Regenerative Medicine Follows the CAR T-Cell Gravy Train: Maxim Group's Jason Kolbert and Jason McCarthy RESX, INO, BCLI, IMUC, STEM, ATHX, MESO, BLUE, CUR, OPXA, CLLS, CYAD


Jason Kolbert Jason McCarthy Why have stem cell and regenerative medicine companies underperformed other segments of biotech? Maxim Group's Jason Kolbert and Dr. Jason McCarthy identify a possible answer: Investors believe stem cell data has yet to definitively reach proof of concept in the blockbuster indications that the companies are pursuing. They want to see results like those shown by gene therapy/CAR-T companies, such as bluebird bio Inc. ("the Bird") in sickle cell disease. In this interview with The Life Sciences Report, Kolbert and McCarthy tackle the issues that have frustrated investors, and leave readers with a list of names that could reap multiples on investment while patients enjoy longer lives.

The Life Sciences Report: Regenerative medicine equities have lagged behind nearly every other biotechnology category. The industry leader, Mesoblast Ltd. (MESO:NASDAQ; MSB:ASE; MBLTY:OTCPK), saw a sharp reduction in its valuation after its U.S. initial public offering (IPO) last month, and lost almost half its market capitalization, falling from $1 billion ($1B) to about $400 million ($400M) today. Yet valuations for the adoptive T-cell and gene therapy companies remain at premium levels. There's quite a gap between these two groups, which on the surface appear to be clinical equals. Is this all as you say, "proof-of-concept (POC) driven"? Or is it something else? How do you see the two ends of the curve?

Jason Kolbert: At Maxim we have had an epiphany of sorts. We are going to need to be on both sides of this equation. Immunologist and molecular biologist Dr. Jason McCarthy is now working with me as an analyst, covering gene therapy and T-cell names like bluebird bio Inc. (BLUE:NASDAQ), Kite Pharma (KITE:NASDAQ) and Juno Therapeutics (JUNO:NASDAQ). He understands the dynamics of that space, having spent a decade studying immunology.

"Athersys Inc.'s MultiStem is going to prove viable, and will change the paradigm for treating stroke."

My favorite area is on the other side: regenerative medicine, which I define as using cell therapy to regenerate or revascularize tissues. It could be about failing hearts, ischemic conditions in the limb, or it could be ameliorating some of the secondary trauma associated with ischemic insults, such as the brain damage that occurs after a stroke, or damage to the heart post-acute myocardial infarction (AMI/heart attack).

TLSR: I don't think any of us doubts that regenerative medicine will have its day eventually, but why the lag in performance? Is there a philosophical answer, or might you have a more definitive answer?

JK: We can understand the disparity between the groups by appreciating both the market opportunities and the disease indications these sectors are going after.

Dr. McCarthy follows bluebird, which treated and possibly "cured" the first sickle cell disease patient it treated with its gene-based LentiGlobin therapy. It may be a bit premature to use the term "cure," and even bluebird would not say that it has cured the patient at this point, but for all intents and purposes that technology has dramatically changed the outlook for sickle cell patients. We saw proof of concept with an "n of 1" (n = 1, or a single patient in a study), and I can think of very few instances where this has happened.

To point up the difference in disease indication, and the ability to achieve proof of concept in the diseases regenerative medicines companies are going after, I'll use Athersys Inc. (ATHX:NASDAQ) as an example. In mid-April of this year, Athersys announced results of its Phase 2 ischemic stroke trial with 136 patients (n = 136). Even if it had cured one stroke patient, we wouldn't know it was a cure. Maybe the company got lucky, maybe the patient got lucky. Stroke is a variable disease, and some patients make better recoveries than others.

"With BrainStorm Cell Therapeutics Inc. we didn't have to struggle with safety."

