ECTE Update 01-18-11

8/7/2019 ECTE Update 01-18-11

1/20 Echo Therapeutics (ECTE) Page 1

Market Data Share Data Most Recent Quarter

Price $1.78 Outstanding 29.8M Revenue $0.0M

52-Week $0.85-$2.04 Cash/Share $0.01 Net Income ($0.6M)Market Cap $53.1M Book/Share $0.26 EPS ($0.02)Avg. Daily Vol. 150,922 Price/Book 6.8x Cash $0.2M% Short 0.0% Debt/Share $0.01 Debt $0.3M

Financial Results and ProjectionsFYE Dec. 31 2009 2010E 2011E 2012E 2013E

Revenue $1.3M $0.5M $2.9M $23.2M $63.8MNet Income ($13.5M) ($4.4M) ($7.7M) $0.2M $19.3MEPS ($0.61) ($0.15) ($0.22) $0.01 $0.50

Please See Last Two Pa es For Important Disclosures And Anal st Certification

Unlocking the Value of Science Boca Raton New York

Echo Therapeutics (ECTE)

UPDATE REPORTJanuary 18, 2011

Rating TargetStrong

Speculative Buy$4.50

AnalystsStephen M. Dunn

Sr. Managing Director [email protected]

(954) 240-9968

William D. DawsonSenior VP Research

[email protected](561) 504-5818

Symbol: ECTE

Exchange: OTC BB10 Forge Parkway

Franklin, MA 02038Phone: 508-553-8850

www.echotx.com

CEODr. Patrick T. MooneyCFOHarry G. Mitchell

$5.5M Funding Enables Echo to Advance Symphony Expecting FDA Clearance for Prelude SkinPrep1.) Echo Therapeutics recently raised $2.5M with an additional $3M inbinding commitments. These funds now allow for Echo to advance theirSymphony transdermal continuous glucose monitoring (tCGM) systemthrough development.

2.) On November 11, 2010, a 510(k) premarket notification was submitted tothe FDA for Echos Prelude SkinPrep System for use with 4% lidocaine

cream. Investors should also note that FDA 510(k) clearance triggers a$750,000 milestone payment 90 days later from Ferndale Pharma Group plusminimum guaranteed royalties of $12.6M. While Echo has granted Ferndale alicense to develop, market and sell Prelude for delivery of topical 4%lidocaine product in North America and the United Kingdom, Echo retains therights to continental Europe and Australia which may provide additionalupside to Echo through future partnership licensing and royalty agreements.

3.) Echo Therapeutics Symphony transdermal continuous glucose monitor(tCGM) system is a unique needle-free, wireless system which we believe isset to begin a pivotal clinical trial in ICU/Critical Care patients in Q211(following a final pilot trial). We believe this puts Echo Therapeutics ahead of

the curve with respect to tougher FDA standards for hospital use.

4.) Echo recently announced the development of a new transdermal biosensorfor continuous lactate monitoring to be used in critical care and sportsmedicine. In sports medicine, lactate threshold is an important indicator ofmuscular tolerance and injury reduction for athletes. Additionally, lactatemonitoring is important in critically ill patients in shock as the amount oflactate produced is believed to correlate with oxygen deprivation,hypoperfusion, and the severity of shock.

8/7/2019 ECTE Update 01-18-11

2/20Echo Therapeutics (ECTE) Page 2

www.LifeTechCapital.com Januar 18 2011

5.) Echo Therapeutics continues to attract attention in a variety of publications such as the cover story in the January 2011issue of Assembly Magazine (http://www.assemblymag.com/Articles/Article_Rotation/BNP_GUID_9-52006_A_10000000000000963300) and in Diabetes Health (http://www.diabeteshealth.com/read/2010/11/29/6962/echotherapeutics-needle-free-symphony-continuous-glucose-monitoring-system/) as well as Scientific American(http://www.scientificamerican.com/article.cfm?id=wireless-blood-glucose-diabetes)

6.) While the results of the STAR 3 trial indicate that continuous glucose monitoring can benefit patients (see STAR 3

Trial Results-Continuous Glucose Monitoring Benefits), we note that the need for Echos transdermal biosensor isgrowing in light of the FDA Warning Letter to DexCom (Nasdaq:DXCM) on the risks of sensor wire fractures underneaththe patients skin, particularly pediatric and adolescent patients. The warning letter noted that DexCom s sensor wires arenot approved for use in children or adolescents, pregnant women or persons on dialysis and can only be used in theabdomen. (see FDA Warning Letter to DexCom on Sensor Wire Factures). We believe this should give Echostransdermal biosensor a significant advantage in the marketplace.

7.) We are maintaining Echo Therapeutics with a Strong Speculative Buy and a 12-18 month price target of $4.50. Ourvaluation is based on 35x projected 2013 EPS and discounted 40% for risk yielding a 12-18 month target of $4.50 as theFDA PMA approval of the Symphony tCGM system could occur within the forecast period. This would result in amarket capitalization of approximately $130 to $160 million. This is a discount to DexCom (Nasdaq:DXCM) ( seeCompetition), the only pure-play comparable, which has FDA approval for their invasive, implantable biosensors with a

market capitalization of approximately $900 million.

Company Description

Franklin, Massachusetts-based EchoTherapeutics is developing the SymphonytCGM System which is a next-generation, non-invasive (needle-free), wireless transdermalcontinuous glucose monitor (tCGM) systemdesigned to provide reliable, on-demand bloodglucose data conveniently, continuously and

cost-effectively. Symphony includes thePrelude SkinPrep system which incorporatesa patented feedback mechanism for optimalskin permeation control and their continuoustransdermal sensor to detect glucose trends, forcontrolling complications associated with bloodglucose levels that stray outside of a medicallyrecommended target range. With Symphony,the company is focused on changing the currentstandard of care paradigm of invasive (needle-based), episodic blood glucose testing with their needle-free tCGM technology designed to improve patient compliance tofrequent glucose testing and achieve better overall glucose control. All existing FDA-approved continuous glucose

monitoring (CGM) systems are needle-based, requiring insertion of a glucose sensor into the patients skin, which givesrise to risks of infection, inflammation or bleeding at the insertion site. In addition, the Prelude SkinPrep device (acomponent of the Symphony tCGM system) was licensed to Ferndale Pharma Group to develop and market for skinpreparation prior to the application of a topical analgesic or anesthetic cream for local dermal anesthesia or analgesia priorto a needle insertion or IV procedure in North America and the U.K.

MILESTONES & EVENTSDate Prelude SkinPrep Symphony tCGM

Q110 Pilot StudyQ210

Q310 Results of Equivalency TrialQ410 File FDA 510(k) SubmissionQ111 FDA 510(k) Approval Initiate Final Pilot Trial

Q211 U.S. Launch (Ferndale Pharma)Complete Final Pilot Trial

Initiate Pivotal Trial

Q311Complete Pivotal Trial

File FDA PMA Submission

Q411Q112

Q212FDA PMA Approval

U.S. LaunchSource: Echo Therapeutics and LifeTech Capital Estimates
http://www.assemblymag.com/Articles/Article_Rotation/BNP_GUID_9-5-2006_A_10000000000000963300http://www.assemblymag.com/Articles/Article_Rotation/BNP_GUID_9-5-2006_A_10000000000000963300http://www.assemblymag.com/Articles/Article_Rotation/BNP_GUID_9-5-2006_A_10000000000000963300http://www.assemblymag.com/Articles/Article_Rotation/BNP_GUID_9-5-2006_A_10000000000000963300http://www.diabeteshealth.com/read/2010/11/29/6962/echo-therapeutics-needle-free-symphony-continuous-glucose-monitoring-system/http://www.diabeteshealth.com/read/2010/11/29/6962/echo-therapeutics-needle-free-symphony-continuous-glucose-monitoring-system/http://www.diabeteshealth.com/read/2010/11/29/6962/echo-therapeutics-needle-free-symphony-continuous-glucose-monitoring-system/http://www.diabeteshealth.com/read/2010/11/29/6962/echo-therapeutics-needle-free-symphony-continuous-glucose-monitoring-system/http://www.scientificamerican.com/article.cfm?id=wireless-blood-glucose-diabeteshttp://www.scientificamerican.com/article.cfm?id=wireless-blood-glucose-diabeteshttp://www.scientificamerican.com/article.cfm?id=wireless-blood-glucose-diabeteshttp://www.scientificamerican.com/article.cfm?id=wireless-blood-glucose-diabeteshttp://www.diabeteshealth.com/read/2010/11/29/6962/echo-therapeutics-needle-free-symphony-continuous-glucose-monitoring-system/http://www.diabeteshealth.com/read/2010/11/29/6962/echo-therapeutics-needle-free-symphony-continuous-glucose-monitoring-system/http://www.assemblymag.com/Articles/Article_Rotation/BNP_GUID_9-5-2006_A_10000000000000963300http://www.assemblymag.com/Articles/Article_Rotation/BNP_GUID_9-5-2006_A_10000000000000963300

