After Arteriocyte‘s name appears in the media, it’s not uncommon for CEO Don Brown to get inquiries from people looking to buy stock in the company.
These would-be investors aren’t aware the Cleveland-based company is privately held and has no plans for an initial public offering. But the calls signify the buzz created by the somewhat-under-the-radar company.
Part of the interest is the company’s growth — it’s hired more than 70 employees (about half are in Cleveland) since its inception in 2004 and plans to as much as double that number over the next few years.
Arteriocyte’s primary focus — developing therapeutics from stem cells — also has been a hot topic in recent years. The company is developing therapies using adult-derived stem cells (not the embryonic ones that generate so much controversy) to treat diseases like chronic ischemia, and it’s also working on a technology called NANEX that uses stem cells to create “universal-donor” red blood cells (pdf), among other cell applications.
Payoffs on these therapies are down the road. But Arteriocyte is generating revenue today from its Magellan device, which harvests and quickly concentrates stem cells and blood platelets during surgeries. These concentrated cells can be fed back to patients, boosting the body’s ability to repair itself. The device is used in about 6,000 surgeries per month, according to the company.
Arteriocyte, which grew out of technology licensed from Case Western Reserve University, has raised $48 million in grants and investment funding over its lifetime. Before Arteriocyte, the highest-profile assignment for veteran health industry executive Brown was leading Schering-Plough’s prescription business for allergy drug Claritin.
MedCity News caught up with Brown shortly after the opening of Arteriocyte’s new 10,000-square-foot corporate headquarters and R&D facility on Cleveland’s East Side. U.S. Rep. Marcia Fudge, who attended the opening, lauded Arteriocyte as “a shining example of a company helping to transform Cleveland from its industrial past to a powerhouse in biomedical enterprise.”
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Brown said the move from its previous 1,800-square foot space “marks our growing up as a company.” He spoke with MedCity News about the company’s recent progress and priorities.
Q: What needs to happen before the stem cell therapy can hit the market?
A: In any cell therapy development program, the development effort often mirrors a drug’s development efforts, meaning there’s significant FDA regulation. Safety, efficacy, and finally, dose-ranging studies need to be conducted, all with long-term follow up. Typical development periods can be 10 years or longer with significant financial resources committed prior to submitting a formal request for market clearance to the FDA. We’ve done human safety studies using our lead cell product sourced from marrow, and are now initiating our first in-man safety study using umbilical cord blood as the primary source of cells, with efficacy studies soon to follow.
Q: What’s the status of the red blood cells that you’re developing?
A: Our rapid-cultured red blood cells initiative has been through significant pre-clinical development work, using both in-house and outside reference labs to validate the process and quality of the product. For the next year-and-a-half, we’ll focus on scaling up the manufacturing of that technology before we move into human clinical evaluation. Along the way, we’ve found that that this culturing technology (NANEX) represents a potential broad platform technology for the company, which we believe will be of value in drug, vaccine and diagnostic development for malaria — a blood-borne infection — and leukemia — a blood-borne cancer.
Q: Talk about your strategy surrounding the Magellan product.
A: When we started the company, we were focused on the mindset that the human body already contains the cellular building blocks for tissue repair. Our original focus was to harvest, purify and redeliver a specific cell thought to be most responsible for affecting that tissue repair. Our clinical development focus was to start with the heart and then move to the limbs. What we’ve discovered through our research programs is that it’s more likely not just one cell is responsible for repair, but often a concert of cells that drive the effect we’re looking for.
The synergy that the Magellan technology brings to our core efforts is a device that enables rapid bedside processing of tissue — blood or bone marrow — that delivers back to the surgeon a concentrated injectate of those cells for use as the surgeon deems appropriate. In our first clinical trial with a purified cell, the processing of the unit took nine hours. Today that process at bedside takes 15 minutes.
Q: Explain the difference between Arteriocyte and Arteriocyte Medical.
A: The novel discovery and development is on the Arteriocyte side of the business. Once we commercialize a product, it is manufactured, distributed and marketed through the Arteriocyte Medical Systems unit. The dual structure is designed to capitalize on the strengths on each side of the business. Discovery and development often take a more circuitous path, with expected stumbles along the way and important discoveries that can’t be measured on a monthly or quarterly basis. The commercial side of any medical device company has a much more direct customer focus, in that it is charged with enabling or improving surgical procedures. Both environments breed the need for a unique skill set, and it’s often better to keep them separate.
Q: What do you see as Arteriocyte’s most likely exit scenario?
A: As in most startups, meeting the market need often brings company success. In our case, that is defined by enabling improved patient outcomes. The better we do at that, the more attractive we become to larger companies as a potential acquisition. We don’t spend time today thinking about going public or potentially getting acquired because we have sufficient capital to fund our R&D and commercial initiatives, and our preference is to stay independent so that we can continue to focus on improving patient outcomes.
