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RepliCel (RP.V) Should Benefit From Renewed Investor Focus, Sweeping Legislation On Cell Therapy



Cell therapy is hot again!

The sector exited 2016 with two significant and positive events. On December 12, 2016, Bayer AG and Versant Ventures joined forces to launch a new stem cell therapy company called BlueRock Therapeutics. BlueRock is focused on breakthrough treatments based on latest stem cell technology. The company's vision is to cure diseases with significant cell loss and diminished self-repair potential with an initial focus on cardiovascular, neurological and other conditions. To accomplish this goal, Bayer and Versant seeded the company with a whopping $225 million in cash!

The next day, on December 13, 2016, President Obama signed into law the 21st Century Cures Act; and with it, sweeping legislation designed to expand medical research and speed up approval of new drugs and medical devices. The Cures Act is a potential boon for the regenerative medicine industry. The Act grants the U.S. FDA the ability to provide faster and more flexible approval for important breakthrough medicines like cell therapy. The Cures Act creates a new pathway designation called a regenerative advanced therapy, or "RAT". Once a company is granted RAT, they become automatically eligible for several existing types of special treatment, including Accelerated Approval. It's a dramatic cost and time-saving designation, and industry experts are starting to take notice.

The combination of renewed investor attention and sweeping legislation should make it a good year for many publicly-traded regenerative medicine companies. One such company that looks very well-positioned to benefit from the rising tide is RepliCel Life Sciences (TSX:RP.V) (OTC:REPCF).

An Impressive Pipeline with Pending Catalysts

RepliCel is a regenerative medicine company focused on developing autologous cell therapies that address conditions linked to a deficit of healthy cells required for normal healing and function. The company's technology leverages the unique cellular properties of the hair follicle to develop a portfolio of products that use cells for healing. RepliCel’s cell therapy products are developed to address specific functional cellular deficits that occur as a result of injury, normal aging or genetic predisposition, leading to a variety of health conditions. The company's current focus is on the repair of chronically injured tendons, restoration of damaged skin, and the rejuvenation of hair growth.

RCT-01: RepliCel is currently engaged in a Phase 1/2 clinical study taking place in Canada examining RCT-01 for the treatment of chronic tendinosis. RCT-01 is an autologous cell-based treatment utilizing non-bulbar dermal sheath (NBDS) cells isolated from the hair follicle sheath to treat chronic tendinosis caused by acute and chronic tensile overuse. The primary purpose of this study is to assess the safety profile of RCT-01 injections as compared to placebo injections in 10 subjects with Achilles tendinosis.

Chronic Achilles tendinosis is a degenerative disease of the tendon caused by a cycle of injury, including improper healing and re-injury. The result is ongoing pain and diminished function. It is often caused by sports related injuries, occupational overuse, and aging. In fact, tendinosis accounts for 30 to 50% of all sports injuries and 50% of occupation-related disorders in the United States. Industry experts peg the total annual incidence of Achilles tendinopathy in North America at over 650,000. A third of these are sports-related.

RepliCel anticipates results from the important clinical study in February 2017. This is a tremendous pending catalyst for the shares. Successful results from RCT-01 in Achilles tendinosis likely allows RepliCel to expand development into several other enormous market opportunities, including tennis elbow, rotator cuff injury, patellar injury, and periodontal disease. This makes the potential market opportunity for RCT-01 gigantic, estimated at well over $1 billion. One can envision this is something both amateur and professional athletes will eagerly try. Importantly, previous clinical data in tendinosis demonstrated improvement in function and a reduction in pain post treatment.

 RepliCel is currently conducting a Phase 1 clinical trial investigating the use of RCS-01 to treat patients suffering from aged and UV-damaged skin. The study is taking place in 17 subjects aged 50 to 65 years old in Germany. The primary endpoint is local safety and tolerance, but RepliCel should also be able to obtain important data on gene expression of skin aging biomarkers and assess any fundamental and molecular changes in skin structure post treatment.

