Intraoperative Lymphoscintigraphy for Malignant Melanoma

Transcription

1 Intraoperative Lymphoscintigraphy for Malignant Melanoma Marketing Plan by Dana E. Thomas

2 CONFIDENTIALITY STATEMENT The information, data and drawings embodied in this Marketing plan are strictly confidential and are supplied on the understanding that they will be held confidentially and not disclosed to third parties without the prior written consent of Neoprobe Corporation. MEMORANDUM OF RISK The following Marketing plan represents management's best current estimate of the future market opportunity of Neoprobe products addressing the melanoma market opportunity. It must be recognized that no business is free of major risks and few plans are free of errors of omission or commission. Although this plan attempts to evaluate all the risks associated with the marketing of Neoprobe s instrumentation, the reader should be aware that inherently there are risks that can not be foreseen or predicted.

3 FIGURES, TABLES & ATTACHMENTS FIGURES FIGURE 1: PROJECTED LIFETIME OF MELANOMA PATIENTS... 5 FIGURE 2: TRADITIONAL TREATMENT FOR MALIGNANT MELANOMA... 5 FIGURE 3: INNOVATIVE TREATMENT FOR MALIGNANT MELANOMA... 6 FIGURE 4: STAKEHOLDER ANALYSIS I - ILM FIGURE 5: STAKEHOLDER ANALYSIS II - ILM WITH BLUE DYE TABLES TABLE 1: SENTINEL LYMPH NODE MAPPING DATA... 8 TABLE 2: INCIDENCE RATES MELANOMA & BREAST CANCER TABLE 3: GEOGRAPHIC CONCENTRATION OF SELECTED CANCER TYPES - US TABLE 4: GEOGRAPHIC CONCENTRATION OF SELECTED CANCER TYPES - EUROPE TABLE 5: PROJECTED MARKET PENETRATION & MARKET SHARE FOR DEVICES TABLE 6: DEVICE PRODUCT COMPARISON TABLE 7: PREOPERATIVE LYMPHOSCINTIGRAPHY / NUCLEAR MEDICINE TABLE 8: SURGERY / HOSPITAL FACILITY SERVICES TABLE 9: SURGERY / PHYSICIAN SERVICES TABLE 10: SURGERY / NUCLEAR MEDICINE SERVICES TABLE 11: SURGERY / PATHOLOGY SERVICES TABLE 12: TRAINING STATUS OF NEOPROBE 1000 CUSTOMERS APPENDIX RECENT PUBLICATIONS... A ALBERTINI PAPER... B GEOGRAPHIC DISTRIBUTION OF MELANOMA IN US... C ILS DETECTOR PROBE SPECIFICATIONS... D DEVELOPMENT TIMELINE... E INTERFERON ALPHA-2B ADVERTISEMENT... F DEVICE PURCHASE PROCESS DIAGRAM... G TOP HEALTHCARE SYSTEMS TREATING MELANOMA... H POTENTIAL DEVICE CUSTOMER LEADS... I ILS BIBLIOGRAPHY... J SOCIETY OF NUCLEAR MEDICINE MEETING PARTICIPATION... K MSLT TRIAL LEADS... L DR. REINTGEN COURSE BROCHURE... M POTENTIAL ILS TRAINING CENTERS... N 1996 MARKETING CALENDAR... O CURRENT STATUS OF MAJOR CANCER CENTERS US... P

4 ILM Marketing Plan June 1996 Contents I. EXECUTIVE SUMMARY... 2 II. RECOMMENDATIONS... 4 III. DISEASE AND TREATMENT... 5 TRADITIONAL TREATMENT... 5 INNOVATIVE TREATMENT... 6 BLUE DYE DEVELOPMENTS... 7 INTRAOPERATIVE LYMPHOSCINTIGRAPHY (ILM)... 7 IV. MARKET ANALYSIS MARKET SIZE COMPETITION MARKET SHARE V. PRODUCT DESCRIPTION PRODUCT DEVELOPMENT REQUIREMENTS ADDITIONAL PRODUCT DEVELOPMENT PRODUCT COMPARISON REGULATORY MANUFACTURING VI. STAKEHOLDER ANALYSIS VALUE PROPOSITION CUSTOMER PROFILE DECISION MAKERS MAJOR BUYING / PROVIDER GROUPS VII. RELEASE STRATEGY PRODUCT POSITIONING SALES PROCESS DISTRIBUTION PRODUCT PROMOTION PRICING HOSPITAL REIMBURSEMENT HUMAN RESOURCES VIII.TRAINING CUSTOMER MARKET DEVELOPMENT MANAGERS IX. CRITICAL SUCCESS FACTORS X. FINANCIALS ASSUMPTIONS ROI ANALYSIS CONFIDENTIAL FOR INTERNAL USE ONLY

