Orthocell is ready to make waves in the regenerative medicine space: Pitt Street Research – Proactive Investors Australia

Orthocells CelGro platform forms the basis of a specialised collagen rope that could help reconstruct the anterior cruciate ligament, a strong band of tissue linking the thigh and shin bones that can rupture during athletic activity.

() is ready to make waves in the regenerative medicine space with a well-diversified portfolio of drugs at its disposal, according to Pitt Street Researchs Stocks Down Under newsletter.

The companys portfolio includes CelGro for soft tissue repair and dental bone regeneration, Ortho-ATI for tendon regeneration and Ortho-ACI for cartilage regeneration.

Pitt Street believes that as Orthocell continues to further research and trial its therapies, it will be able to address a much larger portion of the market.

The following is an extract from the Stocks Down Under newsletter:

Orthocell listed on the ASX in 2014 and initially had two main products: Ortho-ATI and Ortho-CTI. OrthoATI was the companys lead product for tendon regeneration, with Ortho-CTI being developed for cartilage regeneration. Lastly, the company was in late-stage development for its tissue regeneration technology, called CelGro, with initial human trials underway.

Cartilage tissue is the main connective tissue in the human body and is widely found in joints and bones. Ortho-CTI uses healthy cartilage cells (by extracting healthy articular cartilage from the patient through surgery) and uses it to grow healthy tissue over five weeks. These cells are then deployed into the joint through surgery, where they begin to generate new cartilage, hopefully resulting in complete recovery of the joints over 6-9 months.

Ortho-ATI, on the other hand, is used to treat damaged tendons. It makes use of healthy tendons (using a sample extracted through a biopsy) to cultivate tendon cells in a lab. These cells are then injected into the affected tendon around 4-5 weeks after the biopsy using ultrasound guidance. By late 2015, Ortho-ATI was being used commercially and had already been used to treat over 300 patients.

Ortho-CTI also saw sporadic use in Australia and Southeast Asia. The company was granted patents in numerous jurisdictions, including the US, Australia and Hong Kong, for its various products during this time and continued to expand its clinical presence across Asia. In November 2015, Ortho-CTI was used for the first time on a patient in Singapore.

Despite having access to early commercial opportunities, Orthocell continued to commission clinical trials for Ortho-ATI, mainly to determine its effectiveness against alternatives, such as surgery. One such trial began in July 2016, with results showing that Ortho-ATI was less invasive than traditional treatments (e.g., cortisol injections and physiotherapy) and showed significantly better results.

By the end of 2016, CelGro had also performed extremely well in early-stage clinical trials. It had shown safety and tolerability for being used as a barrier membrane to allow bone growth in dental applications and to treat full-thickness tendon tears.

November 2017 was a pivotal month for the company. Not only did Orthocell treat its 1,000th patient, but it also received CE Mark for CelGro. CE Mark is regulatory approval that allows the specified drug to be sold and marketed in the European Union. CelGro was used for the first time within the EU in May 2018.

Prior to that, in October 2016, the company received approval for a human nerve regeneration study using CelGro. The first results were published in May 2019, showing an 83% improvement in muscle power, which indicated that CelGro could be used to support nerve regeneration.

CelGro further showed an 89% success rate in tendon regeneration and a 96% success rate in nerve repairs in quadriplegic patients in later studies. All these successful studies and the various use-cases for CelGro implied a potential addressable market of over US$2bn, which leads us to believe that Orthocell is not going to find it difficult to grow its business worldwide once approvals are in place.

In December 2020, Orthocell received market approval for CelGro in Australia for dental bone and tissue regeneration. Shortly after, the company received FDA 510(k) clearance, allowing Orthocell to market and supply CelGro in the US.

As of now, CelGro has only obtained approval for a small percentage of its total use cases. We believe that as Orthocell continues to further research and trial its therapies, it will be able to address a much larger portion of the market.

The company is currently busy securing patents for CelGro in multiple jurisdictions. On top of that, Ortho-ATI and CTI continue to show extremely positive results when compared to traditional regenerative treatments.

We believe that Orthocell will continue to go from strength to strength as it further expands its operations and offers its treatments to more patients. This is evident in the companys financial performance as revenue increased 21% in 1HY21 ($446,201) over the corresponding period and other revenues increased by 500% ($228,664). With over $17m in cash at the end of 1HY21, the company has financial runway for the two to three years. By that time, we believe Orthocell should be able to become profitable.

Keeping all these factors in mind, we think Orthocell is a four-star opportunity. While already having numerous products out in the market, we believe the company can leverage its current technology to address many other unmet needs in the regenerative medicine space. We expect Orthocell to continue to seek approval for other use-cases, such as nerve regeneration, vastly expanding its addressable market in the years to come.

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Orthocell is ready to make waves in the regenerative medicine space: Pitt Street Research - Proactive Investors Australia