On Tuesday, RepliCel released what it described as “compelling” safety and clinical data from its phase 1 of 2 tendon repair study investigating the use of RepliCel’s Type 1 collagen-expressing, hair-follicle-derived fibroblasts (RCT-01) as a treatment for Achilles tendinosis. The company said there were no serious adverse effects and patients showed numerous clinically important improvements, including tendon composition, blood supply, physical function and pain sensation.
“This trial was to show the safety of injection of hair follicle-derived non-bulbar dermal sheath cells (NBDS),” said RepliCel’s chief medical officer, Dr. Rolf Hoffman, “as well as to repeat the landmark trials of our collaborators who injected skin-derived fibroblasts together with PRP (platelet-rich plasma) in different tendinopathies. We believe the cause of healing (mechanism of action) in those studies was the cellular collagen production and not the PRP which, in our view, has little clinical or commercial potential as a therapeutic product or treatment for tendon repair. I am very pleased that in this trial we see some early signals of regenerative healing in some patients and because of its similar pathogenesis, there is every reason to believe the ability to heal Achilles tendons will extend to numerous applications including repairing the patellar tendon of the knee (jumper’s knee), both tendons of elbow (tennis elbow, golfer’s elbow) and the rotator cuff. Furthermore, when we have established that our cell therapy heals chronic tendon injury, it may then be used by physicians for more acute injury with the goal of an approved label for these additional treatments in the future.”
In a research update to clients Tuesday, Loe said that for a few reasons he has increased his target price to a level that now implies a return of 393 per cent on RepliCel. He explained why he is so optimistic about the stock.
“Let’s cut to the conclusion first – we are increasing our RP price target to $3.50 from $2.15, largely by reducing the discount rate embedded in NPV and discounted EBITDA/EPS valuation methods to 40% from 45% previously, but also by rolling forward our valuation period to exclude F2016 losses (FQ416/F2016 data should be reported imminently),” said Loe. “Even after this revision, we believe our valuation is conservative when considering how solidly RepliCel has demonstrated functional improvement in at least two cell therapy markets (data from a third medical market [skin rejuvenation] is pending), and with new Achilles tendon repair data serving as evidence for how NBDS could be relevant to other orthopedic/tendon repair markets like rotator cuff injury, or lateral epicondytis (tennis elbow) or patellar tendinitis, all with similar pathology to Achilles tendinosis. Our model solely values RCT-01 in Achilles tendinosis for now, since that is the only active tendon repair program in RepliCel’s pipeline.”
Disclosure: RepliCel is an annual sponsor of Cantech Letter.