TRADEMARK APPLICATION NO. 78772030 - EEGSCREENER - KEDI EEGSUS
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`Page 1 of 4
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`T0:
`
`Everest Biomedical Instruments Company (trademarks@patp_ro.com)
`
`Subject:
`
`TRADEMARK APPLICATION NO. 78772030 - EEGSCREENER -
`KEDI EEGSUS
`
`Sent:
`
`8/29/07 11:43:33 AM
`
`Sent As:
`
`ECOM116@USPTO.GOV
`
`Attachments: Attachment - 1
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`TRADEMARK APPLICATION NO. 78772030 - EEGSCREENER - KEDI EEGSUS
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`UNITED STATES PATENT AND TRADEMARK OFFICE
`
`SERIAL NO:
`
`78/772030
`
`IVIARK: EEGSCREENER
`
`CORRESPONDENT ADDRESS:
`
`MARK E. BOOKS, REG. NO. 40,918
`POLSTER, LIEDER, WOODRUFF &
`LUCCHE SI, L.
`12412 POWERSCOURT DR STE 200
`
`SAINT LOUIS, MO 63131-3615 -
`
`APPLICANT:
`
`Everest Biomedical
`
`Instruments Company
`
`CORRESPONDENT’S REFERENCE/DOCKET
`N0:
`
`KEDI EEGSUS
`
`CORRESPONDENT E-MAIL ADDRESS:
`trademarks@patpro.com
`
`GENERAL TRADEMARK INFORMATION:
`
`http://www.uspto.gov/main/trademarks.htm
`
`REQUEST FOR RECONSI])ERATION DENIED
`
`ISSUE/IVIAILING DATE: 8/29/2007
`
`Applicant is requesting reconsideration of a final refusal issued/mailed February 8, 2007.
`
`file://\\ticrs-ais-01\ticrsexpo1t\Htm1ToTiffInput\REC00012OO7_O9_05_16_52_07_TTAB08...
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`TRADEMARK APPLICATION NO. 78772030 - EEGSCREENER - KEDI EEGSUS
`
`Page 3 of 4
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`After careful consideration of the law and facts of the case, the examining attorney must deny the
`request for reconsideration and adhere to the final action as written since no new facts or reasons have
`been presented that are significant and compelling with regard to the point at issue.
`
`Accordingly, the final §2(e)1 refusal to register the proposed mark EEGSCREENER for “PATIENT
`MONITORING DEVICES, NAMELY, TRANSCEIVERS FOR DEVELOPING, PROCESSING, AND
`RECEIVING ELECTRONIC SIGNALS DEVELOPED BY THE HUMAN NERVOUS SYSTEM TO
`PRODUCE CLINICALLY VALID DATA TO BE USED BY MEDICAL PROFESSIONALS TO
`
`MAKE CLINICAL DECISIONS; AND RELATED SOFTWARE PACKAGES SOLD AS A UNIT
`THEREWITH” is CONTINUED AND MAINTAINED.
`
`In the request for reconsideration, applicant argues that “EEG” has various meanings and “the term EEG
`in the single word EEGSCREENER has absolutely no meaning with respect to applicant’s goods.”
`Applicant argues, “it is not seeking out registration for a word but rather initials juxtapositioned with a
`word.” Applicant further argues that neither EEG nor SCREENER is descriptive of applicant’s goods.
`The examining atlomey is not persuaded by applicant’s arguments. Although “EEG” may have other
`meanings, this is not persuasive, as descriptiveness is considered in relation to the relevant goods. The
`fact that a term may have different meanings in other contexts is not controlling on the question of
`desciiptiveness. In re Chopper Industries, 222 USPQ 258 (TTAB 1984); In re Brz'ght—Crest, Ltd., 204
`USPQ 591 (TTAB 1979); In re Champion International Corp., 183 USPQ 318 (TTAB 1974); TMEP
`§1209.03(e). Further, a mark that combines descriptive terms may be registrable if the composite
`creates a unitary mark with a separate, nondescriptive meaning. In re Colonial Stores, Inc., 394 F.2d
`549, 157 USPQ 382 (C.C.P.A. 1968) (holding SUGAR & SPICE not to be merely descriptive of bakery
`products). However, the mere combination of descriptive words does not automatically create a new
`nondescriptive word or phrase. E.g., In re Associated Theatre Clubs C0,, 9 USPQ2d 1660, 1662 (TTAB
`1988) (finding GROUP SALES BOX OFFICE descriptive for theater ticket sales services). The
`registrability of a mark created by combining only descriptive words depends on whether a new and
`different commercial impression is created, and/or the mark so created imparts an incongruous meaning
`as used in connection with the goods. Where, as in the present case, the combination of the descriptive
`words creates no incongruity, and no imagination is required to understand the nature of the goods, the
`mark is merely descriptive. E.g., In re Copytele Inc., 31 USPQ2d 1540, 1542 (TTAB 1994);Assocz‘ated
`Theatre Clubs, 9 USPQ2d at 1662. Therefore, merely positioning the words “EEG” and “SCREENER”
`next to each other with no space in between them does not obviate the §2(e)(l) refusal.