We would say the same thing in congestive heart failure (CHF), which is a polyfactorial disease, and there are usually multiple comorbidities associated. You could treat 100 patients, and it would still be tough to say what the true therapeutic effect was. When we deal with polyfactorial disease—stroke, heart attacks, critical limb ischemia, diabetes, rheumatoid arthritis, joint disease—there is a lot going on, and it's very hard, without employing large clinical trials, to emphatically say what the therapeutic benefit of a drug is or, in this case, what the benefit of a cell therapy might be.

We're waiting for data, which is what will ultimately drive the regenerative medicine space. I believe that Athersys' MultiStem (multipotent adult progenitor cells), an allogeneic, off-the-shelf stem cell product, is going to prove viable, and will change the paradigm for treating stroke. This disease is not like sickle cell disease, where there is an absolute measurable outcome. In stroke, patient outcomes and recovery vary greatly based on multiple variables.

TLSR: You follow Mesoblast, which has an ongoing Phase 3 double-blind trial testing Revascor (allogeneic mesenchymal precursor cells) in more than 1,700 CHF patients. Is that the scale you're talking about in polyfactorial disease?

JK: Yes, it is. Also, let me say that we are very excited to see Mesoblast, an Australian company, come to the U.S. marketplace. Mesoblast is the most clinically advanced regenerative medical company, with a great partner in Teva Pharmaceutical Industries Ltd. (TEVA:NYSE), and ongoing discussions with biotechnology leader Celgene Corp. (CELG:NASDAQ). I believe Mesoblast's success, through data, will lead the way for valuations to rebound in the sector. It will likely be data-driven, and therefore it will take time.

"ImmunoCellular Therapeutics Inc. entered into a second sponsored research agreement with MD Anderson Cancer Center to develop a stem-to-T-cell program."

The Phase 3 trial for CHF is being run by Teva. What we're seeing is that an off-the-shelf, high-margin product like Mesoblast's Revascor has the potential to significantly impact the bottom line of a company the size of Teva, which has a $56B market valuation.

TLSR: Jason, do you see any signs that investor perceptions are changing toward regenerative medicine companies?

JK: We're seeing a more receptive attitude to cell therapy in Japan. Ocata Therapeutics Inc. (OCAT:NASDAQ) is being acquired by the Japanese firm Astellas Pharma Inc. (ALPMF:OTCPK; 4503:TYO) for about $379M. What's striking is that Astellas has the vision to see the potential in stem cell companies for indications like macular degeneration. What does that mean for StemCells Inc. (STEM:NASDAQ), which has programs I believe are equivalent to, or more mature than, Ocata's? Note that StemCells is trading at a $59M market cap versus a $379M valuation for the Ocata acquisition. I would not be put off by the disparity in valuation, and would encourage investors to look at data.

"Inovio Pharmaceuticals Inc. is basically dominating the human papillomavirus (HPV)-driven cancer and cervical dysplasia space."

The timing is right. We're seeing more Phase 2 data and, for the first time, the initiation of Phase 3 trials in the regenerative space, as we see in the case of Mesoblast. Historically, if you follow the timelines on trials, these usually lead to the inflection point. The exception to that rule has been the CAR-T space, where companies are generating proof-of-concept data with a very small n-value in very early stages of clinical trials. The market opportunities CAR-T companies are going after tend to be smaller, but the diseases tend to be very deadly versus CHF. CHF is still an unmet medical need, as the physician armamentaria is only marginally effective at treating the underlying cause, which is often related to vascular insufficiency.

The bottom line is that regenerative medicine studies are going to require large data sets to emphatically prove the impact they have on the disease and its associated impact on patient mortality and quality of life measures.

TLSR: You've referenced adoptive T-cell technologies—the CAR T-cells and the T-cell receptors. With all the excitement and activity surrounding this space, I wonder if these programs might be advancing the technology in regenerative medicine? Can some of the same chemistry manufacturing techniques and controls go into the propagation and expansion cells for use in regenerative medicine?

JK: That's an insightful question, and I think the answer is absolutely yes. I would cite two examples: Opexa Therapeutics Inc. (OPXA:NASDAQ), with its antigen-specific T-cell platform, and ImmunoCellular Therapeutics Ltd. (IMUC:NYSE.MKT), with its dendritic cell technology.

