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Nviv - final 8-8-11 pdf one
1. 245 Park Avenue, 24th Floor
New York, NY
August 8, 2011
Spinal Cord Injury and Neurological Devices
Symbol and Current Price: NVIV.ob $1.00 Cash and Equivalents as of 3/31/2011: $6.8mE)
Date of first trade (Reverse Merger): 10/10/10 Additional Cash from warrants/options: E)
Current Shares Outstanding: 51.7m (assuming full exercise) $24.7mE)
Fully Diluted Shares Outstanding: 70.0m Long-Term Debt: (none) E)
Mkt. Cap primary/fully diluted: $52m/$82m Insider Ownership: 52.0% E)
InVivo Therapeutics Holdings, Inc. is developing novel technologies for the treatment of spinal cord
injuries (SCI). There are 12,000 SCIs in the U.S. annually and approximately 350,000 chronic patients.
With no successful treatment currently available, existing approaches cost over $5 billion annually.
The first product will be a biocompatible/biodegradable polymeric scaffold device for surgical implantation
adjacent to the acute SCI lesion in the critical hours following injury. In extensive trials in non-human
primates, treated animals showed a reversal of paralysis and a return of normal motor function within
days of treatment. An IDE has been filed and human trials should begin by early in 1Q 2012.
Other SCI products in the company’s development pipeline:
An Injectable Biocompatible Hydrogel for controlled release of methylprednisolone.
Use of Autologous Neural Stem Cells to seed a patient’s stem cells into a biodegradable polymeric
scaffold to regenerate tissue in chronic cases where the spinal cord has already been damaged.
The biopolymer scaffold combines the blockbuster potential of a new therapeutic drug (at projected 90%
gross profit margins) with the development timeline and risk profile of a medical device. On the basis of our
analysis so far, we estimate that this product could generate annualized sales in excess of $150 million in 3-4
years, and that NVIV shares could achieve a significant premium valuation relative to the average M&A multiple
for restorative medicine stocks which is 4-5 times revenues. We believe the current valuation should exceed $250
million on the basis of our 3-4 year sales estimate. We recommend purchase of NVIV shares.
In addition to its own products, InVivo has exclusive worldwide rights to the development and sale of:
…any biomaterial device used as an extracellular matrix either by itself or in combination with
drugs, growth factors and human stem cells for treating spinal cord injury, or for parts of the
peripheral nervous system, the cavernous nerve surrounding the prostate, the brain, retina or cranial
nerve.
This is strategically prime IP territory for any medical device company, especially for a young enterprise
with a market cap of less than $60 million. It suggests that InVivo has a wide range of licensing and
collaborative possibilities with other companies in the burgeoning field of neurological therapies and
devices.
D. H. Talbot
2. EXECUTIVE SUMMARY
With a total investment of only $15 million and in just six years, InVivo has become the first company to
successfully demonstrate functional improvement in a paralyzed non-human primate, has developed a
pipeline of three promising new SCI therapies, and has filed an Investigational Device Exemption (IDE) to
begin human trials on its first product. This is a remarkable achievement on such a modest budget.
Interdisciplinary approach. InVivo’s philosophy uniquely combines medical devices and biomaterials
with the selective use of FDA-approved drugs, growth factors, and human neural stem cells.
Similarly, the management team brings together an extraordinary range of talent, including:
Dr. Robert Langer, ScD, a leading authority on V. Reggie Edgerton PhD., UCLA, pioneer in SCI
biomaterials and product development; research and on the Scientific Advisory Board
Co-inventor of NVIV’s base technology of the Christopher Reeves Foundation
David Feigal, MD, regulatory expert formerly Dr. Eric Woodard, Chief of Neurosurgery at New
with Amgen and the FDA England Baptist Hospital in Boston
Neuro-protection. InVivo has developed products like the a biopolymer scaffold device to enhance
neuro-protection by mitigating the bleeding, inflammation and further cell death that result from the
body’s immune response to SCI. By minimizing secondary injury, the company has demonstrated in
non-human primate trials that functional recovery can be achieved. The company believes its
approach could become a standard treatment for both acute and chronic SCI.
Secondary Injury Process
Source: Company Published Information
Spinal Cord Injury. Acute SCIs afflict 12,000 Americans each year, and this excludes roughly 6,000
people who do not survive past the 30th ---- further testimony to the need for new treatments where
none currently exist. There are 350,000 chronic patients in the U.S. whose paralysis was due to SCI.
Spinal cord injury is among the most expensive conditions ---- first-year costs of managing an SCI
patient range between $240,000 and $820,000. This translates to $4-5 billion on a national basis.
For chronic SCI, the net present value to maintain a quadriplegic injured at age 25 for life is over $3.2
million (and $1.1 million for a paraplegic).
