Regenerative Medicine Market: The future in Life Sciences or just another promise?

Regenerative medicine (RM) is one of the most innovative technologies that might prove to have a significant added value in healthcare. I will start with some scientific definitions and then move into the business area. RM is an interdisciplinary field involving tissue engineering and (stem) cell therapy. Stem cells are undifferentiated cells (i.e. they have not transformed to a specific cell type yet) with the ability to differentiate or self-renew. Progenitor cells have the capacity to differentiate but not self-renew.

In cell therapy ex-vivo cultured stem cells or progenitor cells are used to treat certain types of diseases.

In tissue engineering, scientists use scaffolds and growth factors to create new tissues (or repair damaged tissues) in the patient’s body. There exist three main treatment methods within tissue engineering: stem cell based tissue engineering, non-stem cell based tissue engineering and gene therapy. Stem cell based tissue engineering involves autologous stem cell therapy (e.g. cryopreservation of stem cells for transplantation – many people do that nowadays, when the baby is born) and allogeneic stem cell therapy (e.g. bone marrow transplantation). Accordingly, in non-stem cell based tissue engineering there is autologous and allogeneic (primary/progenitor) cell therapies. Non-stem cell based tissue engineering also involves xenotransplantation. Finally, gene therapy aims at providing tissue cells a suitable environment for the appropriate proteins to be expressed (potential applications: skin, cartilage or bone; Goessler et. al, 2006).

The advantages of each of these specific therapies vary, but in general these are: wide use as science progresses and treatment of previously non-treatable disseases. Disadvantages include: tissue or organ rejection from the body, adverse side effects and high costs.

The challenges that scientists are currently facing is the maintenance of the appropriate environment for terminal cells to expand (pH, temperature, metabolites and nutrients) as well as isolating homogeneous populations of differentiated cells.

Having discussed the problems related to the science of RM I will now move into the business promises and challenges of RM.

• High uncertainty: there is a high uncertainty regarding the therapeutic areas in which RM can be applied at. Literature suggests that orthopaedics and cardiovascular areas are the most promising for RM. Instead, diabetes and CNS remain at the bottom of the list.

• Large scale-up: most of the current treatments in RM are patient-specific and it is very difficult for biotechnology companies to do process scale-ups for these treatments. Therefore, only few hospitals (in high technology areas) are able to offer such therapies.

• Ethics and regulation: regulatory framework for RM is unclear as there is an extensive debate about its uses and applications (Bioethics).

• Costs: as an example an artificial heart valve may cost up to $1,000,000 for the patient and cryopreservation of embryonic stem cells can reach $2,000/year.

• High R&D costs: although the specific costs of RM have not been accurately identified yet, according to the costs for patient and hospitals one can conclude that R&D costs might be equal or even more than developing a drug.

Considering these challenges why would one invest in RM? To answer this question the market drivers should accurately be identified. The following business motives are the most prevalent for RM:

• Pressure for lower health-care costs: As discussed above there are high costs both for companies as well as for patients. However, many believe that as science progresses and time passes the law of “economies of scale” will apply and RM applications will become less expensive than traditional treatment methods.

• High academic research activity: Academia is undoubtedly the protagonist in the progress of RM. There are numerous PhD fellowhips in the field of RM and universities are also offering master degrees in the field of RM. A few years ago this would seem very distant. This involvement of academia has attracted both public organisations (for example the technology strategy board in the UK) and healthcare companies by becoming active investors in the field. On one side, public organisations believe that RM can have a significant added value in medicine and for the treatment of serious diseases, while healthcare companies expect RM –in the long-term- to compensate on the challenges that these companies face (especially big pharma – rising R&D costs, low market growth and patent expirations)

• High demand for organs

• Involvement of big pharma: Big pharma is getting increasingly interested in the field of RM. This interest may be just exploratory (challenges faced by Pharma companies may prevent them from getting intensely involved in other uncertain areas in which they are not familiar) or real (RM offers pharma companies to use stem cells for drug screenings. Also, RM offers a promising diversification of existing business models.)

• Technological innovation in other high-tech areas: for example nano-medicine.

According to my short market analysis, there are currently 50 companies listed in the stock-market that are related to RM of which the top 3 companies have a market cap US$ 2 bn, US$ 1 bn and US$ 600 mn while the rest of the companies have a market cap below US$ 240 mn. Moreover, 34 out of the 50 companies listed, have so far been making losses. But it was the same situation for biotech companies few years ago and pharma realised (with a delay I would say) their huge potential through acquisitions, strategic alliances and partnerships. Could RM be the same? I say we will have to wait. It is important to note however, that the compound annual growth rate (in terms of revenue) of the 50 listed companies (in total) is approximately 16% (from 2007 to 2010).

In conclusion, the scientific progress of RM, the increasing involvement of academia as well as big pharma and the approval of the first stem cell drug Prochymal (for the treatment of graft-versus host disease – produced by Osiris inc,) by the FDA makes me to believe that RM is in the right way and will eventually deliver on its promises.

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