reviewed and approved under a
harmonized format. The FDA's STED Pilot Program is a voluntary pilot premarket
review program that is expected to reduce the burden on manufacturers who face
conflicting premarket submission format and content requirements in different
countries. The program's focus is the harmonized premarket submission format and
content known as "Summary Technical Documentation for Demonstrating Conformity
to the Essential Principles of Safety and Performance of Medical Devices
("STED") developed by the Global Harmonization Task Force ("GHTF"), a voluntary
international group comprised of device regulatory officials and industry
representatives from the five founding members, namely the United States,
Canada, Australia, the European Union, and Japan. A major objective of GHTF is
the harmonization of regulatory systems to reduce the regulatory burden on
regulated industry, and the GHTF believes that achieving this objective will
bring added efficiency to the device review process. This globally-harmonized
regulatory review process is expected to bring added efficiency to SoftScan(R)'s
review process, enable ART to gain market entry with SoftScan(R) in a more
cost-effective manner and enable SoftScan(R) to be available more quickly to the
international community.
In Canada, consultations with the TPD are ongoing. Consultations with key
European jurisdictions (e.g. United Kingdom, France and Germany) will be
undertaken at the appropriate time.
Pilot Trial Results
In the first pilot trial conducted in Montreal and Quebec City, nine (9) healthy
volunteer subjects were scanned with a prototype of SoftScan(R). This study was
successful in evaluating the healthy human breast, its optical coefficients, and
its density. In addition, no adverse events were reported during the study.
Furthermore, the trial results were used to improve the prototypical design of
the SoftScan(R).
In September 2000, a second pilot study was completed in Quebec City. Thirty-one
(31) subjects were scanned according to a pre-determined methodology. The
primary purpose of this study was to evaluate SoftScan(R)'s effectiveness in
capturing and analyzing the variations in optical parameters caused by breast
lesions, both benign and malignant. In addition, the study evaluated
SoftScan(R)'s effectiveness in capturing and analyzing the variations in optical
parameters in radiologically-dense breasts, in breasts where surgery has been
performed, and in breast of women on hormone replacement therapy. SoftScan(R)
effectively imaged a variety of breast characteristics and disease conditions,
including cysts, solid benign lesions, and malignant lesions. Furthermore, no
adverse events were reported during the study.
- 28 -
The study demonstrated that interactions between the emitted, pulsed laser
energy and human tissue in the SoftScan(R) system are neither harmful nor
cumulative. ANSI (American National Standard Institute) Z136.1-2000 and ANSI
Z136.3-1996, the recognized standards for the safe use of lasers in health care
facilities were followed in safety evaluations and system design for the
SoftScan(R) system. Thermal effects on the skin are very unlikely because the
laser is operating at only 20-50% of the maximum permissible exposure, which is
the level at which a heat effect might be felt. Internal software communication
between the laser, scanner and main processor includes a safety feature that
closes the laser shutter if the scanner stops moving.
The primary objective of the SoftScan(R) second pilot trial was to assess the
feasibility and safety of SoftScan(R) in detecting breast anomalies and in
differentiating malignant lesions (i.e., cancer) from other anomalies. Test
volunteers first underwent X-ray mammography, and then were imaged with
SoftScan(R). The optical images were then compared to X-ray mammography and
biopsy findings by a trained breast radiologist. The sample included women with
a variety of breast characteristics and disease conditions, including cysts,
solid benign lesions, and malignant lesions. Results of the trial revealed that
SoftScan(R) effectively imaged three of the four malignancies (one was outside
the scan area), three of the six solid benign lesions (two were outside of the
scan area), and six of the seven cysts. SoftScan(R) was also able to identify
scar tissue. All lesions detected by SoftScan(R) were later confirmed by biopsy.
In May 2002, a clinical study in collaboration with the McGill University Health
Center ("MUHC") was initiated after formal approvals from both Health Canada and
the MUHC Royal Victoria Hospital Research Ethics Board . The objective of this
study was to evaluate several design evolutions and configuration changes made
to the SoftScan(R) device. In April 2004, the MUHC Engineering study which began
in May 2002 of ART's SoftScan(R) breast imaging system was concluded. In
addition to validating several design evolutions and configuration changes made
on SoftScan(R), ART was able to derive positive clinical study results, which
confirmed SoftScan(R)'s ability to discriminate between normal and malignant
tissue.
- 29 -
Ongoing Studies
In June 2003, a multi-centre clinical study was initiated in collaboration with
Sunnybrook and Women's College Health Sciences Centre, and with Ottawa Regional
Women's Breast Health Centre.
Based on past industry experience, the Company expects that marketing clearance
may be granted in Canada and Europe before it is granted in the United States.
The following chart sets out the steps through which the Company currently
anticipates SoftScan(R) will proceed.
------------------------------------------------------------------------------------------------------------------------------------
CLINICAL
VALIDATION (TISSUE CLINICAL FDA/TPD/
2nd PILOT ENGINEERING CHARACTERIZATION) PIVOTAL EUROPEAN
(CONTROLLED) STUDIES STUDIES TRIALS AUTHORITIES
------------------------------------------------------------------------------------------------------------------------------------
Purpose Evaluate safety and Validate design Demonstrate clear diagnosis Verify safety Review process
effectiveness in changes and regardless of breast and and approval.
patient volunteers. optimize characteristics of various effectiveness
performance in patient volunteers. in patient
order to improve volunteers.
data quality,
reduce scan time
and improve
breast coverage.
------------------------------------------------------------------------------------------------------------------------------------
400-900 patient
Test Population 31 patient volunteers. Ongoing studies. Up to 600 patient volunteers. volunteers. n/a
------------------------------------------------------------------------------------------------------------------------------------
Time Frame Completed in 2000. Ongoing since May Ongoing since June 2003. Expected to Approvals expected
2002. start in 2004. in 2005.
------------------------------------------------------------------------------------------------------------------------------------
In addition to becoming compliant with the FDA's Quality System Regulation, the
Company is also seeking to achieve compliance with international standards such
as ISO 13485 and EN 46001 (Quality System - Particular Requirements for Medical
Devices).
