Health Discovery Corporation Issues Corporate Update

SAVANNAH, Ga.--(BUSINESS WIRE)--Health Discovery Corporation (OTCBB: HDVY) announced today that Stephen D. Barnhill, M.D. has resigned as CEO of the Company to accept a new opportunity. Dr. Barnhill, at the request of the Board of Directors, has agreed to continue as a Consultant and Interim CEO until a suitable replacement CEO is hired and fully educated on the technology and product pipeline thereby ensuring a smooth executive transition.

“We wish him all the best and look forward to his continued leadership as we search for an experienced senior executive to continue to drive HDC’s growth strategy.”

“The Board of Directors wishes to thank Dr. Barnhill for his numerous contributions to the company and the integral role he has played in the company's growth and successes from founding the Company through leading the Company to a profitable 3^rd Quarter of 2012,” states Dr. Joe McKenzie, Lead Director, “We wish him all the best and look forward to his continued leadership as we search for an experienced senior executive to continue to drive HDC’s growth strategy.”

“Dr. Barnhill is a scientific visionary having brought together the fields of medicine and mathematics in a way that has and will continue to benefit patients worldwide. He is considered an international expert in this new area of medicine and it is a great pleasure to work with him on cutting edge scientific discovery,” states Dr. Herbert Fritsche, Chief Science Officer at HDC and retired Professor of Laboratory Medicine and Chief of the Clinical Chemistry Section at The University of Texas, M.D. Anderson Cancer Center, “As an inventor of approximately 36 of the patents owned by HDC, Dr. Barnhill’s contribution to the science driving our technology is remarkable and unprecedented.”

“Starting a public biotech company from its inception and taking it to profitability is no easy task and I could not have achieved this goal without the incredible scientific staff, including Dr. Herb Fritsche and mathematics staff including Dr’s Hong Zhang and Isabelle Guyon, at HDC that have joined together and dedicated themselves to the goal of helping patients through scientific discovery,” states Stephen D. Barnhill, MD, Chairman and CEO of HDC. “The Company is now on a solid path with cash, no long-term debt, products on the market and a pipeline in development, a valuable patent portfolio, and an incredible team in place to continue this success. I look forward to working with the Company to find a new CEO and spending time educating that person on the technology and product pipeline to ensure a smooth transition of executive management.”

Dr. Barnhill continued, “I would like to thank the shareholders of the Company for supporting our efforts in the past and for their continued support in the future.”

In addition to the announcement of Dr. Barnhill’s departure, HDC is providing the following current update on the progress at the Company.

First Time Profitability: The Company expects to announce its first profitable quarter in the upcoming Form 10-Q. In addition, the Company has no long-term debt.

NeoGenomics (OTCBB: NGNM),: The Company signed a Worldwide Licensing Agreement with NeoGenomics on January 6, 2012 for Laboratory Developed Test (LDT) rights for hematopoietic and solid tumor cancers. Under the terms of the Agreement, NeoGenomics paid $1 million in cash and issued 1,360,000 (one million three hundred and sixty thousand) shares of NeoGenomics common stock to HDC valued at $1.43 per share (then valued at $1,945,000.00) in upfront licensing fees. Since that time, the NeoGenomics stock price has increased closing at $2.80 per share on Friday, October 22, 2012. On August 13, 2012, HDC sold 409,000 shares of the NeoGenomics stock and received proceeds, net of fees, in the amount of $891,363.00. The Company still retains ownership of 951,000 shares of NeoGenomics stock which is freely tradable and valued at $2,662,800.00 based on the October 22 closing price.

In addition, NeoGenomics will make milestone payments, in cash or stock, based on sublicensing revenue and revenue generated from products and services developed as a result of the Agreement. Milestone payments will be in increments of $500,000 for every $2 million in revenue recognized by NeoGenomics up to a total of $5 million in total milestone payments. After $20 million in cumulative revenue has been recognized, NeoGenomics will pay a royalty of 6.5% on product sales and will share profits from sub-licensing arrangements. In addition, NeoGenomics will pay a royalty of 50% of the revenue recognized from any sub-licensing arrangements for the Cytogenetics Interpretation System and the Flow Cytometry System.

Retinalyze, LLC: Retinalyze, LLC is a 50/50 joint venture between Health Discovery Corporation and Doctors Optimal Formula, LLC formed October 18, 2011 to develop SVM based analysis tools for diagnosing diseases such as macular degeneration using fundoscopic images of the eye.

On February 17, 2012, the Company announced the commercial launch of Retinalytics SVM^TM, to assist Ophthalmologists and Optometrists in the Detection of Macular Degeneration. While the first Retinalytics SVM^TM product released focuses on age-related macular degeneration (“AMD”), the Company continues to develop a second Retinalytics SVM^TM product using fundoscopic images of retinal vessels to assist eye care professionals in the detection of Alzheimer’s disease and diabetic retinopathy.

At the end of the 3^rd Quarter, 2012 there have been 753 Doctors signed up to use the service and 1700 scans were sent for analysis during the 3^rd Quarter for a total of 2,274 scans analyzed to date. Revenue numbers and further detail will be provided in the upcoming 10Q.

SVM Capital: SVM Capital, LLC (“SVM Capital”) is a joint venture between Atlantic Alpha Strategies, LLC (“AA”), a Savannah, Georgia based Registered Investment Advisor (RIA) and Health Discovery Corporation, Inc. (OTCBB: HDVY and “HDC”), a Savannah, Georgia based molecular diagnostics company that uses patent protected SVM technology for personalized medicine. The purpose in forming the joint venture was to apply the advanced mathematical pattern recognition techniques as demonstrated by HDC's SVM technology and intellectual property (“IP”) assets and leverage their capabilities for the first time in the financial markets.

