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Echo Therapeutics (ECTE)

UPDATE REPORT  $5.5M Funding Enables Echo to Advance Symphony™
January 18, 2011
Rating Target
 Expecting FDA Clearance for Prelude™ SkinPrep
Strong
$4.50 1.) Echo Therapeutics recently raised $2.5M with an additional $3M in
Speculative Buy
binding commitments. These funds now allow for Echo to advance their
Analysts
Symphony™ transdermal continuous glucose monitoring (tCGM) system
Stephen M. Dunn
through development.
Sr. Managing Director Research
sdunn@LifeTechCapital.com
2.) On November 11, 2010, a 510(k) premarket notification was submitted to
(954) 240-9968
the FDA for Echo’s Prelude SkinPrep System for use with 4% lidocaine
William D. Dawson cream. Investors should also note that FDA 510(k) clearance triggers a
Senior VP Research $750,000 milestone payment 90 days later from Ferndale Pharma Group plus
wdawson@LifeTechCapital.com minimum guaranteed royalties of $12.6M. While Echo has granted Ferndale a
(561) 504-5818 license to develop, market and sell Prelude™ for delivery of topical 4%
lidocaine product in North America and the United Kingdom, Echo retains the
rights to continental Europe and Australia which may provide additional
upside to Echo through future partnership licensing and royalty agreements.

3.) Echo Therapeutics Symphony™ transdermal continuous glucose monitor

Symbol: ECTE
Exchange: OTC BB
10 Forge Parkway
Franklin, MA 02038
Phone: 508-553-8850
www.echotx.com
CEO – Dr. Patrick T. Mooney
CFO – Harry G. Mitchell
(tCGM) system is a unique needle-free, wireless system which we believe is
set to begin a pivotal clinical trial in ICU/Critical Care patients in Q2’11
(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 biosensor
for continuous lactate monitoring to be used in critical care and sports
medicine. In sports medicine, lactate threshold is an important indicator of
muscular tolerance and injury reduction for athletes. Additionally, lactate
monitoring is important in critically ill patients in shock as the amount of
lactate produced is believed to correlate with oxygen deprivation,
hypoperfusion, and the severity of shock.

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 Projections
FYE Dec. 31 2009 2010E 2011E 2012E 2013E
Revenue $1.3M $0.5M $2.9M $23.2M $63.8M
Net Income ($13.5M) ($4.4M) ($7.7M) $0.2M $19.3M
EPS ($0.61) ($0.15) ($0.22) $0.01 $0.50

Please See Last Two Pages For Important Disclosures And Analyst Certification

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5.) Echo Therapeutics continues to attract attention in a variety of publications such as the cover story in the January 2011
issue of Assembly Magazine (http://www.assemblymag.com/Articles/Article_Rotation/BNP_GUID_9-5-
2006_A_10000000000000963300) and in Diabetes Health (http://www.diabeteshealth.com/read/2010/11/29/6962/echo-
therapeutics-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 Echo’s transdermal biosensor is
growing in light of the FDA Warning Letter to DexCom (Nasdaq:DXCM) on the risks of sensor wire fractures underneath
the patients’ skin, particularly pediatric and adolescent patients. The warning letter noted that DexCom’s sensor wires are
not approved for use in children or adolescents, pregnant women or persons on dialysis and can only be used in the
abdomen. (see FDA Warning Letter to DexCom on Sensor Wire Factures). We believe this should give Echo’s
transdermal 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. Our
valuation is based on 35x projected 2013 EPS and discounted 40% for risk yielding a 12-18 month target of $4.50 as the
FDA PMA approval of the Symphony™ tCGM system could occur within the forecast period. This would result in a
market capitalization of approximately $130 to $160 million. This is a discount to DexCom (Nasdaq:DXCM) (see
Competition), 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 Echo MILESTONES & EVENTS
Therapeutics is developing the Symphony™ Date Prelude™ SkinPrep Symphony™ tCGM
tCGM System which is a next-generation, non- Q1’10  Pilot Study
invasive (needle-free), wireless transdermal
Q2’10
continuous glucose monitor (tCGM) system
Q3’10  Results of Equivalency Trial
designed to provide reliable, on-demand blood
Q4’10  File FDA 510(k) Submission
glucose data conveniently, continuously and
cost-effectively. Symphony™ includes the Q1’11 FDA 510(k) Approval Initiate Final Pilot Trial
Prelude™ SkinPrep system which incorporates Q2’11 U.S. Launch (Ferndale Pharma) Complete Final Pilot Trial
a patented feedback mechanism for optimal Initiate Pivotal Trial
skin permeation control and their continuous Q3’11 Complete Pivotal Trial
transdermal sensor to detect glucose trends, for File FDA PMA Submission
controlling complications associated with blood Q4’11
glucose levels that stray outside of a medically Q1’12
recommended target range. With Symphony™, Q2’12 FDA PMA Approval
the company is focused on changing the current U.S. Launch
Source: Echo Therapeutics and LifeTech Capital Estimates
standard of care paradigm of invasive (needle-
based), episodic blood glucose testing with their needle-free tCGM technology designed to improve patient compliance to
frequent 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 patient’s skin, which gives
rise to risks of infection, inflammation or bleeding at the insertion site. In addition, the Prelude™ SkinPrep device (a
component of the Symphony™ tCGM system) was licensed to Ferndale Pharma Group to develop and market for skin
preparation prior to the application of a topical analgesic or anesthetic cream for local dermal anesthesia or analgesia prior
to a needle insertion or IV procedure in North America and the U.K.