8/7/2019 ECTE Update 01-18-11



Symphony Transdermal Continuous Glucose Monitor (tCGM) System

Echo Therapeutics Symphony Transdermal Continuous Glucose Monitor (tCGM) system is needle-free withcontinuous glucose readings transmitted to a wireless receiver. The system consists of three distinct parts, the Prelude SkinPrep System, the transdermal (needle-free) glucose sensor transmitter and a wireless remote receiver. Each isdiscussed below:

SymphonyTransdermal Continuous Glucose Monitor (tCGM) System

Source: Echo Therapeutics

Prelude Skin Permeation DeviceThe secret behind the transdermal sensor is the Prelude SkinPrepSystem. This advanced microabrasion system enhances the flow ofinterstitial fluids and molecules across the protective membrane of thestratum corneum, the outmost protective layer of the skin. This, in turn,allows their wireless sensor to read the patients glucose measurementswithout requiring a needle. The Prelude is painless, takes just a fewseconds, and stops automatically at the precise point of required abrasion

based on signals from the built-in reference electrode. The single-use,disposable tips represent a continuing revenue stream for EchoTherapeutics.

Also of note, the Prelude SkinPrep device (a component of theSymphony tCGM system) was licensed to Ferndale Pharma Group todevelop and market for skin preparation prior to the application of atopical analgesic or anesthetic cream for local dermal anesthesia oranalgesia prior to a needle insertion or IV procedure in North Americaand the U.K.

SymphonyTransdermal Wireless Glucose Sensor

The transdermal glucose sensor consists of an electrochemical glucose sensor, ahydrogel layer, a potentiostat and a short-range RF transmitter. When the sensor isplaced on the permeated skin site (using the Prelude SkinPrep device), a layer ofhydrogel establishes and maintains continuous fluid paths through the skin and actsas a reliable reservoir for the sensing chemistry to receive glucose flux and convertit into hydrogen peroxide. The hydrogen peroxide is consumed by theelectrochemical sensor and continuous electrical signal is generated in the process.Once the sensor is connected and adhered to the skin, the transmitter switches onautomatically and starts to broadcast the data

Prelude Skin Permeation Device


Pilot Study BioSensorsBioSensor w/ Transmitter


8/7/2019 ECTE Update 01-18-11



The diffusion gradient and sensor consumption of glucose are a function of the blood glucose concentration in thesubpapillary vessels beneath the epidermis and the sensor generates continuous current that is proportional to the bloodglucose concentration. The first calibration is made when the sensor stabilizes (about 1 hour), followed by subsequent

calibrations depending on the applications. Due to the advancedhydrogel chemistry and the Prelude skin permeation process, theglucose flux detected by the sensor can provide reliable continuousglucose readings for 24 hours. To preserve data integrity and savepower, the assembly digitizes, stores and transmits discrete, coded

signals via a wireless link to the wireless remote monitor.

Echo Therapeutics is currently using a one-piece biosensor (notshown), which provides for reduced manufacturing costs andeliminates most of the motion artifact seen using the pilot biosensorthus improving performance. Successful results using the one-piecebiosensor were announced on November 19, 2009. (see ClinicaTrials & Clinical Data)

SymphonyWireless Remote Monitor

The Symphony wireless remote monitor receives digitally coded data from the transdermal glucose sensor transmitterand decodes the data once every minute. Once a reference blood glucose value is entered manually (a calibration) after aone hour warm-up period, the decoded data are converted to blood glucose reading by a built-in data algorithm. TheSymphony wireless remote monitor displays the date, time of day, sensor current, blood glucose reading and rate ofincrease or decrease, amount of time the transmitter has been switched on, battery status, and any alarm or error modesThe keypad provides on/off, data entry, calibration, alarmsilencing, and monitor resetting and the monitor also containsan audible alarm, a RF receiver, a programming port, arechargeable battery pack and a USB data port for computerizedrecord keeping or in-depth data analysis.

In addition, Echo Therapeutics expects that hospital monitors

may be fitted with a receiver module for in-patient management.Finally, data transmission via internet and/or wireless carrieropens up the possibility for remote monitoring and telemedicine applications.

Clinical Trials & Clinical Data

PreludeSkin-Prep SystemOn August 24, 2010, Echo Therapeutics announced the successful completion of a clinical study of their Prelude skinprep system in ablating the skin prior to the application of OTC 4% lidocaine cream for faster-acting local dermaanesthesia. The blinded comparison study evaluated the performance of Prelude prior to the application of 4% lidocaine

cream for local analgesia and demonstrated improvement and a faster onset of action.

On November 11, 2010, a 510(k) premarket notification was submitted to the FDA for Echo s Prelude SkinPrep Systemfor use with 4% lidocaine cream. Investors should also note that FDA 510(k) clearance triggers a $750,000 milestonepayment 90 days later from Echos partner, Ferndale Pharma Group in addition to sales royalties. Ferndale Pharma Grouphas guaranteed a minimum royalty of $12.6 million to Echo Therapeutics. While Echo has granted Ferndale a license todevelop, market and sell Prelude for delivery of topical 4% lidocaine product in North America and the UnitedKingdom, Echo retains the rights to continental Europe and Australia which may provide additional upside to Echothrough future partnership licensing and royalty agreements.

Transdermal BioSensor - Mechanism of Action


SymphonyWireless Remote Monitors

Standalone Monitor Hospital CellphonesSource: Echo Therapeutics

8/7/2019 ECTE Update 01-18-11



Symphony tCGMOn November 19, 2009 Echo Therapeutics announced positive results of a clinical study of its Symphony tCGMSystem in patients with Type 1 and Type 2 Diabetes using the new one-piece biosensor. This could allow theSymphony tCGM to complete a final pivotal trial in Q2 2010 with an FDA PMA filing in Q3 2010. Although thecompany has not yet announced the trial details, we believe a rational trial design would be approximately 200 criticalcare patients, both diabetic and non-diabetic, with a primary endpoint of point and rate accuracy using continuousglucose-error grid analysis (CG-EGA) versus laboratory reference glucose monitoring.

The details of the November 19, 2009 positive clinical study of the Symphony tCGM System in patients with Type 1and Type 2 Diabetes using the new one-piece biosensor were as follows:

Study Design:After Prelude skin ablation, 10 Symphony tCGM biosensors were applied to subjects withType 1 or Type 2 Diabetes. Venous reference blood samples were taken from intravenous lines at 15-minuteintervals for 24 hours and measured on a YSI 2300STAT PLUS laboratory analyzer. At the conclusion of the 24-hour study period, the test skin sites were inspected for redness or any other undesirable effects.

Study Results: Using approximately 900 Symphony tCGM glucose readings paired with reference bloodglucose measurements, CG-EGA revealed that the accuracy of the Echos Symphony tCGM System, measuredas a percentage of accurate readings and benign errors, was 97%. The MARD for the study was 12.89%. Therewere no adverse events reported from the Prelude skin permeation or the Symphony tCGM biosensor.

Methods: CGM performance is evaluated with multiple analytical tools, as defined by the Clinical andLaboratory Standards Institutes POCT05-A guideline. The primary metric, used to evaluate clinical accuracy, isthe continuous glucoseerror grid analysis (CG-EGA). The CG-EGA is a categorization of all data pairs based onthe clinical significance of the accuracy. Accurate readings result in the same clinical decision when based on theCGM trend vs. the underlying blood glucose fluctuations. Benign errors lead to the same clinical outcome asaccurate readings even though the actual clinical decision may differ. Erroneous readings lead to clinical errors.CGM performance is measured as the sum of accurate readings and benign errors. Numerical accuracy is the otherkey method for evaluating CGM performance. The most widely accepted tool is mean absolute relative difference(MARD). MARD is a standard error calculation tool that is used to measure the average absolute value of therelative (or percentage) difference between two measurements.

Previous Pilot StudiesResearch results from three human clinical pilot studies titled Pilot Studies of Transdermal Continuous GlucoseMeasurement in Outpatient Diabetic Patients and in Patients during and after Cardiac Surgery* and published in theJuly 2008 issue of the Journal of Diabetes Science and Technology indicated that Echo Therapeutics transdermaContinuous Glucose Monitoring (tCGM) system was successful and that the new Prelude abrasion technology works aswell the older, bulkier SonoPrep ultrasound system.* Authors: Han Chuang, Ph.D., Echo Therapeutics, Inc.