"RestorGenex Corp. appears to have a unique blocker of the P13K/Akt/mTOR pathway; there will be plenty of upside for shareholders."

I view Opexa as an autologous cell therapy, not necessarily regenerative, but certainly regenerative in the sense that the indication is inflammation or an autoimmune disease. Opexa is addressing secondary progressive multiple sclerosis (MS) with Tcelna (imilecleucel-T), a personalized T-cell immunotherapy. It's also going after neuromyelitis optica (NMO) with OPX-212, an autologous T-cell immunotherapy. NMO is an orphan disease in which the immune system destroys the myelin sheath in the optic nerve and spinal cord.

Opexa uses a combination approach, essentially teaching T cells to attack other T cells that are attacking the body. It's not at all intuitive, but it's actually quite brilliant. In many ways, I view Opexa as somewhere in between regenerative medicine and CAR-T therapy because it's using technology from both to treat an immunological disorder.

TLSR: You also mentioned ImmunoCellular Therapeutics. Go ahead with that.

JK: ImmunoCellular is also using an autologous cell technology. It's employing a dendritic-based vector as an immune therapeutic agent to target glioblastoma multiforme (GBM). This is similar to what Dendreon Corp. (DNDN:NASDAQ) used to target prostate cancer with Provenge (sipuleucel-T).

"The market is punishing companies for missing Phase 2, but I think it's an opportunity if the company learns something from that Phase 2 and can build upon it."

ImmunoCellular's lead candidate is ICT-107. On Nov. 12, ImmunoCellular made an exciting announcement: It had entered into a second sponsored research agreement with MD Anderson Cancer Center to develop a stem-to-T-cell program. The idea is to develop novel stem cell-based T cells that will target cancer antigens. This is a very different approach to the T-cell-based immuno-oncology than what Juno, Kite and bluebird are doing with CAR-T and T-cell receptors. If you're paying attention to the landscape, what you're seeing now is a blurry line between the regenerative side and the CAR-T side, with companies trying to figure out what's going to be possible. For example, is an allogeneic CAR T-cell possible?

TLSR: I note that Celyad (CYAD:NASDAQ; CYAD:BR) is working on that concept.

JK: Celyad has caught our attention as well. It becomes very exciting because an allogeneic CAR T-cell approach would be a breakthrough that changes the cost-of-goods-sold (COGS) proposition, and that brings us to the topic of business models. A company with an allogeneic, or off-the-shelf, model would have a much lower COGS line on its income statement because it would not have to manufacture a personalized therapy for each patient.

TLSR: Jason McCarthy, you put out a note on ImmunoCellular Therapeutics' stem-to-T-cell program on Nov. 13, pointing out the weakness in the CAR T-cell realm—the fact that as effective as these therapies may be, they aren't permanent. You call that the chink in the CAR T-cell armor. Are there other companies, aside from ImmunoCellular, working on a stem-to-T-cell platform?

Jason McCarthy: ImmunoCellular is not the only one working on this. I do not follow Cellectis (CLLS: NASDAQ; ALCLS:Paris), but I have spoken with the company to find out about its allogeneic program. We talked about ImmunoCellular and how the approach taken by CEO Andrew Gengos extends to T cells. Cellectis absolutely believes that this is one area where the allogeneic CAR-T space is heading. Cellectis has a group within the company working on an allogeneic CAR T-cell approach, but it is still in the preclinical stages, like ImmunoCellular. It would certainly be a practical approach to using T cells down the road. Certainly, having T cells in your bone marrow that are ready to go at any given time is attractive.

