RepliCel CEO Lee Buckler talks to Cantech Letter

The waiting game.

Life Sciences investors know it better than anyone else. It’s difficult enough to spot a biotech with world beating potential let alone stick with through the peak and valleys of clinical trials, investigational studies, and safety and efficiency Phase studies.

What makes it even more difficult these days is the environment. “There’s a golden age of biotech, where they are solving some incredibly massive challenges,” Nelson Griggs, executive vice president of listing services at Nasdaq told MarketWatch recently.

From DNA sequencing to nano-drug delivery to synthetic biology there are fortunes to be made in Life Sciences that may rival any time in our history. But what about that wait? Well, what if you just skipped it?

Founded in 2006 as TrichoScience Innovation, RepliCel Life Sciences is an emerging name in the field of cell therapy, an exciting space that is now generating billion dollar pre-revenue companies. With a decade of work behind it, the company thinks it may be ready for prime time, with multiple catalysts on the horizon. CEO Lee Buckler sat down with Cantech Letter to talk about a company that is well “past the start-up, mice and petri dishes phase.”
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Lee, can you walk us through a chronological history of RepliCel?
The company started in 2006 as TrichoScience Innovations. It was renamed RepliCel Life Sciences in 2010 when it was reverse merged into an OTC-listed company. The company was founded around our product targeting a treatment for pattern baldness caused by androgenic alopecia (the primary cause for thinning hair in men and women). In 2012 the company published 6-month interim analysis data from a phase 1 trial of this product which lead to an exclusive Asia-focused license and co-development deal with Shiseido Company executed in 2013. We then diversified our pipeline to include a second cell population which is highly expressive of Type 1 collagen. We put that product into two clinical trials in 2015 – in chronic tendon injury and skin rejuvenation – which will read out interim clinical data this Quarter (Q1 2017). Along the way we also become convinced of the need for a more optimal injector system than anything currently available. This lead us to design a dermal injector which will be our first commercial product designed to improve outcomes for any product injected into the skin. Over the past decade we have brought two biologics through discovery, research, patent filings, development and phase 1 clinical trials in three clinical indications, landed a major partnership in Asia for our lead product, and developed a medical device that is expected to market launch in 2018.

There are now several cell therapy companies with over a billion dollar valuations even though their products are still pre-market

Cell therapy might still sound to some casual observers like science fiction. Is it really at a stage in which it can deliver measurable results?
There is over a billion dollars of annual revenue currently generated globally from the sale of approved cell therapy products in regulated markets. This excludes the thousands of stem cell treatments performed as part of oncology treatments. We represent the next wave of cell therapies in development for almost every imaginable human disease and condition. There are now several cell therapy companies with over a billion dollar valuations even though their products are still pre-market. The industry expects up to 8 new market applications this year alone for cell therapy products. Our job is to continue to create value – reflected in the company’s market cap – as we work to de-risk the technology and march toward commercialization.

RepliCel has four products in its pipeline. Although treatments for Achilles Tendinosis and one for Pattern Baldness might seem miles apart, there is a logical connection. Can you tell us about that?
We are working in three very different clinical indications – skin rejuvenation, pattern baldness, and chronic tendon injury. The common thread is that the starting material for each is a single-stich biopsy of tissue taken from the back of the patient’s scalp. In this tissue are two different cell populations that we isolate, grow, and manufacture into a product delivered back to the clinic for injection. The one cell population is a cell that is responsible for hair growth which – at the back of the scalp – is immune to androgenic alopecia. The other cell population is a cell that is highly expressive of the types of proteins that build and maintain tissue – particularly Type 1 collagen which is critically important to the structure of the extracellular matrix under your skin and the composition of your tendons. Each of the conditions we treat are local conditions tied to the fact that the resident cells are not functioning as intended. With an injection of news cells into the region, we can accomplish the kind of regrowth you just can’t accomplish with surgery, drugs, or other biologics.

