Sweeping leadership changes at Medgenics, Inc. (MDGN), a fast-growing biotherapeutics company with novel technology in personalized gene-regulated protein replacement, were recently announced. The principals involved have had notable success with launching new products in Big Pharma environments, forming critical industry alliances and much hands-on experience in the challenging daily operation of drug firms. I expect this new team to drive Medgenics to realize its deep potential in treating chronic disease in ways safer and more appealing to a patient's quality of life while advancing its public profile.
Moving into the role of President and CEO is Michael Cola, former head of Shire plc's (SHPG) multi-billion dollar Specialty Pharmaceuticals division. Rising through its corporate ranks, Mr. Cola took control of the division in 2006, growing sales from $1.8 billion to $2.6 billion at the time of his departure. He is credited with the 2007 acquisition of privately-held New Rivers Pharmaceuticals in order to gain access to Vyvanse, an attention deficit disorder drug expected to receive FDA approval the very week of the purchase announcement. Mr. Cola's instincts paid off - Vyvanse not only rescued Shire from slumping sales of its Adderall XR ADHD drug and shored the company against growing generic competition, but also provided a substantial revenue stream that continues today. Shire reported in February that Vyvanse delivered sales of over $1 billion in 2012, a 28% increase over last year, making a name for itself as a blockbuster drug.
Mr. Cola has also been known as an operations expert: at Safeguard Scientifics, Inc. (SFE), a private equity and venture firm that builds value in healthcare and technology companies, he served as president of the Life Sciences Group that included chairmanship of publicly-traded NuPathe, Inc. (PATH). Prior to that, he drove clinical operations within a division of AstraZeneca PLC (AZN), and has held leadership positions at cancer Diagnostics Company Clarient, Inc., and Vanda Pharmaceuticals (VNDA) which treats central nervous system disorders.
The goal of biotechnology is to offer patients healthcare choices that are new and better than what's offered by traditional drugs, including therapies that change how some human diseases are prevented and how others are treated, the end result to improve life. Gene therapy, or the insertion of genes into cells to treat disease, created through manipulation of DNA, is the foundation of personalized medicine. Each patient's unique genetic makeup is utilized to develop a specific therapy for the best results. This is the opposite of "standard of care," which is determined by averaging responses to medicine across large groups.
Medgenics is at the lead of personalized medicine. The company has been moving steadily through clinical trials and important regulatory filings toward commercialization of EPODURE and INFRADURE, gene therapy innovations designed to aid those afflicted with anemia and hepatitis, respectively. Clinical trials are also being considered for other metabolic diseases like diabetes, multiple sclerosis, rheumatoid arthritis, and growth hormone deficiency in children. The big market numbers come from diabetes at $100 billion and arthritis at $18.6 billion; the global protein therapeutics market itself, where Medgenics' will make the bulk of its money, is predicted to reach $143 billion by 2015, driven by new products in gene therapy and monoclonal antibodies.
Two other pharmaceutical veterans will join Mr. Cola. John Leaman, M.D. has been appointed as Chief Financial Officer, and Garry Neil, M.D. as Head of Research and Development. Both men have strong industry ties to Mr. Cola, having served with him at prior engagements. Dr. Leaman has a background in corporate strategy and finance with Shire, Devon Park Bioventures, Proteon Therapeutics, Inotek Pharmaceuticals, and McKinsey & Co. Dr. Neil comes from Johnson & Johnson (JNJ) Pharmaceutical Research and Development, from AstraZeneca, and from Merck KGaA. His most recent post was with life sciences private equity fund Apple Tree Partners. Medgenics' founder and former CEO, Dr. Pearlman, opted for retirement but will serve on the Board and as an advisor for an unspecified time.
Positive to this development is that Medgenics, with the addition of this well-rounded and influential team, will have a stronger US presence, affording investors easier access to key management at less expense to the company. A strong corporate culture will be in effect, given the prior collaborations of all three men in the past. Medgenics has another, vital business component in its favor - Sol Barer, founder of billion dollar drug concern Celgene Corporation (CELG) and current chairman of Medgenics, is highly connected, particularly within the Northeast biotechnology community. Alongside Dr. Barer is Isaac Blech, renowned biotechnology entrepreneur and investor who has founded and served on the board of many companies that have generated critical advances in human diseases.
Medgenics' technology to replace lost or dysfunctional proteins is elegant, based on a simple principal of gene therapy - that of using a vector, or delivery agent - that does not elicit a human immune response and deposits genetic information into cells and tissue. Initially harvested from skin of the abdomen, the resulting dermal tissue is transformed into a tiny, organic manufacturing plant. As mentioned above, its first two offerings are EPOGEN that provides erythropoietin and INFRADURE, providing interferon.
The key to Medgenics' gene therapy solution is safety, providing natural, constant and continuous production of protein levels that would be present in healthy individuals. Interim results for anemia patients treated with EPODURE for end-stage renal disease in a Phase IIa trial showed hemoglobin at the desired level that would have been achieved with EPO injections, the painful alternative. Based on these results, a larger study is planned. Earlier this year, the first clinical trial in hepatitis was launched using INFRADURE, a progressive Phase I/II. The study is unique in that it will gather data in hepatitis C patients to be used ultimately in subjects with hepatitis B and D. Medgenics was holding $28.9 million in cash as of the latest quarterly filing, and has reduced operating loss from $3.9 million to $2.4 million in the same period.
In light of past clinical and regulatory accomplishments, and with an exceptionally promising future ahead, I believe now is the time to invest in Medgenics. Earlier this year, the company completed a successful secondary offering, raising $29.4 million, managed by a leading healthcare investment bank. The stock has been gaining attention as demonstrated by a run-up in value: at the end of the second quarter (ended June 30, 2013), Medgenics had a market cap of $64 million and was priced at the writing of this article at $129 million, a 101.5% increase.
Risks, however, cannot be ignored and the largest would be failure in a clinical trial, although Medgenics has early data in both products that looks to support positive outcomes in later studies. The regulatory environment is tough in the US, but Medgenics appears to have a good relationship with the FDA, as evidenced by its ability to secure a coveted Orphan Drug status for INFRADURE not long ago.
With new management possessing resources and expertise headed by Mr. Cola, who brought Shire from a limited-product company to an impressive life science entity with multiple therapeutic lines, Medgenics will be in an increasingly favorable position to take its share of the $143 billion protein replacement market with technology that combines the best elements of gene therapy in a safe and effective device-like platform, making up all the features of a biotech success story.