Timing of Regulatory Approval Basis
The Company expects to initiate its pivotal trial in 2004. Regulatory
applications will then be submitted in the United States, Canada and Europe. The
Company expects approvals for its SoftScan(R) optical breast imaging device in
most of these jurisdictions starting in 2005. While the Company believes that
this is a reasonable timeframe, there can be no assurance that the Company will
successfully adhere to this schedule due to the unforseeability of the
regulatory approval process. Among other matters, regulatory authorities may
require additional pre-clinical and clinical data than what is initially
submitted by the Company and may reject or disallow the Company's claims and
conclusions.
Third Party Reimbursement Criteria
In the United States, most physicians prescribe the diagnostic imaging
procedures with approved payment codes and third-party reimbursement coverage.
The Centers for Medicare and Medicaid Services ("CMS") formerly known as the
Health Care Finance Administration ("HCFA") is the agency in the United States
that establishes, for Medicare, coverage for certain diagnostic imaging
procedures. Generally, CMS does not cover new diagnostic imaging procedures
before
- 30 -
the technology has obtained FDA marketing clearance. Most insurance companies'
reimbursement plans establish coverage for their clients based upon the
companies' own experience, and, for new procedures, based upon CMS's coverage
decisions. The Company believes that diagnostic imaging procedures with
SoftScan(R) will be covered after FDA marketing clearance is granted.
Target Market
The Company expects that demand for SoftScan(R) will in part be tied to changes
in purchasing criteria for medical devices. These purchasing criteria are
evolving in a manner that the Company believes will provide its products with
significant competitive advantages. Traditional models based on return on
investment are being displaced by models designed to assess the cost of new
equipment relative to the overall cost to the health care system for a patient
in whom a disease has initially gone undetected, and who therefore requires more
substantial treatment in the long term. Furthermore, insurance companies are
increasingly placing importance on devices that fill a real clinical need and
are able to provide a useful clinical outcome for the patient. Because
SoftScan(R) is designed to provide new functional information about the early
stages of breast cancer, the Company believes that it will provide clinical
information not easily available currently as well as help reduce expenditures
that might otherwise have been required if the cancer had gone undiagnosed.
According to the American Cancer Society, it is estimated that in the United
States over 211,000 women will be diagnosed with breast cancer this year. In the
United States, breast cancer kills nearly 40,000 women every year. In Canada, it
is estimated that more than 21,000 women per year will be diagnosed with breast
cancer and that over 5,300 women will die of breast cancer this year. Over the
years, the ability to treat breast cancer has improved; the five-year survival
rate for localized breast cancer has increased from 72% in the 1940s to nearly
97% today. However, if the breast cancer has spread regionally, the survival
rate is 79% and if it has metastasized, the survival rate falls to 23%. In other
words, survival is ultimately dependent on when the cancer is first diagnosed:
the earlier it is diagnosed, the better the chances that a woman will have a
longer life. Furthermore, the more accurately tumors can be targeted and
characterized and the more efficiently the effects of treatment can be
determined, the more effectively breast cancer can be treated. The Company
believes that functional imaging can play a new and important role in detecting,
diagnosing and characterizing tumors and in characterizing the course of cancer
treatment.
In recent years there has been significant consolidation in the U.S. health care
sector. In particular, distribution channels have seen hospitals join together
to form integrated health networks and have also seen the growth of major group
purchasing organizations ("GPOs") that purchase medical devices and other
medical equipment and drugs. Currently, three major hospital GPOs account for
nearly 30% of hospital purchases of medical devices in the United States. The
Company believes that GPOs will dominate spending for medical equipment and
drugs. Furthermore, the Company believes that because GPOs have very large
budgets that cover expenditures ranging from devices designed to detect cancer
to devices and drugs designed to treat cancer, they are prepared to make
additional investments in devices designed to detect, diagnose and characterize
cancer more effectively if it means that the cost of doing so will be more than
offset by a reduction in expenditure on devices and drugs used to treat cancer.
The Company believes that SoftScan(R)'s ability to detect, diagnose and
characterize cancer more
- 31 -
effectively than other technologies will provide compelling economic and
clinical logic for GPOs and other purchasers to invest in this technology.
Marketing and Distribution
The Company's marketing and distribution strategy is two-fold: the first
component is linked to its regulatory strategy, which is designed to give it a
"first to market" advantage and to ensure broad distribution and market
acceptance. On October 22, 2002, ART and GE Medical Systems (now known as GE
Healthcare), a unit of General Electric Company, signed a multi-year strategic
manufacturing/commercial/R&D and financial alliance. Under the SoftScan(R)
Commercial Alliance Agreement (the "SoftScan(R) Agreement"), GE Healthcare will
manufacture and distribute globally SoftScan(R) as of the full-production phase
(the phase following the clinical and pre-production phases). Prior to the
full-production phase, ART will manufacture the SoftScan(R) device. During the
pre-production phase, GE Healthcare's specialists will receive SoftScan(R)
specific training in order to prepare for commercialization, with a focus on
using GE Healthcare's distribution channels. The further commercial terms of the
SoftScan(R) Agreement will be negotiated once regulatory approval for the
SoftScan(R) device has been obtained. Under the Research and Development
Alliance Agreement, GE Healthcare and ART will jointly collaborate on research
and development projects in the field of optical molecular imaging. Also, GE
Healthcare agreed to make an investment of US$3.0 million in the share capital
of ART. The closing of this investment occurred on November 15, 2002, and was
effected by way of private placement.
The second component of the marketing and distribution strategy is linked to the
unique advantages of functional imaging. The Company will seek indications where
SoftScan(R) can fill a true unmet clinical need.
Moreover, the Company also believes that it is important to familiarize breast
cancer action groups with SoftScan(R). Third-party alliance building is
instrumental in introducing women to SoftScan(R), as well as creating public
awareness of the product. Initiating third-party outreach will allow ART to
build awareness, identify opportunities to leverage cooperative patient and
physician education programs, explore opportunities for distributing educational
materials and position ART as a leader in cancer detection, diagnosis and
characterization technology.
