Regeneus Ltd.'s (RGS:ASX) collaborative agreement is with Asahi Glass (AGC), a major Japanese firm well known for its enterprise in glass, chemicals, high-tech materials, and biotech that is expanding into the regenerative medicine sphere. The agreement, announced on Dec. 29, 2016, calls for an upfront payment from AGC to Regeneus of $5.5 million, with milestone payments totaling $11 million.
The agreement establishes a "50/50 joint venture for exclusive clinical development and commercialisation of Progenza for osteoarthritis and all inflammatory conditions for Japanese market," according to the company.
In addition, the company stated that, "Regeneus will also be entitled, through its 50% interest in the joint venture, to its share of upfront license fees, milestone payments and royalties from sublicensing the development and commercialisation of Progenza for osteoarthritis and all other clinical indications in Japan."
"We welcome the deal, which strengthens Regeneus's balance sheet and provides significant validation for the Progenza technology and IP (intellectual property)," Edison analyst Dennis Hulme wrote in a Jan. 29, 2017, research report.
The partnership with AGC represents a validation of Regeneus' stem cell platform technology, which was "thoroughly reviewed during the due diligence process," Hulme wrote. "This validation, combined with AGC's existing relationships with pharma and healthcare companies, should strengthen Regeneus's position as it engages with potential partners for clinical development and commercialisation of Progenza in Japan (as part of the JV) and in other markets."
"This is a nicely designed deal," analyst Colin Novick of CJ PARTNERS told The Life Sciences Report in an interview published on Feb. 1. "Regeneus gets the upfront payments and the milestone payments from AGC, but it also gets a portion of subsequent milestone payments and upfront payments from any pharmaceutical company that it teams up with for the commercialization rights."
Acknowledging that "the name doesn't really spell it out for you," Novick explained that "AGC is Japan's largest biologics CMO (contract manufacturing organization). AGC is basically saying it would like to expand its CMO offerings from a simple biologics manufacturing capacity to regenerative medicine."
"As part of a 10-year strategic vision established in February 2016, AGC has designated life sciences as one of three high value-added strategic businesses where it will aim for high growth in targeted markets," Hulme wrote. The company has made a number of deals to facilitate this vision, including the Regeneus JV. Other major Japanese firms that have expanded into the regenerative medicine space include Fujifilm Holdings Corp. (4901:TYO), Shiseido Company Ltd. (4911:TYO), Takeda Pharmaceutical Co. Ltd. (TKPYY:OTCMKTS; 4502:TYO), and Nikon Corp. (7731:TYO), according to Novick.
Japan has emerged as a frontrunner in the field of regenerative medicine following legislation enacted in 2014 that accelerates approval for use of stem cell products in the country once those products have demonstrated safety and efficacy, which is possible after Phase 2 trials.
The 21st Century Cures Act, recently signed into law in the United States, also "will allow the US FDA to grant accelerated approval to regenerative medicine products, and will give the FDA wide discretion in creating new approaches to regenerative medicine," Hulme wrote.
"Recent regulatory change in Japan offers a potential fast path to market for Progenza, [the company's] off-the-shelf human stem cell product, which is currently in a Phase I trial," Hulme elaborated. "Regeneus's strategy is to focus on early-stage product development and to seek partners that will undertake the later stages of clinical development."
The analyst expects that, once "technology transfer and GMP manufacture of Progenza by AGC" is completed, a Phase 2 study in osteoarthritis in Japan might begin in Q3/19. Hulme calls Progenza the company's "most valuable product."
Both Hulme and Novick commented on the inclusion of cell secretions, a feature "unique" to Progenza. Hulme noted, "Evidence from animal studies indicates that the secretions provide an immediate anti-inflammatory effect when Progenza is injected into a diseased or damaged joint."
According to Hulme, the upfront payment from AGC, as well as the anticipated milestones, give Regeneus a "stronger balance sheet to fund development" of its other pipeline products, including a human cancer vaccine and veterinary compounds including CryoShot and Kvax.
"AGC is a world-class technology driven multinational company headquartered in Tokyo with a clear vision and strategic priority to grow its life science business. This makes AGC an ideal fit for us," Regeneus CEO John Martin stated in the company release announcing the deal. "As a leading manufacturer of biopharmaceutical products in Japan with recent acquisitions of manufacturing capability in Europe and the USA, AGC is well placed to expand into the fast-growing market for manufacturing regenerative medicine products."
Want to read more Life Sciences Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.
1) Tracy Salcedo compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She owns, or members of her immediate household or family own, shares of the following companies mentioned in this article: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this article: None.
2) The following companies mentioned are sponsors of Streetwise Reports: Regeneus Ltd. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Comments and opinions expressed are those of the specific analysts and not of Streetwise Reports or its officers.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview or article until after it publishes.
Disclosures from Edison, Regeneus, Jan. 27, 2017
This report has been commissioned by Regeneus and prepared and issued by Edison for publication globally. All information used in the publication of this report have been compiled from publically available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report.
Disclosures from The Life Science Report interview with Collin Novick, published Feb. 1, 2017
Colin Lee Novick: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this interview: Regeneus Ltd., Asterias Biotherapeutics Inc., and I'rom Group Co. Ltd. Furthermore, I'rom Group also owns 22.22% of CJ PARTNERS Inc. I determined which companies would be included in this article based on my research and understanding of the sector. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
Click here to read the interview and for additional disclosures.