Hypertension Diagnostics, Inc. (HDII-OTC: BB)
Interview with:
Mark N. Schwartz, Chairman and CEO
Business News, Financial News, Stocks, Money & Investment Ideas, CEO Interview
and Information on their
proprietary non-invasive blood pressure waveform analysis methodology for measuring the elasticity of large and small arteries.


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Hypertension Diagnostics is offering physicians a test that could not only help them increase revenues but also better diagnose hypertension thereby decreasing the risk of heart attack

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Medical Instruments & Supplies

Hypertension Diagnostics, Inc.

2915 Waters RoadSuite 108
Eagan, MN 55121-1562
Phone: 651-687-9999

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Mark N. Schwartz
Chairman and CEO

Interview conducted by:
Lynn Fosse, Senior Editor
December 1, 2005

Mark N. Schwartz
Chairman and CEO

Mark N. Schwartz has been chairman and CEO of Hypertension Diagnostics, Inc. since August 2003. Previously he was CFO of DDD Group plc, a digital media company he took public on the London Stock Exchange. He was the founder and CFO of Bodega Latina Corporation, a successful Hispanic grocery warehouse retailer in Los Angeles. Mr. Schwartz was an investment banker at Credit Suisse First Boston and Donaldson, Lufkin, Jenrette. He is a former member of the board of directors of Starbucks Coffee Company.

Company Profile:
Hypertension Diagnostics, Inc., headquartered in Eagan, Minnesota, was founded in July 1988 to develop a proprietary blood pressure waveform analysis methodology into a non-invasive means for measuring the elasticity of large and small arteries. HDI has developed proprietary blood pressure waveform analysis technology, which has been incorporated into the design of several products.

Hypertension Diagnostics is in the business of saving lives by helping reduce the risk of cardiovascular disease using the CVProfilor. The CVProfilor is a device that enables physicians to identify heart disease before it results in a heart attack or stroke. It works by measuring small and large artery elasticity, the key indicator of cardiovascular health. Approximately 50% of the population in the United States dies from cardiovascular disease, but with early detection, 90% of the people at risk can be saved.


The CVProfilor painlessly and non-invasively measures both large and small arterial elasticity. The test, a simple 7-minute process, enables physicians to identify patients who require immediate and aggressive therapy based on evidence of underlying vascular disease. It provides a reproducible and reimbursable way to differentiate between hypertension and elevated blood pressure, risk-stratify patients with diabetes, atherosclerosis and hypertension, and detect vascular disease in white coat hypertensive, borderline hypertensive, hypercholesterolemic, and pre-diabetic patients. The CVProfilor enables physicians to screen their at-risk patient population for early signs of cardiovascular disease years or even decades before they manifest symptoms.

Five drug manufacturers have permitted the public disclosure of their use of our CVProfilor in their multi-site clinical research trials: Alteon, AstraZeneca, Parke-Davis, Pfizer, and Solvay. The CVProfilor was used in the NHLBI Multi-Ethnic Study of Atherosclerosis (MESA) research trial in May 2000. Recently, the American Society of Hypertension (ASH) released its new definition of hypertension at its 2005 annual meeting, which emphasizes the vascular health component of cardiovascular disease. Pfizer released the results of the AVALON trial at the ASH meeting, which showed the benefits of its new drug, Caudet, on improving arterial elasticity in as short as eight weeks. There are over 200+ published, peer-reviewed scientific articles and presentations on HDI's methodology, which provides evidence on the validity, accuracy and reproducibility of the CVProfilor.

CEOCFO: Mr. Schwartz, what was your vision when you came to Hypertension Diagnostics and how has that developed so far?
Mr. Schwartz: “What attracted me to HDI was the fact that the CVProfilor was a device that really could save lives. It is a technology that one-day will be in every primary care physician’s office in the United States and around the world. It is at the early stage of its deployment into the marketplace. We are at that classic situation where the technology is ahead of the marketplace and studying Jeffrey Moore, Crossing The Chasm and the other books he’s written; there is an opportunity to develop market niches for the company as the marketplace caught up with the technology. This was also an opportunity to one day have an extraordinary technology/medical device company.”

CEOCFO: Where is HDI today?
Mr. Schwartz: “We now have the core business model that gives us the launching pad to deploy a profitable business model. It is an economic model that we have refined that is attractive to our customers, attractive to our sales representatives and extremely compelling to investors and to the marketplace. We feel that we can now grow the company exponentially. We can double the size of the company every year if not more, for the next five to seven years.”