`
`Applicant further states that the examining attorney “ignores the portion of the mark for which
`registration is sought is ‘SCREENER’. and not SCREEN as set forth in the rejection.” Applicant has
`misinterpreted the explanation in the final refusal. The word “SCREENER” is the noun form of the
`word “SCREEN” which means, “to test or examine for the presence of disease or infection.” See the
`Internet dictionary definition attached to the February 8, 2007 Office action. Thus, the word
`“SCREENER” means something that tests or examines for the presence of disease or infection. This
`meaning is further supported by the Internet website evidence attached to this Office action and the prior
`Ofiice actions, which show the word “SCREENER” used in a descriptive manner to describe medical
`devices that test or examine for the presence of disease or infection.
`'
`
`Applicant further argues that the proposed mark does not suggest “the presence of ‘disease or infection”
`and that applicant’s goods are intended to monitor patients under anesthesia. Applicant explains that the
`goods “never tests or examines for the presence of disease or infection.” The examining attorney is not
`persuaded by applicant’s arguments. The word “DISEASE” means “a disordered or incorrectly
`functioning organ, part, structure, or system of the body resulting from the effect of genetic or
`developmental errors, infection, poisons, nutritional deficiency or imbalance, toxicity, or unfavorable
`
`file://\\ticrs-ais-01\ticrsexport\Htm1To.Tifi'Input\REC000l2007_09_O5_16_52_07_TTABO8...
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`

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`TRADEMARK APPLICATION NO. 78772030 - EEGSCREENER - KEDI EEGSUS
`
`Page 4 of 4
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`environmental factors; illness; sickness; ailment,” or “an impairment of health or a condition of
`abnormal functioning.” See the attached Internet dictionary definition. Applicant’s goods may be used
`to monitor patients under anesthesia in order to test and examine the patients’ electroencephalograph or
`electroencephalogram to ensure that brain is not disordered or incorrectly functioning while the patient
`is under the anesthesia.
`In other words, even under applicant’s argument, the proposed mark merely
`describes a purpose, characteristic, quality, function, feature, or use of applicant’s goods. See the
`Internet website evidence attached to the February 8, 2007 Office action from applicant’s website.
`
`Accordingly, applicant’s request for reconsideration is denied. The time for appeal runs from the
`date the final action was issued/mailed. 37 C.F.R. Section 2.64(b); TMEP Section 715.03(c). If
`applicant has already filed a timely notice of appeal, the application will be forwarded to the Trademark
`Trial and Appeal Board (TTAB).
`
`/Laura A. IIamme1/
`
`Trademark Examining Attorney
`Law Office 116
`
`(571) 272-8260
`
`STAT US CHECK: Check the status of the application at least once every six months from the initial
`filing date using the USPTO Trademark Applications and Registrations Retrieval (TARR) online system
`at http://tarr.uspto.goV. When conducting an online status check, print and maintain a copy of the
`complete TARR screen. Ifthe status of your application has not changed for more than six months,
`please contact the assigned examining attorney.
`
`file://\\ticrs-ais-O1\ticrsexpo1t\Htm1ToTifiInput\RECO0012007_O9_05_16_52_07_TTAB08...
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`9/5/2007
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`

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`Th8 l8tB$t tI’8fld$ ifl P38 UGVKBS.
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`w‘ridwca'nefirst,thectid<enortl\eeqg?Thesana
`westia1mld1tbeasl<edoftt'osern/dvedhthe
`davalom\erttofr1ewairrtprovedpotysonroqaphy(P$G)
`dagmsth: devlces. Doesthe eno'neer‘s idea came firstand
`thenisofferedtothemarkenotdoesthe mfufflednea!
