SafeStitch Medical (OTCBB:SFES) plans to introduce its AMID Stapler, a repair system for inguinal and ventral hernias, at a joint meeting of the American and European Hernia Societies on March 28, 2012 in New York City.

Jeffrey Spragens

“We see the AMID Stapler as a new and innovative device in the treatment of hernias that can promote faster patient turnaround in the operating room,” co-founder and CEO Jeffrey Spragens said in an interview with BioTuesdays.com. “Fast procedure time and less tissue manipulation are expected to provide patients with a more comfortable recovery and the potential to return to work in less time.”

The AMID Stapler, which was developed with direct involvement from Dr. Parvis Amid, who pioneered and teaches the widely used Lichtenstein hernia procedure, is pre-loaded with titanium staples. The staples secure a mesh screen in the hernia sac, as part of a Lichtenstein repair, which helps prevent the recurrence of a hernia.

There are over 600,000 Lichtenstein inguinal, or groin, hernia procedures performed in U.S. annually, with an annual growth rate of 5%, and virtually all of them are sutured. “The stapler is designed for ventral (abdominal) hernias as well but our initial focus will be on hernias in the groin,” Mr. Spragens says. “With a Lichtenstein repair, patients leave the hospital on the same day as the procedure because treatment is minimally invasive.”

SafeStitch’s premarket evaluations have identified approximately 250 hernia surgeons who collectively perform some 40,000 procedures a year. “They have tried the stapler in various non-human models and the feedback we have is that they like the device and they’re ready for the sales introduction,” he adds. SafeStitch’s initial marketing plans will focus on these early adopters.

“Our competition is hand suturing,” he says, noting that the “stapler will cost more than suturing but has many offsetting advantages. These 250-plus doctors seem to agree.”

SafeStitch anticipates deploying a sales team of eight employees, 14 independent contracted sales reps, and one distributor, with 10 sales people, to market the AMID Stapler.

SafeStitch's AMID Stapler(R)

Mr. Spragens says that the second phase of the company’s sales and marketing strategy, running from 2014 through 2016, will target formulary acceptance by Group Purchasing Organizations (GPOs), which currently cover approximately 480,000 hernia procedures a year.

SafeStitch was founded by Dr. Charles Filipi, Dr. Phillip Frost, Dr. Jane Hsiao and Jeffrey Spragens in 2006 largely to develop medical devices that manipulate tissues for the treatment of obesity, gastroesophageal reflux disease (GERD), esophageal obstructions, Barrett’s Esophagus, upper gastrointestinal bleeding, and other intraperitoneal abnormalities through endoscopic and minimally invasive surgery. SafeStitch’s offices and manufacturing facilities are located in Miami, Florida and its animal laboratories in Omaha, Nebraska.

The company’s gastroplasty (GST) system is under development to treat GERD and obesity, using a device that passes through the mouth, with moderate sedation in an outpatient setting.

SafeStitch GERD Procedure

GERD is a condition where stomach contents, food or liquid, leak from the stomach into the esophagus, which is the tube from the mouth to the stomach. GERD results not only in heartburn but can led to ulcers as well as development of Barrett’s Esophagus, a precancerous condition where cells lining the esophagus turn into stomach-lining cells because of the continued presence of stomach juices in the esophagus.

Mr. Spragens explains that there are surgical procedures to narrow the opening around the esophageal sphincter valve and stop reflux, but they are invasive operations with corresponding recovery time. “Our GST system has a full surgical array of transoral tools,” he says.

Dr. Filipi, SafeStitch’s chief medical officer, said that after 17 months, “GERD and obesity patients from our first human trial are doing well. We demonstrated that our GST devices can perform the intended procedure safely at the gastroesophageal junction. The patients are continuing to do well with the procedures displaying the necessary durability.”

SafeStitch Obesity Procedure

To treat obesity, Mr. Spragens explains that the GST device can make a mini-pouch below the esophageal sphincter, using the body’s own tissue rather than a prosthetic device such as a lap band. Food goes down through the opening into the stomach and hits the mini-pouch that has been made internally with the GST system.

“We have the only transoral procedure that uses endogenous tissue formation for optimal efficacy and durability,” he contends. “This is what differentiates us.”

Many people suffering from obesity resort to adjustable lap bands, which are placed around the top portion of the stomach. In 2010, the number of gastric bypass and banding procedures totalled 370,000 in the U.S. and 79,000 in the EU, with expected growth rates of 10% to 15% a year, respectively.

But complications from gastric banding have led to a reported 20% to 30% removal rate in the first year. “This trend is expected to continue,” Mr. Spragens says, adding that this could be an “additional marketing opportunity for our GST product. Our procedure also may expand the market because it is transoral and is expected to require moderate sedation in an outpatient setting.”

Even though the same SafeStitch GST device can perform both procedures, the company will need to conduct two separate trials for GERD and obesity, and seek FDA clearance and approval for two indications. “The plan now is to move into feasibility trials in the U.S. for both indications sometime next year,” he says.

Mr. Spragens says the company also is evaluating commercialization options for its Smart Dilator and Bite Blocks products.

Esophageal dilations are performed to expand the esophagus, which has narrowed often because of GERD-induced ulcers. There are over one million dilations performed in the U.S. each year, with studies pointing to a nearly 1% perforation rate. Untreated perforation of the esophagus is fatal, usually within two days. Research also indicates that during dilation, a physician should place no greater than two pounds of pressure on the dilator.

“Our Smart Dilatorhas an indication on the handle that provides a physician with a cost effective, visual indicator before reaching the recommended two-pound limit,” Mr. Spragens says.

“While there are numerous dilators on the market, we believe none include a feedback mechanism similar to that contained in the Smart Dilator,” he adds, noting that the device was cleared by the FDA in February, 2009.

Mr. Spragens says a bite block is used to keep patients from biting down on an endoscope and damaging it during GI procedures. “In fact, more money is spent each year repairing endoscopes than on buying new endoscopes,” he says.

Airway Bite Block

SafeStitch’s Airway Bite Block, contains a built-in airway that assists breathing in patients with larger tongues or smaller throats, usually because of obesity, during an endoscopic procedure.

“This is probably a commodity product but the fact is no one has ever tried to incorporate an airway and a bite block in the same device, and with more and more obese patients undergoing endoscopic procedures, there is a need for such a device,” he adds.

SQI Diagnostics (TSX-V:SQD), a maker of in vitro diagnostic (IVD) tests and automated analyzers to process the tests, expects to announce a major diagnostic tools and services customer during the first half of this year to drive near-term revenue.

Andrew Morris

“By successfully achieving our operational milestones, we expect to exit the fourth quarter of 2013 on a cash flow positive basis,” CFO Andrew Morris says in an exclusive interview with BioTuesdays.com.

“We believe there are significant opportunities to create revenue streams from customers who have existing single-plex diagnostic tests and who are seeking to multiplex this content using our multiplexed product development, commercial diagnostic production and SQiDworks and SQiDlite automated analyzers,” Mr. Morris says, referring to SQI’s ability to analyze multiple biomarkers simultaneously from a single patient sample.

“We have successfully overcome the technical challenges associated with microarray, multiplexed protein diagnostics and achieved our initial commercial objectives,” he adds.

Last fall, SQI realigned its business plan to focus on the following three key areas:  IVD products in production; completing regulatory filings for later-stage quantitative multiplexed products in development; and converting prospects for its diagnostic tools and services segment in order to generate near-term revenues.

The expansion into diagnostic tools is intended to enable SQI’s lab and diagnostic customers to expand their use of the company’s platforms by converting their content to microarrays. Applying SQI’s in-house processes and systems to develop microarray formatted tests incorporating customers’ content will allow customers to reduce their assay costs with less development risk and effort by purchasing their microarrays and development services directly from SQI.