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Symphony™ Transdermal Continuous Glucose Monitor (tCGM) System

Echo Therapeutics’ Symphony™ Transdermal Continuous Glucose Monitor (tCGM) system is needle-free with
continuous 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 is
discussed below:

Symphony™ Transdermal Continuous Glucose Monitor (tCGM) System

Source: Echo Therapeutics

Prelude™ Skin Permeation Device

The secret behind the transdermal sensor is the Prelude SkinPrep
System. This advanced microabrasion system enhances the flow of Prelude™ Skin Permeation Device
interstitial fluids and molecules across the protective membrane of the
stratum corneum, the outmost protective layer of the skin. This, in turn,
allows their wireless sensor to read the patient’s glucose measurements
without requiring a needle. The Prelude is painless, takes just a few
seconds, 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 Echo
Therapeutics.

Also of note, the Prelude™ SkinPrep device (a component of the

Symphony™ tCGM system) was licensed to Ferndale Pharma Group to
develop and market for skin preparation prior to the application of a
topical analgesic or anesthetic cream for local dermal anesthesia or Source: Echo Therapeutics
analgesia prior to a needle insertion or IV procedure in North America
and the U.K.

Symphony™ Transdermal Wireless Glucose Sensor

The transdermal glucose sensor consists of an electrochemical glucose sensor, a
Pilot Study BioSensors
hydrogel layer, a potentiostat and a short-range RF transmitter. When the sensor is
BioSensor w/ Transmitter
placed on the permeated skin site (using the Prelude™ SkinPrep device), a layer of
hydrogel establishes and maintains continuous fluid paths through the skin and acts
as a reliable reservoir for the sensing chemistry to receive glucose flux and convert
it into hydrogen peroxide. The hydrogen peroxide is consumed by the
electrochemical sensor and continuous electrical signal is generated in the process.
Once the sensor is connected and adhered to the skin, the transmitter switches on
automatically and starts to broadcast the data
Source: Echo Therapeutics

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The diffusion gradient and sensor consumption of glucose are a function of the blood glucose concentration in the
subpapillary vessels beneath the epidermis and the sensor generates continuous current that is proportional to the blood
glucose concentration. The first calibration is made when the sensor stabilizes (about 1 hour), followed by subsequent
calibrations depending on the applications. Due to the advanced
Transdermal BioSensor - Mechanism of Action hydrogel chemistry and the Prelude™ skin permeation process, the
glucose flux detected by the sensor can provide reliable continuous
glucose readings for 24 hours. To preserve data integrity and save
power, 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 (not

shown), which provides for reduced manufacturing costs and
eliminates most of the motion artifact seen using the pilot biosensor,
thus improving performance. Successful results using the one-piece
biosensor were announced on November 19, 2009. (see Clinical
Trials & Clinical Data)
Source: Echo Therapeutics

Symphony™ Wireless Remote Monitor

The Symphony™ wireless remote monitor receives digitally coded data from the transdermal glucose sensor transmitter
and decodes the data once every minute. Once a reference blood glucose value is entered manually (a calibration) after a
one hour warm-up period, the decoded data are converted to blood glucose reading by a built-in data algorithm. The
Symphony™ wireless remote monitor displays the date, time of day, sensor current, blood glucose reading and rate of
increase or decrease, amount of time the transmitter has been switched on, battery status, and any alarm or error modes.
The keypad provides on/off, data entry, calibration, alarm
silencing, and monitor resetting and the monitor also contains Symphony™ Wireless Remote Monitors
an audible alarm, a RF receiver, a programming port, a
rechargeable battery pack and a USB data port for computerized
record keeping or in-depth data analysis.

In addition, Echo Therapeutics expects that hospital monitors

Standalone Monitor Hospital Cellphones
may be fitted with a receiver module for in-patient management. Source: Echo Therapeutics
Finally, data transmission via internet and/or wireless carrier
opens up the possibility for remote monitoring and telemedicine applications.

Clinical Trials & Clinical Data

Prelude™ Skin-Prep System
On August 24, 2010, Echo Therapeutics announced the successful completion of a clinical study of their Prelude™ skin-
prep system in ablating the skin prior to the application of OTC 4% lidocaine cream for faster-acting local dermal
anesthesia. 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 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 Echo’s partner, Ferndale Pharma Group in addition to sales royalties. Ferndale Pharma Group
has guaranteed a minimum royalty of $12.6 million to Echo Therapeutics. While Echo has granted Ferndale a license to
develop, market and sell Prelude™ for delivery of topical 4% lidocaine product in North America and the United
Kingdom, Echo retains the rights to continental Europe and Australia which may provide additional upside to Echo
through future partnership licensing and royalty agreements.