5 ILM Marketing Plan June 1996 I. Executive Summary Melanoma is the fastest rising form of cancer in the United States, and is second only to leukemia in greatest number of potential life years lost due to cancer. The American Cancer Society reports that for the various types of skin cancer there are 1 million new cases recorded each year, 38,000 of which are diagnosed as malignant melanoma. Of the approximately 9,500 deaths resulting from skin cancer, the majority are attributed to malignant melanoma. Federal databases also indicate that the true number of new malignant melanoma cases may not be 38,000 but actually 80,000 cases. The April 1996 issue of Oncology reports that from 1973 through 1992, the overall percentage increase for melanoma was 47.9%, representing the highest increase for all cancers. Neoprobe Corporation is poised to participate in this emerging market opportunity. By proactively selling our existing instrumentation, we can generate immediate income, establish a market presence, and develop a customer base for future product launches. Our strategic intent is to create a Sales and Marketing platform that provides Neoprobe with the option of further developing its sales infrastructure to successfully commercialize the RIGS technology. A market presence will also provide substantial leverage with any potential marketing partner. A controlled, disciplined approach to growing internal Sales and Marketing capability allows for incremental resource additions given sales performance. Intraoperative Lymphoscintigraphy (ILM) for melanoma represents the first opportunity for Neoprobe to establish market leadership in intraoperative gamma detection. Worldwide, this ILM initiative will also reaffirm our commitment to customers and competitors that we will be proactive in developing markets for our technology, and thereby attain a distinct competitive advantage. Neoprobe will continue to appropriately invest and innovate both in radiopharmaceuticals and gamma detection devices. Half the total incidence of Melanoma, Breast Cancer, and Colorectal Cancer occurs in the U.S. in almost all of the same nine states. There is also a similar geographic concentration in Europe. Approximately half of the new melanoma, breast cancer, and colorectal cancer cases reported each year in Europe occur in just two countries. The size of the European market opportunity for each disease is essentially the same as in the U.S. This affords Neoprobe a worldwide opportunity to develop markets and train the same customers that will progress from ILM to RIGS. Clinical research using our probe is also underway at a number of institutions for ILM Breast Cancer, which represents a procedure market size five times that of melanoma. Intraoperative Lymphoscintigraphy is a new procedure that employs a radiopharmaceutical and a hand-held gamma detection probe for lymphatic mapping and identification of sentinel lymph nodes. This technique was originally developed for use with blue dye for visual tracing of the lymphatic flow. The use of a currently available radiopharmaceutical and Neoprobe's instrumentation allows the surgeon to perform a less invasive procedure for locating the sentinel lymph node. The sentinel lymph node is the first draining node from the primary tumor, which is highly predictive of the presence or absence of metastatic disease. As a result of this new procedure, a regional lymphadenectomy will only be required in those patients that have metastatic disease confirmed post-operatively by pathology. This will eliminate the need for 80% of the lymphadenectomies currently performed for this disease. The cost-effectiveness of this episode of care is considerable, especially when considering the morbidity and debilitating Dana E. Thomas Page 2

6 June 1996 ILM Marketing Plan effects of a lymphadenectomy. This new procedure also permits the use of local anesthesia in a more cost-effective outpatient setting. A recent study also demonstrated that surgeons were able to identify the sentinel node 69% of the time with the blue dye alone and 96% of the time with the blue dye and intraoperative lymphoscintigraphy. One major component of this strategy is the development of an 11mm ILM disposable probe handle with a reusable tip. The value to the customer will be a reliable, ergonomic, pre-sterilized handle that will be cost-effective compared to a very expensive reusable probe. The value to Neoprobe is the generation of a recurring income stream from the disposable handle for ILM Melanoma and future procedures. This initiative will reinforce Neoprobe's place in the Operating Room. The 1996 projected loss is $661,000, primarily a function of the ILM product development and Marketing Development Managers. The 1997 projected net income is $915,000 due to the 221 Neoprobe 1000 installations worldwide. The cumulative 10 year after-tax cash flow is $52 million with a positive 10-year NPV of $12.9 million using a 24% discount rate to reflect the inherent risk associated with this project. page 3 Dana E. Thomas

7 ILM Marketing Plan June 1996 II. Recommendations It is recommended that Neoprobe capitalize on the ILM Melanoma opportunity immediately, in an effort to generate an income stream, establish a market presence, fund further device development, and prepare for future product launches. The following investments are recommended: Recruit and train (3) additional Market Development Managers for California, Texas, and New York by the end of second quarter A Market Development Manager from Florida has been successfully recruited from ValleyLab and is currently located in Tampa. A total of (3) individuals were in the 1996 budget. Recruit and hire a Product Manager for ILM specifically to support ILM Melanoma field activities, develop an ILM Breast Cancer marketing plan, and provide the vision, direction, and experience to develop these markets ahead of the competition. This individual should be hired as soon as possible to permit Neoprobe's existing Product Manager to prepare a worldwide marketing plan RIGScan Colorectal. Pursue Marketing/Distribution partnerships for Europe with the option of recruiting and training in the first quarter The financial model reflects these European MDM additions. However, they will not be hired until Neoprobe conducts an assessment of potential Marketing/Distribution partnerships. This activity should begin immediately. Recruit and hire a Director of Sales in January 1997 to manage the growth of ILM Melanoma, ILM Breast Cancer, and the introduction of RIGScan for colorectal cancer. This individual could potentially come from the four existing market development manager ranks. Recruit and train (4) additional Market Development Managers for Pennsylvania, Illinois, Ohio, and New Jersey by the first quarter Conduct Outcomes Research with McDermott, Will and Emery to validate the reimbursement and cost benefits for ILM melanoma compared to traditional treatment. This should be completed by the third quarter Conduct rapid product development and achieve commercialization of the ILM disposable probe and reusable probe tip by April If possible, this design could be part of a platform concept to provide a family of products, i.e., a 19mm highly featured single-operator disposable probe. Conduct Market Research on pricing for the ILM disposable probe and reusable tip. Help establish and support the creation of five additional training Centers of Excellence, beyond the H. Lee Moffitt Cancer Center and Research Institute at the University of South Florida. Host a surgeon panel meeting to refine product design criteria for the ILM disposable probe and reusable tip by end of 3Q96. Dana E. Thomas Page 4