Current treatment options only address the symptoms, not the condition. Not unlike eschemic stroke, SCI
requires treatment usually within 8-10 hours before irreversible damage sets in. When a traumatic
SCI patient enters an operating room, the surgeon is likely to only repair the musculoskeletal system
and decompress the spinal cord using spinal fixation devices. These orthopedic procedures do not
address the underlying paralysis. InVivo’s products are adjunctive therapies that complement existing
medical practice and that, if approved, will be a new therapeutic class.
First product: a scaffolding device. This product is designed for implantation by a neurosurgeon
adjacent to the SCI lesion in order to serve as an extraceullular matrix that provides structure, and
minimizes inflammation and scarring. The device is composed of polylacticcoglycolic acid (“PLGA”), a
biodegradable/biocompatible polymer that is already approved by the FDA and is in broad use for
surgical sutures, drug delivery, and tissue engineering.
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3. Implant of polymer into open wound Implant of polymer
with depiction of laminectomy device into open wound
Source: Company Published Information
As depicted above, the product does not require a change from the current method of treating spinal
cord injuries. After the neurosurgeon has affixed screws and rods and decompressed the spinal
column creating access to the spinal cord itself, the surgeon inserts the biopolymer scaffolding into
the lesion. The simplicity of this adjunctive procedure should facilitate rapid adoption.
FDA approval process. The company expects to commence human clinical trials on the scaffolding
device in early 2012 in 10 acute contusion SCI patients with a scheduled 12-month follow-up of each
patient. The trial will be conducted at sites in Boston, Washington, DC and the Shepherd Center in
Atlanta, a medical complex known for its expertise in SCI. A larger pivotal trial in acute contusion SCI
patients may required but that will be the FDA’s decision. Based on the positive results of the device
in non-human primate trials, which is the best proxy for how the product will work in humans, we
would expect that improvement in human patients would also be observed. Among the human
patients with the most to gain from such a treatment are those patients with complete SCIs in the
high cervical levels (C1-C3) whose injuries have caused quadriplegia and require a ventilator for
breathing assistance.
InVivo’s FDA consultant is Janice Hogan, a managing partner at Hogan Lovells US LLP who has over 25
years of experience in representing the spine interests of J&J, Synthes, Abbott, Stryker, and Medtronic.
Spinal cord regeneration. Unlike the skin, blood, muscle and other organs, the central nervous system
(CNS) does not routinely replace cells that are damaged. In SCI, restoring the electrical transmission
between the brain and spinal cord requires the regrowth of severed nerve fibers across the site of
injury and into the neural network that is below the lesion.
InVivo is pursuing a number of avenues to regenerate the spinal cord. For example, the company
recently entered into a collaboration with The University of Miami Miller School of Medicine's Miami
Project to Cure Paralysis for the development of novel SCI treatments including Schwann cells. This
agreement gives InVivo the right to license and commercialize this technology exclusively on a
worldwide basis.
Product pricing: partly based on therapeutic benefit . Management’s discussions with insurance industry
executives are said to have been constructive, as there is strong interest in supporting new cost-
effective treatments for SCI. We believe that NVIV’s pricing options are relatively attractive and
precedent for premium levels is widespread. For example, conventional SCI treatment such as
immobilization of the spine (which only treats symptoms) is a $45K-$65K surgical procedure. Relatively
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4. sophisticated products in the device field range from $30-40K for an artificial heart valve up to $200K
for autologous bone marrow transplantation.
Addressable U.S. Market
% Qualifying for Addressable Market Potential
(a)
U.S. Patient InVivo Treatment U.S. Patient (Assuming $50,000
Population Population Average Unit Price)
Acute SPI 13,000 80% 10,400 $520 m
Chronic SPI 346,000 50% 175,000 $8,750 m
(a)
Source: Compiled from RA Cripps et al and company estimates . Outside-In Research product price assumptions.
Near-term milestones. A Form S-1 has registered approximately 13 million shares in connection with
the private placement of stock in late 2010 --- an event that should help to increase NVIV trading
volume. Other estimated milestones of note include the following
8/11 10/11 1/12
Completion of 3rd non- Preliminary Human trial of
rd
human primate trial results of 3 trial published device begins
(partial SCI damage)
Source: company estimates
Relative Valuation. We believe a significant portion of the $530m market capitalization of Geron
Corporation (GERN) relates to its work in developing human embryonic stem cells for SCI. Accorda
Therapeutics (ACOR) is valued at $1.3 billion (6x sales) primarily due to its activities in its multiple
sclerosis (MS) research program, but also its preclinical programs in SCI and CNS
Recent M&A valuations in the regenerative medicine space are among the highest in the healthcare
sector and are currently averaging 5-6 times revenues. InVivo could attract a lot of M&A interest ans
superior valuation because of its leadership in SCI, its high profit margin potential, and the strategic
value of the IP portfolio.