`vice?
`sxemessedbyadaeptemhmeuermesmmafisnew
`
`-
`
`Thesmaieanswertsthatttlsacon'bhati3nofboth.$1eep
`rnecicine-—~and the devtes that support it-is constantly
`evolving with new chicd daonoses and sxzofm standards, as
`we! as techroloqtcal ‘nnovatian. Whie t
`wxartes ‘n 933 m.av.*.wc:v°
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`Market Trend
`
`Issue: January]February 2007
`What's New In PSG Dlagnostlcs?
`by To: Valenza
`
`” Em” mi’ MM‘
`» Reprint This Nude
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`,9 wrke um Edi“
`
`mWt».W
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`

`
`
`uuvoa mu.» an - u\4 nu»; ulgnuvu «an-u.uu buy; uvuuntalls; ulna
`patier1tcare.itprobabiywilriotsotretheorroohgsieep
`
`technologst shortaQe—-at least not yet.
`
`3
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`s
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`PRACTICE
`Calendar of Events
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`
`
`
`want to know
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`what's going on?
`Check out our
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`Podcosl:
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`>
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`
`M A R K E T I N G
`CONSUHATION
`
`DEVICE DEVELOPMENT
`Lawrence Epstein, NO, medical drama! of sleep Haaithcenters, Newton, Mass, and past president of
`the American Academy of sleep Medcine (AASM), has participated in refining some new equipment for
`mamfacturers.
`
`"Usually, manufacturers take the wrrent existing devices, speak with people who are ushg them, and
`seewhatimdsoftrtnsdzattheywanttododfferently. thentheytrytodewithenewerupdated
`version to moot the roqtiorrionts,‘ Epotoh wys. '80, for kzztanco, as stoop doctors want to stat |ook'rg
`at poise transit times or dfferent ways of measuring airflow, ‘device’ manufacturers wil bean to
`incorporate that hto the‘: axisthg devices.’
`
`Mick Farrel. vice president of maketinu at Rest-vied Corp, Poway, Calf, says that the company designs its
`products by first trying to exarrine what patients, physicians, and technologists need today and what wi
`ha nmrhd 3 tn 5 years in the infirm. ‘we lnnk at rvir-ririving those nnnr5<,irirbr<r.vv1irio which rims
`are rfiiiiooho to dive improvements h patient care, growth for the hdustry, and orofitablity for on:
`mar at
`' he says,
`Epstein says that it is iroortant for rnanufacturers to continue analyzing the market and creating,
`upgrading, and Irmroving their devices. ‘There are a lags number of manufacturers, and If they dorft
`keaoup, themarketwiishiftmderthern.Sorrreoftheoeoplewhousedtomakethaoidpaperciirives
`for steep systems are no longer h buSi‘BSS becwse it‘s al svgitched to data! eo.iprnent.'
`THE LATEST TRENDS: GOING WIRELESS
`The latest trends in pdysormoqaohic devices are mirroring the latest trends ‘:1 the consumer electronics
`market. Manufacturers are desiminu steep products to be smaler, lidwter, and portable, don; with '
`compiamentary dqitai software that will be compatble with electronic rnedical record (EMR) systems.
`
`Consequently, the same Biuetiooth“ and 802.11!) wireless technology that alows for raai—tI'ne data
`communication for consumer laptops and POAs aiso is becoming incorporated hto PSG diamostic devices.
`Likewise, faster cormuter chips, memory advances, and fighter, more durabie piastics are aiiowhg PSG
`devices to become smaler and more portabie.
`
`Grass-Teiefactor, West Warwick, RI, one of the pioneers in PSG recordho eqripment, recentiy
`introduced a compact wireless PSG system for sleep studies. The ALXlA® PSG uses buitin Biuetooth
`technology and a 25-chame! system to transmit PSG data to a computer recordna station without the
`patient being tied down by was. For portabie testing, the mode! also can store data on a removable
`flashcardonasrrialarripifier'systei'nthatiswornbythepatienthasmalpouch.Thedatacanbe
`upioaded later into the laboraizm/‘s PSG system software. The small arwlifier Lrit is about the size of a
`DOA.
