EP Vantage Interview - TiGenix seeking regenerative niche

The world swiftly became a different place in March of this year for TiGenix, when the Belgium company was still riding high on hard-won European approval of its novel cell-based cartilage regeneration therapy, ChondroCelect. News that the FDA required a second pivotal study, setting back any possible launch in the US by up to five years, sent the company crashing back to earth (TiGenix reels from surprise US delay, March 19, 2010).

Despite this considerable setback, TiGenix is soldiering on with a strategy of building a niche offering of products and tools for regenerative and orthopaedic surgeons, led by flagship product ChondroCelect, which is starting to generate sales in Europe. Gil Beyen, TiGenix’s chief executive, tells EP Vantagea number of M&A and licensing opportunities are being evaluated. However, first the company needs to raise some funds and it seems likely that shareholders, who have watched the stock lose 60% of its value this year, are going to be asked to carry some of the burden.

Mr Beyen says that the company has tested the ground and found support for this strategy, given TiGenix’s expertise in this area and the lack of any other firms specialising in the regenerative medicine and cell therapy field.

“Typically today there are bigger players who have a couple of products, but there’s not really a focused player who offers cell-based products and the instruments needed,” he says.

They are scouting for instruments such as specialist sutures and tools as well as the products themselves, he says, and hopes to bring in another product this year.

Funding required

However, Mr Beyen also admits that this pathway requires investment. TiGenix ended June with €14m in cash, and expects to spend less than €10m in the second half of the year. That means funds are going to be needed sooner rather than later, possibly in the next six months, he says.

“We have two choices, one to reduce burn but the real choice is to go for a financing round and seek strategic investors who really see this opportunity of building the first company with critical mass in this space. And that is ongoing,” he says.

That message will be harder for current investors to swallow, considering the decline in the company’s share price in the last year. The stock breached €5 in the wake of the European approval of ChondroCelect, and were trading above €4 before the US news came. Shares in TiGenix were trading at €1.49 today, valuing the company at $45m.

“Our current investors understand that yes we have had a setback in the US and yes we’re paying a price for that, but we have the potential and we have a strategy but we will need to take some dilution,” he says.

Building confidence

Growing sales of ChrondroCelect would help build confidence in this strategy. These should become evident next year when crucial reimbursement decisions have been made, Mr Beyen says.

In the first half of the year, the product generated €300,000, mainly through private sales. For example, a patient who had one knee treated as part of the clinical trial paid €19,000 to have the second knee operated on. The company hopes to report sales of just over €1m for the full year.

ChondroCelect is indicated to treat large cartilage lesions, which can cause serious pain and disability, normally in young and healthy patients. Without treatment, osteoarthritis can develop. Current treatment is mainly painkillers and sometimes a surgical procedure called microfracture, where holes are drilled in the surrounding bone in order to create bleeding and scar tissue, which fills the gap in the cartilage.

ChondroCelect is created by taking cartilage-forming cells from the patient, growing them outside the body, then re-implanting them. The company recently presented five-year follow up data from its pivotal trial, confirming that the therapeutic effect and clinical benefit of ChondroCelect over microfracture was maintained.

“The launch is going well. It is a first product in a new class so it takes some while. Reimbursement discussions are on track,” he says.

Crucial reimbursement

Clearly, the outcome of these reimbursement negotiations is crucial for the future of ChondroCelect in Europe, and no doubt investors would be more comfortable digging into their pockets once a few outcomes are known. The company expects to hear from Belgium and the Netherlands before the end of the year, followed by France next year, and positive reviews would be taken well.

Lacking the lucrative US market is clearly a blow, but the company is still searching for a partner to help push forward there. As part of the post-approval commitment in Europe another pivotal trial is required here as well, but the company has decided to run two separate studies, due to different surgical procedures which might jeopardise the results.

Considering such trials need a long follow up, this is going to require a partner with a long term view, something Mr Beyer acknowledges.

“There is interest but it will obviously be quite a long path of development so we need someone with a clear strategic commitment to regenerative medicine. We have appointed an advisor around it and we are in discussions.”

He says as well as specialist players, larger companies are taking a look at this area, pointing to Baxter’s acquisition of orthobiologic specialist ApaTech earlier this year and Medtronic’s swoop on Osteotech, a maker of biologic products for regenerative healing.

“They still do not have cell technology but that will be the next step for them,” Mr Beyer predicts.

There is little doubt that TiGenix has blazed a trail with ChondroCelect; it was the first cell-based product to be centrally approved in Europe under the new Advanced Therapy Medicinal Products legislation, and remains one of the few cell-based regeneration therapies available at all. However others need to follow TiGenix's path in cell technology for its strategy of building a presence in this field to yield results.

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