As part of the joint venture agreement, SVM Capital acquired the exclusive and perpetual right to apply HDC’s patent protected SVM technologies to all financial markets world-wide. Since executing their joint venture agreement in 2007, SVM Capital has developed and live traded a series of fully automated trading models based on an initial ETF strategy, the first investment program developed as a result of the joint venture. The results of this ETF program are audited and available for review. A second trading program, using a long/short large cap hedging strategy began live trading in July 2012 and a third and fourth program, currently in development and based on a small cap and mid cap strategy respectively, have yet to begin live trading.

SVM Capital desires to rapidly grow the joint venture and is now evaluating potential joint venture partnerships, IP licensing opportunities and/or various strategic alternatives, including mergers and acquisitions as a means to realize this objective. SVM Capital is actively targeting a combination of individual traders, investment analysts, hedge funds and brokerage firms in addition to research organizations, financial data providers, and financial technology providers as potential clients and/or partners.

Smart Personalized Medicine, LLC: Health Discovery Corporation owns an equity position in and has signed a Licensing Agreement with Smart Personalized Medicine, LLC, founded by Dr. Richard Caruso, Chairman and Founder of Intergra Life Sciences (NasdaqGS:IART) to work to develop a novel breast cancer prognostic test using HDC’s support vector machine (SVM) technology in collaboration with MD Anderson Cancer Center. Smart Personalized Medicine, LLC and HDC recently terminated their development agreement with Quest Diagnostics and plan to identify a new partner to complete the development of this breast cancer test.

MelApp: MelApp is the world’s first SVM-based iPhone App for assessing the risk of melanoma. MelApp uses highly sophisticated patent protected state-of-the-art mathematical algorithms and image based pattern recognition technology to analyze the uploaded image and give an indication if a mole is low, moderate, or high risk of being a melanoma. In all cases, MelApp refers the App user to a physician for an appropriate medical evaluation. It is an educational tool never to be used as a substitute for a physician diagnosis.

There have been approximately 11,500 MelApp downloads purchased to date. In addition to the revenue generated from the App itself, the Company hopes to generate additional revenue from physician subscriptions for potential patient referrals and advertising for sun care and protection product companies as soon as there is sufficient critical mass in the ordering patterns.

Patent Portfolio: The Company now holds the exclusive rights to 57 issued U.S. and foreign patents covering uses of SVM and FGM technology for discovery of knowledge from large data sets. The Company also has 23 pending U.S. and foreign patent applications covering uses of the SVM technology as well as biomarkers and diagnostic methods that have been discovered using the SVM technology.

Intel: Regarding Intel’s Patent No. 7,685,077 entitled “Recursive Feature Eliminating Method Based on a Support Vector Machine,” the Company has received notification from the United States Patent and Trademark Office that it intends to issue a re-examination certificate to Intel Corporation. During the re-examination, the Patent Office agreed that all elements of the HDC patented SVM-RFE method are present in the Intel claims. A fundamental principle of patent law is that the addition of one or more elements to a patented claim does not avoid infringement. In this case, Intel merely added a standard computer operation to the Company’s SVM-RFE method. Furthermore, possession of a patent on series of steps does not avoid infringement of a patent covering a subset of those steps.

The matter has now moved to the interference issue. An interference is an administrative proceeding within the Patent Office through which a determination is made of who is entitled to a patent when two parties make claims to the same invention. Under current U.S. Patent Law, the first person to invent an invention is entitled to a patent. An interference is commonly provoked by submitting a new continuation application with claims that were copied from an issued patent or published application. If the owner of the continuation application can show that they are entitled to an earlier priority date than the issued patent, then the party with the issued patent must provide persuasive evidence that they actually invented the claimed subject matter before the earlier priority date of the other party. In this case, the HDC’s earliest application describing SVM-RFE was filed in March 2000. Intel’s application for SVM-RFE was filed in August 2005.

The patent examiner who is examining the Company’s continuation application has agreed that the claims of the application are identical to those of the Intel patent and that they are, therefore interfering. As a result, the Company is confident that it will prevail and be declared the sole owner of the SVM-RFE method when its claims are compared side-by-side with Intel’s claims.

University Licensing Program: The Company continues to implement the University Licensing Program for it Intellectual Property Portfolio. Further detail will be provided in the upcoming 10-Q.

About Health Discovery Corporation

Health Discovery Corporation is a molecular diagnostics company that uses advanced mathematical techniques to analyze large amounts of data to uncover patterns that might otherwise be undetectable. It operates primarily in the emerging field of personalized medicine where such tools are critical to scientific discovery. Its primary business consists of licensing its intellectual property and developing its own product line of biomarker-based diagnostic tests that include human genes and genetic variations, as well as gene, protein, and metabolic expression differences and image analysis in digital pathology and radiology. For more information, see www.healthdiscoverycorp.com.

Forward-Looking Statements

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, the accuracy of which is necessarily subject to risks and uncertainties, including, without limitation, statements regarding future performance, opportunities and investments, and anticipated results in general. From time to time the Company may make other forward-looking statements relating to other matters, including without limitation, commercialization plans and strategic partnerships. Actual results may differ materially due to a variety of factors, including, among other things, the acceptance of our approach to applying mathematics computer science and physics into the disciplines of biology, organic chemistry and medicine and our products and technologies associated with those approaches, the ability to develop or commercialize new drugs, therapies or other products based on our approaches, and other factors set forth from time to time in the Company’s Securities and Exchange Commission filings.

All forward-looking statements and cautionary statements included in this document are made as of the date hereof based on information available to the Company as of the date hereof, and the Company assumes no obligation to update any forward-looking statement or cautionary statement.