Below OneMedRadio interviews Reynolds where he speaks candidly about his own injury rendering him a paraplegic, and the passion behind his work. Reynolds will be presenting InVivo’s technology at OneMedForum New York on July 12, 2012.
Click below to hear audio interview and see full transcript that follows.
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Matt Margolis: Greetings from OneMedRadio, I’m Matt Margolis. Today, I’m speaking with Frank Reynolds, CEO and CFO of InVivo Therapeutics, a Massachusetts-based medical device company developing regenerative and neuroprotective technologies for the treatment of spinal cord injuries. The company is developing biocompatible polymer scaffolding devices and hydrogels to treat acute and chronic SCI. It’s also the first company in history to successfully demonstrate functional improvement in a paralyzed non-human primate. Thank you for joining us Mr. Reynolds.
Frank Reynolds: Thank you very much for having us.
MM: Sure. So today, we’re discussing the rise of biologics and drug development as well as the potential of neural stem cells in treating SCI, but I think we should start with an overview of the company. What is it that you guys do?
FR: Sure. So I can tell you we do quite a few things, you know. Neurotrauma is an area that’s a really merging field of science and medicine. You know, in a lot of ways, we feel that we’re creating a new clinical franchise in medicine.
No one has been able to develop any biomaterials intervene and mitigate say bleeding and inflammation after a spinal cord injury or after a car accident of some kind of crush to the arms and legs. There’s a whole range of neurotrauma injuries that result in bleeding and inflammation that helps mainly scar the tissue and prevents functional recovery.
So what we do is we intervene. It turns out that in spinal injury – let’s take that – in spinal cord injury, 90% of the patients or about 90%, when they arrive in the emergency room are not paralyzed for life. They’re suffering spinal shock so they can’t move, they can’t feel. However, they’re going to go through a bleeding and inflammation process over the next 3 weeks. After 3 weeks, there’s going to be a scar that pretty much dominates the spinal cord, puts them in a wheelchair for life, and that scar becomes a barrier.
So what we would do is we would intervene in the days after the injury reducing that scarring, and what’s good for the patient and good for us is that it turns out if you could spare just a little bit of the spinal cord, only 10% or more – I mean we don’t have to say 80% or 50% or 70% of the spinal cord. We can be just 10% of the spinal cord, the electrical signaling that the brain sends to walk will get through.
So it’s interesting. At the point of injury, you’ll receive scarring, but all the tissue below the point of injury remains completely healthy because it gets all the blood it needs. So the spinal cord below the point of injury is just waiting to be used. So say somebody like Christopher Reeves with a high neck injury, you know, C-2 is responsible for breathing, and so, you know, of course, he was going to have trouble breathing, but below that point of injury, the tissue that controls bowel and bladder sexual function, that tissue is all healthy waiting to be used. If we had been able to intervene and mitigate the scarring, you know, signals could have gotten through, and then things like, you know, bowel and bladder and sexual function can restore, although the patient may still be on the ventilator, you still get a lot of functional recovery.
So that’s what we’re interested to do. We’re interested in intervening, you know, after injuries of neurotrauma injuries, and of course, spinal cord injury being the most devastating of nerve trauma injuries, we’d like to intervene with these patients in the days after, and every patient is going to have a different type of injury, so some of them are going to require just biomaterials alone, some of them are going to require biomaterials with drugs, and some of them are going to require combinations of biomaterials and cells.
I can tell you that on our strategic game plan, we have a device that ultimately will deliver drugs the first few weeks after a spinal cord injury followed by cells on top of that to provide the regeneration. So of course, initially, you’ll provide neuroprotection, and then ultimately, for the patients that are in wheelchairs, or you know, for some of the patients that have scarred across, we want to provide regeneration.
MM: Sure. So why is it integral to focus on neuroprotection and not exclusively on regeneration?
FR: Yeah, you know, that’s a great question. We get it all the time. You know, our stock price recently had a significant inflection point. Some people call it a hockey stick, you know, advance, and that was because a company like Geron, a regeneration company, had announced that after spending hundreds of millions of dollars on stem cell research, they were bowing out of spinal cord injury altogether, and neuroprotection is cost effective. I mean it doesn’t cost a lot of money to develop materials. The drugs that we’re using are already FDA approved. By the way, the FDA has just come back and identified a 15 year path through the FDA for any cell technologies, and that’s what regeneration is.
