Miraculins President and CEO Christopher Moreau talks to Cantech Letter

We are constantly and correctly reminded that early screening for a variety of diseases and conditions can drastically increase our chances of beating them. Yet for a myriad of problems, many of us end up simply avoiding the doctor’s office. We are too tired. We hate needles. And we’re probably fine, right?

What if the advances in preventative screening were more accessible? What if it were less of a hassle to test for diabetes, for cholesterol, for Cancer? It’s not a stretch to imagine that the widespread adoption of early screening could make a noticeable impact on average life expectancy on a global basis.

Winnipeg-based Miraculins (Miraculins Stock Quote, Chart, News: TSXV:MOM) is a company with a focus on non-invasive medical diagnostic and risk assessment tests that operates in a market that appears to be set to explode. A recent report on the Non-invasive Diagnostics market by Veracity Health predicted that the value of the diagnostic testing for Cancer alone will grow from $186.8-million to $6.2-billion by 2020, a CAGR of 65%.

Cantech Letter talked to Miraculins President and CEO Christopher Moreau about his detailed and ambitious plan to win a sizable chunk of the non-invasive medical diagnostic market.

Chris, can you tell me a bit about how Miraculins came together?

Miraculins was founded in 2002 with a specific focus on biomarker discovery with the goal of helping improve the early diagnosis of various cancers. When I became CEO in 2007, I changed our course to our current path of acquiring and or in-licensing, diagnostic and screening tests that have already come through early development stages, which reduces the risks associated with early stage discoveries.

If highly sensitive and mobile POC tests can be developed that dramatically increase the number of people getting screened for various diseases, then I believe a significant impact will be made towards dramatically improving the quality of people’s lives.

Miraculins’ focus is non-invasive medical diagnostic and risk assessment tests. A recent report on the Non-invasive Diagnostics market by Veracity Health predicted that the value of the diagnostic testing for Cancer alone will grow from $186.8-million to $6.2-billion by 2020, a CAGR of 65%. Why is this market set to grow so fast?

Non-invasive usually means that the test is less likely to cause short or long-term pain and discomfort, and avoiding pain is something that generally speaking, people like to do. It has also been estimated that 20% of the general population is needle phobic and may avoid seeing a doctor as a result. So any advancements in technology that result in new non-invasive testing procedures should be well-received.

Are there instances in which non-invasive medical diagnostic tests can expand the reach of good medicine in general? I am thinking of the possibilities in the Third World in particular…

If non-invasive also means point of care (POC) then yes I do believe that the potential is there to have a significant positive impact on health care delivery throughout the world and in particular, third world and developing nations. If highly sensitive and mobile POC tests can be developed that dramatically increase the number of people getting screened for various diseases, then I believe a significant impact will be made towards dramatically improving the quality of people’s lives.

In 2013, you acquired Veralight and the Scout DS®, a non-invasive diabetes screening technology. Veralight didn’t have much success with Scout DS®. Why do you think Miraculins can?

There are an incredible number of factors and variables that are at play and that need to come together for a biotechnology product to make it to the market. These factors range from the basics of how well the product performs and the regulatory claims surrounding its uses, to having sufficient capital needed to move the technology through its various stages of development. The products that make it are easy to recognize and remember, but thousands never see the light of day. Sometimes, to use a sports analogy, one company can bring the ball down the field but only gets it to the 30 yard line and another company picks the ball up and runs it all the way for a touchdown. There are so many variables at play. I think one of Miraculins’ greatest assets is its experienced management team and I think we are uniquely positioned as a result of that experience to be able to take the Scout DS® ball and run it to the goal line.

How large is the market for non-invasive diabetes screening? Is there competition in this vertical?

There are 387 million people with type 2 diabetes in the world and this will grow to 500 Million by 2030. More than 470 million will have pre-diabetes by 2030. Hundreds of millions remain undiagnosed and so the market is enormous and is growing. Medical experts are now referring to diabetes as the fastest growing disease in history.

What is the status of PreVu®, your non-invasive skin cholesterol point-of-care test?

We have executed several pilots for PreVu® in Canada and the U.S. and are currently reviewing our next strategic steps for this technology. While the response of consumers has been very positive we are still working to determine the best platform for the distribution and delivery of the test in the market here in North America. We are also exploring foreign market distribution potential, including in Asia where dense populations and limited medical resources favour screening devices that are non-invasive and mobile. We continue to review the market options and will be advising the market as we move forward.

