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Cytex and Cartilage Restoration: a New Approach to Treating Osteoarthritis
Chief Executive Officer
Cytex Therapeutics, Inc.
919 400 2693
Interview conducted by:
Lynn Fosse, Senior Editor, CEOCFO Magazine
Published – January 6, 2020
CEOCFO: Mr. Pritchard, what attracted you to Cytex Therapeutics, Inc? This is not your first venture in the industry.
Mr. Pritchard: No, it is not. I met Cytex as a mentor working with The Council for Entrepreneurial Development, Venture Mentoring Services group here in Raleigh. One of the cofounders gave a presentation on Cytex and it caught my interest, not just for the quality of the science and the clear unmet clinical need but having had multiple knee surgeries myself, I was particularly sensitive to the kinds of things that they were doing. As I came to know the team better, I recognized their commitment to the mission and found that very compelling.
CEOCFO: What is the idea behind Cytex?
Mr. Pritchard: The idea behind Cytex is to provide a way for orthopedic surgeons to restore cartilage in an arthritic joint, an operative tool they currently do not have. The starting point for osteoarthritis is cartilage damage. Over time, it gets worse until the pain and disability reach the point where joint replacement is the only option. You typically think of joint replacement surgeries, especially in the hip where Cytex is focusing, in association with older patients. The fact is that about half of the hip replacements done yearly in the US are done on patients under 60, and most of the growth in hip surgery is coming from these younger patients.
The clinical challenge surgeons face is that hip replacement, while very appropriate for older patients is not a great choice for the younger, more active patients. Our focus is an alternative treatment that restores the damaged cartilage rather than replacing the entire joint. Restoring the cartilage should return the hip to a state of normal, pain-
CEOCFO: What is involved in restoring the hip?
Mr. Pritchard: The challenge is that cartilage, which is the slick, slippery material that lines the ends of bones where bones fit together in a joint gets damaged over time in the course of normal activities. Because it has neither a blood supply nor a nerve supply, damaged cartilage does not heal. That has been a long standing challenge. What do you so with damaged cartilage? Techniques that have worked to somewhat restore cartilage in the knee have not proven successful in the hip. This leaves surgeons with just the one option of total hip replacement. Again, as suitable as this is for older patients, younger patients who want to return to their more active lifestyles do not want to face hip replacement and the prospect of revision surgery to replace the replacement. Hip restoration that restores damaged cartilage and delivers pain-
CEOCFO: What have you found out so far that is leading you to a procedure or to a restoration that will work? What do we know today?
Mr. Pritchard: That is a good question, because over the years, there have been many companies that tried to do what we are trying to do and unfortunately, for them and for us and for the patients, they have failed. Our challenge is to convince people, including potential investors, surgeons and companies in the orthopedic device field, that we are going to succeed where everyone else has failed. The only way we know to deliver that message is with science-
The technology at Cytex enables us to manufacture 3D implants that basically plug into place where there is a defect in the cartilage and from the time that you put that implant in place it behaves just like natural cartilage. Over time, the implant, which is made out of a very safe bio compatible material that the US FDA has a lot of data on in terms of safety, is replaced by bone and normal cartilage. However, we have immediately enabled that joint to function pain free by virtue of the performance characteristics, if you will, of the implant itself. Importantly to Cytex as a business, this technology is patented. Now, I have boiled down, in thirty seconds, twelve years worth of research, but we ended up with this implant that behaves like cartilage.
CEOCFO: It enables the patient to be pain free, but why does it or how does it actually restore the cartilage? If you put an artificial hip in, does that not allow the person to be pain free, but the cartilage does not restore?
Mr. Pritchard: That is technically correct. The caveat with metal and ceramic implants is that these implants have a limited life span in patients, which makes their use a suboptimal solution for patients who outlive the implant. The implants last about twenty years. If you are seventy five and you get an implant, the chances of you outliving your implant are, statistically, not very great. What happens if you are an active patient of thirty or forty or fifty? What happens is that if you are going to wear that implant out in ten years. Replacing the implant in a procedure called a revision surgery leaves a less stable joint. What happens after that first revision surgery? Maybe ten or twelve years later, you need another. Every time you go in to re-
The goal with our implants is to restore the cartilage and leave all the healthy bone in place, resulting in a joint that have been restored to a pre-
CEOCFO: Why does the cartilage grow back?
Mr. Pritchard: Our implants are engineered to provide an environment that encourages cells to set up shop, so to speak, and grow new cartilage and new bone. That sounds trivial, but as an engineering challenge, it really is not. We had to make sure that the implant, that is the little 3D structure that we are plugging in to the cartilage defect in the joint, has to have certain biomechanical characteristics of natural bone and cartilage or it will not work. These carefully designed features not only support the patient but protect the cells as they make new tissues.
CEOCFO: Once that regrowth happens is it permanent?
Mr. Pritchard: First, let us take a small step back. Cartilage damage leads to arthritis. If you look at the hip surgeries performed in the United States, ninety two percent of hip surgeries have a primary diagnosis of osteoarthritis. It is that cartilage damage that leads you to go to the doctor and say, “Ow, my hip hurts, what have you got, how can you help me.” That is the first point.
