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    Stock Alerts for MELA Sciences Inc. (MELA)

    MELA Sciences (MELA) is a medical technology company focused on developing MelaFind, a non-invasive and objective multi-spectral computer vision system intended to aid in the detection of early melanoma.  The company designed MelaFind to assist in the evaluation of clinically atypical pigmented skin lesions when a dermatologist chooses to obtain additional information before making a final decision to biopsy in order to rule out melanoma.  MelaFind acquires and displays multi-spectral (from blue to near infrared) and reconstructed RGB digital images of pigmented skin lesions and uses automatic image analysis and statistical pattern recognition. Although no cure is currently available for advanced-stage melanoma, the desease is virtually 100% curable if caught early.  By increasing the accuracy and reducing the invasiveness of early screening, MELA hopes to help improve early screening rates, reduce the number of unnecessary biopsies and help save lives.

    Share Statistics (07-Sept-11) FY2009 FY2010 % Chg Q22010 Q22011 % Chg
    Symbol MELA Revenue, $Mn 0.00 0.00 0.00 0.00
    Current price $3.80 Gross marg.
    52wk Range: $1.75-$8.32 Oper. margin
    Avg Vol (3m): 261,638 Net margin
    Market Cap. 95.23M
    Shares Outstanding 25.26M EPS, $ -0.96 -0.83 -13.5% -0.20 -0.19 -5.0%

    Source: Reuters.com, SEC Filings.

    Investment Highlights

    Shares of MELA gained 73.2% in the last five trading days and 76.4% in the last month.  Year-to-date, the stock is down 44.6%.

    Shares rocketed 79% yesterday after the New York-based medical device developer said it secured regulatory approval to market its melanoma detection device MelaFind in the European Union (EU). Over 7.8 million shares traded hands during the session, compared to a 10-day average of just over 144K.

    MELA received the CE (Conformité Européenne, or European Conformity) Mark approval which allows the Company to market MelaFind freely across the 27 nations that comprise the EU.  According to the release, MELA intends to initially market its skin-cancer detecting device in Germany, which has the highest incidence of melanoma in Europe.

    “With more than 81 million people, Germany represents a significant opportunity for the company and an ideal market to launch MelaFind in the EU,” said Joseph V. Gulfo MD, president and CEO of MELA, “Given the high rates of melanoma seen in the German population, we believe MelaFind has the potential to make a deep impact on the disease there. In order to achieve our initial goals for the commercial development phase of the launch, we plan to utilize a direct sales force that will focus on strategically placing MelaFind systems in the top dermatology practices in several key cities throughout the country.”

    The clinical data for the CE Mark application were submitted in May 2011 and the complete technical file was submitted in early July 2011.

    The studies used to support the CE Mark application were the 1,383-patient U.S. pivotal trial and the companion reader study of 110 dermatologists: the device demonstrated a 98% sensitivity; whereas dermatologists had a 72% sensitivity in the companion reader study.  MELA worked with the U.S. Food and Drug Administration (FDA) to design the pivotal study, the largest ever conducted in melanoma detection, and has a Binding Protocol Agreement with the FDA.  Approximately 11% of all lesions and melanomas in the MelaFind database were obtained from European clinical sites.

    In the U.S., the Company submitted a Pre-Market Approval (PMA) application for MelaFind in June 2009, and received a positive vote from the General and Plastic Surgery Devices Panel at an advisory committee meeting in November 2010.   In February 2011, the Company submitted an amendment to the MelaFind PMA application with the FDA, limiting the indication for use to dermatologists and in May 2011 the company submitted another amendment to the MelaFind PMA that incorporated a training program for users.  The Company is currently awaiting the FDA’s decision.

    MelaFind Proposed Indications for Use

    MELA proposes that MelaFind is indicated for the evaluation of clinically atypical cutaneous pigmented lesions (those having one or more clinical or historical characteristics of melanoma, such as asymmetry, border irregularity, color variegation, diameter greater than 6 mm, evolving, patient concern, regression, and “ugly duckling”), when a dermatologist chooses to obtain additional information before making a final decision to biopsy to rule out melanoma.  MelaFind is a non-invasive and objective multi-spectral computer vision system designed as a tool to aid dermatologists in the detection of early (e.g., non-ulcerated, not bleeding, or less than 2.2 cm in diameter) melanoma.

    Source: http://www.melasciences.com/?passthis=yes&andthis=News

    Financial Summary

    MELA has generated significant losses since its inception. As of June 30, 2011, the Company had an accumulated deficit of $108.9 million. The Company expects to continue to spend significant amounts on the development of MelaFind.

    On June 30, 2010, the Company entered into an underwriting agreement, relating to the public offering of 2.2 million shares of the Company’s common stock, at a price to the public of $7.50 per share less underwriting discounts and commissions. The common stock was offered and sold pursuant to the Company’s Prospectus dated June 1, 2010, and the Company’s Prospectus Supplement filed with the SEC on June 30, 2010, in connection with a takedown from the Company’s effective shelf registration statement that closed on July 6, 2010. The gross proceeds to the Company from the sale of the common stock totaled $16.5 million. After deducting the underwriters’ discounts and commissions and other offering expenses, net proceeds were approximately $15.2 million. Approximately $58.5 million remains available under the Company’s 2010 shelf registration statement as of June 30, 2011.

