The Triple Stem Cell Game: 3 companies whose pilots are very profitable – Athersys, Inc. (NASDAQ: ATHX)



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Regenerative medicine has made steady progress in recent years, but with few exceptions few of these advances have translated into stock price appreciation. According to the investor, there should be a balanced perspective that takes into account the likelihood of an exponential growth in the revenues of these small businesses relative to their likelihood of achieving this goal and the resilience of these firms to avoid or overcome the prejudicial dilution before reaching the finish line. For those who are unfamiliar with the industry, there are many variants of regenerative / stem cell therapies. Before discussing the topic of this article, The Stem Cell Triple Play, it would be helpful to review some basic elements for those who are unfamiliar with the industry.

Allogeneic versus autologous therapies

The way in which therapeutic stem cells are derived is a critical aspect of stem cell therapies. A autologous stem cell therapyThere is a treatment that uses a patient's own stem cells and can be derived from many parts of the body. The most common sources currently used are adipose tissue (fat) and bone marrow. Adipose involves a mini liposuction followed by an enzymatic breakdown of fat and a low speed centrifuge that separates the regenerative cells. Cells derived from the bone marrow are generally derived during a procedure under local anesthesia in which a long syringe is inserted into the posterior pelvic bone of the patient, a reservoir of a large amount of bone marrow. The bone marrow is extracted and the regenerative cells are separated according to various methods.

There has been a clear trend in the industry towards the allogeneic model, where young, healthy donors become the source of a stem cell bank and donor cells are cultured in several ready-to-use doses in a standardized product. TiGenix is ​​a perfect example of this trend. The company began with the autologous adipose model, but was converted to an allogeneic model before experiencing clinical success with fistula therapy followed by an acquisition by Takeda (NYSE: TAK). For its part, Cytori Therapeutics (CYTX), one of the first leaders, tried to succeed with the autologous model using adipose tissue as a source of regenerative cells derived from adipose tissue. However, Cytori ultimately failed in this mission and recently sold most of its stem cell resources, due to a lack of clinical success, debt charges and two reverse spin-offs that virtually destroyed shareholder value.

The different biological sources of stem cells

Adults, embryonic and induced pluripotent stem cells are the main types of stem cells that have been tested in clinical trials.

Adult stem cellsas their name suggests, comes from adult tissue. When they are used in therapy, these cells do not usually grafted, a realization that was a reversal of early misconceptions. However, the cells are developed into therapies because of their paracrine signaling mechanisms that affect the local biological environment and have shown that their innate ability modulates an overactive immune system that can cause serious damage in the body. many acute and chronic diseases. Adult stem cells are also thought to promote an environment conducive to healing damaged tissues through biological mechanisms such as angiogenesis, chondrogenesis and neurogenesis, and so on.

Embryonic stem cells (ESC) were an early source of enthusiasm in the field of regenerative medicine but were overshadowed by the fact that they came from the destruction of embryos. CSEs are pluripotent and can differentiate in all body tissues. However, even though they were at the origin of the first optimism in the field of stem cells, until now, the CES have not proved to be the miracle cure all that. they hoped to be. A large-scale ESC clinical program was initiated almost 30 years ago with the incorporation of Geron (GERN) in 1990. This program for spinal cord injury was eventually abandoned by Geron before being purchased by BioTime (BTX) through its wholly-owned subsidiary Asterias Therapeutics. However, after nearly three decades of development, this program has still not been transformed into a phase III clinical trial and, while showing some hope, there has been no miracle cure.

Induced Pluripotent Stem Cells (iPSC) are embryonic stem cells that have been reprogrammed from adult stem cells. This technology was developed in Japan in 2006 and was a breakthrough in stem cell research and biological research. The use of iPSCs in the clinic has increased but remains globally at a relatively early stage of development. However, the ability to create specific tissues and organoids using iPSCs has been a boon for all types of medical research, including drug discovery.