My-Quyen Trieu, B.S., Echo Therapeutics, Inc.James Hurley, Ph.D., Echo Therapeutics, Inc.Elizabeth J. Taylor, M.S., CCRC, CDE, MassResearch, LLCMichael R. England, M.D., Department of Anesthesia, Tufts University School of MedicineStanley A. Nasraway, Jr., M.D., FCCM, Department of Surgery, Tufts Medical Center

The number of patients with demographic data for the three studies is shown below:

PatientDemographics

Study 1Diabetes

Study 2Critical Care

Study 3Abrasion vs.Ultrasound

Male 5 (50%) 7 (87.5%) 4 (66.7%)

Female 5 (50%) 1 (12.5%) 2 (33.3%)

Type I Diabetes 1 (10%) 1 (12.5%) 0

Type II Diabetes 9 (90%) 4 (50%) 0

Non-Diabetic 0 3 (37.5%) 6 (100%)

Ave. Age / Std. Dev. 63.4 / 8.8 66.4 / 6.8 41.1 / 8.9Source:Chuang, et al, Pilot Studies of Transdermal Continuous Glucose Measurement in OutpatientDiabetic Patients and in Patients during and after Cardiac Surgery,J Diabetes Sci Technol 2008;2(4):595-602

8/7/2019 ECTE Update 01-18-11



Study I - Patients with Diabetes: Patients withdiabetes (type-1 or type-2) were enrolled in the studyand were free to eat, move, or sleep at the clinic,simulating home use. SonoPrep (ultrasound) skinpermeation and installation of the tCGM wasperformed at the clinic with blood glucosemeasurements taken at least hourly during the waking

period with data being blinded to ensure that therewere no changes in the subjects routine medication.The reference device was Bayers Ascensia Contourmeter.

A total of 222 biosensor data points were processed.The calibration point was the first reference bloodglucose measurement taken 1 hour after the tCGMwas turned on, and a lag time of 22 minutes wasapplied to BG data, based on the best correlationbetween reference BG and biosensor data as computedby the algorithm. Using polyethylene glycol diacrylate

(PEGDA hydrogel), the 12-hour mean absoluterelative difference (MARD) was 12.4% with 89.6% ofthe data points within the clinically accurate A zone ofthe Clarke error grid (CEG) plot and 98.7% in theclinically relevant A+B zones. It also showed strongcorrelation to the reference measurements with amedian R2 (square of correlation coefficient) of 0.77.The data plot is shown below:

Using PEGDA hydrogel with a porous membrane, the 12-hour MARD was 20.4% and the medium R2 was 0.64 whencompared to reference measurements. Error grid analysis revealed that 70.7% of the data points fell in the A zone with

96.9% in the A+B zones. Introduction of the protective membrane appeared to deteriorate the biosensor performance.However, the authors noted that using a composite porous membrane showed significant improvement in Study II.

Below are two sample datasets, where the continuous trace of tCGM measurements closely tracks the discrete referenceBG values for 12 hours.

Real-Time Biosensor Blood Glucose Measurements Correlate With Reference Blood Glucose LevelsPatient with High Glucose Levels Patient with Low Glucose Levels

Source:Chuang, et al, Pilot Studies of Transdermal Continuous Glucose Measurement in Outpatient Diabetic Patients and in Patients during and afterCardiac Surgery,J Diabetes Sci Technol 2008;2(4):595-602

Study I Results12 Hour Biosensor Data

Source:Chuang, et al, Pilot Studies of Transdermal Continuous Glucose Measuremenin Outpatient Diabetic Patients and in Patients during and after Cardiac Surgery,J Diabetes Sci Technol 2008;2(4):595-602

8/7/2019 ECTE Update 01-18-11



Study II - Patients in Surgical Critical Care: Data was collected from 8 out 11 patients enrolled, of which 1 patient didnot complete the study, and 2 patients were excludeddue to a low biosensor signal, which the authorsbelieve was due to low glucose flux and insufficientskin permeation using the older SonoPrep(ultrasound). The reference device during surgery wasthe Nova Stat Profile Ultra C and the devices used inthe cardiothoracic intensive care unit (CITU) were the

Accu-Check Inform system glucometer, the BayerRapidlab 865 blood gas analyzer for whole bloodglucose and the Unicel DXC 800 for serum glucose.

Using PEGDA hydrogel with a composite porousmembrane and hermetic seals, 147 biosensor datapoints were analyzed from the 8 evaluable patients in12 datasets (7 intraoperative and 5 postoperative). The24-hour mean absolute relative difference (MARD)was 11.6% with 86.4% of the data points within theclinically accurate A zone of the Clarke error grid(CEG) plot and 100% in the clinically relevant A+B

zones. It also showed strong correlation to thereference measurements with a median R2 (square ofcorrelation coefficient) of 0.83. The data plot is shownbelow:

Below are datasets from the intraoperative and postoperative periods showing that the continuous trace of tCGMmeasurements closely tracked the discrete reference values. There was no marked difference of sensor performancebetween intraoperative and postoperative study periods and no observable interferences from the surgical procedure andthe use of routinely administered concomitant medications. The study demonstrated that the tCGM system accurately

predicted blood glucose readings in a cardiac surgical ICU setting every minute for up to 24 hours.

Real-Time Biosensor Blood Glucose Measurements Correlate With Reference Blood Glucose Levels

Patient During Cardiac Surgery Patient in Intensive Care Unit (ICU)

Source:Chuang, et al, Pilot Studies of Transdermal Continuous Glucose Measurement in Outpatient Diabetic Patients and in Patients during and afterCardiac Surgery,J Diabetes Sci Technol 2008;2(4):595-602

Study III - Abrasion vs Ultrasound Skin Permeation: This study was designed to compare two skin permeationmethods, the new Prelude (abrasion) versus the older SonoPrep (ultrasound) technologies for transdermal glucosemonitoring. 6 healthy in-house subjects completed the enrollment with 183 Prelude and 195 SonoPrep biosensor datapoints collected. The reference device was Bayers Ascensia Contour meter.

Study II Results24 Hour Biosensor Data

Source:Chuang, et al, Pilot Studies of Transdermal Continuous Glucose Measuremenin Outpatient Diabetic Patients and in Patients during and after Cardiac Surgery,J Diabetes Sci Technol 2008;2(4):595-602

8/7/2019 ECTE Update 01-18-11



The 24-hour MARD was 9.0% with Prelude and 10.8% with SonoPrep. 100% of the data points from both methods fell inthe A+B zones of the CEG. The median R2 was 0.70 and 0.79 for Prelude and SonoPrep, respectively. Shown below isone sample dataset overlapping two calibrated continuous glucose measurements, where close proximity of the two tracescan be clearly seen throughout the study period. Overall, Prelude exhibited equivalent performance to SonoPrep for use ofthe tCGM system.

Study III ResultsPrelude Abrasion Equivalent to Ultrasound

Source:Chuang, et al, Pilot Studies of Transdermal Continuous Glucose Measurement inOutpatient Diabetic Patients and in Patients during and after Cardiac Surgery,J Diabetes Sci Technol 2008;2(4):595-602

The authors summarized their conclusions as follows:

A reliable method for continuous glucose monitoring represents an unmet need for both home care and criticalcare settings; when developed and refined successfully, the tCGM product can address this need. A cost-effectiveand easy-to-use Prelude SkinPrep exhibits equivalent performance to SonoPrep for tCGM application. With theadvantages of a 1-hour warm-up period and minimally invasive nature, the tCGM system may become a preferredmedical device in facilitating diabetes management. A combination of our new skin permeation and needle-freesensing technologies may provide a low-cost, convenient, safe, and effective solution for continuous glucosemonitoring in diverse populations.

Diabetes MarketAccording to the U.S. Centers for Disease Control (CDC), almost 18 million people have been diagnosed with diabetes inthe United States and almost 6 million people remain undiagnosed. Diabetes is currently the seventh leading cause ofdeath U.S. based on death certificates. Even then, diabetes is likely to be underreported as a cause of death as studies havefound that only about 35% to 40% of decedents with diabetes had it listed anywhere on the death certificate and onlyabout 10% to 15% had it listed as the underlying cause of death. Overall, the risk for death among people with diabetes isabout twice that of people without diabetes of similar age.