    Most of the Company’s expenditures to date have been for research and development activities and general and administrative expenses. Research and development expenses represent costs incurred for product development, clinical trials, activities related to regulatory filings, and manufacturing development efforts. MELA expenses all of its research and development costs as they are incurred. As of August 5, 2011, the Company has not borrowed (other than by issuing convertible notes, all of which have been converted into equity) or financed its operations through equipment leases, financing loans or other debt instruments.

    As of June 30, 2011, the Company’s total of cash and cash equivalents was approximately $20.9 million. Management believes that this cash balance will be sufficient to fund the Company’s anticipated level of operations for at least the next twelve months. However, the Company will require additional funds to achieve significant commercialization of MelaFind. There can be no assurances that the Company will be able to raise additional financing in the future. Additional funds may not become available on acceptable terms, and there can be no assurance that any additional funding that the Company does obtain will be sufficient to meet the Company’s needs in the long term. In the event that the Company is unable to raise additional funds, the Company has the ability and intent to reduce certain discretionary expenditures.

    MELA’s cash and cash equivalents at June 30, 2011, are liquid investments in money market accounts and deposits with commercial banks, which are held in amounts that substantially exceed FDIC limits.

    Net cash used in operations was $9,547 for the six months ended June 30, 2011. For the corresponding period in 2010, net cash used in operations was $9,054. In both periods, cash used in operations was attributable to net losses after an adjustment for non-cash charges related to depreciation/amortization and share-based compensation, and other changes in operating assets and liabilities.

    For the six months ended June 30, 2011, there was $31 net cash used in its investing activities for the purchase of fixed assets. For the corresponding period in 2010, $636 net cash was used in its investing activities, for the purchase of fixed assets.

    For the six months ended June 30, 2011, no net cash was provided by or used in its financing activities. For the six months ended June 30, 2010, net cash provided by its financing activities was $5,331, representing proceeds from the Committed Equity Financing Facility, as well as the exercise of options and warrants.

    Source: http://biz.yahoo.com/e/110805/mela10-q.html

    Financial Strength (07-Sept-2011)

    Company

    Industry

    Sector

    S&P 500

    Quick Ratio (MRQ) 1.56 1.77 0.76
    Current Ratio (MRQ) 17.28 1.91 2.17 1.12
    LT Debt to Equity (MRQ) 0.00 206.64 22.78 110.91
    Total Debt to Equity (MRQ) 0.00 251.94 28.95 149.31
    Interest Coverage (TTM) 3.08 1.62 23.25

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    Analyst Recommendations and Revisions

    1-5 Linear Scale

    Current

    1 Month
    Ago

    2 Month
    Ago

    3 Month
    Ago

    (1) BUY 1 1 1 1
    (2) OUTPERFORM 2 2 2 2
    (3) HOLD 0 0 0 0
    (4) UNDERPERFORM 0 0 0 0
    (5) SELL 0 0 0 0
    No Opinion 0 0 0 0
    Mean Rating 1.67 1.67 1.67 1.67

    # of Estimates

    Mean

    High

    Low

    1 Year Ago

    SALES (in millions)
    Quarter Ending Sep-11 2 1.15 1.41 0.90 1.89
    Quarter Ending Dec-11 2 2.49 2.88 2.10 3.52
    Year Ending Dec-11 3 5.63 8.60 3.40 7.28
    Year Ending Dec-12 3 32.89 40.42 24.90 35.82
    EARNINGS (per share)
    Quarter Ending Sep-11 3 -0.24 -0.22 -0.27 -0.26
    Quarter Ending Dec-11 3 -0.25 -0.20 -0.31 -0.22
    Year Ending Dec-11 3 -1.03 -0.95 -1.13 -1.01
    Year Ending Dec-12 3 -0.41 -0.14 -0.66 -0.35
    LT Growth Rate (%) 1 40.00 40.00 40.00 40.00

    Technical Analysis

    Source: http://stockcharts.com

    MELA is above the upper Bollinger Band, implying that it is currently extended from its recent trend. Be aware, however, that a cross outside of the Bollinger Bands can sometimes be a signal of trend strength and not, necessarily, trend reversal.

    The MACD for MELA currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Sept07-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
    BSD Medical Corp. BSDM 2.77 82.02M n/a n/a n/a n/a
    Hologic Inc. HOLX 16.58 4.35B 13.26 11.76 2.44 2.28
    Varian Medical Systems Inc. VAR 54.87 6.43B 15.90 13.86 2.46 2.26
    Accuray Inc. ARAY 4.52 271.90M 90.40 n/a 1.27 0.72
    Medical Instruments & Supplies Median       15.81 n/a 2.10 n/a
    MELA Sciences Inc. MELA 3.73 94.23M n/a n/a 10.93 3.23

    Source: Thomson Financial

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