VistaGen Therapeutics Inc. (OTCQB: VSTA) is a biotechnology company applying human pluripotent stem cell technology in a whole new way. Unlike StemCells Inc. (NASDAQ: STEM) or Aastrom Biosciences Inc. (NASDAQ: ASTM), VistaGen is focused on leveraging stem cell technology for drug rescue and for screening new drug candidates for heart and liver toxicity and metabolism issues.
The Failure-Prone Drug Development Paradigm
Pharmaceutical companies spend a lot of time and money trying to bring new drugs to market. Eli Lilly & Co. (NYSE: LLY) noted on its company blog around Super Bowl time that, on average, it costs $1.3 billion to bring a new drug to market. That’s enough to buy 371 Super Bowl ads, pay the salary of almost all NFL players, or purchase two professional football stadiums.
But adjusting for failure rates, these costs could really be between $4 billion and $11 billion, according to Bernard Munos of the InnoThink Center for Research in Biomedical Innovation. These costs are derived by everything from clinical trials (the highest can cost $100 million) to manufacturing and clinical testing (that can cost upwards of $1 billion).
Finally, experts estimate that fewer than one in 10 medicines that start human clinical trials end up succeeding. The combination of rising costs and rising failure rates has led to a growing problem for the pharmaceutical industry.
Improving Results with Stem Cells
VistaGen Therapeutics is using stem cell technologies to address the largest component of drug development failures – heart and liver toxicity. Some 60% of the cost of failure associated with new drug candidate R&D is related to heart and liver toxicity, according to the company’s management, which means that the elimination or even reduction of ongoing losses in drug development could save billions.
Using stem cell technologies, the company’s versatile stem cell technology platform, Human Clinical Trials in a Test Tube™, provides clinically relevant predictions of potential toxicity of promising new drug candidates long before their testing on humans. And its CardioSafe 3D™ human heart cell-based in vitro screening system, soon to be complemented by its LiverSafe 3D human liver cell-based bioassay system, represent the two most advanced applications of this game-changing technology.
While predictive toxicology may be a great way to generate revenues, the company is really focused on developing a pipeline of new drug candidate assets by leveraging small molecule compounds that have already demonstrated efficacy through the investment of millions by others, but went off track due to heart or liver toxicity or metabolism issues. VistaGen’s drug rescue initiatives are designed to combine human stem cell technology with modern medicinal chemistry to generate new, safer chemical variants (“drug rescue variants”) of once-promising drug candidates. These are small molecule drug candidates with potential efficacy benefits (but also safety concerns) previously discovered and developed by pharmaceutical companies, the U.S. National Institutes of Health and other governmental agencies, and academic research laboratories. Hundreds of such drug candidates have already been identified and reviewed, and the firm has chosen five as areas of further focus and potential drug rescue activities.
VistaGen Therapeutics’ lead drug candidate is AV-101 for the treatment of neuropathic pain. AV-101 is completing Phase IB clinical trials. The company hopes that Phase I safety studies will enable a corporate partnering arrangement for further clinical development and, ultimately, commercialization of the drug for the treatment of neuropathic pain and, potentially, depression, epilepsy or Parkinson’s disease. Notably, the firm has received $8.5 million from the National Institute of Health (NIH) for preclinical and Phase 1 clinical development of the drug.
VistaGen plans to develop drug rescue variants and put them back in the hands of the pharmaceutical company that developed the original drug. By limiting their focus to toxicity, the firm requires very little headcount to generate drug rescue variants, and it could generate and license or sell its first variant in 2013.
Finally, the company’s management team has a lot of experience in leading and building OTC companies and has strong backing from existing long-term institutional shareholders. With plans to seek a listing on a NASDAQ or NYSE market next year, investors can look forward to additional value being unlocked, while capital costs should remain relatively low due to its innovative business model that does not require any time-consuming interaction with the FDA, elaborate and expensive manufacturing infrastructure, or costly clinical trials.
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