Several groups have been identified in the United States and Canada. For
example, in the United States, ART has identified several advocacy groups
including the National Alliance of Breast Cancer Organizations, the Susan G.
Komen Breast Cancer Foundation and other leading action groups. In Canada, ART
has initiated contact with Breast Cancer Action, which is part of the Canadian
Breast Cancer Network.
Competition
The breast cancer field has many devices that provide good anatomical
information. However, safe functional imaging devices are not as prevalent.
Optical imaging devices are not yet on the market, and the Company believes that
SoftScan(R)'s ability to identify early stage tumors and to determine whether
they are malignant or benign through functional imaging will offer a solution to
the limitations inherent in the other technologies which provide anatomical
information.
The Company also believes that because the regulatory process and the need for
major strategic alliances pose significant barriers to entry for new players in
the medical diagnostic imaging market, the Company has or will have a
significant competitive advantage. To the Company's
- 32 -
knowledge, no company other than ART has publicly acknowledged that it is
currently working with time domain based optical imaging technology.
eXplore Optix(TM)
Molecular Imaging Overview
ART has developed a pre-clinical molecular imaging device ("eXplore Optix(TM)")
to answer an unmet need in the drug development process and in basic research by
allowing scientists to track dynamic biological processes at a cellular level in
a living system (in vivo). This field of research has been termed molecular
imaging. Imaging is made possible by the injection of a contrast agent or a
molecular probe, which highlights the cell or process of interest. The methods
employed in molecular imaging are very sensitive and it is now within reach to
detect the functional indications of a disease on a molecular level prior to the
appearance of anatomical signs of the disease.
eXplore Optix(TM) is an example of the Company's ability to leverage its base
optical technological platform to fill a need in a leading-edge research area -
that of imaging cellular and molecular events in living animals.
The Company believes that optical imaging techniques are particularly suited for
molecular imaging. In addition to eXplore Optix(TM), ART's proprietary time
domain technology platform has a number of medical applications, including an
optical breast imaging device (SoftScan(R)) currently under development.
SoftScan(R) can provide functional information about tissue perfusion and blood
oxygenation levels. SoftScan(R) must still obtain regulatory approval before it
is available to the market. eXplore Optix(TM) does not face the same regulatory
hurdles as SoftScan(R).
The Company believes that there is an important need in the drug development
process for longitudinal in vivo information from animal models regarding drug
targets, pharmacokinetics (drug absorption, distribution, metabolism and
excretion), efficacy, toxicity and side effects. This information ultimately
provides critical pre-clinical information. Standard practice is to sacrifice
animals for tissue analysis or to take blood or urine at regular time points.
This requires time-consuming analysis and extrapolation of in vitro data to make
the data applicable to the in vivo situation. Since optical imaging is
non-invasive, molecular events can be detected and characterized in real-time,
and perhaps more importantly, over time, in the same animal. Following a single
animal over time allows researchers to accurately monitor the effects of
interventions on disease progression and outcome. This ultimately results in
more specific and earlier disease diagnosis as well as improved treatment and
monitoring.
Market Overview
The Company believes that the market for ART's pre-clinical molecular imaging
device is comprised of the pharmaceutical industry, specialized CROs that
conduct research for the pharmaceutical industry and academic institutions.
In particular, the Company believes that eXplore Optix(TM) can significantly
improve research practices and that the advantages to the pharmaceutical
industry are important. Specifically, this small animal imaging device can
obtain important pharmacokinetic data from small animal pre-
- 33 -
clinical trials. ART believes that eXplore Optix(TM) can diminish the costs
relating to the testing of small animals, as an animal can be scanned by eXplore
Optix(TM) several times a day without being harmed. This in turn permits the
analysis of a greater number of different drug targets subjected to different
drug candidates. Perhaps most importantly, the use of eXplore Optix(TM) can
improve the quality of small animal pre-clinical trials. These factors all speed
the time to market for drugs. The information from small animal trials could
also prevent drugs from entering human trials, thus potentially saving millions
for the pharmaceutical industry, especially in the United States where the FDA
is requiring more extensive safety data sets for new drug applications, rising
clinical development costs. The information can be used to further knowledge
about the drugs that fail, and thus prevent even more flawed drugs from entering
expensive animal or human trials.
According to the Pharmaceutical Research and Manufacturers of America (PhRMA),
it takes between 10 to 15 years to bring a drug from concept to market, which
reflects the greater complexity of target diseases, the longer and larger
clinical trials required by the FDA, and the medical system's growing demand for
more complex data about new drugs. The cost of developing a new, novel drug is
about US$802 million per drug - almost 6 times greater than what it was in 1975.
The number of new drugs produced by the pharmaceutical industry has risen only
modestly despite a six-fold increase in research spending to more than US$30
billion annually. The FDA has publicly stated, among its concerns, the need to
speed and improve development and approval of new genetic and traditional drugs
and medical devices.
Pressure to improve productivity is expected to greatly increase research and
development expenses for an average pharmaceutical company in the coming years.
Controlling clinical costs, which has outpaced discovery and pre-clinical
development cost growth, will be a major factor in reducing the rapid increase
in overall research & development spending.
Technology
SAMI(TM) eXplore Optix(TM) is based on ART's imaging platform and enables an
extensive characterization of fluorescent material embedded in organic tissue.
The innovative design uses the dynamics of time domain light detection to
extract a wealth of data from each set of measurements providing accurate,
quantitative information. eXplore Optix(TM) does not use ionizing radiation or
radioactive probes. Instead, eXplore Optix(TM) relies on the injection of
fluorescent probes, which are safe, sensitive, and can be specifically
conjugated to small molecules, antibodies, and proteins. In addition, eXplore
Optix(TM) provides the potential for very high sensitivity (nanomolar
concentrations at depths of 10-15 mm).