TLSR: ImmunoCellular has a $38M valuation currently, but there is a lot going on at this company. The Phase 3 GBM trial with ICT-107 (NCT02546102) will start anytime now, and my understanding is that it will take the company about two years to recruit 414 GBM patients. Unlike Dendreon's Provenge, which targets only one antigen, ICT-107 targets six, which will hopefully be more effective against brain tumors than Provenge has been against prostate cancer. The stem-to-CAR T announcement appears to have invigorated the stock, but basically ImmunoCellular's shares have languished. Why does this stock suffer with such a low valuation?

JM: I think the institutional bandwidth has soaked up all the CAR-T and T-cell receptor approaches. People are not paying attention to dendritic cell-based vaccines right now. Dendritic cell therapy is often forgotten about, and as an immunologist, I will tell you that this is unfortunate, because the dendritic cell approach is so important for driving T-cell responses.

Jason Kolbert: Remember that Dendreon no longer exists as a company today. It was essentially sold in bankruptcy; Valeant Pharmaceuticals International Inc. (VRX:NYSE; VRX:TSX) acquired it. People came to the conclusion that a $100,000 ($100K)-per-year therapy with a $99K cost of goods just wasn't going to be viable. That's not the cost of goods proposition at ImmunoCellular, nor is it the cost of goods proposition at Opexa.

"We're waiting for data, which is what will ultimately drive the regenerative medicine space."

You could ask the same question about languishing shares at Athersys. Often, we see that when companies run Phase 2 studies, there's an expectation that they must hit the primary endpoint with p-values under 0.05. If a company fails to hit its primary endpoint, the Street punishes it. But when you hit a primary endpoint—as in the case of bluebird's Phase 1 proof-of-concept study—the opposite is true. Companies get a big valuation because investors see a dramatic change in patients' disease. The market is punishing companies for missing Phase 2, but I think it's an opportunity if the company learns something from that Phase 2 and can build upon it.

TLSR: Let's stay with Athersys for a moment. On Oct. 21, the company announced that under a mutual agreement, its collaboration with Chugai Pharmaceutical Co. Ltd. (4519:TYO) to develop MultiStem in Japan for ischemic stroke had been terminated, and that it would retain the $10M license fee from Chugai. At the end of September, Athersys had $28.5M on its balance sheet. Does that include the $10M from Chugai?

JK: It does not. I have heard an affirmation that Chugai owes Athersys that payment. My understanding and expectation is that, in light of the termination, we will see a new Japanese partner step into the breach. My confidence level that this is going to happen is higher now that Astellas has decided to acquire Ocata.

TLSR: You speak Japanese and know the culture quite well. The Athersys press release said that a letter of intent had been signed with another Japanese company to take the place of Chugai, and this new collaboration would probably include more than just ischemic stroke. We also saw that a good faith payment accompanied that letter of intent. Do you imagine we'll be hearing the name of this new Japanese company soon?

JK: [In Japanese] Hai, so desu. Yes, I do. It takes time to move from negotiation to a signed letter of intent, and then to a signed deal. I can tell you that Athersys CEO Gil Van Bokkelen, whom I've known for the last 10 years, is a straight shooter. I know that he's in Japan a great deal of the time. I hear his enthusiasm, and I see what's happening at Koseisho (the Ministry of Health and Welfare), and I see the reform and the regulations. I just think it makes sense.

I'm also aware that stroke is a massive unmet medical need in Japan. The Japanese have no choice but to invest in this space. Remember that in Japan, people still consume a traditional diet that's high in salt (lots of soy sauce). The reality is that hypertension—maybe a result of this high salt diet—results in a higher incidence of stroke, and Japan's is the highest in the world. I think it is very likely we will see the emergence of a major company working with Athersys in Japan. I have no special knowledge, but I believe it makes sense based on the ischemic stroke data from Athersys' Phase 2 trial.

TLSR: My understanding is that the Pharmaceuticals and Medical Devices Agency (PMDA), which comes under the Ministry of Health and Welfare and is equivalent to the FDA, is requiring about 25% of patients be either in Japan or Japanese. Is it reasonable to assume that Athersys could begin a pivotal study in ischemic stroke in Japan by, let's say, mid-2016?