So we view neuroprotection as our first path to revenue, and then of course, we take the same exact platforms to scaffolds and gels, and then we enhance them with the regeneration technologies later, you know, when these cells are more advanced. Imagine 15 years through the FDA. I can’t think of a business team that can come up with a 15-year investment plan for that. So you know, with neuroprotection, we get products to market very quickly. We can deal with biomaterials and drugs. We never want to forget our chronic injured patients. The spinal cord injured patients are waiting for us so we are exactly – I’m very excited to be, you know, enhanced those scaffolds and biomaterials with cells that are safe and effective, and then make them more effective with therapeutic for the regeneration space.
MM: So why are people excited about the potential of your technologies? I mean you’re the first company to get primates to walk after being paralyzed.
FR: Yeah, and actually, I think people are most excited, you know, when they see the possibilities for all the conditions. That’s really good so I’m excited. I can tell you that we’re having, we’re holding the 2012 Langer Neurotrauma Summit in early July and it’s a private conference that we’re holding. We do open invitation so scientists out there to approach us for an invite, but we do pretty much have that locked in, but that summit, again, is to take our technologies to apply to other conditions around the body. So conditions like ALS and MS, these are chronic conditions in the spinal cord that are going to require time with either drugs or cells or combinations of biomaterials drugs and cells.
There’s no doubt about that. So that’s why people are excited.
I can tell you a story. We published our gel, our first gel paper, The Journal of Biomaterials back in the fall of 2010, and the chair of Neurology at Sloan-Kettering – It’s, you know, top 5 say cancer hospital in the world, but the chair of Neurology, John Howe, called me from Sloan-Kettering. He said he have read about this gel that we could reduce bleeding and inflammation of the spinal cord in 3 weeks after an injury, and he started telling us about a bleeding and inflammation process in the prostate nerve after plastic surgery, but that bleeding and inflammation process is probably more like a 90-day process, and he said is there anything you could do about that?
Well our gels are flexible enough that we can program them to release drugs for up to 1-1/2 year probably. So yeah, we can, so we’ve been working with John now for a little over a year and we’re excited about a project that we’re going to be putting forward once we open up our global headquarters in July.
We have a new global headquarters coming online, which is going to provide really the field of Neurotrauma, the first we think focused rodent center. We’ll have 400 rodents in our center, you know, conducting research in Neurotrauma using biomaterials never been seen before, so the conditions we’ll be working on very – Of course, initially, we’ll be working on spinal cord injury, but you know, bringing, you know, a whole new team and a whole new approach to Neurotrauma is sorely needed by the entire field.
MM: So are we, in fact, experiencing a paradigm shift in the development of therapies to treat neurotrauma?
FR: Yeah. I think that what you see – what we’ve seen now is, you know, the last 20 years, we’ve seen a lot of advancements in drug development and cell development, but the fact is that the body who has an extracellular matrix, you know, these tissues, you know, are not just cells. They’re cells that are held together by ectocellular matrixes, and that’s what Bob Langer, of course, my partner, discovered over 30 years ago with his work at MIT.
Bob has been in the field. He co-founded the field in tissue engineering with some people from Harvard now just a little over 30 years ago, but knowing that that extracellular matrix was absolutely required, Bob then began mimicking it, you could say, what’s a scaffolding devices, and you know, he’s lead us now to the whole field of biomaterials and the range of possibilities, but there’s no doubt that, you know, the fields by the discovery that have been focused on drugs and cells will only benefit, you know, by using these devices that deliver their cells or hold their cells.
We know that cell survive and thrive a lot better with biomaterials when they’re applied, and of course, we know that a lot of drugs need to be held and delivered over a long period of time. Now it’s very difficult to inject the drug with, you know, a half life of say a day or two to provide any therapeutic effect. If we could keep releasing those drugs over time, you know, you can get them up a lot better therapeutic effect. So the world really does really need these technologies.
MM: Now I understand there is a personal connection here.
FR: Yeah, absolutely. I was paralyzed myself. Went in for spine surgery, woke up paralyzed back in 1992, and it’s been almost 7 years recovering from that; 5 years in a body brace, and even my neck was quite a challenge, and you know, I didn’t set out to really discover treatments for spinal cord injury, but you know, you could say I got back to health in 1998 and 1999 and set out on a career path to let me fill the work in school business and Siemens Corporation and on to Bob Langer.