The key features of the device, which the Company feels are valuable to the
industry, are listed below:
- In vivo visualization of fluorescence intensity and lifetime;
- Longitudinal studies of disease progression and regression in mice
and rats;
- Quantitative localization of depth and concentration;
- Depth sensitivity for biodistribution and pharmacokinetics;
- Can image hairless, albino, and pigmented mice and rats;
- Simple and reproducible animal positioning;
- 34 -
- Combines high throughput with flexible scanning options and advanced
image processing capabilities;
- Heated animal plate ensures the well being of anaesthetized animals.
Regulatory Process
The sale and commercialization of pre-clinical research imaging devices are not
subject to the same regulatory process as medical devices for humans and, as
such, the Company did not seek Health Canada and FDA approval before
commercializing eXplore Optix(TM).
Over the longer term, validation of optical molecular imaging tests conducted on
small animals will make it possible to design clinical trials for a variety of
purposes. An optical molecular imaging device that could be used to monitor the
results of treatments in the fields of oncology, cardiology or neurology would
be subject to regulatory approval from Health Canada and the FDA in the United
States.
Marketing and Distribution
From January 2003 through May 2003 inclusively, four large pharmaceutical
companies and research centres were involved in the beta testing of eXplore
Optix(TM).
On June 18, 2003, ART announced the official commercial launch of SAMI(TM),
ART's pre-clinical molecular imager.
In August 2003, the Company concluded an agreement under which GE Medical
Systems (now known as GE Healthcare) acts as exclusive worldwide distributor for
ART's eXplore Optix(TM) pre-clinical molecular imaging device. Under this
agreement, GE Healthcare purchases eXplore Optix(TM) units from ART and ART
retains manufacturing and sourcing for all eXplore Optix(TM) units sold through
GEHealthcare. ART also retains all rights to the technology and intellectual
property. GE Healthcare is responsible for sales, distribution, training,
marketing and after-sales service.
On September 19, 2003, ART announced the first sale of eXplore Optix(TM) , to
the National Institutes of Health (NIH) in the United States.
On October 20, 2003, ART announced the sale of eXplore Optix(TM), to Novartis
Pharma AG.
On December 8, 2003, the Company announced the continued success of its
commercialization efforts with additional sales of its SAMI(TM) pre-clinical
optical molecular imager to the pharmaceutical and academic research sectors,
and a change in the name under which the SAMI(TM) product will be distributed to
"eXplore Optix(TM)".
On March 28, 2004, the Company presented results of in vivo studies
demonstrating the high quantitation and high sensitivity capabilities of eXplore
Optix(TM) in the nanomolar range at the Annual Meeting of the American
Association for Cancer Research. These in vivo studies demonstrated subnanomole
fluorophore quantity detection capabilities at a depth of between 10 and 15 mm.
Furthermore, volumetric reconstruction of this time-domain data was also
achieved.
- 35 -
On March 29, 2004, ART presented at the Annual Meeting of the Academy of
Molecular Imaging the results of a study demonstrating the high quantitation,
precise three-dimensional localization, and fluorescence lifetime in vivo
capabilities of the eXplore Optix(TM) system in the murine animal model. The
results of a second study were also presented which demonstrated the system's
abilities to localize and discriminate between multiple endogenous and exogenous
molecules. Time-domain resolution of fluorescent lifetimes as small as 0.2
nanoseconds was achieved.
On June 2, 2004, ART and LAB Preclinical Research International Inc., a
preclinical contract research organization based in Laval, Canada, announced the
signing of an agreement under which LAB Preclinical Research International Inc.
acts as a preclinical demonstration site and provide real-time testing and
evaluation of ART's eXplore Optix(TM) time-domain small animal molecular imaging
system.
Competition
Many of the imaging technologies, such as nuclear imaging, magnetic resonance
imaging, computed tomography and ultrasound, originally developed for human use,
have recently been scaled down to allow imaging in small animals, particularly
mice.
-----------------------------------------------------------------------------------------------------------
eXplore Optix(TM) Competition
-----------------------------------------------------------------------------------------------------------
User Requirements
-----------------------------------------------------------------------------------------------------------
No ionizing
radiation or Fluorescence
Modality Functional Targeted(1) Anatomical radioactivity(2) Depth Lifetime(3)
-----------------------------------------------------------------------------------------------------------
Optical TD* x x x x x
Imaging
-----------------------------------------------------------------------------------------------------------
CW** x x x ~
-----------------------------------------------------------------------------------------------------------
Nuclear Imaging x x x
-----------------------------------------------------------------------------------------------------------
Ultrasound Imaging ~ x x x
-----------------------------------------------------------------------------------------------------------
Magnetic Resonance Imaging ~ x x x
-----------------------------------------------------------------------------------------------------------
Computed tomography ~ x x
-----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
eXplore Optix(TM) Competition
----------------------------------------------------------------------------------------------------------------
User Requirements
----------------------------------------------------------------------------------------------------------------
Real Time/ Cost User- Acquisition
Modality Quantitative Pharmacokinetics In vivo Effectiveness friendliness time
----------------------------------------------------------------------------------------------------------------
Optical TD* x x x x x x
Imaging
----------------------------------------------------------------------------------------------------------------
CW** x x x x x
----------------------------------------------------------------------------------------------------------------
Nuclear Imaging x x x x
----------------------------------------------------------------------------------------------------------------
Ultrasound Imaging x x x
----------------------------------------------------------------------------------------------------------------
Magnetic Resonance Imaging x x
----------------------------------------------------------------------------------------------------------------
Computed tomography x x x x
----------------------------------------------------------------------------------------------------------------
1: targeted exogenous chromophores
2: ionizing radiation and radioactivity limits the use of an animal in
longitudinal studies
3: fluorescent lifetime characterizes physiological parameters
*: Time Domain Technology
**: Continuous Wave Technology
- 36 -
Unique Benefits of the Time Domain Optical Imaging Strategy:
o Accurate surface information of the embedded fluorescent
material.
o Accurate depth information of the embedded fluorescent
material.
