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RepliCel (RP.V) Targeting Multiple Billion Dollar Markets With Autologous Cell Therapies



RepliCel Life Sciences, Inc. (OTC:REPCF) (TSX: RP.V) is a regenerative medicine company focused on the use of autologous cell therapies for the treatment of cellular deficits. The company is targeting three potentially multi-billion dollar markets: regenerative hair growth, skin aging, and chronic tendinosis. With multiple data readouts coming soon, it may be time for investors to familiarize themselves with this underfollowed company with big potential.

Autologous Cell Therapy

Autologous cell therapy (ACT) refers to the use of a patient’s own cells as a therapeutic intervention. The cells are extracted from the patient, grown outside the body, and then administered back to the donor. There are a number of advantages to using ACT, including the lack of an immunological response to treatment, no issues with bio-incompatibility, and no risk of disease transmission, all of which can be seen using tissue or grafts derived from another individual. There are a number of FDA approved ACTs for a variety of conditions, including wound healing, inflammation, and burns.

RepliCel ACT Technology

RepliCel is currently developing two technologies based on the company’s expertise in the biological function of hair follicle (HF) cells. The HF is continually undergoing morphogenesis and regeneration throughout the hair cycle during an organism’s life. Inside the HF are reservoirs of multipotent stem cells, which are capable of differentiating into multiple cell types. The image to the right of a HF shows the different cell types contained within it. The dermal mesenchyme compartment consists of the dermal papilla (DP), which is a small aggregation of cells at the base of the HF bulb, and the dermal sheath (DS), which surrounds the bulb and envelops the HS. There is a special collection of cells that are located at the base of the HF that support the growth of the DP, which are referred to as the dermal sheath cup (DSC). Both DP and DSC cells are involved in the development, growth, and regeneration of hair (McElwee et al., 2003). In contrast, non-bulbar DS cells (NBDS) do not have HF inductive abilities, however they do produce collagen and thus can be utilized to treat conditions that require restoration of collagen. RepliCel is developing treatments that utilize DSC cells to treat alopecia and NBDS cells to treat tendinosis and aging or sun-damaged skin.

RCT-01 for the Treatment of Tendinosis

Tendinosis is the degeneration of a tendon’s collagen in response to overuse, for example when the tendon is used continuously without being given time to heal. Even tiny movements, when done in a repetitive fashion, can cause tendinosis. Tendinosis is often confused with tendinitis, which is a completely different clinical condition in which tiny tears in the tendon occur due to a tendon being overloaded with a force that is too heavy and/or sudden. Tendinitis is also associated with an inflammatory response, while tendinosis is not.

Interestingly, tendinitis is very commonly diagnosed, however it appears that what is thought to be tendinitis is actually tendinosis (Khan et al., 2011). One study reported that patients with clinically diagnosed ‘tennis elbow’, which is described as tendinitis of the extensor carpi radialis brevi, did not have acute or chronic inflammation, which would lead to the conclusion that ‘tennis elbow’ is actually tendinosis (Boyer et al., 1999).

Treatment of tendinosis usually involves an extended period of time away from whatever activity initially caused the condition. The affected area is usually placed in some type of splint or brace and ice packs are used to instigate vessel constriction and prevent abnormal blood vessel formation at the affected tendon. Tendinosis usually resolves within two to three months. Severe cases of tendinosis can lead to surgery to debrade scar tissue and perform tendon grafting.

The annual incidence of midportion Achilles tendonopathy, which includes both tendinosis and tendonitis, is reported to be approximately 2 per 1,000 in the general population (de Jonge et al., 2011). This would equate to an annual incidence rate in the U.S. of approximately 600,000 cases per year.

RCT-01 for Chronic Tendinosis

RCT-01 is RepliCel’s fibroblast technology for the treatment of tendinosis. It is a tissue-engineered product derived from NBDS cells taken from a patient’s HF. The fibroblasts derived from NBDS cells are efficient producers of type I collagen, and due to the fact that they are of anagen HF mesenchymal origin, they readily reproduce in tissue culture.

In December 2014, the company announced the initiation of a Phase 1/2 clinical trial. This was a randomized, double blind, placebo controlled study to examine the effect of RCT-01 in patients suffering from chronic Achilles tendinosis who had failed prior treatment (NCT02330146). Subjects were randomized in a 3:1 fashion to receive either treatment or placebo. For treatment, as few as 20 hair follicles were extracted from the back of a subject’s scalp via a single punch biopsy. NBDS cells were isolated from the hair follicle sheath, replicated in a cGMP facility, and then readministered using ultrasound guidance directly into the area of the damaged tendon. The primary endpoint of the study was safety, with secondary endpoints examining changes in tendon thickness, echotexture, interstitial tears, and neovascularity.

