March 1, 2011 (Vol. 31, No. 5)

Tissue Repair and Replacement Business On Upswing After Tenuous Previous Decade

Production of biomaterials for cell, tissue, and bone treatment, repair, or replacement holds the promise of becoming a highly profitable business given that the baby boomers have great expectations for maintaining active lives as long as possible. We’re not talking stainless steel and plastic replacement parts either. We mean highly sophisticated products that can provide scaffolding or more complex matrices for cellular growth, contain living cells, respond to internal biological signals, and that evade tissue rejection by the recipient’s immune system.

While investors remain cautious about backing companies with regenerative medicine products, Gil Van Bokkelen, Ph.D., chairman and CEO of Athersys and chairman of the Alliance for Regenerative Medicine, believes otherwise. “People view regenerative medicine as a far-off objective, but that is not true. There’s a tremendous amount of ongoing work,” he said at the regenerative medicine session of “Biotech Showcase™ 2011” held recently in San Francisco.

And while scientists may be trying to build entirely new organs and develop stem cell-based solutions for regenerative therapeutics, highly complex products have been on the market for a long time. These products are intended to provide a foundation for the body to rebuild itself.

The history of two pioneering companies in the tissue repair and replacement business illustrates some of these complexities and the comprehensive expertise needed to stay the course and build a tissue-regeneration company. Both companies were off to strong starts with products incorporating skin cells, extracellular matrices, and biocompatible scaffolding approved by the FDA and marketed for burn treatment and wound healing. But both companies went bankrupt.

Both Advanced Tissue Sciences (ATS) and Organogenesis’ products have achieved reincarnation in new corporate entities backed by new funding, strategic development planning, and leadership, and each may help define the path to regulatory and commercial success for complex regenerative medicine products.

Apligraf is a bilayered, bioengineered cell-based product. According to Organogenesis, the two layers make it effective in speeding up wound healing and achieving healing in wounds previously unresponsive to treatment.


Advanced Tissue Sciences, founded by Gail Naughton, Ph.D., in 1987, developed its Dermagraft TransCyte (Dermagraft-TC) product to create an artificial skin for burn patients. The startup raised hundreds of millions of dollars and spent 15 years developing its human tissue products before filing for Chapter 7 bankruptcy liquidation in late 2002. ATS partnered with Smith & Nephew in a joint venture to manufacture its product line. Smith & Nephew tried without success to commercialize the technology itself—and ultimately sold the same rights and facilities in 2006 to Advanced BioHealing.

Dermagraft was approved by the FDA in March 1997 as a temporary wound covering for partial-thickness burns. It was reportedly the first human fibroblast-derived temporary skin substitute approved by the FDA. However, in 1998, the FDA issued a nonapprovable letter for Dermagraft asking for more clinical data supporting the efficacy of the product in its first indication, the management of diabetic foot ulcers.

A 1999 FDA audit of ATS led to a warning letter and a Class II recall after the agency raised concerns that the firm’s temporary skin substitute might have been related to a patient’s death.

The recall and warning letter, which raised questions about environmental monitoring and sterility, sent ATS’ stock into a downward spiral. On March 31, 2003, ATS was liquidated, effectively destroying $300 million of stakeholder financing. Although the company was successful in the development of remarkable breakthrough technologies in the regenerative medicine arena and the building of a substantial portfolio of patents, it never made a profit.

Ultimately the same rights and facilities were sold in 2006 to Advanced BioHealing, which now manufactures and markets Dermagraft. The company had projected revenue of $130 million in 2010.

With a 2010 list price of $1,425, Dermagraft, which requires weekly application, is costly to use. It is indicated for up to eight weekly applications over a 12-week period and consists of fibroblasts derived from human foreskin tissue, extracellular matrix, and a polyglactin mesh bioabsorbable scaffold. The fibroblasts proliferate to fill the interstices of this scaffold and secrete human dermal collagen, matrix proteins, growth factors, and cytokines to create a 3-D human dermal substitute containing metabolically active, living cells.

Dermagraft is in an ongoing pivotal trial in individuals with venous leg ulcers (VLUs) to determine the product’s safety and efficacy in promoting VLU healing. Trial participants have been randomized to receive either weekly applications of Dermagraft and four-layer compression dressings or only weekly applications of four-layer compression dressings (control group). Patients are seen weekly until wound closure is achieved or until the 19-week treatment study is completed. Follow-up visits are to be done monthly for three months.


Organogenesis says its Apligraf product is the only marketed cell-based product approved for both venous leg ulcers and diabetic foot ulcers. Apligraf consists of a bovine collagen matrix, living keratinocytes, and fibroblast cells. The collagen is combined with fibroblasts to first form a dermal matrix, onto which keratinocytes are seeded to form an epidermal layer, comprising the two primary layers of skin. Together, the two cell types in Apligraf reportedly produce over 40 cytokines and growth factors required for the development, regeneration, and healing of skin.

Founded in 1985 as a spin-off to develop ideas born at M.I.T., Organogenesis sold the marketing rights to Apligraf, its only product at the time, to Novartis in 1996. In 2002, in order to focus on its manufacturing operation, Organogenesis re-acquired the marketing rights but was soon forced to file for Chapter 11 bankruptcy protection. Since then, the company has made a serious comeback and many of the laid-off workers are now back with the company through funding from private investors.

