Echo’s needle-free technology a game-changer

Echo Therapeutics’ (OTCBB:ECTE) platform for needle-free drug delivery and a wireless biosensor that continuously monitors diabetics’ blood glucose levels without breaking the skin is giving the company a shot at several blockbuster markets.

“The scope of the technology is applicable to the delivery of many drugs and monitoring many analytes in the blood stream,” CEO Dr. Patrick Mooney says in an exclusive interview with BioTuesdays.com. “Multiple billion-dollar opportunities could be addressed by this technology.”

Of course, the bottom line is that nobody likes getting stuck with a needle. “When you think about that in the context of our current market valuation of $140 million, we’re a fraction of the value of our nearest competitor, which uses a needle to monitor blood sugar levels continuously, and we think we have a superior technology,” he adds.

Echo’s two technologies are the Prelude SkinPrep and Symphony transdermal continuous glucose monitor (tCGM), which came out of Dr. Robert Langer’s lab at MIT.

In a new report last week, Feltl and Co. analyst Ben Haynor said Echo’s technology has “game-changing potential.” He stated, “We believe Echo Therapeutics will revolutionize the continuous glucose monitor and topical anesthetic markets with its non-invasive technology platform.”

He initiated coverage of Echo with a “strong buy” rating and a 12-month price target of $6.50. The stock closed at $4.15 on Friday.

In a move that will sharply broaden the pool of potential investors, Echo has applied for a national listing on the NASDAQ or the AMEX and will move to whichever exchange accepts the listing application first.

Prelude™ SkinPrep Platform Technology

About the size and shape of an electric nose-hair clipper, the Prelude SkinPrep is a skin permeation device that quickly removes the outer layer of dead skin called the stratum corneum, with no pain or bleeding, stopping precisely before reaching live skin. That puts the device microns away from capillary blood vessels in the epidermis and allows for both painless drug delivery and continuous glucose monitoring with the Symphony biosensor.

Echo has licensed Prelude to Ferndale Pharma Group for enhanced delivery of its skin-numbing lidocaine cream in North America and Britain. The $15 million deal excludes royalties and manufacturing revenues from the single-use, disposable abrasion tips on the Prelude device. “It’s a razor-razor blade business model,” Dr. Mooney says.

“We just did a clinical trial that was the basis of our most recent FDA filing, where we permeated the skin with Prelude and then applied lidocaine and achieved numbness in three to five minutes,” he says.  Existing lidocaine creams can take up to an hour to get through the dead skin layer. “So we have a much more attractive product profile.”

Echo estimates that Prelude and lidocaine could have an annual market potential exceeding $1 billion in cosmetics and pediatrics.

In pediatrics, Dr. Mooney explains that a nurse could permeate a child’s skin with Prelude and lidocaine, making an inoculation painless in just a few minutes. In the cosmetics and aesthetics markets, patients would be free of painful injections of Botox and collagen fillers, for example, allowing plastic surgeons and dermatologists to get patients in and out of procedures much more quickly.

Last February, Ferndale received FDA comments on its 510(k) submission that Echo described as minor and consistent with expectations. “They were very benign and generally related to manufacturing,” Dr. Mooney says, adding that an amended filing will be made mid-year, with possible regulatory clearance as early as the third quarter.

Symphony tCGM System

While Prelude SkinPrep represents a separate business for Echo, the needle-free Symphony tCGM depends on the Prelude device to prepare the skin for the non-invasive biosensor. The system also includes a wireless monitor or a portable handheld device.

Dr. Mooney explains that after skin permeation with Prelude SkinPrep, the biosensor’s surface detects glucose as it diffuses out of the capillaries and comes in contact with the biosensor. The biosensor also contains an enzyme that reacts to glucose and relays those readings as an electric signal. The impulse passes wirelessly to a handheld device, which records the information and monitors the readings. It also can transmit readings to a cell phone, emitting an automatic alert should there be a critical rise or fall in the level of a blood-sugar reading.

All existing FDA-approved continuous glucose monitoring systems use sensor wires inserted into the patient’s skin, increasing the risks of infection, inflammation or bleeding at the insertion site.

In a report last month, LifeTech Capital analyst Stephen Dunn said the Symphony system has the potential to change the “current standard of care paradigm” and “improve patient compliance to frequent glucose testing and achieve better overall glucose control.”

Symphony™ tCGM Glucose Monitoring System

Echo estimates the addressable market for continuous glucose monitoring in the hospital critical care setting at more than $1 billion a year, with the global glucose monitoring market at more than $12 billion annually.