Diabetes Prevalence in U.S.Diagnosed 17.9 million people 5.9% of US Population

Undiagnosed 5.7 million people 1.9% of US Population

Total 23.6 million people 7.8% of US PopulationDiabetes Demographics in U.S.

Age 20+ Years 23.5 million 10.7% of this Age GroupAge 60+ Years 12.2 million 23.1% of this Age Group

Men 12.0 million 11.2% of men over 20

Women 11.5 million 10.2% of women over 20Source: US Centers for Disease Control (CDC) data for 2007

Uncontrolled diabetes can result in heart disease and stroke, high blood pressure, blindness, kidney disease, nervoussystem disease, amputations and dental disease. Total direct medical costs are estimated at $116 billion and costs for

8/7/2019 ECTE Update 01-18-11



people diagnosed with diabetes were 2.3 times higher than what expenditures would be in the absence of diabetes. Anadditional $58 billion in indirect costs are due to disability, work loss, and premature mortality.

Costs spent on inpatient hospital care were $58.3 billion and $9.9 billion on physicians office visits directly attributed todiabetes. Diabetes-related hospitalizations totaled 24.3 million days in 2007 (an increase of 7.4 million from 2002). Theaverage cost for a hospital inpatient day due to diabetes was $1,853. The average cost for a hospital inpatient day due todiabetes-related chronic complications, including neurological, peripheral vascular, cardiovascular, renal, metabolic, andophthalmic complications was $2,281.

FDA to Require Hospitals to Use More Accurate Glucose Monitors

As reported in the July 19, 2009 issue ofThe New York Timestitled Standards Might Rise on Monitors for Diabeticsthe FDA is concerned that current self-monitoring blood glucose (SMBG) devices are not accurate enough as error ratesup to 20% are allowed under existing approval standards (ISO 15197) developed 7 years ago. The FDA has now placedthis approval standard up for review in light of the failed NICE-SUGAR in-hospital trial (see NICE-SUGAR Trial). TheFDA Center for Devices and Radiological Health (CDRH) believes the high incidence of hypoglycemia seen in the NICE-SUGAR trial was probably caused by hospitals using inaccurate glucose monitors in attempting tight glycemic control forhospital patients which resulted in too much insulin being delivered to the patient.

In response to the NICE-SUGAR results, FDA Commissioner, Dr. Margaret Hamburg June 24, 2009 letter (includingCDRH analysis) to the American Association of Clinical Endocrinologists stated:

Nevertheless, many hospitals continue to use SMBG devices, cleared only as aids in the management of diabeticpatients, in these settings, even though they are not FDA cleared to diagnose disease or to maintain tight glycemic contro

of diabetic and non-diabetic patients in the hospital environment. This practice can be problematic. Where hospitalized

patients are sicker (such as those in the ICU), any inaccuracies in the meters would pose different risks of greater

magnitude than expected in the population and use for which the SMBG devices are cleared.

The FDA now wants to restrict the use of self-monitoring glucose monitors in hospitals in favor of more accurate methodsincluding the development of continuous glucose monitors for intensive insulin therapy in the hospital setting such as

Echo Therapeutics Symphony Transdermal Continuous Glucose Monitor (tCGM) system.

Reference InformationNew York TimesJuly 19, 2009

Standards Might Rise on Monitors for Diabeticshttp://www.nytimes.com/2009/07/19/health/policy/19monitor.html

FDA Letter and CDRH AnalysisJune 24, 2009FDA Commissioner Dr. Hamburg to AACE President Dr. Garber

http://www.nytimes.com/packages/pdf/health/20090717_MONITOR_1.pdf

FDA Warns of Potentially Fatal Errors with GDH-PQQ Glucose Monitors

On August 13, 2009, the FDA issued a Public Health Notification warning of potentially fatal errors with GDH-PQQglucose monitoring technology. Specifically, GDH-PQQ (glucose dehydrogenase pyrroloquinoline quinine) glucosemonitoring measures a patients blood glucose value using methodology that cannot distinguish between glucose andother sugars. Certain non-glucose sugars, including maltose, xylose, and galactose, are found in certain drug and biologicformulations, or can result from the metabolism of a drug or therapeutic product. When these non-glucose sugars are

present in the patients blood, using a GDH-PQQ glucose test strip will produce an elevated glucose result which maysuggest the need for clinical action. This can lead to inappropriate dosing and administration of insulin, potentiallyresulting in hypoglycemia, coma, or death. In addition, cases of actual hypoglycemia may go unrecognized if the patientand healthcare practitioner rely solely on the test result obtained with the GDH-PQQ glucose test strips. The FDArecommends avoiding the use of GDH-PQQ glucose test strips in healthcare facilities.
http://www.nytimes.com/2009/07/19/health/policy/19monitor.htmlhttp://www.nytimes.com/2009/07/19/health/policy/19monitor.htmlhttp://www.nytimes.com/packages/pdf/health/20090717_MONITOR_1.pdfhttp://www.nytimes.com/packages/pdf/health/20090717_MONITOR_1.pdfhttp://www.nytimes.com/packages/pdf/health/20090717_MONITOR_1.pdfhttp://www.nytimes.com/2009/07/19/health/policy/19monitor.html

8/7/2019 ECTE Update 01-18-11



Reference Information

FDA Public Health Notification: Potentially Fatal Errors with GDH-PQQ* Glucose Monitoring Technologyhttp://www.fda.gov/MedicalDevices/Safety/AlertsandNotices/PublicHealthNotifications/ucm176992.htm

List of GDH-PQQ Glucose Test Strips and Manufacturershttp://www.fda.gov/MedicalDevices/Safety/AlertsandNotices/PublicHealthNotifications/ucm176992.htm#attachment

We believe this demonstrate the new FDA desire to restrict the use of self-monitoring glucose monitors in hospitals infavor of more accurate methods including the development of continuous glucose monitors for intensive insulin therapy inthe hospital setting such as Echo Therapeutics Symphony Transdermal Continuous Glucose Monitor (tCGM) system.

COMPETITION

There are a limited number of continuous glucose monitorsystems currently on the market. The significant differences

between Echo Therapeutics Symphony system and thecompetition is the needle-free transdermal biosensor, clinicaltrials in the hospital setting and biosensor life.

We believe the transdermal biosensor is a significant advantageover the existing biosensors on the market. All existing FDA-approved continuous glucose monitoring (CGM) systems areneedle-based, requiring insertion of a glucose sensor into the

patients skin, which gives rise to risks of infection,

inflammation or bleeding at the insertion site. Symphony is anon-invasive tCGM system that does not require insertion of itsglucose sensor and thus does not give rise to the risks associatedwith needle-based CGM systems.

We also believe Echo Therapeutics clinical trials in the critical care setting provides a major marketing advantage over thecompetition in the hospital market. The Symphony system would represent an answer to the new FDA demands for

more accurate glucose monitors in the hospital. (see FDA to Require Hospitals to Use More Accurate Glucose Monitors)

We further believe that the comparatively short 1-2 day biosensor lifeis not a drawback, but rather an advantage. In the at-home market, theweekly biosensors begin to lose adhesion after several showersswimming and other physical activity and rubbing against clothing. Itcan cost a person $60 if they accidently dislodge or damage thebiosensor whereas a cheaper 1-2 day biosensor reduces the economicrisk of biosensor damage through daily activity.

Additionally, skin irritation from being in contact with the adhesive aswell as the possibility of infection raises hygiene issues. The risk of

infection becomes a significant issue in the critical care/ICU marketWe believe a 1 or 2 day biosensor makes more sense in the same waydaily disposable contact lenses are safer than extended wear contac

lenses.