“For example, our customers will be able to add requested target biomarkers to an existing panel of biomarkers, or they may request an entire panel of protein-based or antibody-based biomarkers to be developed into a research-use only microarray that they may use as a lab-developed test,” Mr. Morris says.

SQI’s claim to fame is high-throughput analyzers that are capable of measuring multiple protein, antigen and antibody biomarkers in a single test array to aid in the diagnosis of autoimmune, allergen and infectious diseases. “To our knowledge, no fully automated high-throughput microarray systems exist that are capable of addressing the combined multiplex testing needs of these markets,” Mr. Morris says.

According to Mr. Morris, the company’s core IVD technology gives laboratories the ability to analyze simultaneously multiple biomarkers in 96-well microarray plates, deliver accurate and quantitative patient results in less time, significantly reducing labor costs, and increasing profits. In a 96-well consumable plate, SQI’s technology can analyze 74 patients with up to 12 biomarkers tested quantitatively and 24 biomarkers for screening.

“Our goal is to be the single source for non-molecular, microarray diagnostics products, contract manufacturing and development services,” he says.

“We differentiate ourselves from our competition in the IVD markets by taking away the need for many lab technicians spending many hours to run these tests,” Mr. Morris contends. “By multiplexing, we also can reduce the number of vendors that a customer has to deal with, because we aggregate all of the biomarkers on one test.”

Regarding the diagnostics tools and services market, he adds, “we also provide assay development, development software, print optimization and our automated analyzers on an OEM basis, compared with other microarray services providers who only print content.”

SQI, which began its R&D in 2003, already has received regulatory clearance to market qualitative rheumatoid arthritis and celiac assays in the U.S., qualitative and quantitative rheumatoid arthritis and celiac assays in Canada and quantitative rheumatoid arthritis and celiac assays in the European Union.

Mr. Morris explains that a qualitative test refers to the presence or absence of a biomarker, while a quantitative result is the measurement of the concentration of a particular antibody. “In the past, the market was all about qualitative testing, but now every one of our IVD products in development is a quantitative test,” he adds.

“One of our key operational goals is to continue to develop, and seek regulatory approval for, additional tests, as we believe that expanding our test menu will drive adoption of our analyzer platform and products,” he adds.

Robust IVD Pipeline

SQI plans to file in the first half of this year for regulatory approval of its celiac 6-plex (the number of biomarkers tested for each patient) quantitative panel in the U.S., Canada and Europe and to follow that up in the second half of the year with filings for its vasculitis quantitative panel in the U.S., Canada and Europe and a lupus 12-plex quantitative panel in Canada and Europe.

“A 12-plex panel for lupus is the killer app in our space,” Mr Morris says, noting that there is high demand from customers. While there are not a lot of patients with lupus, the wrong treatment can make a patient very ill. “So labs try to rule out lupus, which results in a lot of testing for lupus even though there aren’t a lot of patients that actually have the disease,” he adds.

SQI has signed partnerships for each of its disease targets with leading research institutes around the world, including Cleveland Clinic, Beth Israel Deaconess Medical Center, Barcelona University Hospital, the University of North Carolina at Chapel Hill and Maastricht University Hospital.

Mr. Morris explains that partnering has given SQI access to blood samples and qualified concentrations of biomarkers from patients with autoimmune diseases. “These samples would otherwise be expensive and hard to get,” he notes. He adds, “The other key thing is that our partners can help us qualify the panels we’re developing, and we encourage them to publish the results from using our systems and assays.”

He figures SQI’s IVD segment represents a $4.5 billion a year market opportunity in autoimmune, allergen and infectious diseases, of which about 65%, or $3 billion, is in North America and Europe. The market potential of SQI’s diagnostic tools business is $2 billion a year in the U.S. and Europe, according to Mr. Morris.

Also during 2012, the company plans to launch its SQiDlite analyzer in non-IVD markets in North America and to ink its first non-North American diagnostic deal for its SQiDworks machine and IVD products.

SQiDworks Fully-Automated Platform

SQiDworks, which is the only fully automated, microarray processing system with regulatory clearances in the U.S., Canada and Europe, can generate 888-plus billable assay results an hour.

SQiDlite, the company’s second generation diagnostic platform, uses the same technology as SQiDworks but is intended to be a bench-top system. A prototype of SQiDlite, which can generate 300-plus billable assay results an hour, was previewed at the American Association for Clinical Chemistry Annual Conference last summer.

Mr. Morris says SQI initially is targeting the top 300 autoimmune testing reference labs in North America and top 50 in Europe for its IVD diagnostic products. For diagnostic tools and services, the initial target is the top 30 non-IVD testing reference labs in Europe and the top 50 CLIA labs in the U.S. “The addition of diagnostic tools and services meaningfully broadens our addressable customer base,” he adds.

A technician’s hands-on time to perform a four-plex SQI biomarker test is about 7.5 seconds, compared to the four minutes required to perform the comparable traditional ELISA biomarker test.  The cost of a four-plex test panel is about $23, compared to the $40 cost of the comparable traditional ELISA biomarker test, thus resulting in a savings to the lab of $17 per patient.”  The savings estimate increases with the number of biomarkers analyzed per panel, he says, adding that the $17 per patient potential savings jumps to more than $53 with a 12-plex test, for example.

“Our solutions can impact more than 80% of lab spending,” Mr. Morris contends, explaining that lab spending is comprised of the costs of labor and benefits, supplies and, if the lab can’t complete all of the testing, the cost of having the testing completed at another lab.

Matt Dolan

As a senior research analyst focused on medical technology: (devices and diagnostics) with ROTH Capital Partners, Matt Dolan’s investment views have been cited by a “Who’s Who” of publications on Wall Street. Prior to joining Roth in 2003, Mr. Dolan, a graduate of Northwestern University, formed a trading group at the Chicago Board of Trade and Chicago Board Options Exchange where he analyzed position risk and traded equities and fixed income products. He has also served as an analyst at a healthcare- focused hedge fund. In this exclusive interview with BioTuesdays.com, he shares his insights for an industry rebounding from the financial meltdown as well as themes ranging from taxation, reimbursement, consolidation and the impact of austerity measures in Europe.

Let’s start with ROTH’s focus on healthcare.

Principally, our focus is on small-cap equities across the board, with healthcare playing an increasing role over the past several years. I look at both our Annual Growth Stock Conference and deal flow as key metrics. Our conference last year had about 420 companies presenting, and roughly a third of those were healthcare-related. We’ve brought on board a number of professionals both on the research side and banking side over the past three-plus years, which has helped build our exposure and focus in the healthcare space. And that has obviously led to more transactions and more of our business coming from that sector.

What’s the state of the medical devices sector?

We’ve had a few years of a shaky underlying market in terms of device procedure volume and hospital spending.  Volumes of procedures in offices and hospitals now appear to be relatively stable, if not improving to a small degree. On the hospital spending side, the credit crunch impacted companies that sell capital equipment, but that has started to turn around as well.

The biggest concerns in the near term are Europe and the implications of austerity measures on budgets for capital equipment and the impact those measures might have on patients and procedure volumes. Stateside, going into 2013, the medical device tax, health care reform and reimbursement could be huge swing factors for the sector.

How would you characterize the industry’s relationship with the FDA?

Venture capital investment into medical devices has been down dramatically over the past few years, and I think a lot of that has to do with regulatory uncertainty of not having a clear and predictable path to the market in the U.S. This has forced a lot of companies to dry up and be acquired for lower than historical values. Other companies are taking their technologies overseas to vet them clinically with the intention of then selling them to bigger companies to forge through the FDA’s regulatory process.