On March 28, 2017, RepliCel announced positive results from the Phase 1/2 trial of RCT-01 with a complete safety profile at six months along with no serious adverse events related to study treatment or injection procedure. In addition, each of the patients treated with RCT-01 exhibited signs of clinical improvement in such areas as tendon composition, blood supply, physical function, and pain sensation. Specifically, patients treated with RCT-01 reported a 15.3% improvement in the VISA-A scale of Achilles tendon injury severity, 4/5 patients treated with RCT-01 showed clinically relevant signals of improvement in pain on loading based on VAS score (average improvement = 62.9%), and two patients showed select measures of near-complete elimination of pain by VAS scoring. We believe these proof-of-concept data fully support the continued development of RCT-01 and could lead to its use in other injuries including “tennis elbow” and to the rotator cuff.

RCH-01 for the Treatment of Hair Loss

Androgenic alopecia (pattern baldness) is hair loss seen in both men and women that is the result of a combination of genetic predisposition and family history. It can affect up to 70% of men and 40% of women. While there is no physical ailment associated with the condition, it can cause significant emotional distress, as exhibited by the over $3 billion that is spent each year to treat the condition.

There are very few scientifically proven and FDA approved medications for hair loss, however there are numerous products with unfounded claims regarding their ability to re-grow hair. The two FDA approved medications for hair loss are:

Minoxidil (Rogaine®): a topical medication that is available over the counter and can be used by men and women. It is more likely to stop hair loss that is occurring as opposed to growing new hair. It must be administered once or twice a day for the rest of a person’s life in order for the effects to continue.

Finasteride (Propecia®): approved for androgenic hair loss in men and belongs to a class of drugs called 5-alpha reductase inhibitors. It is believed to reduce hair loss by blocking the effects of hormones in scalp hair follicles. It is only available by prescription.

In addition to those medications, another popular option to treat hair loss is hair transplant surgery, which involves the surgical removal of a prominent band of hair-bearing scalp or multiple smaller biopsies from the back of the head. The hair follicles from the resected tissue or biopsies are then isolated and implanted into balding areas of the scalp. Numerous procedures are typically required in order to achieve the desired result.

In contrast, RCH-01 involves the extraction of as few as 20 hair follicles from the back of a patient’s scalp followed by the extraction of DSC cells. The DSC cells are then expanded in tissue culture and readministered to the balding areas of a patient’s scalp.

RCH-01 Phase 1 Clinical Trial

In 2012, RepliCel initiated a Phase 1 clinical trial to test the safety and efficacy of DSC cells (RCH-01) in men and women with androgenic alopecia (NCT01286649). A total of 19 subjects were enrolled in the trial and all of them completed 24-month post injection follow-up visits. Seventeen of the subjects completed five years of extended follow-up to evaluate the long-term safety of RCH-01.

On March 14, 2017, RepliCel announced the completion of the Phase 1 study as it successfully met its endpoints. The safety of RCH-01 was demonstrated through measurement of local and systemic tolerance that revealed no serious adverse events reported over the entire 60.5-month follow-up period. There were a few minor scalp irritations reported on or near injection sites that quickly resolved soon after treatment. Most importantly, biopsies performed at six, 12, and 24 months following injection did not show any evidence of the formation of tumor, granuloma, or foreign body formation. This is a potential issue that could arise with the use of stem-cell treatment, and the fact that no evidence of tumor/granuloma growth was seen is very encouraging. An analysis of biopsies taken 60.5 months following treatment is currently underway, with those results expected to be announced in the next few weeks.

While the trial was not designed for statistical significance, efficacy data was collected for all 19 patients that revealed the potential for improvement in hair density. The seven top responders saw their hair density increase >10% at six months post-injection. At 24 months, the average increase in hair density for those seven subjects was 8.3% over baseline, with three out of the seven maintaining >10% increase in hair density. Similar results were seen in the top 10 responders (at least >5% increase in hair density at six months) as those participants had an average hair density increase of 4.2% at 24 months. Stabilization in hair loss was seen in all participants.