8 June 1996 ILM Marketing Plan III. Disease and Treatment The most malignant type of skin cancer is melanoma. Cutaneous melanoma occurs on any skin surface, predominately in areas of the head, neck, trunk and upper and lower extremities. The site of tumor is gender dependent because melanoma occurs more often on the lower extremities in women and on the back in men. The majority of melanomas arise from an unusual skin condition, especially a change in the size or color of a mole or other darkly pigmented growth or spot. The overall 5-year survival rate is 87%. For disease confined to the primary tumor, the 5-year survival is 94%; and rates for regional nodal and distant disease is 60% and 16%, respectively. This cancer can spread to any other tissue in the body. Greater than 80% of the patients with melanoma will present with disease confined to the primary tumor and without evidence of nodal disease. The early presentation of melanoma is termed clinical stage I (CS-I). (Cancer Facts & Figures ) Incidence rates are approximately 40 times greater among whites and 3-fold higher among persons living in the sun belt states. During the past decade, the incidence of melanoma has increased at a substantial rate. By the year 2000, 1 in 90 persons living in the United States will develop melanoma (Cancer: Principles and Practice of Oncology). The reasons for the increase are unclear, but factors such as early detection and increased recreational exposure to sunlight may contribute to the higher incidence among young Americans. Recent publications further support these trends (Appendix A). Rate/100,000 PAST, CURRENT AND PROJECTED LIFETIME RISK OF A PERSON IN THE UNITED STATES DEVELOPING MELANOMA : : : :150 LIFETIME RISK :135 Source: Cancer: Principles & Practice of Oncology :90 Traditional Treatment The traditional, standard of care treatment for melanoma has been a multi-step process beginning with a biopsy of the primary lesion to determine the pathological diagnosis and the histological stage by measuring the maximum tumor thickness. The next step for patients with intermediate and greater thickness melanoma (>0.75 mm) and without clinically suspicious lymph nodes (CS-I) is a wide local excision (WLB) of the primary tumor under general anesthesia. Approximately half of the surgeons performing this procedure will also include a Elective lymph node dissection (ELND) Biopsy of suspicious skin lesion Wide local excision (WLE) of primary melanoma lesion Patients with CS-I melanoma Traditional treatment for malignant melanoma Delayed lymph dissection page 5 Dana E. Thomas

9 ILM Marketing Plan June 1996 regional lymphadenectomy (excision of all lymph nodes within a lymphatic basin). Regional lymph nodes are the first drainage pathways from the primary tumor. The surgical management of regional nodes in patients with CS-I melanoma is controversial despite the fact that the most powerful factor in predicting progression of disease is the status of the regional lymph nodes. A regional lymphadenectomy is costly and associated with a high complication rate. Some surgeons prefer to perform a lymph node dissection of the regional nodes as a prophylactic intervention even when the nodes appear normal because of the risk of subclinical or microscopic disease. This procedure is termed an elective lymph node dissection (ELND). Of the patients undergoing an ELND, 20-30% have micrometastatic disease in regional lymph nodes, while 70-80% have not developed metastatic disease. The other treatment choice is a "wait and see" approach. Some surgeons prefer to observe the patient and perform the lymph node dissection in only patients who develop palpable or clinically suspicious regional nodes. This procedure is viewed as more therapeutic and selective because only the patients who develop nodal metastases are subject to this costly and highly morbid procedure. Innovative Treatment Since 1992, the surgical treatment paradigm for patients with CS-I melanoma is undergoing a dramatic change. The change is based on new information about the location and number of regional lymph node basins draining the primary lesion and the nonrandom or orderly progression of nodal metastasis within a regional lymphatic basin (Ann Surg 1994; 6: ). The surgical management or wide local excision of the primary tumor is unchanged except for more emphasis placed on conservative margins (2 cm). The thickness of the primary tumor is still used as a predictor of patients at risk for metastatic disease to regional lymph nodes. In the patients with CS-I melanoma, the recommended next step is a diagnostic imaging procedure termed lymphoscintigraphy, first reported by Robinson et al. (Surg Forum, 1977: 28: ). Lymphoscintigraphy is used to identify the lymph node basins at risk by determining lymphatic flow or drainage from the primary lesion to regional lymph nodes Biopsy of suspicious skin lesion Histologically negative SLN - Follow patient Wide local excision (WLE) of primary melanoma lesion Patients with CS-I melanoma Lymphoscintigraphy - Identification of regional nodal basin(s) at risk for metastatic disease - Identification of location and number of sentinel lymph nodes (SLN) Intraoperative lymphatic mapping - Vital blue dye - Introperative lymphoscintigraphy Histologically positive SLN - Lymph node dissection of regional nodes Innovative treatment for malignant melanoma basins. Lymphoscintigraphy involves the injection of technetium-99m sulfur colloid around the primary lesion. Using a scintillation camera, images of lymphatic flow from the primary tumor are obtained to determine the regional lymphatic basins draining the tumor. The use of lymphoscintigraphy has resulted in a more precise and accurate identification of lymph node basins at risk for metastatic spread of melanoma. Before lymphoscintigraphy, the Dana E. Thomas Page 6