The temporal information (TPSF) contained in the signal
enables quantification of inclusion depth. The CW intensity
measurement includes all photons, whereas time domain
temporally discriminates photons, which have probed different
depths, resulting in greater depth sensitivity.
o Accurate recovery of fluorophore concentration.
Depth information leads to an accurate recovery of fluorophore
concentration when the data is reconstructed in
post-processing.
o 3D localization.
Due to the temporal dimension in time domain measurements, the
signal contains volumetric information about the tissue, thus
3D localization can be achieved.
o Fluorescence lifetime.
This allows the distinction between different fluorescent materials.
Furthermore, with an appropriately designed probe, changes in fluorescence
lifetime occur with varying tissue properties such as pH, oxygenation level and
calcium levels, and can thus be used to establish those properties.
Revenues
The Company recorded sales of US$681,875 during the eight-month fiscal period
ended December 31, 2003, as compared to none in the fiscal years ended April 30,
2003 and 2002. These revenues came from the sales of eXplore Optix(TM) units to
clients from the biomedical research and pharmaceutical sectors.
Research and development
The Company conducts the majority of its research and development activities
in-house. The Company has assembled a core team of high-level scientists, most
of whom hold specialized doctorates in the fields of biomedical imaging, medical
engineering, electro-optics, spectroscopy and modelling. As of May 31, 2004, the
Company had 47 employees directly engaged in research, development and
engineering work with respect to SoftScan(R) and molecular imaging related
products. The Company's in-house research and development efforts are focused
primarily on completing the development of SoftScan(R) and researching new
applications for its proprietary technology.
In addition to its in-house research program, the Company collaborates with
academic and research institutions, including the INO, which is working with the
Company on the SoftScan(R) project and other related projects, to support
research in areas of interest to the Company.
Since inception up to December 31, 2003, the Company has invested approximately
US$27.2 million into the development of its proprietary time domain optical
technology gross of investment tax credits (US$2.8 million). The Company has
been able to control its research and
- 37 -
development costs as a result of the following factors: (i) extensive in-house
expertise; (ii) strong collaboration agreements with leading research
institutions; and (iii) its ability to leverage effectively its knowledge of
applications of optical imaging technologies.
Quality Management
In order to achieve successful regulatory approval of its products, the Company
must undergo conformity assessment of its Quality Management System by most
countries, including the United States, Canada and countries in the European
Union.
For FDA approval, the Company is required to comply with the Code of Federal
Regulation Title 21, Part 820 (Quality System Regulation). For approval by
Health Canada and European authorities, the Company is required to comply with
ISO 13485 (Medical Devices - Quality management system - Requirements for
regulatory purposes).
As part of an incremental approach to Quality System implementation and to
provide a strategic advantage for the commercialization of its eXplore Optix(TM)
product, the Company has implemented its Quality Management System in compliance
with ISO 9001: 2000 (Quality Management System - Requirements). This initial
implementation serves as a stepping-stone for the implementation of ISO 13485
Quality Standard and compliance with the FDA 21 CFR, Part 820.
The objective of the Company is to achieve regulatory compliance as well as
customer satisfaction by conducting its business with the objective of supplying
products, services and solutions that consistently meet requirements and exceed
expectations.
Product Development
The Company continually evaluates the likelihood and ease with which
complementary products, derived from its core technology or from existing
products, can be identified, developed and introduced. For instance,
SoftScan(R)'s ability to identify and differentiate between various anomalies
within human tissues has led the Company to look at other possible medical
applications. The development of additional products that fit with the Company's
vision and mission are an integral part of the Company's strategy. When the
Company is prepared to expand its current addressed markets and wishes to pursue
new products, a new product development team is formed and authorized by the
Executive Management team to identify specific new market opportunities for our
technologies. This team uses and develops various internal and external sources
of ideas, concepts and innovations to further develop existing products as well
as novel electro-optic technologies aimed at the bio-medical sector. The Company
has established a New Product Development process that takes into account market
potential, technology and business factors.
- 38 -
ART has several development projects that fall into three principal categories:
(a) Projects that will lead to functional and, or, cost improvements to
the existing product lines.
(b) Projects for products evolving from present technology within
current markets.
(c) Projects for innovative products to enter new markets.
The Company expects that a majority of its projects will fall within the first
two categories for the near term and then as the company achieves profitability,
it will look to expand its served markets.
To help with the assessment of the requisite resource allocation, ART has
created a systematic decision-making process. The first phase involves technical
and commercial analysis of a project. In this first phase, technical, patent and
market issues are evaluated. Based on this analysis, as well as on evaluation of
the strategic and tactical attractiveness and the risk of the project, a
decision is made as to whether to proceed. The second phase explores the
technical and legal feasibility of the project and assesses its market
positioning. The third and final phase seeks to establish significant
competitive advantages and create barriers to entry for others through business
best practices and global intellectual property protection. This involves
performing value engineering, functional and systems specification for the
product and developing prototypes. A business plan is drafted for the project
and the expected technological and financial returns are assessed.
The Company has also established a competitive intelligence process using
internal and external resources. The process is aimed at gathering information
about existing and potential markets, technologies and existing and expected
competition. This data enables the Company to anticipate or forecast the
competition's reaction to ART's positioning.
The Company also has access to external research and development resources and
facilities. It has ongoing contracts and activities with internationally
recognized centers-of-excellence such as the INO, located in Quebec City. The
Company is in close association with MGH, a teaching hospital affiliated with
Harvard Medical School, which has one of the largest hospital-based research
programs in the United States.
The Company is presently involved in extending its product range by applying
ART's core technology to other challenges in the health, life sciences and other
sectors.
Scientific Advisory Committee
The Company has established a Scientific Advisory Board composed of leading
members of the medical and scientific community. The Scientific Advisory Board
provides advice and scientific expertise to the Company on an ongoing basis. The
Scientific Advisory Board is regularly informed on the development of the
Company's research and development projects. The Scientific Advisory Board
provides feedback and ideas intended to accelerate the development process and
reduce time-to-revenue. Members of the Scientific Advisory Board also fulfill
the role of external advisors involved in the project-specific system design
reviews. Scientific
- 39 -
Advisory Board members enhance the Company's innovation process and provide
support for the Company's technical and scientific personnel.