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5. Table of Contents
Page
Executive Summary 2-5
Company History 6
Management 7
Technology
Products in development 8
Miami Project 9
Preclinical Results 10
Company
Commercialization Strategy 12
Intellectual Property 13
Competition 13
Spinal Core Injury
Facts and Figures 15
Spinal Cord Physiology – Post Injury 15
Cost of Care 16
Financial
Stock analysis 17
Balance sheet 18
Statement of Operations 19
Risk Factors 19
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6. COMPANY HISTORY
InVivo is the first company to successfully demonstrate functional improvement in a non-human primate
following paralysis. In these pre-clinical trials, behavioral scoring was performed along with collection of
EMG and kinematic data and demonstrated an improved level of functional recovery in all treated
animals. Management believes that this model is the best surrogate for how the products will work in
humans. Research from the pilot non-human primate study was published in the Journal of Neuroscience
Methods and received the 2011 Apple Award from the American Spinal Injury Association.
Timeline
11/28/05. Date of incorporation. Founded to develop proprietary technology was co-invented
by Robert S. Langer, ScD, Professor at MIT and Joseph P. Vacanti, MD, affiliated with
Massachusetts General Hospital.
July 2007. Obtained a worldwide exclusive license to a suite of patents co-owned by MIT and
CMCC. This license covers 10 issued US patents and 3 pending US patents as well as 67
international patents and 34 international pending patents.
April 2008. Initiated first non-human primate study.
September 2009. initiated second primate study.
10/4/10. Merged into InVivo Therapeutics Holdings Corp. (“ITHC”)
10/26/10. ITHC acquired InVivo Therapeutics Corporation through the completion of a reverse
merger transaction, and transferred all of its operating assets and liabilities to its wholly-owned
subsidiary, D Source Split Corporation.
10/26/10 -- 12/3/10. Completed a private offering of $13.0 million. Exercise of warrants in
connection with this offering will provide an additional $18.2 million in cash. Together these
resources are expected to fund the Company to PMA filing.
February 2011. Initiated third primate study.
7/7/11. Submitted an IDE to the FDA for its scaffolding device to initiate an open-label study of
10 patients with acute SCI. Patients will be followed for one year.
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7. MANAGEMENT
Frank Reynolds, Chairman of the Board, CEO, and Founder
Former Director of Global Business Development at Siemens Corporation where he was responsible for new
business in 132 countries. After suffering a paralyzing injury to his spine in 1992, he spent years gaining subject
matter expertise on the spine and spinal cord. Degrees include a MBA from MIT and an MS in Engineering from
University of Pennsylvania.
Eric Woodard, MD, Chief Medical Officer and Scientific Advisory Board
Chief of Neurosurgery at New England Baptist Hospital in Boston, and was formerly Chief of Spinal Surgery in the
Department of Neurological Surgery at Brigham and Women's Hospital, where he held the rank of Assistant
Professor in Surgery at Harvard Medical School.
George Nolen, Lead Director, Board of Directors
Former Chief Executive Officer of Siemens Corporation U.S. --- the first American to be so appointed.
Sir Richard Roberts, Ph.D. --- Board of Directors and Scientific Advisory Board
Sir Richard was awarded the 1993 Nobel Prize in Medicine and Physiology with Phillip Allen Sharp for the
discovery of introns and eukaryotic DNA and the mechanism of gene splicing.
Christi Pedra, Board of Directors
Christi Pedra is SVP Strategic New Business Development & Marketing (Customer Solutions Group) for Siemens
Healthcare USA.
Robert S. Langer, Sc.D., Scientific Advisory Board
Robert S. Langer is the David H. Koch Institute Professor at MIT where Dr. Langer has written over 1,100 articles
and has approximately 760 issued and pending patents worldwide. He served as a member of the FDA’s Science
Board, the FDA's highest advisory board, from 1995 -- 2002 and as Chairman from 1999-2002. Dr. Langer has
received over 180 major awards for leadership and innovation.
V. Reggie Edgerton, Ph.D., Scientific Advisory Board
Director of U.C.L.A's Edgerton Lab since 1968 and member of the Scientific Advisory Board of The Christopher
Reeves Foundation. His research has primarily focused on neural control of movement and how this neural
control adapts to altered use and after spinal cord injury.
Todd Albert, MD, Scientific Advisory Board
The James Edwards Professor and Chairman of the Department of Orthopedics at Jefferson Medical College in
Philadelphia and President of the Rothman Institute. Previously, he served as Co-director of Reconstructive Spine
Surgery at Thomas Jefferson University.
