InVivo Therapeutics Releases Letter to Shareholders
Cambridge, Mass. (October 12, 2012) – InVivo Therapeutics Holdings Corp. (NVIV), a developer of groundbreaking technologies for the treatment of spinal cord injuries (SCI) and neurotrauma, today released a letter to Shareholders.
To Our Shareholders and Potential Shareholders:
InVivo has been making excellent progress in the past months and we are firing on all cylinders. I wanted to use this letter as a forum to provide an important update on how we are using InVivo’s resources to create and capture shareholder value. We expect the next six months to mark a major inflection point in our growth. The FDA has not put up any roadblocks or requested additional information that will delay the start of the study for the use of our biopolymer scaffolding to treat spinal cord injuries (SCI). Before the end of 2012, we expect to validate our clean room and then manufacture GMP batches which will be submitted to the FDA as part of the IDE application. We expect FDA approval to start the clinical study in early 2013.
We are disappointed with our recent stock price performance. The 50% decline since the end of August 2012 is unwarranted and seems to have been driven by unsubstantiated internet rumors. We believe our stock is undervalued and has significant near-term catalysts that should drive valuation.
At InVivo, we have assembled a world-class team of experts to develop treatments for neurotrauma. It’s been my pleasure to lead this team of scientists from over 15 fields of medicine and science. We spent the last six years working through some of the most important SCI scientific decisions in order to begin the “first-ever human study to implant biomaterials into the spinal cord.” We’ve had over 200 team members help us move the ball forward. It has been one of the greatest challenges of every member’s life, but working through the process has been well worth the wait and hard work as we are now in the final steps of preparation for our first human study.
The list of potential challenges at the FDA for a first-in-man study could have been endless, but leveraging my team’s past FDA experience and track record with biomaterial-based FDA approved products, we are pleased with the progress of our meetings with the FDA. Bob Langer’s lab at MIT has produced over 50 products either in clinical trials or through clinical trials. Many of Bob’s products are similar biomaterials to InVivo’s and that has helped us significantly with finalizing the FDA process. Lastly, my recent new hires have brought over 100 biomaterials products to market and they’re plugged into InVivo’s system to drive our products to the clinic.
We all wanted to start the human study yesterday but above all we need to make sure our first study is safe and successful and that it puts the product on the path to FDA approval. The extensive product development and regulatory processes we have implemented are thorough and will enable expedited paths through the FDA for our extended platform technologies including scaffolds and hydrogels. We are creating significant internal intellectual capital and intellectual property as we continue to expand our product portfolio.
Recent hires in biomaterials engineering, biomaterials manufacturing, regulatory affairs, quality affairs, and project management have provided us with a talented staff of FDA cGMP experienced experts required to complete all work to manufacture a safe product. Brian Hess leads our new development team. He has personally brought six biomaterial products to market in recent years. InVivo has become a leader in neuroscience and is an exciting and challenging place to work. We have employment candidates banging on our doors to join InVivo. We are in an enviable position and continue to recruit the best and brightest to InVivo.
We hold exclusive and world-wide patents from MIT and Harvard covering the use of any synthetic biomaterial to treat SCI. In the process of developing our manufacturing methods, we had to ensure that the final product was non-toxic for the nervous system. Our discoveries and improvements to our manufacturing process have resulted in key patent filings in 2012. We have applied for patents related to the key processes required to make a non-toxic synthetic biomaterial for spinal cord implantation. We believe the manufacturing related patents represent additional barriers of entry into our emerging neurotrauma space.
On September 25, 2012, InVivo, the Massachusetts Life Sciences Center, and several Massachusetts government officials, with the support of Governor Deval Patrick, cut the ribbon on our new 21,000 square foot global headquarters at One Kendall Square in Cambridge, MA, consolidating three locations into one cohesive organization. Our new HQ is a great achievement for patients, stakeholders, and shareholders. We will now conduct all of our research in-house maximizing productivity allowing us to significantly increase the amount of SCI and neurotrauma research in 2013 vs. 2012.
Critical for our human studies, the R&D center also houses our cleanroom for FDA cGMP manufacturing of all scaffolds and hydrogels. We’ve combined corporate offices, a chemistry lab, a biology lab, a cell lab, a vivarium and manufacturing into one location. Our SCI rodent vivarium is the largest in the world and will enable InVivo to rapidly develop multiple products in a very cost effective manner.
On November 1, 2012, we will cut the ribbon on an additional 5,000 square foot area, extending our facility to 26,000 square feet, comprising the entire fourth floor of the building. We will then have adequate space to bring all products in our pipeline through the FDA.
In 2011, on behalf of InVivo’s staff and shareholders, Dr. Jonathan Slotkin and I accepted the American Spinal Injury Association’s 2011 Apple Award, named for David F. Apple, Jr., MD, for our published primate paper in the Journal of Neuroscience Methods. The paper discussed the methods and results of our landmark 2008 pilot non-human primate study which demonstrated impressive functional recovery in primates after treatment with our biopolymer scaffolding. Prior to this study, we had no roadmap to follow. We wanted the world to know how we did our work and we made recommendation for next steps. Since that time we have completed studies with an additional 40 primates with a variety of treatments and assessed efficacy using very sophisticated assessment models. We expect to submit an important paper in the near future confirming that spontaneous recovery did not occur in the primates and that our scaffold treatment causes the functional recovery.