The manufacture of allogeneic stem cells

One of the important problems for the commercialization of stem cells on an allogeneic basis, besides the obvious need to demonstrate safety and efficiency, is the ability to manufacture large-scale treatment and produce a viable product and consistent. The FDA must be convinced that a stem cell-based product approved for clinical trials is essentially the same product as ALL doses manufactured in a commercial production line. Stem cells are living organisms, making them much more difficult to manufacture and follow in the supply chain compared to a non-biological drug.

To be considered part of my triple play on stem cells, any allogeneic processing company must have a highly scalable manufacturing platform, and the two allogeneic companies in my Triple Play program have met this test. Scalability does not apply to autologous stem cell therapy, which involves, by definition, obtaining cells directly from the treated patient. As mentioned above, autologous stem cell therapies have generally lost favor because of their commercial viability. However, autologous therapy, because of its efficacy, its elegant simplicity, its obvious economic benefits, and the recent FDA approval has been added to the list.

And the winners are …

Stem Cell Triple Play involves three companies at different stages of development. Avita Medical (OTCQX: AVMXY) is the only autologous triple play company and the only company to achieve commercialization. Avita recently obtained the FDA's approval for the treatment of burns in September 2018 and is currently increasing sales. It also has bigger indications in the pipeline. Athersys Corp. (ATHX) is in the nine months following the observation of significant outcomes in Japan for ischemic strokes and possibly acute respiratory distress syndrome, and has very encouraging data for these indications in preclinical work and clinical trials phase II completed from the tree, Cynata Therapeutics (OTC: CYYNF) (CYP on the Australian Stock Exchange) is in the first phase of development. FUJIFILM, who has completed a Phase I trial of graft-versus-host disease, is waiting for the Japanese conglomerate to exercise its option on 19 September.th, 2019, to go ahead with its rights to develop graft versus host disease on the basis of a Phase I trial that has yielded excellent results. The following table gives a quick overview of the three companies:



Source: WST Research

The purpose of this article is not to provide a thorough analysis of any of these companies but just a summary overview as well as the reasons why investors should look closely at each one. Previously, I have written extensively on Avita Medical and Athersys and will provide the relevant links. Instead, I will focus on recent and relevant developments since my last article (s).

Avita Medical Limited

I refer readers to Avita Medical: A Better Mouse Trap with FDA Approval to Treat Burns in Patients for a thorough review of the company and its substantial competitive advantages in the wound healing market written in mid-February. I bought these AVMXY ADRs when they were trading around $ 1.86 a few weeks before the publication of this article. Fortunately, in just a few months, stocks climbed to over $ 7.00. I liquidated my position in mid-May, but it was more than just a big gain in the face of the uncertainty surrounding Trump's pricing action. Recently, the shares were exchanged and I reinstated a new position at $ 4.70.

The company has a breakthrough technology in the wound healing market called the RECELL system. The product is elegant in its simplicity and yet very effective. A small skin sample is taken from the patient and treated with a disposable battery kit and an exclusive enzyme that converts it into a fine spray of disintegrated skin cells that are then sprayed on a large burn. This cocktail of regenerative skin cells, including melanocytes, allows the burn to heal faster and more cleanly than usual skin care. Healing begins directly from the center of the wound:



Source: Avita Medical

The main game on Avita for the next six months is the rise of the RECELL system. As mentioned in my previous article, RECELL has huge competitive advantages over existing burn treatment technologies thanks to its unique kit that harnesses the regenerative powers of the patient's regenerative skin cells at a price well below that of competitors. A company-sponsored study showed that using the RECELL system to treat severely burned patients could save up to $ 28 million a year in a burn treatment center, compared with standard treatment. The first quarter of commercial sales in March 2018 amounted to approximately $ 1,525,000 for firefighting centers that adopted early in the commercial launch of the product nationwide. This was certainly not a huge figure, BUT an important presence at the 51st annual meeting of the American Burn Association (ABA), which was held in Las Vegas from April 2 to 5, 2019, should have given him great visibility to allow him to gain ground. The company said that 26 of the 134 burn treatment centers in the United States had placed orders for the RECELL system during the first quarter and it had explained that the typical process of evaluating a product by a hospital took 6 months or more.