Finally, there are risks involving the competitors need for sensor wires resulting in sensor wire fractures underneath thepatients skin. The FDA issued a warning letter to DexCom concerning these sensor wire fractures in May 2010 and alsonoted that the DexCom SEVEN and SEVEN PLUS Systems are not approved for use in children or adolescents, pregnantwomen or persons on dialysis and can only be used in the abdomen. (see FDA Warning Letter to DexCom on Sensor WireFactures)

Transdermal vs. Needle BioSensor

Source: Mayo Clinic and LifeTech Capital

Irritation From 7-Day DexCom BioSensor

Source: Kerri Morrone Sparling
http://www.fda.gov/MedicalDevices/Safety/AlertsandNotices/PublicHealthNotifications/ucm176992.htmhttp://www.fda.gov/MedicalDevices/Safety/AlertsandNotices/PublicHealthNotifications/ucm176992.htmhttp://www.fda.gov/MedicalDevices/Safety/AlertsandNotices/PublicHealthNotifications/ucm176992.htm#attachmenthttp://www.fda.gov/MedicalDevices/Safety/AlertsandNotices/PublicHealthNotifications/ucm176992.htm#attachmenthttp://www.fda.gov/MedicalDevices/Safety/AlertsandNotices/PublicHealthNotifications/ucm176992.htm#attachmenthttp://www.fda.gov/MedicalDevices/Safety/AlertsandNotices/PublicHealthNotifications/ucm176992.htm

8/7/2019 ECTE Update 01-18-11



Continuous Glucose Monitors

CompanyEcho

TherapeuticsAbbott Labs DexCom Medtronic MiniMed

Stock Symbol ECTE ABT DXCM MDT (div. of MDT)

Device Symphony Freestyle NavigatorDexCom

SEVEN PLUSGuardian RT Paradigm

Target MarketsCritical Care& Home use

Home use Home use Home use Home use

Needle-Free Yes No No No No

Sensor Life 24 to 48 hours 120 hours 168 hours 72 hours 72 hoursInitialization Time ~ 1 hour 10 hours 2 hours 2 hours 2 hours

CalibrationsRequired

TBAAt 10, 12, 24 and

74 hoursEvery 12 hours Every 12 hours Every 12 hours

Accuracy >97% 98.0% 97.0% 98.9% 98.9%

MARD 7.5% - 16% 9.3% - 12.3% 13.0% - 15.9% 15.6% - 19.7% 15.6% - 19.7%

Frequency ofReading

1 min 1 min 5 min 5 min 5 min

Pricing forSystem:Sensors:

(1 mo. supply)

TBA(competitive)

$1,000$370

$450$280

$1,000$370

$1,000$370

Regulatory Status Clinical trials Approved Approved Approved ApprovedSource: Echo Therapeutics and LifeTech Capital

Competitive Update: Echo Therapeutics competitor DexCom (Nasdaq:DXCM) and their partner, EdwardsLifeSciences (NYSE:EW) received a CE-Mark in Europe in October 2009 for their 1st generation GlucoClear

continuous glucose monitoring (CGM) system for in-hospital critical use and filed with the FDA in Q2 2010. They arecontinuing post-CE Mark trials in Europe and stated they have enhanced its ease of use in their 2 nd generation productwhich they expect to launch in Europe in late 2011. Investors should note that the GlucoClear system uses aninvasive blood-based intravenous sensor, not a subcutaneous interstitial fluid sensor.

DexCom has stated they are working on a 5th generation sensor platform which applies aspects of their blood-basedhospital sensor, for Edwards LifeSciences, into a subcutaneous sensor for both a future ambulatory sensor and asubcutaneous sensor for use in the hospital outside of critical care.

We continue to believe that Echo Therapeutics Symphony transdermal continuous glucose monitoring system(tCGM) will be the first transdermal CGM system to file with the FDA for the in-hospital use.

FDA Warning Letter to DexCom on Sensor Wire Factures

On May 21, 2010, Echo Therapeutics competitor DexCom (Nasdaq:DXCM) received an FDA Warning Letter for theirSeven PLUS Continuous Glucose Monitoring System due to complaints involving sensor wire fractures underneathpatient's skin as reported to the FDA. In addition, their sensors are not approved for use in children or adolescentspregnant women or persons on dialysis and can only be used in the abdomen. Investors should note that EchoTherapeutics Symphony Transdermal Continuous Glucose Monitoring (tCGM) system eliminates the need forsensor wires and could be considered safer, especially for children and adolescents.

(seehttp://www.fda.gov/ICECI/EnforcementActions/WarningLetters/ucm213414.htm)

Customer Report: 09-5141, dated 7/11/2009 reported a sensor wire broke off in a three (3) year old and reported apiece of it was under her skin. The mother reported the child had surgery under general anesthesia to remove thebroken wire underneath her skin.

Customer Report: 09-0274, dated 1/6/09 reported the sensor wire tip broke off in patient's body. The DexComrepresentative advised patient to not to pursue extraction. The report states "sensor break with fragment retained underthe skin".
http://www.fda.gov/ICECI/EnforcementActions/WarningLetters/ucm213414.htmhttp://www.fda.gov/ICECI/EnforcementActions/WarningLetters/ucm213414.htmhttp://www.fda.gov/ICECI/EnforcementActions/WarningLetters/ucm213414.htmhttp://www.fda.gov/ICECI/EnforcementActions/WarningLetters/ucm213414.htm

8/7/2019 ECTE Update 01-18-11



Customer Report: 09-3516, dated 5/07/09 the report states (that when) the nurse went to pull the old sensor off thesensor wire it was not there. The patient's nurse reported she could see it under the skin but she could not get hold of iwith tweezers and then it disappeared. The nurse thinks "it came off and is still in his skin."

Customer Report: 09-3641, dated 5/18/09. Patient reports 2 sensors have broken off under his skin. His most recentsensor looks broken upon removal today, and he can feel the wire under his skin. Site is red and he is going toprescribing physician.

Customer Report: 09-5555, dated 7/20/2009. Patient called (to) report a failed sensor and has irritated skin. Patientreported he thought the wire came out completely, but his doctor removed a "hair like structure" from under his skin.

Customer Report: 09-4237, dated 6/17/2009. Patient is a 30 month old child. Mother called to report sensor wirebreakage under skin of child. Patient taken to the ER when an infection developed.

Partnerships

Echo Therapeutics has two licensing partnerships which validate the Symphony technology platform:

Handok Pharmaceuticals: The Symphony tCGM was licensed in South Korea to Handok Pharmaceuticals, the largesdiabetes pharmaceutical company in South Korea. Specifically, on June 15, 2009 Handok paid a licensing fee ofapproximately $600,000 and will pay Echo Therapeutics milestone payments upon receipt of US FDA clearance of

Symphony and upon the first commercial sale of Symphony in South Korea. Handok will also pay a royalty on net salesof Symphony and additional milestone payments based on Handoks achievement of certain other targets. Handok isresponsible for all product development fees and costs, and for all regulatory filings, for the final development ofSymphony in South Korea.

Ferndale Pharma Group: The Prelude SkinPrep device was licensed to Ferndale Pharma Group to develop andmarket for skin preparation prior to the application of a topical analgesic or anesthetic cream for local dermal anesthesiaor analgesia prior to a needle insertion or IV procedure in North America and the U.K. Specifically, on May 27, 2009,Ferndale Pharma Group paid a licensing fee of $750,000 and will pay Echo Therapeutics a milestone payment of$750,000 90 days after US FDA 510(k) medical device clearance of Prelude. Ferndale will also pay an escalating royaltyon net sales and milestone payments based on Ferndales achievement of certain net sales targets, as well as guaranteedminimum royalties, totaling an additional $12.6 million. Ferndale is responsible for all product development fees and

costs, and for all regulatory filings, for the final development of Prelude in North America and the U.K.

Financial Model & Valuation

Our financial model assumes the timing of Echo Therapeutics clinical milestones and events as show below:

MILESTONES & EVENTSDate Prelude SkinPrep Symphony tCGM

Q110 Pilot StudyQ210

Q310 Results of Equivalency TrialQ410 File FDA 510(k) SubmissionQ111 FDA 510(k) Approval Initiate Final Pilot Trial

Q211 U.S. Launch (Ferndale Pharma)Complete Final Pilot Trial

Initiate Pivotal Trial

Q311Complete Pivotal Trial

File FDA PMA Submission

Q411Q112

Q212FDA PMA Approval

U.S. LaunchSource: Echo Therapeutics and LifeTech Capital Estimates

8/7/2019 ECTE Update 01-18-11



U.S. ICU Glucose Monitoring MarketAccording to the Society of Critical Care Medicine (SCCM), approximately 5 million patients are admitted annually intoICUs in the U.S. (in 87,000 ICU beds) with an average length of ICU stay of 6.1 days when an interventionist is treating(rising to 9.3 days if treated by an attending physician). The U.S. Centers for Disease Control (CDC) states that theprevalence of diabetes is 7.8% of the U.S. population (assuming undiagnosed diabetic patients will become diagnosedonce in the ICU). Anecdotally, fully-loaded hospital costs run approximately $50-$100 per day for monitoring glucoseand rise to $200 per day if tight glycemic control is required for the patient.