JK: Yes. Based on slices of data from Athersys' 136-patient Phase 2 trial in ischemic stroke, the sooner you treat patients, the better the outcome. We saw the readout of that trial back on April 17. The data point to a 36-hour window for treatment with MultiStem following a stroke would be a tremendous advantage over the 3-hour window we see with recombinant tissue plasminogen activator (tPA). That timeframe would be a huge advantage for patients who have had a stroke. Remember, too, that tPA is a powerful clot buster, and patients face multiple risks when it is used.

"We're seeing a more receptive attitude to cell therapy in Japan."

Now, I'll grant that this 36-hour window hypothesis is a post-hoc analysis, and we always worry about looking at data after the fact, but time is hard on a brain that has had an infarct. Other than tPA or a mechanical thrombectomy, where you unblock an ischemic artery in the brain with a reperfusion catheter and aspirate the clot, there is very little that can be done to improve recovery. What we're seeing is that Athersys' allogeneic stem cells may have a significant impact on the recovery time, but that it's important to treat the right segment of patients.

TLSR: Two years ago, in November 2013, the Japanese Diet (legislature) passed a bill that changed the status of regenerative medicine in Japan. The result is that the PMDA is now welcoming developers of regenerative medicine products into Japan, especially in stroke indications. On Sept. 2 of this year, Terumo Corp. (4543:TYO) got conditional approval for an autologous skeletal muscle sheet product that could be implanted in patients with heart failure, and a day later we saw full approval of Prochymal (remestemcel-L, allogeneic adult human mesenchymal stem cells) for children in crisis with graft versus host disease (GvHD), which was developed by Osiris Therapeutics Inc. (OSIR:NASDAQ), acquired by Mesoblast, and then partnered with JCR Pharmaceuticals Co. Ltd. (4552:TYO) in Japan. Do you believe that it's necessary for European and U.S. developers to partner with either Japanese pharmas or Japanese contract research organizations to take regenerative medicine products forward?

JK: With very few exceptions, the answer is yes. One of the exceptions was the launch of hepatitis C drug Harvoni (ledipasvir + sofosbuvir) in Japan by Gilead Sciences Inc. (GILD:NASDAQ). It's a great drug, and we just heard that Harvoni actually has been approved in the U.S. for genotypes 4 through 6. It was originally approved in October 2014 for genotype 1 only. I think Gilead recognized the highest incidence of hepatitis C is in Japan, and decided to do the registration itself, which was brilliant on the company's part. But, with very few exceptions, that really can't be done in Japan.

Mesoblast, recognizing the opportunity in Prochymal, made a very conscientious decision to acquire that asset from Osiris. The company knew it was getting both a fantastic intellectual property (IP) estate and a product that could eventually be brought to the U.S. for GvHD in pediatrics and in adults. Mesoblast made the critical link to JCR Pharma. It's important to remember that JCR did not go through an expedited regulatory pathway for Prochymal. It went through the traditional pathway and emerged with reimbursement intact. That was quite brilliant. Mesoblast is one of the few companies that have the vision and know-how to commercialize regenerative medicine, and it's one of the reasons why it is the leader in the space.

TLSR: You currently follow at least one company developing a stem cell candidate for amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig's disease. You wrote a report back in February comparing stem-cell approaches by BrainStorm Cell Therapeutics Inc. (BCLI:NASDAQ), a company under your coverage, and Neuralstem Inc. (CUR:NYSE.MKT), which also has an ALS stem cell candidate. These two companies have very different stem cell approaches to ALS. Back in March, Neuralstem reported a disappointing result from a Phase 2 safety study, and that hurt the stock badly. BrainStorm was hit pretty hard too. Do you think Neuralstem has been a drag on BrainStorm?

JK: Very rarely do I take a negative position on a micro-cap company, but we took a negative position on Neuralstem and launched coverage with a Sell rating. We are excited to champion these small companies, but they have to meet a certain threshold. For me, Neuralstem's intraspinal injection of cells—directly into the cord—just was not safe, and I could never get past the risk. I'm sad for the patients in the Neuralstem trial, but I always worried about the risk versus the reward.