CEOCFO: Is this your rent to own plan?
Mr. Schwartz: “This is a combination of renting and then converting to ownership once a customer is doing in excess of 20 tests per month.  At that point, the economics no longer favor renting and it makes business sense for the physician to purchase. It is the difference between going to Hertz rent a car and spending $55.00 per day for a 30 days for several months, versus what it would cost to get that same car if you bought it through a car loan or a lease. It is pretty simple economics that we show, so what eventually happens is that they become owners of the technology using some of their rental payments to buy down the purchase price of the equipment. Therefore, we get a nice sale; our salesmen get a nice commission and as long as we continue to repeat that process of bringing on new customers, it is a very profitable model for HDI.”

CEOCFO: Tell us how the economics will work for the physician.
Mr. Schwartz: “We focus on the primary care physician who on average, across the board in the United States, makes $164 thousand per year. We can increase his earnings, 25 to $50 thousand per year with very modest implementation of our technology and that is real money. Therefore, a lot of physicians see the power of our economic value and get really excited about the technology. We like to find a balance between those that see clinical value and those that see economic value.”

CEOCFO: What group of physicians are you targeting?
Mr. Schwartz: “We target primary care physicians who see a lot of hypertensive and diabetic patients, which means primarily: internists, general practitioners, family practitioners and endocrinologists.”

CEOCFO: Given that doctors are presented with new ideas all of the time, how do you reach them?
Mr. Schwartz: “That is a very good question and a very important part of our process. First, we attempt to hire sales representatives that have relationships with those types of physicians. They would be ones who know their way into the physicians offices and their gatekeepers whom they’ve done business with in the past and whom they have a trusting relationship with. Therefore, we are bringing people onboard sales reps who have entrée into those types of customers. Second of all, we have a referral plan that allows physicians to act as opinion leaders and get their colleagues to come onboard. We find that existing customers are the best way to get new customers. They often are very effective in identifying and convincing other physicians to try our technology.”

CEOCFO: What does your product line consist of?
Mr. Schwartz: “The model that we use for the physician office is the CVProfilor®-DO-2020; it is the FDA approved device. The model that we have for research is the CVProfilor®-CR-2000 and that model is purposefully not FDA approved, so that if a pharmaceutical buys a number of those devices for a clinical trial, as Pfizer Inc. (NYSE: PFE) has done and others will, it can’t be used in the practice for billing patients because it is not FDA approved. We wanted to have a distinct research. It is also used by government agencies; the NIH (National Institute of Health), and the Center for Disease Control. Our CVProfilor®-MD-3000 is used in the physicians practice outside of the United States.”

CEOCFO: Does the physician administer the test himself?
Mr. Schwartz: “Our test is done by the medical technician or the lowest person on the totem pole in the physician practice; I could train you to do this in an hour. After 10 or 15 practice tests you would get the hang of it. The physician generally does not do it, which is very positive. The physician doesn’t need to take the time to do these tests themselves; the physician doesn’t have to have a high powered lab assistant or specialized assistant onboard like you do with ultrasound. The receptionist, the mailroom clerk, the UPS delivery guy or whoever is the least costly resource in the practice, can administer the tests. The results are self evident, because they printout and there is a scale on the back and it allows the doctor to come in; quickly analyze the results and recommend a therapeutic regimen in response to the test results.”

CEOCFO: Where are you with regards to reimbursements?
Mr. Schwartz: “We are in good shape with payers across the United States. We have worked very hard to maintain our reimbursement, with some outstanding reimbursement consultants in Washington, D.C. This is a test that generally reimburses in the 100 and $150.00 range. Of course that is dependent upon the geography, the plan, and the insurance that the patient has. Therefore, it is a very attractive economic model. If you have competent biller, you will get reimbursed. If you don’t have a competent biller, you may not get reimbursed, but that’s true of any procedure or diagnostic tool in a physician’s office. There is a very high correlation between the expertise or the biller and the ability to get reimbursed and the amount that you get reimbursed.”

CEOCFO: What is the financial position at HDI today?
Mr. Schwartz: “We are very close to profitability and anticipate getting there this year. We are aggressively ramping up our sales team, so we are putting people on who require some time to reach their level of productivity and efficiency. Further, the company is well capitalized to meet its plan and objectives for the next year.”

CEOCFO: What about the production and are disposables a part of your sales and revenue model?
Mr. Schwartz: “We assemble the products in our office in Eagan, MN and the components are manufactured to our specifications by third party manufacturers. In terms of a disposable, the test is the disposable when you are on the rental model. We charge $45.00, but we bring in the equipment to do the test, which is a computer with our software, sensor, blood pressure cuff and printer. We set it up in the physician’s office, the printed reports, and the ink cartridges, we supply. If there is a purchase involved, they can buy extended warranty protection.”

