us phase 2 trial proves ferriscan superior

Plus:

2. Increased penetration of US market for FerriScan
3. Upscaled HepaFat trial to commence for FDA approval (note time from submission to approval for the T2 test was only 3 months)
4. "no capital raising planned at this stage"
5. Equilibrium contrast imaging available in London
6. US marketing strategy
7. Australian rebate progress

I hope you find my email to management followed by the responses to most of the issues raised of some benefit.

...... I have a few questions based on publically available information involving the company, which I would be grateful if you could assist me with where able.
1. I see on the ANZ Clinical Trials Register that a HepaFat study using retrospective data is to be undertaken this year. Logically this is to progress the US patent application. When do you anticipate the review of data to be completed and can you confirm a February start? Can you confirm trial costs will be minimal as existing data will be used?

2. The December 10 presentation at the American Society of Hematology on disparaties between the MRI metrics of R2* and R2 observed during the Phase II trial of an iron chelator drug would appear to further discredit R2* as I extract below:

"Ferriscan was systematically 10.2% ± 27.8 % higher than R2* measurements (p<0.004), having 95% confidence intervals of [-45% – 65%]................The second source of error is the systematic underestimation of R2* (and their iron estimates) at high iron levels............... values greater than 25-30 mg/g dry weight may have been underestimated.",

My understanding is that it had been thought possible to calibrate the MRI using one FerriScan R2 test and then apply a constant offset to the R2* setting provided with many MRI machines (thus negating FerriScan future services). However, the study seems to indicate this is no longer valid as at higher iron levels this may seriously underestimate readings in a non uniform manner. Could you please comment as to the accuracy of my understanding.

3. If correct do you believe it will assist gaining US insurance company rebates if what is perceived a "free" or in-house R2* test is proven invalid?

4. Do you believe it will assist with the Australian rebate position, noting the board specifically mentioned the existance of alternative metrics (R2* and T2*) to Ferriscan as a relevant consideration and criticised the trail methodology employed as being insufficiently robust?

I also note that some drugs (particularly aimed at children) have been extensively tested using R2*, most recently in Korea. This data would now appear questionable and push drug testing companies towards using a R2 test instead of an R2*.

5. It would appear that the company is targeting the children hospital market segment in the US. Is this because there is more reluctance from parents to undertake a liver biopsy on a child due to the pain and discomfort. Is further expansion of this market segment anticipated?

6. None of the hospitals used for the US phase II / FerriScan R2* comparative trial appear on your website list of centres using FerriScan services. Is that because the relationship is solely with Novartis via Dr John Wood?

7. University of London released a presentation a couple of weeks ago dealing with their T3 imaging process, indicating equilibrium contrast imaging as one of the uses of the new machine. Is this the same process that Resonance has control of an exclusive license for? I can't see any specific patent on the technology, do you know if one is being progressed?

8. Finally, as increasing costs can be expected in bringing HepaFat online, do you anticipate existing funds can stretch until the company is cash flow positive or do you expect some sort of limited capital raising in the interim?

Thanks in advance for clarifying my knowledge of the company.



MANAGEMENT RESPONSE

Thank you for your inquiry and please see below my answers to your questions.

1. The clinical trial you refer to is work we are doing to test our HepaFat Scan software, which is required for our FDA submission. As you point out, costs will be minimal as the data already exists, it just needs to be analysed with our software and compare the results.

2. Your technical understanding of the products and the market is very good. There was a poster presented at ASH (which is an abstract and not a full publication) so we have limited details. For someone to calibrate a different technique against FerriScan, they would have to do multiple measurements across the whole range of iron overload to take account of standard errors, statistical fluctuations and the non-linear relationship across the range of iron. This could not be transferred to another scanner, but would be unique for that scanner.

3. The extensive validation data we have on FerriScan (across many types of MRI scanners, in children and adults, in numerous disease types and with the presence of liver fibrosis) is second to none and is extremely important to the public and private payers we are talking to in the US. We have a further detailed publication on the Validation of FerriScan which has been submitted for review and publication.

4. The FerriScan validation data will certainly help us with the Australian rebate. Their comments to us have confirmed that they are satisfied with the technical robustness of our product. The additional data they are seeking relates to demonstrating the direct contribution FerriScan makes to the health outcome of patients, with published data to support such claims.

5. Regarding your comment on Korea, I am only aware of the Novartis study in Korea for Exjade, which used FerriScan. I wonder if it’s a misprint in the publication which may refer to the test as R2*? (we do see this from time to time). Once a drug has achieve regulatory approval, it’ usually only taken off the market if there are adverse events, and probably not for a fault device used in the clinical trials.

6. Children’s hospitals are targeted for a number of reasons. First, they are particularly responsive to the argument of minimising the need for a liver biopsy, as no one wants to perform a liver biopsy on a child. Secondly, the children’s hospitals tend to be well funded and have a stronger program for patient management that in many of the adult hospitals. Many doctors in the US have said that their sickle cell patients are well managed and tracked (and kept healthy) while handled by the paediatric hospital but no one follows them up and makes sure they attend appointments once they become adults. We continue to target both children and adult hospitals with large populations of our target markets.

7. I will check to see if the hospitals used in the Phase II study are on our system as FerriScan centres. They should be. I assume you are referring to the Ferrokin study which Dr John Wood was involved in, however your email refers to Novartis.

8. A patent has been lodged for the equilibrium contrast imaging and it’s is currently in the review process. So it may not be in the public domain yet.

9. Our current focus with HepaFat Scan is to get it FDA approved. We will be looking at a number of commercialisation paths for this product including potential licensing arrangements to the MRI manufacturers or large research facilities, together with offering imaging services. We would hope that the revenue could therefore flow from a number of sources. Following our FDA submission and discussions with potential licensees we will be in a better position to determine any funding requirements. No capital raising is being planned at this stage.

I hope this answers your questions.

Many thanks for your interest and please let me know if you have any further queries.

Kind regards,



Liza Dunne

Managing Director