And when I met Bob in 2005, you know, we felt that with my background in healthcare and business development and technology development combining it with the technology, and of course, my passion for the patients, you could say, with spinal cord injuries, we threw in a good combination. So we founded the company back in the fall of 2005 and made scientific history in a number of ways including that primate study, but you know, last year, we won the 2011 Apple Award given by the American Spinal Injury Association, you know, identifying us with the number one published paper in the world, and that was our first paper that we published on our primates. I can tell you just this week, continued to assess our 2011 primate study that we completed recently, and very excited about that day that only confirms our earlier study so very exciting work.
MM: And now I want to shift gears to the company growth strategies perhaps. You anticipate beginning a 10-patient pilot study in the second half of 2012, so you know, what is the status of your research?
FR: Yes. I’ll tell you, we’re actually very excited. We met with the FDA on April 12, and you know, there was I guess some, you know, range of possibilities whenever you mean with the FDA, I guess hopeful to get what you want, and you know, we’re always a little worried what could happen, and yeah, another week came out. We kind of assessed what we knew with the grand slam writing. We got everything we wanted, but even more exciting, you just mentioned – and for years, our talks with the FDA – discussed the 10-patient study, but I think that they are confident in our primate data and over our pre-clinical data allowing us to start with just 5 patients so it’s very exciting not only for us and the patients. I mean it literally cuts across over human study in half, but what’s exciting is after the 5 patients, we’re going to open up to study we believe to cervical injuries, which are, of course, you know, the most crippling.
So no one has ever been approved to do a cervical spinal cord injury study before, and you know, we think we have the elements in place to get that started before anything.
So again, we do expect to start the human study this year. It’s going to be 5 patients, not the 10 that we had thought. So we have lower costs and the lower hurdles for approval. A more exciting maybe coming out of the meeting was the FDA’s agreement for a human device exemption application, which is the orphan status. So the orphan status gives us not only a very low threshold, you could say through the FDA, and again, you know, these are biomaterials that have been using the body for other applications. It’s well tested, very safe, so it does give us a very low threshold for approval with the human device exemption.
But on top of that, we also get 7 years of exclusivity in the market space. Of course, we have, you know, over hundred patents, and we’re proud of our patent portfolio, but you know, that 7 years is going to give us the ability to create a real brand for InVivo in the Neurotrauma space. So with that brand, of course, we’ll bring our follow-on products to market and have full market approval for all those. So it’s very exciting plan. You know, we’ve been executing on it now for 5 years, handling almost all the mouse down through really to the worst recessionary times in the last 7 years, so we’re very proud of our business performance.
And again, you know, from inception in November 2005 to going public in the fall of 2010 five years later, now, we have over 100% return to our investors to date with very exciting human data coming up later this year, new applications to other parts of the body. You know, we think our investors should be very excited.
MM: And can you talk a little bit about your business models, the multi-prong? Are you developing technologies for out licensing as well as therapies in-house?
FR: Yeah, so I can tell you there’s another piece our investors are very excited about is we have a very, very cost-effective model in spinal cord injury, you know, in regards to bringing products to market. About 80% of all spinal cord injuries are treated at only 75 level-one trauma centers in the United States. So in Boston, there’s only a few and in New York, only 8. You know, these are centers that have basically helicopters on the roof, neurosurgeons in the operating room or in the emergency room, you know, 24 hours a day. Very, very expensive. So again, there’s very few of them.
So in the spinal cord injury space, we’re able to bring that product to market ourselves. Again, a multi-billion dollar product where I probably need somewhere between 20 to 25 salespeople to tap the entire United States. For the chronic injury space, that’s a different situation. You may have noticed in our recent press release where I was able to bring in Bob Housler Jr. from Stryker.
So Bob just wrapped, you could say, a 20-year stellar outstanding career of business development, sales, all kinds of executive responsibilities at Stryker. I know he’s responsible for bringing $150 million in new strategic business in the last 5 years. You know, he’s just a superstar, and we’re bringing him in because of applications we have seen in chronic pain. So the peripheral nerve injury market, there are probably thousands of nerve, you know, pain management centers in United States. That’s a different situation. That’s the goal of the market in a whole new way, much different than spinal cord injury. So in that space, we’re all looking to partner.