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Symphony™ tCGM
On November 19, 2009 Echo Therapeutics announced positive results of a clinical study of its Symphony™ tCGM
System in patients with Type 1 and Type 2 Diabetes using the new one-piece biosensor. This could allow the
Symphony™ tCGM to complete a final pivotal trial in Q2 2010 with an FDA PMA filing in Q3 2010. Although the
company has not yet announced the trial details, we believe a rational trial design would be approximately 200 critical
care patients, both diabetic and non-diabetic, with a primary endpoint of point and rate accuracy using continuous
glucose-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 1
and 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 with
Type 1 or Type 2 Diabetes. Venous reference blood samples were taken from intravenous lines at 15-minute
intervals 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 blood
glucose measurements, CG-EGA revealed that the accuracy of the Echo’s Symphony™ tCGM System, measured
as a percentage of accurate readings and benign errors, was 97%. The MARD for the study was 12.89%. There
were 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 and
Laboratory Standards Institute’s POCT05-A guideline. The primary metric, used to evaluate clinical accuracy, is
the continuous glucose–error grid analysis (CG-EGA). The CG-EGA is a categorization of all data pairs based on
the clinical significance of the accuracy. Accurate readings result in the same clinical decision when based on the
CGM trend vs. the underlying blood glucose fluctuations. Benign errors lead to the same clinical outcome as
accurate 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 other
key 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 the
relative (or percentage) difference between two measurements.

Previous Pilot Studies

Research results from three human clinical pilot studies titled “Pilot Studies of Transdermal Continuous Glucose
Measurement in Outpatient Diabetic Patients and in Patients during and after Cardiac Surgery”* and published in the
July 2008 issue of the Journal of Diabetes Science and Technology indicated that Echo Therapeutics transdermal
Continuous Glucose Monitoring (tCGM) system was successful and that the new Prelude abrasion technology works as
well 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, LLC
Michael R. England, M.D., Department of Anesthesia, Tufts University School of Medicine
Stanley 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:
Study 3
Patient Study 1 Study 2
Abrasion vs.
Demographics Diabetes Critical Care
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 / 8.9
Source: Chuang, et al, “Pilot Studies of Transdermal Continuous Glucose Measurement in Outpatient
Diabetic Patients and in Patients during and after Cardiac Surgery”, J Diabetes Sci Technol 2008;2(4):595-602

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Study I - Patients with Diabetes: Patients with

diabetes (type-1 or type-2) were enrolled in the study Study I Results – 12 Hour Biosensor Data
and were free to eat, move, or sleep at the clinic,
simulating home use. SonoPrep (ultrasound) skin
permeation and installation of the tCGM was
performed at the clinic with blood glucose
measurements taken at least hourly during the waking
period with data being blinded to ensure that there
were no changes in the subjects’ routine medication.
The reference device was Bayer’s Ascensia Contour
meter.

A total of 222 biosensor data points were processed.

The calibration point was the first reference blood
glucose measurement taken 1 hour after the tCGM
was turned on, and a lag time of 22 minutes was
applied to BG data, based on the best correlation
between reference BG and biosensor data as computed
by the algorithm. Using polyethylene glycol diacrylate
(PEGDA hydrogel), the 12-hour mean absolute
relative difference (MARD) was 12.4% with 89.6% of
the data points within the clinically accurate A zone of
the Clarke error grid (CEG) plot and 98.7% in the
clinically relevant A+B zones. It also showed strong
correlation to the reference measurements with a
median R2 (square of correlation coefficient) of 0.77.
The data plot is shown below: Source: Chuang, et al, “Pilot Studies of Transdermal Continuous Glucose Measurement
in Outpatient Diabetic Patients and in Patients during and after Cardiac Surgery”,
J Diabetes Sci Technol 2008;2(4):595-602

Using PEGDA hydrogel with a porous membrane, the 12-hour MARD was 20.4% and the medium R2 was 0.64 when
compared 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 reference
BG values for 12 hours.

Real-Time Biosensor Blood Glucose Measurements Correlate With Reference Blood Glucose Levels
Patient 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 after
Cardiac Surgery”, J Diabetes Sci Technol 2008;2(4):595-602

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Study II - Patients in Surgical Critical Care: Data was collected from 8 out 11 patients enrolled, of which 1 patient did
not complete the study, and 2 patients were excluded
due to a low biosensor signal, which the authors Study II Results – 24 Hour Biosensor Data
believe was due to low glucose flux and insufficient
skin permeation using the older SonoPrep
(ultrasound). The reference device during surgery was
the Nova Stat Profile Ultra C and the devices used in
the cardiothoracic intensive care unit (CITU) were the
Accu-Check Inform system glucometer, the Bayer
Rapidlab 865 blood gas analyzer for whole blood
glucose and the Unicel DXC 800 for serum glucose.

