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Medgenics (AMEX:MDGN) has, what I believe to be, the most disruptive biotechnologies of the last 20 years. This company is poised to own the 90 billion plus protein therapy market. We are talking about an enormous indication. Nomura (the big investment bank) calls this one of the top 10 biotech companies to watch over the next 5 years.

Currently the only form of treatment for Anemia is Epogen. Epogen is a synthetic version of the Erythropoietin that increases your red blood cell production. It is a $12B a year product monopolized by Amgen (NASDAQ:AMGN) and affects nearly 1-2 billion worldwide.

When you are diagnosed with anemia, you go to your doctor. Your doctor is going to tell you that you have an abnormally low hemoglobin count and he will prescribe an epogen shot to get your hemoglobin into check and into a 10-12 count range which is considered healthy.

These shots cost about $25K a patient per year and are very painfully administered. What is going to occur is a spike of your Epo level from very low up to a 100x, which can lead to high blood pressure, a percentage increase of fatal cardiac events (as per the FDA) and all sorts of side effects. Over the next 48 hours, your Epo will crash back to a low level after which you will be treated with another shot of epogen, and this happens over and over again for the rest of your existence.

It's a terrible way to live, costs the system billions and is one of the worst FDA procedures on the market. In fact, Amgen has already received a black box warning because of the side effects and increased risks and is under major scrutiny for reimbursements issues as well.

The holy grail of Anemia treatment is to treat the patient without the infections and without that "spike" in Epo which is deadly in nature and provides a terrible quality of life.

Medgenics has developed a therapeutic system that can provide a dosage of the sustained levels (no spikes) of Erythropoietin naturally with literally no side effects and only two primary clinic visits for a fraction of the money. Let me explain exactly what they do and how they do it:

  1. Medgenics takes a small piece of your skin about the size of a one inch toothpick from your abdomen.
  2. This piece of tissue is then processed in a lab by inserting a small piece of DNA that teaches it to continuously produce the missing protein; which in this case is Erythropoietin.
  3. Once this engineered piece of tissue is making the protein you are missing and at the levels needed, it is injected back under your skin and the result is a mini biobump that produced natural Epogen without the spikes, without the shots, without the side effects or dropouts. And for a fraction of the cost of Amgen's Epogen shots.

The Phase I/II study was done with 20 patients, all people diagnosed with anemia obviously. In all 20 patients you have biopumps producing Erythropoietin safely for as long as 36 months without any follow up, within that 10-12 count and without the injections and their dangerous spikes.

The most compelling thing about this story is that this isn't just a treatment for only Anemia; it is a platform that can be used on ALL protein therapies. In fact the company is entering Phase 1 for Hep C (Interferon) in Q2 of this year. Hepatitis C/Interferon is a 3.5 billion dollar Market this year. Gilead (NASDAQ:GILD) paid 11 billion for a HEP C company… Inhibitex (NASDAQ:INHX) was taken over for 2.5 billion (another Hep C company).

Medgenics already has an active program for Hemophilia developed with Baxter (NYSE:BAX), and they will also be starting programs for:

  1. Growth Failure/growth hormone
  2. Multiple Sclerosis/Interferon Beta
  3. Diabetes/Insulin
  4. many others

In summary you have a company that has:

  • $50 million invested
  • the most disruptive technology in biotech today
  • a management team that is arguably from top to bottom the best I have ever seen. Former head of Stanford Medicine, and an entrepreneur who sold his last company for 600 million
  • Baxter collaboration and the potential for many more collaborations on multiple indications
  • already finished Phase I/II and entering Phase IIB, this is NOT pre Clinical; this is tested and proven in human
  • a ridiculously low valuation relative to its competitors.
  • the potential of two probably partnerships in the near term
  • a science which is not a one trick pony, it is a platform that covers every protein therapy which is more than a 91 billion dollar market
  • largest shareholders are Joel Kanter and Isaac Blech. Joel has just sold Clarisonic for $600 million. Isaac has founded over 35 billion in companies

Enough of the science. Let me walk you through the value proposition of the investment. There are two public companies and one collaboration that I will use as comparisons.

Protalix (NYSEMKT:PLX) has a platform technology and is at about the same stage of clinical as Medgenics, but is only for an indication of 25,000 patients and trades at a 520 million dollar market cap.

Prolor (NYSEMKT:PBTH), which has a treatment which only increases the half lives of protein therapies, trades at a 300mm market cap.

And of course Zymogenetics which only has an interferon lasting slightly longer than the usual 5-6 hours for Hep C, was bought by Bristol-Myers Squibb (NYSE:BMY) for $545 million.

Medgenics' market value is currently approximately $32 million and is clearly poised to be the leader in a multi billion dollar space, and I believe will far exceed the market value of the the companies mentioned in this article.

Source: Medgenics' Disruptive Biotechnology Is One To Watch