May 22nd, 2007 8:38 AM

*VeriChip Shares Soar On Alzheimer's Microchipping*

By DAMIAN J. TROISE AP Business Writer
© 2007 The Associated Press

NEW YORK — Shares of VeriChip Corp., which makes implantable locating
and identification devices, soared Friday on reports the company's
VeriMed identification chip will be used for consenting Alzheimer's
patients at a Florida adult care facility.

The stock gained $1.17, or 27 percent, to reach $5.50 in afternoon
trading. Shares have traded between $4.27 and $6.99 over the last 52 weeks.

The VeriMed chip, approved by the Food and Drug Administration in 2004,
is only part of the company's business. Revenue mainly comes from what
are called active radio frequency identification devices, such as
bracelets placed on both mother and newborn child while in the hospital
to avoid mix-ups and even kidnappings. The company also sells devices
used to track patients with dementia.

But the company is now making a large investment of time and money on
its passive technology, or the VeriMed chip, with the view that it could
become part of total care for patients with chronic conditions. Unlike
the active technology, the chip, implanted just beneath the skin on a
patient's arm, is dormant until scanned using a hospital-based reader to
extract the medical data. The chip costs about $200 to install, plus
between $20 and $80 annually, depending on the amount of information on it.

It is not yet covered by insurance carriers, something the company hopes
to achieve as it continues to collect ongoing post-approval studies and
opinions by third-party advocates, such as the National Kidney Foundation.

Meanwhile VeriChip has been installing the scanners free, leaving
hospitals with only the expense of training staff. In all, 130 hospitals
are using the technology, with 600 having signed on for installation.
The markets mostly impacted are Boston, northern New Jersey and
Washington D.C.

"It's the proverbial chicken and egg," said Scott Silverman, VeriChip's
chief executive officer. "If the hospital doesn't have the scanners,
there's no reason to get a chip."

But the campaign to build use of the technology is primarily
word-of-mouth. The company's distributor is offering "starter kits" to
physicians, which include the scanner and 10 chips, as part of its
campaign to build up use. The goal is for those physicians to recommend
the chip to high-risk patients, those that are likely to show up at an
emergency room unconscious, making the data on the chip the only fast
way to pull up medical history.

"VeriMed is hard to budget," Silverman said. "Clearly we're making the
investment there."

He hopes the company can turn a profit with the VeriMed business by 2009.

"Ultimately, you have to have a lot of doctors embrace this," said David
Sterman, senior analyst Jesup & Lamont Securities Corp. "Its unclear to
me still how to make that happen and how large the market will be."

Merriman Curhan Ford senior analyst Kevin Dede sees the technology as
being most valuable in an emergency room setting, but said it is
difficult to forecast how it might fare in the market because the
infrastructure is still being set up.

"You can't run a train unless you have the tracks built," he said in a
phone interview.

He estimates the eventual patient market for the system could include 45
million people, with conditions ranging from coronary disease to
diabetes. Meanwhile, he forecast revenue in 2007 of $30.3 million.