In the end, a better mousetrap sells, especially when it allows for substantial savings for the health system. This story is reminiscent of Vericel's (VCEL), a languid autologous regenerative medicine company (and a competitor in the burns market) until its autologous cartilage treatment is approved by the FDA on 12/12/16. . In a year, when it became clear that sales were increasing, the actions followed:



Avita Medical is not a single-turn pony, but a unique high-margin platform with many possible indications. The company has guided the reduction margins by 90% for RECELL and is also looking for indications on pediatric thermal burns, chronic wounds, vitiligo, traumatic injuries and, in combination with gene therapy for skin rejuvenation and skin rejuvenation. Other skin diseases. When sales increase, these growth opportunities should be taken more seriously by investors.



Source: Avita Medical

Athersys Inc.

I have been talking about Athersys for Seeking Alpha for about eight years, keeping a close eye on progress while dealing with more than one disappointment over the years. In retrospect, I was too early to invest. However, having the skin in the game for all these years, I have been forced to closely monitor the company. As a result, I have been able to appreciate the efforts and progress made by the company to reach a point where extremely important inflection points are at hand, even though the current assessment does not reflect this potential.

It has always been a compelling body of scientific evidence about the potential of MultiStem that has allowed me to invest. Although I have learned a lot over the years about stem cell biology, it's clear that I still do not know much about it. The fact is that there is still much to be done in human biology, even for the brightest biologists. Biology is damn complicated, and when you approach the interactions and communications between individual cells, DNA, mRNA, and the unique biological character of each individual, it is more complicated to understand that it would be more complicated than learning all the human languages ​​spoken from nothing. However, Athersys has gained expertise in a biological niche with huge market potential. That being so, taming the destructive work of a hyperactive immune system in acute injury indications by exploiting the natural immunomodulatory effects of MultiStem.

May 15th, I attended the Athersys Investor Meeting at Harvard Club New York …



My general impression during the presentation was that the management team, led by Dr. Gil van Bokkelen (GvB), Managing Director, is honest in its collective belief that it is about to create the Holy Grail From medicine, a stem cell platform can treat a range of diseases and afflictions sharing the same type of injuries caused by an overactive or defective immune system. Of course, no one can guarantee that Athersys will achieve this ambitious goal, but for 11 years that Athersys has been public, I love the assurance that GvB has never sold a single Athersys share beyond nominal sales directly related to withholding tax. restricted share awards. I doubt that you will see a comparable commitment and restraint on the part of the CEO of any other biotechnology over a period of more than ten years. GvB now holds 1,328,906 shares. Athersys recently posted a link to an abbreviated video of this conference. Investors can find the presentation here, and it's definitely worth watching.

I've already written a lot about the science behind MultiStem and stroke, leading indication of Athersys, and so I'm going to refer readers to my 2016 article: Testing Cell Attacks Pivotal strains Athersys in Japan – Exploration of scientific evidence. I would also recommend the analysis of another contributor, SA, Vision and Value, in his most recent article, Athersys is about to pluck the Holy Grail from serious injury. For a very interesting recent interview on the MultiStem and stroke course with Robert "Willie" Mays, VP, and Head of Neuroscience Programs at Athersys, listen to episode 138 of the stem cell podcast. The interview starts at 23:00. With regard to the timing of stroke data, Healios' trial results in Japan on stroke are expected in the first half of 2020.

