Echo Therapeutics (ECTE) needlefree

Unlocking the Value of Science Boca Raton New York 

Echo Therapeutics (ECTE) 

UPDATE REPORT 

August 16, 2011 

Rating Target 

Strong 

$6.00 

Speculative Buy 

Analysts 

Stephen M. Dunn 

Sr. Managing Director Research 

sdunn@LifeTechCapital.com 

(954) 240-9968 

William D. Dawson 

Senior VP Research 

wdawson@LifeTechCapital.com 

(561) 504-5818 

Symbol: ECTE 

Exchange: NASDAQ 

8 Penn Center, 

1628 JFK Boulevard, Suite 300 

Philadelphia, PA 19103 

Phone: 215-717-4100 

www.echotx.com 

CEO – Dr. Patrick T. Mooney 

CFO – Christopher P. Schnittker 

Expecting FDA Clearance for Prelude SkinPrep Q3 

Keystone U.S. Patent for Symphony tCGM System 

Symphony tCGM System Nears Final Design & Trial 

1.) Prelude Remains on Track: In February, Echo partner Ferndale 

Pharma, received FDA comments on their 510(k) submission of the Prelude 

SkinPrep System that were described as “minor and were consistent with both 

companies' expectations.” Management reiterated the Q3 target. Investors 

should note that FDA 510(k) clearance for Prelude triggers a $750,000 

milestone payment 90 days later from Ferndale Pharma Group plus minimum 

guaranteed royalties of $12.6M. While Echo has granted Ferndale a license to 

develop, market and sell Prelude for delivery of topical 4% lidocaine 

product in North America and the United Kingdom, Echo retains the rights 

to continental Europe and Australia which may provide additional 

upside to Echo through future partnership licensing and royalty 

agreements. 

2.) Strengthened IP Portfolio: On August 8, 2011, Echo Therapeutics 

received notice that their patent application "System and Method for 

Continuous Non-Invasive Glucose Monitoring" will issue as US Patent 

7,963,917. We believe this represents a keystone patent in Echo Therapeutics 

intellectual property portfolio and provides a significant barrier to competitive 

entry. Investors can access the patent at http://1.usa.gov/qEGZ2x 

3.) Symphony Remains on Track: Echo Therapeutics Symphony 

transdermal continuous glucose monitor (tCGM) system is a unique needlefree, 

wireless system which we believe is set to begin a pivotal clinical trial 

in ICU/Critical Care patients H1 2012 (following a final pilot trial). We 

believe this puts Echo Therapeutics ahead of the curve with respect to 

tougher FDA standards for hospital use. (see FDA to Require Hospitals to 

Use More Accurate Glucose Monitors) 

Market Data Share Data Most Recent Quarter 

Price $3.43 Intraday Outstanding 34.2M Revenue $0.2M 

52-Week $0.85-$4.98 Cash/Share $0.09 Net Income ($2.0M) 

Market Cap $117.3M Book/Share $0.29 EPS ($0.06) 

Avg. Daily Vol. 153,817 Price/Book 11.8x Cash $3.2M 

% Short 2.8% Debt/Share $0.00 Debt $0.0M 

Financial Results and Projections 

FYE Dec. 31 2009 2010 2011E 2012E 2013E 

Revenue $1.3M $0.4M $3.2M $24.2M $65.8M 

Net Income ($13.5M) ($4.3M) ($11.4M) $1.4M $22.6M 

EPS ($0.61) ($0.15) ($0.32) $0.04 $0.58 

Please See Last Two Pages For Important Disclosures And Analyst Certification 

Echo Therapeutics (ECTE) Page 1

www.LifeTechCapital.com August 16, 2011 

4.) National Listing: On Wednesday, June 29, 2011 Echo Therapeutics began trading on NASDAQ Capital Market on 

under the existing ticker symbol "ECTE." We believe this is a significant milestone for Echo as a national listing increases 

visibility on Wall Street and should provide additional liquidity for Echo shares. 

5.) Clear Market Opportunity: We also remind investors that the results of the STAR 3 trial indicated that continuous 

glucose monitoring can benefit patients (see STAR 3 Trial Results-Continuous Glucose Monitoring Benefits), we also 

reiterate the need for Echo’s transdermal biosensor is growing in light of the FDA Warning Letter to DexCom 

(Nasdaq:DXCM) on the risks of sensor wire fractures underneath the patients’ skin, particularly pediatric and adolescent 

patients. The warning letter noted that DexCom’s sensor wires are not approved for use in children or adolescents, 

pregnant women or persons on dialysis and can only be used in the abdomen. (see FDA Warning Letter to DexCom on 

Sensor Wire Factures). We believe this should give Echo’s transdermal biosensor a significant advantage in the 

marketplace. 

6.) We are maintaining Echo Therapeutics with a Strong Speculative Buy and a 12-18 month price target of $6.00 based 

on 35x projected 2013 EPS and discounted 35% for risk as the FDA PMA approval of the Symphony tCGM system 

could occur within the forecast period. This would result in a market capitalization of approximately $200 million. This is 

a significant discount to DexCom (Nasdaq:DXCM) (see Competition), the only pure-play comparable, which has 

FDA approval for their invasive, implantable biosensors with a market capitalization of approximately $800 

million. 

Company Description 

Based in Philadelphia Pennsylvania, Echo 

Therapeutics is developing the Symphony 

tCGM System which is a next-generation, noninvasive 

(needle-free), wireless transdermal 

continuous glucose monitor (tCGM) system 

designed to provide reliable, on-demand blood 

glucose data conveniently, continuously and 

cost-effectively. Symphony includes the 

Prelude SkinPrep system which incorporates 

a patented feedback mechanism for optimal 

skin permeation control and their continuous 

transdermal sensor to detect glucose trends, for 

controlling complications associated with blood 

glucose levels that stray outside of a medically 

recommended target range. With Symphony, 

the company is focused on changing the current 

standard of care paradigm of invasive (needlebased), 

episodic blood glucose testing with 

their needle-free tCGM technology designed to 

MILESTONES & EVENTS 

Date Prelude SkinPrep Symphony tCGM 

Q1’10 Pilot Study 

Q2’10 

Q3’10 Results of Equivalency Trial 

Q4’10 File FDA 510(k) Submission 

Q1’11 

Q2’11 

Q3’11 

FDA 510(k) Approval 

U.S. Launch (Ferndale Pharma) 

Q4’11 Initiate Final Pilot Trial 

Q1’12 

Complete Final Pilot Trial 

Initiate Pivotal Trial 

Q2’12 Complete Pivotal Trial 

Q3’12 File FDA PMA Submission 

Q4’12 

FDA PMA Approval 

U.S. Launch 

Source: Echo Therapeutics and LifeTech Capital Estimates 

improve patient compliance to frequent glucose testing and achieve better overall glucose control. All existing FDAapproved 

continuous glucose monitoring (CGM) systems are needle-based, requiring insertion of a glucose sensor into the 

patient’s skin, which gives rise to risks of infection, inflammation or bleeding at the insertion site. In addition, the 

Prelude SkinPrep device (a component of the Symphony tCGM system) was licensed to Ferndale Pharma Group to 

develop and market for skin preparation prior to the application of a topical analgesic or anesthetic cream for local dermal 

anesthesia or analgesia prior to a needle insertion or IV procedure in North America and the U.K. 

Symphony Transdermal Continuous Glucose Monitor (tCGM) System 

Echo Therapeutics’ Symphony Transdermal Continuous Glucose Monitor (tCGM) system is needle-free with 

continuous glucose readings transmitted to a wireless receiver. The system consists of three distinct parts, the Prelude 

SkinPrep System, the transdermal (needle-free) glucose sensor transmitter and a wireless remote receiver. Each is 

discussed below: 



Symphony Transdermal Continuous Glucose Monitor (tCGM) System 

Source: Echo Therapeutics 

Prelude Skin Permeation Device 

The secret behind the transdermal sensor is the Prelude SkinPrep 

System. This advanced microabrasion system enhances the flow of 

interstitial fluids and molecules across the protective membrane of the 

stratum corneum, the outmost protective layer of the skin. This, in turn, 

allows their wireless sensor to read the patient’s glucose measurements 

without requiring a needle. The Prelude is painless, takes just a few 

seconds, and stops automatically at the precise point of required abrasion 

based on signals from the built-in reference electrode. The single-use, 

disposable tips represent a continuing revenue stream for Echo 

Therapeutics. 