`
`Simiariy, Nihon Kohden America, Foothil Ranch, Caif, has begun dstrbution of its new A':EEG wireless
`EEGIPSG recording system. which has the capabiity of recordng up to 64 chameis of sleep data. Whie
`the Grass~Teiefactor system uses Btuetooth technology to transfer its data to the laboratorys computer
`recordno station, Nhon Kohden desimed its system to hcorporate a secue medical-orade version of
`802.11b wieiess protocol. essentialiv the same tedinoioav used bv leptons at home or at the Iocai
`internet cafe. The AirEEG also has a smaii portable disc drive h the amoifier that car store data for up to
`an hour if the wireiess correction is broken for some reason. Past simal transrrission errors that plagued
`flrst~generation systems have been largeiy efirninated, especiaiiy with new backu: systems.
`
`Although wieiess PSG systems are axrenthr more exper‘srve_ than traditional cabled systems. wireiess
`PSG iends itself to several advaritaces for sleep laboratories and patients. Fist, it aiiovrs patients to be
`
`

`
`
`
`r-.~ row nu: rum: nu acvcru auvauoga: run seq.) raaaouaca or nu paucnu. urn, IL oauvu pcuuuu w 0::
`more comfortable. Second, wireless technology inproves effciercy when a steep study is interrupted.
`such as when a patient gets up suing the nidat.
`
`Mark Rizk, the business unit manager for sleep products at Nhon Kohtien, says, “With cable systems, you
`haveto3ohandu+ook[thepatjent1,Lrhooktheoxirieterprobe.serrdtherntothebatt*roorn,arid
`thenho
`timer-ribacl<uoandoetbacl<h'rtot|'ieroom.So,ti1ere'salotofeaseofuseinvolvedh
`[wieie-ss].' The AirEEG system has a range oftp to 350 feet between the ampifier on the patient to
`the recortfing base station.
`
`Perhapsthemosthtriotirzoadvantaoetoasteepcentermanaoerlowhororexnabedspaceiswreless
`D96’: portability. The systems are relatively simple to set up h a hospital room--or any other location.
`Rizk notes that many off~sr'te sleep laboratories are usho Nihon Kohden's AHEEG systems.
`
`‘we have several major hotel lnstatatiorisf he says. ‘Some of them use AHEEG, with a combination of
`cabled ampifiers, but the MEG is certahly a good soiution for that khd of situation. If that contract
`runswtwiththehotel,ywca1ptktpyuJmodtahoeq.iprrier1tar1dbave.vflU1fi'reAiEEGwieiess
`system, its a lot easier to do that. Aocutionairy, the contract with the rotor has to be more corrpiex
`because you have to talk about runnho cable for fixed ampifier
`
`TRENDS IN HOME TESTING DEVICES
`Although new wireless 6356 systems are portable, they are manly desigted to be used for attended
`sleep studies that record complex channels of data. For nonretnbused & home diagnostic screenhg of
`obstructive sleep apnea (OSA), tl'Bre as many prothcts with portable ‘rmvatiors—thoud1 none are
`sanctioned by the AASM or insurance companies.
`
`Nonetheless, manufacturers conthue to develop home testrg devices for Europe and Asia, where they
`are widely accepted by ptblc medical systems for reimbursement. In America, home testing devices are
`uidkatuu diir.-Jlly as GSA scrueriiu th:rvlt.u> fur primary Lav Lirysttjaro ad the? ualksrils wiliru to pay
`cash for the tests.
`
`As with the sophisticated 32-channei laboratory PSG systems, manufacturers are designing the devices to
`be small, portabie. and smile, though without neoessarly reduclno daonostic features. For exarmle,
`Nihon Kohderrs E05 Arntulatorv PS6 Screener is smal and Ecxhtweidwt with nine-chamel ohyslolodcai
`data recorcing. its sensors record oxygen saturation, pulse rate, aiflow, snoring, thoracic and abdominal
`respiratory effort, periodic limb movement, and body position, though not EEG. It also includes NYX, a
`slrrpie scomg software designed for a respiratory therapist or physician that may not have a iot of sleep
`training.
`
`New hot-ne_—testing device: also can be as unoortolicated as rlesMed‘s Apneaunk, a single-channel
`screening device that was origlnaly developed h Germany and later adapted for American physicists
`who wanted to lncnde measuement for pulse oximetry. Farrel says that the ApneaLink's target is to
`have zero false negatives and that it has approximately 5% t_o10% false positives.