Last week, Echo received the key components of its next generation Symphony tCGM design that it will test in a final series of clinical trials, replacing the prototype used in earlier clinical testing. The next generation design incorporates numerous technological advances required to meet market expectations for system accuracy, manufacturability and product cost.

Dr. Mooney says Echo plans to complete an additional critical care pilot study this summer “to make sure we have a commercially ready system.” It also plans to start its pivotal study at the beginning of 2012 and hopes to obtain regulatory approval by the end of the year.

As in earlier testing, the pivotal study will draw blood from critically ill patients at four hospitals and compare their blood sugar levels against Symphony readings. The study, with an estimated 200 patients, should take about three months to complete.

Echo has already completed six clinical trials with its biosensor, generating about 3,200 glucose monitoring data points from 70 patients. In those studies, Symphony’s performance was consistent and effective at monitoring blood glucose. The device had error rates between 7.5% and 16%, which were well below the FDA guidelines for error rates of 20% to 25% in diabetic glucometers.

Citing regulatory filings of competing continuous glucose monitors, Dr. Mooney points out that the Medtronic Guardian device had an error rate of 19.7% while the DexCom (NASDAQ:DXCM) Seven was 15.7%. Dexcom is the only pure play in continuous glucose monitoring.

“Not only are our error rates much lower than [what] historically the FDA has used as a threshold for approval, but they are also consistent from study to study,” says Dr. Mooney, a former physician, senior biotech analyst at Thomas Weisel Partners, and CMO and CEO of Aphton (NASDAQ:APHT).

“That tells me, as a scientist and physician, that our data are reproducible, which is equally as important as the accuracy performance. We can consistently reproduce good results with our device.”

Continuous BG Monitoring System Comparison

Besides its glucose monitor, Echo is working on a biosensor to detect lactate levels in blood. “It’s an early development program. However, we initiated it, because we want to establish that this is a platform technology that allows us to do many things,” Dr. Mooney says. “Once you permeate the skin, we can make many different types of biosensors, and we should be able to deliver many different types of drugs.”

A lactate biosensor could represent a big market opportunity with top-tier professional athletes, who are interested managing their lactate levels to achieve optimum muscle performance, and for critical care patients. Dr. Mooney says the technology also could be applied, among other things, to measure blood alcohol levels, thyroxine levels for thyroid hormone and coumadin levels for patients who take blood thinners.

Echo’s needle-free technology received an unexpected shot in the arm last summer when DexCom received a warning letter from the FDA about the risks of sensor wire fractures underneath patients’ skin, especially in pediatric and adolescent patients. “We believe this should give Echo’s transdermal biosensor a significant advantage in the marketplace,” said LifeTech’s Mr. Dunn.

Another differentiating advantage Dr. Mooney cites is Symphony’s chemical reaction strip, which adheres to the skin and converts glucose into a numerical reading. The strips are replaced every one to two days, compared with competing biosensors, which can be worn for up to seven days.

“They make their biosensors last longer, because they want patients to use needles less frequently,” he figures. “We don’t use needles. And another problem with wearing a biosensor for so long is that the adhesive irritates the skin.”

In 2009, Echo teamed up with Handok Pharmaceuticals to develop and distribute the Symphony system in South Korea. Handok is the largest diabetes care-focused company in South Korea and a member of the Sanofi-Aventis group. “While the deal validated our technology, it also represented a possible strategic path into Sanofi,” Dr. Mooney says. “And we still have the rest of the world open for a partnership with a bigger company.”

There are four multinationals that dominate the glucose monitoring sector—J&J, Roche, Abbott and Bayer, while two newcomers—Novartis and Sanofi-Aventis—have moved aggressively into the space in the past few years. “They all know us, and they are all interested to varying degrees,” he points out.

“This is a big year for us.  If we produce consistent data with our next pilot study and get the pivotal study going, I’m probably not running this company in three years. Echo could be part of a much bigger company.”

Continuous glucose monitoring is not in question, he says, adding that the medical literature is clear that pricking your finger a couple times a day isn’t good enough to control your diabetes.

“So the big players are moving towards continuous glucose monitoring. But all of our competitors use needles; we don’t. So there’s traction in the space, with a lot of interest in Echo. If you can monitor glucose continuously without a needle, you have the potential for a disruptive technology, and companies like that generally don’t remain independent.” 

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.