Medgenics protein delivery platform promises a revolution in personalised medicine

YOU can sense the frustration of Andrew Pearlman when he speaks of the potential of his company Medgenics (LON:MEDG, AMEX:MDGN) and its game-changing protein delivery system, the Biopump.

And you can understand it too. The company has made material progress in the past year, yet the share price has drifted. In the meantime rivals with competing but less effective technology are trading on much ritzier ratings. 

The disconnect reflects the fact that Medgenics until April traded solely on AIM, whose reputation for nurturing innovative biotechnology and healthcare stocks faded around a decade ago.

Its New York IPO, which raised US$13 million, introduces it to a far more knowledgeable investor base which has seen the little acorns of the sector turn into mighty oaks such as Amgen, Biogen, Genzyme and Genentech. 

And it is to be hoped this new, savvy audience will eventually spot the value of Medgenics’ potentially revolutionary drug delivery system.

The Biopump is a staggeringly simple invention, and one that appears to be very effective. 

A tiny sliver of tissue smaller than a tooth pick is taken from a patient, modified to carry the gene to enable it to continuously produce the required protein. It is then re-injected into the body using the firm’s proprietary DermaVac harvesting and implantation device. 

The result is a system which produces and releases the required protein over a sustained period of time – clinical trials have shown it can last at least six months to a year. 

And it is a truly personalised medicine as it uses the patient’s own tissue to continuously make and deliver the protein in the way that person is used to receiving it.

Medgenics is developing three applications of the technology, which was the brainchild of Professor Ed Mitrani and Professor Amos Panet, of Jerusalem’s Hebrew University. They are for anaemia, hepatitis-C and haemophilia. However it appears to be a  versatile platform technology that can be applied to almost any therapeutic protein, either registered or in development.

In the case of hepatitis-C, and the current alpha-interferon treatment for it, there are two major problems. 

The first is the problem of flu-like symptoms and other side-effects from the short term overdose caused by each injection, which is common. The second is the very rapid drop-off rate after each injection, which necessitates regular weekly injections – with their side effects - for  six months.  The Biopump has the potential to overcome both.

The company’s research into a long-acting treatment of anaemia is furthest advanced. Medgenics is conducting a phase I/II study of the company’s EPODURE therapy, which produces and delivers erythropoietin, or EPO.   

The interim data is impressive for a treatment so early in its development. The end point of this trial is of course to see whether EPODURE is safe and well tolerated, but it is already showing strong signs of efficacy in the majority of the 14 patients so far tested.

In one patient EPODURE is still working some 30 months after the Biopump was first inserted, while most of the others are enjoying relief from their symptoms six to 12 months after first receiving the implant. 

“Most other treatments to keep anaemia in check are once a week - perhaps once every two weeks,” Pearlman told Proactive Investors.

“There is nothing remotely close to giving six or 12 months continuous treatment from a single treatment. So this is truly a revolution in that sense.”

The early work on EPODURE has been carried out in Israel, though the plan is to put it into Phase IIb trials in the US under the guidance of the US Food & Drug Administration.

To do this Pearlman and his team must secure investigational new drug status for EPODURE, a milestone it hopes to achieve by early 2012.

Medgenics will follow the same template for INFRADURE, the treatment for hep-C, which Pearlman hopes to “have in the first patients by the end of 2011”.

Then there is HEMODURE for haemophilia, which has emerged from a collaboration with the US healthcare giant Baxter.

“They asked us to look at Factor VIII (the blood clotting agent), which is arguably the most challenging protein to look at,” Pearlman says.

“We signed a feasibility agreement with them and we have developed Biopumps which are producing very nice quantities of Factor VIII.”

The Medgenics boss believes Baxter will extend the agreement, but cannot yet say if they will proceed towards a full commercial licensing agreement. “We are hopeful they will go forward with us,” he adds. 

“We think this is going to be a great product for treating haemophilia and has the potential of normalising the lives of patients who fear every time they start to bleed that they may bleed to death, and have to stay close enough to a major hospital that is known to have the very expensive Factor VIII protein on hand.”  

He also reveals the company is talking to other potential partners as EPODURE moves towards phase IIb trials.

This may alleviate the need to come to the market for more cash. With the cash from the IPO and other anticipated funding from the Israeli government office of the Chief Scientist will fund the company out past the first quarter of next year at which point it will consider “all the funding options”.

The frustration for all involved with Medgenics is that the market has given Pearlman and his team little or no credit for the progress they have made to date.

A valuation of $50 million pales in comparison with Amex-listed Prolor Biotech, which makes protein therapies last longer between injections by modifying the protein molecule, but with their first clinical trial just underway, the company claims the method can typically extend inter-injection time by three to fivefold, nothing like the six to 30 months Medgenics has already shown in its first clinical study.  

“We believe one of the reasons these guys have market cap of US$350 million is because they are sitting on Amex,” says Pearlman.

“We are on AIM, but we have a technology that is arguably much better, we have substantial data showing that it actually works in treating patients, and we have been collaborating with a major healthcare company.”

Successfully negotiating a second partnership with a strategic partner could provide a huge catalyst for the rerating of the stock.

And as the major drug companies become more desperate to replenish their product pipelines, so the payments involved escalate.

Obviously, the later in the development process a project is the more valuable it becomes as is witnessed by Genzyme’s US$1.28 billion stem cell deal with Osiris in 2008. 

But you can still extract a keen price for potential blockbusters that are phase I and II as Merck’s US$422 million tie-up with San Diego-based Lpath, a therapeutic antibody company, last year proves.

And have no doubt Medgenics is targeting some major markets with combined annual sales of £95 billion.

Why then, given such an optimistic outlook for the company, have shares succumbed to selling pressure in the weeks after the IPO?

The issue of warrants as part of the New York fund-raise has muddied the water a little and created a clear arbitrage opportunity that may have helped depress the price.

During the same period, the Company has been in a standard “quiet period” following the AMEX listing, during which it could not actively promote the company and its stock.  

However in the past fortnight, following the end of the “quiet period” the selling has receded and the share price has begun to nudge tentatively higher.

Hopefully, an update on the EPODURE trial in the coming month or two will report completion of the recruitment and treatment of the final patients in phase I/II trial, and will maintain the momentum.

It is one of a series of key milestones which the company is aiming for between now and the early part of next year, including the receipt of IND approval from the US FDA for the Phase IIB anaemia trials.  

Medgenics is also preparing for human trials of INFRADURE. Elsewhere there should be an update on the work being carried out on HEMODURE later this year.

If the investing public is having problems comprehending the potential of Medgenics, the industry isn’t, judging by Pearlman’s comments as we wind up our conversation.

“We are having some rather significant discussions with potential strategic partners,” he reveals, “But it is premature to say more than that.”