Also of note, the Prelude SkinPrep device (a component of the 

Symphony tCGM system) was licensed to Ferndale Pharma Group to 

develop and market for skin preparation prior to the application of a 

topical analgesic or anesthetic cream for local dermal anesthesia or 

analgesia prior to a needle insertion or IV procedure in North America 

and the U.K. 

Prelude Skin Permeation Device 


Symphony Transdermal Wireless Glucose Sensor 

The transdermal glucose sensor consists of an electrochemical glucose sensor, a 

hydrogel layer, a potentiostat and a short-range RF transmitter. When the sensor is 

placed on the permeated skin site (using the Prelude SkinPrep device), a layer of 

hydrogel establishes and maintains continuous fluid paths through the skin and acts as 

a reliable reservoir for the sensing chemistry to receive glucose flux and convert it into 

hydrogen peroxide. The hydrogen peroxide is consumed by the electrochemical sensor 

and continuous electrical signal is generated in the process. Once the sensor is 

connected and adhered to the skin, the transmitter switches on automatically and starts 

to broadcast the data 

Symphony BioSensor 




The diffusion gradient and sensor consumption of glucose are a function of the blood glucose concentration in the 

subpapillary vessels beneath the epidermis and the sensor generates continuous current that is proportional to the blood 

glucose concentration. The first calibration is made when the sensor stabilizes (about 1 hour), followed by subsequent 

calibrations depending on the applications. Due to the advanced 

Transdermal BioSensor - Mechanism of Action hydrogel chemistry and the Prelude skin permeation process, the 

glucose flux detected by the sensor can provide reliable continuous 

glucose readings for 24 hours. To preserve data integrity and save 

power, the assembly digitizes, stores and transmits discrete, coded 

signals via a wireless link to the wireless remote monitor. 


Echo Therapeutics is currently using a one-piece biosensor (not 

shown), which provides for reduced manufacturing costs and 

eliminates most of the motion artifact seen using the pilot biosensor, 

thus improving performance. Successful results using the one-piece 

biosensor were announced on November 19, 2009. (see Clinical 

Trials & Clinical Data) 

Symphony Wireless Remote Monitor 

The Symphony wireless remote monitor receives digitally coded data from the transdermal glucose sensor transmitter 

and decodes the data once every minute. Once a reference blood glucose value is entered manually (a calibration) after a 

one hour warm-up period, the decoded data are converted to blood glucose reading by a built-in data algorithm. The 

Symphony wireless remote monitor displays the date, time of day, sensor current, blood glucose reading and rate of 

increase or decrease, amount of time the transmitter has been switched on, battery status, and any alarm or error modes. 

The keypad provides on/off, data entry, calibration, alarm 

silencing, and monitor resetting and the monitor also contains 

Symphony Wireless Remote Monitors 

an audible alarm, a RF receiver, a programming port, a 

rechargeable battery pack and a USB data port for computerized 

record keeping or in-depth data analysis. 

In addition, Echo Therapeutics expects that hospital monitors 

Standalone Monitor Hospital Cellphones 

may be fitted with a receiver module for in-patient management. 


Finally, data transmission via internet and/or wireless carrier 

opens up the possibility for remote monitoring and telemedicine applications. 

Clinical Trials & Clinical Data 

Prelude Skin-Prep System 

On August 24, 2010, Echo Therapeutics announced the successful completion of a clinical study of their Prelude skinprep 

system in ablating the skin prior to the application of OTC 4% lidocaine cream for faster-acting local dermal 

anesthesia. The blinded comparison study evaluated the performance of Prelude prior to the application of 4% lidocaine 

cream for local analgesia and demonstrated improvement and a faster onset of action. 

On November 11, 2010, a 510(k) premarket notification was submitted to the FDA for Echo’s Prelude SkinPrep System 

for use with 4% lidocaine cream. Investors should also note that FDA 510(k) clearance triggers a $750,000 milestone 

payment 90 days later from Echo’s partner, Ferndale Pharma Group in addition to sales royalties. Ferndale Pharma Group 

has guaranteed a minimum royalty of $12.6 million to Echo Therapeutics. While Echo has granted Ferndale a license to 

develop, market and sell Prelude for delivery of topical 4% lidocaine product in North America and the United 

Kingdom, Echo retains the rights to continental Europe and Australia which may provide additional upside to Echo 

through future partnership licensing and royalty agreements. 



Symphony tCGM 

On November 19, 2009 Echo Therapeutics announced positive results of a clinical study of its Symphony tCGM 

System in patients with Type 1 and Type 2 Diabetes using the new one-piece biosensor. This could allow the 

Symphony tCGM to complete a final pivotal trial in Q2 2010 with an FDA PMA filing in Q3 2010. Although the 

company has not yet announced the trial details, we believe a rational trial design would be approximately 200 critical 

care patients, both diabetic and non-diabetic, with a primary endpoint of point and rate accuracy using continuous 

glucose-error grid analysis (CG-EGA) versus laboratory reference glucose monitoring. 

The details of the November 19, 2009 positive clinical study of the Symphony tCGM System in patients with Type 1 

and Type 2 Diabetes using the new one-piece biosensor were as follows: 

Study Design: After Prelude skin ablation, 10 Symphony tCGM biosensors were applied to subjects with 

Type 1 or Type 2 Diabetes. Venous reference blood samples were taken from intravenous lines at 15-minute 

intervals for 24 hours and measured on a YSI 2300STAT PLUS laboratory analyzer. At the conclusion of the 24- 

hour study period, the test skin sites were inspected for redness or any other undesirable effects. 

Study Results: Using approximately 900 Symphony tCGM glucose readings paired with reference blood 

glucose measurements, CG-EGA revealed that the accuracy of the Echo’s Symphony tCGM System, measured 

as a percentage of accurate readings and benign errors, was 97%. The MARD for the study was 12.89%. There 

were no adverse events reported from the Prelude skin permeation or the Symphony tCGM biosensor. 

Methods: CGM performance is evaluated with multiple analytical tools, as defined by the Clinical and 

Laboratory Standards Institute’s POCT05-A guideline. The primary metric, used to evaluate clinical accuracy, is 

the continuous glucose–error grid analysis (CG-EGA). The CG-EGA is a categorization of all data pairs based on 

the clinical significance of the accuracy. Accurate readings result in the same clinical decision when based on the 

CGM trend vs. the underlying blood glucose fluctuations. Benign errors lead to the same clinical outcome as 

accurate readings even though the actual clinical decision may differ. Erroneous readings lead to clinical errors. 

CGM performance is measured as the sum of accurate readings and benign errors. Numerical accuracy is the other 

key method for evaluating CGM performance. The most widely accepted tool is mean absolute relative difference 

(MARD). MARD is a standard error calculation tool that is used to measure the average absolute value of the 

relative (or percentage) difference between two measurements. 

Previous Pilot Studies 

Research results from three human clinical pilot studies titled “Pilot Studies of Transdermal Continuous Glucose 

Measurement in Outpatient Diabetic Patients and in Patients during and after Cardiac Surgery”* and published in the 

July 2008 issue of the Journal of Diabetes Science and Technology indicated that Echo Therapeutics transdermal 

Continuous Glucose Monitoring (tCGM) system was successful and that the new Prelude abrasion technology works as 

well the older, bulkier SonoPrep ultrasound system. 

* Authors: Han Chuang, Ph.D., Echo Therapeutics, Inc. 

My-Quyen Trieu, B.S., Echo Therapeutics, Inc. 

James Hurley, Ph.D., Echo Therapeutics, Inc. 