Skin rejuvenation is an enormous market opportunity. Products like Botox® and Juvederm® deliver blockbuster sales. In 2013, the American Society of Plastic Surgeons reported 6.7 million botulinum toxin injections, 2.3 million soft tissue fillers, and 1.7 million hyaluronic acid producers in the U.S. An estimated $2.5 billion was spent on facial aesthetics in 2013 and GBI Research estimates that figure will more than double to $5.4 billion by 2020.

- Japanese Law Facilitates Marketing Approval - 

RepliCel reports being in active licensing discussions for both RCT-01 and RCS-01 with a number of national and multinational companies in Japan. Data from the Phase 1 studies is expected in February 2017. The opportunity in Japan is both tremendous and near-term given a new stem cell therapy initiative that 
came into law in November 2014. It is similar to the 21st Century Cures Act noted above, only far more transformational.

In Japan, biopharma companies can gain conditional approval to launch a cell therapy product into the market - with reimbursement - providing the company has demonstrated sufficient safety and some evidence of efficacy. The company then has seven years during which time the sponsor must obtain full market approval through a biologics license application (BLA) or the Japanese equivalent thereof. This, no doubt, will be an important focus for RepliCel and major potential catalyst for the shares in the not-so-distant future.

 RCH-01 is an autologous cell therapy utilizing dermal sheath cup (DSC) cells isolated from the hair follicle to treat androgenetic alopecia, otherwise known as male or female pattern baldness. RepliCel has a fantastic YouTube video available that explains the technology.

RCH-01 is under Phase 2 clinical investigation at Tokyo Medical University Hospital and Toho University Ohasi Medical Center in Japan. The study is being financed by RepliCel's partner, Shiseido Company. RCH-01 is being manufactured by Shiseido at their SPEC (Cell-Processing and Expansion Center) facility in Kobe, Japan which is certified by the Japanese Pharmaceuticals and Medical Devices Agency (PMDA) and operates under GMP compliant production protocols. Data from this study is expected in 2018.

In 2012, 6-month post-injection safety and efficacy interim analysis data was announced from a phase 1 trial of RCH-01 in patients with androgenetic alopecia.  In February 2017, RepliCel will announce final data on 5-year safety as well as 12 and 21-month efficacy.

This is obviously an enormous market opportunity. A survey conducted by the International Society of Hair Restoration reports 35 million men and 31 million women have androgenetic alopecia in the U.S. In 2015, approximately 360,000 surgical and 700,000 non-surgical hair restoration procedures took place in the U.S. at a cost of $2.5 billion. Another $1.0 billion per year is spent by individuals on non-procedural related expenses. The vast majority of these products are wildly ineffective.

RCH-01 has the potential to make a real difference. Previous clinical data demonstrates a 63% response rate at 6-months post injection with RCH-01, with 70% of the responders reporting greater than a 10% increase in follicle density (average 14.3%). The data compares quite well with commonly used agents like Propecia® and Rogaine® that are far more toxic and dangerous to the patient. Both Propecia® and Rogaine® generated peak sales in excess of $400 million.

A Fascinating Opportunity For Investors

RepliCel has a market capitalization of only $27 million. That's one-tenth of the amount of money that Bayer and Versant just invested in start-up BlueRock and RepliCel has already advanced three products into clinical development! Two of these clinical programs will report important data in the next month. Additionally, sweeping legislative change that make investment in the cell therapy industry far more favorable and economical are taking place in major markets for RepliCel's products, including Japan and the U.S.

RepliCel recently 
secured $4.2 million in cash through the closing of a private placement in October 2016. The offering was actually over-subscribed and included a healthy mix of past, existing, and new investors. This cash infusion is expected to extend the runway into 2018. The lack of funding was a significant overhang for the stock in 2016, but with overhang gone and two major catalysts on the very near-term horizon, this is an incredible opportunity for investors. As such, it looks like the recent uptick in the stock is just the beginning for RepliCel Life Sciences.

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