So from our perspective on small-cap companies, the regulatory environment is one factor that we expect will continue to drive a more general trend toward increased consolidation in the space in the next three to five years. The large cap players need to find ways to grow sales and earnings per share in that period of time, and we expect smaller medical device players will provide innovative technologies to generate underlying growth for the industry. The value metrics around recent acquisitions have begun to tick up over the past few quarters, and overall volume and transaction size have also gone up, both of which, we believe, are early indicators of this broader trend.

What about device safety issues and the FDA?

We’ve seen a lot more device recalls and a lot fewer approvals from the FDA in recent years. A while back, there was a product that was approved based on falsified information, and that really spurred the latest discussion about safety. But there hasn’t been any indication that the safety of medical devices has deteriorated in any way. I think we have turned the corner toward improvements in the US regulatory process for medical devices with the hope of a more predictable pathway for industry, albeit at the cost of greater resources required.

Give me your take on tax reform.

The medical device tax, which is embedded in President Obama’s healthcare reform plan, is a 2.3% charge on revenues of medical device manufacturers selling product in the U.S. According to the legislation, the tax is slated to go into effect in 2013. If we assume it goes ahead as stated, it would be a notable weight on the profit and loss statements of all device companies, especially smaller players. If we go back to Sarbanes-Oxley and the expenses that were required for companies to remain in compliance, I think we can draw a number of parallels to the medical device tax. Taking 2.3% of the revenue of some small-cap players would have a disproportionate impact on operating income of smaller companies. According to surveys we’ve run, resources that could be invested in sales and marketing or research and development are now likely to be reallocated into the device excise tax. A lot of the companies that we’ve polled have indicated they would like to pass the tax on in terms of price hikes to hospitals, but given the backdrop of pressure on procedures and hospital budgets, I don’t think that’s necessarily a positive for the progress of the industry in terms of growth and margin improvements next year and in the long term.

On the other hand, I feel that this is yet one additional pressure point that will lead to further consolidation in the industry, which should ultimately favor smaller innovators.

Any new developments on the reimbursement issue?

As always, reimbursement continues to be another challenge that is impeding investment in the space. The dynamics of the reimbursement discussion are changing, and the key factor now is cost effectiveness. A device now has to be able to, not only produce better results, but also save the system money. In the past, a lot of devices were approved just because they worked better regardless of the cost.

Patient necessity is also becoming a bigger factor on the reimbursement side. Through this last recession in the U.S., we saw patients who had chest pain, for example, forgo medical care due to financial constraints. Combine that with the fact that a lot of reimbursement programs have higher deductibles and higher co-pays, there’s now a much greater consumer element in healthcare than we’ve seen in prior years. All of these variables point to a similar theme: medical device companies will need a more comprehensive sales argument for the efficacy, safety and cost effectiveness of their products.

How does the debt crisis in Europe affect the industry?

Any impact?

Europe is a bit of a different animal in terms of reimbursement. The cost effectiveness argument that’s shaping up in the U.S. is really the state of affairs in Europe. We’ve seen pockets of softness for medical devices in areas of Europe that have been hit by austerity measures. In some of the countries that are having major credit issues, we’ve seen signs of incremental weakness over the past four months. The biggest question mark for a lot of corporate outlooks in 2012 is how does what happens in Europe affect purchases of medical equipment by hospitals.

What are your views on industry consolidation?

For the small- and mid-cap medical device sector, the biggest theme that is derived from all of these variables is the consolidation idea. And the question comes down to who needs whom more. I think the larger players are facing the same pressures as the small-cap players. A lot of innovative technologies are coming from the smaller side of the equation. And I think the large-cap guys have to find a way to grow their earnings per share going forward. We’ve seen a lot of buybacks, which will help the number, but they’re also going to have to find a way to grow the top line, and I think that will be achieved through strategic acquisitions. So, thematically, the small players offer that capability to larger companies, and that’s ultimately why we will likely see a much consolidated industry in the next three to five years.

Let’s talks about some of your top picks in the sector.

Align Technology's Invisalign

A company we cover in the dental space is Align Technology (NASDAQ:ALGN). It makes a product called Invisalign, which straightens teeth with a series of removable, virtually invisible aligners. Invisalign generates sales of around $500 million a year and the company runs a virtual monopoly in the space. That’s given them a lot of runway to build their brand and the value of Invisalign. In the second half of 2011, Align grew volumes in excess of 20%, which is hard to find in the small- and mid-size medical device space with a comparable revenue base. Profit margins exceed 20% as well. Align is a story that offers growth and, more importantly, earnings power over the next few years. Cash balances are healthy at over $3 a share.

Conceptus’ flagship Essure® system product

Another company we cover is Conceptus (NASDAQ:CPTS), which we upgraded last fall. It has a lot of the variables going for it that we’ve already discussed. Conceptus provides a minimally invasive means of blocking fallopian tubes to provide permanent birth control for women, compared with major tubal ligation surgery. Most Conceptus procedures are performed in the physician office setting, which allows patients to get back to their normal lives relatively quickly. Reimbursement is in place, which is quite profitable to the physician. It’s a high-margin, recurring business, with mid-80% gross margins, and ultimately could be a strategic acquisition candidate over the next couple of years. The company appointed a new CEO in December and, along with a return to positive growth in 2012, could start to get noticed by investors this year.

Natus' ALGO® 5

We also like Natus Medical (NASDAQ:BABY). One of its differentiating products is a test for newborn hearing, which is done nearly 100% of the time in the U.S. and is a growing trend around the world. The ability to detect hearing impairment early significantly improves a person’s communication later in life and eases the burden on medical resources, thereby offering a cost effectiveness argument. So, it’s a very compelling product from that standpoint and has a pretty substantial growth opportunity outside of the U.S. Natus maintains single-digit organic growth, and management has shown a solid propensity to execute on acquisitions that are accretive immediately.

Anything you like in the micro-cap space?

TearLab Osmolarity System

We recently initiated coverage on TearLab (NASDAQ:TEAR) as one of our micro-cap medical device ideas. The company has developed an osmolarity diagnostic for Dry Eye Disease in the physician office setting. In December and January, TearLab received a positive code decision from Medicare and its CLIA waiver from the FDA, which we think is a transformative event. We have covered a lot of diagnostic companies that sell into the physician office setting and therefore understand the impact these developments could have on a company’s commercial success. We expect these two milestones will really open the gate for the company to start placing a lot of its systems out in the field and allow revenue to scale up in a significant way in the next few years.

This interview has been condensed and edited.

Closely held enGene of Vancouver is working on a financing of up to $20 million with venture capital funds to conduct the first two phases of human clinical trials of its intestinal immunotherapy platform to treat ulcerative colitis, a major subtype of Inflammatory Bowel Disease (IBD).

Dr. Anthony Cheung

“We have built significant momentum for the financing in the last two months, and our goal is to put a term sheet in place during the first half of 2012,” interim CEO and co-founder Dr. Anthony Cheung says in an exclusive interview with BioTuesdays.com.

“enGene is working with a number of potential lead institutional investors with deep experience in gastroenterological diseases on a strategy involving a total raise of $20 million, which would suffice to carry us through to completion of a relatively large Phase 2A trial,” he adds.

The company’s plans call for the completion, within 28 months of the closing of the financing, of an initial safety and proof-of-clinical efficacy in a dose escalating, single-dose Phase 1/2A trial for its lead EG-10 product in patients with active ulcerative colitis. This will be followed by a multiple-dose escalating Phase 2A clinical trial within 44 months after the financing is in place.

