Penta Water

AquaPhotonics created an exclusive licensing agreement for its technology with Penta Water Company (PWC). This agreement enabled PWC to capture the premium drinking water market in the Health Food Store marketplace. Collectively the agreement produced over 70 Million dollars in wholesale revenue for PWC. By 2005 Penta Water products were in 90% of US Health Food Stores. The bottled water industry is over 40 Billion Dollars worldwide and is expanding at 7% annually.

 

AquaPhotonics Strategic Structure

The Company’s primary function will be the continuous development of new technologies and applications of its core technologies and other related technologies. The goal of this development is to position the Company as an intellectual property holding company. The Company may consider categorizing this intellectual property and divesting it tax-free into separate corporate entities that will focus on the targeted industries: pharmaceutical, nutraceutical, cosmetic, agricultural, medical care, and industrial. The management of Aquaphotonics will actively seek opportunities with strategic corporate partners to further each of these strategic business units.

 

Technology Platform

The Company believes that AquaRx’s physical properties represent significant technological advances for a number of the products and services marketed by the pharmaceutical, nutraceutical, cosmetic, medical care and other industries. Many of the products sold into these industries, such as liquid medicines, liquid nutritional supplements, facial creams, medical solutions and solvents, are primarly water. Many of AquaRx’s characteristics make it superior to ordinary water for these kinds of applications. Simply by using AquaRx as a replacement for normal deionized or distilled water, companies can improve their products.

In addition, the Company’s ability to nanosize various substances by using its proprietary process will enable the development new applications of various substances that were not thought possible before.

The Company believes that by marketing engineered nanosized solutions along with its water as a technology platform, it will create a new, large and lucrative technology market. The Company and/or its strategic business units will identify and enter into licensing or distribution agreements with established category leaders in the pharmaceutical, nutraceutical, cosmetic, medical care and other industries for the development, marketing and distribution of co-branded products and services. For co-branded applications, the Company intends to brand AquaRx as the underlying technology platform on which the industry partner’s product is based. Partnering with industry leaders will help to enable the Company to establish a dominant early position in those industries as the premium source of water technology and help to forestall future competition. Co-branding AquaRx as an underlying technology brand will enable the Company to work with multiple companies in the same industry.

 

Target Industries

Pharmaceutical, Nutraceutical, Cosmetic, Agricultural, Industrial Products

According to the United States Treasury and industry sources, the pharmaceutical and cosmetic industries each generate annual worldwide revenue of $45 billion and the nutraceutical industry generates an additional $15 billion. Many of these products contain essentially the same ingredients and taste alike or otherwise have a similar effect on the consumer. In such cases, competing products are differentiated principally by the secondary messages delivered through massive brand marketing campaigns.

AquaRx’s hydration capabilities and physical properties can greatly improve the delivery and efficacy of cream, lotion or liquid drugs, nutritional supplements and cosmetics. In such cases, these properties would enable manufacturers to create products that would actually make the consumer feel different, such as a drug solution that uses a smaller amount of an active ingredient with no loss in effectiveness or a face cream that makes the skin feel softer or removes wrinkles more effectively.

 

Medical Care

The National Institute of Health estimates that direct spending for medical care of cancer alone topped $37 billion. The healthcare industry categories for the treatment of heart failure/pulmonary edema and renal failure and dialysis add $25 billion and $10 billion in annual sales, respectively. By reducing edema and increasing the body’s own disease fighting and repair capabilities, AquaRx can also improve the efficacy and reduce the side effects of a number of medical procedures. The largest consumer of medical healthcare dollars is Type 2 Diabetes. In the United States, the annual cost of treatment and research related to this disease is over $100 billion.

The Company is currently completing a protocol for a double-blind, double crossover, placebo-controlled clinical study on the benefits of AquaRx water for chemotherapy patients.

