Free Declaration in Support - District Court of California - California

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1 Henry C. Su (SBN 211202; [email protected]) Katharine L. Altemus (SBN 227080; [email protected]) 2 HOWREY LLP 1950 University Avenue, 4th Floor 3 East Palo Alto, California 94303 Telephone: (650) 798-3500 4 Facsimile: (650) 798-3600 5 Robert Ruyak Matthew Wolf 6 Marc Cohn HOWREY LLP 7 1229 Pennsylvania Avenue, NW Washington, DC 20004 8 Telephone: (202) 783-0800 Facsimile: (202) 383-6610 9 Attorneys for Plaintiff 10 HOLOGIC, INC., CYTYC CORPORATION and HOLOGIC LP 11 12 13 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION Case No. C08 00133 DECLARATION OF KATHARINE L. ALTEMUS IN SUPPORT OF PLAINTIFFS' OPPOSITION TO DEFENDANT'S MOTION FOR CONTINUANCE OF THE HEARING ON PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION

14 HOLOGIC, INC., CYTYC CORPORATION, and HOLOGIC LP, 15 Plaintiff, 16 vs. 17 SENORX, INC., 18 Defendant. 19 20 21 22 23 24 25 26 27 28
Declaration of Altemus ISO Opposition Case No. C08 00133 RMW

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1

I, Katharine L. Altemus, declare that I am an associate in the law firm Howrey LLP and a

2 member of the Bar of this court, and I serve as one of the outside counsel for Hologic, Inc., Cytyc 3 Corporation and Hologic LP. The following declaration is based on my personal knowledge, and if 4 called upon to testify, I could and would competently testify as to the matters set forth herein. 5 1. Attached hereto as Exhibit A is a true and correct copy of a Soleil Securities an Equity

6 Research Company Update about SenoRx prepared by Soleil Securities Analyst Junaid Husain, dated 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Declaration of Altemus ISO Opposition Case No. C08 00133 RMW -1-

January 11, 2008. I declare under penalty of perjury that the foregoing is true and correct and that this declaration was executed on February 21, 2008 at East Palo Alto, California. By: /s/ Katharine L. Altemus Katharine L. Altemus

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Exhibit A

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Equity Research Company Update

SenoRx SENO, $8.81, Buy Despite Patent Litigation, We Continue To Expect Full Launch Of Contura In CY08

January 11, 2008

Junaid Husain 617-314-7456 [email protected] Sales and Research 1-800-447-4318 Trading 1-800-569-2407 www.soleilgroup.com
Ticker Market Cap (M) Price 52-Wk. Range Rating Price Target Shares Out (M) Dividend Yield Trading Volume(M) Market SENO $150.7 $8.81 $11­$7 Buy $13.00 17.1 $0.00 0.0% 0.028 NASDAQ

Action We remain confident that SenoRx (SENO, Buy-rated) will push forward with full-scale launch of Contura in CY08, despite this morning's announcement that Hologic (HOLX, Buy-rated) has filed a patent infringement lawsuit against SENO. HOLX's complaint alleges infringement on patents relating to MammoSite. We have spoken to SENO and get the sense that this action from HOLX was expected--nevertheless, SENO is confident with its intellectual property and is moving forward with full-scale launch plans for Contura in 1Q:08. An initial hearing is expected this April, with Markman Hearings to follow. To some extent, today's news sounds similar to a patent infringement case between Xoft and Cytyc Corporation (pre-acquisition), which was ultimately settled out of court. Net/net, while patent infringement cases are difficult to predict -- and with this litigation playing out over 1-2 years, at least -- we continue to expect $7.4MM of Contura sales in CY08. Maintaining our Buy-rating on SENO.
Fiscal Year Dec $ Revenue Current Previous EPS Current Previous P/S Current P/E Current F06A 25.5 25.5 (6.61) (6.61) 5.9 NM Fiscal Year F07E F08E 35.2 50.4 35.2 50.4 (0.55) (0.24) (0.55) (0.24) 4.3 3.0 NM NM Calendar Year F06A F07E F08E 25.5 35.2 50.4 25.5 35.2 50.4 (6.61) (0.55) (0.24) (6.61) (0.55) (0.24) 5.9 4.3 3.0 NM NM NM Curr. Qtr. 4Q07E 10.4 10.4 (0.10) (0.10) -- -- Next Qtr. 1Q08E 11.0 11.0 (0.08) (0.08) -- -- Yr. Ago Qtr. 4Q06A -- -- -- -- -- --

Price: Shares have traded publicly since 3/29/07. Price Target: Valuation range: $11-$13 Sector Opinion: NA

Revenues in millions, except when noted.

