COLORADO, Nov. 7, 2013 - The Shasta GenStrip blood glucose monitoring test strip for in-home use received FDA approval on November 30, 2012. Decision Diagnostics Corp. (OTCBB: DECN) has been fighting a battle to bring the Shasta GenStrip to market ever since and DECN’s management is now realizing the fruits of their labor.
Decision Diagnostics is the exclusive worldwide sales, service and regulatory process agent for Shasta GenStrip, which is a blood glucose test strip designed to work with Johnson & Johnson’s (J&J) market leading LifeScan Ultra family of glucose test meters. What makes the opportunity unique is that Decision Diagnostics management has said their GenStrip can be up to 50% less expensive than competitors’ products, which is expected to drive strong demand for the product. The rollout of GenStrip has been delayed by legal efforts by J&J as well as constraints on capital to grow manufacturing volume for expected demand. Over the last two weeks DECN’s management has seen many of the legal and financial issues that prevented the product from reaching consumers fade significantly.
In March 2013 Decision Diagnostics was issued a Preliminary Injunction from a District Court Judge in Northern California essentially banning the company from manufacturing, marketing and shipping GenStrip products in regards to a patent infringement claim against the company by J&J. Decision Diagnostics and their subsidiaries appealed the ruling and in May of 2013 the United States Circuit Court restored DECN’s ability to manufacture and sell GenStrip. Adding to the good news, the Washington DC U.S. Circuit Court for Federal Claims reversed the ruling made by the Judge in District Court citing the Doctrine of Patent Exhaustion and remanded the case back to the lower court with instructions to use the guidelines set out in the U.S. Circuit Court decision. Keith Berman, the Principal Executive Officer of Decision Diagnostics said of the decision, "The Circuit Court's ruling, reversed a lower court ruling (Northern California) and has put to rest a substantial part of J&J/Lifescan's lawsuit. We are delighted with the ruling. With this court decision, our company can move forward and complete the branding of our GenStrip. By all estimation, November 4 is a seminal day in DECN's history." In essence, this ruling allows DECN to fully implement its rollout strategy for GenStrip.
The Global Diabetic Diagnostic Market was estimated to be around $11.3 billion in 2010 and is expected to grow to $26 billion in 2015 and $32 billion in 2017. This market growth is precipitated by the global growth of diabetes. According to the World Health Organization (WHO), there were 347 million in the world with diabetes in 2012. The International Diabetes Federation believes this number will rise to 552 million in 2030. The Federation goes on to say that in 2011 the cost of diabetes was 11% of total global expenditures at nearly a half a trillion dollars. These market metrics are why incumbent health care companies will vigorously defend their market share positions and why new market entrants are eager to get their products into the market. Just 1% of the expected 2017 market for diabetic diagnostics equates to $320 million in revenues for a company, which is significant to both existing and new companies.
Decision Diagnostics management is confident that they can capture market share with their lower priced, effective GenStrip. Decision Diagnostics has extensive experience as a distributor of diabetes products and GenStrip is their first proprietary product. DECN announced that they began shipping GenStrip through their Pharma Tech Solutions subsidiary on October 25th and the shipments appear to have continued through October 31st the day of the statement. DECN said they made bulk shipments to large box distributors over that period of time. The sales should show up as revenues in DECN’s 2013 4th quarter earnings release, which will reflect an important milestone for Decision Diagnostics in monetizing their proprietary product.
Furthermore, Decision Diagnostics received a signed term sheet for a $12.5 million non-dilutive line of credit for the manufacturing of GenStrip. This alleviates the concerns that DECN did not have the balance sheet to peruse the rollout of GenStrip as aggressively as the company would like. The company believes that at peak manufacturing and shipments they can turn their inventory 1.8 times/month, which means this new line of credit will allow DECN to achieve over $250 million in annual sales if the product demand grows to that level. Mr. Berman commented, "Our credit line provides substantial resources for the company to initiate our important, aggressive and revolutionary GenStrip business strategies." This line of credit should close in November, which will allow DECN to begin fulfilling all orders they receive, further boosting the company’s revenues.
The events of the last two weeks have cleared the way for DECN to fully implement the sales and marketing strategy for GenStrip. As soon as the line of credit financing closes in the next few weeks, Decision Diagnostics will have everything in place to fully participate in the diabetes diagnostic market place and to carve out market share in this rapidly growing market.
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