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Medgenics (MDGN) made a significant and landmark debut at the widely attended Kidney Week last week, a once-a-year professional gathering sponsored by the American Society of Nephrology (ASN), where the company presented data on three dialysis patients suffering from the final stage of kidney failure, or ESRD, in a Phase II trial. Results confirmed what was seen in prior clinical studies, a strong testimony to Medgenics' technology.

Dialysis-related ESRD dominates the kidney anemia market -- more than 100,000 people start dialysis each year in the U.S., and approximately 400,000 patients receive dialysis annually, an industry of $20 billion. Medicare reimbursement is generous with regard to kidney failure: 80% of clinics offering dialysis are for-profit and almost 70% are operated by two chains, DaVita (DVA) and Fresenius Medical Care (FMS), with combined operating profits of $2 billion per year.

This year's Kidney Week was eminent in that its focus was on curing chronic kidney disease, keeping pace with the theme of Medgenics' poster. During the conference, ASN president Ronald Falk announced the launch of the Kidney Health Initiative, an effort joined by leading nephrology groups to pressure the FDA to facilitate clinical trials aimed at chronic kidney failure. This is timely for Medgenics, because positive Phase II data in Israel will be used to support FDA approval to begin a larger Phase II study in the U.S.

Last March, Medgenics was given clearance to begin Phase II studies of EPODURE, an internally placed pump made of human tissue to deliver erythropoietin (EPO) therapy in dialysis patients in the last stage of kidney disease. These studies aim to replace the medical practice of multiple, long-term injections of the human protein that causes dangerous peaks and valleys of hemoglobin levels in the blood, leading to very serious side effects.

Only 20 patients are required for the study, and it will be the first time that just one application of the tiny pump will be used to show efficacy. Phase I trials done on patients prior to dialysis successfully proved safety and showed efficacy through prolonged, steady levels of EPO, something never seen when currently marketed drugs are used. Clinical validation in a Phase II will thrust Medgenics and its technology into what could become a leading position in the global protein therapy market, projected to rise to $143.4 billion within the next three years.

Today's anemia drugs -- Procrit, marketed by Johnson & Johnson (JNJ), and Epogen and Aranesp, made by Amgen (AMGN) -- have undergone multiple safety reviews, most recently after a clinical trial linked the use of Aranesp to a double risk of stroke. This was burdened by the fact that optimal hemoglobin levels have never been established for patients with chronic kidney disease, meaning that doctors could be prone to overdose, particularly in a setting of multiple injections where effects diminish quickly, requiring more shots.

Furthermore, in an analysis of almost 14,000 oncology patients in 51 trials, it was found that patients die 10% more often and have a 57% higher risk of life-threatening blood clots if the top anemia drugs are used. Seizures and complications in premature births have also been observed. Yet sales of the three leading anemia drugs topped $8 billion in 2011, with physicians walking away with up to $300,000 in their pockets for prescribing the drugs. Not surprisingly, tort lawyers are on the prowl for plaintiffs.

Financial results are not immune from this kind of trouble -- Amgen's third-quarter sales were lower for Aranesp and Epogen, falling 9% and 2%, respectively, on lingering safety concerns and an ongoing product recall of Epogen for glass flakes found in vials of the drug.

Like its fellow erythropoietin-stimulating agents, Omontys -- made by Affymax (AFFY) and just approved last March -- scares the FDA, earning the drug a black box warning that screams side effects of death, myocardial infarction, stroke, venous thromboembolism, tumor progression, and tumor recurrence. Clinical trials showed Omontys to be as safe and effective as Epogen, and it has the clinical advantage of once-monthly dosing. However, this drug is pegylated, meaning polyethylene glycol is used in its manufacturing. We know from the past that pegylated drugs like PEG-Intron for hepatitis C come with an inventory of terrible side effects, ranging from the physical (fever and bloody diarrhea) to the mental (severe depression, aggressive behavior, and sadomasochistic thoughts).

Medgenics offers a safer and potentially more effective way to treat dialysis patients suffering from the final stage of kidney failure. Its approach is entirely unique and seems far more natural and organic -- using a patient's own tissue to produce and deliver erythropoietin.

There are always risks, and the company has yet to receive regulatory approval for its platform Biopump technology. Therefore there is a technology risk, as well as the risk of not receiving regulatory approval. As a small-cap company, Medgenics carries financing risk if it can't continue to raise money to fund product development and trials. However, I believe that despite being a far smaller company than its larger competitors in the kidney disease space, as Megenics keeps building its patent portfolio and advancing with clinical trials, companies like Johnson & Johnson and Amgen have cause for concern about competition against their own anemia drugs.

Source: New Data Presented By Medgenics Positions It As Leader In $20 Billion Kidney Disease Market