“Given the novelty of our therapy, which involves delivery of genetic material to patients, clinical testing must be conducted in diseased patients rather than healthy volunteers,” Dr. Cheung points out. “This offers us the opportunity to look for therapeutic effects of our drug even in the first-in-man Phase 1 trial.”

enGene’s EG-10 localizes the delivery of human IL-10 protein to diseased tissue in the intestine via administration of DNA-containing nano­particles to the colon. IL-10 is a naturally occurring protein in the body with a well-established role in suppressing inflammation and promoting immune tolerance.  Previous large-scale clinical trials conducted by Schering-Plough demonstrated promising therapeutic efficacy in humans with IBD, using low doses of injectable recombinant IL-10 protein. However, its effectiveness was limited by excessive systemic adverse drug effects at higher doses.  The short half-life of recombinant IL-10 in the bloodstream is also a significant limiting factor for its clinical success.

Therapeutic efficacy of EG-10 in IBD mouse models

EG-10 is designed to address these limitations specifically.  The company has proven in animal models that EG-10 effectively concentrates IL-10 proteins in the intestine, while limiting wider, systemic protein drug distribution, which greatly improves the safety and efficacy of IL-10.  Moreover, therapeutic efficacy of EG-10 has been demonstrated in multiple animal models of IBD.

IBD is a chronic and debilitating disease affecting over 1.6 million people in North America and over four million worldwide. The disease is sub-categorized into ulcerative colitis and Crohn’s disease; both are chronic conditions requiring lifelong treatment. Global annual sales of biologic drugs to treat IBD totaled $4 billion in 2010 and are forecast to reach $5.6 billion by 2019.

enGene’s initial human studies will be conducted in Canada with several world class clinical investigators in the field of IBD at the Robarts Clinical Trials at the University of Western Ontario and at the University of Alberta. Clinical testing beyond Phase 2A will likely incorporate U.S. and European clinical sites, according to Dr. Cheung.

Last week, enGene established a clinical advisory board, consisting of several world-leading clinical investigators in the field of IBD:  Drs. Brian Feagan of Robarts, Richard Fedorak of the University of Alberta, Geert D’Haens of the University of Amsterdam and Scott Plevy of the University of North Carolina.

The intestine is the largest immune organ in the body, where over 70% of the body’s immune cells are found. “Recent groundbreaking research has revealed that critical immune cells, which control certain autoimmune diseases, including IBD, Type 1 diabetes, multiple sclerosis, celiac disease and rheumatoid arthritis, are regulated in the intestine,” Dr. Cheung said.  He adds that IL-10 also has been shown to be a “crucial suppressor of these culprit immune cells in the intestine.”

enGene's technology offers multiple opportunities

This new research provides a strong rationale for enGene to develop its EG-10 product into a mucosal immunotherapy platform.  The company intends to modify EG-10 to target other immune disorders, such as Crohn’s disease, Type 1 diabetes, and celiac disease, once safety and pharmacodynamics are established in the Phase 1/2A clinical trial for ulcerative colitis.

“However, the money we’re raising now will only be used to advance the development of EG-10 for ulcerative colitis,” he says.

The company already has demonstrated that gut-localized delivery of IL-10 resulted in changes in overall intestinal and systemic immunity, which ultimately led to significant therapeutic improvement in several animal models of autoimmune diseases, including IBD and Type 1 diabetes.

“We are the only company in the world that has the proven capability to effectively deliver DNA to the gut mucosa,” Dr. Cheung contends.  “With the increasing appreciation that the intestine controls the pathogenesis of multiple autoimmune diseases, enGene’s robust nucleic acid delivery system optimized for the intestinal tract offers a new therapeutic approach to deal with various diseases of the immune system,” he adds.

“Our proprietary technology is comprised of extremely small particles carrying a therapeutic nucleotide—either DNA or siRNA—which we encase in a proprietary formulation consisting of a biocompatible polymer called chitosan.  These nanoparticles are designed to protect the payload and facilitate efficient uptake by mucosal cells,” Dr Cheung explains.

enGene’s technology is covered by a family of over 30 issued and filed patents. The company is also developing a formulation for oral delivery of its products to augment its current delivery technology.

enGene was originally founded to develop a way of systemically delivering insulin from the gut. “Through that process, we became experts at delivering genes to gut cells,” Dr. Cheung says. The company has advanced its EG-02 candidate as a meal-regulated insulin replacement therapy through dosing studies in large animal models and is now in partnership discussions that could produce a deal later this year, he adds.

The company also has adapted its formulation chemistry for the delivery of small-interfering RNA (siRNA) to mucosal tissues, such as the lung, uterus and gut, and has established a partnership with a large pharma­ceutical company to use its formulation to deliver siRNA.

“We’re not putting a lot of financial investment into this area at this point,” Dr. Cheung says. “But what we bring to the table for our partner is a great deal of know-how and intellectual property about how to formulate nanoparticles for delivering siRNA to various mucosal tissues. Our partner is screening the formulation in animal models, and in six to seven months, if the data are promising, there could be a significant partnership deal for enGene.”

Dr. William W. Howard likes to say there’s a lesson to be learned in how closely held Alitair Pharmaceuticals has spent the first couple years of its existence developing a portfolio of respiratory therapeutics and a drug safety technology: make some money first and then go out and get investors.

Dr. William W. Howard

“We’ve been able to develop an operational pharmaceutical company without any outside investors,” the Alitair CEO says in an exclusive interview with BioTuesdays.com. “There are very few companies out there that have done it our way.”

Conventional wisdom for biotech startups has focused on using other people’s money to develop a risky new molecule. But that model has become decidedly more difficult as venture capitalists have lost their appetite to back startups in recent years.

Not that Alitair didn’t try to raise money in its infancy. But the financial meltdown in late 2008 and early 2009 derailed those plans. “So, I got into business the old-fashioned way; we got customers and they gave us money,” Dr. Howard recalls.

Specifically, Alitair signed a partnership deal with a private global billion-dollar pharmaceutical company to license out two of Alitair’s prescription cough candidates. It nailed down a combination of upfront payments and development milestones totaling about $3 million and is in line to receive royalties on product sales that could range from $4 million to $8 million a year.

Now that the Morristown, N.J.-based company has built value through its initial licensing deal, it is ready to move to the next stage. “We have an offer on the table now for about $10 million in funding,” he says, adding that “we think we’re pretty close.”

Alitair’s initial need for capital is for a human proof-of-concept study of its overdose reduction technology (ODR), which is designed to function as a passive safety system that limits the amount of drug released in the body irrespective of the quantity ingested.

Unintentional drug overdose deaths by major type of drug, United States, 1999-2007

“ODR is a field we think we are pioneering,” Dr. Howard says. “Overdose is fundamentally different than drug abuse. There are several technologies to deter drug abuse, but no technology exists for overdose reduction, except behavioral programs which are ineffective. Our approach is intrinsic to the formulation of the drug. In other words, if you take too many tablets, we will still protect you from overdosing on the drug.”

Unintentional prescription drug overdoses result in more than one million emergency room visits annually in the U.S., at an estimated cost of $4 billion a year. Moreover, 15,000 deaths a year result from unintentional prescription drug overdose, which is twice as many deaths that are caused by illegal drug abuse.

He figures Alitair should be able to move directly into a human pilot study, because the “ingredients we use to make well known drugs safer are also well known. We need about $2 million and one year to develop a formulation that we can test in humans.”

In earlier lab experiments, Alitair’s ODR technology demonstrated an ability to regulate drug release so that therapeutic amounts were released quickly, but higher doses were released much more slowly. This would allow a normal dose to work effectively but protect a patient if a higher dose were taken.

Alitair’s ODR technology

“If this works out in a human being, it would be virtually impossible to kill yourself with a drug formulation,” Dr. Howard contends.

Alitair’s strategy would be to license out its platform ODR technology to manufacturers of: opioids such as Vicodin, OxyContin and Tramadol; anti-depressants such as Prozac, Celexa and Lexapro; and tranquilizers such as Xanax and Valium. This would create new brand-name drugs that would require efficacy testing but would also extend the franchise of these drugs.