Using PEGDA hydrogel with a composite porous

membrane and hermetic seals, 147 biosensor data
points were analyzed from the 8 evaluable patients in
12 datasets (7 intraoperative and 5 postoperative). The
24-hour mean absolute relative difference (MARD)
was 11.6% with 86.4% of the data points within the
clinically 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 the
reference measurements with a median R2 (square of
correlation coefficient) of 0.83. The data plot is shown
below:
Source: Chuang, et al, “Pilot Studies of Transdermal Continuous Glucose Measurement
in Outpatient Diabetic Patients and in Patients during and after Cardiac Surgery”,
J Diabetes Sci Technol 2008;2(4):595-602

Below are datasets from the intraoperative and postoperative periods showing that the continuous trace of tCGM
measurements closely tracked the discrete reference values. There was no marked difference of sensor performance
between intraoperative and postoperative study periods and no observable interferences from the surgical procedure and
the 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 after
Cardiac 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 permeation
methods, the new Prelude™ (abrasion) versus the older SonoPrep (ultrasound) technologies for transdermal glucose
monitoring. 6 healthy in-house subjects completed the enrollment with 183 Prelude and 195 SonoPrep biosensor data
points collected. The reference device was Bayer’s Ascensia Contour meter.

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

Study III Results – Prelude Abrasion Equivalent to Ultrasound

Source: Chuang, et al, “Pilot Studies of Transdermal Continuous Glucose Measurement in

Outpatient 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 critical
care settings; when developed and refined successfully, the tCGM product can address this need. A cost-effective
and easy-to-use Prelude SkinPrep exhibits equivalent performance to SonoPrep for tCGM application. With the
advantages of a 1-hour warm-up period and minimally invasive nature, the tCGM system may become a preferred
medical device in facilitating diabetes management. A combination of our new skin permeation and needle-free
sensing technologies may provide a low-cost, convenient, safe, and effective solution for continuous glucose
monitoring in diverse populations.”

Diabetes Market
According to the U.S. Centers for Disease Control (CDC), almost 18 million people have been diagnosed with diabetes in
the United States and almost 6 million people remain undiagnosed. Diabetes is currently the seventh leading cause of
death U.S. based on death certificates. Even then, diabetes is likely to be underreported as a cause of death as studies have
found that only about 35% to 40% of decedents with diabetes had it listed anywhere on the death certificate and only
about 10% to 15% had it listed as the underlying cause of death. Overall, the risk for death among people with diabetes is
about 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 Population
Diabetes Demographics in U.S.
Age 20+ Years 23.5 million 10.7% of this Age Group
Age 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 20
Source: US Centers for Disease Control (CDC) data for 2007

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

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people diagnosed with diabetes were 2.3 times higher than what expenditures would be in the absence of diabetes. An
additional $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 physician’s office visits directly attributed to
diabetes. Diabetes-related hospitalizations totaled 24.3 million days in 2007 (an increase of 7.4 million from 2002). The
average cost for a hospital inpatient day due to diabetes was $1,853. The average cost for a hospital inpatient day due to
diabetes-related chronic complications, including neurological, peripheral vascular, cardiovascular, renal, metabolic, and
ophthalmic complications was $2,281.

FDA to Require Hospitals to Use More Accurate Glucose Monitors

As reported in the July 19, 2009 issue of The New York Times titled “Standards Might Rise on Monitors for Diabetics”,
the FDA is concerned that current self-monitoring blood glucose (SMBG) devices are not accurate enough as error rates
up to 20% are allowed under existing approval standards (ISO 15197) developed 7 years ago. The FDA has now placed
this approval standard up for review in light of the failed NICE-SUGAR in-hospital trial (see NICE-SUGAR Trial). The
FDA 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 for
hospital 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 (including
CDRH 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 diabetic
patients, in these settings, even though they are not FDA cleared to diagnose disease or to maintain tight glycemic control
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 methods
including 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 Information
New York Times – July 19, 2009
“Standards Might Rise on Monitors for Diabetics”
http://www.nytimes.com/2009/07/19/health/policy/19monitor.html
FDA Letter and CDRH Analysis– June 24, 2009
FDA 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-PQQ
glucose monitoring technology. Specifically, GDH-PQQ (glucose dehydrogenase pyrroloquinoline quinine) glucose
monitoring measures a patient’s blood glucose value using methodology that cannot distinguish between glucose and
other sugars. Certain non-glucose sugars, including maltose, xylose, and galactose, are found in certain drug and biologic
formulations, or can result from the metabolism of a drug or therapeutic product. When these non-glucose sugars are
present in the patient’s blood, using a GDH-PQQ glucose test strip will produce an elevated glucose result which may
suggest the need for clinical action. This can lead to inappropriate dosing and administration of insulin, potentially
resulting in hypoglycemia, coma, or death. In addition, cases of actual hypoglycemia may go unrecognized if the patient
and healthcare practitioner rely solely on the test result obtained with the GDH-PQQ glucose test strips. The FDA
recommends avoiding the use of GDH-PQQ glucose test strips in healthcare facilities.

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Reference Information
FDA Public Health Notification: Potentially Fatal Errors with GDH-PQQ* Glucose Monitoring Technology
http://www.fda.gov/MedicalDevices/Safety/AlertsandNotices/PublicHealthNotifications/ucm176992.htm
List of GDH-PQQ Glucose Test Strips and Manufacturers
http://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 in
favor of more accurate methods including 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.