The Company currently has eight members on its Scientific Advisory Board. The
individuals are the following:
Samuel Achilefu -- Dr. Achilefu is Associate Professor of Radiology,
Division of Radiological Sciences at the Washington University School of
Medicine. Professor Achilefu utilizes a multidisciplinary approach to
discover or develop bioactive molecules for various medical applications.
Specifically, his work involves the design, synthesis and performance of
in vitro and in vivo evaluation of molecular beacons for use in optical,
scintigraphic, ultrasonic and magnetic resonance imaging of cancer. He is
also interested in the development of cancer-related multi-modal imaging
and therapeutic drugs. He holds a Ph.D. in Chemistry from the University
of Nancy, France, and was a Postdoctoral Research Fellow,
Bioorganic/Inorganic Chemistry at Oxford University, from 1991 to 1993.
Irving J. Bigio -- Dr. Bigio received his Ph.D. in Physics from the
University of Michigan in 1974. Since then he has conducted research in
laser physics, optics and applications at Los Alamos National Laboratory,
New Mexico, acting as the Laser Science Program Manager and Leader of the
Laser Science and Applications Group (1988-1994). Since 1986, he has
focused his research on biomedical applications of lasers and optics. He
holds several patents for biomedical optics instrumentation, and has
received three R&D-100 Awards for the development of optical devices for
biomedical applications, as well as the 1996 Federal Laboratory Consortium
Award for Excellence in Technology Transfer. Dr. Bigio is currently a
senior scientist in the Bioscience Division at Los Alamos, and is
Professor of Biomedical Engineering and Electrical & Computer Engineering
at Boston University.
David Boas -- Dr. Boas received his B.Sc. in Physics at Rensselaer
Polytechnic Institute in 1991 and his Ph.D. in Physics at the University
of Pennsylvania in 1996. He has worked in the field of biomedical optics
since 1992 with a focus on developing a new medical imaging technique
based on diffuse near-infrared light. He has published more than 20 papers
on this topic. He presently holds the positions of Assistant Professor at
Harvard Medical School and Assistant Physicist at the Massachusetts
General Hospital's Department of Radiology.
Britton Chance -- Dr. Chance received two Ph.D.s -- the first in Physical
Chemistry from the University of Pennsylvania in 1940, and the second in
Biology from Cambridge University in 1942, as a Guggenheim Fellow. From
1942 to 1946 he worked at the MIT Radiation Laboratory, where he helped
develop advanced radar systems and the Norden Bomb Sight. From 1949 until
1983 he headed the Johnson Research Foundation, as well as the Department
of Biophysics and Physical Biochemistry at the University of
Pennsylvania's School of Medicine, where he focused his work on the basic
understanding of cell energetics. He published more than 600 refereed
papers. He is founder and President of Non-Invasive Technology Inc., the
holding company for his many optical imaging patents. Dr. Chance is
Professor Emeritus in the Departments of Biochemistry/Biophysics at the
University of Pennsylvania.
- 40 -
Amir H. Gandjbakhche -- Dr. Amir H. Gandjbakhche received his Ph.D. in
Physics from the University Denis Diderot (Paris 7) in 1989. From 1990 to
1995, he was Visiting Fellow, and, from 1995 to 1996, Visiting Associate
at the Physical Sciences Laboratory of the Division of Computer Research &
Technology (DCRT), which was part of the National Institutes of Health
(NIH). In 1995, Dr. Gandjbakhche also received the NIH Fellows Award for
Research Excellence. In 1997, he became a Senior Staff Fellow of the
Laboratory of Integrative and Medical Biophysics at the National Institute
of Child Health and Human Development (NICHD), NIH. Since 1999, Dr.
Gandjbakhche holds the position of Investigator, Chief Unit on Biomedical
Stochastic Physics at the Laboratory of Integrative and Medical
Biophysics, NICHD. Dr. Gandjbakhche is an active member of the scientific
community. He is namely a member of the Optical Society of America
Bio-Optics Advisory Committee and a member of the Program Committee of the
Optical Society of America Conferences on Advances in Optical Imaging,
Photon Migration and Tissue Optics. He is also Chair of the Biomedical
Optical Imaging Technical Committee of the Optical Society of America.
Since the beginning of his career, Dr. Gandjbakhche has published more
than 55 papers on Biophysics and Optical Imaging.
Daniel Kopans -- Dr. Kopans is an honors graduate from Harvard College and
he received his M.D. from the Harvard Medical School, where he graduated
as a member of the Alpha Omega Alpha honors society. He is Professor of
Radiology at the Harvard Medical School of Harvard University and has been
the Director of the Breast Imaging Division at the Massachusetts General
Hospital (MGH) since 1978, soon after completing his residency training in
Diagnostic Radiology at MGH. Dr. Kopans has taught and written widely on
all facets of breast imaging and is an expert in all aspects of breast
cancer detection and diagnosis. He leads efforts in the investigation of
methods for improving breast cancer detection and diagnosis including
digital mammography, magnetic resonance imaging (MRI) of the breast,
ultrasound, and nuclear medicine. He is a leading authority on breast
cancer screening. Inventor, author, investigator, and educator, Dr. Kopans
has authored more than 160 peer-reviewed articles on breast cancer
detection and diagnosis. He is the author of a textbook on breast imaging
that is now in its second edition (Breast Imaging, Philadelphia:
Lippincott-Raven Publishers, 1998) and is one of the standards in the
field.
Joseph Lakowicz -- Since 1988, Professor Lakowicz holds the position of
Director, Center for Fluorescence Spectroscopy at the University of
Maryland, School of Medicine. His work has focused on advancing the field
of fluorescence spectroscopy. This involves chemical synthesis of new
fluorophores, development of novel fluorescence measurements, development
of instrumentation for time-resolved fluorescence, and the chemical
applications of fluorescence sensing. Much of this work has resulted in
inventions, patents and licensing. His laboratory is also involved in the
more advanced topics of multi-photon excitation, in which molecules are
excited by the simultaneous absorption of two or more long wavelength
photons.
