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Feature Articles : Jul 1, 2012 (Vol. 32, No. 13)

Tissue Engineering Revenues Rise

  • Vicki Glaser

More than half (52%) of the companies comprising the tissue engineering (TE) and stem cell industries are revenue-generating, compared to about 21% four years ago, according to an analysis published in Tissue Engineering Part B. Of those companies, 31% having commercial products and 21% are service-based; another 30% have products in clinical trials.

“Today, the industry has begun to understand how to manufacture and market TE and stem cell products, sustaining itself and still growing,” concludes a team of authors led by Robert Langer, Sc.D., David H. Koch Institute Professor at the Massachusetts Institute of Technology.

The data collected by Dr. Langer and colleagues between 2007 and mid-2011 “suggest the TE and stem cell industry has stabilized and is on a path pointing toward continued success,” state the authors in the article entitled Progress in the Tissue Engineering and Stem Cell Industry: Are We There Yet?

They report that the industry is just attaining profitability, with sales revenues reaching $3.5 billion and industry spending approaching $3.6 billion, and “appears to be on a positive trajectory,” although they anticipate “that there may be growth pains as the industry matures."

Up until his passing in 2009, Michael Lysaght, Ph.D., professor at the Center for Biomedical Engineering at Brown University, had periodically tracked the growth of the tissue engineering and stem cell industry, publishing his findings in Tissue Engineering.

More than a decade ago he wrote, “tissue engineering research and development was being pursued by 3,300 scientists and support staff in more than 70 startup companies or business units with a combined annual expenditure of over $600 million.”

A follow-up accounting in 2008 concluded the following: “As of mid-2007 approximately 50 firms or business units with over 3,000 employees offered commercial tissue-regenerative products or services with generally profitable annual sales in excess of $1.3 billion…In addition, 100 development-stage companies with over 55 products in FDA-level clinical trials and other preclinical stages employed 2,500 scientists or support personnel and spent 850 million development dollars in 2007.

“These totals represent a remarkable recovery from the downturn of 2000–2002, at which time tissue engineering was in shambles because of disappointing product launches, failed regulatory trials, and the general investment pullback following the dot-com crash.”

The 2012 analysis by Dr. Langer’s group reported a nearly threefold increase in commercial sales for TE and stem cell products and services compared to the previous four-year period. Furthermore, the number of companies selling products or offering services increased by more than twofold to 106.

Although the industry remains a long way off from achieving its potential, the fact that it has matured sufficiently to reach the break-even point shows that “clearly it is making an impact on patients’ lives and on worldwide industry,” says Dr. Langer.

“The growth over recent years has certainly been encouraging and is evidence that businesses can be made of tissue-engineered/regenerative medicine products,” says Chris Gemmiti, Ph.D., chairperson of the Tissue Engineering Industry Council and product director, oral regeneration, Organogenesis. “I expect the field to continue along the path of productivity, but as an industry, we still have plenty of room for improvement and have not yet reached our fullest potential.”

Tissue Engineering journal formed the Industry Council for the purpose of helping to guide the evolution of the industry and to create strategic initiatives aimed at overcoming some of the R&D, manufacturing, and regulatory challenges facing the industry.

“The hype in the 1990s got ahead of the reality,” says Laura Nikalson, M.D., Ph.D., a member of the Industry Council, founder of Humacyte, and professor in the department of anesthesiology and biomedical engineering, Yale School of Engineering and Applied Sciences. Throughout the 1990s, TE companies were so overhyped and overvalued that by 2002 many had folded or were near folding and in trouble, she notes. By 2007, there was a resurgence and TE companies were starting to sell products.

“Some had become profitable and interesting enough so that in the last couple of years we have seen some major acquisitions of cell therapy companies, which I didn’t think would happen this soon.” Examples include the acquisition by Shire Pharmaceuticals of Advanced BioHealing in 2011 and of Pervasis Therapeutics in 2012.

Defining Therapies

As the current report notes, “The line between TE technology and other types of medical technology is often not clear and highly dependent upon the definitions imposed at the time.” In the analysis by Dr. Langer and co-authors, “TE and regenerative medicine are used interchangeably. Further, stem cell therapeutics are included, consisting of both cell-based therapies and stem cell banking.”

Defining the scope of the TE, regenerative medicine, and stem cell industries can be challenging. The definition has been somewhat of a moving target, and understanding what products and services do and do not fall within the scope of the definition is critical to interpreting and understanding an economic analysis such as this one.

