ACell’s Skin and Tissue Regeneration Technology
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We’ve talked before about the many types of regenerative medicines under development by a multitude of companies. Investors are pouring money into a burgeoning field of life sciences called longevity of which regenerative medicine is a part of. From printing organs on demand to harvesting them from pigs, there are many promising regenerative medicine technologies being developed. Today, we want to talk about regenerating the biggest organ on the human body which covers over 22 sq ft. of surface area – your skin.
Physicians have been working on methods to regenerate skin now for a while. For example, it’s common to use extracellular matrix (ECM) scaffolds for skin regeneration. These are described as “structural and functional proteins that act as a tissue-specific template for constructive tissue remodeling.” You might think of this as a layer that’s placed over open wounds that helps skin regenerate more quickly. While many companies produce ECM products, only one company has developed a superior ECM scaffold made from pig bladders – the urinary bladder matrix (UBM). And they just decided to raise $86 million through an initial public offering (IPO) of their stock.
About ACell
Founded in 1999, ACell has disclosed funding listed as a single $8.7 million round taken in 2011. In the company’s words, they’re “focused on the development, manufacture and sale of products primarily used in acute care settings as part of the treatment and management of moderate to severe wounds and reinforcement of soft tissue surgical defects.” Simply put, they’re the only company out there producing and selling UBM-based products that are designed to enhance the body’s ability to restore natural tissue while minimizing scarring. ACell has three product lines for help in management of traumatic, surgical and chronic wounds, burns, hernias, and other conditions requiring the reinforcement of soft tissue.
Each of these product lines utilizes the MatriStem UBM™ (Urinary Bladder Matrix) technology to address a different medical use case, all of which involve regenerating tissue better than any other competing ECM solution out there. One of ACell’s featured publications provides the below chart which shows how ACell outperforms the competition when it comes to raw regenerative capabilities.
Since ACell’s first product introduction in 2009, the company has sold over 500,000 units of product based on their MatriStem UBM technology.
Some Basic Numbers
Right now, it’s good times for ACell as their revenue growth continued in 2019, up about 13% from the previous year. Here’s a look at some basic financial numbers for ACell:
In terms of possible upside for growth, ACell estimates their total addressable market in the United States for currently marketed products at over $2 billion. That’s based on “expected 2019 revenues for hernia matrices and biologic skin and dermal substitutes for wound care.” If their product is superior enough then it should be able to steal more market share than the 5.35% they’ve already captured. That’s not to mention global markets and other possible products they could release based on MatriStem UBM technology. Of course, this only works if they can stay ahead of all the competition by continuing to innovate as time goes on.
Staying Ahead of the Competition
In reading through the ACell S-1 filing, we found lots of mention about the 40 years of research that went into ACell’s platform and how much their work is being cited in other research papers. (BTW, does anyone else think that we should do away with gory images in S-1 filings? Most of the people reading this stuff don’t want to see how the sausage gets made.) The company also noted a list of competitors for their product lines as follows:
- Gentrix (hernia repair) – Becton, Dickinson and Company, Cook Biotech Inc., Johnson & Johnson, Integra LifeSciences, Allergan, Medtronic, TELA Bio, and W. L. Gore & Associates.
- MicroMatrix and Cytal (wound management including burn care) – Avita Medical, Integra LifeSciences, MiMedx, Organogenesis, Smith & Nephew, and Vericel Corporation.
In the above list, there are some formidable names – like Johnson & Johnson, a medical giant that spent 13.4% of revenues on R&D last year in 2019 (about $11 billion). Contrast that to ACell which spent about 7.8% of revenues on R&D in 2019 (about $7.9 million). The trend is also going in the wrong direction, as ACell decreased R&D spend from $9 million in 2018 to $7.9 million in 2019.
Even if ACell’s extensive intellectual property portfolio protects them in the courtroom, much is happening in regenerative medicine. Some day we may be able to take a patient’s cells and use them to 3D print personalized skin grafts that look just as good as the original. Using technologies such as gene editing, we might even be able to speed up the healing process far beyond what nature is capable of today.
A Recent Settlement
It’s easy to read all about a company’s potential in their marketing collateral, but more difficult to find mentions of things that PR firms may have been paid lots of dollars to squash. Everyone makes mistakes, but it’s only forgivable if they learn from those mistakes and become stronger. Investors need to know about past mistakes because they represent company-specific risk, something that you want to minimize as much as possible.
Last year, ACell announced that it had reached a final settlement with the U.S. government relating to “civil and criminal allegations relating to the sales and marketing of the Company’s products.” The press release announcing the outcome noted, “The activities DOJ investigated occurred many years ago, when ACell was headed by a different management team,” one that probably wants to get this behind them as quickly as possible. We only mention it because it’s something any potential investor would consider relevant to an investment decision.
Conclusion
As time goes on, technological advancements mean that we’ll be able to regenerate skin quicker and better. ACell faces many competitors with big R&D budgets and even bigger sales teams. In order to show they’re a leader, they’ll need to continue showing strong revenue growth. It’s a proxy for capturing market share, something they’ll need to do before some other regenerative medicine company does.
If the IPO happens as planned, shares of ACell are expected to trade under the ticker ACLL.
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Look at ReNeuron Group (RENE.L)
After an eventful 2020, ReNeuron released updated 12-month Phase ll data in January on its lead human retinal progenitor cell (hRPC) project. This continues to show a consistent and robust, sustained average gain in visual acuity in retinitis pigmentosa (RP). A continuation study in nine patients using two million cells is underway with three- and six-month data due over H2 CY21 and the first three patients treated. This will facilitate partnering negotiations. A pivotal hRPC study may start in 2022. Deals are possible in CY21 on the exosome genetic drug delivery platform, which could be very valuable. The valuation remains at £190m with strong cash.
Very difficult stock to understand and they also fall below our market cap cutoff of $1 billion.