COMPETITION
There are a limited number of continuous glucose monitor Transdermal vs. Needle BioSensor
systems currently on the market. The significant differences
between Echo Therapeutics Symphony™ system and the
competition is the needle-free transdermal biosensor, clinical
trials in the hospital setting and biosensor life.

We believe the transdermal biosensor is a significant advantage

over the existing biosensors on the market. All existing FDA-
approved continuous glucose monitoring (CGM) systems are
needle-based, requiring insertion of a glucose sensor into the
patient’s skin, which gives rise to risks of infection,
inflammation or bleeding at the insertion site. Symphony™ is a
non-invasive tCGM system that does not require insertion of its
glucose sensor and thus does not give rise to the risks associated
with needle-based CGM systems. Source: Mayo Clinic and LifeTech Capital

We also believe Echo Therapeutics clinical trials in the critical care setting provides a major marketing advantage over the
competition 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)

Irritation From 7-Day DexCom BioSensor We further believe that the comparatively short 1-2 day biosensor life
is not a drawback, but rather an advantage. In the at-home market, the
weekly biosensors begin to lose adhesion after several showers,
swimming and other physical activity and rubbing against clothing. It
can cost a person $60 if they accidently dislodge or damage the
biosensor whereas a cheaper 1-2 day biosensor reduces the economic
risk of biosensor damage through daily activity.

Additionally, skin irritation from being in contact with the adhesive as

well as the possibility of infection raises hygiene issues. The risk of
infection becomes a significant issue in the critical care/ICU market.
We believe a 1 or 2 day biosensor makes more sense in the same way
Source: Kerri Morrone Sparling
daily disposable contact lenses are safer than extended wear contact
lenses.

Finally, there are risks involving the competitor’s need for sensor wires resulting in sensor wire fractures underneath the
patients’ skin. The FDA issued a warning letter to DexCom concerning these sensor wire fractures in May 2010 and also
noted that the DexCom SEVEN and SEVEN PLUS Systems are not approved for use in children or adolescents, pregnant
women or persons on dialysis and can only be used in the abdomen. (see FDA Warning Letter to DexCom on Sensor Wire
Factures)

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Continuous Glucose Monitors

Echo
Company Abbott Labs DexCom Medtronic MiniMed
Therapeutics
Stock Symbol ECTE ABT DXCM MDT (div. of MDT)
DexCom
Device Symphony Freestyle Navigator Guardian RT Paradigm
SEVEN PLUS
Critical Care
Target Markets 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 hours
Initialization Time ~ 1 hour 10 hours 2 hours 2 hours 2 hours
Calibrations At 10, 12, 24 and
TBA Every 12 hours Every 12 hours Every 12 hours
Required 74 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 of
1 min 1 min 5 min 5 min 5 min
Reading
Pricing for
System: TBA $1,000 $450 $1,000 $1,000
Sensors: (competitive) $370 $280 $370 $370
(1 mo. supply)
Regulatory Status Clinical trials Approved Approved Approved Approved
Source: Echo Therapeutics and LifeTech Capital

Competitive Update: Echo Therapeutics competitor DexCom (Nasdaq:DXCM) and their partner, Edwards
LifeSciences (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 are
continuing post-CE Mark trials in Europe and stated they have enhanced its ease of use in their 2nd generation product,
which they expect to launch in Europe in late 2011. Investors should note that the GlucoClear® system uses an
invasive 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-based
hospital sensor, for Edwards LifeSciences, into a subcutaneous sensor for both a future ambulatory sensor and a
subcutaneous 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 their
Seven PLUS Continuous Glucose Monitoring System due to complaints involving sensor wire fractures underneath
patient's skin as reported to the FDA. In addition, their sensors are not approved for use in children or adolescents,
pregnant women or persons on dialysis and can only be used in the abdomen. Investors should note that Echo
Therapeutics Symphony Transdermal Continuous Glucose Monitoring (tCGM) system eliminates the need for
sensor wires and could be considered safer, especially for children and adolescents.

(see http://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 a
piece of it was under her skin. The mother reported the child had surgery under general anesthesia to remove the
broken wire underneath her skin.
 Customer Report: 09-0274, dated 1/6/09 reported the sensor wire tip broke off in patient's body. The DexCom
representative advised patient to not to pursue extraction. The report states "sensor break with fragment retained under
the skin".

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 Customer Report: 09-3516, dated 5/07/09 the report states (that when) the nurse went to pull the old sensor off the
sensor wire it was not there. The patient's nurse reported she could see it under the skin but she could not get hold of it
with 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 recent
sensor looks broken upon removal today, and he can feel the wire under his skin. Site is red and he is going to
prescribing physician.
 Customer Report: 09-5555, dated 7/20/2009. Patient called (to) report a failed sensor and has irritated skin. Patient
reported 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 wire
breakage 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 largest
diabetes pharmaceutical company in South Korea. Specifically, on June 15, 2009 Handok paid a licensing fee of
approximately $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 sales
of Symphony and additional milestone payments based on Handok’s achievement of certain other targets. Handok is
responsible for all product development fees and costs, and for all regulatory filings, for the final development of
Symphony in South Korea.