Estimated U.S. Market for ICU Continuous Glucose Monitoring

Variable Avg. Minimum Upside to Minimum Avg. Maximum Most LikelyICU Patients 5 million 5 million 5 millionDiabetic Patients 7.8% Pre- and possibly Non-diabetic patients 100% 15%

Length of Stay 6 days Can be up to 9 days if attending physician 8 days 7 daysCost per Day $50 Can be up to $200 for tight glycemic control $100 $75

Total U.S. Market $120 million $4 billion $400 million

We calculate that the U.S. market, for just diabetic and pre-diabetic patients in ICU, is approximately $400 millionhowever it will take some time for sales to reach this level. It is important to note that should the Echo Therapeutics

Symphony tCGM system become the standard of care (including non-diabetic patients), the U.S. market opportunitywould increase dramatically to $1+ billion in sales.

U.S. Home-Use Continuous Glucose Monitoring MarketAlthough we expect Echo Therapeutics to eventually address the U.S. home-use market for continuous glucose monitorswith the Symphony tCGM system, we have not included this market in our financial models. We believe that EchoTherapeutics will remain focused on becoming the first continuous glucose monitoring system in the ICU and hospitalsetting and exploit their first-mover advantage. However, the home-use market remains a future upside to the company.

U.S. Topical Lidocaine MarketU.S. sales of Endo Pharmaceuticals Lidoderm (5% lidocaine) patch were $764 million in 2009 with the market for alltopical local anesthetics estimated to be $1.2 billion for 2009. Based on the Ferndale Pharma Group licensing agreement

(see Partnerships) there is a guaranteed minimum royalty totaling $12.6 million. Until we receive more visibility onFerndales marketing plan, we are assuming Echo Therapeutics will receive the minimum annual royalty.

MarginsFor Symphony tCGM product line, we believe that Echo Therapeutics will sell for cost, or give away, the Preludecomponent of the Symphony system while generating approximately 80% on the consumables (Prelude tips andBioSensors) yielding an overall margin of that we estimate at 55% and is in-line with other medical technology productsSince Ferndale will purchase the Prelude for use with lidocaine at cost yielding no gross profit, we reflect only thePrelude royalty portion for the sake of clarity in our financial model. A higherroyalty stream from increased Preludesales to Ferndale remains an upside to our model.

Valuation

Our valuation based is on 35x projected 2013 EPS and discounted 40% for risk yielding a 12-18 month target of $4.50 asthe FDA PMA approval of the Symphony tCGM system could occur within the forecast period. This would result in amarket capitalization of approximately $130 to $160 million. This is a discount to DexCom (Nasdaq:DXCM) (seeCompetition), the only pure-play comparable, which has FDA approval for their invasive, implantable biosensors with amarket capitalization of approximately $900 million.

Intellectual Property

Echo Therapeutics has a number of patents and patent applications in the United States and foreign countries as shownbelow. We expect additional patent applications will be filed in the future as development progresses.

8/7/2019 ECTE Update 01-18-11



Description of Patents and Patent ApplicationsUnited States Foreign

Patents Applications Patents ApplicationsFeedback Mechanism For Optimal Skin Permeation Control 1 3 -- 4Non-Invasive, Continuous Transdermal Biosensor 2 5 1 12

Sonophoresis For Transdermal Drug Delivery Or Diagnosis 5 -- 3 --

Ultrasound Pretreatment Followed By Drug Delivery Or Diagnosis 4 2 3 --Source: Echo Therapeutics

Recent Financing Activity

On November 26, 2010, Echo Therapeutic entered into a Subscription Agreement with certain strategic institutional andaccredited investors of up to 120 units at a price per Unit of $25,000. Each Unit consists of (i) 25,000 shares of theCompanys Common Stock(ii) Series-1 warrants to purchase 12,500 shares of Common Stock with an exercise price of$1.50 per share (iii) Series-2 warrants to purchase 12,500 shares of Common Stock with an exercise price of $2.50 pershare. Echo Therapeutics has received aggregate proceeds of $1,936,500 for the purchase of an aggregate of 77.46 Units.As a result Echo Therapeutics issued an aggregate of 968,250 Series-1 Warrants and 968,250 Series-2 Warrantsexercisable immediately and which expire no later than January 4, 2013.

On January 5, 2011, Echo Therapeutics entered into a strategic short term financing arrangement with Platinum MontaurLife Sciences, one of their largest institutional investors, and issued an 8% Senior Promissory Note in the principalamount of $1,000,000. The outstanding principal amount of the Note will accrete in value at an annual rate of 8%compounded monthly, and is due on February 1, 2011. Also on January 5, 2011, Echo and Montaur also entered into abinding Term Sheet to which Montaur and any new investors will invest at least $3,000,000 through the purchase ofshares of a newly-created class of Series D Convertible Preferred Stock and common stock purchase warrants. Theparties intend to exchange the Note for Series D Stock no later than February 1, 2011, at which time Montaur willpurchase an additional $500,000 of Series D Stock. Montaur subsequently shall purchase $1,500,000 of Series D Stock inmonthly installments from March through May 2011, for a total investment of at least $3,000,000. For every $100,000face value of Series D Stock purchased, the Investor shall be issued (i) Series 1 warrants to purchase 50,000 shares of thecommon stock with an exercise price of $1.50 per share (ii) Series 2 warrants to purchase 50,000 shares of CommonStock with an exercise price of $2.50 per share. The Warrants shall have a term of two years provided, that if the Warrants

are not exercised in full at the expiration of the term by virtue of the application of a beneficial ownership blocker, thenthe term of the Warrants shall be extended until such time as the beneficial ownership blocker is no longer applicable.

Echo Therapeutics has authorized 100,000,000 shares of common stock of which 29,806,245 were issued and outstandingas of November 15, 2010. In addition, Echo Therapeutics has 2,846,166 exercisable employee stock options with aweighted-average exercise price of $ 0.93 as of September 30, 2010. Finally, Echo Therapeutics has 8,282,652 ofoutstanding common stock warrants with a weighted-average exercise price of $ 1.78 as of September 30, 2010.

STAR 3 Trial Results - Continuous Glucose Monitoring Benefits

On July 22, 2010, theNew England Journal of Medicine published the successful results of the 489-patient STAR 3 Phase

IV clinical trial for Medtronics (NYSE:MDT) MiniMed Paradigm REAL-Time System combining an insulin pump withtheir continuous glucose monitor. The paper titled Effectiveness of Sensor-Augmented Insulin-Pump Therapy in Type 1Diabetes concluded In both adults and children with inadequately controlled type 1 diabetes, sensor-augmented pumptherapy resulted in significant improvement in glycated hemoglobin levels, as compared with injection therapy. A

significantly greater proportion of both adults and children in the pump-therapy group than in the injection-therapy

group reached the target glycated hemoglobin level. Specifically, the results showed that the 1 year baseline glycatedhemoglobin level of 8.3% had decreased to 7.5%, as compared with 8.1% in the injection-therapy group (P

8/7/2019 ECTE Update 01-18-11



and children with inadequately controlled type 1 diabetes, sensor-augmented pump therapy resulted in significant

improvement in glycated hemoglobin levels, as compared with injection therapy. A significantly greater proportion of

both adults and children in the pump-therapy group than in the injection-therapy group reached the target glycated

hemoglobin level.

The NEJM paper can be accessed at:http://content.nejm.org/cgi/content/full/363/4/311The clinical trial design details can be accessed at:http://clinicaltrials.gov/show/NCT00417989

Investors should note that the Medtronic/MiniMed continuous glucose monitor uses invasive sensor wires similar to thoseof DexCom (Nasdaq:DXCM) while Echo Therapeutics Symphony Transdermal Continuous Glucose Monitoring (tCGM)system eliminates the need for sensor wires. . (see FDA Warning Letter to DexCom on Sensor Wire Factures)

NICE-SUGAR Trial

The March 26, 2009 issue ofThe New England Journal of Medicine (NEJM) published the results of the NICE-SUGARtrial in a paper titled Intensive versus Conventional Glucose Control in Critically Ill Patients where the researchersconcluded intensive glucose control increased mortality among adults in the ICU. However, we caution investors fromextrapolating these findings to the Echo Therapeutics Symphony tCGM system. We believe that the use of inaccurate

glucose monitors in the trial caused significant errors in the data. In fact, the FDA felt the use of inaccurate glucose meterswarranted a review to bar their use in hospital critical care settings (see FDA to Require Hospitals to Use More AccurateGlucose Monitors)

As the NEJM editorial points out, the NICE-SUGAR study simply tells us there is no additional benefit from thelowering of blood glucose levels below the range of approximately 140 to 180 mg per deciliter. In fact, we believe thismay have been a result of too tight control in trying to achieve a low level of blood glucose and overshooting the target ashypoglycemia was seen in 6.8% of the patients versus 0.5% in the control arm. As proof, previous Belgian studiescomparing intensive glycemic management to standard of care showed a patient survival benefit when reduction ofglucose level was initiated only if the level is markedly elevated at >215 mg per deciliter.

