Biotech Requests OK to Assess Device in Second Indication
Research Report

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Sernova Biotherapeutics Inc. (SVA:TSX.V; SEOVF:OTCQB; PSH:XETRA) submitted, to the U.S. Food and Drug Administration, an investigational new drug (IND) application seeking permission to evaluate the company's Cell Pouch, auto-transplanted with thyroid cells, in patients undergoing total thyroidectomy for nodular thyroid disease, reported H.C. Wainwright & Co. Analyst Dr. Joseph Pantginis in a Feb. 3 research note.

Already, clinical trials are underway of this treatment-delivering implantable device in type 1 diabetes (T1D) patients.

"Building on the progress made in T1D, demonstrating efficacy in a second indication is a testament to the potential of the Cell Pouch and what could become a 'pipeline in a device,'" Pantginis wrote.

2,627% Return Potential

On the news, H.C. Wainwright reiterated its CA$6 per share price target on Sernova.

"Visibility for the company should increase around its opportunities around its Cell Pouch system across multiple indications, starting with T1D in driving insulin independence in patients," wrote Pantginis.

The medical device firm is trading now at about CA$0.22 per share. The difference between this price and the target price implies a potential return for investors of 2,627%.

Sernova remains a Buy.

Encouraging Preclinical Data

Pantginis relayed that the goals of thyroid treatment delivered via Sernova's Cell Pouch are to lower or do away with daily use of lifelong thyroid medications, recover the natural feedback loop of thyroid hormones, reduce side effects of low thyroid hormone levels and thereby boost long-term efficacy, and drastically improve hypothyroidism patients' qualify of life.

Sernova has conducted preclinical studies in animals, reported the analyst, to determine how well the treatment, delivery of thyroid tissue and cells via the Cell Pouch for five weeks post total thyroidectomy, met these objectives.

For these trials, the loaded Cell Pouch was implanted in animals for five weeks. Subsequently, they underwent a total thyroidectomy, after which their T3, FT4, and TSH levels and weight were monitored.

Here's what the studies revealed, Pantginis noted. After the total thyroidectomy and re-implantation of thyroid tissue and cells into the Cell Pouch, the animals' T3 and FT4 levels returned to baseline levels. As for TSH, it peaked right after thyroidectomy and slowly dropped, starting about five weeks post re-implantation of thyroid tissue. Six months after re-implantation, thyroid tissues were healthy and functioning, as evidenced on radioisotope uptake imaging and histology.

"Although these experiments were conducted in nonhuman subjects, the Cell Pouch successfully recovered the production of thyroid hormones following a thyroidectomy, enough to be potentially clinical effective, in our belief," commented Pantginis.

The results also support Sernova's IND in this second indication, according to the analyst. They show a transplanted Cell Pouch acts like the actual organ, the thyroid in this case. They highlight the flexibility and adaptability of Sernova's device. They justify further exploration and evaluation in thyroid disease and beyond.

Notable Market Opportunities

Pantginis discussed the scope of the opportunity with Cell Pouch in hypothyroidism, a high unmet need indication, and in T1D. In the U.S., about 150,000 thyroidectomies are done each year, and the hypothyroidism market opportunity is significant, at about US$2.2 billion (US$2.2B).

"We assign a 25% chance of success on sales of US$2.3B; importantly, these peak sales are based on a very low approximate 2.1% market penetration in the hypoglycemic unawares population," wrote Pantginis. "We believe the market could be significantly larger with the broader T1D population and the continuing dramas surrounding insulin supply and its costs."

H.C. Wainwright purported that Cell Pouch could hit the U.S market in 2027.

Impressive T1D Trial Data

Pantginis reported that at the 2024 European Association for the Study of Diabetes meeting, Sernova announced new positive results of its ongoing Phase 1/2 clinical trial assessing its Cell Pouch device in T1D, now consisting of two cohorts, A and B, with a third, C, slated for the near future. The histological data, specifically, showed cell differentiation, durable vascularization and potential T1D ameliorating activity, indicating Cell Pouch has been working as intended.

Overall, the analyst wrote, the additional findings support the already reported "impressive results" from the ongoing Phase 1/2 trials and help derisk upcoming studies. Further, the data show T1D patients can be insulin independent for at least two years with related Cell Pouch-delivered treatment, an outcome that could lower T1D patients' healthcare costs materially.

"We maintain the deepening and durable responses in T1D speak to the potential of the Cell Pouch device, continue to raise the strategy's profile in a competitive environment, and continue to crystallize Sernova's stock's possible upside."