Delivering A New Non-Invasive Meter, Did Biocontrol Bite Off More Than It Could Chew?

Biocontrol Technology, Inc. has been receiving a great deal of attention regarding its Diasensor 1000 non-invasive blood glucose meter. Stockholders have been calling the (DIABETES HEALTH) office asking if we know what is going on with Biocontrol-when will the device be ready to market?

Biocontrol, based in Pittsburgh, is one of many companies competing for a non-invasive method of testing blood glucose levels. The company has fallen behind schedule in its attempts to produce a working prototype. Biocontrol canceled its $32.5 million contract with its German-based distributor, Imaco, on February 20th, claiming that Imaco violated the contract by failing to place any purchase orders for January.

Imaco says the deal collapsed because Biocontrol was incapable of providing a single prototype of the Diasensor 1000. In a February 23rd article, Bernard Springer, vice president of Imaco, told Patricia Sabatini of the Pittsburgh Post-Gazette that Biocontrol canceled the contract to save face rather than admit the prototype wasn’t ready.

“The first delivery should have been in December,” Springer said.

Springer reported that when Imaco officials visited the Biocontrol research facility in November 1995 for a demonstration, the Diasensor’s trial model broke down. So far the only results Imaco has seen “have been on paper,” Springer told the Pittsburgh Post Gazette.

Fred E. Cooper, CEO of Biocontrol and president of Diasense, said, “Because we have not received the first month’s purchase order or any down payment, as called for in the contract, we feel that it is in the best interest of the company, at this time, to move forward without Imaco or any other distributor in its place.” The contract stipulated that Imaco would purchase 5,100 of the devices in 1996.

Also in the Pittsburg Post-Gazette article, Cooper admitted that Biocontrol had produced only one experimental Diasensor, still undergoing laboratory tests, but said production, “could have been stepped up had we gotten January’s purchase order.”

Taking Orders

Biocontrol, in operation since the early 1970s, phased out its pacemaker manufacturing operation and began working on a non-invasive meter in the mid-1980s. Originally, company officials projected that the Diasensor 1000 would be on the market by 1990.

Like many companies, however, Biocontrol found that non-invasive technology is difficult to perfect. Biocontrol expected the Diasensor 1000 to be ready by 1994, and then planned to begin producing the monitors at its facility in Indiana, Pa. in January 1996 for sales overseas. FDA approval is not required for exportation of the device, which is considered to be Class 2-intended for human use but is not life-sustaining or supporting.

In a December 12, 1995 letter addressed to the public from Diasense, U.K., Ltd., the company stated it “is accepting orders and patient inquiries…Order deposits may be paid direct to our bank. Diasense U.K. has chosen London, U.K. as being the center from which the Diasensor 1000 will become available.”

Companies Reuniting

In 1989, Biocontrol spun off Diasense, Inc., giving the company marketing rights to the Diasensor 1000 but retaining the rights to manufacture them. In December 1995, Biocontrol announced that it had reached a preliminary agreement to take over Diasense through a stock swap. Biocontrol owns the majority of Diasense shares.

Biocontrol stated that combining the two companies would allow its shareholders to “participate in the full amount of the revenues and profits” the device might produce.

Joe Sable, a financial consultant with Smith Barney in New York said in a December 13, 1995 Pittsburgh Post-Gazette article that Biocontrol shareholders may have insisted on the transaction.

“When they first announced they were going to spin the Diasense unit off, I’m sure people were not happy, because people who had been buying Biocontrol were buying it basically to take advantage of the glucose sensor.”

Biocontrol and Diasense have separate boards, but the top three officers and directors of Biocontrol are Diasense directors.

High Hopes

In January 1994, the company released a statement announcing that the FDA had accepted Biocontrol’s application for a 510(k), the pre-market notification that requires a manufacturer to prove that its product is equal to or better than similar devices on the market.

Janet MacDonald of the FDA says, “The company has to comply with provision for export only, and must not be in conflict with the laws of the export country.”

According to the 1994 Biocontrol statement, “We anticipate that the approval process should take no longer than 90 to 120 business days. At the present time, we are commencing with our manufacturing start-up. It will take four to five months to get our Indiana, Pa. facility ready to begin production of the sensors by early fall.”

In April 1994, the company announced that it would be able to manufacture “1,000-2,000 sensors per month for the first few months as we gear up to larger production capabilities. Biocontrol will manufacture the Diasensor 1000 for its affiliate, Diasense, Inc., which in turn will sell the sensor throughout the world.”

By December 1994, however, the company had not received 510(k) approval. David L. Purdy, Chairman and President of Biocontrol and CEO Fred E. Cooper met with the FDA, which requested data from three additional testing sites.

A Biocontrol press release from December 13, 1994 reads, “Going forward, although there can be no guarantees, management feels optimistic regarding obtaining FDA approval once we have successfully completed the additional testing requested by the FDA.”

Criticism Voiced

The Pittsburgh Post-Gazette reported in November 1995 that Biocontrol has not had a product to sell for some time and lost $12 million in 1994. The company has been funded by stock offerings, and received $12 million from off-shore investors to finance a manufacturing facility.

The Post-Gazette reported that some people in the diabetes industry “are skeptical the Diasensor will pass FDA scrutiny any time soon, estimating it will take at least several more years, if ever, to work out all the bugs for such a project.”

Others contend that the device, which is about the size of a personal computer, is too large to be practical for most people with diabetes. Since it would not be portable, it could not be used for multiple daily testing outside the home. Its $8000 price tag, along with the required five-hour single-person calibration time also make the sensor impractical for many.

Because it must be calibrated for one person, the Diasensor is not appropriate for use in a doctor’s office or hospital.

Too Busy

Calls continue to come into the DIABETES HEALTH office from concerned Biocontrol stockholders. One man said that he has invested his child’s college fund in the company.

According to the November 1995 Post-Gazette article, Biocontrol hasn’t had an annual meeting since December 1992. Said Biocontrol spokesperson Diane McQuaide, “We’ve been too busy developing all of our products.”

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