Newsletter

Dermisonics: Insulin Without Needles

November 12, 2005
Volume VI, Issue 96
Home Page : www.otcjournal.com
Email Questions or Comments To: editor@otcjournal.com

To OTC Journal Members:
 

Comments in the BLOG

I'm planning a BLOG posting on the move up in HESG based on yesterday's QVC announcement. I'll get to it over the weekend. If you want a technical comment on the way the stock is behaving, you will find it by Monday morning. I am choosing to wait until the market closes today so we can see how the stock performed. Your comments and questions are welcome.

Also, for those with an interest- myself included- BPTR is releasing Q3 earnings Monday before the open. A conference call will be held Monday at 5:00 Eastern, 2:00 Pacific for any interested parties. Investors can access the call by dialing toll free 800-901-5217 and use pass code 81797204.

To use the BLOG, simply go to the home page at www.otcjournal.com - the BLOG will scroll down automatically on the right side of your screen. The most current journal entries appear in the middle of your screen. Check back frequently for updates particularly when stocks are moving to overbought or oversold levels or in volatile markets. Your questions and postings do not automatically appear, so don't bother posting the same question multiple times. I personally go through to moderate and respond to every question.
 

First Coming Attraction: Exciting New Drug Delivery Technology Targeting Diabetes

Here's the first of three new ideas I have coming in the next two weeks. The second will probably come Monday after the close. This is our second idea associated with the diabetes epidemic. It is early stage, but the technology is very exciting and has potential applications far beyond the delivery of insulin. A second diabetes related idea is coming within the next two weeks.

Monday, after the close, I expect to deliver another new idea in the telecommunications industry. It's a pure numbers play. The company is growing, delivering north of $20 million in annual sales, cash flow positive, and simply undervalued.

Despite the nice seasonal rebound in the broader markets, interest in microcap stocks is still very lackluster. I view 2005 as the year of the "Energy Shock". The plethora of negative news has investors stuffing their mattresses with money they otherwise might be willing to commit to speculation. 

Volume will come back and small stocks will move off oversold and undervalued levels. The energy shock is running its course. Oil and natural gas prices more than doubled in one year. This kind of energy shock only happens once every 30 years. The economy has absorbed the blow, and it's once again back on track. Micros are due to perk up. Be there ahead of the crowd in the right stocks. 

For your consideration:
 

Dermisonics (OTC BB: DMSI): Revolutionizing Transdermal Drug Delivery

Type II Diabetes is an epidemic in the US- here are the hard numbers: 21 million Americans suffer from diagnosed diabetes; 90% or 18 million have Type II Diabetes- Type II being less complex version. Their bodies produce insufficient insulin, and they can be treated with insulin injections.

Dermisonics is developing a method for delivery of insulin transdermally- another words with a patch rather than a needle. Transdermal delivery means through the skin- specifically through a patch on the skin. Hence the image of a cross section of the human skin for your benefit.

Few drugs beyond birth control are available in transdermal version for a very simple reason: The skin can only absorb molecules with a molecular weight less than 500. Molecular weights from 500 to 1,000 require some kind of enhancement to open the pores. Currently, drugs with a molecular weight over 1,000 cannot be delivered transdermally. 

There are only 14 FDA approved drugs with a molecular weight of less than 500- Insulin has a molecular weight of 6,000. Hence, the limitations of transdermal delivery for commonly taken drugs despite the benefit of not having to use any needles or upset your stomach.

Enter Dermisonics (DMSI from here forward). DMSI has a solution to the problem of transdermal drug delivery. The company has discovered that the combination of a transdermal patch and the application of very sophisticated ultra wave will open the skin pores enough to allow the delivery of 82% of all drugs.

Using heat to open the skin pores might seem like an obvious solution. However, with heat there are two problems: 1. The heated area can lead to skin irritation and 2. once exposed to heat, the molecular structure of many drugs can change, making them ineffective.

DMSI has discovered a way to open the skin pores without heating the area. There are two components to the skin patch. The white part you see in the picture is the transdermal patch that contains the insulin. There is an adhesive around the outer ring. This design prevents the adhesive from mixing with the medication.

Once applied in the abdomen area (the same place diabetics give insulin injections), the black component snaps into place on the transdermal patch. This component provides the ultrasonic signal which opens to skin pores and accepts the medication.

The ultrasonic component is attached by wire to the unit you see pictured here. It will more likely be worn on the belt like a cell phone rather than on the arm.

