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ElectroOptical Sciences Inc Reports Operating Results (10-K)

March 03, 2011 | About:

ElectroOptical Sciences Inc (MELA) filed Annual Report for the period ended 2010-12-31.

Mela Sciences Inc has a market cap of $77.5 million; its shares were traded at around $3.07 .

Highlight of Business Operations:

Skin cancer is the most common form of cancer in the United States. More than 3.5 million skin cancers in over two million people are diagnosed annually. Each year there are more new cases of skin cancer than the combined incidence of cancers of the breast, prostate, lung and colon. It is estimated that more than 114,000 new cases of melanoma were diagnosed in the U.S. in 2010 more than 46,000 non-invasive (in situ) and more than 68,000 invasive, with nearly 8,700 resulting in death and a similar number of new cases is projected for 2011. This has resulted in melanoma being the cause of one death every hour of every day of the year in the U.S. Melanoma is responsible for approximately 75% of skin cancer fatalities and is the deadliest of all skin cancers as there currently is no cure for advanced stage melanoma. However, detection of early melanoma, can lead to virtually a 100% cure rate. Advanced stage melanoma is costly to treat and is responsible for approximately 90% of the total spending on melanoma treatment in the U.S., costing up to $160,000 per patient. If diagnosed early, however, early melanoma is almost always cured by simple resection at a cost of approximately $4,500 per patient. The cost of treating a Stage IV melanoma is estimated to be more than 22 times the cost of treating a melanoma at the melanoma in situ stage.

Cancer of the skin (non-melanoma and melanoma skin cancers combined) is the most common of all cancers, with over 2 million projected cases annually, and is estimated to account for almost 50% of all cancers. Melanoma is the deadliest form of skin cancer and in 2010 accounted for an estimated 8,700 deaths. It is estimated that more than 114,000 new cases of melanoma were diagnosed in the U.S. in 2010 more than 46,000 non-invasive (in situ) and more than 68,000 invasive, with similar numbers projected for 2011. There are three significant forms of skin cancer: basal cell, accounting for approximately 75% of skin cancer cases; squamous cell, totaling approximately 20% of skin cancer cases; and melanoma, which accounts for an estimated 4% of skin cancer cases, but is responsible for approximately 75% of all deaths from skin cancer. The American Cancer Society projects over 10,000 deaths annually from all types of skin cancer. Since 1973, the mortality rate for melanoma has increased by 50%. Because approximately 62% of melanomas and 45% of melanoma deaths occur prior to age 65, melanoma places significant burdens on the healthcare system well beyond Medicare.

Melanoma can be fatal if left untreated. If diagnosed and removed early in its evolution, when confined to the outermost skin layer and deemed to be in situ, it has a survival rate of almost 100%. Invasive melanomas that are thin and extend into the uppermost regions of the second skin layer still have excellent cure rates (greater than 90%). However, once the cancer advances into the deeper layers of skin, the risk of metastasis (spreading to other parts of the body) increases. Metastases can occur when the tumor enters into lymphatic channels and newly formed blood vessels, potentially resulting in significant morbidity (illness) and mortality (death). Once the cancer has advanced and metastasized to other parts of the body, it is difficult to treat. At this advanced stage, the five year survival rate is about 15% to 20%. Moreover, survival prospects for those with advanced melanoma have not improved over the past three decades.

In terms of incidence, melanoma is currently the fastest growing cancer and the subject of significant attention in the medical community. A publication from the National Cancer Institute (report published in the July 10, 2008 online edition of the Journal of Investigative Dermatology) indicates that the annual incidence of melanoma among young adult Caucasian women rose 50% between 1980 and 2004. Unlike many other common cancers, melanoma has a wide age distribution. In fact, it is one of the more common cancers in people younger than 30, the most common cancer in women aged 25 to 29 and the number-one cancer killer of women ages 30 to 35. Melanoma is virtually 100% curable if caught early, though no cure is currently available for advanced-stage melanoma.

The MelaFind® pivotal clinical trial was conducted at seven centers across the U.S. and included 1,831 pigmented skin lesions from 1,383 patients. Prior to the start of the study, the Company and the FDA entered into a binding Protocol Agreement to stipulate the sensitivity and specificity endpoints that should be used to determine the safety and effectiveness of MelaFind®. MelaFind® detected 112 of 114 (98% measured sensitivity; lower confidence bound of 95%) melanomas that were eligible and evaluable for primary sensitivity endpoint analysis, and 125 of 127 (98% measured sensitivity; lower confidence bound greater than 95%) melanomas overall. Importantly, MelaFind® detected 172/175 melanomas and high grade lesions (98% sensitivity; lower confidence bound greater than 95%). The Protocol Agreement called for sensitivity endpoints of greater than 95% lower confidence bound (a lower confidence bound of greater than 95% indicates that if the study were repeated, there would be less than a 5% chance that the sensitivity would be below 95%). MelaFind®s specificity (9.5%), the ability to accurately rule out disease, was significantly superior to that of the study dermatologists (3.7%), who are skin cancer experts (p-value less than 0.02). The Protocol Agreement calls for MelaFind® to be more specific than the study physicians at a p-value of less than 0.05 (a p-value of less than 0.05 indicates a less than 5% probability that the observed difference was due to chance).

In order to generate a comparison with physicians ability to accurately detect melanomas, the Company conducted an online reader study in which 155 physicians participated including 110 dermatologists. Using images and clinical histories for 65 randomly selected melanomas from the pivotal study, this group of dermatologists, on average, missed (i.e., would not have elected to biopsy) 28% of the melanomas. The biopsy sensitivity of MelaFind was 97% (p < 0.0001 versus dermatologists). In addition, variability was observed in dermatologists decisions to biopsy, measured with a kappa score of 0.29. This indicates that dermatologists often did not elect to biopsy the same lesions as other dermatologists participating in the study (note: a kappa score of 1.0 would indicate perfect agreement, while a score of 0.0 indicates no agreement).

Read the The complete Report

About the author:

Charlie Tian, Ph.D. - Founder of GuruFocus. You can now pre-order his book Invest Like a Guru on Amazon.

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