Remarkable progress has been made in the treatment of Type 1 diabetes, which formerly was invariably fatal in young adults. This has largely come from improvements in monitoring and delivering insulin to Type 1 diabetes sufferers, who don't produce insulin.
Novo Nordisk (NYSE:NVO) has a long-term commitment to diabetes (both Type 1 and Type 2) treatment. Indeed, it will continue to depend on diabetes treatment for its revenues, expecting diabetes to contribute 80-90% of total revenues in 10 years' time. Novo Nordisk's current view is that, notwithstanding major advances in understanding the mechanisms underlying the disease, a cure for Type I diabetes is remote. Instead, it is focusing on delaying the onset and progression of Type 1 diabetes by addressing the immune attack on the insulin-producing cells of the pancreas.
A cure for Type 1 diabetes needs insulin-producing cells to be reestablished and functioning properly. Recent advances in stem cell biology have given a glimpse of cure.
A recent breakthrough in the development of stem cell based treatment for Type 1 diabetes has been reported from Doug Melton's lab at the Harvard University. Doug has worked in this area for more than 20 years after his son was diagnosed with Type 1 diabetes. The Harvard group has worked out how to trigger stem cells to develop into insulin-producing beta cells. This is a major step forward. However, a viable therapy still needs to overcome the immune system attack. Nevertheless, the advance is already enabling research in drug discovery. AstraZeneca (NYSE:AZN) has partnered with the Harvard team to use the insulin-producing beta cells from human-induced pluripotent stem cells for drug screening to find new diabetes treatments.
In the Novo Nordisk 2014 annual report, mention is made that in finding a cure for Type 1 diabetes, two things are needed:
i) a means to trigger stem cells to make unlimited quantities of insulin-producing cells, and
ii) a means to encapsulate these cells so that the immune system doesn't destroy them while at the same time allowing the encapsulated cells to respond to glucose levels by producing insulin.
With progress at Harvard on triggering stem cells to transform into insulin-producing cells, it is timely that the Australasian company Living Cell Technologies (OTCQX:LVCLY) (ASX:LCT) is getting serious about commercialising its cell encapsulation technology for treatment of Type I diabetes through a joint venture, Diatranz Otsuka, with Japanese company Otsuka Pharmaceutical Factory (OTCPK:OTSKY). DIABECELL is encapsulated pig islet cells, which produces insulin, sourced from pathogen-free pigs. Otsuka has the rights to market the DIABECELL product in the US and Japan.
Living Cell Technologies is a tiny ASX-listed biotech company with a market capitalisation of just A$25 million. There have been limited trials in humans in New Zealand, Argentina, and Russia, with the best result being that two Type I diabetic patients ceased insulin injections for a period of 32 weeks. Mostly, the results are more modest involving decreased insulin injections and significant reduction in unaware hypoglycemic events. A key aspect of the encapsulated technology is that the cells are protected from immune attack, so immunosuppressive treatments are not needed.
Recently, Living Cell Technologies has refocused its activities on NTCELL, another encapsulated cell product for treating Parkinson's disease, but this does not mean that DIABECELL development is on the back-burner.
In March 2015, it was announced that Otsuka will take a more significant role in seeking FDA approval for DIABECELL. This follows on from transfer in mid-2014 of the 55 member DIABECELL team from Living Cell Technologies to the joint venture, which has access to a loan of up to NZ$42 million from Otsuka. This suggests that Otsuka sees the DIABECELL treatment as a significant new product.
Otsuka is a formidable Japanese company with an established presence for its products in the US. Most notably its Abilify antipsychotic drug (shared with Bristol-Myers Squibb (NYSE:BMY)) generated $6.5 billion in US sales in 2013 (a top 10 US drug). To show it is no shrinking violet, Otsuka is involved in a fight to keep out generic versions of Abilify by suing the FDA! Otsuka is also aggressively on the acquisition trail, with the recent acquisition of Avanir Pharmaceuticals for $3.5 billion. It will be interesting to watch the progress on DIABECELL in the US.
Given Otsuka Pharmaceuticals' interest in the brain, it would be surprising if Otsuka wasn't also interested in Living Cell Technologies' NTCELL product for Parkinson's disease, which is in a small (4 patients) Phase1/2a trial in New Zealand, with results due in June 2015. Given the invasive nature of this treatment (injection of encapsulated pig choroid plexus cells deep into the brain), it is perhaps not surprising that Otsuka has pulled back from direct involvement in this trial. However, if the results are positive, perhaps Otsuka could be a party that might support further development of this product too.
Diabetes is obviously of major interest to a number of large pharmaceutical companies, with the future of Novo Nordisk heavily dependent on diabetes treatments. With advances in the two key steps to a cure for Type 1 diabetes (stem cell technology and cell encapsulation), expect action from the big players. Watch also for Otsuka's action in this space.
For those with a gap in their investment portfolios for a high-risk biotech opportunity, it might be worth a look at Living Cell Technologies. While Seeking Alpha indicates warning bells investing in a company with a tiny market capitalisation, Living Cell Technologies has a deep pocketed Japanese partner financing its Type 1 diabetes program.
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