NEWS - Health & Hospitals

By Lou Phelps
SBJ Staff

July 11, 2011 – Savannah’s Health Discovery Corp. Inc., led by Dr. Stephen D. Barnhill and with headquarters at 2 East Bryan St., has filed a prospectus to sell an additional 17 million shares of stock in the quiet, but dynamic biotech company that many in Savannah many have never even heard of.  But it's a company on the cutting edge of medicine.

The company originally notified the SEC of its intention to sell an additional  17.875,000 million shares of common stock on April 15, 2011 and then updated that filing in late May.  The stock trades with the symbol HDVY.OB on the OTC Bulletin Board.  At noon today, the stock was selling at $.07.  The new shares will bring the total shares outstanding to over 229 million, plus more than 18 million shares of preferred stock also owned.

The company is a molecular diagnostics company that has acquired patents and has patent pending applications for certain machine learning tools, primarily pattern recognition techniques using advanced mathematical algorithms to analyze large amounts of data thereby uncovering patterns that might otherwise be undetectable.  Such machine learning tools are currently in use for diagnostics and drug discovery, but are also marketed for other applications.

It operates primarily in the emerging field of personalized medicine where such tools are critical to scientific discovery, and licenses its intellectual property to work with prospective customers on the development of varied products. In drug discovery, biomarkers can help elicit disease targets and pathways and validate mechanisms of drug action.  They may also be pharmacodynamic indicators of drug activity, response and toxicity for use in clinical development. 

“We intend to continue partnering with clinical laboratories to commercialize our clinical diagnostic tests and to provide pharmaceutical and diagnostic companies with all aspects of all phases of diagnostic and drug discovery, from expert assessment of the clinical dilemma to proper selection and procurement of high quality specimens,” according to Barnhill in the SEC filing.  “Our business is based on the belief that to discover the most clinically relevant biomarkers the computational component must begin at the inception of the clinical dilemma to be solved.  This process includes several critical levels of decision-making - all of which are part of our business strategy.  We intend to identify more relevant and predictable biomarkers for drug discovery so that new and better medicines and diagnostic markers can be developed for patients worldwide.”

According to YahooFinance.com, “the company has completed its testing and has received payments on two major joint ventures with Abbott Labs and Quest Diagnostics. The successful results have been announced on their urine test for prostate cancer where it demonstrated 97-99 % effectiveness in diagnosing cancer cells as well as normal body tissues. This compares with the PSA blood test for prostate cancer, which has only 70-80% accuracy.”

New Patents
On January 19, 2011, the European Patent Office published the notice of grant of the Company’s RFE-SVM patent in the European Patent Bulletin.  On February 2, 2011, a new continuation application was filed including claims directed to identification of gene co-regulation patterns using unsupervised clustering.  Such a method is useful when some of the data is missing labels.  The parent of this application, covering the use of clustering methods for recognizing patterns in text or speech, issued later the same month.  Also in February, the U.S. Patent and Trademark Office issued a notice of allowance for the Company’s patent application with claims directed to an SVM-based method for evaluating features within data that have been identified as significant by another feature selection method.  This application had been filed in September 2010. In March 2011, the Canadian Intellectual Property Office issued a new Canadian patent covering the Company’s method for pre-processing and post-processing of data for enhancing knowledge discovered using a support vector machine. With the new filing, and issuances, the Company now has 49 issued and 39 pending U.S. and foreign patent applications, according to Barnhill.

Plans in 2011
The Company plans to initiate its new academic/research institution licensing program in the second quarter of 2011.  Universities and research institutions that have reported the use of SVMs in published reports such as academic journals and conference proceedings will be contacted and offered a paid-up license against past and future infringement of the Company’s patented technology for a nominal one-time license administrative fee plus a percentage of any revenue generated when the results of the SVM usage are licensed for commercialization.  The program will begin first with admitted usages of the Company’s SVM-RFE method.  To date, over 30 U.S. institutions have been identified as using RFE through review of academic publications, with many of the reported uses relating to biomarker discovery and medical diagnostics.  The Company plans to expand its licensing efforts to European institutions once all formalities have been completed for validation of the recently-granted European SVM-RFE patent.  The program will later be broadened to other reported uses of SVM and other technology covered by the Company’s patents.

Recent Financial Report
For the three months ended March 31, 2011, revenue was $28,509 compared with $54,178 for the three months ended March 31, 2010.  Amortization expense was $65,680 for both the three months ended March 31 2011, and 2010. Amortization expense relates primarily to the costs associated with filing patent applications and acquiring rights to the patents.

