Below, OneMedRadio interviews Jason Napodano, a senior biotech analyst for Zacks Investment Research. Specializing in regenerative medicine and stem cell therapy, Napodano discusses 4 regenerative medicine companies making headway in the space. Pluristem [PSTI], and InVivo Therapeutics [NVIV] will be presenting at next month’s OneMedForum NY 2012 investor conference.
Click below to hear the full audio interview and see transcript that follows.
Brett Johnson: Welcome, this is Brett Johnson with OneMedRadio in New York City. Today, we are with Jason Napodano. He’s a senior biotech analyst for Zacks Investment Research, specializes in the areas of regenerative medicine and stem cell. Thanks for joining us today, Jason.
Jason Napodano: Hey, Brett, thanks for having me.
BJ: So could you give us a broad overview of what’s happening in the regenerative medicine or stem cell field?
JN: Regenerative medicine is an interesting field. Regenerative medicine in my opinion is kind of a buzzword in a sense that it encompasses a lot of moving parts within biotech and medical device. You know, I cover a number of stem cell companies, they’re going after various indications that you would consider regenerative medicine whether it’s trying to regrow heart tissue or trying to restore blood flow to a severely ischemic limb or restore some kind of function or preserve some kind of a function in a patient with spinal cord injury or ALS or even just simply trying to heal a non-healing wound whether it’s a diabetes foot ulcer or a pressure wound. So there’s a lot of different kind of moving parts to regenerative medicine. I think it’s kind of a buzzword, but there’s so many companies going out now in that space that, you know, it’s kind of a hot area of biotech.
BJ: So, yeah, before you get into some of the companies that you know more in-depth on, what’s your sense about the overall sector in terms of the investor interest and the support that some of these docs are getting on the street?
JN: Yeah. You know, it’s mostly still early stage. You were starting to now see clinical trials move into the phase 2 and the phase 3. If you look at a company like Aastrom, they’ve got a large phase 3 2now ongoing. If you look at a company like Osiris, they recently just received approval for a stem cell product in Canada and New Zealand, haven’t got approval in the US yet but moving in that direction, Cytori kind of moving in that direction. So a lot of this stuff was very early stage a couple of years ago and I think stem cell has got a lot of hype and then the bubble kind of burst. But a lot of these companies are now starting to come back and you’re finally moving into where you’re no longer just generating hope, you’re actually generating real clinical data.
BJ: Okay. Any companies in particular that you’ve been following or any research on and can you give us a summary of what they’re doing?
JN: Yeah. I mean I think Aastrom is one of my favorite place whether you call it regenerative medicine or stem cell. I remain a big fan of Aastrom. They have a phase 3 product called ixmyelocel-T, which is an autologous stem cell therapy, autologous meaning it comes directly from the patient. Aastrom processes it at their facility and then returns it back to the patient so autologous meaning like. It’s in a phase 3 trial called REVIVE, which is for critical limb ischemia, which is the most severe form of peripheral artery disease. It’s in roughly 600 patients and it’s enrolling now and it’s a very large market opportunity.
Once these patients progress to the point, at least to the point at which Aastrom is looking to enroll them in their critical limb ischemia trial, they really have very little treatment options if any available. Mostly it’s just surgical and even after surgery the mortality rate is high. It’s 25% the first year and I think it’s 75% over five years for these patients. So it’s a rather high mortality rate and it’s a large unmet medical need. If you look at Aastrom’s phase 2 data in CLI, critical limb ischemia, they’ve got some pretty encouraging results. So I think that’s one investors definitely should keep an eye on. It’s in phase 3 now. You probably won’t see data until about 2014, but the fact that the trial is now underway and it’s a high profile phase 3 trial in the stem cell industry I think is something investors should keep an eye on.
BJ: What kind of market cap does Aastrom have?
JN: 84 million. So I think that’s extremely cheap. This is a potential $500M, $750M opportunity. Yeah. So they’re well below what I would consider fair value.
BJ: So another company, is Pluristem also in the related area?
