By James Netterwald, Ph.D.
On Sept. 13, 2010, a press release announced that a small startup based in Allendale, NJ, was awarded a landmark patent that has the potential to propel the field of regenerative medicine into the next phase. The story behind the patent is a case study in biotechnological innovation … and the story behind the patent owner —Amorcyte Inc. — is a story in and of itself.
Amorcyte Inc. was founded by Dr. Andrew Pecora, a very prominent physician-scientist, clinical researcher, and businessman. At the time Amorcyte was founded in 2004, Dr. Pecora’s day job was (and still is) chairman of the John Theurer Cancer Center at the Hackensack University Medical Center, Hackensack, NJ, which, in 12 years, he has built into one of the top-10-largest cancer centers in the country. Pecora started another biotechnology company while continuing to serve as chairman of the cancer center. The company — Progenitor Cell Therapy (PCT) — is one of today’s leading GMP manufacturers of cell therapy products and a processor of bone marrow stem cell transplants for the major cancer centers around the country; Amorcyte was spun out of PCT.
Although Dr. Pecora is still a vital member of the company, Amorcyte’s day-to-day operations are managed by CEO Paul Schmitt.
It Starts With The Science
The main idea behind Amorcyte’s regenerative stem cell technology was born out of Dr. Pecora’s clinical observations in which autologous stems cells removed from acute myocardial infarction (AMI), or heart attack, patients were shown to promote new blood vessel growth and preserve heart muscle. Essentially, the technology was developed as follows. Heart attack patients were admitted into the hospital and given the standard of care for their condition, which included the insertion of a stent to alleviate the blockage and a variety of medications. These patients spent three days in the hospital. Patients that participated in the study were asked to make a very small bone marrow donation. The bone marrow samples were then sent to PCT, where they were subjected to a now-patented process in which CD34-positive stem cells containing the CXCR4 receptor were isolated. CD34 and CXCR4 are proteins that sit atop the cell surface and aid in their isolation and identification by PCT.
Once isolated, the stem cells were stabilized to increase their shelf life from 24 hours to 72 hours using a now-patented process. PCT then enriched them, tested them for potency and stability, and performed other procedures to ensure the cells were being developed according to GMP guidelines. Adherence to GMP guidelines is crucial to development of a cell-based therapy, and the lack thereof might cause the field of cell-based therapy to stall. Within 10 to 18 hours after processing, the cells were sent back to the hospital by carrier. “The patient already had a stent placed in the artery right above where the heart attack occurred. So we just ran a catheter back up the same way into the patient and, at the point of the stent, blocked off blood flow to quickly reinfuse this highly selected pool of CD34 cells into the damaged heart muscle,” says Schmitt. The molecular biology of the CXCR4 receptor enables the CD34-positive stem cells to migrate very rapidly to the point of the infarct and thereafter initiate a cell-signaling cascade called the SDF gradient, which results in the formation of new blood vessels (neoangiogenesis).
“We showed in a Phase 1 trial that we are the first company and only company — to my knowledge — to demonstrate neoangiogenesis in heart muscle that is damaged as a result of a severe heart attack,” says Schmitt. “Once you have a heart attack, there is a certain amount of muscle that is destroyed, and that area is called the infarct zone. There is also a peri-infarct zone, which is a mass of muscle around the infarct, and that muscle will go into hibernation and eventually die.” Amorcyte hopes that by inducing neoangiogenesis in that damaged heart muscle, it will demonstrate functionality in a later stage clinical trial.
Getting Down To Business
Novitas Capital is the main investor in Amorcyte Inc., a relationship that has been ongoing for the last four years. Novitas is an early-stage fund of about $250 million under management, which primarily invests in early stage or start-up companies, and Schmitt leads the life sciences side of Novitas. Amorcyte is a virtual biotechnology company. Novitas Capital defines a virtual biotech company as a start-up with only three or four employees at the time they are trying to establish a proof of concept. “To be considered a virtual biotechnology company, according to Novitas, they must be determined to fulfill an unmet medical need,” says Schmitt, who adds that the unmet medical need must have a really large potential market that will be enticing enough to attract more investment partners later on in the development of the therapy. Amorcyte meets all of these criteria.
“One of the nice things about life sciences investing today is you can outsource everything. So we tried to get into investments like Amorcyte where we don’t need lots of people or infrastructure at the early stages until they get to a proof-of-concept stage,” says Schmitt. The investment started when Dr. Pecora came to Schmitt with a request to raise $5 million to fund a Phase 1 trial, which, according to Schmitt, was structured more like a Phase 2 trial that he describes as follows. “The trial contained three dosage groups — 5, 10, and 15 million cells. We had 15 patients in each arm [i.e. treated and control]. The trial tested not only for safety but also clinical effect, which turned out to be neoangiogenesis.” And aside from direction given by Dr. Pecora and a small team of researchers, the rest of the labor for this trial was outsourced. Clinical trial management was outsourced to a CRO with experience in cardiovascular drug development, and PCT was hired to perform the contract manufacturing, as well as basic administrative and logistical functions. The trial was conducted over a two-year period with highly successful results that eventually enabled the company to be awarded a broad, deep patent. However, following the trial, Amorcyte had three tasks to complete: analyze the Phase 1 clinical data, prepare for the Phase 2 trial, and finally, start presenting the company to strategic partners. Schmitt was asked to serve as CEO to accomplish these tasks and agreed to take on the role on a part-time basis but remained a partner at Novitas Capital. Schmitt’s qualifications include a long operating background. He has been CEO of four life sciences and biotechnology companies and has raised lots of venture capital for those companies (in excess of $200 million).