This unit can be programmed to activate the delivery of insulin either on command or on a regular schedule. It has data memory, and can be hooked up to a computer so that the user can send the usage data to his or her doctor over the internet.

The unit also has an RFID port so that future applications could include wireless commands.

On Friday after the market closed, DMSI announced it would be starting Phase I clinical trials on this product in the first qtr of '06. After lengthy deliberations with the FDA on the design of a trial, the company is taking its first major step towards commercialization of the technology.

For the purposes of the regulatory approval, their product is not considered a new drug and therefore the process will not be as lengthy. It is considered a medical device. The company will only have to prove the device delivers the drug effectively without harming the user.

DMSI will self finance the study in Phase I clinical trials. A small sampling of patients with Type II Diabetes will participate. In Phase II, a much larger sampling of at least 250 patients will be used. Since this is a medical device, the company can petition for its PMA (pre market approval) after the Phase II study has been completed.

DMSI's timeline goals through the first half of 2006 are as follows:

  • Commence the Phase I clinical trial
  • Complete and Compile Data from Trial in the March/April time frame
  • Get peer review publication on data from Associates- specifically hoping for Princeton University Medical 
  • Unveil the product at the American Diabetes Association annual convention in June
  • Seek out a major biotech or pharmaceutical giant to partner up with the company for the Phase II clinical trial.
While there are no guarantees any or all of the goals can be attained, the time line makes sense if they can get the Phase I trial started in early 2006.

On the fundamental side, DMSI has 40 million shares I&O, leading to a $40 million market valuation at $1. The company has $1.5 million in convertible debt, which converts into a maximum of 600,000 shares based on the terms of the note and is therefore, non toxic.

It is certainly early stage and should be looked at with a long term perspective. However, when one considers the possibility for drug delivery of not only insulin, but the other 175 commonly used drugs that could be delivered transdermally with the DMSI technology, the $40 million starting level offers an enormous upside.

Patents also add value to the story. DMSI has filed for 15 patents on this process. One has been granted, and they are closing in on a second. This will insure a "first to market" valuation if and when the market prices in an approval.

Technically there is nothing remarkable about the chart. This is a weekly chart going back to mid summer. Like so many of its micro brethren, the stock has been in a down trend early August. The stock should reverse course on Friday's announcement of the commencement of the first clinical trial.

I would expect the stock to start getting traction as the company's unique transdermal/ultrasound delivery system begins to get publicity in the medical community. This is very exciting technology with unlimited upside. I don't know how long it will take, but I can easily see this company being acquired by a major pharma or biotech company. 

Here is the complete text of today's news for your review:
 

Press Release Source: Dermisonics, Inc.

Dermisonics Receives IRB Approval to Expand Human Pilot Clinical Trials of U-Strip(TM) Insulin Patch in Diabetes Patients

Friday November 11, 4:01 pm ET

Patented Ultrasonic Technology Platform Designed to Be Painless, Safe Method of Delivery for Insulin and Other Drugs

WEST CONSHOHOCKEN, Pa.--(BUSINESS WIRE)--Nov. 11, 2005--Dermisonics, Inc. (OTCBB:DMSI - News; FWB:FQC), a developer of painless, injection-free, ultrasonic transdermal drug-delivery patches and technologies with broad pharmaceutical and consumer applications, announced today that it has received approval from the Chesapeake Research Review Investigative Review Board to enter into the next stage of human pilot trials of its proprietary U-Strip(TM) Insulin Patch drug-delivery system in patients with Type-2 diabetes.

The approval is a major step toward identifying Dermisonics as the front-runner in securing federal regulatory approval for injection-free transdermal (through the skin) drug-delivery technologies and positions the Company to become a leader in the $19 billion drug-delivery market segment. Approval for the Company's HPT-2 trials came from the Investigative Review Board (IRB) of the Chesapeake Research Review, an independent biomedical research review organization.

The trials, expected to begin in the first quarter of 2006, will evaluate the use of Dermisonics' proprietary U-Strip (TM) transdermal patch device as an insulin delivery system for Type-2 diabetics. Currently, people with diabetes rely on regular, frequent needle injections of insulin to control blood glucose levels. Dermisonics' patented U-Strip(TM) system employs proprietary microelectronics and ultrasonic technologies with a drug-carrying patch to enable the painless delivery of large-molecule drugs through the skin's natural pores and hair follicles.