The second point is that damage, untreated, and this is no surprise, gets worse and worse, because, as we talked about a minute ago, cartilage does not heal. The trouble is that despite the fact that there is an opportunity to intervene early in the progress of cartilage damage related to osteoarthritis, there is no real reason to, because the surgeons cannot do anything. They basically tell their patients, “Do a little bit of physical therapy, which does not help but it is all I have got. Take pain relief medication, which helps you live with the disease but does nothing to reverse the disease, and then come back when you cannot stand it anymore and I will replace your hip.” Right now, that is what patients are hearing from their orthopedic surgeons, all throughout the country. We get phone calls from patients saying, “Is my doctor refusing to treat me?” and the answer is no. They just do not have anything that they can affectively come in and do that early intervention and basically halt the progression of disease and really and truly restore the hip to a healthy condition. That is what we are doing. Therefore, it is not hip replacement. We are doing hip restoration. To answer your question specifically, the cartilage we restore is not any more permanent than the cartilage that it replaces. That is a simple fact of aging and activity. Our implants may re-
CEOCFO: Does it work for everyone? Are there certain parameters or sets of circumstances or is it pretty much across the board that this will be good?
Mr. Pritchard: Our approach will not be ideal for patients with end stage osteoarthritis. For example, if the entire articular cartilage on the head of the femur is worn away, it is kind of too late. For these patients, hip replacement, regardless of your age, is the right choice. If you want to think about it in an analogy, we can repair pot holes, but repaving the entire road is not the best use of our technology. Cytex implants are designed to fix smaller lesions associated with the earlier stage disease.
We are targeting younger, more active patients with our implants. These patients often have earlier stage arthritis, with one or two significant, repairable cartilage lesions. We think these patients stand to benefit most from the cartilage restoring properties of our implants.
CEOCFO: Where are you right now? What are your next steps? What was your funding situation?
Mr. Pritchard: We have been interacting with the FDA, their orthopedic device division and their device branch, for about a year, laying out just what we have got in the way of large animal data, to show that it is safe and that it works for cartilage restoration. They have asked us to do a few more studies and asked us to, instead of taking a look at the six month period, take a look and see what happens with the implants at twelve months. We are working now on finishing up that study and conducting additional studies on the physical properties of the implants themselves..
The next step for us will be to work with the FDA to design a single center pilot study. We would have to file what is called an Investigational Device Exemption, or an IDE, to start that First in Man pilot study. We think that if we can get the funding we will be ready to file for that IDE in 2020. Cytex has been funded entirely by NIH grants but we are going to need to raise equity capital in order to conduct the study. We are looking to raise what is called an A round, a first round of financing for a private company of up to ten million dollars, which will take us through 2020, 2021 and 2022, to the end of the pilot study and probably fund us into planning for the larger multi center pivotal study.
CEOCFO: What is the interest from the investment community in this area of medicine?
Mr. Pritchard: Unfortunately, cartilage repair technologies, by and large, have not worked well. The investors are pretty skeptical. That said, investments are being made in this area. It is hard to find the funding to get to the point where the big strategic investors will take a serious look at the company. It has been described various ways as a Valley of Death for funding. Everybody wants to see the clinical data. We are trying to raise money to generate that clinical data. However, it is one of these Catch 22 things. We cannot really do a deal without clinical data, but we cannot raise the money to get to that point. We are pursuing people who will invest in this particular area in MedTech.
It is interesting; I was at a MedTech conference in San Francisco a couple of weeks ago and one of the people that I ran into, a CEO of an orthopedic device company like ours, said, “Do not spend any time talking about the clinical need, do not spend any time talking about the market opportunity and how big it is; spend time talking about how you are going to succeed when everybody else has failed.” His message was, “Everyone knows there is a huge unmet clinical need; everybody knows that it is a multibillion dollar opportunity. How is it that you guys, Cytex, are going to succeed where everybody else has failed?” All we can do is show them the science and show them the data. You have got to reach your own conclusions. However, right now we feel very confident in the results we are getting, very confident in our intellectual property position, and we are ready to go and meet with anybody who can help us raise the money to get our implants into the clinic, which is where this technology belongs and ultimately will be proved.
CEOCFO: What has been the response from the medical community?
Mr. Pritchard: We have a clinical advisory board. One of the things that we have tried to do is to make sure that when we come up with a solution that it is a real world problem. We have gone to clinicians, leading orthopedic surgeons in the US and Canada, and given them the pitch, shown them what we are doing and they love it! The people that we present it to are leading surgeons and they have never seen anything like this. They have all heard promises of cartilage regeneration but tell us they have never seen results like we are showing them.
I would describe them as, not even skeptical, but they are physician scientists. It needs to be safe, it needs to work, and it needs to be easy for them to use to fit their workflow. However, with everything we have shown them, they are fully onboard. These surgeons want to help their patients. They know when they see a fifty year old with arthritis in the hip, that all they have got is a hip replacement. They also know that that is not the right choice, but it is all they have. Therefore, they want more choices to help their patients. They are very encouraging, very supportive and very much onboard with what we are doing.
CEOCFO: Why should both the healthcare and investment communities look at Cytex Therapeutics Inc right now?
Mr. Pritchard: Right now, because we do have a scientific solution backed by very strong data to solve a genuine unmet clinical need, that happens to be coupled with a huge economic opportunity. What we are doing works. This technology deserves to be funded to the point where we can get it into the clinic and really make a difference in peoples’ lives in a very positive way.
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“Our focus is an alternative treatment that restores the damaged cartilage rather than replacing the entire joint. Restoring the cartilage should return the hip to a state of normal, pain-