`
`How these home«test'rio PSG devices compare to the accuacy
`ot laboratory PSG testhg is a matter of qeat debate in the
`United States, though many foreign medical systems smction
`horne-saeer1r\gdevicesforOSAtiagmslsarx1welcorriethemfor
`tfeir cost savings. itwk believes that Amaican insurance
`companies wil eyentudy become more open to home testhg for
`the same reason.
`
`m cine.
`
`Astor theAASM,EpsteinsaysthatitisstiIeva!uat'ngthe
`pogntlal for portable monitors and their appropriate use it steep
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`
`Rizk mderstands the AASM's caution. ‘I tiink the AASM is being conservative about supporting [home]
`testing because they want to make sure there's a general quality of care out there that mahtains the
`integrityofthefieid.Theyneedtodomat..rdIcm1mrddemfudohgmat,mtatttesaneum,
`we're talking about health care costs, wfich wit be driven down with more people being tested
`[through home testing devtes].
`
`Automated Scoring and the changing AASM Guidelines
`
`The AASM cmrentiy is crafting new scoring criteria, which wl ‘neyitabiy cause dfiite makers to modify
`that automated scorhg aigoritims to corrply with the new standards.
`
`All laboratory D96 acqxjsitzlori software incorporate: aloofithns for some level of autornated scoring.
`However, the algorithms that define deep stages are based on the 19603 criteria created by
`Rechtschaffen and Kales.
`
`“The Rechtschaffen and Kaies criteria addressed only how toscore sleep in normal adults,‘ Epstein says.
`"Since that time, we‘ve recognized that there are a lot of abnormais, and that there are a lot of other
`events than iust sieeo stapes. And so this [review of scorho criteria] was an attempt to look at the
`scientific evidence that has accurrulated sirce that time, and see how we update and expand the
`scoring criteria. It's gong to affect the technology, in that as this [update] becomes the new stardard,
`it shoud be incorporated into the bddng of devices.‘
`'
`
`Rizk knows that the new scoring criteria will affect Nitvzn i<ohden's automatic scoring software. and the
`cornparrywihavetomiddyadaptthenewg.rideiinesintoitssoftwareforPSGdevices.Hesays,'we‘re
`gongtohavetorecategorizesieep,a1orehdexouariaiysisottherecordbasedor1ti'ieriewcnteriaiot
`sieepstaging. It's had tosayhowlargeofanimpact,butIwcruidI'nawieit'sgoingtoinpactmmt
`verdors sirriiarly."
`
`Epstein says that the new scorhg manual wt! hduw tectricd specifications, such as what leads shodd
`be recorded. how best they shouid be recorded, aid updated ujdeines for how to hterpret the data.
`He aisu notes that the AASM ha: Luisuited with riiariulai.i.u'ers in we wiiellier the Ii-:LLlilllt£lU&J
`changes are feasble and practtal, but that the final scoring criteria changes will be made on the basis of
`the evidence and the experts involved h the process.
`
`The new AASM guidefines are schecued to be published sometirnein the spring of2Co7.
`
`FUIUYQ TGCNHOIOQV V5 RPSGTS?
`
`AstheRP$GT shortagecontmes, somewonder whetherhcmePSGtest'ngar'idadyaricesriscor‘rig
`algorithms wit eventualy become so accurate-and cost efficient—that the demand for RPSGTS wii
`substantially decrease or be dmhated entreiy.
`
`Epsteinbeiieyesthatwhiecorrpariesmayimrovetheaccuracyaridreiabiitvoftechnoiocjesfor
`screening, dagnosis, and treatment. the advancements wfi never replace qualified _technoiog‘sts.
`
`’$ieepapr'eaisrntasir*adedisorderwhereeverybodyhasthesa'ne thing,'saysEpstein. 'You‘realways
`going to need peopka who can dfferentiate the subtleties ard dscririnate between the severity of
`ilness. The more you can automate the process, reduce eyduation tine, acuiisition tine, and
`preparation time, the more that M! improve the efnciency, and therefore help with the Initauons that
`currentiy exist. As demand hcreases, you‘re going to be better able to handle it. but 1 don't thric you
`will be able to My eirninate the need to have well-trained tecmoiodsts avaflabie.‘
`
`Rizk, an RPSGT for 20 yeas, agrees. “I don't believe that sleep techs are going to be dinosaurs. I believe
`thefleldisgoing tocontinuestrongiy. Andnotoniythat, I thinkthefact thatyouwiibedoingmore
`n-.o:-t.- -sou-I «rifle-.o-w husar a-.5 tn.-to ml auskshlxr vnslan Mun A~»s on-la‘; so-J-s -«an Asp.-w-cu and mm-vv-I
`
`

`
`
`
`patients an?! dfferant types of test's'w§ probabk niake the sleep tech‘: job mdre aiverse and éxpand
`their job responsbiity."