Regarding the acute respiratory distress syndrome program, a very relevant and up-to-date press release was recently published by Athersys' partner and main shareholder, Healios KK, describing how their own post-hoc analysis of Athersys Phase II data in ARDS favors the patient population related to pneumonia. recruitment in the ONE-BRIDGE Healios study is conducted in Japan:



Understand that this small study of 30 patients is designed for approval On the basis of Japanese laws for regenerative medicine that streamline the approval process of stem cell therapies and essentially give the benefit of doubt to potential therapies through a concept called "conditional approval" for a period up to 'to 7 years, based on the demonstration of safety and security. some evidence of effectiveness. This is not a high bar for approval.

If this trial succeeds, it would generate a substantial source of revenue for Athersys. This Healios press release looks very unusual and indicates a very high level of trust from its CEO. Continuing its commitment to MultiStem on June 13, In 2019, Healios announced that it was reducing its participation in its long-term program to fight against blindness of the iPSC and that it was deferring a larger part of its economic problems to its partner, Sumitomo Dainippon Pharma Co., Ltd. This decision certainly gives the impression that they want to focus their resources more on the company. MultiStem and Athersys. It will be interesting to see if these very recent developments foreshadow an early decision by Healios to exercise the company 's expansion option on China on June 30, 2019, instead of waiting. the end of the year when this option will expire.

According to clinicaltrials.gov, the expected completion date for the ARDS trial is quoted in May 2021. I assume that the results of this test will be known much sooner and that these results should be approved in Japan.

Cynata Therapeutics Ltd.

Cynata Therapeutics is an obscure Australian stem cell company. Cynata's common shares trade with limited liquidity on the Australian Stock Exchange under the symbol CYP. Cynata can be purchased directly from the Australian Stock Exchange in US dollars through Fidelity and other online brokers offering international exchanges.

Cynata's strength lies in its proprietary Cymerus manufacturing technology, originally developed by the University of Wisconsin-Madison, a world leader in stem cell research. Cymerus technology can make a unlimited offer identical mesenchymal stem cells (MSCs) from a single donor. Usually, MSCs and most adult stem cells can only be expanded to a limited number of population doublings before becoming senescent. This proprietary licensed technology begins with induced pluripotent stem cells (iPSCs) that are converted to a cell type called mesenchymoangioblast (MCA). Since iPSCs can be produced indefinitely from a single donor without degradation, an unlimited number of MCMs can also be derived from a single donor during this process. MCAs are precursors of MSCs and can be transformed into MSC, all identical. As MCA's offer is unlimited, the same goes for MSCs. In comparison, Mesoblast (MESO), an important player in this space, uses various adult stem cells of the mesenchymal lineage (MLC) in its programs, whose expandability is limited. The patented MAPC cells from Athersys can be expanded to millions of doses. Having a uniform MSC product with unlimited expansion capabilities is a valuable asset as MSCs continue to progress in the clinic. The potential value of this technology is the interesting aspect of this obscure Australian society.

Clinically, Cynata is in its infancy. They completed a 2018 phase I trial of graft-versus-host disease and achieved impressive results:

Cynata obtained favorable data on efficacy and safety in a preclinical study conducted on a mouse model of GvHD, conducted at the University of Massachusetts at Amherst (UMass), USA. These data provided a solid basis for conducting a clinical trial on GvHD.

Following approval by the UK regulatory agency, Cynata then advanced to a Phase I clinical trial of CYP-001 in the treatment of acute steroid-resistant GvHD. The study was conducted in several clinical sites (major transplant centers) in Australia and the United Kingdom. The trial began in 2017 and was remarkable since it was the first clinical trial in the world involving an allogeneic product (donor cells) derived from the iPSC to be received. regulatory approval. When it was completed in August 2018, it became the first worldwide clinical trial on cells derived from iPSC. A total of 16 patients were included in the trial, the first assessment period corresponding to the first 100 days following the start of CYP-001 treatment. One patient could not be treated, a total of 15 patients who received CYP-001.

All treated patients received two infusions of CYP-001. Patients in cohort A received a dose of 1 million cells per kilogram of body weight, up to a maximum of 100 million cells per infusion. Patients in cohort B received 2 million cells per kg body weight, up to a maximum of 200 million cells per infusion.

