Dr. Samuel Lynch is president and CEO of BioMimetic Therapeutics Inc. The Franklin-based company develops drugs for the repair of orthopedic injuries to bone, cartilage, ligaments and tendons. BioMimetic late last year won an important patent for its regenerative tissues and recently wrapped up a stock offering. Lynch sat down to discuss his company’s growth with Post news correspondent William Williams.
You sold $8 million of stock in April to InterWest Partners, one of the company’s largest shareholders. How will this impact the company?
We plan to use the proceeds of the financing for general corporate purposes, including working capital. Specifically, later this year, we expect to initiate a North American pivotal clinical trial for the second product candidate in our pipeline, Augment Injectable Bone Graft, which if successful will be the first product of its kind to actively stimulate bone healing via a minimally invasive procedure.
The idea is that when a patient with a bone fracture goes to the emergency room, they could get an injection to help the fracture heal faster. It’s a potentially revolutionary treatment concept, but like all drug development of novel therapeutics, it will be very expensive to develop and obtain FDA approval. These funds, along with those from the rights offering currently underway, will help fund the clinical trials needed to get Augment Injectable FDA approved and commercialized.
You’re also close to wrapping up a rights offering to sell another $17 million of stock, which is being backstopped by the company’s top investor, Novo A/S. Are rights offerings such as this somewhat unusual? Even more so, is it unusual to have an investor agree ahead of time to buy shares not sold in the offering?
Simply put, a rights offering allows shareholders an opportunity to buy shares of a company on a pro rata basis. That is, if they already own 1 percent of the stock they can buy 1 percent of the stock being sold in the offering. That way, current shareholders don’t get diluted when the company sells more stock.
Rights offerings are a relatively new concept in the United States but have been used fairly extensively in Europe. The rights offering is conducted via a registration statement. As you indicated, we also entered into a standby purchase agreement with Novo A/S, one of our existing stockholders. The way this works is that Novo has agreed to purchase any shares not bought by other shareholders up to $15 million of common stock.
Since Novo is already a large shareholder, law requires shareholders to approve the sale of more shares to them. But we believe this is a very good transaction structure for BMTI because it guarantees us a successful offering, and it is a very good structure for shareholders because it allows them to buy more shares in the company if they would like to do so.
Shares of BioMimetic have been down in 2009 compared to 2008. How do you assess this?
Most companies have experienced a decline in stock price over the past nine months. I would say that BioMimetic has fared better than many and not as well as some. We are very fortunate in that we are well capitalized, and will be in an even better position after this rights offering is completed.
It was recently reported that 42 percent of public biotech companies have less than six months of cash, 53 percent (out of 342) publicly traded biotech companies have a market cap below $100 million and 69 companies are trading below their cash levels. By these metrics, BMTI has fared extremely well.
Even more importantly, though, we have achieved several key milestones over the past several months that position the company for future growth. We extended patent coverage of our lead technology platform until 2025 and completed enrollment in both our U.S. and E.U. pivotal clinical trials for our lead orthopedic product candidate.
We are expecting to file our pre-marketing approval with the FDA later this year, which is required for commercial approval of a product in the United States. And as I mentioned earlier, we plan to initiate a pivotal trial with our second orthopedic product candidate later this year. So, overall, given the recession and the difficult financial problems many companies are facing, we are very pleased with our current position.
You’ve completed enrollment in the final phase of the pivotal trial of Augment Bone Graft and should submit data to the FDA for potential product approval by the end of the year. What more can you tell us about this product?
It is an exciting and busy time for the company right now. Currently, and for the past 20 or 30 years or more, to treat severe bone injuries, surgeons would often perform a second operation to cut out bone from one part of a person’s body to graft it into the bone injury in another part of the body. The transplanted bone is called autograft. This process takes up extra time in the operating room, increases the chances of post-operative complications, and is very painful for the patient.
Augment Bone Graft is designed to be a sterile, completely synthetic substitute for autograft that surgeons can quickly and easily place into the bone injury. It contains a highly purified, highly concentrated formulation of one of the body’s main wound-healing proteins and a synthetic bone matrix.
We have enrolled 436 patients in 37 hospitals across the United States and Canada in our pivotal trial to determine if Augment works as well as autograft but without all the drawbacks inherent in using autograft.
As you mentioned, we are now following all these patients to see how they heal. But that doesn’t mean we’ve just been waiting. We’ve been working all spring on two of the three modules, or sections, of the PMA application that companies have to file with the FDA to gain approval to sell a novel medical device or drug in the United States.
Once the six-month follow-up for all patients has been completed in July, we will then lock the database, perform a rigorous analysis of the data and compile the final study report to be included in the third and final PMA module for submission to FDA in the fourth quarter of this year. If all goes well, it takes the FDA about a year to review all the documents and data and make a final determination whether to approve the product.
Thus we would expect FDA approval of our first orthopedic product, Augment Bone Graft, in the United States in late 2010. In the meantime, though, if the data appear to us to be strong, we will need to begin to build our commercialization team, including sales, marketing and reimbursement personnel. We’ll also have to ramp up our specialized pharmaceutical and medical device commercial manufacturing operation at the Cool Springs Life Sciences Center in Franklin.
You mentioned your plans for another pivotal trial with a second orthopedic product, Augment Injectable Bone Graft. That sounds like a key potential advance. What is the update on that effort?
The results of early clinical studies in wrist fractures and in foot and ankle fusions have shown that this injectable product has the potential to speed bone healing by delivering a bone growth factor in a putty that looks kind of like toothpaste. Therefore, we are making plans to initiate a pivotal trial with this product candidate later this year.
This trial will be in foot and ankle fusions and will involve many of the same investigators and essentially the same protocol as the current Augment pivotal trial. This approach will reduce time to potential approval by up to two years. We are in the process of putting together the information necessary to gain regulatory authorization to initiate this study in the United States and Canada.
Just how big is the potential market for your products?
The latest industry data estimates the size of the worldwide orthopedics market at $25 billion as of 2007. Strong growth in the industry is expected to continue, driven by aging baby boomers, the desire for active lifestyles well into retirement, and growth in the incidence of diseases that contribute to orthopedic tissue injuries and impair the ability of the body to heal injuries.
The specific area in which we focus — orthobiologics, which is the development and commercialization of biologically active, regenerative therapies — is leading the transition in orthopedics from passive, mechanical implants to biological solutions designed to enhance the regenerative potential of orthopedic tissues.
As you suggest, it is a growing therapeutic approach in orthopedics. In fact, orthobiologics, in particular bone grafting-related products, is one of the fastest-growing segments within the orthopedics market. According to recent market research reports, the global orthobiologics market was estimated to be $4.2 billion in 2007. With a growth rate of 17 percent, it is projected to almost double by 2012. Given that we are positioned to be one of the leaders of this therapeutic revolution, we are excited about our future growth opportunities.