TLSR: In the Neuralstem trial, investigators were injecting allogeneic cells from eight-week-old human fetal spinal-cord-derived stem cells. In the BrainStorm trial, patients receive autologous cells derived from the patient's own bone marrow, and the cells are injected intrathecally—into the subarachnoid space—where the cells enter the flow of the cerebrospinal fluid. There are also intramuscular injections in the spinal region, but not directly into the cord. Quite a difference, isn't it?

JK: Yes. With BrainStorm we may wonder about efficacy, but we didn't have to struggle with safety. One of the points Dr. McCarthy has made is that, given the unmet medical need, there's clearly upside in finding out the answer to questions of efficacy.

"Regenerative medicine studies will require large data sets to emphatically prove the impact they have on disease, patient mortality and quality of life."

This is obviously going to be a long road. Again, this comes back to proof of concept. If it's bluebird, if it's Juno, if it's Kite, I can get a better feel in a reasonable amount of time for whether the therapy is working in sickle cell disease, in non-Hodgkin's B cell lymphoma or in beta thalassemia. It's not the same for these other indications.

TLSR: Jason McCarthy, you are an immunologist, and you follow the DNA vaccine space, where a patient is given a gene or genes to express an antigen or antigens, which elicit both an antibody and a T-cell response. Could you talk about your coverage in this area?

JM: We are finding out that Inovio Pharmaceuticals Inc. (INO:NASDAQ) is basically dominating the human papillomavirus (HPV)-driven cancer and cervical dysplasia space. We expect Inovio's DNA-based immunotherapy VGX-3100 will enter a Phase 3 trial by mid-2016 for cervical dysplasia, a precancerous condition detected by Pap smear.

Basically, VGX-3100 vaccine therapy has been able to reverse cervical intraepithelial neoplasia (CIN) in women with CIN-2 and CIN-3. The Phase 2 trial that we got the readout on in July 2014 showed that VGX-3100 can revert the condition to CIN-1 or no disease at all, and clear the virus from the tissues. We saw Phase 2 proof of concept that this condition can be reversed.

Inovio is also using VGX-3100 with an immune activator called interleukin-12 (IL-12). This candidate is called INO-3112 (VGX-3100 + DNA-based IL-12 cytokine), and was partnered to Medimmune (a division of AstraZeneca Plc [AZN:NYSE]) back in the summer in a deal that could be worth over $700M, plus double-digit royalties. This deal includes an upfront payment of $27.5M. INO-3112 is now in Phase 1 studies, and we've seen some compelling data in cervical cancer, as well as in head-and-neck cancer. Inovio has established a relationship to develop INO-3112 with the European Organization for Research and Treatment of Cancer, which is the biggest cancer organization in Europe. That collaboration gives Inovio and Medimmune access to all countries in the European Union and European Economic Area, which would make clinical trial development relatively easy.

TLSR: Inovio is not only involved in cancer, but it is also developing therapeutic and preventive agents for infectious disease. That comes under the DNA vaccine platform as well, doesn't it?

JM: Yes. This other side of the company is very interesting. Ebola virus disease was a hot topic last year, and the company now has a product, INO-4212, in development as both an Ebola preventive and therapeutic vaccine.

"What you're seeing now is a blurry line between the regenerative side and the CAR-T side, with companies trying to figure out what's possible."

We continue to see companies like Bavarian Nordic (BAVA:OMX), Johnson & Johnson (JNJ:NYSE) and NewLink Genetics Corp. (NLNK:NASDAQ.GM) make progress in Ebola. But Inovio is leading an international consortium of a group of companies, including Medimmune, to develop its DNA-based vaccine. The company is also developing a DNA monoclonal antibody (dMAB) for Ebola, where the patient is administered the DNA vaccine, which results in expression of the antibody in the patient's own cells. This is a new technology that could preclude the need for using ex vivo-produced monoclonal antibodies, which are expensive to make. With this technology, you can inject the gene as a plasmid and patients pump out their own antibodies. The Ebola immunotherapeutic is now in Phase 1 under a $45M grant from the U.S. Defense Advanced Research Projects Agency (DARPA).