Jonathan Slotkin, MD, Scientific Advisory Board
Dr. Slotkin is a clinical neurosurgeon and research scientist with expertise in complex spinal surgery, minimally
invasive surgery, and brain tumor surgery. He performed a fellowship in spinal surgery with Dr. Eric J. Woodard.
Paul Mraz, Business Advisory Board
CEO of Cerapedics, Inc., which is developing biologic bone grafting products for the spine, trauma and orthopedic
markets. Former CEO of Angstrom Medica, Inc., prior to which he was a Principal of the company that developed
and commercialized the Charite Artificial Disc – the first total replacement device for the lumbar spine.
David W. Feigal Jr, M.D., Business Advisory Board
Recently served as Vice President, Global Regulatory at Amgen, Inc. and was previously Head of Global Regulatory
and Global Safety Surveillance at Elan. Prior to joining Elan, he spent 12 years with the FDA where he was Head
of the Center for Devices and Head of the Center for Biologics for five years each.
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8. TECHNOLOGY
Currently there are no successful spinal cord injury treatment options for SCI patients. InVivo takes a
multiphasic and multi-dimension approach to the treatment of SCI. In effect, InVivo is a medical device,
biomaterial, drug, growth factor, and neural stem cell company rolled into one. A principal goal is the
protection of the undamaged portion of spinal cord (as little as 10%) against secondary injury by
minimizing further tissue damage and promoting neural plasticity of the spared healthy tissue.
The biopolymer-based devices are surgically implanted or injected into the lesion created during
traumatic injury, or the “primary injury”. This protects the damaged spinal cord by mitigating the
progression of “secondary injury” resulting from the body’s inflammatory and immune response to
injury, and promotes neuroplasticity, a process where functional recovery (the recovery of motor movement or
sensation) may occur through the rerouting of signaling pathways to the spared healthy tissue. Achieving
these results is essential to the recovery process, as secondary injury can significantly worsen the
immediate damage sustained during trauma. The additional damage dramatically reduces patient
quality of life post-injury.
The company initially plans to develop and commercialize three products.
1. A biocompatible and biodegradable polymer scaffolding device to treat acute
spinal cord injuries. The current cell and drug-free nature of this implantable
device is expected to expedite the regulatory approval timelines. The device
will be customized to fit inside a patient-specific lesion. The IDE calls for a
pilot human trial in 10 patients with high-level (ASIA-A) contusive injuries to the
spine, the leading cause of SCI and are most often caused by auto accidents.
Class A is a designation established by the American Spinal Injury Association (ASIA) that indicates a
“complete” spinal cord injury where no motor or sensory function is preserved. This is the
classification to be used in the human trial of the scaffolding device.
In preventing the cascading inflammatory response, the InVivo device is designed to perform four
functions:
Fill the necrotic lesion to minimize secondary injury
Bridge the gap formed by the lesion, providing a matrix designed to promote regrowth and
reorganization of neural elements
Act as a synthetic extracellular matrix, with the goal of promoting survival of surrounding
neurons
Reduce scar formation (astrogliosis).
Pore size of the PLGA material can be pre-selected to encourage revascularization and blood vessel
ingrowth. The PLGA scaffold provides optimum structure for blood vessel attachment and ingrowth.
2. An injectable hydrogel designed to counteract the inflammatory conditions that result during a
secondary injury from a closed-wound SCI where further cell death occurs. The hydrogel is designed
to release drugs over a designated amount of time in order to synchronize the rate of delivery to
match the period in which the inflammatory response peaks during secondary injury. While the
hydrogel could incorporate a number of drugs or therapeutic agents, the second product is designed
to deliver the anti-inflammatory steroid methylprednisolone sodium succinate.
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9. Methylprednisolone is FDA-approved and is currently a treatment option for SCI. However, high-
dose intravenous administration of the drug can result in harmful systemic side effects, including
increased risks of pneumonia, sepsis and mortality. By precisely controlling the release of the drug
at the site of injury, InVivo scientists believe that therapeutically effective doses can be delivered
to the point of inflammation while mitigating the risk of harmful systemic side effects.
In the 1-year follow-up data from a multicenter randomized controlled trial of methylprednisolone
for treatment for acute SCI, patients treated within 8 hours of injury demonstrated increased
recovery of neurological function at 6 weeks and at 6 months, which continued to be observed 1 year
after injury
3. A biocompatible biodegradable scaffolding seeded with autologous human neural
stem cells (or Schwann cells) to treat acute and chronic spinal cord injuries. The
scaffold acts as a synthetic extracellular matrix on which cells can be
transplanted. This product is intended to counteract the pathophysiology of
SCI by:
Replacing lost cells in the spinal cord.
Activating natural regenerative processes such as formation of new synapses and axonal
sprouting based on molecules that stems cells produce.