JN: Yes, they’re going after critical limb ischemia. They’re actually a little bit earlier stage in the sense of well both in their status and in terms of clinical trials. But in the patients that they’re going after, they’re looking at patients that have not quite progressed to the level of sickness that Aastrom has gone after, the so called no-option patients. Pluristem is going after an indication called intermittent claudication, which is a form of peripheral artery disease but not as severe as the no-option patients that Aastrom is going after. Basically, the patients that Aastrom are going after are patients that are headed towards or ready for surgery, for an amputation whereas Pluristem is a little earlier on in the disease category.
But I believe they’re in phase 2. I think, I’m not sure, I don’t cover Pluristem so I’m not sure if they’ve updated this, but the last I’ve looked they were in a phase 2 clinical trial for that intermittent claudication looking to kind of move into a phase 3. They have a placenta-expanded stem cell so it’s not an autologous product like Aastrom’s product. The benefit to the placenta-expanded product is that it would be an off-the-shelf product so a little bit different strategy in terms from Aastrom is doing. Aastrom’s product comes directly from the patient and goes back into the patient whereas Pluristem looks to take these donated placentas, expand then to create essentially a shelf product and then when a patient would come in, you would be able to get the dose right there. So, you know, an advantage certainly in terms of dosing and timing and receiving the medication, but I would say as of right now they’re a little bit behind Aastrom in terms of clinical development. So two names that are kind of very similar, you know, each has its advantages.
BJ: Well another company that’s gotten a lot of attention, a lot of buzz, in fact that we invited them. They’ll be presenting at the OneMedForum in New York City on July 12th, so it will be very interesting to follow them going forward. Any other companies that you are following now and doing interesting things?
JN: Yeah. One of the names I like a lot is Cytomedix, which is a small company. Let me get you their market cap, $121M. They have two approved products. One of them is called AutoloGel, which is an autologous platelet-rich plasma product for non-healing chronic wounds and those are basically diabetic foot ulcers, pressure ulcers, venous stasis ulcers. That product is approved, it’s on the market and they’re selling it. They recently got some good news from the center of Medicare and Medicaid services announcing that they are going to consider reimbursing that product.
They have another product, which creates platelet-rich plasma called Angel and basically that is a huge product potential in my view.
Then the other kind of pillar of the Cytomedix business is just pure stem cell. They’ve acquired a company earlier in the year called Aldagen, which has an autologous stem cell product where they’re looking to go after these stem cells that express something called aldehyde dehydrogenase and they call them ALDH Bright Cells. But they’re an autologous stem cell product looking for specific stem cells that are high producers of this ALDDH and they’re in phase 2 for CLI, heart failure, and stroke.
Stroke is the kind of headline program that they’re going after right now. They’re enrolling patients. There was recently an update by an independent data safety monitoring board that had cleared the continuation of the trial. There’s nothing out there really for stroke patients right now. You know, we expect data in 2013 and if positive, it could really be a monster opportunity for Cytomedix. So very interesting company in the sense of two approved products, both very large market opportunities with their approved products and then a pure stem cell phase 2 with three indication in play.
BJ: Well that will be an interesting one to follow. What about some of the other firms? I know that you also cover InVivo and Neuralstem. Are those two others that you talk about?
JN: Yeah. Yeah, I think it would be kind of interesting to kind of talk about those guys together. So Neuralstem, instead of going after a cardiovascular indications like heart failure or critical limb ischemia, they are going after neuronal stem cells. What they do is they take neuronal stem cells, spinal stem cells or brain stem cells and they’re looking to kind of preserve function in patients with ALS, Lou Gehrig’s disease. They are in a very interesting phase 1 trial right now where they’re essentially injecting these human neuronal stem cells into spinal cord of patients with ALS looking to see if they can improve function. I don’t know if you know much about ALS but it’s just a horrible, horrible disease. I’m writing my research report about ALS, it’s one of the things that just makes you kind of shake your head back and forth and say it’s an absolute shame. And there’s nothing out there really for ALS patients so anything that Neuralstem could to kind of preserve function in ALS patients we think would just be a huge opportunity.