Ferndale Pharma Group: The Prelude™ SkinPrep device was licensed to Ferndale Pharma Group to develop and
market for skin preparation prior to the application of a topical analgesic or anesthetic cream for local dermal anesthesia
or 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 royalty
on net sales and milestone payments based on Ferndale’s achievement of certain net sales targets, as well as guaranteed
minimum 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 & EVENTS

Date Prelude™ SkinPrep Symphony™ tCGM
Q1’10  Pilot Study
Q2’10
Q3’10  Results of Equivalency Trial
Q4’10  File FDA 510(k) Submission
Q1’11 FDA 510(k) Approval Initiate Final Pilot Trial
Complete Final Pilot Trial
Q2’11 U.S. Launch (Ferndale Pharma)
Initiate Pivotal Trial
Complete Pivotal Trial
Q3’11
File FDA PMA Submission
Q4’11
Q1’12
FDA PMA Approval
Q2’12
U.S. Launch
Source: Echo Therapeutics and LifeTech Capital Estimates

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U.S. ICU Glucose Monitoring Market

According to the Society of Critical Care Medicine (SCCM), approximately 5 million patients are admitted annually into
ICUs 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 the
prevalence of diabetes is 7.8% of the U.S. population (assuming undiagnosed diabetic patients will become diagnosed
once in the ICU). Anecdotally, fully-loaded hospital costs run approximately $50-$100 per day for monitoring glucose
and 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 Likely
ICU Patients 5 million 5 million 5 million
Diabetic 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 days
Cost 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 million
however 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 opportunity
would increase dramatically to $1+ billion in sales.

U.S. Home-Use Continuous Glucose Monitoring Market

Although we expect Echo Therapeutics to eventually address the U.S. home-use market for continuous glucose monitors
with the Symphony™ tCGM system, we have not included this market in our financial models. We believe that Echo
Therapeutics will remain focused on becoming the first continuous glucose monitoring system in the ICU and hospital
setting and exploit their first-mover advantage. However, the home-use market remains a future upside to the company.

U.S. Topical Lidocaine Market

U.S. sales of Endo Pharmaceuticals Lidoderm® (5% lidocaine) patch were $764 million in 2009 with the market for all
topical 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 on
Ferndale’s marketing plan, we are assuming Echo Therapeutics’ will receive the minimum annual royalty.

Margins
For Symphony™ tCGM product line, we believe that Echo Therapeutics will sell for cost, or give away, the Prelude™
component of the Symphony™ system while generating approximately 80% on the consumables (Prelude™ tips and
BioSensors) yielding an overall margin of that we estimate at 55% and is in-line with other medical technology products.
Since Ferndale will purchase the Prelude™ for use with lidocaine at cost yielding no gross profit, we reflect only the
Prelude™ royalty portion for the sake of clarity in our financial model. A higher royalty stream from increased Prelude™
sales 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 as
the FDA PMA approval of the Symphony™ tCGM system could occur within the forecast period. This would result in a
market capitalization of approximately $130 to $160 million. This is a discount to DexCom (Nasdaq:DXCM) (see
Competition), the only pure-play comparable, which has FDA approval for their invasive, implantable biosensors with a
market 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 shown
below. We expect additional patent applications will be filed in the future as development progresses.

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United States Foreign

Description of Patents and Patent Applications
Patents Applications Patents Applications
Feedback Mechanism For Optimal Skin Permeation Control 1 3 -- 4
Non-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 and
accredited investors of up to 120 units at a price per Unit of $25,000. Each Unit consists of (i) 25,000 shares of the
Company’s 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 per
share. 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 Warrants
exercisable 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 Montaur
Life Sciences, one of their largest institutional investors, and issued an 8% Senior Promissory Note in the principal
amount 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 a
binding Term Sheet to which Montaur and any new investors will invest at least $3,000,000 through the purchase of
shares of a newly-created class of Series D Convertible Preferred Stock and common stock purchase warrants. The
parties intend to exchange the Note for Series D Stock no later than February 1, 2011, at which time Montaur will
purchase an additional $500,000 of Series D Stock. Montaur subsequently shall purchase $1,500,000 of Series D Stock in
monthly installments from March through May 2011, for a total investment of at least $3,000,000. For every $100,000
face value of Series D Stock purchased, the Investor shall be issued (i) Series 1 warrants to purchase 50,000 shares of the
common stock with an exercise price of $1.50 per share (ii) Series 2 warrants to purchase 50,000 shares of Common
Stock 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, then
the 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 outstanding
as of November 15, 2010. In addition, Echo Therapeutics has 2,846,166 exercisable employee stock options with a
weighted-average exercise price of $ 0.93 as of September 30, 2010. Finally, Echo Therapeutics has 8,282,652 of
outstanding 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, the New England Journal of Medicine published the successful results of the 489-patient STAR 3 Phase
IV clinical trial for Medtronic’s (NYSE:MDT) MiniMed Paradigm REAL-Time System combining an insulin pump with
their continuous glucose monitor. The paper titled “Effectiveness of Sensor-Augmented Insulin-Pump Therapy in Type 1
Diabetes” concluded “In both adults 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.” Specifically, the results showed that the 1 year baseline glycated
hemoglobin level of 8.3% had decreased to 7.5%, as compared with 8.1% in the injection-therapy group (P<0.001). The
proportion of patients who reached the glycated hemoglobin target (<7%) was greater in the pump-therapy group than in
the injection-therapy group. The rate of severe hypoglycemia in the pump-therapy group did not differ significantly from
that in the injection-therapy group. There was no significant weight gain in either group. Our conclusion is that
continuous glucose monitoring can result in better patient outcomes and the researchers concluded “In both adults

