As we discussed in our first article on elite regenerative medicine companies, there are several methodologies to delineating the “cream of the crop.” In this exercise, we will take a look at the impact that regenerative medicine technologies can have on ischemic conditions – where tissue in the heart, brain, organs or limbs are damaged as a result of restricted blood flow – and identify some of the most innovative companies that have a strong upside based on the products and technologies they are developing, stage of development, and current valuations.
Ischemic conditions are expansive, covering common conditions such as stroke, heart disease and peripheral vascular disease (which in severe cases can result in critical limb ischemia, requiring amputation of digits or limbs). The economic impact of these types of conditions is also substantial. Research by the American Heart Association indicates that cardiovascular disease (most of which is ischemic in nature) comprises more than $300 billion in healthcare related expenses annually, accounting for more than 17% of total healthcare related expenses in the U.S. Furthermore, these conditions impose a huge quality of life burden for patients and their families, and therefore are areas of great unmet medical need.
From a company and investor perspective, they represent multi-billion-dollar opportunities. Cumulatively, hundreds of millions of people are affected globally, but traditional medicines and clinical treatments provide little benefit. Regenerative medicine technologies represent new options that could yield a new age of therapies and viable solutions for patients that presently have very few, if any, options.
In our initial article, Cytomedix, Inc. (OTCQX: CMXI) was omitted from the top five because of the broad scope of credentials defining companies with obvious headroom for growth. Within the parameters of ischemia-related treatments, however, the Gaithersburg, Maryland-based developer of biologically active regenerative therapies deserves a strong mention.
Cytomedix is developing platelet technologies for orthopedics and wound care and a pipeline of autologous (patient-derived) stem cell therapies for tissue repair. The company is already generating revenue through its AutoloGel™ System, a platelet rich plasma (PRP) producing device for exuding wounds, and its Angel® Whole Blood Separation System, a blood processing device for separating whole blood into red cells, platelet poor plasma (PPP) and PRP for use in surgical and orthopedic settings. For the third quarter of 2012, total revenues increased 15% to $1.76 million from $1.53 million in the year prior quarter.
Honing in on the ischemic conditions, through the acquisition of Aldagen in February at a bargain price of $16 million in stock (plus additional shares upon milestones being met), Cytomedix gained control of Aldagen’s proprietary ALDH bright cell (ALDHbr) technology and finally made the transition from just a wound care company to cement its position as a leading developer of a promising new therapy to treat patients that have recently suffered a stroke.
The ALDHbr technology is used to isolate biologically active stem cells which have previously shown the potential to promote cell and tissue regeneration in preclinical studies. The cells are isolated from the patient’s own bone marrow, shipped to the company for subsequent expansion, and are then reinfused into the patient roughly 3 weeks later. A 100-patient Phase 2 trial for the treatment of ischemic stroke using ALDHbr Bright Cells derived from a patients’ own bone marrow is underway that will involve patients from 12 to 15 sites in the United States. Safety data from the first 10 patients in the Phase II RECOVER-Stroke study of ALD-401 were recently presented at the World Stroke Congress in Brazil showing a solid safety profile.
The clinical trials aim to build upon promising laboratory research. Mice treated with ALD-401 two weeks after an induced stroke demonstrated nearly four-fold improvement in motor function compared to controls. Further, stark improvements were seen in ALD-401 slowing decreases in brain volume and the reversal of decline in stroke-induced cell viability. Additional studies with ALD-401 in animal models showed perfusion (blood flow) levels returning to normal after four weeks in stroke-induced subjects receiving the ALDHbr cell treatment while untreated controls remained impaired.
This study is only one of several clinical trials being conducted to test Cytomedix’s ALDHbr technology. ALD-201 has completed a Phase I clinical trial testing its safety as a therapeutic candidate for ischemic heart failure. The 20-patient trial showed ALD-201 to be well-tolerated and produced a statistically significant reduction in ischemia as well as improvement in MaxVO2, a measure of the body’s ability to take up oxygen during exercise, in patients receiving the ALDHbr therapy as compared to a placebo group.
In a 21-patient Phase 1/2 clinical trial on ALD-301 testing critical limb ischemia with no revascularization options, the treatment was again well-tolerated with data indicating improved blood flow. Patients with this condition face a 35% risk of limb amputation, but 10 of the 11 patients (91%) treated with ALD-301 required no such procedure.
Additional Phase I clinical research is being conducted at Duke University utilizing two different populations of ALDHbr cells derived from cord blood. ALD-151 is being researched to enhance engraftment following cord blood transplants used to treat leukemia and ALD-601 is being studying to treat inherited metabolic diseases through in utero stem cell transplantation.Clearly, Cytomedix’s ALDHbr technology is showing early promise for a variety of ischemic conditions. If there are any limiting factors, they stem from the autologous nature of the product and the time to treatment. In order to create the various ALD treatments, stem cells must be removed from the patient and sent offsite for processing before being returned to the body. The process can take weeks, which can lead to the death of cells in the interim. While still possibly extremely beneficial, these concerns are valid and pose some limitations.
Baxter International (NYSE: BAX) is a higher-priced issue, which could limit upside compared to smaller companies, but simply has to be part of the list of companies pioneering stem cell research in chronic myocardial ischemia (CMI), one of the most severe forms of coronary artery disease causing significant long-term damage to the heart muscle and disability to the patient. Financially speaking, the company generated $3.5 billion in global revenues during the third quarter to bring its trailing-twelve-month total to about $14 billion. Baxter is on pace to deliver $1.80 per share in dividends this year to shareholders, and provides the type of profits and financial stability that emerging innovators can’t yet point to.
