Nviv - final 8-8-11 pdf one

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Nviv - final 8-8-11 pdf one

  1. 1. 245 Park Avenue, 24th Floor New York, NY August 8, 2011Spinal Cord Injury and Neurological DevicesSymbol 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 cordinjuries (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 implantationadjacent to the acute SCI lesion in the critical hours following injury. In extensive trials in non-humanprimates, treated animals showed a reversal of paralysis and a return of normal motor function withindays 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 ouranalysis so far, we estimate that this product could generate annualized sales in excess of $150 million in 3-4years, and that NVIV shares could achieve a significant premium valuation relative to the average M&A multiplefor restorative medicine stocks which is 4-5 times revenues. We believe the current valuation should exceed $250million 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 enterprisewith a market cap of less than $60 million. It suggests that InVivo has a wide range of licensing andcollaborative possibilities with other companies in the burgeoning field of neurological therapies anddevices. D. H. Talbot
  2. 2. EXECUTIVE SUMMARYWith a total investment of only $15 million and in just six years, InVivo has become the first company tosuccessfully demonstrate functional improvement in a paralyzed non-human primate, has developed apipeline of three promising new SCI therapies, and has filed an Investigational Device Exemption (IDE) tobegin 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. OutsideIn Research - 2
  3. 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 Medicines 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 OutsideIn Research - 3
  4. 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. OutsideIn Research - 4
  5. 5. Table of Contents PageExecutive Summary 2-5Company History 6Management 7Technology Products in development 8 Miami Project 9 Preclinical Results 10Company Commercialization Strategy 12 Intellectual Property 13 Competition 13Spinal Core Injury Facts and Figures 15 Spinal Cord Physiology – Post Injury 15 Cost of Care 16Financial Stock analysis 17 Balance sheet 18 Statement of Operations 19Risk Factors 19 OutsideIn Research - 5
  6. 6. COMPANY HISTORYInVivo is the first company to successfully demonstrate functional improvement in a non-human primatefollowing paralysis. In these pre-clinical trials, behavioral scoring was performed along with collection ofEMG and kinematic data and demonstrated an improved level of functional recovery in all treatedanimals. Management believes that this model is the best surrogate for how the products will work inhumans. Research from the pilot non-human primate study was published in the Journal of NeuroscienceMethods 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. OutsideIn Research - 6
  7. 7. MANAGEMENTFrank 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 Womens 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 FDAs 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.As 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. OutsideIn Research - 7
  8. 8. TECHNOLOGYCurrently there are no successful spinal cord injury treatment options for SCI patients. InVivo takes amultiphasic 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 theprotection of the undamaged portion of spinal cord (as little as 10%) against secondary injury byminimizing 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 duringtraumatic injury, or the “primary injury”. This protects the damaged spinal cord by mitigating theprogression of “secondary injury” resulting from the body’s inflammatory and immune response toinjury, and promotes neuroplasticity, a process where functional recovery (the recovery of motor movement orsensation) may occur through the rerouting of signaling pathways to the spared healthy tissue. Achievingthese results is essential to the recovery process, as secondary injury can significantly worsen theimmediate damage sustained during trauma. The additional damage dramatically reduces patientquality 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. OutsideIn Research - 8
  9. 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 injury3. 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. OutsideIn Research - 9
  10. 10. Preclinical DevelopmentInVivo has demonstrated the proof of concept for its SCI therapy in both non-human primate and rodentanimal models. The company is the first in history to successfully demonstrate functional improvementin a paralyzed non-human primate and believes this model is the best surrogate for how the productswill 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 AmericanSpinal Injury Association (ASIA).2002 Seminal Rodent Study. Results showed functional locomotive improvement as early as two weekspost-injury in animals that received the scaffold. Animals demonstrated sustainable functional recoveryand no adverse pathological reactions to the product.2008-2010 Non-Human Primate Studies. Behavioral scoring was performed along with collection ofEMG and kinematic data. On average, all treated animals demonstrated an improved level of functionalrecovery compared to the control animals. Relative Effectiveness in Restoring Motor Function Rodent Study Second Non-Human Primate Study Source: Company Published InformationThe Miami ProjectOn May 4, 2011, InVivo and The University of Miami Miller School of Medicines Miami Project to CureParalysis announced the formation of a strategic research collaboration for the development of novelSCI treatments. Co-founded by the son of Pro Football Hall of Famer Nick Buoniconti, the Miami Projecthas raised over $350 million over the past 25 years and is one of the worlds most comprehensive spinalcord injury research centers. OutsideIn Research - 10