"The IRB approval to begin this significant trial provides an important opportunity to validate our proprietary ultrasonic drug-delivery technology," said Bruce Haglund, CEO of Dermisonics. "The Company's U-Strip system is being designed to serve as a safe and painless alternative to injections for delivering a broad range of drugs transdermally, that is, through the skin. Should our trials be successful, we believe Dermisonics' platform technology has the potential to emerge as a leading force in the creation of breakthrough methods to deliver at least 175 existing drugs that would otherwise require uncomfortable, inconvenient or painful injections."

    * About the Human Pilot Trial 2 (HPT-2) -- The trial will involve a small group of volunteers, Type-2 diabetes patients, to compare the performance of the Dermisonics U-Strip(TM) Insulin Patch system with an existing FDA-approved insulin pump delivery system. The test will run for approximately three months. The study will evaluate the effectiveness of the Insulin Patch in comparison to conventional pump therapy, with one significant advantage; the U-Strip(TM) Insulin Patch will be totally non-invasive. The results of the study will be presented for publication by peer reviewed medical journals in 2006.
    * About Diabetes Sufferers -- When final regulatory approval has been obtained, the U-Strip(TM) Insulin Patch technology has the potential to improve the lives of both Type-1 and insulin dependent Type-2 diabetics, reaching 55 million diabetics, or nearly 30% of the total 185 million diabetic population worldwide, who endure painful needle injections to survive this debilitating disease. 

About Dermisonics, Inc.

Dermisonics is an intellectual property company and advanced technology incubator that is primarily focused on the ongoing development, testing and eventual commercialization of a transdermal patch that has been designed to facilitate the efficient and needle-free delivery of drugs with large molecular structures into the bloodstream. Its breakthrough system, called the U-Strip, is based on a radical integration of microelectronics and ultrasonic science with a product-carrying patch, and represents a quantum leap in non-invasive, transdermal delivery technology. Tests have shown that this system facilitates the transdermal delivery of insulin as well as potentially at least 175 other existing drugs that at present cannot be effectively delivered through the pores of the skin using conventionally available transdermal technology due to their large molecular size. The Company has also developed other portable ultrasonic systems for applications in the medical (Antiseptic Wand) and skin care (U-Wand) fields. For more information visit http://www.Dermisonics.com.

For more investor-specific information about Dermisonics, please visit http://www.trilogy-capital.com/dmsi_summary.aspx. To read or download an Investor Fact Sheet about the Company, visit http://www.trilogy-capital.com/tcp/dermisonics/factsheet.html. For stock price quotes, visit http://www.trilogy-capital.com/tcp/dermisonics/quote.html.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are based upon current expectations or beliefs, as well as a number of assumptions about future events. Although the Company believes that the expectations reflected in the forward-looking statements and the assumptions upon which they are based are reasonable, it can give no assurance that such expectations and assumptions will prove to have been correct. The reader is cautioned not to put undue reliance on these forward-looking statements, as these statements are subject to numerous factors and uncertainties, including but not limited to adverse economic conditions, intense competition, lack of meaningful research results, entry of new competitors and products, adverse federal, state and local government regulation, inadequate capital, unexpected costs and operating deficits, increases in general and administrative costs, termination of contracts or agreements, technological obsolescence of the Company's products, technical problems with the Company's research and products, price increases for supplies and components, litigation and administrative proceedings involving the Company, the possible acquisition of new businesses that result in operating losses or that do not perform as anticipated, unanticipated losses, the possible fluctuation and volatility of the Company's operating results, financial condition and stock price, losses incurred in litigating and settling cases, dilution in the Company's ownership of its business, adverse publicity and news coverage, inability to carry out research, development and commercialization plans, loss or retirement of key executives and research scientists, changes in interest rates, inflationary factors, and other specific risks. In addition, other factors that could cause actual results to differ materially are discussed in the Company's most recent Form 10-QSB and Form 10-KSB filings with the Securities and Exchange Commission.

Contact:

Dermisonics, Inc.
Bruce Haglund
Toll Free: 888-401-DERM (3376)
Phone: 610-543-0800 
Fax: 610-543-0688 
bruce.haglund@dermisonics.com
or
Trilogy Capital Partners (Financial Communications)
Paul Karon, 800-592-6067
paul@trilogy-capital.com
or
European Investor Relations Contact:
Michael Drepper
Phone: +49-621-430-6130
investor-germany@dermisonics.com

Source: Dermisonics, Inc.


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