For example, the authors of the 2007–2011 analysis in Tissue Engineering opted to exclude Dendreon’s cell-based immunotherapeutic Provenge® from their data. Although “often touted as a breakthrough TE technology,” stated the authors, “it does not provide any regenerative or reconstructive function to a damaged organ or tissue. Dendreon is at the commercial stage and generates about $72 million in sales. Had they been included, the industry market cap would have been drastically increased by $1.86 billion.”

The 2012 analysis excludes research focused on cancer stem cell therapy and “all medical technology in the cancer space.” The authors chose to include stem cell banking companies as commercial entities in the stem cell industry. They also included contract research organizations (CROs) that provide services for other TE firms in their analysis.

Todd McAllister, Ph.D., CEO of Cytograft Tissue Engineering, notes that the annual sales figure in excess of $1.3 billion cited by Dr. Lysaght et al. in the 2008 report for the aggregate field comprising TE, regenerative medicine, and stem cell therapeutics was largely dominated by Medtronic’s product Infuse® Bone Graft, comprised of recombinant human bone morphogenetic protein (rhBMP-2).

In the breakdown of the $1.3 billion sales total, the authors reported the following: “Three areas predominate: sales of Medtronic’s Infuse Bone Graft products are approaching $700 million, the aggregate volume of private sector cord banking of adult stem cells now exceeds $270 million, and sales of biomaterials with a propensity for tissue regeneration, including small intestine submucosa (SIS), now exceeds $240 million.”

While some definitions of the TE and stem cells industry have expanded to include recombinant proteins, extracellular matrices, and other types of products such as SIS, in Dr. McAllister’s view, these entities—while used for regenerative medicine applications—are not technically tissue engineering products and are certainly not cell-based therapeutics that have been grown in a laboratory in tissue culture processes.

The more focused definition of the field he prefers would exclude a number of commercial products, greatly reduce revenue figures, and dramatically diminish both Dr. Lysaght’s and now Dr. Langer’s numbers.

Despite this cautionary perspective, even if one defines the field more narrowly as cell-based therapeutics, “there is no question that sales are ramping up,” there are likely many more companies in existence at present than there were four years ago, and “there is significant growth and cause for celebration,” says Dr. McAllister.

“Recently we have seen a strong increase in the number of clinical trials with cell-based therapies,” he adds, noting that a search of the ongoing clinical trials would likely yield more than 1,000 unique clinical studies of cell-based therapies.

“To me, clinical success will drive commercial success, as you have to make a product that works first; and numbers of products in clinical testing will drive clinical success. The dramatic increase in the number of cell-based therapies being used in the clinic I think is the single most critical indicator of success of the field and of the impending commercial success,” he says.

Viable Business Models

Other signs of strong growth described in the 2012 report were the 7,710 jobs created by the industry during the four-year study period—a 2.3-fold increase compared to the 2008 industry analysis—and the rise in total number of companies from 171 to 202, at all stages, “indicating that the field is not only progressing but also sustaining itself,” stated the authors.

“It took the field 18–20 years or more to get its footing with regard to the complexities of product design and development, regulatory throughput, and distribution, clinical acceptance, and reimbursement,” says Peter Johnson, M.D., co-editor in chief of Tissue Engineering, president and CEO, Scintellix, and vp R&D, Avery Dennison Medical Solutions.

All of those issues “appear to have been surmounted by more than one company with more than one type of product, and that suggests to me that we have at least the beginning of an understanding and acceptance by the FDA on the clinical side and the business savvy, and that business models are now beginning to align with the realities of these types of products.”

Tempering his optimism with the recognition that the industry is still in the early stages, Dr. Johnson states that “the signs point toward a day when we will begin to understand the immunology and cell sourcing so much better that common manufacturing techniques can be used that are accepted by the FDA.”

The industry will then be a step closer to realizing the fundamental value of the potential for tissue-engineered, cell-based products to integrate with the body and yield long-term cures with a single treatment.

“From a business perspective we are absolutely seeing that people can make and sell efficacious products and sell them at a profit. It is a viable business model,” says Dr. McAllister. “In 2008, when the last paper was published, I would argue that you couldn’t have said that for a cell-based therapy.”

What could dramatically accelerate the pace of industry growth or derail its current trajectory in Dr. Langer’s view? A “huge new success” such as a product to regenerate heart muscle, cartilage, or bone, could result in large amounts of new funding and resources being pumped into the industry, or a major discovery on a par with the development of induced pluripotent (iPS) stem cells, for example.

In contrast, a significant negative outcome, whether due to the unexpected behavior of certain cells, less than careful work, or an insurmountable technical hurdle could slow growth and development.

