A Follow-Up Interview with Gerald 'Gary' Bisbee, CEO of ReGen Biologics, Inc.
BY JOHN MCCORMICK, OCTOBER 6, 2005
One of the leaders in this emerging meniscus repair market is ReGen Biologics. We recently had a chance to do a catch up with Gary Bisbee, CEO of ReGen Biologics who we interviewed last year.
Disclosure: Individual members of HealthpointCapital, LLC including the author currently own nominal amounts of ReGen Biologics, Inc. common stock.
JM: Please Introduce our Readers to your core activities and products.
GB: Our core product is the ReGen® CMI™ which is a collagen based implant designed to facilitate the growth of tissue in the meniscus - crescent-shaped cartilage pads on the tibial plateau of the knee. The CMI targets a large portion of the 2004 estimated 860,000 partial meniscectomy procedures in the United States. An athletic injury, a wrong step off the curb or wear and tear over time can all lead to a torn meniscus. The treatment of choice today is a surgery called the partial meniscectomy, in which the torn or damaged tissue is removed. Of course, all of the surgeons realize that once the meniscus has been removed there is less protection of the articular cartilage and that can lead to a host of other problems such as osteoarthritis of the knee. Patients and surgeons are looking for an alternative solution which addresses the problems cause by a loss of tissue, and we believe the CMI will fill that need. We are close to submitting data to the FDA and assuming approval lies in our future, this will be the first meniscus implant available on the market.
JM: Tell us about your FDA clinical trial. In our last interview, you talked about submitting the clinical module of the PMA in 2Q:05. What is the status of the clinical module?
GB: We have submitted the manufacturing module, the pre-clinical module is ready to submit and we are working to complete the PMA submission by the end of this year. You will recall that the FDA requires that all patients be through two years post-surgery. The last surgery was completed in April 2003, so all patients were two years or more beyond their surgery date in April 2005. We are taking the intervening period between April of 2005 and the end of this year to analyze the data and work with the FDA on a number of procedural items.
JM: Can you elaborate on the FDA warning letter recently received by the Company?
GB: Of course. As disclosed in our recent quarterly reports, the FDA conducted an inspection of the Company in Q2 2005 and issued its report of findings called a Form 483. The 483 covered a number of observations made by the FDA with respect to procedural issues related to the administration of the CMI clinical trial. We responded to the 483 and have since communicated supplementally with the FDA to address the points in more detail. The FDA saw fit to follow-up on its 483 with a warning letter, which we received on September 16. All of the items included in the warning letter were addressed either in our response to the 483 or in the supplemental materials.
JM: So would you expect a panel review in late 2006 potentially?
GB: Yes, we are hoping for late 2006. Of course there are no guarantees, but a one year review period appears to be typical. Assuming we complete the submission by the end of this year, we hope that December of 2006 would be the time when we have the panel review.
JM: And the period of time from panel review to ultimate approval can be as much as 6 months...
GB: It could be as much as that. It could also be less than that. We can't be overly precise at this point in time, but we would hope for FDA approval and labeling in something like 2 - 3 months after panel approval.
JM: Tell us about the data then
GB: The clinical data remain positive and they have been stable for some time now. The first area of interest would be tissue growth. Does the implant cause tissue to grow? The answer is yes. We have published data in our 10-K. One subset of the patients who have received the implant end up with twice the tissue compared to control group who have had a partial menisectomy. Then there is the question that if the patient has more tissue, how does that manifest itself as a clinical benefit? The answer is that if you look at activity levels, for example, the same set of patients referred to above have returned a substantially greater portion of activity lost due to their injury than the control patients.
JM: Elaborate more on the control group.
GB: The control is a partial menisectomy. Note that in 2004 this type of procedure was performed approximately 860,000 times in the U.S. and we estimate that this number is growing at 5% per year.
JM: And these are all medial menisectomies?
GB: We estimate that approximately 65% of the partial menisectomies are medial and 35% are lateral. The technology underlying both products is the same; however, the actual shape of the meniscus is different and the surgical technique is somewhat different. The current clinical trial is for the medial side. In Europe our medial meniscus product is approved and we are currently working on gaining the CE mark for the lateral CMI.
JM: Also tell us about the data that came out a few months ago in the Journal of Arthroscopy.
GB: That was very exciting for us. The article consisted of a report on 8 CMI feasibility study patients. These patients underwent an arthroscopic re-look at one year post surgery, which gave us a good look at the extent of the tissue growth. Thankfully all those patients agreed to another arthroscopic re-look five to six years later. That answers the longitudinal question, which was one that needed to be answered. The short story is that the tissue at 6 years looked almost exactly the same as the tissue at 1 year in terms of volume--the patients lost no significant tissue volume over the course of the intervening 5 years. These patients also had a sustained increase in activity over the 6-year period. So when it comes to both tissue growth and clinical benefit--that is, increased activity level--we have very good news.
JM: American or European patients?
GB: These were all US patients, operated on by Dr. Steadman.
JM: What is your reimbursement strategy with respect to data?
GB: That's a very good question, and one of your recent research articles addressed reimbursement. We started looking at reimbursement 2 years ago. Not only is my background in reimbursement, we have consulted with experts to assist us in our strategy and implementation. Basically there are two choices, you can either seek a new CPT code or piggyback on an existing code. We are looking to piggyback on the meniscus transplant code, which is a relatively newly created code. Given the amount and strength of our clinical data, we expect to be in a position to educate payers regarding the clinical benefits of the CMI. Any existing coverage issues for current meniscus transplantation procedures should be adequately addressed by the CMI data.
JM: Will you apply for add-on payments because this is a new technology?
GB: We have engaged the support of reimbursement consultants and are assessing the possibility of applying for a transitional pass-through code.
JM: We see a lot of sports medicine doctors are practicing out of surgicenters, which are very cost conscious. How does that affect your ASP?
GB: The ASC payment for all procedures tends to be very low. However, the CMI is an implant and may therefore be subject to commercial carrier carve-out payments. These contract carve-outs would allow for CMI payment outside the global contracted rate. In addition, the implant can be used in the hospital environment where payment levels tend to be higher.
JM: During our last conversation you mentioned you had enough cash to get through Q1 of 2006. You just did a recent offering. Was that opportunistic?
GB: As you pointed out we did have enough capital to get through the beginning of '06. Given the activities surrounding the clinical trial and our approach to the FDA, we felt it was a good time to raise the next dose of capital. We raised net proceeds of about $11.2 million, which is enough capital to get through an additional 12 to 18 months depending on a number of factors including how much revenue we generate in Europe to offset some of the overhead. Including the new round of capital, we now have enough cash to operate through at least Q1 2007.
JM: Anything else you'd like to share with our readers?
GB: We are off to a good start in terms of marketing and distribution in Europe. We obtained back all rights from Zimmer to sell the CMI, so ReGen now has worldwide rights to the CMI product. We have set up a European subsidiary in Switzerland, are working to establish distributors in Italy and Spain, and we're going direct in Germany and several other countries. We believe the CMI will have a substantial direct-to-consumer marketing aspect to it. Typically in orthopedics that has not been the case; however, this market is one where the active people that have meniscus problems seek out alternatives, so we want to do the best we can to get this information in front of them, using the internet and other DTC techniques.
JM: I would assume that applies to people who have had prior menisectomies years ago because the "installed base" is an applicable audience?
GB: Yes, and we believe that "installed base" is a substantial portion of the people in the US who have undergone an estimated 9 million partial meniscectomy procedures over the past 15 years.
JM: Great. Thank you very much.
GB: You're welcome.