CEOCFO: Can you explain the difference between hypertension and high blood pressure?
Mr. Schwartz: “One is a disease and one is a risk actor. Hypertension is the beginning of cardiovascular disease and high blood pressure is just that; it a reading above 120 over 85 at a given moment in time. It may be what is known as white coat hypertension, which is something that may elevate your blood pressure level; such as being late for the doctor’s appointment, couldn’t get a parking space or got a traffic ticket. What we have is a device that diagnoses the evidence of the disease and allows the physician to treat the disease, not a risk factor. The reason why that is important is that 50% of the people who have a heart attack or stroke, have normal blood pressure, 120 over 85 and normal cholesterol and yet they experience these cardiac events. Unfortunately, half of those cardiac events are fatal, so the diagnostic tools that the physicians have today, the blood pressure cuff and the cholesterol tests, are missing 50% of the people that actually will have a cardiac event. Our technology is able to pick up those patients and we all have heard stories about people who are in excellent health and suffered a heart attack.  It is tragic; you take Bill Clinton, President of the United States, who for eight years in the White House had his own personal physician and yet no one picked-up that he had cardiovascular disease until he had a near heart attack and had to go in for a coronary artery bypass graph. On top of that, three months latter he had to go in and have it re-done. He had advanced stage cardio vascular disease; we should have picked him up ten or twenty years ago and could have with our CVProfilor.”

CEOCFO: Are you able to work with organizations such as the American Society of Hypertension?
Mr. Schwartz: “The American Society of Hypertension at its annual meeting in May, pronounced a new definition of hypertension that went beyond the blood pressure cut points, the 120 or 85. The idea is to begin to look at the vascular components of the disease and the target organ damage and that is the beginning of closing the gap between where the technology is and the marketplace coming together. They have been the most progressive in terms of saying that it is not enough just to do a blood pressure test; you have to understand the vascular health of the patient. Pfizer recently did a study on a new drug called Caduet®, which used our technology and showed the improvement in the vascular health. The fact that the largest pharmaceutical in the world is beginning to incorporate this into clinical trials gives us another piece of evidence that the gap is closing.”

CEOCFO: What is ahead for HDI and why investors should be interested?
Mr. Schwartz: “We are on a very strong trajectory in terms of our revenue growth and our earnings growth. We’ve cracked the code on how to take this technology that should be in everyone’s office and build it into a successful business. Therefore, we can have an explosive growth rate in our revenues and our earnings, and have a great impact for our investors. We view this as a great opportunity to be joining HDI as an employee or coming in as an investor; we are at the tipping point.”

CEOCFO: In closing, what should people realize about the company that might not come through when they first look?
Mr. Schwartz: “I think the first thing people think of is that our product should be in every physician’s office and one day that will happen. It is so obvious that everyone should want on of these tests. The question is, ‘why isn’t it out there’, and the answer is that we live in a system where we don’t have healthcare, we have sick care. The orientation of the insurance companies is not towards prevention, but the orientation of the consumers is very much towards prevention. There is a disconnect between what the medical system provides and what the customers want. Eventually that dysfunction will correct itself and come into alignment. Clearly, we will be the beneficiary of that

We can build the business to the point where the market has accepted it and then it becomes a mass product. It is very similar to the Blackberry experience. I was involved with the software company that provided the software for Remote Email Access. Seven years ago they were marketing it to the big corporations, but nobody wanted to get emails via a cell phone. The question then was, ‘why would anyone want to do that’, we’ll just log on and check our emails when we get home or, if we carry a laptopm when we get to our hotel and can dial up. There wasn’t a business opportunity then, so the company had to position itself into a niche market, where the concept of emails going through a wireless telephone made sense. They focused on the deaf and hard of hearing market, where the text was the only way to use a cell phone. Eventually, the corporate market caught up and people did want to check their emails remotely . We are exactly in that same phase; we are going after the doctors who need this type of test and can appreciate this. The great market opportunity is a few years ahead of us.”


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“We focus on the primary care physician who on average, across the board in the United States, makes $164 thousand per year. We can increase his earnings, 25 to $50 thousand per year with very modest implementation of our technology and that is real money. Therefore, a lot of physicians see the power of our economic value and get really excited about the technology. We like to find a balance between those that see clinical value and those that see economic value.” - Mark N. Schwartz


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