Dr. Howards figures the revenue potential for just one product incorporating ODR could approach $500 million within three years. “ODR would compete in a sizeable market with little or no innovation,” he adds.

Alitair, formerly known as the Cough Co., is an outgrowth of Adams Respiratory Therapeutics, which developed Mucinex, an FDA-approved non-drowsy formula that loosens mucus that causes chest and nasal congestion and also works as a cough suppressant. Adams was acquired in 2008 by Britain’s Reckitt Benckiser Group for about $2.3 billion.

“Alitair wouldn’t be where it is today if it hadn’t been for our experience at Adams,” says Dr. Howard, who was senior VP of new products and business development at Adams. “The products we’re working on now are a stepping stone from our previous success at Adams.” Alitair’s management team also includes other former executives from Adams.

Dr. Howard says the FDA has forced over 1,000 prescription cough products off the market in the last four years, because they were not FDA-approved. This represents about 50% of the prescription cough products market. “This creates an unparalleled marketing opportunity for Alitair,” he adds.

Prescriptions have fallen due to hydrocodone product removals

For example, a leading codeine product, codeine with promethazine, was ordered by FDA to add a Black Box warning due to death by overdose, and a leading hydrocodone brand, Tussionex, was the subject of a Public Health Alert, following a death by overdose. Not surprisingly, prescriptions have fallen because of hydrocodone product removals.

Alitair is developing twice-a-day cough formulations, which improve safety due to more accurate dosing. Most of the products on the market are four-times-a-day liquid formulations. Moreover, there are no twice-a-day products in the codeine market and no long-acting codeine or hydrocodone products with a nasal decongestant.

While two of Alitair’s products – a combination hydrocodone product and a combination codeine product – have already been partnered, the company is using that knowledge to develop a 12-hour single ingredient hydrocodone or codeine product.

Dr. Howard figures Alitair needs about $2 million and two years to develop and get its single ingredient cough products to market. “They’re not blockbusters and could generate annual revenues of $50 million to $75 million each,” he says, noting that the company can either license them out or commercialize them itself.

“Our ODR technology grew out of our work with codeine and hydrocodone, which are narcotics and if [they’re] not used properly, you can die from them,” he adds.

Asked whether Alitair has any plans to go public, Dr. Howard says his goal is to sell the company down the road. “Going public is highly overrated. The downside is that if your product fails, you really have problems, because your stock isn’t worth anything and you don’t have control of the company anymore. That’s life lesson number two: going public is not a goal.”

Novadaq Technologies (TSX:NDQ), a maker of real-time fluorescence imaging products for the operating room, reached a significant milestone earlier this month when it named MAQUET Cardiovascular as the exclusive distributor of its CO2 Heart Laser system in the U.S.

Dr. Arun Menawat

“We have now completed our strategic agenda of partnering each one of our first four surgical applications with a market-leading company,” CEO Dr. Arun Menawat says in an exclusive interview with BioTuesdays.com, pointing out that the laser system will be sold by the industry’s largest specialized cardiac surgery sales force.

“Eight out of 10 cardiac procedures in the U.S. use at least one of MAQUET’s products, so it has the best relationships, not only with cardiac surgeons, but also with technicians that help out in the process,” he says. “This multiple-level relationship drove us to MAQUET.”

The CO2 Heart Laser is used for transmyocardial revascularization (TMR), a surgical procedure used to improve blood flow to areas of the heart that are not amenable to other revascularization methods, such as stents. During TMR, the laser is used to create small channels in heart muscle in order to improve blood flow. While the procedure is often performed in conjunction with coronary bypass surgery, it is also used for stand-alone interventions on patients with unresolved angina.

“There is more potential for TMR today compared to a few years ago,” Dr. Menawat says. “Stents have taken care of many cardiac patients these days, but there is a growing population that can’t benefit from a stent, and this is the target patient population for TMR.”

Novadaq’s core technology platform is SPY Imaging. It provides anatomic and physiologic images of perfusion in tissues, blood flow in vessels, tumor margins and lymphatics during open and minimally invasive surgical procedures.

In addition to MAQUET, Novadaq has signed partnerships with Intuitive Surgical, LifeCell and Kinetic Concepts.

Intuitive Surgical is integrating SPY into its da Vinci Surgical Robotic System, targeting urology, gynecology, GI and other robotic procedures. The integrated system received FDA approval in February 2011 and was launched in July.

LifeCell’s SPY Elite System, launched in February 2011, is designed for breast reconstructive, gastrointestinal, and head and neck surgery.

And last November, Novadaq announced an agreement with Kinetic Concepts to further develop the SPY imaging platform for applications in vascular surgery and wound care for the U.S and certain foreign markets.

JMP Securities analyst J.T. Haresco, who initiated coverage of Novadaq last December, figures there are 1.5 million procedures that can be performed using SPY technology, “which translates into an annual market opportunity of $2.3 billion”, excluding international or hardware sales.

He rates Novadaq as “market outperform”, with the 12-month price target of $7. The stock closed at $5.00 on Friday.

“Clinical data produced to date shows consistent reduction in re-operations and costs associated with the use of SPY technology,” Mr. Haresco writes, adding that the company’s string of partnerships “validate the technology while providing revenue.”

Intuitive's groundbreaking da Vinci surgical robot

According to Dr. Menawat, since Intuitive and LifeCell launched their SPY products, “our results have been coming together very nicely every quarter”, with Intuitive and LifeCell placing more than 100 devices per quarter in hospitals. He adds, “So in terms of our installed base, this is a phenomenal rate.”

New and older installations include Stanford Hospital, MD Anderson Cancer Center, Johns Hopkins Hospital, Duke University Hospital, University of North Carolina, UCLA Head & Neck, Montefiore Medical Center and Mayo Methodist Hospital.

LifeCell's Spy Elite System

Combined shipments of fluorescence imaging systems in the third quarter last year exceeded the company’s expectations by reaching a total of 165, Dr. Menawat says, leading to a 20% increase in revenue to $4.2 million from $3.5 million in the second quarter of 2011. “While we believe it is still too early to accurately predict longer-term system shipment trends, we are delighted by this initial surge in demand,” he added.

He figures MAQUET will launch the CO2 Heart Laser in the current quarter, while Kinetic Concepts will be ready to commercialize the wound care product in the third quarter of this year.

“2012 looks like a very pivotal year for us,” he adds. “The key next steps are watching the continued growth through the first two partnerships and the initiation of the second two partnerships as the year progresses. Investors should expect revenues will continue to grow. Entering 2013, we expect to have one of the industry’s largest installed bases in our space.”

MAQUET is planning for a sales team of 60-plus reps to market the heart laser, including five Novadaq sales reps, which have been transferred to MAQUET. “2011 was a pretty good year for us in the TMR business,” Dr. Menawat says. “We created the right marketing message with a small sales team that really worked, and now, we’re turning over our team of five reps to MAQUET. So, MAQUET initially doesn’t have to create the marketing message; all it has to do is get the product to the mass market.”

Transmyocardial Revascularization

Novadaq now has about 200 heart lasers installed in the U.S., doing 2,000 to 3,000 procedures a year. He figures that prior to the MAQUET deal, the CO2 Heart Laser was used in about 10% of cardiac surgery patients who could benefit from the therapy.

“What often happens is the device gets used only when a sale rep reminds the surgeon to use it,” Dr. Menawat says. “With MAQUET now representing the product, there will be a large group of sales reps in hospitals detailing the Heart Laser along with other products, and we think the MAQUET people should be able to both expand the user base and grow utilization of currently installed systems.”

MAQUET is a subsidiary of Sweden’s Getinge AB group of companies. The MAQUET brand represents the group’s Medical Systems business division. In 2010, MAQUET generated nearly half of the group’s annual revenue of 2.3 billion Euros, employing 5,100 people in 36 international sales and service organizations, as well as a network of more than 250 sales representatives.

