Company Overview
| Company Name |
ATOSSA GENETICS INC |
| Company Address |
4105 E MADISON STREET
SUITE 320
SEATTLE, WA 98112 |
| Company Phone |
206 325 6086 |
| Company Website |
www.atossagenetics.com |
| CEO |
Steven C. Quay |
| Employees (as of 11/9/2012) |
10 |
| State of Inc |
DE |
| Fiscal Year End |
12/31 |
| Status |
Priced (11/8/2012) |
| Proposed Symbol |
ATOS |
| Exchange |
Nasdaq SmallCap Market |
| Share Price |
$5.00 |
| Shares Offered |
800,000 |
| Offer Amount |
$4,000,000.00 |
| Total Expenses |
$500,000.00 |
| Shares Over Alloted |
0 |
| Shareholder Shares Offered |
-- |
| Shares Outstanding |
12,919,367 |
| Lockup Period (days) |
180 |
| Lockup Expiration |
5/7/2013 |
| Quiet Period Expiration |
12/18/2012 |
| CIK |
0001488039 |
We estimate that the net proceeds of the sale of the shares that we are
offering will be $3,100,000, or $3,640,000 if the underwriters exercise their
overallotment option in full, based on the initial public offering price of
$5.00 per share, and after deducting estimated underwriting discounts and
commissions, underwriter non-accountable expense reimbursement fee, other
underwriter expense reimbursement obligations and estimated offering expenses
that we must pay.
A $1.00 increase (decrease) in the initial public offering price of $5.00 per
share would increase (decrease) the net proceeds to us from this offering by
$720,000, assuming the number of shares offered by us, as set forth on the
cover page of this prospectus, remains the same and after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by us.
The principal purposes of this offering are to obtain additional working
capital to fund anticipated operating expenses, establish a public market for
our common stock and facilitate future access to the public capital markets. We
estimate that we will use the net proceeds from this offering for the following
purposes (set forth in order of use):
• up to approximately $500,000 of these net proceeds to expand our cytology
and molecular diagnostics laboratory;
• up to approximately $500,000 of these net proceeds to fund manufacture of
a number of MASCT System units needed to launch the MASCT System across the
United States as our initial national roll-out of the product;
• up to approximately $1,500,000 of these net proceeds to hire and train
sales and marketing personnel for initial regional marketing and subsequent
national distribution;
• up to approximately $1,000,000 of these net proceeds to develop and
commence manufacturing and commercialization of the FullCYTE Test;
• up to approximately $1,000,000 of these net proceeds to develop and
commercialize the NextCYTE Test; and
• the remaining net proceeds for the research and development of Intraductal
Treatment Programs, our diagnostic tools and for general working capital
purposes, including approximately $50,000 for patent maintenance fees and
application prosecution expenses related to the Acueity asset purchase.
A portion of the net proceeds may be used to acquire or invest in complementary
businesses, technologies, services or products in the event that we identify
opportunities for such acquisitions, or investments that we believe are in the
best interests of our stockholders. We have no current plans, agreements or
commitments with respect to any such acquisition or investment, and we are not
currently engaged in any negotiations with respect to any such transaction.
Although we currently anticipate that we will use the net proceeds as described
above, there may be circumstances where a reallocation of funds may be
necessary. The amounts and timing of our actual expenditures will depend upon
numerous factors, including the progress of our development and
commercialization efforts, the development of our business opportunities and
our operating costs and expenditures. Accordingly, our management will have
significant flexibility in applying these net proceeds. An investor will not
have the opportunity to evaluate the economic, financial or other information
on which we base our decisions on how to use the proceeds.
The costs and timing of commercialization of our products and development of
business opportunities are highly uncertain, are subject to substantial risks
and can often change. Accordingly, we may change the allocation of use of these
proceeds as a result of contingencies such as the uptake of our products in the
marketplace, competitive responses, and operating costs and expenditures.
Pending use of the proceeds from this offering as described above or otherwise,
we intend to invest the net proceeds in short-term, interest-bearing,
investment-grade securities.
We believe that the MASCT System for NAF collection will compete in the medical
device product industry with Neomatrix and with academic scientists and
physicians who use “homemade” NAF fluid collection systems for research
purposes. The Neomatrix device is automated and provides warmth and nipple
aspiration simultaneously and is the only non-”homemade” NAF collection system
of which we are currently aware. The advantages of the MASCT System compared to
the Neomatrix device include a lower acquisition cost and portability. The
disadvantages of the MASCT System compared to the Neomatrix device include the
requirement that a nurse or other healthcare provider manually operate the
device, which may result in increased risks of human error and improper sample
collection, and the reduced availability of experience with the device among
the medical community.