10 June 1996 ILM Marketing Plan decision as to which lymph node basin to dissect was based on anatomical guidelines. Comparative studies using anatomical guidelines and lymphoscintigraphy demonstrated that in more than 50% of the patients, the guidelines underestimated the paths of lymphatic flow from the primary tumor. To eliminate the possibility of misdirected lymph node dissections, lymphoscintigraphy is now being used before surgery to identify the regional lymphatic basins at risk for metastatic disease. The next step in the management of melanoma was an extension of earlier work with lymphoscintigraphy. Donald Morton, M.D. and his colleagues at the John Wayne Cancer Institute hypothesized that lymphatic drainage pathways from the primary tumor may indicate the node(s) within the regional basin most likely to contain tumor. Morton termed the sentinel lymph node (SLN) and defined it as the first node in the regional lymphatic basin that drains the primary tumor (Arch Surg 1992; 127: ). Douglas Reintgen, M.D. and his colleagues at the H. Lee Moffitt Cancer Center and Research Institute confirmed Morton's hypothesis of an orderly progression of melanoma nodal metastases. The researchers concluded that metastases is not a random event, but occurs in a sequential manner with involvement of the SLN initially followed by involvement of the higher level nodes. Blue Dye Developments Morton and his colleagues developed an intraoperative lymphatic mapping technique for the identification of the SLN. They injected a vital blue dye intradermally around the primary tumor, isolated the afferent lymphatics and followed the lymphatic channels to the blue sentinel lymph node. An excisional biopsy of the SLN node and subsequent lymph dissection was performed to determine if the histology of the node is reflective of the remainder of the regional lymphatic basin. Morton's group studied 223 patients with CS-I melanoma, preformed 237 lymph node dissections and found 194 SLNs. Of the 237 specimens, metastases were found in at least one node in 40 (21%) specimens. Among the patients with nodal metastases, 62.5% had only the SLN involved with tumor. The high predictive value of the SLN as a predictor of the histology of the regional lymphatic basin was confirmed by the finding of 1% of the patients with histologically negative SLNs developed nodal metastasis in the same basin. The results of the study confirmed the researchers' hypothesis that the lymphatic metastatic pathway of melanoma begins with the SLN. The study demonstrated a relationship between the number of procedures and the incidence of identifying the SLN using the blue dye technique. The success of identifying the SLN increased over time as the surgeon gained more experience with the technique. An acceptable technical skill level was achieved after 60 or more procedures. Intraoperative Lymphoscintigraphy (ILM) Intraoperative lymphoscintigraphy is a technique using a radiopharmaceutical and a hand-held gamma detector probe for intraoperative lymphatic mapping and identification of sentinel lymph nodes. David Krag, M.D., pioneered intraoperative lymphoscintigraphy from the University of Vermont. Dr. Krag first described the successful use of a hand-held gamma detector probe for the detection of technetium-99m sulfur colloid concentrated in blue sentinel lymph nodes using a page 7 Dana E. Thomas

11 ILM Marketing Plan June 1996 pre-clinical model. Following the pre-clinical investigation, Krag and his colleagues reported the combined use of technitium-99m sulfur colloid with a hand-held gamma detector probe and vital blue dye for intraoperative lymphatic mapping and identification of the SLN (Surg Onc 1993: 2: ). Krag cited the surgeon's significant learning curve to achieve technical expertise and the tedious dissection needed when using only the blue dye technique as reasons for gamma probe localization of the SLN. In this initial study of 10 patients, the gamma detector probe was used successfully to identify all blue SLNs. Since Krag's study, other investigators from major medical centers (University of Texas M.D. Anderson Cancer Center, John Wayne Cancer Institute, and the Sydney Melanoma Unit in Australia) have preformed intraoperative lymphatic mapping for the identification of the SLN and have confirmed its accuracy in predicting patients at risk for metastatic melanoma. Results of clinical trials are represented in the table below. An example of the confirmatory studies is the recent report by Albertini and his colleagues from the Moffitt Cancer Center (Ann Surg 1996: 223: ). This report (Appendix B) describes the successful use of vital blue dye and ILM for the identification of the SLN. One hundred six patients with clinical stage-i melanoma underwent a preoperative lymphoscintigraphy and intraoperative lymphatic mapping using vital blue dye and ILM. Of the 200 SLNs biopsied at operation, 69% were identified by blue dye alone compared to 83.5% localized using ILM. Further analysis demonstrated that the combined use of vital blue dye and ILM resulted in the identification of the SLN in 96% of the lymphatic basins. Sentinel Lymph Node Mapping Data Researcher Indication Patients Blue Dye Preoperative Detector Localization Radiocolloid Lymphoscint Probe Rate 82% Morton 4/94 Melanoma 223 Yes No No No* (78% axilla) Uren 8/94 Melanoma 190 Yes Yes Antimony Trisulphide No* 99% Kaptelin 6/95 Melanoma 45 Yes Yes Solco Nanocolloid Neoprobe % Hill 6/95 Melanoma 14 Yes Yes Filtered Sulfur Colloid Neoprobe % Reintgen Melanoma 106 Yes Yes Filtered Sulfur Colloid Neoprobe % Source: Published literature * The Neoprobe 1000 has since been incorporated into their technique. The authors concluded that intraoperative lymphatic mapping is enhanced by use of ILM and reported the following advantages: The location of the SLN can be determined prior to the incision. Precise identification of the SLN is possible through a small and more conservative incision. The learning curve for the technique can be decreased from procedures to five (5) procedures. Identification of SLN(s) using ILM is more rapid and accurate when compared to the vital blue dye technique. Dana E. Thomas Page 8