With four partnerships already in its pocket, Novadaq’s next step is commercializing its PINPOINT endoscope system, which combines high-definition visible light imaging plus SPY fluorescence in a single system for minimally invasive surgery. The device, which is FDA-approved, is currently being evaluated in post-marketing studies at four hospitals for a number of clinical applications, including colorectal surgery.

PINPOINT may assist physicians performing colonoscopy by more effectively: Identifying polypoid and non-polypoid lesions in the colon; delineating cancerous margins; and confirming the presence/absence of synchronous lesions

Clinical data are expected this summer, and Novadaq hopes to launch PINPOINT with its own sales team in the third quarter of this year, initially targeting minimally invasive GI surgery. The company figures there are about 500,000 endoscopic procedures done annually that could use the PINPOINT product.

“Because PINPOINT will be a combination of capital sales and recurring revenue, we’ll probably start with a sales team of five to 10 and grow the team in regional terms as revenue grows,” Dr. Menawat says, pointing out that 50 to 100 sales reps will probably represent the ultimate size of the team.

Novadaq also hopes to parlay its own sales team off its four partnerships.

“That’s the beauty of our strategy,” he contends. “We’ll know which hospitals already will have SPY technology when we launch PINPOINT. So, when we speak to minimally invasive surgeons, we’ll be able to advance our arguments about PINIPOINT in the context that the hospital administration and other surgeons already are aware of the benefits of SPY. At a time when it’s difficult to get new technology into a hospital, that synergy will be huge.”

Cynapsus Therapeutics (TSX-V:CTH) is set to release human proof-of-concept data of its sublingual thin film-strip as a treatment for motor fluctuations, or episodes of immobility, in patients with Parkinson’s disease.

Anthony Giovinazzo

“This will represent an important de-risking event for the project,” CEO Anthony Giovinazzo says in an exclusive interview with BioTuesdays.com, referring to the company’s APL-130277 sublingual thin film strip, which is similar to a Listerine strip and utilizes FDA-approved apomorphine in a new delivery system. Apomorphine is a dopamine agonist, not a narcotic.

He says, “This is the first time that a formulation of this drug has been tested on a convenient film-strip to determine its pharmacokinetic profile”, explaining that this is the amount of drug achieved in the bloodstream in a specific period of time.

Apomorphine

Apomorphine, available as a branded injection called Apokyn in the U.S. and ApoGo in Europe, is not available in Canada, but is the current standard of care for episodes of motor fluctuations in Parkinson’s disease. The drug is generally limited to patients who experience severe symptoms of freezing-up, because side-effects, such as irritation, scarring and infection, can be significant. In addition, the inconvenience of the administration of a syringe injection is also significant.

Mr. Giovinazzo says there are a number of reasons that the Cynapsus sublingual strip is an attractive opportunity:

• Since apomorphine is an approved drug in the U.S., Europe and several other countries, with known efficacy and safety as an acute rescue therapy, the APL-130277 project is relatively low-risk.
• The use of a thin film-strip is simpler and safer for Parkinson’s patients to administer, compared with self-injection, which often isn’t a viable option because of immobility and tremors.
• The reduced side-effects of a thin film-strip would expand the market to a much broader segment of Parkinson’s patients who experience these “Off” (freezing) episodes at least once a day or more and who normally don’t use the injection because of the associated side-effects, inconvenience and social stigma.
• And if the company can demonstrate bioequivalence of APL-130277, compared with Apokyn, it can qualify to pursue a shorter development timeline, using the FDA’s 505b(2) regulatory pathway.

“The fact of the matter is that for the past 10 to 15 years, around 10 companies have tried to reformulate apomorphine into a different delivery mechanism and have either failed or shelved their projects, because they couldn’t get close enough to a successful opportunity,” Mr. Giovinazzo says.

Formulations Comparison

Companies have tried a tablet that dissolves in the mouth, nasal drops, patches on the arm, rectal suppositories and inhalation. Among the problems were an inability to get enough of the drug into the bloodstream fast enough and tissue irritation, he points out.

“What’s attractive to us is that we’ve had the benefit of looking at all these other attempts, all of their problems and some of the data that has been published, and we were able to come up with this thin film-strip approach that resolves all of these issues and more,” he contends. He further states, “Unless somebody comes up with a way of curing Parkinson’s, our approach is going to have a much lower competitive base associated with it.”

If the latest human proof-of-concept data match successful preclinical results in the rabbit model, Cynapsus plans to file an IND with the FDA in April or May to conduct a bioequivalence study in the U.S. this summer.

Mr. Giovinazzo says the buccal cavity of the rabbit is almost identical to that of man, with the same type of tissue, the same type of absorption into the bloodstream and the same thickness of tissue, making it an appropriate comparison model.

T-max

In June, results of preclinical testing of APL-130277 in rabbits demonstrated a T-max, or the time to maximum drug load in the bloodstream, of 14 minutes, making it nearly identical to Apokyn’s T-max of 10 to 60 minutes, with a median of 20 minutes. “These results are important as they support our premise that APL-130277 thin film-strips provide efficacious serum levels that match closely the FDA criteria for a 505(b)2 submission,” he adds.

The planned bioequivalence study, which could start this summer, will be conducted with 24 healthy volunteers to determine if the pharmacokinetic impact of the film-strip is within a range of 80% to 125% of what is produced by taking Apokyn by injection.

“Time and concentration of drug in the bloodstream as well as the safety profile, compared with the injected drug, are the parameters that the FDA will compare to the human injection data for bioequivalence,” he contends.

A successful bioequivalence study would allow Cynapsus to proceed to a final safety study, comparing APL-130277 to Apokyn. Because apomorphine is an FDA-approved drug, no efficacy study is required. The safety study would enroll around 120 Parkinson’s patients, likely beginning at the start of 2013, with a final report released in the fall of that year.

“We’ve met with [the] FDA and confirmed the potential use of certain data for the shorter 505(b)2 bioequivalence clinical and regulatory pathway that could lead to a new drug application by early 2014,” Mr. Giovinazzo says.

But submitting an NDA for marketing approval is not part of Cynapsus’ strategy at the moment.

“Our strategy is to develop a rapport with a number of pharmaceutical companies over the next two years as we meet our de-risking events – the bioequivalence study, the FDA meeting after the study and the safety study,” he says, adding that six U.S. and international pharmaceutical companies already have entered into confidentiality agreements with Cynapsus.

“We believe that by the end of the data set for the safety study, one or more of the Pharma companies will step forward and indicate a clear interest in signing some sort of relationship with us,” Mr. Giovinazzo adds. “The Pharma partner would prepare and file the NDA and begin the commercialization process.”

In addition to its clinical program, Cynapsus has surveyed HMOs and neurologists about reimbursement and the unmet medical need of APL-130277.

Two famous Parkinson's patients

A global survey by an independent research firm of 500 neurologists and movement disorder specialists, who manage some 62,000 Parkinson’s patients, found that a majority believes a “less invasive, sublingual formulation of apomorphine would be very useful in the treatment of a significant proportion of patients with motor fluctuations, versus a needle injection,” according to Mr. Giovinazzo.

That would ultimately create a far larger market than currently exists for apomorphine, which had worldwide sales of about $37 million in 2010.

Based on the survey, Cynapsus has developed conservative market assumptions of pricing and daily usage which suggest that peak annual sales of a sublingual strip could range from $350 million to $1 billion on a worldwide basis across mild, moderate and severe patients.

Cynapsus also has conducted a survey of 11 large U.S. HMOs and insurers, finding strong support for reimbursement at rates comparable to the injection therapy and a willingness to accept a price premium, assuming the existence of additional benefits such as reduced use of levodopa, the gold standard in Parkinson’s therapy. It is believed that overuse of levodopa, which has a wearing-off effect and requires more drug over time, can exacerbate the frequency and length of freezing episodes.