`
`7'01 Va/72313 .9 staff write folsieep RBVEWJQ tmba rsachedaf
`
`Related Articles - Market Trend
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` These search terms have been highlighted: screener medical deirlce
`
`
`_
`An Executive interview with
`Alan Neison, F’h.D., President and
`CEO of NeoPath inc.
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`Alan Nelson, F‘h.D., planned to he a rock and roll star when he was growing
`up outside Phoenix. Following his parents‘ divorce, Nelson became ‘pretty
`,
`lndividuallso‘c,' playing in arockband andreadingagreatdeal.Because’one
`California. At USO, Nelson earned a 8.3. in physics, which led him to work at
`NASA‘s jet propulsion laboratory. 'That," he said, ‘is where my interest in
`imaging started.'AtNAsA, Nelson helped design an Imaging spectrometertor
`Jupiter satellite Pioneer 10. He then loined Xeroxs ulexitcal Diagnostics
`|?i"b‘iii?J'ht’vBl?§."§'6'é'&i§ilfi‘fid°fil‘rhiiia‘r%’a?'iHlaBli?ifi"B3§iiti“6ii“htt"éh'§ln’é'§rlh§Y
`science, and rnadical background, Nelson was appointed iolntiy to the
`Harvard and MIT faculties, and he held an endowed chair at MIT. He created a
`Radiological Sciences program for MIT and Harvard; ltwas the counws tlrstto
`offer Ph.D.s In imaging and other aspects of radiology, as well as HDtPh.D,s.
`On sabbatical in Europe, he was named visiting scholar to the Royal Society,
`LABORMORY
`and worked to break through departmental barriers in Europe's academic
`system.
`to effect collaboration among radiologists. pathologists. electrical mnusmv “PO”,
`engineers, physicists, and computer scientists. Recruited in 1987 by the M1,“,
`,“mW_,,W_,«
`University of Washington, Nelson constructed and chaired the Center for
`‘ ““““““““‘“‘““““““"
`imaging Systems optimization, rorwhlch he gained funding from companies
`_
`.
`such as IBM, GE. and Siemens. There, he developed a Ph.D. program that Clinical
`ultimately competed with the one he'd built at Mmi-lanyard. Nelson Joined
`forces with venture capitalists in 1988; together they founded NeoPath in
`[fiaboratory
`a»..n.». ni..L.._..xa....n....‘... ......u.....:......-........-.« ..s...... -.u.z.........a
`January 1989 in Redmond, WA. Nelson later resigned from UW to run
`ews
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`NeoPath. University colleagues questioned why he would give up his tenured
`position to head a company that rnlghtfall. ‘Taking a risk meant that. it i was
`successful. i could help save some lives — and thetwas importantto me,‘
`Nelson explained. ‘I never had 8 sense of entitlement - i always thoughtthet
`you had to continually earn your own way and find a wayto contribute.‘ he said.
`when not at Neoi-‘am, Nelson‘ along with his wife Sharon tvereon, likes to
`restore old houses; theyve lived in seven different homes in the last12 years
`— from Victorians to barns. Nelson learned to install plumbing and electricity
`and to refinish floors. His parents, who were both farmers alone tlme,taught
`him much about hard work.
`
`in the following Interview, Nelson. 47, discusses his work at NeoPath:
`developing the AutoPap system. a fully automated instrument approved bythe
`FDAto re-screen normal Pap smears to tlnd abnormal cells that humans may
`have missed»
`
`Focus on the Economics of the Diagnostics Business
`
`Bauer: How has the diagnostics business changed in the lestrive years. and
`how has this change affected start-up companies?
`
`Nelson: One change is a tremendous focus on the economies surrounding
`the diagnostics business. The financial picture for the clinical laboratory
`business, particularly in the Iaslfew months, is aimost a disaster. The largest
`laboratories have huge pressure to improve profitability -— both gross
`revenues and cost containment. Organizations like Laboratory Cornoratlon of
`America, the largest clinical laboratory in the world. are struggling from the
`merging of two cultures -— Roche Biomedical and National HeaIth.Thelr stock
`has hit an alitime low.