Elizabeth J. Taylor, M.S., CCRC, CDE, MassResearch, LLC 

Michael R. England, M.D., Department of Anesthesia, Tufts University School of Medicine 

Stanley A. Nasraway, Jr., M.D., FCCM, Department of Surgery, Tufts Medical Center 

The number of patients with demographic data for the three studies is shown below: 

Patient 

Demographics 

Study 1 

Diabetes 

Study 2 

Critical Care 

Study 3 

Abrasion vs. 

Ultrasound 

Male 5 (50%) 7 (87.5%) 4 (66.7%) 

Female 5 (50%) 1 (12.5%) 2 (33.3%) 

Type I Diabetes 1 (10%) 1 (12.5%) 0 

Type II Diabetes 9 (90%) 4 (50%) 0 

Non-Diabetic 0 3 (37.5%) 6 (100%) 

Ave. Age / Std. Dev. 63.4 / 8.8 66.4 / 6.8 41.1 / 8.9 

Source: Chuang, et al, “Pilot Studies of Transdermal Continuous Glucose Measurement in Outpatient 

Diabetic Patients and in Patients during and after Cardiac Surgery”, J Diabetes Sci Technol 2008;2(4):595-602 



Study I - Patients with Diabetes: Patients with 

diabetes (type-1 or type-2) were enrolled in the study 

and were free to eat, move, or sleep at the clinic, 

simulating home use. SonoPrep (ultrasound) skin 

permeation and installation of the tCGM was 

performed at the clinic with blood glucose 

measurements taken at least hourly during the waking 

period with data being blinded to ensure that there 

were no changes in the subjects’ routine medication. 

The reference device was Bayer’s Ascensia Contour 

meter. 

Study I Results – 12 Hour Biosensor Data 

A total of 222 biosensor data points were processed. 

The calibration point was the first reference blood 

glucose measurement taken 1 hour after the tCGM 

was turned on, and a lag time of 22 minutes was 

applied to BG data, based on the best correlation 

between reference BG and biosensor data as computed 

by the algorithm. Using polyethylene glycol diacrylate 

(PEGDA hydrogel), the 12-hour mean absolute 

relative difference (MARD) was 12.4% with 89.6% of 

the data points within the clinically accurate A zone of 

the Clarke error grid (CEG) plot and 98.7% in the 

clinically relevant A+B zones. It also showed strong 

correlation to the reference measurements with a 

median R2 (square of correlation coefficient) of 0.77. 

The data plot is shown below: 

Source: Chuang, et al, “Pilot Studies of Transdermal Continuous Glucose Measurement 

in Outpatient Diabetic Patients and in Patients during and after Cardiac Surgery”, 

J Diabetes Sci Technol 2008;2(4):595-602 

Using PEGDA hydrogel with a porous membrane, the 12-hour MARD was 20.4% and the medium R2 was 0.64 when 

compared to reference measurements. Error grid analysis revealed that 70.7% of the data points fell in the A zone with 

96.9% in the A+B zones. Introduction of the protective membrane appeared to deteriorate the biosensor performance. 

However, the authors noted that using a composite porous membrane showed significant improvement in Study II. 

Below are two sample datasets, where the continuous trace of tCGM measurements closely tracks the discrete reference 

BG values for 12 hours. 

Real-Time Biosensor Blood Glucose Measurements Correlate With Reference Blood Glucose Levels 

Patient with High Glucose Levels 

Patient with Low Glucose Levels 

Source: Chuang, et al, “Pilot Studies of Transdermal Continuous Glucose Measurement in Outpatient Diabetic Patients and in Patients during and after 

Cardiac Surgery”, J Diabetes Sci Technol 2008;2(4):595-602 



Study II - Patients in Surgical Critical Care: Data was collected from 8 out 11 patients enrolled, of which 1 patient did 

not complete the study, and 2 patients were excluded 

due to a low biosensor signal, which the authors 

Study II Results – 24 Hour Biosensor Data 

believe was due to low glucose flux and insufficient 

skin permeation using the older SonoPrep 

(ultrasound). The reference device during surgery was 

the Nova Stat Profile Ultra C and the devices used in 

the cardiothoracic intensive care unit (CITU) were the 

Accu-Check Inform system glucometer, the Bayer 

Rapidlab 865 blood gas analyzer for whole blood 

glucose and the Unicel DXC 800 for serum glucose. 

Using PEGDA hydrogel with a composite porous 

membrane and hermetic seals, 147 biosensor data 

points were analyzed from the 8 evaluable patients in 

12 datasets (7 intraoperative and 5 postoperative). The 

24-hour mean absolute relative difference (MARD) 

was 11.6% with 86.4% of the data points within the 

clinically accurate A zone of the Clarke error grid 

(CEG) plot and 100% in the clinically relevant A+B 

zones. It also showed strong correlation to the 

reference measurements with a median R2 (square of 

correlation coefficient) of 0.83. The data plot is shown 

below: 

Source: Chuang, et al, “Pilot Studies of Transdermal Continuous Glucose Measurement 

in Outpatient Diabetic Patients and in Patients during and after Cardiac Surgery”, 


Below are datasets from the intraoperative and postoperative periods showing that the continuous trace of tCGM 

measurements closely tracked the discrete reference values. There was no marked difference of sensor performance 

between intraoperative and postoperative study periods and no observable interferences from the surgical procedure and 

the use of routinely administered concomitant medications. The study demonstrated that the tCGM system accurately 

predicted blood glucose readings in a cardiac surgical ICU setting every minute for up to 24 hours. 

Real-Time Biosensor Blood Glucose Measurements Correlate With Reference Blood Glucose Levels 

Patient During Cardiac Surgery 

Patient in Intensive Care Unit (ICU) 

Source: Chuang, et al, “Pilot Studies of Transdermal Continuous Glucose Measurement in Outpatient Diabetic Patients and in Patients during and after 

Cardiac Surgery”, J Diabetes Sci Technol 2008;2(4):595-602 

Study III - Abrasion vs Ultrasound Skin Permeation: This study was designed to compare two skin permeation 

methods, the new Prelude (abrasion) versus the older SonoPrep (ultrasound) technologies for transdermal glucose 

monitoring. 6 healthy in-house subjects completed the enrollment with 183 Prelude and 195 SonoPrep biosensor data 

points collected. The reference device was Bayer’s Ascensia Contour meter. 



The 24-hour MARD was 9.0% with Prelude and 10.8% with SonoPrep. 100% of the data points from both methods fell in 

the A+B zones of the CEG. The median R2 was 0.70 and 0.79 for Prelude and SonoPrep, respectively. Shown below is 

one sample dataset overlapping two calibrated continuous glucose measurements, where close proximity of the two traces 

can be clearly seen throughout the study period. Overall, Prelude exhibited equivalent performance to SonoPrep for use of 

the tCGM system. 

Study III Results – Prelude Abrasion Equivalent to Ultrasound 

Source: Chuang, et al, “Pilot Studies of Transdermal Continuous Glucose Measurement in 

Outpatient Diabetic Patients and in Patients during and after Cardiac Surgery”, 


The authors summarized their conclusions as follows: 

“A reliable method for continuous glucose monitoring represents an unmet need for both home care and critical 

care settings; when developed and refined successfully, the tCGM product can address this need. A cost-effective 

and easy-to-use Prelude SkinPrep exhibits equivalent performance to SonoPrep for tCGM application. With the 

advantages of a 1-hour warm-up period and minimally invasive nature, the tCGM system may become a preferred 

medical device in facilitating diabetes management. A combination of our new skin permeation and needle-free 

sensing technologies may provide a low-cost, convenient, safe, and effective solution for continuous glucose 

monitoring in diverse populations.” 

Diabetes Market 

According to the U.S. Centers for Disease Control (CDC), almost 18 million people have been diagnosed with diabetes in 

the United States and almost 6 million people remain undiagnosed. Diabetes is currently the seventh leading cause of 

death U.S. based on death certificates. Even then, diabetes is likely to be underreported as a cause of death as studies have 

found that only about 35% to 40% of decedents with diabetes had it listed anywhere on the death certificate and only 

about 10% to 15% had it listed as the underlying cause of death. Overall, the risk for death among people with diabetes is 

about twice that of people without diabetes of similar age. 