So again, we have brought on Bob Hauser Jr. from Stryker. We actually have quickly identified over 25 partners for us to commercially some of these outstanding other applications. So we’re partnering in there, and you know, I know we were talking about revenue from our first product by the end of 2013, but you know, I might not be surprised to see some revenue from some partnerships before then. So we’re very excited about that.
MM: And in February, you completed a public offering valued at $20 million. So how have you invested this capital?
FR: Well, I’ll tell you right now. I think I’m one of the most effective CEOs on Wall Street in the last 5 years. I say that with pride. I have the number to show it. You know, I’ve spent about $14 million to date, and I have a $140 million market cap. Fully diluted, the market cap is over $200 million, but you know, we really delivered on RRY. I mean that’s a 10x to 15 excellent on what we’ve spent so far. We used our money very wisely. I would say it dates back to my immigrant parents who watched every penny, but you know.
Also, I understand how important these dollars are and how resources are. It was tough to come by. You know, that $20 million round was not just cash to InVivo. It was a real thumbs up for all of Wall Street. Yeah, that was a $20 million round. By the way, we set up space $15 million. We ended up racing $20 million. You know, the stock jumped right after we did that deal. The market average deal going into that was about 29.8% discount to the market price, and we did that only 13% discount to the market, but more importantly to us, we brought in 8 powerful institutional healthcare investors lead by Fidelity. So we had Fidelity and quite a few other, you know, leading institutional investors. We went from one institutional investor to nine.
We’re also expected to have analyst coverage coming at InVivo in June based on that deal and we’re very excited about it, but again, this $20 million, we’re using it to drive our multiple platforms to market. You know, people have often said to me, “Well, you said you could get the spinal cord injury study or product to market with tons of $30 million.” Well, at $40 million, I believe I have already 3 ready for the FDA.
So anyway, we’re using it wisely, but more importantly to me, you know, I just felt really outstanding as the CEO and founder of the company to get that pat on the back from the likes of, you know, Fidelity. You know, Fidelity came in very significant portion of that $20 million, and then we have special select funds and Millennium funds and Iguana. We had other large institutional investors so that was – It was important to us now, you know, from getting the capital, which by the way, now gives us over 2 years in cash, so we have plenty of cash for the run. You know, people are talking about increasing earned rate as we grow here, and obviously, is getting into studies. You know, burn rate does go up. As I mentioned, imagine we have a 5 phase study. So very, very little burn.
And by the way, as we go forward, we kind of hired new people, but the talent shifts ahead. So it’s not like you’re just exponentially increasing your cost. You’re kind of shifting cost so that burn rate goes up, but not that much. So again, with that rates now, institutional investor support, you know, 2 years of cash, 2 plus years of cash, you know, it was very powerful around for us.
MM: And so lastly, what’s in store for the future of InVivo Therapeutics? What are your strategies to build shareholder value?
FR: Sure. So I can tell you that we obviously have the interest from suitors at all times. You know, we’ve been looking to expand our board. You know, as a CEO, I was looking to, you know, improve our corporate coverage to a lot of different ways I think our investors will see. Even our investor relation page will be improving in the near term, but from a corporate governance standpoint, we’ll be spending our board to include industry experts, and look for some of those partnerships. You know, in the past, we’ve had some talks with J&J and others about possible deals, and you know, we asked the CEO of the major life science company to put it that way to doing our board just 2 months ago, and he couldn’t because we were target.
So, you know, I have to see what happens with InVivo. We know that we’re going to keep our nose to the grindstone. As I would say, heads in the keyboard, you know, driving our company and we’ll see where chips fall. But again, I see we’re going to be maximizing shareholder value. You know, I know or I do share responsibility as a board, as a management team to maximize their shareholder value, and you know, if someone steps up with the right price, you know, InVivo could become the division of another company, but it’s also possible that we could be an acquirer. You know, we’ve been approached around some banks with some companies, interesting spaces that some of them even have revenue. You know, we might require them, but there’s a range of possibilities for us. I guarantee, we won’t throw them away to drive shareholder value. Again, I’ve taken just $14 million, and you know, over $140 million in market cap and growing, so we’re going to use it wisely.
MM: That was a company snapshot of InVivo Therapeutics with Frank Reynolds, CEO and CFO of the Massachusetts-based medical device company with OneMedRadio. I’m Matt Margolis signing off.