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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/363/4/311

The 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 those
of 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 of The New England Journal of Medicine (NEJM) published the results of the NICE-SUGAR
trial in a paper titled “Intensive versus Conventional Glucose Control in Critically Ill Patients” where the researchers
concluded “intensive glucose control increased mortality among adults in the ICU”. However, we caution investors from
extrapolating 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 meters
warranted a review to bar their use in hospital critical care settings (see FDA to Require Hospitals to Use More Accurate
Glucose Monitors)

As the NEJM editorial points out, the NICE-SUGAR study “simply tells us there is no additional benefit from the
lowering of blood glucose levels below the range of approximately 140 to 180 mg per deciliter”. In fact, we believe this
may have been a result of too tight control in trying to achieve a low level of blood glucose and overshooting the target as
hypoglycemia was seen in 6.8% of the patients versus 0.5% in the control arm. As proof, previous Belgian studies
comparing intensive glycemic management to standard of care showed a patient survival benefit when reduction of
glucose 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 Clinical
Endocrinologists (AACE) on the NICE-SUGAR study on intensive vs. conventional glucose control in critically ill
patients said the results “should NOT lead to an abandonment of the concept of good glucose management in the hospital
setting. 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 Reference Information
targets (average of 115 mg/dl), and were compared NEJM Paper
to a control group whose glucose control was good http://content.nejm.org/cgi/content/short/360/13/1283
(average glucose 144 mg/dl).” NEJM Editorial
http://content.nejm.org/cgi/content/short/360/13/1346
Echo Therapeutics Symphony is a continuous NEJM Correspondence
glucose monitoring system (not insulin delivery) and http://content.nejm.org/cgi/content/short/361/1/89
the trial may have failed because they did not use ADA/AACE Joint Statement
accurate continuous glucose monitoring but rather http://www.diabetes.org/for-media/pr-NICE_SUGAR-study.jsp
only checked once an hour (or 30 minutes at start) CMAJ Paper
and used inaccurate glucose meters resulting in http://www.cmaj.ca/cgi/content/full/180/8/821
overshooting the blood glucose target and causing
CMAJ Commentary
hypoglycemia. Even the NICE-SUGAR study
http://www.cmaj.ca/cgi/content/full/180/8/799
authors stated “We do agree that more accurate
NICE-SUGAR Trial Documentation
systems for blood glucose measurement are
https://studies.thegeorgeinstitute.org/nice/docs/ALGORITHM.pdf
required.” in their NEJM Correspondence reply.
https://studies.thegeorgeinstitute.org/nice/docs/PROTOCOL.pdf
https://studies.thegeorgeinstitute.org/nice/docs/SAP.pdf
Finally, we note that a meta-analysis, including the
NICE-SUGAR study published in the April 14, 2009 Canadian Medical Association Journal (CMAJ) showed that
intensive glucose therapy may be beneficial to adults and children admitted to a surgical ICU (the setting that Echo

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Therapeutics is addressing) and the CMAJ commentary discusses the reasons why patients in surgical ICUs benefit from
intensive 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 he
served as President, Chief Executive Officer and director from September 2006 through the date of the merger. Prior to
joining 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 at
Thomas Weisel Partners, LLC, a full service merchant banking firm and as Senior Biotechnology Analyst at Janney
Montgomery Scott, LLC, a full services investment banking firm. Dr. Mooney received his medical degree from the
Jefferson Medical College of Thomas Jefferson University and trained in surgery at Thomas Jefferson University
Hospital.

Harry G. Mitchell, Chief Operating Officer and Chief Financial Officer: Mr. Mitchell joined Sontra Medical
Corporation (now Echo) in June 2006 and served as Sontra's Interim Chief Executive Officer and Chief Financial Officer
commencing 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 Vice
President and a director of Boston Medical Technologies, Inc., a privately-held diabetes medical device company, and as a
financial and management consultant to several other public and private companies. Mr. Mitchell is a member of the
American 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 financial
experience with public companies, including as Senior Vice President and Chief Financial Officer of KeySpan
Corporation, a NYSE public utility company. Mr. Enright currently serves as a director and Audit Committee Chairman
of certain of the funds managed by Gabelli Funds, LLC, a leading mutual fund manager, positions he has held since 1991.
Mr. 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 Corporation
and ETI, for which he served as Chairman of the Board from September 2006 through the date of the merger and as
President and director from September 2004 to September 2006. Mr. Singh has been working with life science companies
for nearly 20 years. In addition to his role with Echo, Mr. Singh serves, on a part-time basis, as a Principal of Cato
BioVentures 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 and
Managing Director of Start-Up Law, President of Artemis Neuroscience and Corporate Finance Associate in the Silicon
Valley offices of Morrison & Foerster. Mr. Singh is a member of the California State Bar.