HOLX Sues Over Key MammoSite Patents. This morning, SenoRx (SENO, Buy-rated) announced that Hologic (HOLX, Buy-rated) had filed a lawsuit against SENO in the US District Court, Northern District of California, San Jose Division. HOLX's complaint alleges patent infringement of its brachytherapy patent claims, relating to its MammoSite product line in partial breast radiation treatment. Recall, SENO has a competing product in partial breast radiation therapy, the Contura (approved in May CY07). Conversation With Management. We have spoken to SENO management and the sense we get is that this action from HOLX was expected, given the pending full-scale launch of Contura in 1Q:08. Management believes that there are no new additions to the intellectual prior art that would impact their interpretation of claims surrounding the Contura patents. First Hearing In April, With Markman Hearings To Follow. Management has told us that a preliminary hearing is set for sometime in April of this year, where a tentative schedule of events will be set up for the case moving forward -- we believe a Markman Hearing would be arranged for sometime afterward (Markman Hearing definition: A hearing where a judge listens to testimony from both parties on the appropriate meanings of the relevant key words used in the claims of a patent).

Important disclosure information is contained on pages 4 - 7 of this report. The recipient of this report is directed to read these disclosures.

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SENO, $8.81, Buy : Despite Patent Litigation, We Continue To Expect Full Launch Of Contura In CY08

Current Litigation Reminds Us Of Cytyc V. Xoft Case. The HOLX v. SENO litigation has a similar "look-and-feel" to an intellectual property case that privately-held Xoft brought before Cytyc Corporation in CY05 (pre-HOLX acquisition). In that situation, both companies were brawling over three Cytyc patents (we believe the same patents that are part of today's litigation with SENO) related to the MammoSite brachytherapy catheter. Xoft and Cytyc settled this case out of court back in August of 2007. Net/Net, We Remain Comfortable That SENO Rolls Out Full Scale Launch Of Contura In CY08. While patent infringement cases are impossible to predict, we remain comfortable that Contura will launch without preliminary injunction. Moreover, we see multiple iterations of this case playing out for at least the next 1-2 years before resolution. As such, we remain comfortable with our CY08 assumptions of $7.4MM in Contura sales. VALUATION Despite the fact that SENO is earnings-negative, the company has grown sales robustly over the past few years, and we believe it should be valued on a price/sales basis relative to its peer group. We think this is a fair valuation metric, given SENO's roughly 40%/year top-line growth over the last two years and our forward sales forecasts that assume a similar growth trajectory. We note that the medical supplies group trades at roughly 3.5X forward sales. We note that better-than-expected gross-margin expansion, share gains in VAB, an expected full-scale launch of Contura by early CY08, and multiple products in the queue give us conviction on our 12-month valuation range of $11 to $13 (3.8X to 4.3X our CY08 sales estimate of $50.4MM). RISKS TO VALUATION Risks to our valuation include: a) More intense competition from deeper-pocketed HOLX and CYTC as they defend their biopsy and radiation delivery franchises respectively; b) Clinical trial risk for Contura; and c) Growing competition in radiation delivery, particularly from manufacturers of external beam radiation oncology instruments.

