Cytori is moving ADRCs (Adipose-derived regenerative cells) closer to entering the clinic for thermal burn and radiation exposure with data presented at the 2015 meeting of the American Burn Association this week in Chicago. Cytori made two presentations.
The first showed preclinical evidence of accelerated wound healing with increased blood vessel density, collagen deposition and epithelialization (skin) using large animal models of thermal burns and radiation exposure.
This is the first large animal model that reflects the clinical situation of patients exposed to thermal and radiation injury. (ABSTRACT LINK)
The second presentation showed improved dermal regeneration, vascularization and structural organization of thermal burn injuries over control when ADRCs were seeded onto a collagen scaffold. (ABSTRACT LINK)
Conclusion: These data put Cytori closer to the clinic. If the company can get to the clinic, the BARDA contract is structured to add $8M of funding for the first trial, beyond which there are options for additional work in thermal burns complicated by radiation exposure; combined value of $68M. ADRCs are also being evaluated in a pivotal study for scleroderma.
Thermal Burns and BARDA. The BARDA contract is worth up to $106M in non-dilutive capital. The contract with BARDA is now worth $14.1M with the additional $2M added on December 19, 2014. This funds Cytori through pilot studies and planning of an initial clinical trial for thermal burns. If successful in preclinical studies, and with approval of an IDE, another $8M will be added onto the contract to fund a clinical trial. The company anticipates completing the trial following the release of the next-generation Celution system in 2015. The contract also has two options valued at $45M and $23M that could fund a pivotal trial and additional work in thermal burns complicated by radiation exposure. The path through clinical development for ADRCs in thermal burns has the potential to be more rapid than we previously thought as we have now seen the ADRC Celution System given a pathway to approval that includes running only a modest-sized phase II/III pivotal clinical trial in scleroderma.
Adipose-Derived Stem and Regenerative Cells; is fat good? ADRCs, as the name implies, are derived from fat. A key publication describing how ADRCs are characterized after being isolated from adipose tissue with the Celution System was published in 2008 (Lin et al.'Characterization of adipose tissue-derived cells isolated with the celution system', Cytotherapy (2008), Vol. 10, Nov 4). Yes, fat tissue has cells with broad regenerative medicine potential. In fact, adipose tissue is the richest known source of adult stem cells. When you compare that adipose tissue containing 2-5% regenerative cells (ADRCs) to 0.0004% regenerative cells in the same person’s bone marrow, it’s a significant difference. Cytori isolates ADRCs using the ‘Celution System’ which is an automated process that can deliver autologous, point-of-care regenerative cell therapy with minimal handling and manipulation, the latter contributing to low cost of goods sold for the company. Additional indications include thermal burns, scleroderma, stress urinary incontinence, osteoarthritis and acute myocardial infarction.
Valuation. We assume Cytori will be successful in Scleroderma and multiple other indications utilizing ADRCs (thermal burns, stress urinary incontinence, and osteoarthritis. We apply a 25% risk cut to our therapeutic model and a 30% discount to financial models for FCFF, discounted EPS, and SOP to arrive at a $6.00 PT.
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