While it's really interesting for Ebola, this dMAB has implications for the checkpoint inhibitor space as well, which could be important in cancers. This could preclude Inovio's need to partner for a checkpoint combination therapy in its oncology programs, which could be a big deal. It could be a game changer for the checkpoint space.

TLSR: My understanding from Inovio CEO Joseph Kim is that we are looking at the middle of next year for initiation of the Phase 3 pivotal trial of VGX-3100 in cervical intraepithelial neoplasia. Trial initiations don't generally move stocks, and I'm wondering what catalysts might move Inovio shares?

JM: Initiation of the Phase 3 for VGX-3100 is not going to move the valuation too much, but I think the start of that trial, combined with the initiation of studies with Medimmune for INO-3112, and all the incremental catalysts from the company's Ebola studies, prostate cancer vaccine, and HIV vaccine, represent little step-ups in valuation for Inovio going into 2016. Inovio will have data from its Ebola Phase 1 and from its Phase 1 prostate cancer vaccine with INO-5150.

The company has an entire pipeline of DNA-based monoclonal antibodies. It has DNA-based IL-12, which is becoming more known. Ziopharm Oncology Inc. (ZIOP:NASDAQ), Celsion Corp. (CLSN:NASDAQ) and OncoSec Medical Inc. (ONCS:NASDAQ) are all using DNA-based IL-12. Inovio also has DNA-based interleukin-17, -23, -6, and a ton of immune therapies that it's looking to bring out publicly. As the company moves through these earlier-stage trials, the little data releases will be incremental catalysts that drive the stock.

TLSR: Jason Kolbert, did you have one more name you wanted to mention?

JK: Yes, let me make a brief comment about RestorGenex Corp. (RESX:OTCQX). We launched coverage of the company back in April with a Buy rating. I think of RestorGenex as a classical molecular story in the world of pharma. Here, we are looking for a drug to block a signaling cascade. The company has two-core technologies, RES-529 (a PI3K/Akt/mTOR inhibitor), applicable in ophthalmology and oncology, and RES-440 (an anti-androgen), applicable in dermatology.

I'll focus my comments on RES-529. This compound targets, at a molecular level, the components that form TORC1 and TORC2, interfering with their generation of signaling and activity in the P13K/Akt/mTOR pathway, which results in the loss of many cellular regulation functions, such as cell proliferation, angiogenesis and vascular permeability. In wet age-related macular degeneration (AMD), abnormal blood vessels grow (angiogenesis) under the retina and macula due to increased expression of vascular endothelial growth factor (VEGF). They may then bleed and leak fluid, causing the macula to bulge, thus distorting or destroying the central vision. Preclinical in vivo data have shown that RES-529 inhibits VEGF-induced angiogenesis and permeability. RES-529 is also being developed as a subconjunctival injection, compared to the existing intravitreal injection. It may have an advantage over standard of care since it's a once-every-three-month versus a monthly injection. These attributes are an artifact of the multimodal mechanism of action of the compound. The wet AMD market is large, and proof of concept can be demonstrated with small numbers of patients.

In oncology—specifically in glioblastoma—it is known that the P13K/Akt/mTOR pathway is significantly up-regulated, promoting the tumor to grow. Extensive in vitro and in vivo models for glioblastoma multiforme (GBM) demonstrated that RES-529 can penetrate the blood-brain barrier and inhibit both fast and slow glioma tumor growth. The orally available treatment received FDA orphan drug designation in January 2015. We are hopeful to see this molecule move into the clinic and establish safety and maximum tolerated dose, and then move into trials in the target indications in humans, setting the stage for larger Phase 2 POC studies. All of these events represent catalysts for the company.