In 2008 we were not aware of any SCI research team in the world that had conducted any successful primate studies. To date we’re not even aware of a competitive primate study comprising more than four primates in a cohort. The importance of our work will continue to unfold as we roll out our series of important papers on spinal cord injury and neuro-protection.
From an investor relations standpoint, we plan to continue to provide investors with frequent updates, and in Q4 we’ll launch a new investor relations webpage that is intended to provide transparency for investors. I’ll record video webcasts explaining key developments at InVivo as we make announcements. They will be available for viewing at the time of, or shortly after, key updates. Look for a video on our website this weekend where I’ll discuss these developments.
1) InVivo raised $20 million in early 2012 from a select group of institutional investors and had $18 million of cash on hand at June 30, 2012, which we believe is sufficient to fund operations into 2014. In addition, the exercise of warrants has the potential to provide an additional $16.7 million of cash which would provide us additional long-term liquidity. Recently, in October 2012, we were awarded a $2 million low cost loan from the Commonwealth of Massachusetts and the funds will be dedicated to capital equipment purchases. Taken together, these resources provide InVivo with the necessary means to commercialize our biopolymer products for SCI and neurotrauma.
2) InVivo has only spent $19 million in operations through June 2012 and based on the current low share price of $1.45 ($94 million) we’ve delivered a historical return on investment of 394% with considerable potential near-term upside. InVivo has a cost effective business model and is always doing more with less.
This compares favorably to peers in the stem cell space who collectively have spent over $1 billion and yet are years from market.
3) With over 100 patents we have a valuable patent portfolio that covers the use of any synthetic biomaterial to treat SCI, the combination of any biomaterial with drugs and stem cells to treat SCI. We’ve extended the patient portfolio to peripheral nerves, the cavernous nerve surrounding the prostate, retina, spinal cord tumors, and the brain.
4) As we extend our patent portfolio we’ll have multiple opportunities to license deals for different indications and earn payments from big pharma as early as 2013.
5) Our business model in SCI will be very profitable. We estimate that the market opportunity in acute SCI treatment exceeds $10 billion, with gross margins anticipated to exceed 85%. A small sales force can effectively penetrate the market because currently 80% of SCI’s are treated at 75 level one trauma centers.
6) Frank Reynolds has not sold a share since April 2012, despite what the short sellers creating rumors on the internet have claimed. We have several compelling near-term value creating events including the fact that we’re only months from human studies. As a founder, I worked the first two years at InVivo without a paycheck. Over time, investors need to understand I will be selling some stock to raise cash and diversify my financial holdings but will do so in a transparent fashion under a pre-disclosed 10-b5 plan filed with the SEC.
OPERATIONAL UPDATE: Firing on all cylinders
1) InVivo is the only company to restore functional improvement in non-human primates. InVivo’s 2011 non-human primate study confirms that the impressive improvement in motor function observed in the treatment group was attributable to the biopolymer scaffolding alone and was not due to spontaneous recovery. This exciting data will be submitted shortly to a prestigious scientific journal for publication.
2) The FDA confirmed our scaffold would be regulated as a medical device. We’re completing the paperwork now to formalize the Humanitarian Device Exemption process which will speed the pathway to market.
FDA approval to start human clinical trials is expected in early 2013. The FDA is supportive of the technology and has not put up any roadblocks or requested additional information that will delay the start of the study. Before the end of 2012, we expect to validate our clean room and then manufacture GMP batches which will be submitted to the FDA as part of the IDE application.
3) Recently, Brian Hess was promoted to interim Chief Science Officer. Brian has spent his entire career bringing biomaterials to market. Clearly, biomaterial-based neuro-protection technologies will be our focus until cell therapies make more progress through the FDA. We’ve recruited a proven, talented management team with outstanding credentials in biomaterials development that gives us strength in all functional disciplines.
4) On September 25, 2012, InVivo cut the ribbon on our new 21,000 square foot HQ in Cambridge, MA consolidating all of our offices, manufacturing, lab space and vivarium into one location. We believe that we house the largest SCI rodent vivarium in the world enabling our rapid development of multiple products.
5) InVivo has begun discussions with the FDA about our second product, a drug releasing hydrogel for pain management of peripheral nerve pain.
6) InVivo has established the world’s first chronic spinal cord injury rodent population dedicated to developing scaffold and stem cell therapies for a critically underserved chronic spinal cord injury research model.
7) InVivo is led by a driven, passionate, and focused leadership team.
We received a fun but important trademark for “Viva InVivo.” Our organization thrives on the energy of our mission and we do enjoy the feeling of coming to work every day knowing we’re doing great work to help people, so why not “Viva InVivo!”
Frank Reynolds, CEO