The injured spinal cord represents one of the most hostile environments for survival and
proliferation of transplanted stem and progenitor cells, and InVivo’s pre-clinical studies have
demonstrated that stem cells injected into the lesion without the proprietary scaffold do not exert a
therapeutic effect. Comparable to the adhesion of cells to the body’s extracellular matrix, it is
thought that the scaffolding device is necessary for the hNSCs to survive and function following
transplantation.
The second and third products are likely to be regulated as combination drug/devices and as such will
require significantly longer regulatory approval times than the biopolymer scaffolding device.
Additional applications of the platform technologies include:
the potential treatment for spinal cord injury following tumor removal.
peripheral nerve damage, and
postsurgical treatment of any transected nerves.
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10. Preclinical Development
InVivo has demonstrated the proof of concept for its SCI therapy in both non-human primate and rodent
animal models. The company is the first in history to successfully demonstrate functional improvement
in a paralyzed non-human primate and believes this model is the best surrogate for how the products
will work in humans. Research from this landmark study (Journal of Neuroscience Methods, 188 (2010)
258-269) received the 2011 Apple Award recognizing excellence in SCI research from the American
Spinal Injury Association (ASIA).
2002 Seminal Rodent Study. Results showed functional locomotive improvement as early as two weeks
post-injury in animals that received the scaffold. Animals demonstrated sustainable functional recovery
and no adverse pathological reactions to the product.
2008-2010 Non-Human Primate Studies. Behavioral scoring was performed along with collection of
EMG and kinematic data. On average, all treated animals demonstrated an improved level of functional
recovery compared to the control animals.
Relative Effectiveness in Restoring Motor Function
Rodent Study Second Non-Human Primate Study
Source: Company Published Information
The Miami Project
On May 4, 2011, InVivo and The University of Miami Miller School of Medicine's Miami Project to Cure
Paralysis announced the formation of a strategic research collaboration for the development of novel
SCI treatments. Co-founded by the son of Pro Football Hall of Famer Nick Buoniconti, the Miami Project
has raised over $350 million over the past 25 years and is one of the world's most comprehensive spinal
cord injury research centers.
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11. In SCI, restoring the electrical transmission between the brain and spinal cord requires repairing the
myelin sheath around the central nerves. It may also require the regrowth of severed nerve fibers
across the site of injury and into the neural network that is below the lesion. The Miami Project is
seeking FDA approval to conduct clinical trials on a number of promising treatments including
transplanting autologous Schwann cells (SC) for acute and chronic injury of the spinal cord.
Schwann cells are a type of cell found throughout the peripheral nervous system (PNS) that includes all
nerves going out to muscles as well as sensory nerves coming from the muscles back to the spinal cord.
Schwann cells are essential for regeneration in the injured PNS. These cells play a crucial role in
endogenous repair due to their ability to dedifferentiate, migrate, proliferate, express growth promoting
factors, and myelinate regenerating axons necessary for sending appropriate electrical signals.
Schwann cells are not stem cells --- they are adult cells and can only be Schwann cells.
The Schwann cell has been widely studied for repair of the spinal cord. Following trauma to the spinal
cord, Schwann cells migrate from the periphery into the injury site, where they apparently participate in
endogenous repair processes. Grafting Schwann cells into the lesion site has been shown to promote
axonal regeneration and myelination. Clearly, Schwann cells have great potential for repair of the
injured spinal cord, but they need to be combined with other interventions to maximize axonal
regeneration and functional recovery.
Key components of the research collaboration agreement include:
In vitro and in vivo studies with combinations of biomaterials, Schwann cells and other cellular
therapies and drugs
Joint ownership of resulting intellectual property
Right of first offer for InVivo to license and commercialize on a worldwide exclusive basis
Expected Synergies of Collaboration
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12. COMPANY COMMENTS
Product Development Pipeline
Source: Company Published Information
Commercialization Strategy
Manufacturing and Product Delivery Plan
Management believes that raw materials for the first device product can be readily obtained from
suppliers that already have obtained FDA clearance to manufacture these components.
Custom processes. InVIvo has developed a proprietary manufacturing process to create a uniform
porous three-dimensional scaffolding structure for each device.
Manufacturing options. The company has leased a manufacturing and development facility in
Medford, MA as it gears up to possible human trials.
Sales and Marketing
Company will focus U.S. sales on trauma centers for acute indications: the marketing program for
products like the scaffolding-only device will be mainly directed to 300 Level One Trauma
Centers across the in the country, as designated by the American College of Surgeons. It is
important to note that 75 of the largest Level One Trauma Centers treat 80% of SCI patients.
InVivo expects to be able to market the product with a sales force of only 20-25 reps, and plans
to sell its products for acute indications through a direct sales force in the U.S. For foreign
markets, the company will market its product through distributors.
