Regenerative Medicine Co. Adds Saudi Arabia Diabetes Initiative

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Leading regenerative medicine company Sernova Corp. (SVA:TSX.V; SEOVF:OTCQB; PSH:XETRA) announced some key initiatives that it said underscore the company's strategic progress.

The company, which is developing its Cell Pouch bio-hybrid organ as a functional cure for type 1 diabetes, said it has entered into a non-binding letter of intent (LOI) with HealthGena and GOLDTRACK Ventures to develop "Project REEM Ventures" to explore opportunities for product development and commercialization initiatives to address the growing incidence of the disease in Saudi Arabia.

HealthGena is a Riyadh-based "business accelerator with a focus on biotechnology innovation," Sernova noted, and GOLDTRACK Ventures is a German-regulated capital manager based in Leipzig, Germany.

"With our Cell Pouch bio-hybrid organ, Sernova is at the cutting edge of developing a potentially transformative functional cure for type 1 diabetes," said Chief Executive Officer Jonathan Rigby.

Dr. Robert Gabbay will serve in a clinical advisory role for the new partnership. Sernova said he previously served as chief scientific and medical officer at the American Diabetes Association and chief medical officer at the Joslin Diabetes Center.

"Our ongoing discussions with our visionary partners at GOLDTRACK Ventures and HealthGena, plus the addition of Dr. Gabbay as an advisor, signify positive progress towards achievement of our strategic goals," Rigby said.

New Treatment Safe, Well Tolerated

Rigby was appointed to the position in August. To promote transparency and engage with shareholders, it plans to hold a virtual Town Hall for investors on Friday, December 13. The webcast link will soon be available in the investor section of the company's website.

The Town Hall will discuss recent developments and Sernova's strategic plans to create long-term value for shareholders. This will be followed by an open forum for questions and answers.

"The Cell Pouch is the most advanced encapsulation device in development," Ventum Capital Markets Analyst Stefan Quenneville wrote.

Sernova's Cell Pouch is a vascularized cell-carrying bio-hybrid organ implanted in the human body. In an ongoing U.S. Phase 1/2 clinical trial, Sernova is assessing the treatment of patients with insulin-dependent type 1 diabetes and severe hypoglycemic episodes with donor islets implanted within the subcutaneous Cell Pouch. To protect cells from immune attack, patients are provided with an optimized immunosuppression protocol.

To deliver treatment, the Cell Pouch is pre-implanted under the skin between the deep subcutaneous muscle and the fascia, an area rich in blood vessels. The bio-hybrid organ is uniquely designed with pores into which vascularized tissue grows over several weeks post-implantation, forming a vascularized organ-like environment believed to be critical for the long-term survival and function of therapeutic cells. Following the development of the organ-like environment, the cells are transplanted into its containment channels and engrafted into the surrounding microvessel-rich environment, where they read blood sugar levels and release insulin and other hormones to naturally control blood glucose levels.

Clinical trial data so far have shown the Cell Pouch to be safe and well tolerated and the treatment to be effective, reported Dr. Joseph Pantginis, H.C. Wainwright & Co. analyst, in a September research report.

"The Cell Pouch is the most advanced encapsulation device in development," Ventum Capital Markets Analyst Stefan Quenneville wrote in a September research report.

Global Market 'Will Be Massive'

In collaboration with Evotec AG (EVTCY:OTCPK), Sernova is also developing an implantable off-the-shelf, induced pluripotent stem cell (iPSC)-based islet replacement therapy, Technical Analyst Clive Maund wrote recently.

"This partnership provides Sernova a potentially unlimited supply of insulin-producing cells to treat millions of patients with insulin-dependent diabetes (Type 1 and Type 2)," he added.

"If Sernova is successful in bringing its functional cure for insulin-dependent diabetes to the stage where it can go into commercial production, the global market for it will be massive," wrote Maund.

Currently, Sernova's program for Type 1 diabetes requires immunosuppression; however, through partnerships, the company is developing technologies that would eliminate this need, a "blue sky objective,"

Evotec Takeover Bid

Also in the mix was a formal US$2.1 billion bid for Sernova partner Evotec last month by injectable biologics delivery innovator Halozyme, according to a November 15 research note by Analyst Douglas W. Loe of Leede Financial Inc.

The offer was later withdrawn. "We continue to believe that a combination of Halozyme and Evotec would create a leading, differentiated, global pharma services company, benefitting shareholders, patients, and employees," Halozyme President and Chief Executive Officer Helen Torley said. "However, to date, Evotec has been unwilling to engage with us to explore a potential combination, and a company spokesperson has publicly commented that its goal is to remain an independent company."

Loe noted the offer was "undoubtedly based on Halozyme's diligence on Evotec's technological value, value that was and still is relevant to Sernova's partnership status and Cell Pouch initiatives."

Loe rated Sernova a Speculative Buy with a CA$1.50 per share price target.

"Evotec is admittedly a high-profile cell therapy partner for Sernova, but Cell Pouch has broad applications in regenerative medicine to which our model ascribes value," Loe write.

The Catalyst: Markets Growing for Regenerative Medicine, Diabetes Treatments

The global live cell encapsulation market, encompassing drug delivery, regenerative medicine, and cell transplantation, is expected to continue growing through at least 2030, according to Grand View Research. The market's value, US$210.7 million in 2022, is forecasted to increase at a 3.97% compound annual growth rate between that year and 2030.

Leede Financial Inc. Douglas Loe rated Sernova a Speculative Buy with a CA$1.50 per share price target.

Along with diabetes, live cell encapsulation is being used to treat neurological disorders like Parkinson's disease, the market research firm noted. Further, it has been proven to be a suitable way to deliver treatment for other types of diseases, including cancer, anemia, heart failure and more.

Grand View noted that market growth is expected to be driven by the increasing use of live cell encapsulation in regenerative medicine to replace disease or damaged tissues. A related contributor is rising public and private funding and investments in cell and gene therapies.

The advantages of live cell encapsulation in controlled drug delivery are boosting the market, too. They include enhanced therapeutic effects, lowered drug dose, reduced cytotoxicity, improved patient convenience, and better patient compliance.

Diabetes affects 537 million globally and is expected to affect 643 million people by 2030, the International Diabetes Foundation reported. Nations spend as much as 9% of their health budget on the disease, and about 10% of diabetes patients are insulin-dependent.

Grand View reported that the global market size for diabetes devices was estimated at about US$30.31 billion in 2023 and is projected to grow at a CAGR of 7.45% from 2024 to 2030.

Ownership and Share Structure

Sernova, according to Refinitiv, about 12.96% of the company is held by insiders and management, and approximately 5.0% by institutions including Evotec.

The rest is retail.

Top shareholders include Tomas Angel with 4.58%, Director Steven Sangha with 4.01%, Betty Anne Millar with 1.23%, Brett Alexander Whalen with 0.81%, and Garry Deol with 0.72%.

Sernova has 325.32 million outstanding shares and 285.75 million free float traded shares.

Its market cap is CA$73.15 million. It trades in a 52-week range CA$0.77 and CA$0.20.