Today INVO Bioscience, Inc. (IVOB), a medical device company focused on creating alternative treatments for patients diagnosed with infertility and developers of the FDA cleared INVOcell®, the world’s only in vivo Intravaginal Culture System, published a letter to shareholders written by its newly appointed CEO Steven Shum. Please read the letter in its entirety below:
As INVO Bioscience’s newly appointed CEO, it is with tremendous excitement that I write this letter. On behalf of the entire INVO Bioscience team, we sincerely appreciate your support, including those that have been with us for an extended period of time as well as our more recent shareholders. After two years as a director of INVO Bioscience, I have witnessed in practice our opportunity to help transform the infertility treatment marketplace. Our technology, the INVOcell, is the world’s only in vivo (meaning in the body) Intravaginal Culture System. As a simple and more natural solution, with comparable rates of effectiveness to existing options, our device can help the millions of couples worldwide that struggle with infertility, many of which do not currently receive treatment.
According to the CDC, one out of 8 couples needs fertility treatment. We believe that successfully executing on our opportunity to positively affect these couples’ lives also allows us to bring value to our shareholders. While INVO has been on this journey for over 12 years, the last few years have been transformational to our business beginning with the INVOcell device clearance (approval) by the FDA to the recent Ferring U.S. commercialization agreement in early 2019. Equally important, an increasing number of patients are now utilizing our device. However, I believe the best is yet to come. Let me expand on INVO Biosciences’ recent accomplishments and provide an outline of our current plans for the future.
U.S. Commercialization Agreement
As discussed above, in January 2019, we closed a U.S. commercialization rights agreement with Ferring Pharmaceuticals. Ferring is a privately-held biopharmaceutical company recognized around the world with products in over 110 nations. This was a significant milestone for the Company, something we believe has further validated our technology, and is allowing us to leverage the sales capabilities of one of the leaders in women’s health worldwide.
Ferring is responsible for all U.S. commercial activities for INVOcell while we are responsible for manufacturing and supplying the INVOcell devices to Ferring for commercial sales as well as performing a clinical study for label enhancement. Importantly, we retained certain limited domestic rights to establish INVO clinics that exclusively commercialize INVO cycles. We also retained all international commercialization rights.
We received a $5 million one-time non-dilutive milestone payment from Ferring in January 2019 and have the ability to receive an additional $3 million milestone payment upon procurement of the planned label enhancement discussed in further detail below.
In October we attended the annual American Society of Reproductive Medicine (ASRM) conference where Ferring showcased our technology and demonstrated very strong support. While it is still in the early phases of Ferring’s U.S. market plan and rollout, we are encouraged by initial results and have confidence in their commitment to promote the usage of INVOcell throughout the U.S.
Strong Revenue Growth
Through the first six months of 2019, our revenue increased by 296% compared to the same six months in 2018. Our second-quarter revenue was our highest quarterly revenue to date and up 498% compared the last year’s second quarter. The increase in revenue is a result of the agreement with Ferring, which calls for minimum annual commitments that will escalate each year during the initial 7-year license agreement. While our revenue numbers are small currently, we are excited about the accelerated go-to-market effort now underway and look forward to continued adoption of the product in the U.S.
International Commercialization Development
With our U.S. commercialization efforts and sales costs primarily being handled by Ferring, we are now focused on international commercialization opportunities. Worldwide, the fertility treatment market is severely underserved. Currently, only 1% to 2% of the estimated 150 million infertile couples worldwide are treated annually, with the primary prohibiting factor being cost and access to treatment.
We have the advantage of having FDA-clearance which helps streamline the regulatory process in many, although not all, international markets. Additionally, in October, we received the CE Mark which permits us to commercially distribute INVOcell throughout the countries of the EU. The European countries represent a large potential market for INVOcell, with an estimated $3 to $4 billion currently spent on IVF treatments.
We are pursuing several key international opportunities and we believe that our Ferring partnership has accelerated those discussions with enhanced credibility. We also have industry veterans with decades of experience operating in these markets, including Michael Campbell, our COO & VP of Business Development. Mike joined us from Cooper Surgical, a wholly-owned subsidiary of The Cooper Companies, where he was VP of IVF Americas. We also appointed Pressly Ahammed as our Director of International Business Development. Working with myself and Mike, Pressly is developing key international distribution channels in Europe, the Middle East, Africa and parts of Asia. With a career in excess of 11 years, Pressly has worked in numerous segments of the international healthcare sector including hospitals, wholesale and retail sectors, and distribution, and likewise joined us from Cooper Surgical.
The opportunities we are actively discussing overseas range from standard distributor agreements to Ferring-like exclusivity arrangements to potential joint-ventures whereby we could participate in other revenue avenues of the market beyond just selling the device. All said, we have numerous potential opportunities, but we are judiciously choosing them and allocating our resources wisely. We will keep you updated when and if any of these opportunities become a reality.
