RTI Unveils Key Surgical Product Innovation
BY ROBIN R. YOUNG CFA, JUNE 28, 2004
The best source of replacement body parts is the patient. Whether it is skin, tendons, bone, blood or whatever, harvesting from one spot to implant in another spot of the same patient is the gold standard, for more reasons than we can list here. Second best source is a living relative. As we go down the line, the next best source is a stranger, then another species and on until you get to synthetics. The incredible story of biomaterials is that the span separating autologous (i.e. harvested from the patient) and synthetics is narrowing rapidly. In the middle of this continuum of materials are the hard and soft allograft tissues, from human cadavers.
This past week Regeneration Technologies (RTI) announced that they plan to narrow the gap between the gold standard and allograft. RTI said that it had created and was prepared to offer commercially sterile soft tissue derived from cadavers (allograft). Other firms, most notably, LifeCell also offer allograft soft tissue. And by soft tissues, we are referring to cartilage, tendon, skin, ligaments and even just pure sheets or globs of cells (technical term) that can be used for any patching or connecting that a surgeon requires.
LifeCell, in particular, has built an excellent reputation with surgeons as the leading supplier of soft tissue allograft that is safe, flexible and useful in a wide variety of indications. LifeCell's Alloderm product line is proving to be an essential tool for surgeons.
CryoLife, who pioneered allograft soft tissue 24 years ago with its heart valves, stumbled badly when it allowed contaminated cartilage to leave its processing plant a few years ago. That tissue triggered the catastrophic death of a young man in Minnesota. The shock waves from that event are still being felt throughout the $2.5 billion (estimated market value) allograft industry, changing the business models of many firms away from natural tissues to synthetic products like ceramics or plastics.
To address the concerns created by the CryoLife experience, MTF Foundation, the largest supplier of allograft tissues in the world, offers soft tissues but has developed, essentially, pharmaceutical grade processing systems to reassure surgeons.
By far, the most dramatic example of what a safe and effective soft tissue can mean to a company is LifeCell. Having instituted pharma grade processing early on and designed Alloderm to fit the surgeon's needs, LifeCell's revenues have jumped from $34 million in 2002 to an estimated $58 million this year. Its share value has soared from $52 million in 2002 to $278 million last week. The stock is trading at 80x estimated 2004 earnings of $0.13 (consensus).
Regeneration's stock value has risen 62% in the same time period. That's good, but not LifeCell good. So, it was into this environment that Regeneration issued the following statement last week:
'An article in the June 17/2004 issue of The New England Journal of Medicine outlines a study done by the Centers of Disease Control and Prevention, which concludes, 'Sterilization methods that do not adversely affect the functioning of transplanted tissue are needed to prevent allograft infections.' The article goes on to mention: One tissue bank has developed and implemented a low-temperature chemical-sterilization approach (BioCleanse) that kills spores but preserves the biomechanical integrity and function of some allografts. The efficacy of this sterilization method is supported by the absence of reports of bacterial or viral allograft-associated infections in tissue processed by this method (CDC: unpublished data). In contrast, tissues processed with all other disinfection and sterilization methods, including gamma irradiation, have been associated with reports of allograft-associated infections (CDC: unpublished data).'
And behind even that statement is a really strong R&D effort aimed at providing the surgeon with a broad array of what we are starting to call Super Allograft; reiterated at AAOS this year by Randall Mills Ph.D., RTI's Vice President of Business Development. This is to say, this is allograft with significantly greater levels of functionality, more structure, more biologic activity, wider range of indications and more safety.
RTI's new soft tissues should be interesting. We look forward to seeing what else RTI unveils from its growing bag of goodies.
