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The most critical period in a biotech company's life is the move from test tubes and mice to the clinic. Far fewer compounds than those investigated are allowed to go into humans because of meticulous regulation here and overseas, especially for drugs or devices that work in an entirely novel way. With this in mind, Medgenics, Inc.'s (NYSEMKT:MDGN) first enrollment of clinical trial patients for global menace hepatitis C is an event of significance.

Last August, Medgenics succeeded in its first step toward providing the world with a new and better treatment for the costly epidemic of hepatitis when officials in Israel took a bold action: approval for not one but two clinical trials against hepatitis C (HCV) with INFRADURE, an internally-placed pump to provide a natural interferon therapy. The historical implication of this regulatory move is the chance to race INFRADURE more quickly to market because two broad categories of hepatitis patients will be treated, those who have not yet received medication and those that have failed it. The Israeli Ministry of Health has always been sympathetic to new compounds for unmet medical needs, the most recent example being its nod to Protalix BioTherapeutics, Inc. (NYSEMKT:PLX) to start Phase I/II clinical trials for a recombinant plant cell formulation in Fabry's Disease.

Now just five months later Medgenic's first patient has been enrolled, officially beginning trials. The study has the economic benefit of only needing 17 HCV patients to produce safety and efficacy. As preclinical studies illustrated, sustained bloodstream levels of interferon-alpha should be evident. This study is valuable in another way -- as guidance for trials in hepatitis B and D, for which the latter has an Orphan Drug designation in the U.S.

Medgenic's combined Phase I/II study puts into practice a relatively recent innovation in clinical trial design whose purpose is to hasten approval of important drugs. Wyeth Pharmaceuticals, part of Pfizer, Inc. (NYSE:PFE) made the idea famous in a white paper on "seamless" Phase I/II trials that mix the learning stage with the confirmation stage, producing stronger conclusions (pdf) about safety and efficacy faster, cheaper, and with a higher degree of conviction. Similar analyses from the University of Texas, showed that combined trial designs in seamless studies like Medgenics' conserves patient sample size, has better power (significance), and by virtue of design assigns more patients to doses with higher efficacy levels. This means that Medgenics will get significant leverage from every dollar it spends in the clinic.

The start of phased clinical trials typically moves stocks. Recently, when EntreMed Inc. (NASDAQ:ENMD) began the regulatory process for a new cancer drug, shares rose 26.3%. Gentium S.p.A. (GENT) gained 8.5% upon the announcement of trial initiation for its anti-clot drug. Likewise, FluoroPharma Medical, Inc. (OTCQB:FPMI) jumped 20% at the beginning of the year on news of Phase II trials for a novel imaging agent.

Medgenics is entering a big market. As the world's most common blood-borne illness HCV infects between 1% and 2% of Americans. Up to 20% will develop cirrhosis; there has been a 300% increase in those requiring liver transplant in the last 10 years; and 47% with HCV go on to develop liver cancer with a high fatality rate. Other types of hepatitis are just as, if not more, potent and dangerous.

Estimates for the size of treating hepatitis C vary but the most stunning come from the C. Everett Koop Institute of Dartmouth College that asserts the annual healthcare costs for the U.S. population alone may be as high as $9 billion, assuming survival of 40 years. Specialty drugs in the U.S., defined as those used to treat complex conditions like rheumatoid arthritis, viral infections and hemophilia are projected to grow 20% in cost per unit and utilization by 2014, with hepatitis C moving to fifth position in the specialty drug ranking based on what patients spend annually, per month. No wonder pharmaceutical monsters like Abbott Laboratories (NYSE:ABT) and Vertex Pharmaceuticals (NASDAQ:VRTX) are racing to a goal.

Newer treatments for HCV have problems, most notably the controversial nucleoside inhibitors NS5Bs that have either been pulled by the FDA, in the case of Bristol Myers Squibb Company (NYSE:BMY); suffered from a confusing tangle of necessary in-licensing deals such as happening with Merck & Co. (NYSE:MRK), Vertex, Johnson & Johnson (NYSE:JNJ), and InterMune, Inc. (NASDAQ:ITMN); or been instrumental in stopping a merger, seen late last year when the union of Biocryst Pharmaceuticals (NASDAQ:BCRX) and Presidio Pharmaceuticals was cancelled. Medicine awaits a better idea. I believe Medgenics has it.

Let's not forget Sol Barer is working backstage. Dr. Barer's long history of industry successes and accolades, particularly the transformation of Celgene (NASDAQ:CELG) from a chiral compound research shop into a multi-billion dollar international pharmaceutical force. His ever-expanding sphere of influence that usually pairs him up with long-time collaborator Isaac Blech working close by continues the legacy of biotechnology's unstoppable duo with a long list of achievements, which is not simply a case of cronyism for the sake of cronyism. This team has a history of infusing fledgling life science companies with both monetary and intellectual capital. Medgenics is at a stage of growth where Dr. Barer's scientific and business acumen, regulatory knowledge, and industry influence can only increase investor value.

Medgenics, a pre-revenue company, has exhibited good cash control while achieving significant operational goals. Third-quarter (ending Sept. 30) results included a modest research and development cost increase, from $1.8 million to $1.9 million in 2Q2012, considering the progress made in human clinical trials and other regulatory paths -- in addition to movement in hepatitis studies, Orphan Drug status was granted by the FDA last year for rare but deadly hepatitis D. Operating expenses were trimmed by $400,000 as consultant fees dropped, and 10 cents was effectively shaved off net loss from ($0.35) to ($0.25), for a quarterly burn of roughly $3 million, in line with the comparable period last year. Cash stood at $8.9 million. There is no long-term debt; operations have been funded to an extent through grants from the prestigious Office of the Chief Scientist in Israel.

Besides everyday risks associated with investing in biotechnology stocks like failure in clinical trials, regulatory roadblocks, and problems with market launch after approval, disappointing results of its first human trial with HCV would be a very specific risk to MDGN and could affect its success with hepatitis B and, importantly hepatitis D, rendering the prized orphan drug status of little use. I believe this risk is low because of highly positive preclinical efforts first seen at the International Liver Congress in 2010, revealing that biopumps work.

Hepatitis C is now almost constantly in the news as companies large and small attack the virus with potential cures. We know about patients' strong dislike of drugs with PEG-interferon and we're becoming aware of the dangerous consequences newer compounds bring. There is a fierce medical demand for a viable solution and one that uses the biology of the human body, assuming efficacy, should rule the industry. Now that clinicals are starting, with Sol Barer as the driving force in moving forward its hepatitis platform, Medgenics looks ever more the way to invest in hepatitis C.

Source: Medgenics Launches Trial For Multibillion-Dollar Holy Grail Indication Against Hepatitis C