Professional and consulting fees, totaled $197,652 for the three months ended March 31, 2011, compared with $121,790 for the same 2010 period.  The increase is due primarily to higher costs associated with professional service fees of accounting services and patent filing fees.

Legal fees totaled $72,438 during the three months ended March 31, 2011 and were $178,322 during the same period in 2010.  The decrease was primarily due to the Company resolving legal issues during 2010 and not having similar issues in the current period.

Research and development expense was $30,410 for the three months ended March 31, 2011, and $50,060 for the same period in 2010. This decrease relates primarily to the completion of recent validation studies of the urine-based molecular diagnostic test for prostate cancer.

The loss from operations for the three months ended March 31, 2011 was $813,746, compared to $1,017,040 for the three months ended March 31, 2010. This reduction was due to lower costs primarily associated with legal and research and development. In addition, management believes the reduction is evidence of the Company’s focus on controlling costs.

At March 31, 2011, the Company had $2,830,908 in available cash.

Board of Directors
In addition to Barnhill, members of the board of directors include:

- Joseph McKenzie, D.V.M. Dr. McKenzie practices veterinary medicine, having founded and managed the multi-million dollar growth of multiple veterinary practices in Georgia, South Carolina and Florida. He also created and built the community “drug dog” program, which over the years and across the nation has become a generally accepted and highly successful weapon against drug smuggling at the port of Savannah as well as in the community at large.

- D. Paul Graham, a mergers & acquisitions specialist. CEO of Graham Capital Partners, LLC. “Mr. Graham fuels the Company’s strategic direction,” according to its SEC filing. 

- Curtis G. Anderson, investment banker and founder of Anderson Capital Corporation, a privately held venture capital company. He has served as president and CEO for the Kuhlman Corporation in Savannah from 1994 to 1999.

- Herbert A. Fritsche, Ph.D., who was appointed Senior Vice President, Chief Science Officer on September 1, 2010. He spent 42 years at M.D. Anderson Cancer Center, Houston. Dr. Fritsche has focused his research activities on the development and validation of cancer diagnostics.

- John A. Norris, Senior Vice President, Chief Regulatory and Technology Officer since October 2010.

- Ramananda Madyastha, M.D., Ph.D., Senior Vice President of Research and Development since 2003.  Dr. Madyastha is the Recipient of the Raja Ravi Sher Singh of Kalsia Memorial Cancer Research Prize for outstanding contributions in the field of cancer research, and has served on the Faculty of the Basic and Clinical Immunology and Microbiology Department at the Medical University of South Carolina.

- Hong Zhang, Ph.D., Senior Vice President, Computational Medicine since 2004.  As visiting faculty at Johns Hopkins University, Dr. Zhang lectured at the Center for Biomarker Discovery on Bioinformatics: Peak Detection Methods for Mass Spectral Data.  He is currently a Yamacraw Associate Professor at Armstrong Atlantic University.

Company History
In 1999, Dr. Barnhill founded and served as Chairman, President and CEO of Barnhill BioInformatics, Inc., which later became Barnhill Genomics, Inc. and BioWulf Technologies, LLC and raised over $13.5 million in private placement funding.   The primary focus of these companies was to utilize the next generation of artificial intelligence and pattern-recognition techniques, known as support vector machines, to identify genes that cause cancer. He is the sole inventor on the very first patents issued by the United States Patent and Trademark Office for the use of support vector machines in medicine.

In 2003, he sold all assets of The Barnhill Group, LLC to the current entity, and following the acquisition, CEO and Chairman of the Board of Directors, positions he currently holds.

The same year, the company acquired the assets of Fractal Genomics, LLC, a company with patented Fractal Genomics Modeling (“FGM”) software, through the issuance of 3,825,000 common shares of the Company and the issuance of a $500,000 note payable which has been been paid.

In 2004, they set off to purchase 71 patents and pending patent applications, including patents on the use of Support Vector Machines, or SVMs, and other machine learning tools useful for diagnostic and drug discovery, and then acquired SVM Portfolio in 2005 and began to sell more stock.

In the summer of 2007, the company completed its reincorporation in Georgia by effecting a conversion in its legal domicile from Texas to Savannah and in 2008 began to set up subsidiary companies for future expansion flexibility in the healthcare arena.

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