We believe we will compete in the anatomic pathology laboratory industry based
on the patent portfolio for the MASCT System, the technical expertise provided
by our focus on diagnoses utilizing NAF, service-focused relationships with
referring physicians, and our advanced technology. Based on the scope of our
patent claims and the terms of use accompanying the MASCT System, we do not
believe that our competitors can transport or process NAF samples collected
with the MASCT System without infringing our patent estate and the contractual
terms of use.
Laboratories that could process NAF samples not collected with the MASCT System
include thousands of local and regional pathology groups, national
laboratories, hospital pathologists, and academic laboratories. The largest
such competitors include Laboratory Corporation of America and Quest
Diagnostics Incorporated.
Characteristics of each source of competition include:
Local and Regional Pathology Groups . Local and regional pathology groups
focus on servicing hospitals, often maintaining a staff of pathologists on site
that can provide support in the interpretation of certain results. The business
models of these laboratories tend to be focused on the efficient delivery of
individual tests for a multitude of diseases rather than the comprehensive
assessment of only NAF samples, and their target groups tend to be hospital
pathologists as opposed to community physicians.
National Laboratories . National laboratories typically offer a full suite of
tests for a variety of medical professionals, including general practitioners,
hospitals, and pathologists. Their emphasis on providing a broad product
portfolio of commoditized tests at the lowest possible price often limits such
laboratories’ ability to handle difficult or complex specimens requiring
special attention, such as NAF samples. In addition, national laboratories
typically do not provide ready access to a specialized pathologist for
interpretation of test results.
Hospital Pathologists . Pathologists working in a hospital traditionally
provide most of the diagnostic services required for hospital patients and
sometimes also serve non-hospital patients. Hospital pathologists typically
have close interaction with treating physicians, including face-to-face
contact. However, hospital pathologists often do not have the depth of
experience, specialization, and expertise necessary to perform the specialized
services needed for NAF samples.
Academic Laboratories . Academic laboratories generally offer advanced
technology and know-how. In fact, the vast majority of NAF sample processing
over the last several years has been in academic laboratories primarily for
research purposes. These laboratories typically pursue multiple activities and
goals, such as research and education, or are generally committed to their own
hospitals. Turn-around time for specimen results reporting from academic
laboratories is often slow. This limits the attractiveness of academic
laboratories to outside physicians who tend to have focused specialized needs
and require results to be reported in a timely manner.
Alternative Diagnostic Tools . We also anticipate that the MASCT System will
face challenges in market adoption due to the reliance of physicians and other
medical professionals on existing diagnostic tools for breast cancer, including
mammograms, ultrasound examinations, magnetic resonance imaging, or MRI, fine
needle aspiration and core biopsies, among others. These methods are currently
more widely used and accepted by physicians, and may continue to be more widely
used than our proposed products and services because they are currently
reimbursed by third-party payors. In addition, physicians and other medical
professionals may view the MASCT System as a screening tool for existing breast
cancer, like mammography, rather than as an adjunctive procedure to
mammography. As a result, the MASCT System could be deemed to compete directly
with mammography, an established procedure, which could impair market adoption
of the MASCT System. The advantages of the MASCT System compared to ultrasound,
mammography, or magnetic resonance imaging include obtaining cytology and
molecular information, the ease and simplicity of the procedure, and the cost,
especially compared to MRI. The disadvantages of the MASCT System compared to
ultrasound, mammography, and MRI include a lower sensitivity to detection of
cancer. The advantage of the MASCT System compared to fine needle aspiration
and core biopsies include the ease and simplicity of the procedure, the cost,
and the patient comfort. The disadvantages of the MASCT System compared to fine
needle aspiration and core biopsies include the reduced sample size and the
consequent limitation of the range of molecular studies that can be conducted.
In addition to facing competition with respect to our MASCT System and the
processing of collected NAF samples, we also face competition regarding our
ArgusCYTE diagnostic test. The detection and analysis of circulating tumor
cells, or CTCs, in the blood of patients with breast cancer is an active area
of medical research, and many companies and academic research institutes that
have substantially greater financial and research resources than we do are
involved in such detection and analysis. For example, The Massachusetts General
Hospital, Harvard Medical School, received a multimillion dollar grant from
Stand Up To Cancer in 2009 for a CTC chip to diagnose cancer. Additionally,
Johnson & Johnson markets an FDA-cleared test for breast cancer CTCs and
Clariant Laboratories, a GE Healthcare company, also markets a breast cancer
CTC test.