Thankfully we are well past the start-up, mice and petri dishes phase. We expect to be generating sales royalty revenue starting in 2018

RepliCel isn’t a company that new investors are going to have to wait a decade to get up and running. Can you tell us where you are at in terms of a timeline towards revenue generation?
Thankfully we are well past the start-up, mice and petri dishes phase. We expect to be generating sales royalty revenue starting in 2018 from the launch of our medical device (the RCI-02 dermal injector). I also expect to be doing more licensing deals in the next 24 months which will bring in non-dilutive upfront and milestone payments which are posted as revenues. There is also the potential for early commercialization of our products in Japan due to the expedited market access program they have recently implemented there for cell-based therapies.

Can you tell us a bit about your partnership with Shiseido on RCH-01, your treatment for pattern baldness? Shiseido is multi-billion dollar cosmetics and hair care company. What kind of commitment has it made to RCH-01?
The deal with Shiseido gives them exclusive market rights to that product for Asia. They paid $4-million upfront for that license and are committed to up to $31M in milestone payments as they launch the product in various countries in their territory. They are also committed to paying us single-digit sales royalties on every product sale in their markets. Additionally this is a co-development deal in which they are financially committed to pay the direct costs (in their territory) of clinical research/trials, manufacturing, regulatory approvals, sales, marketing and distribution.

Your revenue model is royalty-based, correct? Do you intend to approach partners on your full product pipeline or are you planning direct sales of some?
We still own the markets outside Asia for RCH-01 and all global rights to our other products but we are committed to the partnering model and will commercialize through multi-national licensing partners. We are prepared to develop products as far as necessary to get the right licensing terms but our intention is to partner all our products with commercially established companies for sales, marketing, and distribution. At the end of the day, I don’t want to compete with large, multinationals in any segment but partner with them to take our products to market.

We have more significant milestones expected in the next 12 months than the company has had since its inception

Echelon Wealth Partners analyst Douglas Loe currently has a “Speculative Buy” rating and a one-year price target of $2.15 on RepliCel. In his most recent report, he modeled $27.2-million in revenue for RCT-01 (Achilles) by the year 2021 and $21.3-million in revenue for RCS-01 (Aging, Damaged Skin) in the same time frame. Does that sound right to you, and which of these markets do you think will ultimately prove to be larger?
I’m not smart enough to ever question any of Doug’s analysis but his numbers certainly seem conservatively safe to me. There’s no doubt skin is the larger market but it’s also the more crowded of the two. What we know is that for those people who are plagued with chronic pain of one of their tendons (ankle, knee, elbow, shoulder, etc) there are no good solutions. If we can show the product’s capacity for regenerating chronically degenerated tendons we also know there is an enormous potential for use of the product in more acute settings particularly for high value personnel like athletes, military, etc.

Do you see RepliCel developing more products to add to its pipeline?
Yes. The two most obvious areas to grow the pipeline relate to the tendon and injector. If we can demonstrate the ability to regenerate the Achilles tendon, there is every reason to believe we can do so for tendons of the knee (patellar), both tendons of the elbow (tennis and golfer’s elbow), and the shoulder rotator cuff. As for the injector, we’ve designed this first version for the aesthetic market. Based on a number of conversations we’re having, we believe there are a number of other applications where we can use the patented technology to improve other types of injections.

How is your balance sheet? Do you have sufficient cash to take you to a revenue generation phase?
Current cash doesn’t likely get us to revenue generation but we expect it to get us through a series of catalysts (including three clinical data announcements) which have the potential to significantly impact valuation. We expect one more raise to get us to revenue generation.

What milestones should investors look for from RepliCel over the next 12 months?
This is the exciting part of our story – timing. We have more significant milestones expected in the next 12 months than the company has had since its inception. This quarter alone will see three separate clinical data announcements in addition to the launch of device manufacturing. Our number 1 priority in 2017 is to build, test and validate the device so I can get a deal done on it with a commercial partner who will be expected to launch the product on the market in 2018 likely first in Europe.

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