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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 national
regulatory body approvals for any of their pipeline products.

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

 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 Therapeutics’
existing or future partners to perform satisfactorily or in a timely fashion could adversely impact the company’s
financial position.

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

 Liquidity and Trading Volume: Echo Therapeutics currently trades on the OTC Bulletin Board which may result
in 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 portfolio
with similar companies. In such cases, a significant event for one company may have a material impact on the
valuation of all similar companies regardless of their unique qualities.

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DISCLOSURES

Ratings and Price Target Changes over Past 3 Years

Initiated January 21, 2010 – Strong 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 views
expressed in this report accurately reflect our personal views about any and all of the subject securities or issuers discussed b.) No part
of 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 as
well as a portion of the proceeds from a broad pool of investment vehicles consisting of components of the compensation generated by
investment banking activities, including but not limited to shares of stock and/or warrants, which may or may not include the securities
referenced in this report.

DISCLOSURES
Does the Analyst or any member of the Analyst’s household have a financial interest in any securities of the Company? NO
Does the Analyst or any member of the Analyst's household or Firm serve as an officer, director or advisory board member of
NO
the Company?
Has the Analyst or any member of the Analyst’s household received compensation directly or indirectly from the Company in the
NO
previous 12 months?
Does the Firm or affiliates beneficially own ≥1% of the Company’s common stock? NO
Has the Firm or affiliates received investment banking services compensation in previous 12 months? YES
Has the Firm or affiliates received non-investment banking securities-related services compensation in previous 12 months? NO
Does the Firm or affiliates expect to receive or intend to seek investment banking compensation in next 3 months? YES
Has the Firm or affiliates received non-securities services compensation in previous 12 months? YES
Does the Firm or affiliates make a market in the Company’s securities? NO

The Firm and/or its directors and employees may own securities of the company(s) in this report and may increase or decrease
holdings in the future. The Firm, its officers, directors, analysts or employees may effect transactions in and have long or short positions
in the securities (or options or warrants with respect thereto) mentioned herein. The Firm may effect transactions as principal or agent
in 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 12-18
months; 2) Buy: the stock is expected to appreciate and produce a total return of at least 20% over the next 12-18 months; 3) Strong
Speculative Buy: the stock is expected to appreciate and produce a total return of at least 40% over the next 12-18 months but the
volatility and investment risk is substantially higher than our "Strong Buy" recommendation; 4) Speculative Buy: the stock is
expected to appreciate and produce a total return of at least 20% over the next 12-18 months but the volatility and investment risk is
substantially higher than our "Buy" recommendation; 5) Neutral: the stock is fairly valued for the next 12-18 months; 6) Avoid/Sell:
the 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: the
previous rating and/or price target is suspended due to a significant event which now requires additional analysis and the previous
rating and/or price target cannot be relied upon; 8) Not Rated: the stock has too much business or financial uncertainty to form an
investment conclusion or is currently in the process of being acquired and 9) Restricted: coverage cannot be initiated or has been
temporarily suspended to comply with applicable regulations and/or firm policies in certain circumstances such as investment banking
or an advisory capacity involving the company.

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LifeTech Capital Research Investment FINRA Research Investment

Research Coverage Banking RULE 2711 Coverage Banking
Ratings Distribution % of Total % of Total Ratings Distribution % of Total % of Total
Strong 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%

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THE INFORMATION IN THIS REPORT IS NOT A REPRESENTATION OR WARRANTY AND IS NOT AN OFFER OR SOLICITATION
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INFORMATION).

Investors are expected to take full responsibility for any and all of their investment decisions based on their own independent research
and evaluation of their own investment goals, risk tolerance, and financial condition. Investors are further cautioned that Small-Cap and
Micro-Cap stocks have additional risks that may result in trading at a discount to their peers. Liquidity risk, caused by small trading
floats and very low trading volume can lead to large spreads and high volatility in stock price. Small-Cap and Micro-Cap stocks may
also have significant company-specific risks that contribute to lower valuations. Investors need to be aware of the higher probability of
financial 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 sources
believed 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 recommendations
are solely for advisory and informational purposes and are only valid as of the date appearing on the report and are subject to change
without notice.

Statements in this report that are not historical facts are “forward-looking statements” that involve risks and uncertainties. “Forward
looking statements" as defined under Section 27A of the Securities Act of 1933, Section 21B of the Securities Exchange Act of 1934
and 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 statements
are subject to a number of known and unknown risks and uncertainties outside of the company's or our control that could cause actual
operations 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. Investors
should consider these factors in evaluating the forward looking statements included in this report and not place undue reliance upon
such statements. Investors are encouraged to read investment information available at the websites of the SEC at http://www.sec.gov
and 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

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