Company Description
We are a healthcare company focused on the prevention of breast cancer through
the commercialization of diagnostic tests that can detect precursors to breast
cancer, and through the research, development, and ultimate commercialization
of treatments for pre-cancerous lesions.
Our diagnostic
tests consist of patented medical devices cleared by the Food
and Drug Administration, or FDA, that can collect fluid samples from the breast
milk ducts, where, according to the National Cancer Institute, over 95% of
breast cancers arise. These samples are processed at our wholly-owned National
Reference Laboratory for Breast Health, which has been certified pursuant to
the Clinical Laboratory Improvement Amendments, or CLIA, has been licensed in
the states of California, Florida, Maryland, Rhode Island, and Washington, and
is in the process of obtaining a license to accept testing samples from New
York (which requires out-of-state laboratories to hold a state license). CLIA
certification is legally required to receive reimbursement from federal or
state medical benefit programs, like Medicare and Medicaid, and is a practical
requirement for most third-party insurance benefit programs. Our CLIA-certified
laboratory, which is permitted to accept samples from all 50 states under its
CLIA certification, its state licenses, or, in New York under recognized
exemption provisions while its license application is pending, examines the
specimens by microscopy for the presence of normal, pre-malignant, or malignant
changes as determined by cytopathology and biomarkers that distinguish “usual”
ductal hyperplasia, a benign condition, from atypical ductal hyperplasia, which
may lead to cancer. These cytopathological results provide patients and
physicians with information about the care path that should be followed,
depending on the individual risk of future cancer as determined by the results.
Additionally, we are conducting research on the treatment of these pre-
cancerous cells by using our patented and FDA-cleared microcatheters to
deliver, directly into the milk ducts, pharmaceutical formulations that can be
used to treat these pre-cancerous lesions. By using this localized delivery
method, patients are expected to receive high local concentrations of these
drugs at the site of the pre-cancerous lesions, potentially promoting efficacy
of the treatment while limiting systemic exposure, which has the potential to
lower the overall toxicity of these treatments.
We launched our commercial operations in late 2011 and, as of September 14,
2012, have enrolled and sold MASCT System kits or provided ArgusCYTE collection
kits to 34 doctors and clinics as providers of the ForeCYTE and/or ArgusCYTE
tests. We have received, processed, and reported the results to physicians from
956 ForeCYTE samples and 41 ArgusCYTE samples as of June 30, 2012 and 1,256
ForeCYTE samples and 41 ArgusCYTE samples as of September 14, 2012. When we
launched operations in December 2011, we did so as part of our field experience
trial to collect information about the ease or difficulty of adoption of the
ForeCYTE and ArgusCYTE tests in both mammography clinics and physicians’
offices, the number of sales calls to receive the first orders, and the growth
of sales of specimen collection kits on a monthly basis. We intend to use the
data from this field experience trial to form our national marketing efforts as
we scale up our commercial operations going forward. As of December 31, 2011
and June 30, 2012, we have generated $1,500 and $277,810 in revenue,
respectively, from the sale of our products and services. We incurred net
operating losses of approximately $2.2 million, $1.1 million and $3.4 million
for our six months ended June 30, 2012 and our fiscal years ended December 31,
2010 and 2011, respectively. As of June 30, 2012, we had an accumulated deficit
of approximately $6.9 million. We have not yet established an ongoing source of
revenue sufficient to cover our operating costs and allow us to continue as a
going concern. Our ability to continue as a going concern is dependent on
obtaining adequate capital to fund operating losses until we become profitable.
We plan to obtain additional capital resources by selling our equity
securities, selling the MASCT System and generating laboratory service revenue
from our tests, and making short-term borrowings from stockholders or other
related parties when needed. However, we cannot assure you that we will be
successful in accomplishing any of these plans and, if we are unable to obtain
adequate capital, we could be forced to cease operations.
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We were incorporated in Delaware in April 2009. Our principal executive offices
are located at 4105 East Madison Street, Suite 320, Seattle, Washington 98112,
and our telephone number is (206) 325-6086. Our corporate website is located at
www.atossagenetics.com and our laboratory website is located at www.nrlbh.com.
Our company name comes from Queen Atossa, daughter of Cyrus the Great and wife
of Darius I, the King of the Achaemenid Empire. In about 470 BC, she became the
first woman in recorded history to be diagnosed with breast cancer, of which she
died.