Diagnosed 

Undiagnosed 

Total 

Diabetes Prevalence in U.S. 

17.9 million people 5.9% of US Population 



Diabetes Demographics in U.S. 

Age 20+ Years 23.5 million 10.7% of this Age Group 

Age 60+ Years 12.2 million 23.1% of this Age Group 

Men 12.0 million 11.2% of men over 20 

Women 11.5 million 10.2% of women over 20 

Source: US Centers for Disease Control (CDC) data for 2007 

Uncontrolled diabetes can result in heart disease and stroke, high blood pressure, blindness, kidney disease, nervous 

system disease, amputations and dental disease. Total direct medical costs are estimated at $116 billion and costs for 



people diagnosed with diabetes were 2.3 times higher than what expenditures would be in the absence of diabetes. An 

additional $58 billion in indirect costs are due to disability, work loss, and premature mortality. 

Costs spent on inpatient hospital care were $58.3 billion and $9.9 billion on physician’s office visits directly attributed to 

diabetes. Diabetes-related hospitalizations totaled 24.3 million days in 2007 (an increase of 7.4 million from 2002). The 

average cost for a hospital inpatient day due to diabetes was $1,853. The average cost for a hospital inpatient day due to 

diabetes-related chronic complications, including neurological, peripheral vascular, cardiovascular, renal, metabolic, and 

ophthalmic complications was $2,281. 

FDA to Require Hospitals to Use More Accurate Glucose Monitors 

As reported in the July 19, 2009 issue of The New York Times titled “Standards Might Rise on Monitors for Diabetics”, 

the FDA is concerned that current self-monitoring blood glucose (SMBG) devices are not accurate enough as error rates 

up to 20% are allowed under existing approval standards (ISO 15197) developed 7 years ago. The FDA has now placed 

this approval standard up for review in light of the failed NICE-SUGAR in-hospital trial (see NICE-SUGAR Trial). The 

FDA Center for Devices and Radiological Health (CDRH) believes the high incidence of hypoglycemia seen in the NICE- 

SUGAR trial was probably caused by hospitals using inaccurate glucose monitors in attempting tight glycemic control for 

hospital patients which resulted in too much insulin being delivered to the patient. 

In response to the NICE-SUGAR results, FDA Commissioner, Dr. Margaret Hamburg June 24, 2009 letter (including 

CDRH analysis) to the American Association of Clinical Endocrinologists stated: 

“Nevertheless, many hospitals continue to use SMBG devices, cleared only as aids in the management of diabetic 

patients, in these settings, even though they are not FDA cleared to diagnose disease or to maintain tight glycemic control 

of diabetic and non-diabetic patients in the hospital environment. This practice can be problematic. Where hospitalized 

patients are sicker (such as those in the ICU), any inaccuracies in the meters would pose different risks of greater 

magnitude than expected in the population and use for which the SMBG devices are cleared.” 

The FDA now wants to restrict the use of self-monitoring glucose monitors in hospitals in favor of more accurate methods 

including the development of continuous glucose monitors for intensive insulin therapy in the hospital setting such as 

Echo Therapeutics’ Symphony Transdermal Continuous Glucose Monitor (tCGM) system. 

Reference Information 

New York Times – July 19, 2009 

“Standards Might Rise on Monitors for Diabetics” 

http://www.nytimes.com/2009/07/19/health/policy/19monitor.html 

FDA Letter and CDRH Analysis– June 24, 2009 

FDA Commissioner Dr. Hamburg to AACE President Dr. Garber 

http://www.nytimes.com/packages/pdf/health/20090717_MONITOR_1.pdf 

FDA Warns of Potentially Fatal Errors with GDH-PQQ Glucose Monitors 

On August 13, 2009, the FDA issued a Public Health Notification warning of potentially fatal errors with GDH-PQQ 

glucose monitoring technology. Specifically, GDH-PQQ (glucose dehydrogenase pyrroloquinoline quinine) glucose 

monitoring measures a patient’s blood glucose value using methodology that cannot distinguish between glucose and 

other sugars. Certain non-glucose sugars, including maltose, xylose, and galactose, are found in certain drug and biologic 

formulations, or can result from the metabolism of a drug or therapeutic product. When these non-glucose sugars are 

present in the patient’s blood, using a GDH-PQQ glucose test strip will produce an elevated glucose result which may 

suggest the need for clinical action. This can lead to inappropriate dosing and administration of insulin, potentially 

resulting in hypoglycemia, coma, or death. In addition, cases of actual hypoglycemia may go unrecognized if the patient 

and healthcare practitioner rely solely on the test result obtained with the GDH-PQQ glucose test strips. The FDA 

recommends avoiding the use of GDH-PQQ glucose test strips in healthcare facilities. 




FDA Public Health Notification: Potentially Fatal Errors with GDH-PQQ* Glucose Monitoring Technology 

http://www.fda.gov/MedicalDevices/Safety/AlertsandNotices/PublicHealthNotifications/ucm176992.htm 

List of GDH-PQQ Glucose Test Strips and Manufacturers 

http://www.fda.gov/MedicalDevices/Safety/AlertsandNotices/PublicHealthNotifications/ucm176992.htm#attachment 

We believe this demonstrate the new FDA desire to restrict the use of self-monitoring glucose monitors in hospitals in 

favor of more accurate methods including the development of continuous glucose monitors for intensive insulin therapy in 

the hospital setting such as Echo Therapeutics’ Symphony Transdermal Continuous Glucose Monitor (tCGM) system. 

COMPETITION 

There are a limited number of continuous glucose monitor 

systems currently on the market. The significant differences 

between Echo Therapeutics Symphony system and the 

competition is the needle-free transdermal biosensor, clinical 

trials in the hospital setting and biosensor life. 

We believe the transdermal biosensor is a significant advantage 

over the existing biosensors on the market. All existing FDAapproved 

continuous glucose monitoring (CGM) systems are 

needle-based, requiring insertion of a glucose sensor into the 

patient’s skin, which gives rise to risks of infection, 

inflammation or bleeding at the insertion site. Symphony is a 

non-invasive tCGM system that does not require insertion of its 

glucose sensor and thus does not give rise to the risks associated 

with needle-based CGM systems. 

Transdermal vs. Needle BioSensor 

Source: Mayo Clinic and LifeTech Capital 

We also believe Echo Therapeutics clinical trials in the critical care setting provides a major marketing advantage over the 

competition in the hospital market. The Symphony system would represent an answer to the new FDA demands for 

more accurate glucose monitors in the hospital. (see FDA to Require Hospitals to Use More Accurate Glucose Monitors) 

Irritation From 7-Day DexCom BioSensor 

We further believe that the comparatively short 1-2 day biosensor life 

is not a drawback, but rather an advantage. In the at-home market, the 

weekly biosensors begin to lose adhesion after several showers, 

swimming and other physical activity and rubbing against clothing. It 

can cost a person $60 if they accidently dislodge or damage the 

biosensor whereas a cheaper 1-2 day biosensor reduces the economic 

risk of biosensor damage through daily activity. 

lenses. 

Source: Kerri Morrone Sparling 

Additionally, skin irritation from being in contact with the adhesive as 

well as the possibility of infection raises hygiene issues. The risk of 

infection becomes a significant issue in the critical care/ICU market. 