  11. 11. In SCI, restoring the electrical transmission between the brain and spinal cord requires repairing themyelin sheath around the central nerves. It may also require the regrowth of severed nerve fibersacross the site of injury and into the neural network that is below the lesion. The Miami Project isseeking FDA approval to conduct clinical trials on a number of promising treatments includingtransplanting 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 allnerves 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 inendogenous repair due to their ability to dedifferentiate, migrate, proliferate, express growth promotingfactors, 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 spinalcord, Schwann cells migrate from the periphery into the injury site, where they apparently participate inendogenous repair processes. Grafting Schwann cells into the lesion site has been shown to promoteaxonal regeneration and myelination. Clearly, Schwann cells have great potential for repair of theinjured spinal cord, but they need to be combined with other interventions to maximize axonalregeneration 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 OutsideIn Research - 11
  12. 12. COMPANY COMMENTS Product Development Pipeline Source: Company Published InformationCommercialization StrategyManufacturing and Product Delivery PlanManagement believes that raw materials for the first device product can be readily obtained fromsuppliers 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. OutsideIn Research - 12
  13. 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 PropertyIn July 2007, InVivo obtained a worldwide exclusive license (the “CMCC License”) that covers 10 issuedU.S. patents and 3 pending U.S. patents as well as 67 international patents and 34 international pending patentsthat are the result of over a decade of research by Dr. Robert S. Langer, Professor of Chemical andBiomedical 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 asan extracellular matrix substitute for treating SCI by itself or in combination with drugs, growth factorsand human stem cells. The company believes that any biomaterial extracellular matrix developed totreat 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 andauthority 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 islonger, 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, thecavernous nerve surrounding the prostate, the brain, the retina and cranial nerves. The financial potential forInVivo to profit from this amendment could be highly significant but we do not wish to speculate on thepossibilities at this time.CompetitionThe size of the SCI therapeutic opportunity has attracted a number of worthy competitors but InVivo’smultidisciplinary 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 stemcells that tend to be much earlier stage. OutsideIn Research - 13
  14. 14. In addition InVivo pre-clinical data has demonstrated that stems cells alone do not thrive in the harshinflammatory environment of an SCI. Moreover, growth factor and stem cell compounds are classifiedby the FDA as either drugs or biologics, and thus inherently face a longer approval process than themedical device route. We expect that stem cell companies may find InVivo to be an attractive partner inorder to gain access to the proprietary features and benefits of the biodegradable scaffoldingtechnology.  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 animals 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. OutsideIn Research - 14
  15. 15. SPINAL CORD INJURYFacts 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. Afghaninsurgents have responded to the increased presence of heavily armored U.S. vehicles with larger andmore powerful roadside explosives. Not only do the roadside bombs lead to crushed spines and otherspinal injuries, they also result in traumatic brain injuries when soldiers are exposed to blasts, even withno 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 injuryThe 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 centralnervous system, is also highly vascularized under normal conditions.Major events, such as a contusion injury will change the local blooddynamics of the spinal cord. Spinal cord injury progression is classifiedinto two phases: the primary and secondary phases. The primaryinjury is the neuronal death immediately following an impact. Withthis, comes the breaking and tearing of blood vessels in the spinalcord. The secondary injury progresses over several days or weeks.During this phase, a cyst forms within the spinal cord starting at thelesion epicenter and expanding outward. The physical vascularitychanges are restricted to this new cavitation. That is, blood vesselsabove and below the lesion are left relatively undisturbed. OutsideIn Research - 15