Martin Yaffe (Chairman) -- Dr. Yaffe holds a doctorate in Medical
Biophysics from the University of Toronto, where he teaches. He is a
renowned specialist in medical imaging, more specifically in the early
detection of breast cancer and chairs the Committee on Mammographic Image
Quality for the International Commission on Radiological Units (ICRU). Dr.
Yaffe has been working toward advancing research in the early detection of
- 41 -
breast cancer since the start of his career, and has been involved in many
important initiatives intended to improve related technologies. Among
other things, he is a member of the National Council on Radiation
Protection (NCRP), Quality of Mammography Committee SC-72. He also serves
on several committees of the American College of Radiology. Professor and
researcher in Medical Biophysics at the University of Toronto, Dr. Yaffe
is currently Senior Scientist in Imaging/Bioengineering Research at the
Sunnybrook & Women's College Health Sciences Centre in Toronto and a
Consultant Physicist for the Ontario Breast Screening Program. Dr. Yaffe
has authored many scientific communications and conferences and acts as
reviewer for numerous scientific publications, including Medical Physics
and the International Journal of Radiation Oncology.
Business Advisory Council
The Company has established the ART Business Advisory Council ("BAC" or the
"Council") to further the achievement of ART's corporate goals and objectives.
The purpose of the Council is to advise the President and CEO of ART on the
overall strategic direction of the company in regards to its long-term corporate
growth as well as to the marketing and commercialization of its products and
services. More specifically, the Council provides advice on such matters as
business and corporate development, market segmentation, customers and
end-users, strategic alliances and relationships, clinical and health practices,
government and health-care group reimbursement policies, regulatory bodies,
competitors, lobby groups and community and stakeholder relations.
In order to address important issues which relate to ART's most promising target
markets, the Council is structured on a regional basis comprising a Canadian
BAC, an American BAC and a European BAC. This structure will allow ART to
efficiently leverage the expertise, leadership and contacts of the individual
members of the regional Councils.
The members of the Canadian BAC are the following:
Gerard J. Taillon -- Since 1984, Mr. Taillon has been Senior Vice
President and Managing Director of BMO Nesbitt Burns Limited. Mr. Taillon
is also Chairman of the Board of BMO Nesbitt Burns Financial Services Inc.
and Chairman of the Management Committee of the Private Client Group of
the Quebec Bank of Montreal Group of Companies. He also sits on the
Management Board Counsel of the Bank of Montreal and is a member of the
Executive Committee of the Bank of Montreal Group of Companies for the
Quebec Region. Mr. Taillon has over 30 years of experience in the
securities field. He joined Burns Fry (now BMO Nesbitt Burns Limited) in
1984, and prior to joining Burns Fry, Mr. Taillon held the position of
Vice President at a leading brokerage firm. Mr. Taillon was a member of
the Board of Governors of the Montreal Stock Exchange in 1993 and 1994,
and he has been a member of the Board of the Investment Dealers
Association, Quebec since 1993.
Monique Lefebvre -- Until January 2002, Ms. Lefebvre was President of the
Montreal Transition Committee, in which capacity she was responsible for
setting up the new City of Montreal comprised of 28 former municipalities
in the Greater Montreal Area. From 1998 to 2000, Ms. Lefebvre was Vice
President, Quebec and Atlantic Canada for
- 42 -
Ericsson Canada Inc. From 1996 to 1998, she was President of Quebecor
Multimedia, and, from 1991 to 1996, she held the position of President and
Chief Executive Officer of the Centre de recherche informatique de
Montreal ("CRIM"). Ms. Lefebvre is a director of Transcontinental G.T.C.
Ltd. and BioSyntech. Until recently, she was also the Chair of the board
of directors of Societe Innovatech du Grand Montreal, a capital venture
fund, and acted as Vice Chair of the Montreal Board of Trade. She is a
member of the Board of Trustees of the Canadian Foundation for Innovation.
Brian Levitt -- Mr. Levitt is Partner and Co-Chair of Osler, Hoskin &
Harcourt LLP, one of Canada's leading law firms specializing in business
law, tax, litigation, competition and antitrust. Mr. Levitt was President
of Imasco Limited from 1991 to 2000. From 1976 to 1991, he was
successively Associate and Partner at Osler, Hoskin & Harcourt LLP. Mr.
Levitt is a director of a number of Canadian companies such as BCE Inc.,
Bell Globemedia Inc. and Domtar Inc. He holds degrees inf Applied Science
(B.A.Sc.) and in Law (LL.B.) from the University of Toronto. Mr. Levitt
was called to the Ontario Bar in 1975 and the Quebec Bar in 2001.
Colin Mallet -- During the course of his career, Mr. Mallet held several
senior positions in the pharmaceutical industry in Canada, United Kingdom,
Switzerland, Sweden and South East Asia. From 1987 to 1995, he was
President and Chief Executive Officer of Sandoz Canada Inc. (renamed
Novartis Pharmaceuticals Canada Inc. in 1996). Mr. Mallet was Chair of the
Canadian Health Research Foundation from 1989 to 1991. From 1990 to 1993,
he was also the Founding Chair of the Institute for Industrial Pharmacy
Research. From 1991 to 1993, he was Vice Chair, and, from 1993 to 1994,
Chair, of Canada's Research-Based Pharmaceutical Companies (Rx&D). Mr.
Mallet is currently a director of Axcan Pharma Inc., Micrologix Biotech
Inc., AnorMED Inc., Phytogen Life Sciences Inc., MethylGene Inc. and Prime
Trials Inc. Mr. Mallet holds a B.A. in Economics (1965) from Cambridge
University, United Kingdom. In 1983, he successfully completed the
Advanced Management Program at Harvard University.