We believe a 1 or 2 day biosensor makes more sense in the same way 

daily disposable contact lenses are safer than extended wear contact 

Finally, there are risks involving the competitor’s need for sensor wires resulting in sensor wire fractures underneath the 

patients’ skin. The FDA issued a warning letter to DexCom concerning these sensor wire fractures in May 2010 and also 

noted that the DexCom SEVEN and SEVEN PLUS Systems are not approved for use in children or adolescents, pregnant 

women or persons on dialysis and can only be used in the abdomen. (see FDA Warning Letter to DexCom on Sensor Wire 

Factures) 



Continuous Glucose Monitors 

Company 

Echo 

Therapeutics 

Abbott Labs DexCom Medtronic MiniMed 

Stock Symbol ECTE ABT DXCM MDT (div. of MDT) 

Device Symphony Freestyle Navigator 

DexCom 

SEVEN PLUS 

Guardian RT Paradigm 

Target Markets 

Critical Care 

& Home use 

Home use Home use Home use Home use 

Needle-Free Yes No No No No 

Sensor Life 24 to 48 hours 120 hours 168 hours 72 hours 72 hours 

Initialization Time ~ 1 hour 10 hours 2 hours 2 hours 2 hours 

Calibrations 

At 10, 12, 24 and 

TBA 

Required 

74 hours 

Every 12 hours Every 12 hours Every 12 hours 

Accuracy >97% 98.0% 97.0% 98.9% 98.9% 

MARD 7.5% - 16% 9.3% - 12.3% 13.0% - 15.9% 15.6% - 19.7% 15.6% - 19.7% 

Frequency of 

Reading 

1 min 1 min 5 min 5 min 5 min 

Pricing for 

System: 

Sensors: 

TBA 

(competitive) 

$1,000 

$370 

$450 

$280 

$1,000 

$370 

$1,000 

$370 

(1 mo. supply) 

Regulatory Status Clinical trials Approved Approved Approved Approved 

Source: Echo Therapeutics and LifeTech Capital 

Competitive Update: Echo Therapeutics competitor DexCom (Nasdaq:DXCM) and their partner, Edwards 

LifeSciences (NYSE:EW) received a CE-Mark in Europe in October 2009 for their 1 st generation GlucoClear ® 

continuous glucose monitoring (CGM) system for in-hospital critical use and filed with the FDA in Q2 2010. They 

stated they have enhanced its ease of use in their 2 nd generation product, which they expect to receive a CE-Mark by 

year-end with a launch in Europe in 2012. Investors should note that the GlucoClear ® system uses an invasive 

blood-based intravenous sensor, not a subcutaneous interstitial fluid sensor. 

DexCom has stated they are working on a 5th generation sensor platform which applies aspects of their blood-based 

hospital sensor, for Edwards LifeSciences, into a subcutaneous sensor for both a future ambulatory sensor and a 

subcutaneous sensor for use in the hospital outside of critical care. DexCom stated that it is currently in human 

feasibility studies. 

We continue to believe that Echo Therapeutics Symphony transdermal continuous glucose monitoring system 

(tCGM) will be the first transdermal CGM system to file with the FDA for the in-hospital use. 

FDA Warning Letter to DexCom on Sensor Wire Factures 

On May 21, 2010, Echo Therapeutics competitor DexCom (Nasdaq:DXCM) received an FDA Warning Letter for their 

Seven PLUS Continuous Glucose Monitoring System due to complaints involving sensor wire fractures underneath 

patient's skin as reported to the FDA. In addition, their sensors are not approved for use in children or adolescents, 

pregnant women or persons on dialysis and can only be used in the abdomen. Investors should note that Echo 

Therapeutics Symphony Transdermal Continuous Glucose Monitoring (tCGM) system eliminates the need for 

sensor wires and could be considered safer, especially for children and adolescents. 

(see http://www.fda.gov/ICECI/EnforcementActions/WarningLetters/ucm213414.htm ) 

Customer Report: 09-5141, dated 7/11/2009 reported a sensor wire broke off in a three (3) year old and reported a 

piece of it was under her skin. The mother reported the child had surgery under general anesthesia to remove the 

broken wire underneath her skin. 

Customer Report: 09-0274, dated 1/6/09 reported the sensor wire tip broke off in patient's body. The DexCom 

representative advised patient to not to pursue extraction. The report states "sensor break with fragment retained under 

the skin". 



Customer Report: 09-3516, dated 5/07/09 the report states (that when) the nurse went to pull the old sensor off the 

sensor wire it was not there. The patient's nurse reported she could see it under the skin but she could not get hold of it 

with tweezers and then it disappeared. The nurse thinks "it came off and is still in his skin." 

Customer Report: 09-3641, dated 5/18/09. Patient reports 2 sensors have broken off under his skin. His most recent 

sensor looks broken upon removal today, and he can feel the wire under his skin. Site is red and he is going to 

prescribing physician. 

Customer Report: 09-5555, dated 7/20/2009. Patient called (to) report a failed sensor and has irritated skin. Patient 

reported he thought the wire came out completely, but his doctor removed a "hair like structure" from under his skin. 

Customer Report: 09-4237, dated 6/17/2009. Patient is a 30 month old child. Mother called to report sensor wire 

breakage under skin of child. Patient taken to the ER when an infection developed. 

Partnerships 

Echo Therapeutics has two licensing partnerships which validate the Symphony technology platform: 

Handok Pharmaceuticals: The Symphony tCGM was licensed in South Korea to Handok Pharmaceuticals, the largest 

diabetes pharmaceutical company in South Korea. Specifically, on June 15, 2009 Handok paid a licensing fee of 

approximately $600,000 and will pay Echo Therapeutics milestone payments upon receipt of US FDA clearance of 

Symphony and upon the first commercial sale of Symphony in South Korea. Handok will also pay a royalty on net sales 

of Symphony and additional milestone payments based on Handok’s achievement of certain other targets. Handok is 

responsible for all product development fees and costs, and for all regulatory filings, for the final development of 

Symphony in South Korea. 

Ferndale Pharma Group: The Prelude SkinPrep device was licensed to Ferndale Pharma Group to develop and 

market for skin preparation prior to the application of a topical analgesic or anesthetic cream for local dermal anesthesia 

or analgesia prior to a needle insertion or IV procedure in North America and the U.K. Specifically, on May 27, 2009, 

Ferndale Pharma Group paid a licensing fee of $750,000 and will pay Echo Therapeutics a milestone payment of 

$750,000 90 days after US FDA 510(k) medical device clearance of Prelude. Ferndale will also pay an escalating royalty 

on net sales and milestone payments based on Ferndale’s achievement of certain net sales targets, as well as guaranteed 

minimum royalties, totaling an additional $12.6 million. Ferndale is responsible for all product development fees and 

costs, and for all regulatory filings, for the final development of Prelude in North America and the U.K. 

Financial Model & Valuation 

Our financial model assumes the timing of Echo Therapeutics clinical milestones and events as show below: 

MILESTONES & EVENTS 

Date Prelude SkinPrep Symphony tCGM 

Q1’10 Pilot Study 

Q2’10 

Q3’10 Results of Equivalency Trial 

Q4’10 File FDA 510(k) Submission 

Q1’11 

Q2’11 

Q3’11 

FDA 510(k) Approval 

U.S. Launch (Ferndale Pharma) 

Q4’11 Initiate Final Pilot Trial 

Q1’12 

Complete Final Pilot Trial 

Initiate Pivotal Trial 

Q2’12 Complete Pivotal Trial 

Q3’12 File FDA PMA Submission 

Q4’12 

FDA PMA Approval 

U.S. Launch 

Source: Echo Therapeutics and LifeTech Capital Estimates 



U.S. ICU Glucose Monitoring Market 

According to the Society of Critical Care Medicine (SCCM), approximately 5 million patients are admitted annually into 

ICUs in the U.S. (in 87,000 ICU beds) with an average length of ICU stay of 6.1 days when an interventionist is treating 

(rising to 9.3 days if treated by an attending physician). The U.S. Centers for Disease Control (CDC) states that the 

prevalence of diabetes is 7.8% of the U.S. population (assuming undiagnosed diabetic patients will become diagnosed 

once in the ICU). Anecdotally, fully-loaded hospital costs run approximately $50-$100 per day for monitoring glucose 

and rise to $200 per day if tight glycemic control is required for the patient. 