Baxter has a long history as a leader in the cell therapy area, and in February initiated a pivotal Phase III clinical trial using CD34+ stem cells (cells that express the CD34 molecule) to treat CMI patients. The large study will enroll approximately 450 patients across 50 clinical sites in the United States, whom will be randomized to one of three arms: treatment with autologous CD34+ stem cells, treatment with placebo (control), or unblinded standard of care. Baxter is hoping that the stem cells can repair the damaged muscle tissue and restore quality of life in patients as measured by a change in total exercise capacity at 12 months following treatment. Secondary endpoints include reduced frequency of angina episodes at 12 months after treatment and the safety of targeted delivery of the cells.
In the trial, patient’s cells are collected, sent to the lab for processing and then re-introduced through a single treatment of 10 intramyocardial injections in targeted areas in the heart.
Baxter is hoping that the late-stage trial supports the very promising data reported from earlier trials that “did everything you want a phase 2 study to do,” according to Dr. Douglas Losordo from Northwestern University in Chicago, who now heads up the Baxter regenerative medicine unit. The study showed feasibility, safety and efficacy; with better results than other trials in refractory angina patients ever before. If successfully brought to market, analysts estimate that the treatment could add up to $1 billion annually to Baxter’s revenue stream.
A third leading innovator in the stem cell space targeting ischemic conditions is Athersys, Inc. (NASDAQ: ATHX). The company is developing MultiStem®, a proprietary stem cell product for the treatment of a bevy of diseases and conditions in the cardiovascular, neurological, inflammatory and immune disease areas. Clinical trials ongoing at Athersys include a Phase II trial in partnership with Pfizer, Inc. (NYSE: PFE) testing MultiStem against Inflammatory Bowel Disease; trials treating complications associated with traditional bone marrow or hematopoietic stem cell transplants, such as Graft Versus Host Disease (GvHD) (the company has submitted a plan for a Phase II/III study under Orphan Drug designation from FDA, following up on previous results from a successful Phase I study); and trials treating damage from acute myocardial infarction (Phase I complete, Phase II authorized by the FDA to start). The company and its collaborators have also published work in other ischemic conditions, such as peripheral vascular damage, as well as evaluated MultiStem in chronic heart ischemia models.
The most important clinical trial being run may actually be for ischemic stroke, which affects more than 2 million people each year in the U.S., Europe and Japan, and more than 15 million people globally. Athersys recently announced that it had successfully completed initial enrollment in the first phase of an ongoing 140 patient Phase II clinical trial, with a clean safety profile as judged by the independent clinical safety committee, and is now looking to complete enrollment for the entire study in the next year. Athersys believes that MultiStem could represent a significant advance for stroke patients, because it can be administered in a clinically practical time frame (potentially several days after a stroke), in contrast to the only treatment current available, which has a about a four hour window during which treatment must be administered.
MultiStem is distinguished from the other biologics mentioned in that it utilizes allogeneic stem cells (meaning that they come from a donor, not the patient), not autologous (patient derived). The product can be manufactured on a large scale, extensively tested for potency and safety, and stored right at the clinical site in the pharmacy so they can be administered “off the shelf”. In contrast, the autologous approaches are “patient by patient”, which is logistically more complicated and more expensive. This gives a scalability and immediate availability to MultiStem that is not possible for the Baxter or Cytomedix therapies, where patient-derived cells must mobilized, processed off-site, then returned to the hospital and patient. “Immediate availability” means just that. MultiStem can be administered at the hospital intravenously or by local injection, right when it’s needed, potentially saving critical tissue that could be damaged or permanently lost following a stroke or heart attack. Interestingly, if both the Cytomedix and Athersys technologies are successful (a huge advance for stroke patients), the Athersys approach likely has the advantage due to simplicity of delivery (intravenous vs. intracarotid), timing of delivery (available right away vs. several weeks after the stroke), and scalability.
With more than two million people affected by ischemic stroke each year in the States, Europe and Japan, the company estimates that an effective and safe therapy for that indication alone could generate more than $15 billion in sales annually. If Athersys were to successfully develop a safe and effective, “off the shelf” therapy for stroke, it would quickly become an industry leader. The company has five clinical programs and a broad range of preclinical programs in the inflammatory, neurological and cardiovascular areas and a partnership with Pfizer that should produce clinical data later this year. Despite this breadth, a solid balance sheet, and some significant institutional shareholders, the company has a paltry $65 million market cap, which is likely why investors have recently begun to pay attention.
There are a few other companies in the sector to pay attention to that are focused on the ischemia area. Mesoblast (ASX: MSB) is a company that merits obvious consideration in the category, given its plans to launch a 1,700 patient Phase 3 clinical trial with it’s partner Teva Pharmaceutical (NYSE: TEVA), sometime this year. However, it’s relatively rich valuation ($1.6 Billion), unprofitable status, and higher burn rate prevented it from making the top three picks. Cytori (NASDAQ: CYTX) is another logical contender, given its focus on AMI, and streamlined autologous approach using fat cells, but it also didn’t quite make the final cut. Neostem (NASDAQ: NBS) is another contender and is developing a technology that appears to be similar and competitive with the Baxter approach.
The biotechnology space is experiencing a growing trend of interest in regenerative medicines that are now the focus of intense research and development. Companies at the forefront of new therapies are positioned to experience hyper-growth in the mid-term as potentially high-margin products maneuver down the regulatory pathway. Only a few years ago, the number of companies and therapeutic candidates even in early clinical trials were very limited, but that is no longer the case. In specific areas, such as ischemic conditions, shortcomings in small molecule therapies are being lapped by rapid advancement in cell therapies. Advancing new technologies tapping into the power of the body to heal itself, Cytomedix, Baxter and Athersys have pulled-away from the pack as clear leaders in the ischemic condition arena; moves that could yield investors a windfall in the future.
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