12 June 1996 ILM Marketing Plan The identification and location of SLN(s) is possible using ILM in the presence or absence of the blue dye. The blue dye technique provides confirmatory information. More SLNs are identified using ILM. ILM is the only reliable method to assess the margins of resection and determine whether all SLNs are identified and removed. Recent reports of clinical follow-up data among patients with CS-I melanoma and histologically negative SLNs are establishing the long-term accuracy of the intraoperative lymphatic mapping using vital blue dye and ILM. Dr. J. Gershenwald from M.D. Anderson presented at the 1996 Society of Surgical Oncology a prospective study that identified the risk of recurrence among 618 patients with melanoma who underwent intraoperative lymphatic mapping and biopsy of SLN(s) using the combined techniques of vital blue dye and ILM. Patients with histologically positive SLN underwent a lymph node dissection of the regional nodal basin. Patients with histologically negative SLN were followed with intact or unresected regional nodal basins. The median follow-up was 15 months. Of the 518 patients with negative SLN, 32 (6%) developed recurrent disease. Ten of the 518 patients (2%) developed their first recurrence in a previously mapped regional nodal basin. Of particular significance, a retrospective analysis of SLNs from seven of these same ten patients was done using different and innovative methods to determine the presence of cancer cells. Multiple tissue slides of the SLNs were examined using immunohistochemical staining. A molecular biological technique, RT-PCR was used because of its high degree of sensitivity compared to standard or routine histological procedures. Cancer cells were found in the SLNs among six of the seven patients studied using the more sensitive and innovative techniques. Because of these findings, the six patients were eligible for systemic treatment of their disease. Gershenwald and his colleagues concluded that SLN biopsy is an accurate method to determine the risk of metastatic disease among patients with melanoma. Patients at risk for metastatic disease are now being treated with Interferon Alfa-2b Recombinant. A recent randomized study sponsored by the Eastern Cooperative Oncology Group has demonstrated a significant increase in overall survival (p=.037) and a relapse-free survival (p=.0023) among stage II-III patients treated with Interferon Alfa-2b compared with patients receiving no treatment. Adjuvant Interferon Alfa-2b significantly increased median overall survival from 2.8 to 3.8 years. A 42% improvement in the 5-year relapse-free survival rate was demonstrated among the treated patients. Most patients receiving Interferon Alfa-2b experienced mild to moderate side effects such as fatigue, headache, fever, chills, nausea, vomiting, depression, alopecia, diarrhea, and thrombocytopenia. (J Clin Oncol, 1996,1:14(1): 7-17) page 9 Dana E. Thomas

13 ILM Marketing Plan June 1996 IV. Market Analysis Market Size In 1996, there will be an estimated 38,300 newly reported cases of malignant melanoma. Of these 38,300 new cases, 90% (34,500) will present with no clinical evidence of metastasis in the regional lymph nodes (CS-I). Among these 34,500 patients, approximately 80% (27,600) will have a primary melanoma which is of intermediate or greater thickness, making them candidates for the ILM procedure. Due mainly to contributing environmental factors, the incidence of melanoma has been increasing over the last four years at a rate of 4%. However, the most recent increase from 1995 to 1996 was greater than 12%. Federal databases report that the true incidence may be as high as 80,000 new cases annually, which would suggest that the rate of increase will continue to be rapid for a number of years. The table below lists the rates of increase in the incidence of both melanoma and breast cancer over the last five years, and the total number of cases estimated for 1996: Annual Rates of Increase in Incidence - U.S. Total Cases Melanoma 4% 4% 4% 6% 12% 38,300 Breast 0% 0% 0% 0% 1% 184,300 Source: Cancer Facts & Figures, ACS As illustrated in Appendix C, the geographic distribution in the U.S. of melanoma, breast cancer, and colorectal cancer is dominated by a small number of states. Approximately half of the new melanoma cases reported each year occur in just nine states, in eight states for breast cancer, and in nine states for colorectal cancer. The following table illustrates the high correlation of geographical incidence for melanoma, breast cancer, and colorectal cancer in the U.S. Colorectal cancer has been included for comparative purposes in consideration of the upcoming RIGScan CR49 launch. The concentrations of colorectal cancer populations correlate very closely with breast cancer and melanoma in the U.S. and Europe. This phenomenon will allow Neoprobe to sequentially develop targeted geographic areas. As new Neoprobe products are launched, the incremental resources necessary to support them should be proportionally less. Dana E. Thomas Page 10

14 June 1996 ILM Marketing Plan Geographic Concentration of Selected Cancer Types - U.S. Melanoma (38,300/yr.) Breast Cancer (184,300/yr.) Colorectal Cancer (133,500/yr.) State Incidence % State Incidence % State Incidence % California 4, California 17, California 11, Florida 2, New York 14, New York 9, Texas 2, Florida 11, Florida 8, New York 2, Texas 11, Texas 8, Pennsylvania 2, Pennsylvania 11, Pennsylvania 8, Illinois 1, Illinois 9, Illinois 6, Ohio 1, Ohio 8, Ohio 6, New Jersey 1, Michigan 6, Michigan 5, N Carolina 1, New Jersey 4, TOTAL 19, , , Source: 1996 Cancer Facts & Figures, ACS There are currently 53 National Cancer Institute (NCI) designated cancer centers, 26 of which are comprehensive cancer centers. There are also approximately 430 university/teaching institutions, and 1,600 community hospitals with cancer programs. Another 3,100 hospitals exist which do not have cancer programs, bringing the total number of hospitals in the U.S. potentially treating melanoma patients to approximately 5,200. All accredited hospitals in the U.S. have nuclear medicine departments. If the Florida market is representative of high incidence melanoma states, there may be one or two large melanoma centers treating a disproportionately high number of the cases, with the balance dispersed among the remaining hospitals in the state. For example, in Florida, the Moffitt Cancer Center last year treated approximately 520 of the state's 2,700 melanoma procedures. California provides another example, where the John Wayne Cancer Institute last year treated over 640 of the state's 4,500 melanoma patients. The total potential U.S. market in 1997 for control units is estimated to be 4,170 units. This is based on assumed averages of multiple devices in cancer centers and teaching institutions, and fewer devices at community hospitals (detailm in Financials). At an average selling price of $15,000 per control unit, the market potential for control units is approximately $63 million. This document assumes the development of an ILM reusable probe tip for use with a disposable probe handle. It is estimated that two ILM reusable tips will be purchased with the control unit, and a small volume of additional sales would be anticipated from existing customers purchasing replacements. At an average price of $1,900 per reusable probe tip, the market potential for sales commensurate with control units is approximately $16 million. The disposable probe handle component would be used in conjunction with the reusable tip, and will represent a perprocedure charge. Based on an average selling price of $l50/handle, and 27,600 procedures per year, the annual recurring revenue potential is over $4 million for ILM Melanoma. The geographic distribution in Europe of melanoma, breast cancer, and colorectal cancer is dominated by a very small number of countries. The top three countries, Germany, France and U.K., are identical for each cancer type. page 11 Dana E. Thomas