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13. For chronic SCI, a service business approach is likely. Owing to the challenges and potential
complexities inherent in treating the chronically paralyzed, InVivo is planning to adopt a service
model wherein patients would be transported to a expert facility and the price of the product
would be bundled into a treatment and rehabilitation regimen. This would not be unlike such
specialized procedures as bone marrow transplantation. In all likelihood, this first “center of
excellence” would be located in the Boston area. Other possibilities in include Southern Florida
in conjunction with the Miami Project, or in Atlanta at the Shepherd Center, at the site of the
proposed clinical trials.
Intellectual Property
In July 2007, InVivo obtained a worldwide exclusive license (the “CMCC License”) that covers 10 issued
U.S. patents and 3 pending U.S. patents as well as 67 international patents and 34 international pending patents
that are the result of over a decade of research by Dr. Robert S. Langer, Professor of Chemical and
Biomedical Engineering at MIT and his research teams at MIT’s Langer Lab.
The CMCC License provides InVivo with IP protection for the use of any biomaterial scaffolding used as
an extracellular matrix substitute for treating SCI by itself or in combination with drugs, growth factors
and human stem cells. The company believes that any biomaterial extracellular matrix developed to
treat spinal cord injuries will infringe on the patents licensed to InVivo.
Under the CMCC License, InVivo has the right to sublicense these patents, and has full control and
authority over the development and commercialization of the licensed products, including clinical trials,
manufacturing, marketing, and regulatory filings. InVivo also owns the rights to the data it generates,
and has the first right of negotiation to any improvements to the IP.
The CMCC License has a 15-year term, or as long as the life of the last expiring patent right, whichever is
longer, unless terminated earlier by CMCC.
In connection with the CMCC License, the company submitted a 5-year plan with targets and
projections to CMCC and MIT.
InVivo is required to pay certain fees and royalties under the CMCC License, and is also
required to make milestone payments upon completing various phases of product
development. The company believes that it has sufficient capital resources to make all of
such payments. In addition, following commercialization, we are required to make ongoing
royalty payments equal to a percentage of net sales of the licensed products.
Effective May 25, 2011, the CMCC license was amended to include parts of the peripheral nervous system, the
cavernous nerve surrounding the prostate, the brain, the retina and cranial nerves. The financial potential for
InVivo to profit from this amendment could be highly significant but we do not wish to speculate on the
possibilities at this time.
Competition
The size of the SCI therapeutic opportunity has attracted a number of worthy competitors but InVivo’s
multidisciplinary approach, with initial emphasis on a medical device solution, remains differentiated.
Most other companies in SCI product development are involved with cellular approaches such as stem
cells that tend to be much earlier stage.
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14. In addition InVivo pre-clinical data has demonstrated that stems cells alone do not thrive in the harsh
inflammatory environment of an SCI. Moreover, growth factor and stem cell compounds are classified
by the FDA as either drugs or biologics, and thus inherently face a longer approval process than the
medical device route. We expect that stem cell companies may find InVivo to be an attractive partner in
order to gain access to the proprietary features and benefits of the biodegradable scaffolding
technology.
StemCells, Inc. (STEMB) recently announced the initiation of a Phase I/II clinical trial of its
proprietary HuCNS-SC(R) human neural stem cells in chronic spinal cord injury. This trial is now open
for enrollment, and will accrue patients with both complete and incomplete degrees of paralysis
who are three to 12 months post-injury. The trial is being conducted in Switzerland at the
Balgrist University Hospital of Zurich.
The company’s HuCNS-SC cells reported have shown significant promise in preclinical studies for
restoring lost motor function. The company plans to enroll the first cohort of patients with
complete injury this year, and will then transition to patients with incomplete injuries early next
year.
Geron Corporation (GERN) is developing cell therapy products from differentiated human
embryonic stem cells (hESCs) for multiple indications, and has initiated a Phase 1 clinical trial in
spinal cord injury. In the case of spinal cord injuries, neural cells derived from animal embryonic
stem cells and injected into the spinal cord injury site produced significant recovery of the
animal's ability to move and bear weight.
To apply those observations to humans, Geron has derived oligodendrocyte progenitor cells
(GRNOPC1) from hESCs --- which are naturally occurring cells in the nervous system that have
several functions, one of which is to produce myelin that wraps around the axons of neurons to
enable them to conduct electrical impulses. Myelin enables efficient conduction of nerve
impulses in the same manner as insulation prevents short circuits in an electrical wire.
Acorda Therapeutics, Inc. (ACORD) has licensed a proprietary magnesium formulation, AC105 that
has demonstrated neuroprotective properties leading to improvement of locomotor function in
SCI. AC105 has completed Phase 1 trials in healthy volunteers and Acorda expects to initiate a
Phase 2 clinical trial program in SCI, potentially expanding into other central nervous system
indications, such as TBI and stroke. Acorda expects to apply for FDA Orphan drug designation for
the acute treatment of SCI and will explore Orphan drug designations in Europe and in other
parts of the world given its worldwide development and commercialization rights.