As a result of the Ferring agreement, we are allowed to own a limited number of INVO-only centers here in the U.S. We have some work to do in this area regarding how best to establish such centers, but we are making progress. While our primary focus is on supporting Ferring’s activities and our international efforts, we are working on this area and will provide updates as we make further progress.
We are on the verge of initiating our follow-on clinical study of our INVOcell device. We have our industry veteran in clinical and regulatory affairs, Lori Kahler, managing this effort along with the support of our board member and medical advisor, Dr. Kevin Doody. There are three critical reasons for doing this. As many of you know, our original clinical study focused on a 3-day incubation period and that is what the device was cleared for in the U.S. Over the past few years, the market evolved into 5-day incubation periods as the norm and, in most instances, our device is also being used for 5-day incubation periods as off-label use. We, and Ferring, however, can only currently market the device for 3-day incubation. As part of the Ferring agreement, if we conduct a follow-on study and achieve 5-day labeling approval from the FDA, we receive an additional $3 million non-dilutive milestone payment. This is one of the three critical reasons for doing the study. The other two key reasons involve allowing us to officially market 5-day usage as well as updating our clinical success rate. Based on our retrospective data from clinics reporting results, we know that 5-day incubation produces improved clinical pregnancy and birth rates. Thus, once we finish this effort, not only can we, and Ferring, market 5-day incubation, we expect this will result in improved pregnancy and birth rates, comparable to current IVF 5-day success rates. We estimate this study will cost us approximately $600,000 and are targeting completion in 2020.
Various estimates suggest the Global Fertility market exceeds $20 billion and is growing at an approximate rate of 8% to 10% per annum, which is substantial considering the existing market size. However, in our opinion, this is an incredibly underserved market, with nearly 98% of the couples that need infertility treatment being without care. High costs relative to success, difficult access to treatment, as well as cultural and religious factors are all contributors to this incredibly underserved segment of the market. We believe INVOcell can address these factors.
Historically, innovation has been limited to incremental improvements to support existing techniques, such as IVF and IUI. We believe INVOcell is the first truly innovative technology to address this large and even larger underserved market. On a limited scale, so far, it is already playing a role in the market as an alternative to existing techniques. But, as we continue to see increased usage and build our data profile, we believe it can capture a much larger percentage of the market as well as serve as a tool to actually help expand the market. This is the truly exciting opportunity we believe we have in front of us.
Our Public Company Profile
One of our key goals moving forward involves improved and more regular communication with our shareholders. Although we are a public company and have been for some time, in our opinion, not enough potential public-market investors are aware of the Company and its unique opportunity. We are playing in a very large market with innovative FDA-cleared technology. I believe this will resonate with investors as we continue to build our business and increase the adoption of INVOcell in the global fertility marketplace. However, I believe we need to be more proactive in telling our story, increasing awareness of our public company, and updating shareholders regularly via frequent communications, which we plan to do moving forward.
As part of this effort, we are seeking to improve our website to help further inform fertility patients, fertility experts, and to support current and future partners and distributors across the world. We also have a goal of moving our stock from trading on the OTC marketplace to a listed and more visible exchange in support of all efforts and to increase our potential shareholder base. There is still some planning and logistics associated with any up-listing strategy, but we feel it is important as part of our objectives to build the Company and its profile in front of investors.
I am excited to be the new CEO of INVO Bioscience and I want to thank Katie Karloff and other members of the team for creating this tremendous foundation. Fortunately, Katie is going to continue in an operational role over the near term and will continue to advise, lend guidance and support to the Company as Chair of our Board of Directors.
In summary, the internal INVO Bioscience team is excited and motivated by our continued progress. We are encouraged by our current position and excited by the continuing opportunities ahead. With the recent high profile public offering (led by J.P. Morgan, Goldman Sachs & Co. LLC and BofA Securities) of Progyny, Inc., a leading benefits management company specializing in fertility and family building benefits solutions, helping to shed further light on the fertility market, we feel we are well-positioned.
Execution will be key. We expect to provide updates to our shareholder community at regular intervals and upon major announcements. In addition, we always appreciate the feedback received from our shareholders. We strive to listen to, and consider, all input that may assist us in reaching our goals quickly and efficiently. We plan on conducting a webcast in the coming weeks and will provide an opportunity for you to ask additional questions.
Finally, we want to thank all the shareholders for your ongoing support. Your investment has allowed us to reach this critical point in our business plan. I look forward to the future with great anticipation.
Chief Executive Officer
To learn more about INVO Bioscience (IVOB) and to track its progress daily, please the INVO Bioscience Dedicated Company Page by clicking here.