15 ILM Marketing Plan June 1996 Geographic Concentration of Selected Cancer Types - Europe Melanoma (33,000/yr.) Breast Cancer (166,700/yr.) Colorectal Cancer (179,800/yr.) Country Incidence % Country Incidence % Country Incidence % Germany 11, Germany 46, Germany 52, France 6, U.K. 27, France 30, U.K. 4, France 27, U.K. 30, TOTAL 21, , , Source: Facts and Figures of Cancer in the European Community, IARC Press, 1990, and Neoprobe Corp. Competition The lengthy and successful developmental effort by Neoprobe Corporation towards commercialization of RIGS products has resulted in the emergence of a number of competitors offering their version of hand-held gamma detection instruments. Except for CIS- Biointernational, a French company, these competitors have restricted their development to device products only. There are two device companies in the U.S. and at least three in Europe pursuing ILM or RIGS markets. CareWise Medical Products Corporation is located in Morgan Hill, CA and was established in 1986 by Robert Carroll, MD and Robin Wise. The company is privately owned, and produces one product only, the C-Trak Surgical Guidance System, which was historically rather unsuccessfully marketed for use with OncoScint for intraoperative detection of colorectal cancer. The advent of sentinel node mapping, using the high-energy radionuclide Technetium-99m, has provided a prime opportunity for CareWise to increase their customer base and to more effectively compete with Neoprobe Corporation. Care Wise Medical employs several sales and marketing individuals, and uses manufacturers representatives to promote the C-Trak instrument to surgeons and nuclear medicine physicians. They have sold approximately 30 devices in the U.S. at a price of about $30,000. A second detector probe for a different type of radioactivity is an additional $15,000, totaling $45,000. A newly formed company called Gamma Surgery, directed by Leon De Galley, a physician s assistant has pursued further promotion of the C-Trak instrument. Gamma Surgery offers fee for service assistance by bringing a C-Trak instrument to the operating room of surgical customers, assisting with its use during surgery, and providing direction towards receipt of reimbursement for the intraoperative detection procedure. Gamma Surgery has been more successful pursuing the market for ILM than in earlier attempts with colorectal and endocrine tumor targeting. At the recent SSO meeting it was noted that Leon DeGalley, with Gamma Surgery is now promoting use of instrumentation from the second U.S. competitor, RMD, Inc. This company, located in Watertown, Massachusetts, has made portable detectors since at least RMD has not represented significant competition to Neoprobe, as they have focused primarily on industrial applications for their various detection instruments. With promotion from Gamma Surgery and the popularity of the sentinel node mapping procedure, RMD, Inc. may represent future device competition. At present, only two hospitals are known customers of RMD, Inc. Three European companies are currently marketing hand-held gamma detection systems. CIS bio-international, a French company, produces radiopharmaceutical products for ILM and RIGS Dana E. Thomas Page 12

16 June 1996 ILM Marketing Plan as well as detector instruments. There are several reports in the literature documenting use of the CIS instrument, but the number of customers is estimated to be small at present, and there is no planned presence in the U.S. The two other companies, Stratec (Germany) and Pol. Hi. Tech. (Italy), are new companies for which little information is currently on hand. For detailm on comparative specifications of U.S. and European devices, refer to the Competitive Device Comparison Table, page 16. Market Share It is estimated that Neoprobe currently has a 59% share of the U.S. device market, with CareWise representing the other 41%. CareWise is expected to continue to have a presence as the ILM market develops. CareWise has placed its device in such highly visible institutions as University of Vermont, Massachusetts General, and Memorial Sloan-Kettering. These institutions are advocating use of the CareWise device, and such promotion can potentially escalate their position in the market. It has been assumed that by 1999, CareWise will have developed a new generation of device that will detect Iodine-125 and, using fiber-optic technology, will be comparable in size to the Neoprobe 11mm detector probe. It has also been assumed that by 1998 a European device competitor, such as CIS, Stratec, or pol.hi.tech will have entered the U.S. market. The following table estimates the projected penetration of the total potential device market by all device companies. Also shown is each company's market share. Projected Market Penetration and Share of Market for Devices Total Market 4,170 4,170 4,170 4,170 4,170 Market Penetration - all Companies 3% 11% 19% 33% 50% Total Devices Installed - all Companies Neoprobe Share of Market 59% 60% 62% 65% 67% CareWise Share of Market 41% 40% 36% 31% 27% Other Share of Market 0% 0% 2% 4% 6% It is imperative to have a disposable component in Neoprobe's product line to continue to generate revenue as control unit sales decline as a function of market saturation. It is anticipated that Neoprobe will enjoy a highly differentiated and exclusive position with its family of disposable products. This revenue stream will continue to grow as ILM Breast Cancer and RIGS Colorectal emerge. page 13 Dana E. Thomas