“The HMO and insurer survey provides another valuable source of evidence that if the clinical development of the product is successful, the market size and pricing will create substantial value for the company,” writes Steve Lux, an analyst with Noverra Research. He also writes, “The availability of third party surveys and the resulting data continue to de-risk the market and pricing elements of the business and provide greater visibility for early-stage investors.”

Dear Readers,

2012 is Going to be the Best Year Yet

Wow!  What an interesting year 2011 turned out to be.

The BioTuesdays.com team – Len, Maria, Jen, Suh, Shelly, Greg and I – would like to wish you all a safe and happy holiday season.  We are taking a short break to spend time with family and friends. But, we will be back in full swing with our next Tuesday Feature on January 10.

Regards,

Steve Kilmer

p.s. If any of you are planning to attend the upcoming JP Morgan Healthcare Conference and would like to connect there, please let me know (stephen@biotuesdays.com).

After 15 years of research and clinical testing, Northwest Biotherapeutics (OTCBB:NWBO) is nearing an inflection point in its development of an immunotherapeutic cancer vaccine.

Linda Powers

“We are entering the home stretch in testing our lead program for the most lethal form of brain cancer, which should reach its primary endpoint in the neighborhood of 18 months,” CEO Linda Powers says in an exclusive interview with BioTuesdays.com.

She states, “Pioneering a first-in-class drug in this category has been a long process, and we can say that the nature of our company has shifted from being more scientific-oriented to focused on operations and execution.”

Northwest’s platform technology is DCVax, which uses a patient’s own dendritic cells to marshal the immune system against cancer. The dendritic cells are extracted from a patient through a blood draw, loaded with antigens or biomarkers from the patient’s own tumor tissue to create a personalized vaccine, and injected under the patient’s skin in the upper arm like a flu shot to initiate an immune response against cancer cells.

DCVax-L is Northwest’s lead program for brain cancer. It also has developed a vaccine for prostate cancer and another vaccine, DCVax-Direct, for injection directly into tumors that are considered to be inoperable.

Ms. Powers says DCVax-L potentially could be used to treat any solid tumor as long as tumor tissue is being surgically removed. She says, “The surgeon simply has to drop the cancer tissue into one of our kits rather than a waste container in the operating room.”

The tumor from surgery is shipped to a manufacturing facility, as are blood cells, in order to prepare DCVax-L, which is shipped frozen to a doctor for injection into the patient. DCVax-L is usually manufactured in sufficient quantities for treatment for up to three years.

Northwest is current conducting a Phase 2 clinical trial with DCVax-L in 240 newly diagnosed glioblastoma brain cancer patients. It expects to complete patient recruitment during the fall of 2012 and reach the primary endpoint of progression-free survival within three to six months after that.

“We chose progression-free survival in order to have a crossover arm so that every patient who enters the trial will get access to the vaccine,” Ms. Powers says. “Some patients will get the vaccine right away, and some will get assigned randomly to a placebo control group, where they will initially receive standard of care plus a placebo.  The patients in the placebo control group will be allowed to cross over and receive the DCVax-L vaccine when they have recurrence of the tumor. That’s a very big deal for patients, who might drop out of the trial if they suspect they have been assigned to the placebo control group and will not get any opportunity to receive the DCVax-L treatment. We’ve worked out a clinical trial design so that when patients cross over, the trial remains blinded and we are able to continue collecting data in overall survival, which is a secondary endpoint in the trial.”

The Phase 2 study also has been designed and powered to serve as a pivotal trial. “If we have extraordinary results again like we had in the two Phase 1/2 trials, we would petition regulators for accelerated approval,” she says, adding that while this is not the standard regulatory pathway, there are multiple precedents when results are compelling. “So, we’ve been careful to do everything as though it were a Phase 3 trial.”

Newly diagnosed GBM brain cancer patients

Northwest chalked up impressive survival rates in early testing with DCVax-L in newly diagnosed glioblastoma brain cancer patients. Median time to tumor recurrence with patients receiving DCVax-L was two years, compared with 6.9 months for the standard of care, while median overall survival was three years, compared with 14.6 months for the standard of care.

“Nothing like a median survival of three years has ever been seen with glioblastoma,” Ms. Powers contends, adding that “to have one third of our patients alive at four years and 27% alive at six years is unheard of.” That compares with standard of care, which represents everything that medicine today can throw at brain cancer, including surgery, radiation and chemotherapy, resulting in less than 3% of patients still alive at five years.

“So, we had ten times the percentage of patients alive at the five-year mark, compared with the bleak results with everything medicine can do for these patients today,” she points out.

“Also, very importantly, our vaccine is not a toxic product,” she adds. She further states, “Patients don’t have nausea and vomiting, they don’t suffer such fatigue that they have to quit work, and their hair doesn’t fall out. We have none of that, because our vaccine is not a poison, and it’s not a targeted therapy that is blocking some normal function in tissue. All we’re doing is restoring the immune system to its normal natural functioning.”

Northwest also used DCVax-L in a small Phase 1 trial for metastatic ovarian cancer several years ago and achieved encouraging results.

Last May, Northwest teamed up with Germany’s Fraunhofer Institute for Cell Therapy and Immunology for the production of DCVax-L for clinical trials and compassionate use cases in Europe. Fraunhofer also will assist Northwest with regulatory requirements and select and initiate connections with leading clinical centers. As a result, Northwest is now eligible for certain German government grants of up to about $4 million.

“What’s significant in the relationship with Fraunhofer is that it gives us key advantages that we would traditionally get from a Pharma partnering but without having to sell out our program,” she says, adding “Those advantages include infrastructure, large scale, credibility and clout with medical centers and regulators—and access to funding.”

Northwest is taking a different approach with its prostate cancer vaccine. The FDA has cleared Northwest to begin a Phase 3 clinical study with 612 non-metastatic hormone independent prostate cancer patients. But Ms. Powers says a “go-ahead” depends on partnering, because the cost of the prostate trial will be several times greater than the cost of the brain cancer trial.

“We have been approached by several parties, and we think that the partnering track is attractive,” she says. “But at the moment, we really have our hands full with the brain cancer program. We are recruiting at 21 sites across the U.S. and are in the process of adding sites and a compassionate use program in Europe. Ninety percent of management’s attention is focused on the lead program for now, which we’re doing ourselves with an experienced contract research organization that has managed a number of oncology trials through to registration,” she adds.

The DCVax-Prostate vaccine contains a patient’s dendritic cells similar to DCVax-L, but instead of biomarkers from the patient’s tumor tissue, it includes a recombinant antigen for prostate cancer. That’s because late-stage prostate cancer cells are not in one place but have spread around. “And the research community has found a very good tumor-associated antigen, which is expressed in all prostate cancer tissue,” Ms. Powers adds.

Northwest previously posted impressive Phase 1/2 clinical results with DCVax-Prostate, increasing median survival to more than 54 months in treated patients without metastasis, which was well beyond the end of the trial, compared with 36 months for the natural course of the disease. In addition, the vaccine extended the median time to metastases to 59 weeks from 28 to 34 weeks under the natural course of the disease. There is no FDA-approved treatment for non-metastatic hormone independent prostate cancer patients.

Hormone independent (late stage) prostate cancer - Group A: Patients with no metastases

In the group of prostate cancer patients with metastases, there was an increase in median overall survival to 38.7 months with DCVax-Prostate, compared with 18.9 months for standard of care. Patients in this group had a six- times greater chance of being alive at 36 months, compared with patients treated with the standard of care.

