In vitro diagnostic tests are used to detect the presence and quantity of certain substances in biological samples to diagnose disease, monitor and guide treatment, and assist in managing chronic conditions. The global market for in vitro diagnostic products was estimated to be $34 billion in 2006 according to Boston Biomedical Consultants. Molecular diagnostics is a new and expanding part of the in vitro diagnostics market that emerged in response to a need for more rapid, sensitive and specific diagnostic tests than were previously available using traditional techniques, such as immunoassays.

According to Boston Biomedical Consultants, the genomic market grew 11% in 2006. This market is comprised primarily of infectious disease and human genetic tests, and excludes protein tests. Market growth has been driven primarily by conversion of traditional testing methods to molecular methods.

Nucleic acids, DNA and RNA, are molecules found inside cells and viruses that contain genes, the unique blueprint of each living creature. The diversity of living organisms results from variability in genetic content which is determined by the sequence of four nucleotide bases that form the chemical building blocks of DNA and encode an organism’s genetic instructions. Variability can also be the result of differences in gene expression, the process by which a gene’s DNA sequence is converted into proteins that in turn regulate or perform most of the physiological functions of the body.

The Verigene System is comprised of a microfluidics processor, a touchscreen reader and disposable test cartridges. The microfluidics processor interacts with and manipulates various functional components of the test cartridge, including target binding to the nucleic acid or protein array, nanoparticle probe hybridization, intermediate washes and signal amplification steps. The reader houses the optical detection module that illuminates the test slide and automated spot recognition software analyzes the resulting signal intensities and provides the test results.

To perform a test, the operator adds a prepared sample to a designated port in the test cartridge, enters sample identification and test cartridge information into the reader using the touchscreen keyboard or via the barcode wand, and inserts the test cartridge into the processor. The processor assimilates information received from the reader and matches it to the inserted test cartridge and initiates the specified test protocol. Once the assay process is complete the test array is introduced into the reader for image analysis and result reporting.

The Company is developing additional genomic assays, including tests for cystic fibrosis and a range of infectious diseases. In addition, the Company has an active program to develop protein tests based on established biomarkers and to validate new biomarkers where its ultra-sensitive protein detection technology may enable earlier detection of a broad range of diseases.

For the three months ended March 31, 2007, cost of product sales was $15,179. No cost of product sales was recorded for the three month period ended March 31, 2006.

Research and development expenses were $4.9 million for the three month period ended March 31, 2007, an increase from the $3.9 million of research and development expense for the comparable period in 2006.

Interest income was $384,078 for the three month period ended March 31, 2007, as compared to $18,480 in the comparable period in 2006.

Interest expense was $259,908 for the three months ended March 31, 2007, as compared to $129,500 in the comparable period in 2006.