One of our major goals for 2015 will be to drive towards the goal of CFDA regulatory approval for the Scout DS® in China. This approval will trigger a $15M USD order of Scout DS® units and will be the first major revenue transaction for Miraculins.

You have said that China represents a large opportunity for the Scout DS® product. Why do you think this is the case and what kind of progress have you made there?

Some studies announced by the International Diabetes Federation (IDF) put the number of people in China with type-2 diabetes at 92.4 million, with 60.7% undiagnosed, and almost 500 million pre-diabetics. So the market desperately needs a high throughput, highly sensitive point-of-care test to be able to screen the mass population and move those patients determined to be at risk onto disease confirmation and treatment. If they are diagnosed as pre-diabetic, the next step is to help them reduce their risk factors by introducing them to healthier diet and exercise programs to help slow down or arrest their progression to type 2 diabetes. I believe that the Scout DS® will be an extremely valuable tool in this effort.

What is the status of the Scout DS® Device in the U.S.?

After we acquired the Scout DS® technology, we arranged for a face to face meeting with the FDA as part of a process to identify and better understand the best possible regulatory pathway for the Scout DS® device. Based on that meeting and some additional follow up, we are preparing to file pre-submission documentation with the United States Food and Drug Administration (U.S. FDA) regarding the de novo classification of its Scout DS® device, as a next step in securing marketing clearance in the United States. The de novo classification process provides a potential pathway to Class I or Class II classification for medical devices for which general controls, or general and special controls, provide a reasonable assurance of safety and effectiveness, but for which there is no legally marketed predicate device. We are planning to file the pre-submission documentation in the first quarter of 2015.

In January you did a 10-for-1 share consolidation. Why did you do this? What was the impact on the company?

In January, our stock price was $.035 and the TSXV does not allow financing below $.05. So we had no choice but to consolidate the stock, it was a matter of survival. Generally speaking a consolidation can have a negative impact on a micro-cap company’s stock price and Miraculins was no exception.

Why did you do a financing at $.08?

Financing a pre-revenue biotechnology company in today’s capital markets on the TSXV is an extremely difficult thing to do. When you need to finance, you go to the market and do your best based on the price the stock is at. We did the last major financing at $.08 which reflected the maximum allowable discount to our stock price at the time.

Are you capitalized enough to fund operations for the foreseeable future?

In order to reduce dilution for shareholders, and especially when the stock price is undervalued, Miraculins has leaned towards raising smaller capital rounds that will provide enough capital to allow us to keep building value in a meaningful way and at a reasonable pace. The recent capital raises we completed in December 2014 are very much a part of that plan. Miraculins has an excellent track record of accessing capital when it is needed despite extremely difficult market conditions and we will continue to do so until we have reached profitability.

In September, Miraculins received the first payment under your agreement with Hong Kong’s Catalyn Medical Technologies for the sale and distribution of Scout DS® in China. When do you think Miraculins will be in the black overall?

Our recently announced distribution deal for the Scout DS® in China Included an initial minimum guaranteed order for $15 Million USD in Scout DS® devices for the first year of the agreement term, to be activated upon our achieving approval from the China Food and Drug Administration (“CFDA”) for the Scout DS® device. Provided everything goes according to plan, our expectation is that we will receive approval in 2016. In addition, The Scout DS® technology is cleared by Health Canada and is CE Marked for distribution throughout the EU, and the Company is currently developing strategies for retail pilots and market incursions through select market segments beginning in 2015. The Company also continues to explore revenue channels for its PreVu® Skin Cholesterol Testing technology.

What do you hope to accomplish in 2015? What milestones should investors be looking for?

One of our major goals for 2015 will be to drive towards the goal of CFDA regulatory approval for the Scout DS® in China. This approval will trigger a $15M USD order of Scout DS® units and will be the first major revenue transaction for Miraculins. As part of this process, Miraculins is working hard to ensure that its manufacturing processes will be ready to effectively supply the market demand for the product both in China as well as other world markets.In addition, another major milestone for the Company will be achieving clarity from the U.S. FDA on the best path for regulatory approval for the Scout DS® and to begin the corresponding clinical trial. The Company is also planning to begin pilot programs for the Scout DS® both in the retail and food pharmacy market segment as well as the workplace screening segment in Canada.