CardioGenics Holding Inc. - Letter to Shareholders

To Our Shareholders:
The year 2009 has been an exciting time of change for CardioGenics (“CGI”) and our shareholders, with the company making significant progress in the development and commercialization of our proprietary products to serve the In Vitro Diagnostic market, as well as our acquisition by JAG Media Holdings. I would like to take this opportunity to introduce CGI to our new JAG shareholders, recap some of our scientific developments, and clarify our operating and governing philosophy and plan for the road ahead.

Overview
I founded CGI in 1997 with a mission to develop and commercialize products targeting the immunoassay segment of the IVD testing market, with a focus on the cardiovascular market needs.  To date, we have developed the following technologies: a proprietary method for improving light collection from Paramagnetic Beads (“Beads”); the QL Care Analyzer (“QLCA”), a state-of-the-art proprietary point-of-care (“POC”) immunoanalyzer into which our Beads are employed; and a series of immunoassay tests to detect cardiac markers.  I am proud to say we have made significant advances in our mission to bring these products to the market. We are approximately 12 to 14 months away from submitting our first 510K application to the US Food and Drug Administration (FDA) for our QL Care Analyzer and our first cardiovascular test, Troponin I. With respect to our Beads, in January we signed an agreement with Merck Chimie S.A.S. (“Merck”) pursuant to which Merck is further developing our Beads and then will distribute the final product developed by Merck.  I provide an overview of both in this letter. 

Paramagnetic Beads: A Breakthrough in Chemiluminescence Testing
One of our key innovations was the development of silver-coated magnetic beads, which are consumable test reagents used in 90% of medical lab analyzers. Most paramagnetic beads are made of iron oxide and are traditionally black or brown.  We have developed a proprietary process that coats the beads with a layer of silver, making them white and more sensitive to light. This advance significantly increases the sensitivity of immunoassay tests. We have demonstrated that our beads increase the testing sensitivity five times more than our competitors’ products. In addition to using the Beads in our QLCA, we also explored the commercial opportunities for our Beads with major distributors of paramagnetic beads, who distribute such beads for use in medical lab analyzers throughout the world. As a result of our efforts in January of this year, we signed a “Supply, Development and Distribution Agreement” with Merck pursuant to which Merck will further develop our Beads and commercialize the final developed product on an exclusive basis. Pursuant to that agreement, we have provided Merck with “naked” samples of our Beads and Merck is in the process of adapting their own polymer coating process to our Beads. Once Merck has satisfactorily completed the adaptation process, the final product will be ready for distribution by Merck. We expect an update from Merck on the anticipated launch in the coming months.   
 
QL Care Analyzer: Product Overview and FDA Submission Roadmap
The QLCA represents a shift in the design of point-of-care analyzers. The QLCA is the first POC analyzer that employs chemiluminesence, the highest detection technology commercially available today, which is employed by the majority of modern laboratory analyzers. The QLCA is a small, portable, stand-alone, and completely automated point-of-care immunoanalyzer. The QLCA has a simplified mechanical design due to its proprietary triggering mechanism, which is covered by our core patents. POC immunoassay analyzers are not new however, until the advent of the QLCA, none of the commercial POC analyzers have been able to replicate the sensitivity and accuracy of a test done in a medical lab on traditional large lab analyzers.  

The QLCA uses a self-metering disposable Cartridge, each will be pre-loaded with our Beads and also specific bioluminescent proteins linked to the target reagent. A few drops of whole blood added to the cartridge and several software-mediated steps will result in a chemiluminescent reaction needed to deliver accurate, sensitive and quantitative test results. Operation of the QLCA does not require specialized training, and testing is completely automated and is completed in 15 minutes.

The value of using the QLCA is clear; turn around time of 15 minutes, which provides the ER physician with accurate results to facilitate the clinical management. The current diagnostic process for heart attack is time-consuming.  Blood tests performed in a medical lab currently provide the most definitive diagnosis however, these have an average turn around time of 2.8 hours. For high-risk patients who do not receive treatment during the “golden hour”—the first hour of a heart attack—the chance of permanent heart damage increases significantly and the likelihood of recovery drops.

The QLCA protocol has been rigorously tested in our lab, and we have compared our test results against medical laboratory test data.  We have consistently met or exceeded the sensitivity of medical laboratory immunoassay equipment. We are close to introducing the QLCA to the market with our first test, Troponin I (TnI), which is the standard of care today. We have identified four hospitals and medical clinics in Canada and the US that have agreed to act as beta test sites. Beta-site testing will commence shortly. We expect the following steps to take approximately 12 to 14 months to complete before 510K submission to the FDA for the QLCA and TnI test:

Test adaptation to self-metering disposable cartridge

Commencement of Beta-site testing

Data compilation for FDA submission

FDA Submission (According to the latest data on the FDA’s website, the average approval time for a 510K submission is 90 days and over 90% of the number of 510K applications submitted are approved by the FDA)

In addition to TnI, we have three follow-on tests that we will submit to the FDA in three-month intervals following the FDA’s approval of the QLCA and TnI test: Plasminogen Activator Inhibitor Type-1 (PAI-1), Heart Failure Risk Stratification (HFRS), and Heart Failure Genomics Risk (HFGR) tests. The tests are designed address significant clinical problems in patients suffering the consequences of ischaemic heart diseases, and the full scope of the technology behind our QLCA is covered under our patent web. We look forward to updating our shareholders as we move ahead with these clinical milestones.

The detailed description of various test products in development by CardioGenics

With respect to distributing the QLCA and the subsequent tests, we will market them through a major Tier 1 IVD distributor, and we anticipate that we will select a partner before FDA approval is received. In accordance with industry practice, we intend to enter into a license agreement with our distribution partner for the manufacture and distribution of our products.

Conclusion
Overall, our primary objective is to commercialize our proprietary IVD products and increase shareholder value.  As a result of the JAG Media transaction, we now have new shareholders and at the same time, we have the backing of our loyal CardioGenics shareholders who have invested and supported our developmental efforts for the past 10 years.  You have my pledge in the future to keep all of our shareholders informed about our progress and the work we are doing to bring the QLCA and immunoassay test products to market. I would also like to take this opportunity to thank every member of our clinical team that, through hard work and dedication, has stayed the course to develop our products.

Sincerely,

Yahia Gawad, MD
CEO
CardioGenics Inc.