`
`Corning, another of the laboratory iants, is now being spun off as an
`independent company. SmithKline. which I believe is the healthiest olthem all
`~- is probably looking at further consolidation. driven princlpailybyeconornics.
`Il‘s becoming more dillicult for a clinical
`laboratory to operate in this
`environment; by the end of this decade there will be a handful of centers of
`excellence that have figured out how to conduct business in this environment
`—- and they will dominate the market in terms of start-ups, two/to issue:
`recently took a beating. and a lot of lP0s were pulled oil the market. lbeileve
`that many pending lP0s did not deserve to be public companies. There's a
`very high possibility that a lot of those iPOs, had they been successlul.would
`have lefl shareholders very disappointed. All in all, even though it hurts. the
`shakeup in the IPO industry has probably been a good thing.
`
`Challenges Facing the IVD Start-Up
`
`Bauer. What are the most critical challenges facing ND start-up companies
`today’?
`
`the business. There are fewer and fewer
`Nelson; Sourcing cash for
`investment llrms willing to invest in seed capital for the earliest stages ul a
`startup. Fortunately. they are still willing to make smaller investments to
`nurture companies. were uolno to need more sustaining capital in the pre-
`
`

`
`
`nurture COl'Ylp3nleS. were going to need more sustaining capital in the pre-
`lP0 stage to support companies. because I think IP09 are going to be further
`down the road. Before they have a successful IPO, companies will have to be
`more mature and less of an investment risk. To start a company, you might
`have to consider financing it yourself to get it underway, then raise capital.
`Previously, capital were available to organization: that had a compelling vision
`but hadnt demonstrated anyvalue ~- I thinkthose days are gone.
`
`
`
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`$‘:.n‘e 258$
`
`Bauer; As youve noted, some companies have had very difficult IP03; some
`have been pulled baclc But wall Street was good to you in your $62 million
`effort and also to Cvtvc. in its salt million effort What was the attraction?
`
`Nelson: For NeoPath the attraction is that Pap smear screening is viewed as a
`potential breakaway market A successful company could be come a billion-
`doilar enterprise. That‘s exciting to Wall Street, as is the possibility of
`revolutionizing an industry that today is conducted very much the way itwas 40
`years ago. NeoPath has continuously delivered on milestones ——we lay them
`out years in advance and hit them on target or exceed expectations. investors
`can look at what ways promised and see that we did it. Weve been
`successful with the FDA process, which impresses investors who would have
`expected that we ' d still be waiting (or FDA approval on our first product our
`clinical studies were very thorough and convincing, and we got PMA approval
`from the FDA in only seven months -—the fastest ever for a Class III medical
`device,
`
`Cytyc also now has a favorable track record with the FDA, and they do have a
`very nice tecrmolooy. I tninkthevre viewed as a complement to NeoPalh: cvlyc
`builds a better Pap smear, and NeoPath provides a more accurate and
`economical analysis of the smear.
`
`Automated Pap Smear Screening Economics
`
`Bauer. Your recent FDA approval for Au1oPap tor rescreening normal Pap
`smears was a landmark in this field. How did it come about?
`
`Nelson: in the late 1980s, there was a verylnslghtfui article in The Wall Btreet
`Journal that identified ehortcorninge in Pop leaking. The problem ie that the
`Pap test is very ditticult. The cervix is scraped, cells are spread onto a slide
`and it
`is sent
`to a clinical
`laboratory:
`its stained,
`then viewed by a
`cytolechnologlst with a college degree and one year or specialized training.
`The cytotecnnologlst looks for very subtle chenges—- early indications of
`cancer—- in many different kinds of cells. The cytotechnoioolsts do find most 01
`the disease cases and identify most women at risk orgeitlng cancer, butlhey
`also make rnislakes— which can become tragic mistakes. They occasionally
`miss a cancer (false negative) — the patient is told shes normal and the next
`thing she knows her life is threatened. This is a particularly difllcull industry
`because a Pap smears coetls already at rock bottom. At a few dollars, it's the
`cheapest cancer preecreenlng tact available In the clinical lab bueinec:—it‘s
`very undervalued. it is one of the few tests that has been successful in the
`prevention of any cancers. in the us. lthas resulted in a 10 percent reduction
`in death rate just by early detection. But for a product to be successful in this
`business, it has to improve the standard of care and curb cost
`
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