Estimated U.S. Market for ICU Continuous Glucose Monitoring 

Variable Avg. Minimum Upside to Minimum Avg. Maximum Most Likely 

ICU Patients 5 million 5 million 5 million 

Diabetic Patients 7.8% Pre- and possibly Non-diabetic patients 100% 15% 

Length of Stay 6 days Can be up to 9 days if attending physician 8 days 7 days 

Cost per Day $50 Can be up to $200 for tight glycemic control $100 $75 

Total U.S. Market $120 million $4 billion $400 million 

We calculate that the U.S. market, for just diabetic and pre-diabetic patients in ICU, is approximately $400 million 

however it will take some time for sales to reach this level. It is important to note that should the Echo Therapeutics 

Symphony tCGM system become the standard of care (including non-diabetic patients), the U.S. market opportunity 

would increase dramatically to $1+ billion in sales. 

U.S. Home-Use Continuous Glucose Monitoring Market 

Although we expect Echo Therapeutics to eventually address the U.S. home-use market for continuous glucose monitors 

with the Symphony tCGM system, we have not included this market in our financial models. We believe that Echo 

Therapeutics will remain focused on becoming the first continuous glucose monitoring system in the ICU and hospital 

setting and exploit their first-mover advantage. However, the home-use market remains a future upside to the company. 

U.S. Topical Lidocaine Market 

U.S. sales of Endo Pharmaceuticals Lidoderm ® (5% lidocaine) patch were $764 million in 2009 with the market for all 

topical local anesthetics estimated to be $1.2 billion for 2009. Based on the Ferndale Pharma Group licensing agreement 

(see Partnerships) there is a guaranteed minimum royalty totaling $12.6 million. Until we receive more visibility on 

Ferndale’s marketing plan, we are assuming Echo Therapeutics’ will receive the minimum annual royalty. 

Margins 

For Symphony tCGM product line, we believe that Echo Therapeutics will sell for cost, or give away, the Prelude 

component of the Symphony system while generating approximately 80% on the consumables (Prelude tips and 

BioSensors) yielding an overall margin of that we estimate at35% and is in-line with other medical technology products. 

Since Ferndale will purchase the Prelude for use with lidocaine at cost yielding no gross profit, we reflect only the 

Prelude royalty portion for the sake of clarity in our financial model. A higher royalty stream from increased Prelude 

sales to Ferndale remains an upside to our model. 

Valuation 

Our valuation based is on 35x projected 2013 EPS and discounted 35% for risk yielding a 12-18 month target of $6.00 as 

the FDA PMA approval of the Symphony tCGM system could occur within the forecast period. This would result in a 

market capitalization of approximately $200 million. This represents a significant discount to DexCom (Nasdaq:DXCM) 

(see Competition), the only pure-play comparable, which has FDA approval for their invasive, implantable biosensors 

with a market capitalization of approximately $800 million. 



Intellectual Property 

Update: 

On August 8, 2011, Echo Therapeutics received notice that their patent application titled, "System and Method for 

Continuous Non-Invasive Glucose Monitoring" will issue as U.S. Patent No. 7,963,917 with an expiration in 2025. We 

believe U.S. Patent #7,963,917 represents a keystone patent in Echo Therapeutics intellectual property portfolio and 

that their Symphony® tCGM system now has a significant barrier to competitive entry. Investors can access the patent at 

http://1.usa.gov/qEGZ2x 

The company also received notice that its patent application entitled "Transdermal Analyte for Monitoring Systems and 

Methods for Analyte Detection" was issued as South Africa Patent No. 2009/06959 and will expire in 2028. Additionally, 

Echo has received notice that its applications for the trademark PRELUDE has been registered for use in International 

Class 10 in South Korea and Mexico; and its application for the trademark SYMPHONY has been registered for use in 

International Class 10 in Israel. 

Echo Therapeutic has 12 U.S. patents and 29 foreign patents with over 40 patent applications pending in the U.S. and 

foreign countries. 

Recent Financing Activity 

On August 1, 2011 Echo Therapeutics filed a universal shelf registration statement on Form S-3 with the SEC to raise up 

to $75,000,000 in capital. 

On February 8, 2011, there was a closing in connection with the Series D Agreement and Echo Therapeutics received cash 

proceeds of $2.5M for the purchase of 2,500,000 shares of Series D Stock. Echo issued 1,006,000 shares of Series D 

Stock in exchange for the extinguishment of an 8% Senior Promissory Note issued by Echo on January 5, 2011 in the 

principal amount of $1,000,000, plus interest accrued through February 1, 2011 in the amount of $6,000. 

The Company issued an aggregate of 1,753,000 Series D-1 Warrants and 1,753,000 Series D-2 Warrants to the Series D 

Investors pursuant to the Series D Agreement. The Series D Warrants are immediately exercisable and expire on 

February 7, 2013; however, if the Series D Warrants are not exercised in full by February 7, 2013 by virtue of the 

application of a beneficial ownership blocker (described below), then the term of the Series D Warrants shall be extended 

for thirty (30) days past the date on which the beneficial ownership blocker is no longer applicable. The exercise price is 

subject to adjustment for stock splits, business combinations or similar events. An exercise under the Series D Warrants 

may not result in the holder beneficially owning more than 4.99% or 9.99%, as applicable, of all of the Common Stock 

outstanding at the time; provided, however, that a holder may waive the foregoing provision upon sixty-one (61) days’ 

advance written notice to the Company. 

Pursuant to the Certificate of Designation, Preferences and Rights of Series D Convertible Preferred Stock, the shares of 

Series D Stock are initially convertible into shares of Common Stock at a price per share equal to $1.00, subject to 

adjustment for stock splits, business combinations or similar events, and shall have a liquidation preference equal to their 

stated value. Each holder who receives Series D Stock may convert it at any time following its issuance. The Series D 

Stock does not pay a dividend and is not redeemable. 

On January 5, 2011, Echo Therapeutics entered into a strategic short term financing arrangement with Platinum Montaur 

Life Sciences, one of their largest institutional investors, and issued an 8% Senior Promissory Note in the principal 

amount of $1,000,000. The outstanding principal amount of the Note will accrete in value at an annual rate of 8%, 

compounded monthly, and is due on February 1, 2011. Also on January 5, 2011, Echo and Montaur also entered into a 

binding Term Sheet to which Montaur and any new investors will invest at least $3,000,000 through the purchase of 

shares of a newly-created class of Series D Convertible Preferred Stock and common stock purchase warrants. The 

parties intend to exchange the Note for Series D Stock no later than February 1, 2011, at which time Montaur will 

purchase an additional $500,000 of Series D Stock. Montaur subsequently shall purchase $1,500,000 of Series D Stock in 

monthly installments from March through May 2011, for a total investment of at least $3,000,000. For every $100,000 

face value of Series D Stock purchased, the Investor shall be issued (i) Series 1 warrants to purchase 50,000 shares of the 



common stock with an exercise price of $1.50 per share (ii) Series 2 warrants to purchase 50,000 shares of Common 

Stock with an exercise price of $2.50 per share. The Warrants shall have a term of two years provided, that if the Warrants 

are not exercised in full at the expiration of the term by virtue of the application of a beneficial ownership blocker, then 

the term of the Warrants shall be extended until such time as the beneficial ownership blocker is no longer applicable. 

On November 26, 2010, Echo Therapeutic entered into a Subscription Agreement with certain strategic institutional and 

accredited investors of up to 120 units at a price per Unit of $25,000. Each Unit consists of (i) 25,000 shares of the 

Company’s Common Stock (ii) Series-1 warrants to purchase 12,500 shares of Common Stock with an exercise price of 

$1.50 per share (iii) Series-2 warrants to purchase 12,500 shares of Common Stock with an exercise price of $2.50 per 

share. Echo Therapeutics has received aggregate proceeds of $1,936,500 for the purchase of an aggregate of 77.46 Units. 

As a result Echo Therapeutics issued an aggregate of 968,250 Series-1 Warrants and 968,250 Series-2 Warrants 

exercisable immediately and which expire no later than January 4, 2013. 