 

Technology Licensing

The Company intends to enter into technology licensing and distribution agreements for the manufacture, marketing and distribution of co-branded products and services. Partnering with category leaders will help to speed the introduction and ensure the success of AquaRx-based products and services. This will be particularly true where products require prior FDA approval or substantial marketing and branding campaigns in order to succeed. Industry leaders have regulatory experience, sales channels and marketing resources that would take the Company years to develop.

 

IP and Research & Development Strategy

The Company has established a solid approach to its IP development and acquisition. Nevertheless, significant skepticism still exists among the medical, scientific, and industrial community that could be harmful to the Company. Therefore, one of the company’s key priorities over the next two to three years will be a fundamental and applied research approach using structured water and liquids. This approach and its applications will continually improve the company’s position as a high-tech entity and establish a positive reputation with the use of its technology through publications, presentations, press releases, interviews, and participation in major conferences and congresses.

Before the Company takes any business step, it will be necessary to have a solid scientific foundation supporting a new business investment or development. The Company will also carefully evaluate when to release its scientific information to the general public, scientific, and corporate community. Only data having solid scientific support will be approved for such a release.

 

Initial Target Markets

Skincare and Cosmetic Markets

Prior to the 1990s, skincare was a fairly straightforward matter of cleansing, toning and moisturizing. Today, however, the market is flooded with innovative, high-tech formulae that continue to address new and untapped consumer needs.
New product introductions coupled with the growing "anti-aging" movement within the U.S. and abroad, are to a large part responsible for the 41% growth experienced by the facial skincare segment from 1996 to 2001. Another contributing factor in the success of the facial skincare category is that its appeal extends across all demographic boundaries regardless of ethnicity, education, or income, providing a wealth of opportunities for mass, prestige and alternative channels of distribution. Although sales of traditional moisturizers have remained fairly stagnant, the industry saw the birth and invigorating growth of a new segment containing anti-aging products, including products that fade or bleach the skin. Facial cleansers also experienced incredible growth during this period making it no longer a distant runner-up in the sector. In addition, the growing interest in cosmeceuticals has contributed to the overall growth of the industry, adding 6% annually.

Kline & Company reports that the worldwide market for cosmetics and toiletries reached nearly $150 billion in 2004, up more than 4% from 2003. Euromonitor International reports that the overall cosmetics market in 2001 was $24.4 billion worldwide. According to MarketResearch.com, the facial skincare segment of the market was $6.7 billion in the U.S. in 2004, with the prestige segment contributing $2.5 billion. Facial moisturizers’ share of the total skincare market was 45%.

Over 100 companies market skincare products in the U.S. Most specialize in particular sales channels, but the large companies have a presence in both mass and specialty retail outlets. Four companies dominate the mass market: Johnson & Johnson, Unilever, Proctor & Gamble, and Kao, which markets its products through its Jergens subsidiary. Two companies dominate the prestige skincare market: Estee Lauder leads followed by L’Oreal.

Outside the U.S., the European market comprised a significant portion of the international market with France, Germany, Italy, Spain, and the U.K. as the leading European countries.

The Company’s first FDA-approved use of AquaRx is in a carbon lotion used for dermatology and plastic surgery. The product is a branded Laser Shielding Lotion and is manufactured by Telsar, Inc. of Wood River, IL.

 

In Vitro Diagnostics (IVD) and Cell Culture Media

The ability to maintain large, healthy colonies of cells is central to a number of applications in molecular biology. The end products of mammalian cell cultures are used to produce anti-body products, vaccines, and therapeutic agents. Cell culture reagents include cell culture media, sera, and media supplements.

According to Marketresearch.com, the overall market for IVD and cell culture media is projected to be $20 billion in 2005. This market is viable for AquaRx because of the significant biological benefits the water can bring to cell culture media, reagents, and microbiology, virology, serology, cytology, and histology products. In addition, we believe AquaRx can enhance research in the area of molecular research and drug discovery.

The collective cell culture reagents market, including the serum and media supplement markets was approximately $108 million in 2004 in the United States. The U.S. Serum market, $100 million in 2004, is most substantially composed of fetal bovine serum (FBS). Revenue growth has been flat, and is projected to continue along these lines through 2007. The reasons for such anemic growth are multi-fold, with efforts by the Food and Drug Administration (FDA) to minimize the use of animal sera being in the forefront.