17 ILM Marketing Plan June 1996 V. Product Description The current Neoprobe 1000 Portable Radioisotope Detector is a portable gamma-detecting system (control unit and 19mm reusable probe) designed for a variety of medical and surgical applications. It is used to locate concentrations of injected radiopharmaceuticals by detecting and quantifying radioactive emissions from targeted tissues. The Neoprobe 1000 system consists of a sensitive gamma ray detector probe connected via a cable to a microprocessor-based control unit that displays detected radiation emissions as counts. Increased counts detected from targeted tissues are compared to non-targeted tissues in order to quickly determine the location and extent of targeted tissues. Comparative counts can be communicated to the surgeon by means of an audible signal allowing for visual attention to be kept on the surgical field. This audible signal, or squelch feature, allows the surgeon to use sound feedback from the control unit to identify and locate areas of activity significantly higher than background. This information assists in determining the location and extent of targeted tissues for possible surgical removal. The Neoprobe 1000 system includes a number of features. A small, 19mm hand-held detector probe can be ethylene oxide sterilized and can be positioned on or near a radiation source, improving resolution and detection efficiency compared to external radiation detector cameras. A LCD screen displays radiation counts in either a continuous readout mode or for selected time intervals. The audible feedback system, or squelch, enables the user to "listen" for areas of elevated radioactivity. Maximum portability and electrical safety is achieved with continuous battery operation. A fuel gauge displays battery charge status prior to and during use. Product Development Requirements The first priority for new instrument products will be to develop an ILM detector probe design that incorporates a disposable handle and reusable tip. It is anticipated that this reusable probe tip will house the detector crystal and preamplifier. The disposable handle will be packaged and sold as a sterile component, and will be simple to use and assemble. The first generation of disposable handle will include an integrated cable to connect to the control unit. The customers for whom this product is principally intended are surgeons performing ILM procedures for melanoma and potentially for breast cancer. The estimated sterile, packaged manufacturing cost (COGS) for the ILM disposable handle is $15/handle. The retail price for the product is anticipated to be approximately $150/handle. The estimated nonsterile, packaged COGS for the ILM reusable probe tip is $750. The net sales price at this time is projected to be $1,900. Market research is planned to validate these pricing assumptions. In addition, Neoprobe will host a surgeon and nurse panel discussion to refine the product criteria. The development of this product will merit the highest priority, as worldwide market opportunities exist immediately. It is intended that the ILM detector probe will be a smaller caliber device to facilitate a more minimally invasive approach (smaller incision) and provide high reliability through an integrated cable with the disposable handle. It is also highly desirable that the reusable portion of this product be designed for steam sterilization to reduce the current EtO sterilization cycle time from 24 hours to approximately 10 minutes. This will also alleviate the need for a sterile sheath. A Dana E. Thomas Page 14

18 June 1996 ILM Marketing Plan detailed product criteria is included in Appendix D. Battelle is currently developing a project proposal for the ILM detector probe. The overall plan and milestone chart is in Appendix E. Additional Product Development After the ILM detector probe, the priority is the next generation control unit and 19mm singleoperator reusable/disposable probe, which will be consistent with the RIGS initiative. The control unit is intended to be a user-friendly, flexible platform from which the Neoprobe family of probes can be launched. Along with the single-operator probe products, this control unit should promote as much independence of the surgeon as possible, thus minimizing the need for Operating Room resources. The estimated COGS is less than $1,100/unit, representing 93% gross profit. The hospital list price for the control unit sold separately will be approximately $15,000/unit. This next generation control unit will also include a variable pitch siren mode, data recording capability, and improved visual display. Neoprobe Corporation has been requested to participate with Lockheed/Martin, the University of South Florida, and the H. Lee Moffitt Cancer Center to develop a needle size probe that can be used percutaneously. Funds have already been guaranteed by the Department of Energy to begin proof of principle for this concept. Further discussion will be held with all parties in late June to establish specific objectives, milestones, resource needs, expectations of each contributor, deliverables, and ownership of intellectual property. Product Comparison CareWise and RMD represent the competitors in the U.S. for hand-held gamma detection. Along with CareWise, three additional companies are competing for the European device market. It is important to recognize these potential U.S. competitors in light of the emerging ILM market. The following table provides a competitive device comparison: page 15 Dana E. Thomas

19 ILM Marketing Plan June 1996 Company Device Product Comparison Neoprobe 1000 C-Trak RMD CIS Probe ScintiProbe TecProbe 2000 Neoprobe Corp. Care Wise Med. RMD, Inc CIS biointernational pol.hi.tech. Stratec Location U.S. U.S. U.S. France Italy Germany Market Product Type U.S., Europe, Pacific Rim U.S., Europe U.S., Pacific Rim Europe Europe Europe Device and Pharmaceutical Device Device Device and Pharmaceutical Device Device Detector Probe CdZnTe NaI CdTe or CsI NaI Scint. Crytstal CsI Energy Range (KeV) Iodine-125 Detection Yes No Yes No Yes Yes Count Duration CPS to 100 sec. 0 to 99 sec sec. CPS Visual graph.1 to 600 sec. Audio Signal Binary signal Variable Pitch Variable Pitch Ratemeter Beep None Variable Pitch Display LCD LED LCD LCD LED LED Count Trend No No No Bar Graph Software Bar Graph Probe Diameter 19mm (11 mm) 19mm / 25mm 7mm / 16mm 23mm 11mm 20mm Probe Weight 170 gm 1000 gm 200 gm gm Power Battery Shelf battery/dc Battery AC AC / 1 hr battery Battery Sterility Method ETO ETO / soak ETO -- ETO / soak ETO / soak Data Record No Yes Yes No Yes No Computer No Yes Yes Yes Yes / software No Other features Squelch Beta Probe Laproscopic --- Pricing $19,900 $30,000 $8,500 $21,000 $12,500 None of the devices listed, including the Neoprobe 1000, contain features that qualify it as superior to the others. All devices will presumably work for ILM, and several will work for RIGS applications as well. Surgeons doing ILM procedures desire smaller diameter probes. Neoprobe will gain a significant advantage over CareWise by producing the smaller diameter ILM detector probe. RMD already has a small diameter probe, which also detects Iodine-125 (for RIGS), and is therefore in a strong position to compete. In order to achieve superiority, the Neoprobe 1000 needs to include a variable pitch option for audible guidance of detection, and a data recording capability, preferably via a computer compatible link, allowing for various software package designs. These features are planned for the next generation control unit under development. Regulatory The Neoprobe 1000 system received 510(k) clearance from the FDA in 1986 and is classified as Dana E. Thomas Page 16

