BioWorld International Correspondent

MUNICH, Germany - The Swiss Federal Social Insurance Office (OFAS) decided not to reimburse use of EpiDex, a product from IsoTis SA, for treatment of chronic skin wounds. IsoTis had anticipated that OFAS would allow reimbursement as of Jan. 1, based on an earlier recommendation.

Jacques Essinger, CEO of IsoTis, said, "We are surprised by the decision and its timing, and intend to use all means to reverse the decision."

The company had expected EpiDex to be cash-neutral for 2003, based on anticipated reimbursement in Switzerland. EpiDex is a human skin equivalent derived from the adult stem and precursor cells found in a patient's own hair follicles. It is used to treat hard-to-heal skin ulcers. Because of the OFAS decision, IsoTis will put its European EpiDex business on hold and restructure accordingly. Earlier in 2002, the U.S. FDA granted IsoTis humanitarian use device designation for EpiDex, and the company is seeking a partner to exploit the designation.

IsoTis Group SA was formed in the fall by the merger of Modex Therapeutics Ltd., a Swiss biotechnology company that focuses on skin management, and IsoTis NV, a Dutch company that focuses on orthopedics. Its operations are divided among Lausanne, Switzerland, and Bilthoven, the Netherlands.

Essinger also said that following the merger the company's strategy had changed to focus on other products in its pipeline, so the OFAS decision would not have a significant impact on its plans for 2003.

OFAS argued that EpiDex is more expensive than current techniques such as compression therapy. IsoTis maintains, however, that OFAS had taken a different position earlier in 2002 when it confirmed that clinical data supported an initial placement of EpiDex on the list of reimbursable treatments. The company further says that OFAS should have allowed more time to assess EpiDex in daily practice and to compare it with similar treatments.

Until an appeal on EpiDex is resolved, IsoTis' product closest to market is Allox, a treatment for chronic wounds that began a Phase II trial this quarter. The company also is developing AcuDress, which it expects to be an alternative to skin grafting for plastic reconstructive skin surgery. It plans to start a Phase I/II trial of the product soon, working together with Ethicon GmbH, a Johnson & Johnson company. Existing products include bone fillers, an engineered cartilage product and engineered bone implants for jaw augmentation.