A joint statement by the American Diabetes Association (ADA) and the American Association of Clinica

Endocrinologists (AACE) on the NICE-SUGAR study on intensive vs. conventional glucose control in critically illpatients said the results should NOT lead to an abandonment of the concept of good glucose management in the hospitalsetting. Uncontrolled high blood glucose can lead to serious problems for hospitalized patients, such as dehydration and

increased propensity to infection. It is important to consider that the severely ill patients in this trial were treated

intensively with intravenous insulin to very tight

targets (average of 115 mg/dl), and were compared

to a control group whose glucose control was good

(average glucose 144 mg/dl).

Echo Therapeutics Symphony is a continuousglucose monitoring system (not insulin delivery) andthe trial may have failed because they did not use

accurate continuous glucose monitoring but ratheronly checked once an hour (or 30 minutes at start)and used inaccurate glucose meters resulting inovershooting the blood glucose target and causinghypoglycemia. Even the NICE-SUGAR studyauthors stated We do agree that more accuratesystems for blood glucose measurement are

required. in their NEJM Correspondence reply.

Finally, we note that a meta-analysis, including theNICE-SUGAR study published in the April 14, 2009 Canadian Medical Association Journal (CMAJ) showed thaintensive glucose therapy may be beneficial to adults and children admitted to a surgical ICU (the setting that Echo

Reference InformationNEJM Paper

http://content.nejm.org/cgi/content/short/360/13/1283

NEJM Editorialhttp://content.nejm.org/cgi/content/short/360/13/1346

NEJM Correspondencehttp://content.nejm.org/cgi/content/short/361/1/89

ADA/AACE Joint Statement

http://www.diabetes.org/for-media/pr-NICE_SUGAR-study.jspCMAJ Paper

http://www.cmaj.ca/cgi/content/full/180/8/821

CMAJ Commentaryhttp://www.cmaj.ca/cgi/content/full/180/8/799

NICE-SUGAR Trial Documentationhttps://studies.thegeorgeinstitute.org/nice/docs/ALGORITHM.pdfhttps://studies.thegeorgeinstitute.org/nice/docs/PROTOCOL.pdfhttps://studies.thegeorgeinstitute.org/nice/docs/SAP.pdf
http://content.nejm.org/cgi/content/full/363/4/311http://content.nejm.org/cgi/content/full/363/4/311http://content.nejm.org/cgi/content/full/363/4/311http://clinicaltrials.gov/show/NCT00417989http://clinicaltrials.gov/show/NCT00417989http://clinicaltrials.gov/show/NCT00417989http://content.nejm.org/cgi/content/short/360/13/1283http://content.nejm.org/cgi/content/short/360/13/1283http://content.nejm.org/cgi/content/short/360/13/1346http://content.nejm.org/cgi/content/short/360/13/1346http://content.nejm.org/cgi/content/short/361/1/89http://content.nejm.org/cgi/content/short/361/1/89http://www.diabetes.org/for-media/pr-NICE_SUGAR-study.jsphttp://www.diabetes.org/for-media/pr-NICE_SUGAR-study.jsphttp://www.cmaj.ca/cgi/content/full/180/8/821http://www.cmaj.ca/cgi/content/full/180/8/821http://www.cmaj.ca/cgi/content/full/180/8/799http://www.cmaj.ca/cgi/content/full/180/8/799https://studies.thegeorgeinstitute.org/nice/docs/ALGORITHM.pdfhttps://studies.thegeorgeinstitute.org/nice/docs/PROTOCOL.pdfhttps://studies.thegeorgeinstitute.org/nice/docs/PROTOCOL.pdfhttps://studies.thegeorgeinstitute.org/nice/docs/SAP.pdfhttps://studies.thegeorgeinstitute.org/nice/docs/SAP.pdfhttps://studies.thegeorgeinstitute.org/nice/docs/SAP.pdfhttps://studies.thegeorgeinstitute.org/nice/docs/PROTOCOL.pdfhttps://studies.thegeorgeinstitute.org/nice/docs/ALGORITHM.pdfhttp://www.cmaj.ca/cgi/content/full/180/8/799http://www.cmaj.ca/cgi/content/full/180/8/821http://www.diabetes.org/for-media/pr-NICE_SUGAR-study.jsphttp://content.nejm.org/cgi/content/short/361/1/89http://content.nejm.org/cgi/content/short/360/13/1346http://content.nejm.org/cgi/content/short/360/13/1283http://clinicaltrials.gov/show/NCT00417989http://content.nejm.org/cgi/content/full/363/4/311

8/7/2019 ECTE Update 01-18-11



Therapeutics is addressing) and the CMAJ commentary discusses the reasons why patients in surgical ICUs benefit fromintensive insulin therapy.

Management

Patrick T. Mooney MD, CEO, President and Chairman of the Board: Dr. Mooney joined Echo in September 2007 as

a result of the merger of Sontra Medical Corporation and then privately-held Echo Therapeutics, Inc. (ETI), for which heserved as President, Chief Executive Officer and director from September 2006 through the date of the merger. Prior tojoining ETI, Dr. Mooney was President, Chief Executive Officer and Chairman of Aphton Corporation (Nasdaq: APHT),where he had also served as Chief Medical Officer. Prior to that, Dr. Mooney served as Senior Biotechnology Analyst aThomas Weisel Partners, LLC, a full service merchant banking firm and as Senior Biotechnology Analyst at JanneyMontgomery Scott, LLC, a full services investment banking firm. Dr. Mooney received his medical degree from theJefferson Medical College of Thomas Jefferson University and trained in surgery at Thomas Jefferson UniversityHospital.

Harry G. Mitchell, Chief Operating Officer and Chief Financial Officer: Mr. Mitchell joined Sontra MedicaCorporation (now Echo) in June 2006 and served as Sontra's Interim Chief Executive Officer and Chief Financial Officercommencing in January 2007 through its merger with ETI. Prior to joining Sontra, Mr. Mitchell served as President and

Chief Executive Officer of MedTech Advances, Inc., a privately-held diabetes medical device company, Executive VicePresident and a director of Boston Medical Technologies, Inc., a privately-held diabetes medical device company, and as afinancial and management consultant to several other public and private companies. Mr. Mitchell is a member of theAmerican Institute of Certified Public Accounts and the Massachusetts Society of Certified Public Accountants.

Independent Directors

Vincent D. Enright: Mr. Enright joined our Board of Directors in March 2008. He has more than 30 years of financialexperience with public companies, including as Senior Vice President and Chief Financial Officer of KeySpanCorporation, a NYSE public utility company. Mr. Enright currently serves as a director and Audit Committee Chairmanof certain of the funds managed by Gabelli Funds, LLC, a leading mutual fund manager, positions he has held since 1991Mr. Enright holds a B.S. degree in Accounting from Fordham.

Shawn K. Singh, JD: Mr. Singh joined Echo in September 2007 as a result of the merger of Sontra Medical Corporationand ETI, for which he served as Chairman of the Board from September 2006 through the date of the merger and asPresident and director from September 2004 to September 2006. Mr. Singh has been working with life science companiesfor nearly 20 years. In addition to his role with Echo, Mr. Singh serves, on a part-time basis, as a Principal of CatoBioVentures and, on a part-time basis, as Chief Operating Officer (Acting) and director of VistaGen Therapeutics. Prior to joining Echo, Mr. Singh served as Chief Business Officer of SciClone Pharmaceuticals (Nasdaq: SCLN), founder andManaging Director of Start-Up Law, President of Artemis Neuroscience and Corporate Finance Associate in the SiliconValley offices of Morrison & Foerster. Mr. Singh is a member of the California State Bar.

8/7/2019 ECTE Update 01-18-11



Risks

Some of the operational and financial risks to Echo Therapeutics are:

FDA and Regulatory risks: All of Echo Therapeutics products are ultimately reliant on approvals by the U.S

FDA and other national regulatory bodies. There can be no guarantee of timely or definite FDA or other nationaregulatory body approvals for any of their pipeline products.

Need to Raise Additional Funds: Although it is possible that Echo Therapeutics may raise sufficient funds fordevelopment through partnership fees, milestone payments and warrant conversions, we believe that the companywill be required to raise additional funds for development and commercialization through the issuance of stockwhich would be dilutive to existing shareholders and could potentially affect the share price. We have includedour estimate of future share issuance in our financial model but there can be no guarantee that our estimates areaccurate.