Proceed with Caution

Many technical hurdles remain to be overcome, notably cryopreservation and manufacturing, Dr. Langer observes. “Every tissue/organ has its own issues to solve.”

From Dr. Niklason’s perspective, “The two real stumbling blocks for the industry have been manufacturing (repeatability, reproducibility, and scaling) combined with cost of goods issues. But these are becoming a dragon that can be slain.” While the regulatory environment is not getting easier, she observes, “cell products are less of an unknown for the FDA than they were a decade ago, so there is more precedent for the FDA to regulate products and the number of complete surprises is fewer.”

“The evolving regulatory environment and affordability of healthcare, both in the U.S. and abroad, will continue to pose significant hurdles,” says Dr. Gemmiti.

“That said, speaking from personal experience, the FDA was very willing to work with us at Organogenesis on the recent approval of Gintuit™, our new living cellular sheet for the regeneration of oral soft tissue. The lessons learned through that successful process are already helping to educate the rest of the field. On the healthcare side, companies committing to evidence-based medicine and supporting that with health economics research will find themselves ahead of the pack in the future.”

When asked how the regulatory environment for tissue-engineered and stem cell products has evolved over the past four years, Dr. Gemmiti replied, “In certain instances, the amount of clinical evidence required to support the safety and efficacy of biologics and devices has increased.” However, he points to products such as Provenge, LaViv™ (Fibrocell Science), and Gintuit as “important examples to follow and set precedents, at least on the cell-based side.”

“Unquestionably, the FDA’s aggressive stance with respect to cell-based therapeutics is a dramatic hurdle,” says Dr. McAllister. For at least some applications—and he mentions the use of stem cell-based therapies to treat congestive heart failure and muscle loss associated with acute myocardial infarction as examples—“the risk/benefit analysis is dramatically skewed and, as an industry and a regulatory body, we should be revisiting our cumulative tolerance of risk.”

In 2005, for example, coronary heart disease caused 1 out of every 5 deaths in the U.S. The prevalence of heart failure in the U.S. was about 5.7 million, and mortality attributable to heart failure exceeded 292,000 per year. Mortality due to myocardial infarction (MI) was about 151,000 in 2005, and about 1 in 5 people 40 years of age or older who suffered a first MI would die within a year. “These patients have little hope of improvement with current therapies,” says Dr. McAllister.

An Evolving Industry

The 2012 analysis included a detailed breakdown of spending by industry segment and stage and found that stem cell-based therapies dominate both the clinical (73%) and preclinical (62%) stages, followed by the category of cells and biomaterials (with clinical spending representing 18% of the total, and preclinical 19%). “These data suggest that stem cell-based products and combination products (cells and biomaterials) will be entering the market in the next 5–10 years,” concluded the authors.

“Of particular note is the entrance of embryonic stem cell (ESC)-based therapies into clinical trials for the first time.” The report noted that among companies developing stem cell-based therapies, 59% of those products derived from autologous cells and 39% from allogeneic cells, while 2% utilized xenogeneic cells. The majority (58%) of companies favored adult stem cell technologies, while 10% specialized in ESCs; the other 32% included in the analysis offered stem cell banking services.

Dr. Langer feels that the decision of whether to develop an ESC- versus adult stem cell-based therapeutic, or an autologous versus allogeneic therapy, should be decided on a case-by-case basis depending on the problem you are trying to solve and the properties of each type of cell. The choice between embryonic and adult stem cells will depend largely on which is likely to be most efficacious for a particular application; whereas the decision to work with autologous or allogeneic cells encompasses rejection issues, the need to grow cells without risk of de-differentiation, and how quickly the cells are needed.

“I think allogeneic cell therapies will always have an edge over autologous cell therapies,” says Dr. Niklason. “To contemplate an autologous cell therapy, the benefit to the patient has to be enormous.”

With regard to ESCs versus adult stem cells, “when the dust settles, embryonic stem cells will have taught us a tremendous amount,” says Dr. Niklason. “They have been critically important tools and enabling for the current overall stem cell field.” For the purposes of human therapy, however, she expects that adult stem cells and iPS cells will play a predominant role.

Looking forward, the authors, editors, and members of the Industry Council as a whole are cautiously optimistic. They express confidence in the industry’s ability to continue its upward trajectory and maintain a positive growth trend, while not minimizing the challenges that lie ahead.

“I see the field continuing to grow and becoming more entrenched as a viable industry,” says Dr. Gemmiti. “The setbacks of the past have provided important lessons for everyone: companies, investors, and regulators. The field can continue to translate research into viable products, deliver much-needed therapies to patients, and further establish successful businesses.”