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As Competitors Pursue Alternatives Medgenics' INFRADURE Gains Prominence for its Potential to Treat Hepatitis



2012-12-14 18:49:13 -


Medgenics' (NYSEAMEX: MDGN) INFRADURE(TM) provides sustained productionand
delivery of interferon-alpha for the treatment of hepatitis. INFRADURE(TM) is a
kind of miniature pump that is impacted into the patient and continuously
produces and release the desired protein into the patient's system. It has
received approval for two Phase I/II trials in hepatitis C from the Israeli
Ministry of Health with the first slated to commence in Q4 2012; and has
received Orphan Drug Designation from the FDA for the treatment of hepatitis D.

While Medgenics charges ahead with regulatory approval for its stand-alone,
patient friendly device, competitors are scrambling to fill the need for PEG-
interferon and ribavirin therapy, the current standard known all too painfully
to patients of the hepatitis virus. Alternatives are becoming a motley bag of
therapies, some good, some not so good. The race is on for an effective
treatment that can improve patient compliance and reduce side effects.

Earlier this year it was reported that hepatitis C virus (HCV)-related deaths in
the US occur more frequently that those due to HIV. The World Health
Organization finds that HCV, heretofore largely neglected in the European Union
countries, now infects 9 million people there and shows a very high co-morbidity
with HIV. Highly aggressive hepatitis D virus, for which Medgenics has been
given Orphan Drug status, increases the risk of liver-related deaths and overall
mortality in HIV patients in Europe, where it is more widespread than here. HCV
has gained notoriety as the world's most common blood-borne illness infecting
between 1% and 2% of Americans. Frightening statistics show that up to 20% of
sufferers will develop cirrhosis; there has been a 300% increase in those
requiring liver transplant in the last 10 years; and 47% with HCV go on to
develop liver cancer with a very high fatality rate. Other types of hepatitis
are just as, if not more, potent and dangerous.

Medgenics' object is to replace noxious, long-term injections of PEG-interferon
known for its extremely unpleasant side effects that in many cases lead to
patient non-compliance, reversing interferon's benefits toward sero-conversion.
With an implanted INFRADURE(TM) delivering the interferon protein that is
produced by the patient's tissue, assuming results are comparable to PEG-
interferon, compliance problems would likely fade.

The technology involves a simple medical procedure: needle biopsy extracts a
sample of skin roughly half the size of a toothpick; there is a 7-10 day
processing time to transfer the proper protein-producing gene through a viral
vector and initiate manufacturing. The newly-created biopump is grafted back
into the abdomen to heal in place. More or fewer Biopumps can be implanted as
needed, adjusted to the patient's serum protein levels until optimal. So far, a
single pump in one early clinical trial patient has produced reliable, safe
results for 36 months. Medgenics' highly-scalable processing plants exist in the
US and in Israel where the cost of making a biopump is expected to be low.

At this year's assembly of hepatologists at the American Association for the
Study of Liver Disease (AASLD), a scientific gathering devoted specifically to
problems of the liver, a number of Medgenics' competitors presented potential
treatments for HCV. Medgenics reported that renowned experts at the conference
affirmed the potential of INFRADURE in the treatment of hepatitis B and D.

Patients' dislike for interferon, the only available treatment for HCV, has led
to many attempts at alternatives, the most desirable being a tablet made out of
the NS5B protein inhibitor, albeit with varied results. Gilead Sciences
(NASDAQ:GILD) appears to be the frontrunner with a sofosbuvir/ribavirin
combination in Phase III. Results presented at the Liver Meeting showed 93% and
61% of clinical trial subjects who would or could not use interferon had a
prolonged positive response in HCV genotype 2 and 3, respectively. Gilead is
expected to approach the FDA with permission to test their new drug sometime in
2013. Sofosbuvir is also being tested in a Phase II trial with Bristol-Myers
Squibb Co. (BMY) who is rebounding after withdrawing from trials of an NS5B
inhibitor last summer after a patient death.