Chondroitin sulfate proteoglycans (CSPGs), a component of the scar matrix that forms after
injury, are among the most potent inhibitors of plasticity. Their normal role in the brain and
spinal cord also includes the restriction of changes in connectivity between nerve cells. Acorda is
studying the effects of chondroitinase, a bacterial enzyme that has been shown to inactivate CSPG
inhibition of neural plasticity and regeneration, to improve motor and sensory function following SCI .
Published preclinical studies from six independent laboratories have demonstrated that the
application of chondroitinase resulted in improved recovery of function following injuries to
various areas of the brain or spinal cord.
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15. SPINAL CORD INJURY
Facts and Figures
Over 80% of patients are typically male.
The average age of a spinal cord injured person is approximately 30 years.
SCI injuries are most commonly caused by:
Vehicular accidents 37%
Violence 28% ---- including war casualties.
Falls 21%
Sports-related and other 14%
Only 52% of SCI individuals are covered by private health insurance at time of injury.
There has been a significant increase in SPIs among U.S. troops coming home from Afghanistan. Afghan
insurgents have responded to the increased presence of heavily armored U.S. vehicles with larger and
more powerful roadside explosives. Not only do the roadside bombs lead to crushed spines and other
spinal injuries, they also result in traumatic brain injuries when soldiers are exposed to blasts, even with
no impact to the head.
Selected Global Statistics
Acute SCI Chronic SCI Total SCI
North America 13,500 350,000 363,000
Latin America 13,000 275,000 288,000
Australia 500 15,400 19,400
India 57,000 405,000 462,000
Japan 5,100 79,000 84,400
China 66,500 830,000 896,500
Source: S Christopher Reeves Foundation, National Spinal Cord Injury Statistical Center, China Spinal Cord Injury Network
and analyst extrapolations.
Spinal cord physiology after injury
The central nervous system is one of the most highly vascularized organ systems in the human body,
given its high metabolic rate for oxygen consumption. The spinal cord, a major component of the central
nervous system, is also highly vascularized under normal conditions.
Major events, such as a contusion injury will change the local blood
dynamics of the spinal cord. Spinal cord injury progression is classified
into two phases: the primary and secondary phases. The primary
injury is the neuronal death immediately following an impact. With
this, comes the breaking and tearing of blood vessels in the spinal
cord. The secondary injury progresses over several days or weeks.
During this phase, a cyst forms within the spinal cord starting at the
lesion epicenter and expanding outward. The physical vascularity
changes are restricted to this new cavitation. That is, blood vessels
above and below the lesion are left relatively undisturbed.
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16. In fact, temporary angiogenesis has been observed through the lesion site during the secondary injury
phase. In other words, blood vessels attempt to grow into the cyst/cavity during the secondary phase.
These new vessels eventually die off, as the local conditions are not suitable for growth.
Following injury the body still attempts to send messages, known as sensory messages, from below the
level of injury to the brain. At the same time, the brain still attempts to send messages, known as motor
messages, downwards to the muscles. However, these messages are blocked by the damage in the
spinal cord at the level of injury. Nerves joining the spinal cord above the level of injury will be
unaffected and continue to work as normal.
Although the most obvious symptom of SCI is impairment to the limbs, functioning is also impaired in
the torso, which can mean loss or impairment of bodily functions, including digestion, breathing, and
bowel and bladder control. Because of their depressed functioning and immobility, the most serious
cases are often more vulnerable to pressure sores, osteoporosis and fractures, respiratory
complications, infections, deep vein thrombosis and cardiovascular disease.
Severity depends on both the level at which the spinal cord Cervical Spine
is injured and the extent of the injury. An individual with
an injury at C1 will likely lose function from the neck down
and be ventilator-dependent. An individual with a C7 injury
may lose function from the chest down.
Quadriplegia. When a person sustains an SCI above the
first thoracic vertebra, paralysis usually affects the cervical
spinal nerves resulting in paralysis of all four limbs. In
addition to paralysis of the arms and legs, the abdominal
and chest muscles will also be affected resulting in
weakened breathing and the inability to properly cough
and clear the chest. Cardiovascular complications may
develop from any injury that damages the spinal cord
above the fifth cervical vertebra because of an associated
block of the sympathetic nervous system. A major cause of
death from such injury is respiratory failure.