The first evaluation revealed exceptional data on safety and efficacy, with the following results:

The overall response rate at day 100 was 93% – 14 out of 15 patients showed an improvement in GvHD severity of at least one grade from baseline. The full response rate at day 100 was 53% – the signs and symptoms of GvHD were completely resolved in 8 out of 15 patients The overall survival at day 100 was at least 87%. No serious adverse events or treatment-related safety issues have been identified.

FUJIFILM is Cynata's largest shareholder and partner in Japan. This company has an option for the development of a graft-versus-host disease treatment:

In January 2017, Cynata signed a license option agreement with FUJIFILM Corporation of Japan for the development and commercialization of the CYP-001 product, CYP-001, produced by Cynata based on HIV-induced pluripotent stem cells. lead, for therapeutic purposes. -host illness (GvHD). In addition, the license option agreement also provided for certain rights in Cynata's proprietary Cymerus technology for the prevention and treatment of other diseases. As part of the transaction, FUJIFILM acquired a stake in Cynata by acquiring 8,088,403 common shares of Cynata, enabling Fujifilm to become the largest shareholder of the company with a stake of approximately 9%. The FUJIFILM option could be exercised at any time up to 90 days after the end of the primary evaluation period of Cynata's ongoing Phase I clinical trial on GvHD and presentation of the clinical study report. . On March 21, 2019, the Company announced an extension of the option period at 7:00 pm, Melbourne time, on September 19, 2019, to allow the parties to respond to certain requests made by Fujifilm regarding the timing of the election. Structural aspects of the GvHD licensing agreement. If exercised, an upfront fee of $ 3 million is payable which, along with other potential future milestones, totals more than $ 60 million in potential one-time payments, as well as double-digit royalties. net sales of CYP-001. If FUJIFILM chooses to exercise this option, the future development costs of CYP-001 will be borne by FUJIFILM.

When FUJIFILM asked for more time for its decision to go ahead with the GvHD on March 19, 2019, its shares dropped by 33%:



However, all indications are that FUJIFILM, through its subsidiary of Regenerative Medicine FUJIFILM Cellular Dynamics Inc., will go forward with Cynata and develop graft versus host disease. Cynata said she was also looking for other partnerships, particularly in the area of ​​critical limb ischemia.

The bottom line for Cynata is that the company is still in its infancy and can not go anywhere without significant fundraising and / or partnership. However, in the event of clinical success with the use of adult stem cells by companies such as Mesoblast, Pluristem (PSTI) or Athersys (ATHX), the value of Cymerus IP will increase rapidly as it is a superior manufacturing model. manufacture of natural MSCs.

In conclusion

Understanding and harnessing the living elements of the body's own toolkit is the common theme of these three companies. Avita's technology is the most basic, while Cynata's is the most complex. Athersys has the broadest range of systematic scientific research supporting its MultiStem program. The approach of each company is absolutely unique and bears witness to the incredible complexity of the human body and the many ways to tackle a problem. Avita has reached the clinic and has more indications in the pipeline. He must now show success in gaining market share. Athersys is taking a closer look at important potential catalysts, with much wider opportunities for unmet medical needs. Cynata has state-of-the-art technology that should be of interest to partners as the field of regenerative medicine moves into the clinic, where it can have a significant impact on patients' quality of life.

If you like this article, consider subscribing to my Premium Service – Stem Cell News and Analysis – for direct access to a first "heads-up" on ideas of this type.

Disclosure: I am / we have been for a long time ATHX AVMXY CYN: AU. I have written this article myself and it expresses my own opinions. I do not receive compensation for this (other than Seeking Alpha). I do not have any business relationship with a company whose shares are mentioned in this article.

Additional disclosure: These are the personal opinions of Wall Street Titan Research and should not be taken into account for your investment decisions. All investors should always do their own due diligence.

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