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SenoRx, Inc. Consolidated Income Statement
(Fiscal Years Ending December 31; $ Thousands, except per share) 2007E YE2006 Net Revenue Cost of Goods Sold Gross Profit Operating Expenses: Research & Development Selling & Marketing General & Administrative Total Operating Expenses Gain (Loss) From Operations Interest Expense Change in Fair Value of Convertible / Warrant Interest Income Gain (Loss) Before Provision For Income Taxes Provision For Income Taxes Net Gain (Loss) Net Gain (Loss) Per Share Average Shares Outstanding Year-over-Year Change Net Revenues Cost of Goods Sold Gross Profit Research & Development Selling & Marketing General & Administrative Total Operating Expenses Operating Income Net Income EPS - Operating Margin Analysis Gross Margin Research & Development / Revs Selling & Marketing / Revs General & Administrative / Revs Operating Margin Net Margin $25,508 13,506 12,002 5,323 15,041 2,050 22,414 (10,412) (5,007) Q1A $7,700 3,537 4,163 1,468 4,300 783 6,551 (2,389) 477 (685) (70) (2,110) 0 (2,110) ($0.20) 10,703 NM NM NM NM NM NM NM NM NM NM 54.1% 19.1% 55.9% 10.2% NM NM Q2A $8,121 3,490 4,631 1,647 4,431 1,105 7,182 (2,551) 450 (305) (561) (2,135) 0 (2,135) ($0.15) 13,901 NM NM NM NM NM NM NM NM NM NM 57.0% 20.3% 54.6% 13.6% NM NM Q3A $8,906 3,556 5,350 1,580 4,354 1,206 7,140 (1,789) 453 0 (551) (1,691) 0 (1,691) ($0.10) 17,076 NM NM NM NM NM NM NM NM NM NM 60.1% 17.7% 48.9% 13.5% NM NM Q4 $10,419 3,928 6,491 1,750 5,355 1,198 8,304 (1,813) 457 0 (557) (1,713) 0 (1,713) ($0.10) 17,102 NM NM NM NM NM NM NM NM NM NM 62.3% 16.8% 51.4% 11.5% NM NM Year $35,147 14,511 20,636 6,445 18,441 4,291 29,177 (8,542) 1,837 (990) (1,739) (7,649) 0 (7,649) ($0.55) 14,695 37.8% 7.4% 71.9% 21.1% 22.6% 109.3% 30.2% NM NM NM 58.7% 18.3% 52.5% 12.2% NM NM Q1 $10,977 4,116 6,861 1,647 5,752 966 8,365 (1,504) 434 0 (562) (1,376) 0 (1,376) ($0.08) 17,187 42.6% 16.4% 64.8% 12.2% 33.8% 23.4% 27.7% NM NM NM 62.5% 15.0% 52.4% 8.8% NM NM Q2 $11,857 4,340 7,518 1,725 6,130 1,026 8,881 (1,364) 413 0 (568) (1,208) 0 (1,208) ($0.07) 17,273 46.0% 24.3% 62.3% 4.8% 38.3% -7.2% 23.7% NM NM NM 63.4% 14.6% 51.7% 8.7% NM NM 2008E Q3 $13,028 4,482 8,546 1,863 6,618 1,120 9,602 (1,055) 392 0 (574) (874) 0 (874) ($0.05) 17,359 46.3% 26.0% 59.7% 17.9% 52.0% -7.1% 34.5% NM NM NM 65.6% 14.3% 50.8% 8.6% NM NM Q4 $14,569 4,808 9,761 2,040 7,401 1,253 10,693 (932) 372 0 (579) (725) 0 (725) ($0.04) 17,446 39.8% 22.4% 50.4% 16.5% 38.2% 4.6% 28.8% NM NM NM 67.0% 14.0% 50.8% 8.6% NM NM Year $50,431 17,746 32,686 7,274 25,902 4,365 37,541 (4,855) 1,611 0 (2,283) (3,244) 0 (3,244) ($0.24) 17,316 43.5% 22.3% 58.4% 12.9% 40.5% 1.7% 28.7% NM NM NM 64.8% 14.4% 51.4% 8.7% NM NM

(15,419) 0 (15,419) ($6.61) 2,332 32.5% 33.7% 31.2% 8.6% 48.2% -3.1% 30.6% NM NM NM 47.1% 20.9% 59.0% 8.0% NM NM

Source: Company reports and Neponset Equity Research estimates.