It should be noted that non-type 1 genotypes, which make up the largest
worldwide population of hepatitis virus patients, would benefit most from
treatment with INFRADURE(TM) as it is most effective in this sub-population.
Also, oral hepatitis drugs do not respond in genotype 1, where PEG-interferon
and ribavirin remains the currently approved standard-of-care. Thus, oral
therapy for HCV does not pose an extreme competitive threat.

Some hopefuls in the NS5B race, however, have met with an undesirable fate. Last
month, BioCryst Pharmaceuticals (NASDAQ:BCRX) withdrew its new drug application
for an oral treatment based on an HCV NS5B protein inhibitor from the FDA after
worries about toxicity in preclinicals. In other words, the drug killed rats,
not a good sign for human testing. Following this, its $101 million, all stock
merger with Presidio Pharmaceuticals was stopped, leaving the company with only
one mid-phase pipeline compound, for gout, and no choice but to downsize.

Vertex Pharmaceuticals (NASDAQ:VRTX) has had success with INCIVEK, a new
combination therapy co-developed with Merck & Co. (MRK) that adds an antiviral,
telaprevir to standard interferon/ribavirin therapy but because the body rapidly
builds resistance to it, the combo treatment time is lengthened significantly
and costs run ridiculously high - up to $85,000 versus $36,000 for interferon
and ribavirin alone. Vertex has two non-exclusive deals to test its new HCV
regimens for genotype 1 with Johnson & Johnson (JNJ) and GlaxoSmithKline plc
(GSK).

Also during the Liver Meeting, Achillion Pharmaceuticals (NASDAQ:ACHN) surprised
investors by withholding efficacy data from a drug interaction study of its lead
NS5A all-oral combination, placing it well behind Gilead and causing a 12% drop
in the shares.

Roche Holding AG (RHHB) had acquired Anadys Pharmaceuticals in 2011 for several
hundred million dollars to get setrobuvir, a NS5B inhibitor in human testing, in
addition to danoprevir, bought from InterMune (ITMN), a similar class of
compound in trials. Roche also licensed mericitabine, another NS5B, from
Pharmasset (now part of Gilead).

As you can see, each pharma company has a potentially valuable piece of the
entire HCV puzzle. Medgenics' INFRADURE(TM), intended only to replace PEG-
interferon injections, stands a good chance of approach from pharmaceutical
companies that are testing combinations that still require the standard therapy
of PEG-interferon and ribavirin.

In other company news, full patent protection for the EPODURE Biopump has been
granted in the US, joining countries Australia, Japan, China, and Korea and
bringing the patent portfolio to 36 issued, 81 pending.

Also, Medgenics' third quarter (ending September 30) results included a very
modest rise in research and development costs, to $1.8 million, considering the
progress made in human clinical trials - earlier this year, two HCV trials were
approved to start in Israel and Orphan Drug status was bestowed by the FDA for
rare but deadly hepatitis D. Operating expenses were trimmed by $400,000 as
consultant fees dropped and ten cents was shaved off net loss from ($0.35) to
($0.25), for a quarterly burn of roughly $3 million. Cash stood at $8.9 million.
There is no long-term debt.

In sum, Medgenics' clinical and regulatory progress is highly encouraging and,
with their participation at the Liver Meeting, they are now more broadly
recognized by the medical community at large.



About The Analyst: Sharon Di Stefano

Sharon di Stefano was one of the first analysts on Wall Street to cover the
career of Sol Barer as Chairman and CEO of Celgene Corp.  She has spent 20 years
as a healthcare analyst, beginning her career at Smith Barney, Harris Upham &
Co. specializing in medical devices, pharmaceuticals, healthcare information
technology, and biopharmacology. Ms. di Stefano had also served as Senior
Venture Officer for the Edison Innovation Fund, implemented through the New
Jersey Economic Development Authority that provided funding for early-stage life
sciences companies.

Ms. di Stefano received a Masters of Science degree, in Business, from Johns
Hopkins University in 1986, and a Bachelor of Arts from the University of
Delaware in 1984 with a minor in biology.



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