RestorGenex, as a micro-cap company, appears to have a unique blocker of the P13K/Akt/mTOR pathway. If the molecule can prove this true, there will be plenty of upside for shareholders.

TLSR: Do you have any parting thoughts?

JK: Yes. As analysts, we never know where we will find a gem. Regardless of whether it is in classical drug development or in exciting gene therapies, we believe that investors, by understanding biology coupled with finance, can mitigate risk in this sector with commensurate rewards.

TLSR: Thank you both very much.

Jason Kolbert is a senior managing director with the Maxim Group, and the head of healthcare research as well as a covering analyst. Kolbert's career began as a chemist in the pharmaceutical industry, and evolved into a product and marketing manager with Schering-Plough in Japan. Upon returning from Japan, he joined Salomon Smith Barney as a research associate, which evolved into a 20-year career on Wall Street as a ranked biotechnology analyst. As the head of healthcare at Maxim, Kolbert manages the healthcare effort to maintain a balance of large, capitalized, relevant institutional coverage combined with the next generation of small, capitalized, emerging companies that will influence the sector. His focus is across several therapeutic areas, with an emphasis in antiviral medicine, regenerative medicine, oncology and immunology (cell therapy). Kolbert is noted for being among the first analysts to focus on the changing landscape for Hepatitis C therapy. Today Kolbert is making the same call for stem cell therapy, identifying the sector as having the potential to alter current treatment paradigms. Kolbert spent seven years at Citi Group as a traditional sellside analyst, followed by seven years on the buy side as a portfolio manager with the Susquehanna International Group. Kolbert recently returned to his analyst role after spending time as the head of business development for a public cell therapy company. At Maxim, Kolbert and his colleagues oversee a team responsible for covering 60 companies.

Jason McCarthy, PhD, is a senior equity research analyst covering the biotechnology industry at Maxim Group, which he joined in July 2014. Prior to joining Maxim he received his doctoral degree in biomedical sciences at the Albert Einstein College of Medicine. McCarthy also holds master's degrees in biomedical research (Albert Einstein College of Medicine) and molecular biology (Adelphi University), as well as a bachelor's degree in biochemistry from Stony Brook University. He closely follows gene therapy, CAR-T and the cancer immunology spaces, as well as many traditional biotechnology companies.

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1) Dr. George S. Mack conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report and The Life Sciences Report, and provides services to Streetwise Reports as an independent contractor. He owns, or his family owns, shares of the following companies mentioned in this interview: Athersys, Inovio Pharmaceuticals
2) The following companies mentioned in the interview are sponsors of Streetwise Reports: Athersys Inc., BrainStorm Cell Therapeutics Inc., ImmunoCellular Therapeutics Ltd., Inovio Pharmaceuticals Inc., RestorGenex Corp., StemCells Inc. Mesoblast Ltd. is not affiliated with Streetwise Reports. The companies mentioned in this interview were not involved in any aspect of the interview preparation or post-interview editing so the expert could speak independently about the sector. Streetwise Reports does not accept stock in exchange for its services.
3) Jason Kolbert: I own, or my family owns, shares of the following companies mentioned in this interview: None. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: RestorGenex Corp., ImmunoCellular Therapeutics Ltd., Inovio Pharmaceuticals Inc., Athersys Inc., BrainStorm Cell Therapeutics Inc., StemCells Inc., Neuralstem Inc., Celyad, Opexa Therapeutics Inc., Mesoblast Ltd., bluebird bio Inc. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) Dr. Jason McCarthy: I own, or my family owns, shares of the following companies mentioned in this interview: None. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: RestorGenex Corp., ImmunoCellular Therapeutics Ltd., Inovio Pharmaceuticals Inc., Athersys Inc., BrainStorm Cell Therapeutics Inc., StemCells Inc., Neuralstem Inc., Celyad, Opexa Therapeutics Inc., Mesoblast Ltd., bluebird bio Inc. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent.
5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

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