As of June 30, 2011 Echo Therapeutics had 13,003,221 outstanding common stock warrants with a weighted-average 

exercise price of $1.73. In addition, Echo Therapeutics had 2,413,766 exercisable employee stock options with a 

weighted-average exercise price of $0.85 as of June 30, 2010. Finally, Echo Therapeutics had 34,248,796 shares of 

common stock outstanding as of August 10, 2011. 

STAR 3 Trial Results - Continuous Glucose Monitoring Benefits 

On July 22, 2010, the New England Journal of Medicine published the successful results of the 489-patient STAR 3 Phase 

IV clinical trial for Medtronic’s (NYSE:MDT) MiniMed Paradigm REAL-Time System combining an insulin pump with 

their continuous glucose monitor. The paper titled “Effectiveness of Sensor-Augmented Insulin-Pump Therapy in Type 1 

Diabetes” concluded “In both adults and children with inadequately controlled type 1 diabetes, sensor-augmented pump 

therapy resulted in significant improvement in glycated hemoglobin levels, as compared with injection therapy. A 

significantly greater proportion of both adults and children in the pump-therapy group than in the injection-therapy 

group reached the target glycated hemoglobin level.” Specifically, the results showed that the 1 year baseline glycated 

hemoglobin level of 8.3% had decreased to 7.5%, as compared with 8.1% in the injection-therapy group (P


As the NEJM editorial points out, the NICE-SUGAR study “simply tells us there is no additional benefit from the 

lowering of blood glucose levels below the range of approximately 140 to 180 mg per deciliter”. In fact, we believe this 

may have been a result of too tight control in trying to achieve a low level of blood glucose and overshooting the target as 

hypoglycemia was seen in 6.8% of the patients versus 0.5% in the control arm. As proof, previous Belgian studies 

comparing intensive glycemic management to standard of care showed a patient survival benefit when reduction of 

glucose level was initiated only if the level is markedly elevated at >215 mg per deciliter. 

A joint statement by the American Diabetes Association (ADA) and the American Association of Clinical 

Endocrinologists (AACE) on the NICE-SUGAR study on intensive vs. conventional glucose control in critically ill 

patients said the results “should NOT lead to an abandonment of the concept of good glucose management in the hospital 

setting. Uncontrolled high blood glucose can lead to serious problems for hospitalized patients, such as dehydration and 

increased propensity to infection. It is important to consider that the severely ill patients in this trial were treated 

intensively with intravenous insulin to very tight 

targets (average of 115 mg/dl), and were compared 

to a control group whose glucose control was good 

(average glucose 144 mg/dl).” 

Echo Therapeutics Symphony is a continuous 

glucose monitoring system (not insulin delivery) and 

the trial may have failed because they did not use 

accurate continuous glucose monitoring but rather 

only checked once an hour (or 30 minutes at start) 

and used inaccurate glucose meters resulting in 

overshooting the blood glucose target and causing 

hypoglycemia. Even the NICE-SUGAR study 

authors stated “We do agree that more accurate 

systems for blood glucose measurement are 

required.” in their NEJM Correspondence reply. 

Finally, we note that a meta-analysis, including the 

NICE-SUGAR study published in the April 14, 2009 Canadian Medical Association Journal (CMAJ) showed that 

intensive glucose therapy may be beneficial to adults and children admitted to a surgical ICU (the setting that Echo 

Therapeutics is addressing) and the CMAJ commentary discusses the reasons why patients in surgical ICUs benefit from 

intensive insulin therapy. 

Management 


NEJM Paper 

http://content.nejm.org/cgi/content/short/360/13/1283 

NEJM Editorial 


NEJM Correspondence 


ADA/AACE Joint Statement 

http://www.diabetes.org/for-media/pr-NICE_SUGAR-study.jsp 

CMAJ Paper 

http://www.cmaj.ca/cgi/content/full/180/8/821 

CMAJ Commentary 

http://www.cmaj.ca/cgi/content/full/180/8/799 

NICE-SUGAR Trial Documentation 

https://studies.thegeorgeinstitute.org/nice/docs/ALGORITHM.pdf 

https://studies.thegeorgeinstitute.org/nice/docs/PROTOCOL.pdf 

https://studies.thegeorgeinstitute.org/nice/docs/SAP.pdf 

Patrick T. Mooney MD, CEO, President and Chairman of the Board: Dr. Mooney joined Echo in September 2007 as 

a result of the merger of Sontra Medical Corporation and then privately-held Echo Therapeutics, Inc. (ETI), for which he 

served as President, Chief Executive Officer and director from September 2006 through the date of the merger. Prior to 

joining ETI, Dr. Mooney was President, Chief Executive Officer and Chairman of Aphton Corporation (Nasdaq: APHT), 

where he had also served as Chief Medical Officer. Prior to that, Dr. Mooney served as Senior Biotechnology Analyst at 

Thomas Weisel Partners, LLC, a full service merchant banking firm and as Senior Biotechnology Analyst at Janney 

Montgomery Scott, LLC, a full services investment banking firm. Dr. Mooney received his medical degree from the 

Jefferson Medical College of Thomas Jefferson University and trained in surgery at Thomas Jefferson University 

Hospital. 

Christopher P. Schnittker, CPA, Chief Financial Officer: Mr. Schnittker most recently, he served as Vice President – 

Administration, Corporate Secretary and Chief Accounting Officer of Soligenix, Inc., a publicly-traded biotechnology 

company. Prior to that, Mr. Schnittker served as the Senior Vice President and CFO for VioQuest Pharmaceuticals Inc., 

Micromet Inc., Cytogen Corporation, and Genaera Corporation, all publicly-traded biotechnology companies. Mr. 

Schnittker has also held prior financial management positions at GSI Commerce, Rhône-Poulenc Rorer (now part of 

Sanofi-Aventis), and PricewaterhouseCoopers. He received his B.A. degree in economics and business from Lafayette 

College and is a certified public accountant licensed in the State of New Jersey. 



Marshall “Mac” Deweese, Vice President of Operations: Mr. Deweese has 16 years of experience with Abbott 

Laboratories (formerly MediSense) in the technical product development, program management, and mass manufacture of 

portable glucose meters. As the Director of R & D, Program Management, and OEM Operations at Abbott Laboratories, 

Mr. Deweese led the industrial design, mechanical engineering, and manufacturing preparation of handheld portable 

glucose meters. As the Vice President and co-founder of Massachusetts Technology Associates (Mass Tech), Mr. 

Deweese provided engineering and manufacturing services to its client base, specializing in high quality, rapid turnaround 

prototype and assembly services. Mr. Deweese studied engineering at Massachusetts Institute of Technology. 

Kenneth Gary, Vice President of Research, Clinical and New Products: Mr. Gary has more than 25 years of 

experience in the design and development of sensor-based diagnostics and data connectivity systems for the point-of-care 

and diabetes markets. As R&D Venture Director for Abbott Diabetes Care, he led the design and development of 

hospital-based point-of-care and consumer diabetes testing systems. As General Manager of Breathquant Medical, Mr. 

Gary led the design and successful clinical trials for Breathquant's novel low-cost diagnostic system for the rapid detection 

of pulmonary embolism. Mr. Gary holds a B.S. in Bioengineering and an M.S. in Chemical Engineering from Columbia 

University and an MBA from Boston University. 

Independent Directors 

Vincent D. Enright: Mr. Enright joined our Board of Directors in March 2008. He has more than 30 years of financial 

experience with public companies, including as Senior Vice President and Chief Financial Officer of KeySpan 

Corporation, a NYSE public utility company. Mr. Enright currently serves as a director and Audit Committee Chairman 

of certain of the funds managed by Gabelli Funds, LLC, a leading mutual fund manager, positions he has held since 1991. 

Mr. Enright holds a B.S. degree in Accounting from Fordham. 