The introduction and acceptance of serum-free and synthetic growth media is projected to make a greater impact in the future. The most apparent trend in the serum markets today is the movement away from animal based products to those of extreme purity or chemical definition. This trend is being motivated by a combination of strict regulation and limited supply. The use of fetal bovine serum has become tradition, with impurities in the serum routinely leading to difficulties in cell culture. This is especially true of mammalian cell culture, because these cells require well-balanced environmental conditions for proper growth and maintenance.

The expiration of certain patents requires the market participants to focus product development efforts on developing or acquiring new technology combinations to extend intellectual protections and further product differentiation.

AquaRx provides the market participants with an opportunity for significant product differentiation and potential patentability. Our objective is to target the market leaders and offer them the ability to license our technology to make superior IVD and cell culture media.

 

Ophthalmic Pharmaceutical, Consumer Eye Care Market

According to Bausch & Lomb’s 2004 annual report, the global market for ophthalmic pharmaceutical products is growing at a rate of 8% per year and amounted to approximately $8.8 billion in 2004. The global vision care market was $6.3 billion in 2004 and is growing at about 5% per year. The ability of AquaRx to more effectively deliver biological components makes the water compelling for product differentiation.

According to Oculex Pharmaceuticals, ophthalmic clinicians and industry analysts agree that back of the eye therapeutics are the next frontier in ophthalmology. These new products will be the first capable of effectively treating back of the eye diseases, most of which are largely untreatable today and which account for most cases which threaten sight.

Drug delivery to the inside of the eye continues to be one of the greatest challenges for ophthalmic drug manufacturers. Eye drops have been the standard drug delivery system for over a century. However, current eye drop therapy provides limited penetration into the front of the eye and virtually no penetration into the back of the eye.

Fifty-five percent of all debilitating eye diseases and conditions occur in the back of the eye. However, less than 5% of ophthalmic pharmaceutical sales are derived from drugs designed to treat these disorders. According to UBS Warburg, the $100 million back of the eye market will significantly expand to $2-3 billion over the next few years. Dain Rauscher Wessels estimates that therapeutics for age-related macular degeneration alone may represent a $2 billion market opportunity.

Another factor driving the growth opportunity for intraocular drug deliver systems is demographics. Since eye diseases are predominantly age-related, industry analysts believe the aging population will contribute to an increased demand for new, effective ophthalmic products.

Approximately 16 million Americans have diabetes, a condition that can cause sight-threatening complications such as diabetic retinopathy and diabetic macular edema. Approximately 15 million senior citizens in the U.S. suffer from some form of age-related macular degeneration.

The Company’s strategy for entry into the ophthalmic industry will be primarily based on collaboration with existing market leaders. We will leverage our proprietary drug delivery system, AquaRx, and sell it in quantity or license its patented technology for onsite production. Target companies include Allergan, Alcon, Ciba Vision, Santen, and Oculex.

 

Drug Delivery Market

Pharmaceutical companies have looked increasingly to drug delivery companies for help in life-cycle management of drugs on the market and with promising yet hard-to-deliver drugs. The drug delivery market is currently valued at US$50 billion. Nasal delivery commands the fourth position in market share, with about US$3 billion in sales, following oral controlled release, pulmonary and parenteral delivery routes. However, the potential for growth in this sector is extensive, pending the successful delivery of proteins and peptides as an alternative to parenteral delivery.

