Orthocell: Next Big Thing In Tissue Engineering?

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Regenerative medicine pioneer Orthocell closes in on market payday.

-Orthocell’s new product, CelGro, has received approval to be marketed in Europe
-The company is producing solid sales in cell-culture therapies
-Established products still have plenty of growth potential

By Nicki Bourlioufas

Tennis elbow, golfer’s elbow, rotator cuff tears, osteoarthritis – it’s a world of pain out there, but advances in regenerative medicine by a young Australian company are offering relief to millions of people around the world, as well as the prospect of significant gains for investors.

Orthocell ((OCC)) is a regenerative medicine company focused on regenerating mobility for patients by developing products for the repair of a variety of soft tissue injuries. Orthocell has two well-established medical products on the market, plus a new breakthrough technology that specialist analysis house NDF Research says “may deliver the big payday this financial year”. The company also has two projects in the pipeline that promise continued growth for the stock over the medium to long term.

[Please Note: NDF Research discloses that Orthocell commissioned and paid for the preparation of its report. NDF Research, which is led by founder and senior analyst, Stuart Roberts, is an equity research firm based in Sydney, Australia, which focuses on Life Science companies that are publicly traded on the Australian Stock Exchange. NDF believes that ASX-listed companies have been largely overlooked in the global life sciences boom that began in late 2008, partly because of insufficient quality research. NDF's goal is to provide such research, and introduce investors around the world to potential future billion-dollar companies from Australia.]

Orthocell’s new product, CelGro, has recently received CE Mark approval, which allows it to be marketed and distributed in the European Union. US approval is expected soon. NDF Research estimates CelGro’s potential market is well in excess of US$2bn.

Orthocell’s established products still have plenty of growth potential. NDF Research says Orthocell’s foundation product, Ortho-ACI – which costs US$10,000 per procedure – probably has a US$300m-350m opportunity across Orthocell’s target market.

The company’s other commercially available product, Ortho-ATI, costs US$4,500 per patient, suggesting it represents a US$6.5bn opportunity for rotator cuff repairs alone.

NDF Research’s target price for the company is $1.75 per share. This is the midpoint between its base case of $0.89 and its optimistic case of $2.63. Orthocell has recently been trading around the $0.30 mark.

Orthocell stakes its claim in regenerative medicine field

Regenerative medicine uses drugs and biotechnology to harness the power of stem cells and related growth factors to repair damaged bone and soft tissues, such as tendons and cartilage.

NDF Research says Orthocell, like other publicly traded biotech and medical device companies working in the field, has been undervalued because of the controversy around the ethical use of stem cells and because many therapies are still in clinical development.

Orthocell’s Ortho-ACI provides a therapy known as “autologous chondrocyte implantation”. This uses cartilage cells (chondrocytes) taken from the patient themselves (autologous) and engineered in the lab before they are implanted back into the patient. Ortho-ACI has been used in more than 480 patients since 2010 to treat conditions such joint injuries.

Its product Ortho-ATI uses implants of autologous tendon cells (tenocytes) for treating conditions such as to hamstring, Achilles Tendon and Anterior Cruciate Ligament injuries.

NDF Research says Ortho-ATI is “a market-leading product” as it is the first – and still the only – product that draws on regenerative medicine to repair damaged tendons.

Both Ortho-ACI and Ortho-ATI have approval from the Therapeutic Goods Administration. Ortho-ATI is soon to be the subject of a study to assess its safety and effectiveness compared to corticosteroid injection in the treatment of rotator cuff tendinopathy and tear. The research is being undertaken in collaboration with DePuy Synthes Products, Inc, part of Johnson & Johnson Medical Device Companies.

Collagen 'scaffold' for tissue growth will drive stock price

Most exciting, says NDF Research, is Orthocell’s new product CelGro. This uses high-purity, natural collagen to build a “scaffold” that supports the growth of new tissue at the site of an injury. Such scaffolds can be used to support healing in a variety of orthopaedic, reconstructive and surgical applications.

NDF Research says CelGro is “arguably one of the best tissue repair scaffolds yet invented” and is “unique” in that it is “completely acellular” and has ideal mechanical properties and the right “integration profile” to hasten in-growth of tissue. As well, it has a tunable “degradation profile” – that is, it can be set to biodegrade once the new tissue is in place.

NDF Research says receiving the CE Mark has taken the risk out of CelGro. Further regulatory approvals for CelGro in other jurisdictions, such as the US, and across other indications, such as nerves and ligaments, will provide key catalysts for Orthocell’s share price.

Products in pipeline take a different tack

Orthocell’s commercially available products are autologous therapies. Such patient-derived therapies are relatively expensive, because each dose needs to be manufactured individually. Even so, NDF Research says, Orthocell’s autologous therapies are cost-effective, because they are “fit for purpose” and work better than current alternatives that are commercially available.

The alternative is “allogeneic therapies”, which use cells taken from an unrelated donor, rather than the patient. These generally cost less because they can be bought “off the shelf”. Orthocell’s is exploring this possibility with the two products it now has in early research. These are the “Lab-Grown Tendon” project, in which human tendons grown in a bioreactor may be used in tendon repair, and the “Cell Factories” project. NDF Research says these projects ”have the potential to become the Next Big Things in tissue engineering”.

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