  16. 16. In fact, temporary angiogenesis has been observed through the lesion site during the secondary injuryphase. 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 thelevel of injury to the brain. At the same time, the brain still attempts to send messages, known as motormessages, downwards to the muscles. However, these messages are blocked by the damage in thespinal cord at the level of injury. Nerves joining the spinal cord above the level of injury will beunaffected and continue to work as normal.Although the most obvious symptom of SCI is impairment to the limbs, functioning is also impaired inthe torso, which can mean loss or impairment of bodily functions, including digestion, breathing, andbowel and bladder control. Because of their depressed functioning and immobility, the most seriouscases are often more vulnerable to pressure sores, osteoporosis and fractures, respiratorycomplications, infections, deep vein thrombosis and cardiovascular disease.Severity depends on both the level at which the spinal cord Cervical Spineis injured and the extent of the injury. An individual withan injury at C1 will likely lose function from the neck downand be ventilator-dependent. An individual with a C7 injurymay lose function from the chest down.Quadriplegia. When a person sustains an SCI above thefirst thoracic vertebra, paralysis usually affects the cervicalspinal nerves resulting in paralysis of all four limbs. Inaddition to paralysis of the arms and legs, the abdominaland chest muscles will also be affected resulting inweakened breathing and the inability to properly coughand clear the chest. Cardiovascular complications maydevelop from any injury that damages the spinal cordabove the fifth cervical vertebra because of an associatedblock of the sympathetic nervous system. A major cause ofdeath from such injury is respiratory failure.Paraplegia. This refers to injury that occurs below the first thoracic spinal nerve. The degree at which theperson is paralyzed can vary from the impairment of leg movement, to complete paralysis of the legsand abdomen. Paraplegics have full use of their arms and handsCost of Care for an SCI Patient Average Yearly Estimated Lifetime Costs By Expenses Age at Injury EachSEVERITY OF INJURY First Year Year 25 Years 50 YearsHigh Tetraplegia (C1-C4) $ 829,843 $148,645 $3,273,270 $1,926,992Low Tetraplegia (C5-C8) $ 535,877 $ 60,887 $1,850,805 $1,172,070Paraplegia $ 303,220 $ 30,855 $1,093,669 $ 745,951Incomplete Motor Functional at Any Level $ 244,562 $ 17,139 $ 729,560 $ 528,726Source: National Spinal Cord Injury Statistical Center; February 2010 edition of “Spinal Cord Injury Facts and Figures” OutsideIn Research - 16
  17. 17. FINANCIALCommon StockThe 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 6.340,000Consolidated Balance SheetA 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 thetechnology to which InVivo is the exclusive worldwide licensee.Cash could substantially benefit from conversion of options and warrants to the extent that the stockprice begins to rise. OutsideIn Research - 17
  18. 18. Consolidated Balance Sheet (in thousands) 3/31/2011 12/31/10Current Assets Cash and Equivalents 6,865 $8,964 Restricted Cash 105 --- Prepaid expenses 462 81 Total Current Assets 7,431 9,045Property and Equipment, Net 501 280Other Assets 52 54 Total Assets $7,984 $9,379Current LiabilitiesAccounts payable $294 $337Capital lease payable 30 --Derivative warrant liability 10,526 11,232Accrued expenses 97 248 Total current liabilities 10,947 11,232Capital lease payable – less current portion 59 --- Total liabilities 11,005 11,232Shareholders’ DeficitCommon stock, $0.00001 par value, 100m authorized, 51.6m shares outstanding 0.5 0.5Additional paid-in capital 12,491 12,382Deficit accumulated during development (15,513) (14,235) Total liabilities and equity $7,984 $9,379 OutsideIn Research - 18
  19. 19. Consolidated Income StatementThe current monthly cash burn rate is approximately $525,000. This should decline slightly onceprimate trials are completed in late August. The expected cost of the 10 patient pilot clinical trial inhumans 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. OutsideIn Research - 19
  20. 20. InVivo Therapeutics Holdings, Inc. One Broadway, 14th Floor Cambridge, MA 02142 Cambridge, Massachusetts Contact: Sean Moran (212) 475-1523 smoran@invivotherapeutics.com OutsideIn Research, LLC th 245 Park Avenue, 24 Floor New York, NY 10067 D. H. Talbot (212) 829-5510COPYRIGHT © 2009 - 2011 OUTSIDEIN RESEARCH. ALL RIGHTS RESERVED. OUTSIDEIN RESEARCH, AFFILIATES (OIR), PUBLISHES REPORTSPROVIDING INFORMATION ON SELECTED COMPANIES. OIR IS NOT A REGISTERED INVESTMENT ADVISOR OR BROKER-DEALER. THESE REPORTSARE PROVIDED AS AN INFORMATION SERVICE ONLY, AND THE STATEMENTS AND OPINIONS IN THESE REPORTS SHOULD NOT BE CONSTRUEDAS AN OFFER OR SOLICITATION TO BUY OR SELL ANY SECURITY. OIR ACCEPTS NO LIABILITY FOR ANY LOSS ARISING FROM AN INVESTORSRELIANCE ON OR USE OF THESE REPORTS. AN INVESTMENT IN ANY COMPANY IS CONSIDERED TO BE HIGHLY SPECULATIVE AND SHOULD NOTBE CONSIDERED UNLESS A PERSON CAN AFFORD A COMPLETE LOSS OF INVESTMENT. OIR OR AN AFFILIATE OF OIR MAY HAVE BEEN, HASBEEN/WILL BE OR MAY BE COMPENSATED IN CASH AND/OR RULE 144 STOCK OF THE COMPANY FOR THE PUBLICATION AND CIRCULATION OFTHESE REPORTS. THE MAXIMUM AMOUNT CHARGED BY OIR IS $75,000 IN RULE 144 STOCK PER REPORT. OIR INTENDS TO SELL ALL OR APORTION OF THE OF THE RULE 144 STOCK IN ACCORDANCE WITH ALL SECURITIES LAWS, WHICH PREVENTS OIR FROM SELLING STOCK FOR APERIOD OF SIX MONTHS TO ONE YEAR DEPENDING ON THE NASDAQ, AMEX, BULLETIN BOARD, AND PINK SHEETS REGULATIONS. OIR, AS AMATTER OF INTERNAL POLICY, WILL NOT BUY OR SELL SHARES OF COMPANY(S) STOCK IN THE OPEN MARKET. THESE REPORTS CONTAINSFORWARD-LOOKING STATEMENTS, WHICH INVOLVE RISKS, AND UNCERTAINTIES THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLYFROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS. FOR FURTHER DETAILS CONCERNING THESE RISKS AND UNCERTAINTIES,SEE THE SEC FILINGS OF THE INDIVIDUAL COMPANIES INCLUDING THE COMPANYS MOST RECENT ANNUAL AND QUARTERLY REPORTS.OUTSIDEIN RESEARCH IS A SEPARATE ENTITY FROM PROACTIVE CAPITAL RESOURCES GROUP LLC. HOWEVER THERE IS COMMON OWNERSHIP. OutsideIn Research - 20
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