The 38.7 months of median survival with DCVax-Prostate also surpassed the 25.9 months of survival posted by Dendreon’s Provenge vaccine, which was approved by the FDA for prostate cancer last year. Three-year overall survival of patients treated with DCVax-Prostate was 64% versus Provenge’s 33%. “Ours was a Phase 1/2 trial while Dendreon’s was a Phase 3,” Ms. Powers notes, adding, “So, now we have to replicate our results to confirm them.”

Last week, Zacks Investment Research initiated coverage of Northwest with an “outperform” rating and a 12-month price target of $1.50. The stock closed at 39 cents on Friday.

Analyst Grant Zeng writes that Northwest’s DCVax technology holds “competitive advantages” compared with Dendreon’s Provenge and other competitors, including low cost of manufacturing, ease of administration, high concentration of activated dendritic cells and lesser side effects.

“Both DCVax-L and DCVax-Prostate have the potential to become blockbusters if approved,” he predicts.

Another important advantage for DCVax is its low cost. Since the approval of Provenge last year, sales have not lived up to expectations because of its high price and concerns about reimbursement. Provenge is priced at $93,000 for one month of treatment while DCVax would be priced in the range of $37,000 a year for up to 3 years of treatments, Ms. Powers says.

DCVax’s price also would be substantially below the price range of most antibody drugs and targeted drugs for cancer, which are typically priced at $60,000 to $80,000 a year, and can easily exceed $100,000. These drugs also carry significant side effects and often only extend survival for as little as ten weeks, she adds.

The key to the substantial pricing advantage is Northwest’s proprietary batch manufacturing process, together with its cryopreservation technology for frozen storage of the finished vaccine, she contends, adding that the company spent a decade developing and improving its manufacturing and cryopreservation processes.

Northwest also has established a deep pipeline. Ms. Powers says the DCVax-Direct technology can target almost any solid tumor, adding, “we have FDA approval to proceed with Phase 1 trials in multiple other cancers.”

Northwest Biotherapeutics' Pipeline

Earlier this month, the company cleaned up its balance sheet, eliminating $31 million of liabilities and leaving $2.3 million of trade payables for the clinical trials and $13 million of notes, mostly with long-term supporters of the company. “This has greatly changed and improved our situation and will help us finance the brain cancer study on better terms with a wider range of investor options,” Ms. Powers predicts.

Bottom line: As well as its two promising late-stage immunotherapy candidates, Northwest has been making progress in recent months in terms of its clinical trials, business development and strengthening of the balance sheet.

Dr. Adrian Harel

An experimental treatment developed by BrainStorm Cell Therapeutics (OTCBB:BCLI) that uses a patient’s own stem cells to treat amyotrophic lateral sclerosis (ALS) is expected to begin human clinical trials in the U.S. during 2012.

Since ALS is a devastating disease that has limited treatment options, “our personalized therapy has the potential to offer new hope to patients and families,” acting CEO, Dr. Adrian Harel, says in an exclusive interview with BioTuesdays.com. He explains, “We are not the only company using stem cells for central nervous system indications, but we are the only one at the moment working on an ALS treatment with adult bone marrow-derived stem cells.”

Some 5,600 people in the U.S. alone are diagnosed with ALS, or Lou Gehrig’s disease, each year, and an estimated 30,000 Americans may have the disease at any given time. There is no available cure, and the life expectancy is two to five years from the time of diagnosis.

BrainStorm began a Phase 1/2 clinical trial last June with 24 ALS patients at the Hadassah Medical Center in Jerusalem to study the safety, tolerability and therapeutic effects of its NurOwn stem cell therapy. The clinical study includes twelve patients with early-stage ALS who will receive injections in the bicep and triceps. The other 12 patients with later-stage disease will receive injections into the cerebrospinal fluid.

The company expects to report interim safety data from the first four patients in January 2012, with final data in the third quarter of 2013.

BrainStorm’s novel autologous adult stem cell therapy is designed to repair degenerated tissues by processing mesenchymal stem cells (MSC) from adult human bone marrow, inducing them to differentiate in a proprietary, animal-free growth medium into neurotrophic factor (NTF) secreting cells that support growth of neurological cells and transplanting the MSC-NTF cells back into the patient in or near the site of the muscle damage or the spinal cord.

NurOwn(TM) Step by Step Process

The NurOwn core technology is based on research by Professor Eldad Melamed and Professor Daniel Offen. They were among the first in the world to successfully achieve the in vitro differentiation of both animal and human adult bone marrow cells into neuron-like cells capable of releasing dopamine as well as into MSC-NTF cells capable of releasing several neurotrophic factors, including glial-derived neurotrophic factor (GDNF) and brain-derived neurotrophic factor (BDNF).

“MSC have a track record of safety in multiple clinical trials and indications, and NTFs have a pivotal role in the underlying ALS pathology,” Dr. Harel says. He adds, “BrainStorm’s cell therapy effectively delivers NTFs to the site of damage.”

The company’s cGMP “clean room” facility at the Hadassah Medical Center is under the supervision of the Ministry of Health in Israel. Dr. Harel says the use of autologous bone marrow stem cells should result in a safe and effective therapy without risk of rejection or tumor formation and is free of the ethical, religious and political issues which surround the use of embryonic stem cells.

Mechanism of Action

“This is not a gene manipulation therapy,” he points out, adding that stem cells derived from bone marrow, when appropriately stimulated, differentiate into biologically active nerve-like and nerve-supporting NTF releasing cells.

“The ability to induce differentiation into neuronal-like cells, with delivery either into muscle tissue at the site of damage, the brain or into the spinal cord makes our technology highly attractive for treating ALS and Parkinson’s disease as well as multiple sclerosis and spinal cord injury,” Dr. Harel contends. He adds, “We are focusing on CNS disorders only, and ALS is our first indication.”

An ALS patient who was administered compassionate treatment with Brainstorm’s NurOwn stem cell therapy went public with his story, reporting the procedure was simple, quick and safe. Several months after the procedure, he acknowledged improvements in several physical functions such as breathing and speech.

But Dr. Harel cautions that “one case is insufficient and that the company is currently carrying out a Phase 1/2 clinical trial in 24 ALS patients.”

BrainStorm’s ALS technology is winning high marks at home and abroad.

Last September, BrainStorm received a $1.1 million grant from Israel’s Office of the Chief Scientist, reflecting the clinical status of NurOwn, and boosting total grants received to $2.4 million since 2007. “I regard the latest grant as a validation of our technology,” Dr. Havel says.

BrainStorm’s ALS clinical studies also are generating interest in some unexpected places. “I have received letters from people in Arab countries such as Iran, with whom Israel does not have diplomatic relations, who are seeking our treatment even though they know they could have a problem getting into Israel,” he acknowledges.

Dr. Harel says BrainStorm’s intellectual property covers three patent applications, which would grant exclusivity to the therapy until 2029. The company expects to submit additional patent applications.

Last February, the FDA granted orphan drug status to BrainStorm’s NurOwn therapy. The company has recruited an FDA regulatory affairs consultant in the U.S. and is planning a pre-IND meeting with the agency in 2012. It also has signed a memorandum of understanding with Massachusetts General Hospital and the University of Massachusetts Medical School in anticipation of applying for FDA approval to begin a Phase 2a trial in the U.S. for ALS patients.

“We have a principal investigator in Boston exchanging protocols with us, and we have an IND application ready for the FDA after we establish our protocols. Most of these issues should be resolved in January and February,” he figures.

Dr. Harel says the company plans to announce its next CNS indication before the end of the year. Among the members of the company’s advisory board is Rasheda Ali, the daughter of legendary boxer Mohammed Ali, a Parkinson’s disease patient. “She is very committed to promoting the company’s pipeline for Parkinson’s,” Dr. Harel adds.

Bottom line: BrainStorm’s primary targets – ALS and Parkinson’s – are devastating diseases that have limited treatment options and represent highly unmet medical needs, with market potential in the billions of dollars.