The members of the American BAC are the following:
William J. Webb -- Mr. Webb is a medical industry executive with
approximately 25 years of senior management experience. Mr. Webb began his
career at General Electric Company (GE Medical Systems) where he served in
top management positions. From 1982 to 1999, Mr. Webb held a number of
senior management positions at Picker International, Inc, one of the
world's leading medical imaging company. From 1999 to 2001, Mr. Webb was
President and Chief Executive Officer of Trex Medical, Inc. Trex Medical
consisted of five separate companies, which supplied x-ray equipment
worldwide through five individual sales and distributor networks to the
medical and dental markets. Mr. Webb holds a Bachelor of Science Degree in
Electrical Engineering (BSEE) from Drexel University (1967).
Ronald Lane Goode -- Mr. Goode is President, Chief Executive Officer and
Chairman of the board of directors of eXegenics, Inc, a pharmaceutical
company dedicated to the acquisition, rapid development and
commercialization of drug therapies for use by physician specialists. From
1976 to 1986, Mr. Goode has held key management positions at Pfizer
Pharmaceuticals, and, from 1986 to 1997, at G. D. Searle & Co. From 1997
to 1999, Mr. Goode was President and CEO of Unimed Pharmaceuticals, Inc.,
positioning
- 43 -
the company for sale to Solvay Et Cie, the Belgium-based conglomerate. He
formed the consulting company Pharma-Links in 1999 with the mission of
being the "link" between pharmaceutical companies to help them create
alliances, form joint ventures and effect various transactions. Mr. Goode
also serves on the board of directors of several not-for-profit
organizations. He received his Ph.D. in Microbiology from the University
of Georgia.
The member of the European BAC is the following:
Jean Marsac -- Mr. Marsac is the founder and President of the executive
board of H2i-Management SA. Throughout his career, Mr. Marsac has held
different scientific and management positions in the medical and
biotechnology sectors. He started his career as Professor in pneumology
medicine. During that period, he was at the head of a hospital centre and
a research unit in clinical pharmacology, which specialized in the
treatment of asthma and allergies. Mr. Marsac also acted as Scientific
Counsel at the Agence du Medicament (renamed the Agence Francaise de
Securite Sanitaire des Produits de Sante), a French-governmental
organization. In 1989, Mr. Marsac joined the pharmaceutical industry and
successively held the positions of Director of Laboratories at
Roussel-Uclaf, and Vice President Research and Development at Synthelabo
and Sanofi-Synthelabo.
Intellectual Property
ART has significant intellectual property, which includes technical know-how,
expertise, designs, process techniques and patents. While procedures are in
place to protect intellectual property, ART believes that its success depends to
a large extent on the time and investment required to develop competing
technology and on its continued commitment to research and development.
The Company has been granted six patents related to its optical imaging
technology in the United States and has patent applications pending in the
United States and Canada. Several of these patent applications have
corresponding patent applications in Europe or internationally by ART. In
addition, the Company intends to apply or is in the process of applying for
several additional patents in the United States, Canada and internationally
regarding technology used in SoftScan(R), in eXplore Optix(TM) and in other
optical molecular imaging applications. The Company has also developed
proprietary computer software for its products for which it relies on copyright
and trade secret for protection.
Six patents related to optical imaging and to the detection and diagnosis of
diseases have been granted to ART. The first US patent entitled "Method and
Apparatus for Detecting Malignancies in Living Tissue" (Number: 5,808,304) filed
on November 18, 1996, was granted on September 15, 1998 and expires on November
18, 2016. The invention relates to a method and an apparatus for detecting
malignancies in living, biological tissue, and in particular to a method and
apparatus for detecting breast cancer. The second U.S. Patent entitled "Optical
Imaging through Scattering Media: Fit to an Inhomogeneous Diffusion Model for
Differentiation" (Number: 6,148,226) filed on February 13, 1998, was granted on
November 14, 2000 and expires on February 13, 2018. The invention relates to an
optical method for imaging through a scattering medium in which a fit is made to
an inhomogeneous diffusion model. The method provides a simple means to separate
the
- 44 -
absorption and scattering contributions of inhomogeneities. The third U.S.
patent entitled "Scanning Module for Imaging through Scattering Media" (Number:
6,332,093) filed on August 6, 1998, was granted on December 18, 2001 and expires
on August 6, 2018. The invention relates to a scanning module image through
scattering media while alleviating adverse effects on the weak transmission
through highly scattering media. The fourth patent entitled "Optical Imaging of
Turbid Media with Depth-Related Discrimination" (Number: 6,415,172) filed on
January 21, 2000, was granted on July 2, 2002 and expires on January 21, 2020.
The invention relates to a method for scanning a turbid medium and displacing an
optical signal source over a first face of the medium and a corresponding
optical detector over an opposite face from one respective spatial location to
another. The fifth patent entitled "Optical Imaging of Turbid Media with
Depth-Related Discrimination" (Number: 6,678,049) filed on January 25, 2002, was
granted on January 30, 2004 and expires on January 30, 2024. The invention
relates to an optical imaging system for detecting light from an excitation
source through a scattering medium. The system includes a photo detector for
receiving light from the scattering medium, an amplification circuit coupled
from the photo-detector, an electro-optical source coupled from the
amplification circuit for providing a secondary light signal, and a streak
camera receiving the secondary light signal and providing an image of the
scattering medium. The sixth patent entitled "Choice of Wavelengths for
Multiwavelength Optical Imaging" (Number: 6,694,159) filed on November 2, 2001,
was granted on February 17, 2004 and expires on November 2, 2021. The invention
relates to a method for wavelength selection in a multi-wavelength TPSF-based
optical imaging system.
In the biomedical field, ART also has seventeen patent applications pending in
the United States and Canada.
Furthermore, the Company also has an exclusive worldwide license to use the
inventions and patents developed by Emeritus Professor Dr. Britton Chance, which
are owned by Non-Invasive Technology Inc., with respect to the imaging of tissue
using time domain optical technology. On December 15, 2003, ART acquired
exclusive worldwide licensing rights to Dr. Joseph Lakowicz's extensive optical
molecular imaging patent portfolio.
The ownership of any intellectual property is protected through employment
agreement