They’re doing the same thing in spinal cord injury. In spinal cord injury, it hasn’t quite progressed to phase 1 yet. But again kind of a similar model in the sense of somebody with a spinal cord injury whether it may be a complete injury or an incomplete injury or a paraplegic or tetraplegic, you know, there’s nothing really out there for them.
If you look at a company like InVivo, they’re going after spinal cord injury as well. They’re doing it a little bit different from Neuralstem, they’re doing it with a medical device. They’ve got this polymer, this biodegradable polymer that they fit over the site of the spinal cord injury to potentially reduce swelling and kind of protect the spinal cord while it heals itself protected essentially from the body’s own kind of cytokines and inflammatory molecules that come in around these sites of the injury and actually do more damage sometimes than the actual injury itself.
BJ: Right. Can you talk about what’s the market cap of InVivo and what stage are they at in their development?
JN: Yes. So InVivo has got $134M market cap. We expect them to be in human trials by the fourth quarter for the biodegradable scaffolding for the spinal cord injury. So they will start what’s known as an IDE or an HDE kind of remains to be seen, which it’s going to be. HDE stands for Humanitarian Device Exemption. If they get that, that would be huge because that would really accelerate the path to market. But we expect them to be in human trials let’s say roughly by the start of the fourth quarter.
They’ve got another product that we think will be entering the clinic shortly, which is a Hydrogel, which is a very interesting product that they’re going after for peripheral nerve damage, and then eventually spinal cord injuries. So while the scaffolding is kind of a rigid product, the hydrogel will be for lack of a better word, I’m going to call it a goop product that will kind of surround the injury and protect the spinal cord. Or in the sense of peripheral nerve, they’ll be able to kind of co-dose it with maybe a steroid to reduce pain or reduce inflammation. So both of those indications I think will be in human trials by the end of the year and since they’re both medical device indications, I think they’ll progress quite rapidly over the next several quarters. It’s certainly quicker than tradition drug or biologic that has to go through phase 1, 2, 3, and then the NDA filing.
BJ: Right, interesting. Well InVivo is also going to be presenting in New York City on the July 12th at the OneMedForum so we’ll be sure to follow up and provide some more information on that going forward. Any other sort of outlook in general on this sector? I mean do you expect – you know, how are the general markets in general affecting some of these stocks?
JN: Yeah, yeah. I mean I think it’s still tough to get funding. For smaller companies, it’s always going to be tough to get funding. There are so many stem cell companies and regenerative medicine companies and there’s obviously a lot of contenders and there’s obviously a lot of pretenders. I mean that’s kind of the way the market works. So you’ll look at the funding that Aastrom did earlier in the year, which I think was maybe one of the most impressive early stage biotech fundings that I’ve seen and you look at a company like Osiris that is trying to make progress outside the US and then come back to the US. I think that there’s clearly companies that are headed towards that contender definition. But the early stage companies there’s a lot of small companies, there’s a lot of stem cell companies that are trading under a buck and maybe those are the pretenders. You know, I think they’ll probably continue to struggle to kind of get funding.
So you may see over the next five years finally some differentiation between the stem cell and they typically trade in kind of a basket and they’ve traded that way for probably the last ten years, they’ve traded that way. But with some of these bigger companies now finally moving into late stage trials, finally starting to see approvals, getting good quality funding, I think some of those horses are going to move to the front and get products approve and maybe some of the rest of them will drop back.
BJ: Right. Well it’s certainly an interesting sector and one worth paying attention to. I appreciate very much your insights on what’s happening on regenerative medicine and for joining us today.
JN: Absolutely. Thank you.
BJ: So that’s Jason Napodano. He’s a senior biotech analyst at Zacks Investment Research. He had been giving us an overview of some of the things happening in the regenerative medicine space and some companies who are doing some interesting things. This is Brett Johnson from New York City for OneMedRadio signing off. Good day.