The inflection point in the investment world reflects a significant change in the progress of a company, sector, industry, or economy. Once a dramatic change occurs, an inflection point can be considered a turning point, which can cause either positive or negative results. After following Advanced Cell Technology (ACTC) for seven years, I decided to conduct an online interview with them because I feel this small biotech company will soon reach this critical inflection point to differentiate itself from the competition.
ACTC (company's website) is a small biotechnology company that specializes in the development and potential commercialization of stem cell therapies for the treatment of a variety of diseases. ACTC is primarily developing stem cell based technologies, both adult stem cell and human embryonic stem cell, and other treatments in the area of regenerative medicine.
I would strongly recommend investors and interested parties to read the latest SEC filings (latest SEC file), conference presentations (corporate presentations), and this online interview before investing in this biotech stock.
In preparing this article, I had the opportunity for a little email exchange with Ted Myles (CFO, COO, interim president) and Matt Vincent (Director of Business Development). Here are some of the points I would like to share.
ACTC has publicly announced that they are in the process of conducting a search for a new CEO. According to Ted, the CEO search is being carried out by the Board of Directors, led by ACTC's chairman, Mike Heffernan. The goal, says the company, is to find a CEO for the company who has experience running a publicly traded company in the life science space. Experience in managing late stage clinical trials, market authorization, drug pricing and reimbursement, and extensive experience in dealing with global partnering relationships are also characteristics that they are looking for in a candidate. The timing of that hire is of course difficult to predict, the important thing is that ACTC get the right person for the job.
In addition to a new CEO, the issue of renewing Dr. Lanza's contract has been on many investors' mind. According to Ted Myles, Dr. Lanza's employment contract discussions are between him and the Board of Directors so is not an area he will comment on. Dr. Lanza is working tirelessly towards cures for some of the most significant degenerative diseases we face. It should also be noted that Dr. Lanza is a meaningful shareholder in the company, which makes him even more engaged and incentivized in the success of ACTC.
At the end of last year, ACTC suggested a potential timeline for the release of some interim clinical trial results. The company has become a bit more circumspect over the last few months. With respect to a timeline for a published journal article, Ted did respond by pointing out that ACTC has been clear in its goal of getting the data published in a prestigious scientific journal, but have never articulated a timeline for this form of publication as they don't control the process. The more recent company presentation at the World Stem Cell & Regenerative Medicine Congress (WSCRMI) states that a manuscript that was co-authored by the company and all of the US clinical trial sites has been submitted and it provides information about the interim data for their US AMD and SMD clinical trials. There are of course no assurances it will be accepted, and we must accept that this process will take whatever time it requires. What is clear is that the company would prefer not to release any data ahead of publication.
We want to respect the peer review process and the publication process that is required to get our data into a highly regarded journal
is the way Ted articulated the company's current position around release of any interim data. What is potentially encouraging is the fact that all of the clinical trial sites have participated in this publication effort, and also according to WSCRMI, those investigators have encouraged the company to advance to Phase II studies. Furthermore, Dr. Steve Schwartz (Jules Stein Eye Institute) seems to be ready to initiate the Phase 1 trial for testing these same RPE cell formulations in patients with myopic macular degeneration.
From a business development standpoint, I thought it would be interesting to understand how the interest of big pharma has been towards the company, and if they have perceived any recent shift in stem cell technologies being a part of the business development plans for big pharma. Matt pointed out that substantially all of the global pharma and biotech companies have started in-house stem cell discovery units, though have been principally focused on using stem cells for generating drug screening assays and have taken a slower approach to cell therapies. However, what he believes is clear is that both regenerative medicine and ophthalmology drug development are gaining significant momentum in interest and in research efforts. If that is the case, then the company's RPE program may represent a powerful intersection of regenerative medicine and ophthalmology. Their therapy is well suited according to Matt, it is a small, easy to manufacture and easy to handle dose of cells for use in an indication space that has a substantial and rapidly growing patient population. The company's expectation of initiating Phase 2 by the end of the year represents a potential value inflection point, and as they have been pointing out the last year or so, that event may give the company more options for partnering, if they chose to do so.
One question that has been on everyone's mind is understanding the status for the proposed up-listing to the NASDAQ exchange and the specific requirements that ACTC needs to meet to accomplish that up-listing. Again, according to Ted, there are many listing requirements that must be met in order to successfully up-list to Nasdaq, or any national exchange, for that matter. ACTC has been evaluating them and have a plan to achieve this important corporate objective. The settlement of the Aronson Gorton matter was a critical step in cleaning up the company and making it attractive to Nasdaq, and more importantly to a broader range of institutional biotech investors. The reverse split and the up-list to a national exchange are important objectives, but they are means to a greater end - the dominant goal being to properly fund their Phase 2 clinical trials. The company is clearly excited about how close they are to achieving these goals and really completing the transformation of the company. That was summed up succinctly in a company email to me
Our goal for ACTC by the end of 2014; is to become a Nasdaq-listed biotech, free of unfortunate legacy issues, and well capitalized to pursue phase II results in one of the biggest unmet medical needs of our time, while also, investing into a robust pre-clinical pipeline.
Recently Roslin Cells entered into a manufacturing agreement with pharmaceutical giant Pfizer in which Roslin Cells will manufacture retinal pigment epithelium (RPE) cells that will be used in cell therapy clinical trials for Wet AMD. This project is not apparently not directly involving ACTC nor ACTC's cells. Roslin Cells is a not-for-profit UK institution chartered with advancing UK research and development efforts using embryonic stem cells. It is perhaps one of the few sites in the UK that has the capability and resources to generate transplantable tissue from embryonic stem cell sources. It's no surprise that Pfizer, in its involvement in the "London Project" with the University College London, would work with Roslin Cells for manufacturing RPE cells for a clinical study for treating wet AMD. There are many exploratory clinical programs that happen in the face of competitive patent positions; perhaps with a "wait-and-see" attitude for assessing the patent landscape and licensing needs once some initial understanding of safety and efficacy is in hand rather than pay upfront without any visibility on even human safety. One only needs to look to the DPP-4 inhibitor marketplace to see that dynamic at work. The Pfizer-Roslin Cells agreement may very well fit into that category of activity.
As noted in the disclosure, I maintain a long position within ACTC since the science is exciting. The long awaited peer results will surely move the price per share needle. However, due to the financial conditions of ACTC, legacy issues of former management, and the upcoming peer reviewed article, it is difficult to properly recommend a buy, sell, or hold. I look forward to my readers' comments for their investment theses. It is important to separate emotions to make sound investment but if ACTC is able to show efficacy and safety with their clinical trials, it will surely be an inflection point not only for the company but for the stem cell sector as a whole.
Disclosure: The author is long ACTC. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
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