20 June 1996 ILM Marketing Plan a Class I device. Subsequent clearances were received in 1992 and 1995 reflecting minor changes in design and addition of accessory components such as the detector probe collimator and shield. The 11mm reusable probe will be submitted for 5l0(k) approval in May The ILM detector probe with a disposable handle and reusable tip will be submitted consistent with an April 1997 product release. The regulatory strategy is that our current device labeling includes the ILM applications. Current device labeling describing indications of use of the Neoprobe 1000 is contained in the Operation Manual. In summary, "The Neoprobe 1000 enables the user to detect and localize concentrations of injected radiopharmaceuticals in a variety of external and intraoperative applications. It is the responsibility of the physician to determine the suitability and clinical utility of the radiopharmaceutical to be used, as well as the actual protocol for administering the drug and intraoperative use of the device. The following benefits realized by using the Neoprobe 1000 for ILM have been described in various peer-reviewed publications. These benefits will be included in promotional materials, as they represent powerful justifications for ILM. The benefits of using Neoprobe products for ILM Melanoma have been identified as the following: Improved success rate of SLN localizations (vs traditional techniques) Dramatic reduction in OR time due to more expedient SLN localization Reduction in tissue dissection - minimally invasive surgery (MIS) Potential for outpatient procedure using local anesthesia, resulting in a significant economic benefit Manufacturing For the last two years, Neoprobe 1000 Systems have been manufactured at Random Corporation, a contract manufacturer located in Cincinnati, Ohio. Consistent with the ILM Melanoma initiative, the total sales forecast for 1996 is 29 systems. More importantly, the 1997 sales forecast is 204 systems. A new supplier may manufacture the ILM detector probe. In addition, if Neoprobe participates and a viable product results from the collaboration with Lockheed/Martin and USF, the agreement with the Department of Energy requires Lockheed/Martin to perform the manufacturing. This requirement comes from one of the project objectives, which is to achieve technology transfer and to further diversity Lockheed/Martin's aerospace business. page 17 Dana E. Thomas

21 ILM Marketing Plan June 1996 VI. Stakeholder Analysis Value Proposition The value proposition for ILM is less invasive surgery, less patient morbidity, less unnecessary lymphadenectomies, local anesthesia in an outpatient setting, and selection for drug regimens. There is, therefore, compelling clinical and economic justification. This procedure is of interest to both the surgeon and the Nuclear Medicine physician. ILM further defines lymphatic mapping as a minimally invasive procedure. Transcutaneous localization of the SLN allows for precise placement of a small incision. Dissection to locate and remove the node is reduced to a minimum. Information regarding possible additional sentinel nodes is immediately available upon survey of the bed of resection. These attributes make possible the transition of this procedure from an extensive exploration requiring general anesthesia to the outpatient setting under local anesthesia, and reduce elective lymphadenectomies as much as 80%. This information should provide compelling incentives for major health care providers such as Columbia/HCA to rapidly adopt this procedure. Recent FDA approval of Interferon Alfa-2b (Appendix F) for treatment of high-risk melanoma provides the first available treatment for patients at risk that has demonstrated a significant survival benefit. This therapy is costly and involves significant side effects, requiring proper selection of patients for therapy. Selection rests upon nodal status of patients who present with primary malignant melanoma. The most efficient and cost-beneficial method of determining nodal status is by means of ILM to locate and remove the SLN for pathologic evaluation. The value proposition of the ILM detector probe is the disposability which provides a sterile, reliable handle and cable available for each case, less initial capital outlay for the hospital, significantly lower replacement cost if the probe is damaged, steam sterilization and squelch capability to precisely set conditions for the audible control unit signal. Capital expenditures are increasingly difficult for hospitals due to reductions and greater scrutiny of departmental budgets. A control unit priced at $15,000 will be offered in Conjunction with disposable ILM detector probes. A reduction in the system purchase price from $19,900 to $15,000 will address some of their cost concerns. Customer Profile The surgeon is the primary customer, who determines the appropriate therapeutic course of action for their patients diagnosed with malignant melanoma. A secondary customer is the nuclear medicine physician. The surgeon performing the ILM procedure would probably be a Surgical Oncologist, General Surgeon, or Plastic Surgeon. The thought leaders and early adopters have been successfully presenting and publishing their work. Approximately 50% of the attendees at the March SSO meeting said they were using blue dye for melanoma procedures. Although there is a high concentration of cases in major cancer centers, it is generally believed that the remainder of melanoma surgical treatment is dispersed throughout the balance of the hospitals. Given surgeon and nuclear medicine training and experience, there may be a consolidation of melanoma procedures in fewer hospitals. For example, the H. Lee Moffitt Dana E. Thomas Page 18