Currently, many nasal drug products on the market are indicated for the treatment of local disease such as allergic rhinitis. However, this is likely to change soon. There are a number of nasally delivered, systemically acting drugs on the market in different therapeutic categories, with a growing number of products in the pipeline. There are many reasons for this change, including improved patient compliance (elimination of needles), avoidance of first-pass metabolism and rapid onset of action. Migraine is a key area where a nasal system (Imitrex® nasal spray, GlaxoSmithKline) has provided rapid relief, avoidance of taking an oral formulation while nauseated, and pain-free administration circumventing the need for an injection. Other therapeutic areas where nasal delivery could provide an alternative to current dosage forms are crisis situations (seizure and heart attack), erectile dysfunction, pain management, motion sickness and psychotropic drugs. Although the market share for nasal delivery may never take the number one spot enjoyed by oral controlled release, it remains a drug delivery route with an enormous potential for growth. (Pharmatech 2003)

 

Tissue and Stem Cell Preservation Market

While the overall market for tissue and stem cell preservation is projected to be over $12 billion by 2005, the Company will focus on selling AquaRx to those companies most actively involved in creating products for progenitor cell therapies and companies involved in the extraction, preservation, and storage of stem cells.

Products and applications for these targets include cell separation and purification systems, stem cell expansion systems, scaffolds for seeding cells, autologous cell products, autologous cell based gene therapies, cell based cancer vaccines, allogenic and xenotropic cell therapy systems, organ preservation and transplants. Companies developing these products include Aastrom, Amcell, Ariad Pharmaceudicals, Baxter Labs, Biochem, BioHeart, Biosurgery, BioWhittaker, Curis, Dendreon, Diacrin, Enzo, Genzyme, GVAX Vaccines, IsoTis, Ixion, Nexell Therapeutics, Novartis, Ortec Select Therapeutics, THM Biomedical, and Vitrix. (Stem Cell and Progenitor Cell Therapy: Current Uses and Future Possibilities – BCC, Norwalk, CT)

Research and Product Development

The Company’s research and development activities will be conducted under the direction of Bill Holloway and Michael Holloway will also be involved in the Company’s R&D effort.

The primary objective of the Company’s investment in research and development will be to develop product applications for its technology.

Design and engineering work has been completed on the system that will be used by customers to process AquaRx at their own facilities. This will be a completely self-contained skid-based unit that will be capable of producing about 700 liters of AquaRx per hour. The system will be inserted into a customer’s existing water production system after the purification process and before the storage tanks. The AquaRx processing unit will only be accessible to Aquaphotonics’ service personnel. It will be connected to the Internet to enable real time monitoring of system functions, performance, and production levels. The Company will service the unit under contract with the customer.

The Company has a world-class Scientific Advisory Board (SAB) comprised of top scientists from around the world. Board members include Dr. Jakob Bohr, grandson of Nobel Prize winner Neils Bohr and Professor of Physics at the Technical University of Denmark;.

 

AquaPhotonics Research Guidelines

1. Assign each research project to one of the four categories (below) and keep a reasonable balance among them for across-the-board impact.
2. Each research project should be carefully evaluated for its intellectual property (IP) content and impact. The goal is to establish the strongest possible patent portfolio for AquaPhotonics that can generate the highest financial return on investment.
3. The goal of each research project should be to deliver results that are accurate, simply understood, and suitable for consumer/investor digestion, and
4. Each research project should have strong input by the SAB from the proposal stage, through the funding level(s); with ongoing monitoring of progress, and final filtering prior to undertaking marketing claims, brochure descriptions, and/or posting on the AquaPhotonics website.

 

Research Categories

Four research categories will be used to organize the research efforts of the Company: Biological (B), Physical (P), Pre-Clinical (PC), and Clinical (C). The PC category involves animal studies and the C category relates to human trials and/or testimonials or anecdotal evidence of health benefit. B and P areas will provide solid and publishable evidence regarding the differences between AquaRx water and regular water, whereas the PC and C categories will supply evidence of health benefits that can often require lengthy and repeated studies to enable scientific publication. The goal is to provide sufficient evidence of the differences and benefits of AquaRx versus regular water and, in total, to provide a clear-cut and compelling comprehensive case for its superiority.

 

Grant Strategy

As a part of its strategy to constantly development and enhance its intellectual property, the Company expects to apply for a significant number of government and private foundation grants. Even though the Company expects to win a number of grants during the next few years.