The results from the Phase 1 trial show that RCH-01 has a very clean safety profile. Five-year follow-up data is very uncommon for cell-based therapies, and will be important data to have as the company moves forward with development and potential partnering discussions. In addition, the trial involved the injection of a very high number of DSC cells, and the company believes that a smaller number of cells per dose administered over multiple injections will increase efficacy, something that will be incorporated in future Phase 2 clinical trials.

Agreement with Shiseido

In 2013, RepliCel signed a Collaboration and Technology Development Transfer Agreement with Shiseido Company, Ltd. that gives Shiseido an exclusive marketing license to RCH-01 for certain Asian countries, including Japan, China, South Korea, and Taiwan. Shiseido paid RepliCel an upfront fee of approximately CDN$4.2 million and the agreement includes milestone payments of up to CDN$31.5 million plus royalties.

In July 2016, Shiseido initiated a trial of RCH-01 at Tokyo Medical University Hospital and Toho University Ohasi Medical Center. Shiseido is financing the trial and RCH-01 is being produced at Shiseido’s facility in Kobe, Japan. Under terms of the agreement between Shiseido and RepliCel, Shiseido will share the clinical data from the ongoing study in Japan, which will likely be included in future regulatory submissions as well as to support additional license or collaboration agreements.

RCS-01 for Skin Rejuvenation

Wrinkles and fine lines in the skin are features associated with aging, and a person’s propensity to develop them is dictated by both genetic and environmental factors. The skin’s dermis and epidermis lose both elasticity and thickness as a person gets older, and as this occurs solar radiation, particularly UVA, is able to penetrate deeper and leads to additional damage to fibroblasts, collagen, and additional extracellular matrix proteins, leading to physiologic changes in the skin that are manifested as wrinkles and fine lines. This is depicted in the following graphic.

A treatment that results in additional collagen production could counteract the effects seen in aged and/or sun-damaged skin. RepliCel’s RCS-01 uses fibroblasts isolated from NBDS cells, as they produce collagen and can be applied directly to the affected area.

In 2015, RepliCel received clearance from the German Competent Authority to initiate a Phase 1 clinical trial to test the safety and efficacy of RCS-01 in subjects with aged or damaged skin (NCT02391935). It is a randomized, double blind, placebo controlled study that will examine the safety of intradermal injections of RCS-01 as well as quantitatively analyze skin bio-markers (n=18) and perform histopathological assessment of treatment sites (n=12). We anticipate preliminary data from this trial by the end of the first quarter of 2017.

The skin rejuvenation market is enormous. Botox®, which is used to treat facial wrinkles, had 2015 worldwide sales of $2.8 billion in 2015 (EvaluatePharma). Juvederm®, which is composed of hyaluronic acid, is an injectable facial filler and had sales of $264 million in 2015 (EvaluatePharma). As the population continues to age, demand for products that treat wrinkles and fine lines is only going to increase, representing a large opportunity for RepliCel with RCS-01.

RCI-02 for Dermal Injections

RepliCel is developing a next-generation dermal injector that can be used in conjunction with the company’s cell based therapeutics. The RCI-02 injector is designed to deliver programmable volumes of substance into specific cell layers of the skin with minimal pressure or shear stress. This will limit degradation to the product upon application and also removes the variability in injections. Lastly, a cooling device is incorporated at the injection site, which alleviates the need for anesthetic. In addition to supporting the company’s products, there is the potential for using the RCI-02 injector in a number of dermatological procedures that require specific amounts of an injection at a specific depth, thus the company is actively exploring potential licensing opportunities.

Transitioning to Late-Stage Development Company

RepliCel has recently announced positive results from the Phase 1 study of RCH-01 and we anticipate additional preliminary results from the Phase 1 studies of RCS-01 and RCT-01 to be announced shortly. These data readouts are important as the company looks to enter into additional partnerships, focusing first on additional partnerships in Asia. In addition, RepliCel anticipates the next major partnership announcement to be with a multinational corporation in regards to the RCI-02 injector.

To support the transition of the company to the next phase of development, RepliCel recently sold 8,000,000 units at $0.52 per unit to raise total gross proceeds of $4.16 million. Each unit consisted of one share of common stock and one warrant to purchase one share of common stock at a price of $0.85 per share. With a burn rate of approximately $180,000 per month, we anticipate the company’s current cash to finance operations well into 2018 and allow for serious partnering discussions to commence, as financing is no longer an issue.

With a market cap of only $17 million and positive data for its lead products, we believe that now is an excellent opportunity for investors to get to know RepliCel better as the opportunity for outsized returns is a distinct possibility.

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