Paraplegia. This refers to injury that occurs below the first thoracic spinal nerve. The degree at which the
person is paralyzed can vary from the impairment of leg movement, to complete paralysis of the legs
and abdomen. Paraplegics have full use of their arms and hands
Cost of Care for an SCI Patient
Average Yearly Estimated Lifetime Costs By
Expenses Age at Injury
Each
SEVERITY OF INJURY First Year Year 25 Years 50 Years
High Tetraplegia (C1-C4) $ 829,843 $148,645 $3,273,270 $1,926,992
Low Tetraplegia (C5-C8) $ 535,877 $ 60,887 $1,850,805 $1,172,070
Paraplegia $ 303,220 $ 30,855 $1,093,669 $ 745,951
Incomplete Motor Functional at Any Level $ 244,562 $ 17,139 $ 729,560 $ 528,726
Source: National Spinal Cord Injury Statistical Center; February 2010 edition of “Spinal Cord Injury Facts and Figures”
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17. FINANCIAL
Common Stock
The stock currently trades at $1 per share and there are 51.7 million shares outstanding.
Company Capitalization Table
Common Total Including Ownership Ownership
Stock Warrants/Options Primary Fully Diluted
Frank Reynolds 15,147,660 16,182,584 29.3% 21.0%
Robert S. Langer 8,262,360 8,262,360 16.0% 10.7%
Spencer Trask Ventures 4,047,043 9.507,843 7.8% 12.4%
Other stockholders 24,217,649 37,556,84 46.9% 48.8%
Other option holders 5,388,092 --- 7.0%
__________
Total shares outstanding 51,674,712 76,897,728 100% 100%
Schedule of Warrants Outstanding
Exercise Raised
Shares Price on Exercise
Issued to investors -- Q4 2010 Private Placement 13,000,000 $1.49 $18,399,000
Issued to Spencer Trask as placement agent 2.700,000 1.00 2,700,000
2,600,000 1.40 3,640,000
SubTotal 5,300,000 6.340,000
Consolidated Balance Sheet
A notable feature under the asset column is the lack of goodwill, notwithstanding the fact that the co-
inventors at MIT and Children’s Hospital have spent many millions over several decades developing the
technology to which InVivo is the exclusive worldwide licensee.
Cash could substantially benefit from conversion of options and warrants to the extent that the stock
price begins to rise.
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18. Consolidated Balance Sheet
(in thousands)
3/31/2011 12/31/10
Current Assets
Cash and Equivalents 6,865 $8,964
Restricted Cash 105 ---
Prepaid expenses 462 81
Total Current Assets 7,431 9,045
Property and Equipment, Net 501 280
Other Assets 52 54
Total Assets $7,984 $9,379
Current Liabilities
Accounts payable $294 $337
Capital lease payable 30 --
Derivative warrant liability 10,526 11,232
Accrued expenses 97 248
Total current liabilities 10,947 11,232
Capital lease payable – less current portion 59 ---
Total liabilities 11,005 11,232
Shareholders’ Deficit
Common stock, $0.00001 par value, 100m
authorized, 51.6m shares outstanding 0.5 0.5
Additional paid-in capital 12,491 12,382
Deficit accumulated during development (15,513) (14,235)
Total liabilities and equity $7,984 $9,379
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19. Consolidated Income Statement
The current monthly cash burn rate is approximately $525,000. This should decline slightly once
primate trials are completed in late August. The expected cost of the 10 patient pilot clinical trial in
humans is expected to approximate $1.5 million roughly incurred over the course of 2012.
Consolidated Statement of Operations
(in thousands)
3 Mos. Ended 3 Mos. Ended Inception in 2005
3/31/11 3/31/10 To 3/31/11
Operating Expenses
Research and development $636 $157 $5,793
General and administrative 764 225 4,084
Total operating expenses 1,401 382 9,877
Operating Loss 1,401 382 (9,877)
Other income (expense)
Other income -- -- 383
Interest income 3 -- 14
Interest expense (1.5) (72( (1,055)
Derivatives gain (loss) 123 __ (4,978)
Other Income (expense), net 123 72 (5,636)
Net Loss $(1,278) $454) ($15,513)
Net loss per share, basic and diluted ($0.02) ($0.02) ($0.56)
Wtd. Average Shares Outstanding 51,661 26,260 27,737
RISK FACTORS
An investment in InVivo Therapeutics involves risk. This report supplements information
available in the Company’s Form 10-K for the year ended December 31, 2010 and related
documents. The Company’s financial condition and results from operations could be
materially affected by these risks.
These risks are more specifically set forth in the Risk Factors section of the 10-K. Investors
should refer to the qualification and limitations of forward-looking statements in the 10K. An
investor should also refer to the Company’s subsequent Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K. The Company disclaims any obligation to update its forward-
looking statements. Additional risks not presently known to the Company, or that the
Company currently deems immaterial, may also adversely affect InVivo’s business, financial
conditions or results of operations.
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