Partnerships: Echo Therapeutics is reliant on partners to successfully market some its products as well as partners

for development, clinical trials and regulatory filings for some of its products. Failure of Echo Therapeuticsexisting or future partners to perform satisfactorily or in a timely fashion could adversely impact the companysfinancial position.

Patent Litigation: Third-party claims of infringement of intellectual property could require Echo Therapeutics tospend time and money on defending their intellectual property rights up to and including adverse judgmentsagainst Echo.

Liquidity and Trading Volume: Echo Therapeutics currently trades on the OTC Bulletin Board which may resultin both lower trading volume and liquidity possibly leading to large spreads and high volatility in the stock price.However, we believe Echo Therapeutics will pursue a listing on the Nasdaq or AMEX exchanges sometime in the

future which could result in higher trading volume and liquidity.

Sector Rotation: Echo Therapeutics is a small medical technology development company often kept in a portfoliowith similar companies. In such cases, a significant event for one company may have a material impact on thevaluation of all similar companies regardless of their unique qualities.

8/7/2019 ECTE Update 01-18-11



8/7/2019 ECTE Update 01-18-11



DISCLOSURES

Ratings and Price Target Changes over Past 3 YearsInitiated January 21, 2010Strong Speculative Buy - Price Target $4.50

Analyst Certification: We, Stephen M. Dunn and William D. Dawson, the authors of this research report certify that a.) All of the viewsexpressed in this report accurately reflect our personal views about any and all of the subject securities or issuers discussed b.) No parof our compensation is directly or indirectly related to the specific recommendations or views expressed in this research report and c.We may be eligible to receive other compensation based upon various factors, including total revenues of the Firm and its affiliates aswell as a portion of the proceeds from a broad pool of investment vehicles consisting of components of the compensation generated byinvestment banking activities, including but not limited to shares of stock and/or warrants, which may or may not include the securitiesreferenced in this report.

DISCLOSURES

Does the Analyst or any member of the Analysts household have a financial interest in any securities of the Company? NODoes the Analyst or any member of the Analyst's household or Firm serve as an officer, director or advisory board member ofthe Company?

NO

Has the Analyst or any member of the Analysts household received compensation directly or indirectly from the Company in the

previous 12 months?NO

Does the Firm or affiliates beneficially own 1% of the Companys common stock? NOHas the Firm or affiliates received investment banking services compensation in previous 12 months? YESHas the Firm or affiliates received non-investment banking securities-related services compensation in previous 12 months? NODoes the Firm or affiliates expect to receive or intend to seek investment banking compensation in next 3 months? YESHas the Firm or affiliates received non-securities services compensation in previous 12 months? YESDoes the Firm or affiliates make a market in the Companys securities? NO

The Firm and/or its directors and employees may own securities of the company(s) in this report and may increase or decreaseholdings in the future. The Firm, its officers, directors, analysts or employees may effect transactions in and have long or short positionsin the securities (or options or warrants with respect thereto) mentioned herein. The Firm may effect transactions as principal or agenin the securities mentioned herein.

Ratings Definitions: 1) Strong Buy: the stock is expected to appreciate and produce a total return of at least 40% over the next 12-18months; 2) Buy: the stock is expected to appreciate and produce a total return of at least 20% over the next 12-18 months; 3) StrongSpeculative Buy: the stock is expected to appreciate and produce a total return of at least 40% over the next 12-18 months but thevolatility and investment risk is substantially higher than our "Strong Buy" recommendation; 4) Speculative Buy: the stock isexpected to appreciate and produce a total return of at least 20% over the next 12-18 months but the volatility and investment risk issubstantially higher than our "Buy" recommendation; 5) Neutral: the stock is fairly valued for the next 12-18 months; 6) Avoid/Sellthe stock is expected to decline at least 20% over the next 12-18 months and should be avoided or sold if held; 7) Under Review: theprevious rating and/or price target is suspended due to a significant event which now requires additional analysis and the previousrating and/or price target cannot be relied upon; 8) Not Rated: the stock has too much business or financial uncertainty to form aninvestment conclusion or is currently in the process of being acquired and 9) Restricted: coverage cannot be initiated or has beentemporarily suspended to comply with applicable regulations and/or firm policies in certain circumstances such as investment bankingor an advisory capacity involving the company.

8/7/2019 ECTE Update 01-18-11

20/20


LifeTech CapitalResearch

ResearchCoverage

InvestmentBanking

FINRARULE 2711

ResearchCoverage

InvestmentBanking

Ratings Distribution % of Total % of Total Ratings Distribution % of Total % of TotalStrong Buy 25% 50% Buy 100% 50%Strong Speculative Buy 75% 50% Hold/Neutral 0% 0%Buy 0% 0% Sell 0% 0%Speculative Buy 0% 0% Total 100% 50%Neutral 0% 0%

Avoid/Sell 0% 0%Under Review 0% 0%Not Rated 0% 0%Restricted 0% 0%Total 100% 50%

Legal DisclaimerTHE INFORMATION IN THIS REPORT IS NOT INTENDED TO BE USED AS THE BASIS FOR INVESTMENT DECISIONS ANDSHOULD NOT BE CONSTRUED AS ADVICE INTENDED TO MEET THE PARTICULAR INVESTMENT NEEDS OF ANY INVESTOR.THE INFORMATION IN THIS REPORT IS NOT A REPRESENTATION OR WARRANTY AND IS NOT AN OFFER OR SOLICITATIONOF AN OFFER TO BUY OR SELL ANY SECURITY.

TO THE FULLEST EXTENT OF THE LAW, LIFETECH CAPITAL, AURORA CAPITAL LLC, OUR OFFICERS, ADVISORS, ANDPARTNERS WILL NOT BE LIABLE TO ANY PERSON OR ENTITY FOR THE QUALITY, ACCURACY, COMPLETENESS,RELIABILITY OR TIMELINESS OF THE INFORMATION PROVIDED IN THIS REPORT, OR FOR ANY DIRECT, INDIRECTCONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF INFORMATIONPROVIDED TO ANY PERSON OR ENTITY (INCLUDING BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES,TRADING LOSSES AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THISINFORMATION).

Investors are expected to take full responsibility for any and all of their investment decisions based on their own independent researchand evaluation of their own investment goals, risk tolerance, and financial condition. Investors are further cautioned that Small-Cap andMicro-Cap stocks have additional risks that may result in trading at a discount to their peers. Liquidity risk, caused by small tradingfloats and very low trading volume can lead to large spreads and high volatility in stock price. Small-Cap and Micro-Cap stocks mayalso have significant company-specific risks that contribute to lower valuations. Investors need to be aware of the higher probability ofinancial default and higher degree of financial distress inherent in the Small-Cap and Micro-Cap segments of the market.

The information, opinions, data, quantitative and qualitative statements contained in this report have been obtained from sourcesbelieved to be reliable but have not been independently verified and are not guaranteed as to accuracy nor does it purport to be a

complete analysis of every material fact regarding the company, industry, or security. The information, opinions, or recommendationsare solely for advisory and informational purposes and are only valid as of the date appearing on the report and are subject to changewithout notice.

Statements in this report that are not historical facts are forward -looking statements that involve risks and uncertainties. Forwardlooking statements" as defined under Section 27A of the Securities Act of 1933, Section 21B of the Securities Exchange Act of 1934and the Private Securities Litigation Act of 1995 include words such as opportunities, trends, potential, estimates, may, will,could, should, anticipates, expects or comparable terminology or by discussions of strategy. These forward looking statementsare subject to a number of known and unknown risks and uncertainties outside of the company's or our control that could cause actuaoperations or results to differ materially from those anticipated. Factors that could affect performance include, but are not limited to,those factors that are discussed in each profiled company's most recent reports or registration statements filed with the SEC. Investorsshould consider these factors in evaluating the forward looking statements included in this report and not place undue reliance uponsuch statements. Investors are encouraged to read investment information available at the websites of the SEC at http://www.sec.govand FINRA at http://www.finra.org.

Copyright 2011 LifeTech Capital. All Rights Reserved.

LifeTech Capital is a division of Aurora Capital LLC member FINRA / SIPC

Boca Raton Office New York Office4431 Woodfield Blvd. 17 Park Avenue, #201Boca Raton, FL 33432 New York, NY 10016Tel: 561-988-9129 Tel: 917-834-7206Fax: 561-988-9129 Fax: 415-887-7814

ECTE Update 01-18-11

Documents

Transcript of ECTE Update 01-18-11