According to Organogenesis’ CEO Geoff McKay, “Apligraf is now growing over 30% in the U.S. Our first-generation technology is in pretty good shape and has allowed us to have the financial strength to think long term.”

One reason for Organogenesis’ early problems, McKay said, was that the original culture of the company was “really cutting-edge science. Commercialization, marketing, and sales were an afterthought, to the extent that these functions were just licensed out. Organogenesis defined itself as an R&D-based company. The trouble with that is that the model often doesn’t work. It is very well documented that the majority of out-licensing partnerships don’t translate into success for the smaller partner.

“The original company did some groundbreaking things—the research and development of Apligraf and some follow-on products that never made it. I think if you go back to the 1990s, Organogenesis was the first company to get an allograft approved. At that point the company had a market cap of over a billion dollars in 1998 with no revenue. What the financial community was valuing was the new field of medicine.”

Translating that breakthrough science into a business model that could be measured by revenue, he said, remained an ongoing problem. “As great as the science was, with FDA approval a whole new set of challenges arose. How could you make a laboratory product scaleable? How could you do it efficiently, reliably, and cost-effectively? Organogenesis stumbled for many years trying to scale up a living technology with no roadmap to follow.”

In hindsight, he commented, the company was “great at research but undeveloped on the operational side. It couldn’t get costs or reliability under control; the more it sold, the more it lost.” So, the company began to focus on business fundamentals, honing its infrastructure and operational skill set, and maximizing its “biggest single competitive advantage, our ability to mass produce cell therapies.”

One key factor, for example, was the ability to expand Apligraf’s shelf life from 5 to 15 days. “For us, our release criteria are cell viability and histology—over 90% viability and all proper dermal structure has to be perfect at the end of the shelf life. We were able to develop packaging that could keep the cells at an optimal temperature and add 10 days to the shelf life,” McKay said. “Just focusing on business fundamentals with infrastructure and an operation skill set, the biggest single competitive advantage is our ability to mass produce cell therapies.”

The company continues to develop innovative products, some of which will be based on its 2008 acquisition of NanoMatrix. NanoMatrix’ electrospinning platform produces and assembles nano-scale fibers into 3-D scaffolds that mimic the structure and biochemical environment of the human body’s tissues.

“We have the cells and the matrix, and most of our focus has been on cells. We concluded that as a second-generation technology we could enhance our first generation by optimizing the matrix. We bought the rights to electrospinning technology to provide more optimized scaffolding for the cells.”

The company is also working on its VCT01™ bi-layered, bio-engineered skin, with the dermal matrix generated de novo from the human dermal fibroblasts instead of bovine collagen. Human keratinocytes seeded on top of the dermis form the epidermal layer for an all-human cell-therapy product.


In 2005, Osiris Therapeutics ( began distribution of its Osteocel® product, used for the repair, replacement, and/or reconstruction of bone defects. Osteocel consists of cancellous bone, demineralized bone matrix, and viable mesenchymal and osteoprogenitor cells. In 2008, NuVasive which is focused on developing products for minimally disruptive surgical treatments for the spine, completed its acquisition of the Osteocel biologics business from Osiris Therapeutics. NuVasive offers Osteocel Plus, described as an allograft cellular matrix to help facilitate cervical fusions and other spinal surgeries.

According to Osteocel Plus product manager Sharon Smull, “over 50,000 patients have been treated with it with no adverse events in a variety of conditions requiring bone fusions. Osiris perfected the processing technique for keeping the cells on the matrix. The processing keeps the cells viable, then we do extensive testing to ensure that the product contains viable MSCs and osteoprogenitor cells, then the product is delivered cryogenically frozen.”


Genzyme’s Carticel® remains the only FDA-approved autologous chondrocyte implantation treatment, according to the company. Indicated for the repair of symptomatic cartilage defects of the femoral condyle (medial, lateral, or trochlea) caused by acute or repetitive trauma, Carticel is used in patients who have had an inadequate response to a prior arthroscopic or other surgical repair procedure.

To produce Carticel in an initial arthroscopic procedure, the patient’s chondrocytes are removed from a nonload-bearing area of the knee. The cells are then grown in vitro at Genzyme Biosurgery for approximately six weeks until the population reaches 10–12 million cells, then returned to patient.

Genzyme has taken the approach developed for Carticel further with its MACI® (matrix-induced autologous chondrocyte implantation), a third-generation autologous chondrocyte implantation product, reported Leanna M. Caron, vp and GM cell therapy and regenerative medicine. MACI consists of a type I/III collagen membrane into which the patient’s harvested and expanded cells are seeded.

The MACI product is currently available commercially in many countries in Europe, Australia, and Asia Pacific, and a pivotal clinical trial is currently under way in Europe.

Without doubt, viable regenerative medicine products are needed, and as more physicians use the marketed products, more companies may be incentivized to form the alliances they need to deliver cell-based products.

Patricia F. Dimond, Ph.D. ([email protected]), is a principal at BioInsight Consulting.

Previous articleOpinion: Watson, Come Here … You’re Needed at the PTO
Next articleFDA Approves Nycomed and Forest’s Daliresp for Reducing COPD Exacerbations