A Development And Commercialization Background
Schmitt has a B.S. in finance from Lehigh University and an MBA from Rutgers University, New Brunswick, NJ. He has spent about nine years as CEO of four distinct companies. The first company, a medical device division of a major British healthcare company, was the BOC group. He left BOC to spin a company out of the University of Pennsylvania — Bioelectron — which was one of the first producers of noninvasive bone growth stimulators. He was then recruited by venture capitalists to start up a company out of Princeton University called DNX, which was one of the first to create transgenic animals. In 1999, he got into the venture business with Novitas leading their initiatives in the life sciences. “I’ve been on both sides of the stream, having been an operating guy that has developed products and commercialized them. I’ve done lots of corporate deals. I’ve raised lots of venture monies. I’ve taken companies public. And it’s been fun the last two years to apply those experiences to help up-and-coming entrepreneurs on the venture side,” says Schmitt. Amorcyte is one of those 15 life sciences investments at Novitas. Other companies include TetraLogix Pharmaceuticals in Philadelphia and Logical Pharmaceuticals in Boston.
From Investor To CEO, Adapting To A New Set Of Goals
Schmitt will remain in the role of CEO until Amorcyte is properly financed. Upon taking on this role, his goals as CEO were pretty straightforward. His first major goals was to prepare the company to conduct a Phase 2 trial, which involved finding companies for outsourcing (CROs, subcontract partners, regulatory consultants, etc.) various aspects of the trial and to ensure that the Phase 2 trial will be adequately financed. These goals will take at least 24 months to accomplish. The second goal was to be awarded the patent, which has already been accomplished. Says Schmitt: “Patents are so fundamental to our business, and we felt that we had a chance of getting some pretty significant patent activity, but we did not predict that we would get as strong a patent as we did.” Schmitt credits Dr. Pecora with the successful management of the patent-filing process. The third goal was to ensure that company was well-financed. Novitas put in some additional money ($1.8 million). Finally, Schmitt’s goal was to organize a presentation to attract more investment partners for long-term development. “For that presentation, we analyzed the market to figure out why this is such an attractive investment, to identify this as a big opportunity, mostly based on the strength of our patent and the significance of the clinical data that established evidence of neoangiogenesis in heart muscle damaged as a result of AMI,” says Schmitt, who adds that Amorcyte’s patent operates on three fronts: composition of matter protection for the CD34 cells with the CXCR4+ receptor; protection of the stem cell processing method which enables the cells to maintain potency, stability, and viability for up to three days; and patents on most, if not all, of the catheter-based delivery methods used by the interventional cardiologist.
Schmitt feels that Amorcyte has a good opportunity to raise money based on the strength of its patent and clinical significance of the neoangiogenisis data. “It is a very difficult market today, but because we have a very good product, fundamental IP that now provides 20 years of exclusivity, and a clinical plan which is doable (fewer than 600 patients) that can be executed in phases, Amorcyte’s early-stage development can be successful with a total investment of probably less than $50 million,” says Schmitt, who adds that Amorcyte can have an approved product on the market worth several billions of dollars from a very small investment of starting capital.
Eventually, Amorcyte will need to recruit a new CEO, but what will be the qualifications of this person? “Once we get the financing done and the clinical trial started, we will probably want to recruit a CEO who can continue to drive the clinical process and drive the process in a way that saves time and, in parallel, will line up partners from around the world that will capitalize on Amorcyte’s patent protection in major international markets,” says Schmitt. In terms of investment partners, Amorcyte is seeking out a pharmaceutical or biotechnology company that has a strong cardiovascular franchise or wants to build a cardiovascular franchise and has made the decision that it wants to get into regenerative medicine and stem cell therapies.
“The biggest challenge is that Amorcyte is a cell therapy company, and that is a whole new area in biotechnology,” says Schmitt. “Even though stem cell gets a lot of play in the press, there is a lot of hyperbole out there.” Schmitt explains that Amorcyte is at the front of the new wave. The first successful autologous stem cell therapy in that wave comes from the biotechnology company, Dendreon, and that approval came in the last six months. “We are in the area now where there is going to be a prudent business model, as in Dendreon. We are starting to see major pharma companies such as Roche and AstraZeneca announce that they are moving into regenerative medicine. So I think our timing is right.” The other issue is the economy. “There’s just not a lot of venture money out there, and most venture companies, including Novitas, are protecting the stars in their existing portfolio. They are not making new investments in product and equity.”