Shawn K. Singh, JD: Mr. Singh joined Echo in September 2007 as a result of the merger of Sontra Medical Corporation 

and ETI, for which he served as Chairman of the Board from September 2006 through the date of the merger and as 

President and director from September 2004 to September 2006. Mr. Singh has been working with life science companies 

for nearly 20 years. In addition to his role with Echo, Mr. Singh serves, on a part-time basis, as a Principal of Cato 

BioVentures and, on a part-time basis, as Chief Operating Officer (Acting) and director of VistaGen Therapeutics. Prior to 

joining Echo, Mr. Singh served as Chief Business Officer of SciClone Pharmaceuticals (Nasdaq: SCLN), founder and 

Managing Director of Start-Up Law, President of Artemis Neuroscience and Corporate Finance Associate in the Silicon 

Valley offices of Morrison & Foerster. Mr. Singh is a member of the California State Bar. 

William F. Grieco: Since 2008, Mr. Grieco has served as the Managing Director of Arcadia Strategies, LLC, a business 

and legal consulting organization servicing healthcare, science and technology companies. He brings approximately 30 

years of healthcare industry experience. From 2003 to 2008 he served as Senior Vice President and General Counsel of 

American Science and Engineering, Inc., an x-ray inspection technology company, and prior to that he served as Senior 

Vice President and General Counsel of IDX Systems Corporation, a healthcare information technology company. From 

1995 to 1999, he was Senior Vice President and General Counsel for Fresenius Medical Care North America. Mr. Grieco 

received a B.S. from Boston College, an M.S. in Health Policy and Management from Harvard University and a J.D. from 

Boston College Law School. 

James F. Smith: Mr. Smith is Vice President and Chief Financial Officer of Orchid Cellmark, Inc., a leading 

international provider of DNA testing services, where he leads all aspects of finance, including control, financial 

reporting, tax, treasury, and M&A. He brings over 30 years of financial management experience, including over 20 years, 

with Wyeth and American Cyanamid Company, most recently as Vice President of Finance. During his time at Wyeth 

and Cyanamid, he obtained extensive commercial international business experience and was involved in numerous new 

product commercialization projects. Mr. Smith started his accounting career at PricewaterhouseCoopers. He is licensed as 

a certified public accountant. 



Risks 

Some of the operational and financial risks to Echo Therapeutics are: 

 

 

 

 

 

 

FDA and Regulatory risks: All of Echo Therapeutics’ products are ultimately reliant on approvals by the U.S. 

FDA and other national regulatory bodies. There can be no guarantee of timely or definite FDA or other national 

regulatory body approvals for any of their pipeline products. 

Need to Raise Additional Funds: Although it is possible that Echo Therapeutics may raise sufficient funds for 

development through partnership fees, milestone payments and warrant conversions, we believe that the company 

will be required to raise additional funds for development and commercialization through the issuance of stock 

which would be dilutive to existing shareholders and could potentially affect the share price. We have included 

our estimate of future share issuance in our financial model but there can be no guarantee that our estimates are 

accurate. 

Partnerships: Echo Therapeutics is reliant on partners to successfully market some its products as well as partners 

for development, clinical trials and regulatory filings for some of its products. Failure of Echo Therapeutics’ 

existing or future partners to perform satisfactorily or in a timely fashion could adversely impact the company’s 

financial position. 

Patent Litigation: Third-party claims of infringement of intellectual property could require Echo Therapeutics to 

spend time and money on defending their intellectual property rights up to and including adverse judgments 

against Echo. 

Liquidity and Trading Volume: Echo Therapeutics currently trades on the OTC Bulletin Board which may result 

in both lower trading volume and liquidity possibly leading to large spreads and high volatility in the stock price. 

However, we believe Echo Therapeutics will pursue a listing on the Nasdaq or AMEX exchanges sometime in the 

future which could result in higher trading volume and liquidity. 

Sector Rotation: Echo Therapeutics is a small medical technology development company often kept in a portfolio 

with similar companies. In such cases, a significant event for one company may have a material impact on the 

valuation of all similar companies regardless of their unique qualities. 





DISCLOSURES 

Ratings and Price Target Changes over Past 3 Years 

Initiated January 21, 2010 – Strong Speculative Buy - Price Target $4.50 

Updated February 14, 2011 – Strong Speculative Buy - Price Target $6.00 

Analyst Certification: We, Stephen M. Dunn and William D. Dawson, the authors of this research report certify that a.) All of the views 

expressed in this report accurately reflect our personal views about any and all of the subject securities or issuers discussed b.) No part 

of our compensation is directly or indirectly related to the specific recommendations or views expressed in this research report and c.) 

We may be eligible to receive other compensation based upon various factors, including total revenues of the Firm and its affiliates as 

well as a portion of the proceeds from a broad pool of investment vehicles consisting of components of the compensation generated by 

investment banking activities, including but not limited to shares of stock and/or warrants, which may or may not include the securities 

referenced in this report. 

DISCLOSURES 

Does the Analyst or any member of the Analyst’s household have a financial interest in any securities of the Company? 

Does the Analyst or any member of the Analyst's household or Firm serve as an officer, director or advisory board member of 

the Company? 

Has the Analyst or any member of the Analyst’s household received compensation directly or indirectly from the Company in the 

previous 12 months? 

Does the Firm or affiliates beneficially own ≥1% of the Company’s common stock? 

Has the Firm or affiliates received investment banking services compensation in previous 12 months? 

Has the Firm or affiliates received non-investment banking securities-related services compensation in previous 12 months? 

Does the Firm or affiliates expect to receive or intend to seek investment banking compensation in next 3 months? 

Has the Firm or affiliates received non-securities services compensation in previous 12 months? 

Does the Firm or affiliates make a market in the Company’s securities? 

NO 

NO 

NO 

NO 

YES 

NO 

YES 

YES 

NO 

The Firm and/or its directors and employees may own securities of the company(s) in this report and may increase or decrease 

holdings in the future. The Firm, its officers, directors, analysts or employees may effect transactions in and have long or short positions 

in the securities (or options or warrants with respect thereto) mentioned herein. The Firm may effect transactions as principal or agent 

in the securities mentioned herein. 

Ratings Definitions: 1) Strong Buy: the stock is expected to appreciate and produce a total return of at least 40% over the next 12-18 

months; 2) Buy: the stock is expected to appreciate and produce a total return of at least 20% over the next 12-18 months; 3) Strong 

Speculative Buy: the stock is expected to appreciate and produce a total return of at least 40% over the next 12-18 months but the 

volatility and investment risk is substantially higher than our "Strong Buy" recommendation; 4) Speculative Buy: the stock is 

expected to appreciate and produce a total return of at least 20% over the next 12-18 months but the volatility and investment risk is 

substantially higher than our "Buy" recommendation; 5) Neutral: the stock is fairly valued for the next 12-18 months; 6) Avoid/Sell: 

the stock is expected to decline at least 20% over the next 12-18 months and should be avoided or sold if held; 7) Under Review: the 

previous rating and/or price target is suspended due to a significant event which now requires additional analysis and the previous 

rating and/or price target cannot be relied upon; 8) Not Rated: the stock has too much business or financial uncertainty to form an 

investment conclusion or is currently in the process of being acquired and 9) Restricted: coverage cannot be initiated or has been 

temporarily suspended to comply with applicable regulations and/or firm policies in certain circumstances such as investment banking 

or an advisory capacity involving the company. 



LifeTech Capital 

Research 

Research 

Coverage 

Investment 

Banking 

FINRA 

RULE 2711 

Research 

Coverage 

Investment 

Banking 

Ratings Distribution % of Total % of Total Ratings Distribution % of Total % of Total 

Strong Buy 17% 50% Buy 83% 50% 

Strong Speculative Buy 67% 50% Hold/Neutral 8% 100% 

Buy 0% 0% Sell 8% 100% 

Speculative Buy 0% 0% Total 100% 58% 

Neutral 8% 100% 

Avoid/Sell 8% 100% 

Under Review 0% 0% 

Not Rated 0% 0% 

Restricted 0% 0% 

Total 100% 58% 

Legal Disclaimer 

THE INFORMATION IN THIS REPORT IS NOT INTENDED TO BE USED AS THE BASIS FOR INVESTMENT DECISIONS AND 

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Echo Therapeutics (ECTE) needlefree

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