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SENO, $8.81, Buy : Despite Patent Litigation, We Continue To Expect Full Launch Of Contura In CY08

Regulatory Required Disclosures
Hologic: Soleil Securities Corp. has managed or co-managed a public offering of securities for the subject company in the past year for which it received fees. (HOLX)

Analyst Certification
I hereby certify that the views expressed in the foregoing research report accurately reflect my personal views about the subject securities and issuer(s) as of the date of this report. I further certify that no part of my compensation was, is, or will be directly, or indirectly, related to the specific recommendations or views contained in this research report. By: Junaid Husain SOLEIL SECURITIES DISCLOSURE INFORMATION ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST Soleil Securities Corporation distributes this research pursuant to a license from the publisher and/or author. The author's compensation is based upon the value directly or indirectly attributed to the research services by Soleil's institutional brokerage clients. Soleil Securities Corporation does not act as a market-maker. Soleil does act as a block positioner. Soleil Rating Key: Buy: In the analyst's opinion, the stock will outperform the general market over the next 12 months. Hold: In the analyst's opinion, the stock will be inline with the general market over the next 12 months. Sell: In the analyst's opinion, the stock will underperform the general market over the next 12 months.
Soleil Securities Distribution of Ratings/IB Services Firmwide and by Sector Health Care IB Serv/Past 12 Mos. Rating BUY[BUY] HOLD[HOLD] SELL[SELL] Count Percent Count Percent Rating Count Percent IB Serv/Past 12 Mos. Count Percent

148 125 10

52.30 44.17 3.53

0 0 0

0 BUY[BUY] 0 HOLD[HOLD] 0 SELL[SELL]

21 13 0

61.76 38.24 0.00

0 0 0

0 0 0

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SENO, $8.81, Buy : Despite Patent Litigation, We Continue To Expect Full Launch Of Contura In CY08

Soleil Securities Rating and Price Target History for: SENO
04/19/07 I:B:$12 06/20/07 B:$13
11 10 9 8 7 6

Q1

Q1

Q2

Q3 2006

Q1

Q2

Q3 2007

Q1

Q2

Q3

2008

Ratings Key: B - BUY H - HOLD S - SELL

Created by BlueMatrix

Soleil Securities Rating and Price Target History for: HOLX
04/05/07 I:B:$70 01/04/08 B:$76
75 60 45 30 15 0

Q1

Q1

Q2

Q3 2006

Q1

Q2

Q3 2007

Q1

Q2

Q3

2008

Ratings Key: B - BUY H - HOLD S - SELL

Created by BlueMatrix

ADDITIONAL DISCLOSURES INFORMATION Soleil Securities Corporation: The opinions, forecasts, and recommendations contained in this report are those of the analyst preparing the report and are based upon the information available to them as of the date of the report. The analysts are basing their opinions upon information they have received from sources they believe to be accurate and reliable and the completeness and/or accuracy is neither implied nor guaranteed. The opinions and recommendations are subject to change without notice. Soleil Securities Corporation has no obligation to continue to provide this
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SENO, $8.81, Buy : Despite Patent Litigation, We Continue To Expect Full Launch Of Contura In CY08

research product and no such obligation is implied or guaranteed. The report is provided to the institutional clients of Soleil Securities Corporation for informational purposes only and is not an offer or a solicitation for the purchase or sale of any financial instrument.

Companies Mentioned Hologic (HOLX, $69.74, Buy , Nasdaq) SenoRx (SENO, $8.81, Buy , Nasdaq)
Neponset Equity Research, Inc. Rating and Price Target History for: SENO as of 01/10/2008
04/19/07 I:B:$12 06/20/07 B:$13
11 10 9 8 7 6

Q1

Q1

Q2

Q3 2006

Q1

Q2

Q3 2007

Q1

Q2

Q3

2008

Ratings Key: B - BUY H - HOLD S - SELL

Created by BlueMatrix

Neponset Equity Research, Inc. Rating and Price Target History for: HOLX as of 01/10/2008
04/05/07 I:B:$70 01/04/08 B:$76
75 60 45 30 15 0

Q1

Q1

Q2

Q3 2006

Q1

Q2

Q3 2007

Q1

Q2

Q3

2008

Ratings Key: B - BUY H - HOLD S - SELL

Created by BlueMatrix

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SENO, $8.81, Buy : Despite Patent Litigation, We Continue To Expect Full Launch Of Contura In CY08

Additional Disclosures

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