Advanced Tissue Sciences Inc. on Monday entered into a $70 millionjoint venture for commercialization of its Dermagraft product fordiabetic foot ulcers.
The deal with London-based Smith & Nephew plc entails a $10million up-front fee to Advanced Tissue and $60 million inmilestones that can be reached after the dermal replacement productis approved. Starting Jan. 1, 1997, the companies will share expensesand profits equally under the joint venture.
Advanced Tissue's stock (NASDAQ:ATIS) gained $1.50 Monday toclose at $15.63.
Dermagraft is an engineered tissue product placed into the woundbed of the diabetic ulcer. It's designed to vascularize with underlyingtissue after a few days. Enrollment in a 200-patient pivotal study isnearly complete and a premarket approval (PMA) application couldbe filed by the end of the year, said Marie Burke, Advanced Tissue'sdirector, corporate communications.
A similar product, Dermagraft-TC, which is being developed forburns, is designed to act as an artificial epidermis layer. ButDermagraft-TC (transitional covering) is removed prior toautografting. Advanced Tissue, of La Jolla, Calif., retained all rightsin burn indications and intends to market to U.S. burn centers itself.
The agreement with Smith & Nephew covers only diabetic footulcers. The London company, which focuses on wound managementand orthopedics and had $1.6 billion in 1995 sales, has right of firstrefusal, through the joint venture, for other Dermagraft applications,such as pressure ulcers.
In addition to the $10 million fee, Advanced Tissue would get $5million upon approval of the PMA and another $5 million related toreimbursement issues. The rest of the $50 million in milestones istied to sales. For each $100 million in annual sales, up to $500million, Advanced Tissue would receive $10 million.
The primary endpoint in the pivotal Dermagraft study is completewound closure at 12 weeks. A secondary endpoint is rate ofrecurrence. An interim analysis showed the trial was on track forshowing statistically significant results, Burke said. Significant resultswere seen in the pilot study. There was no recurrence among thosehealed with Dermagraft and followed an average of 14 months.
The company, citing literature, said rates of recurrence from 20 to 50percent are standard among those healed using other methods.Standard treatment now is wet saline solution followed by gauze,Burke said.
"Our target market is the difficult-to-heal ulcers," Burke said, addingthat population represents about half the 800,000 patients affected bythe condition each year in the U.S. Replicating the strong lack-of-recurrence results in the pivotal study could help the product's useamong those with easier-healing ulcers, she said.
The agreement with Smith & Nephew also includes a provisionallowing Advanced Tissue to borrow up to $10 million in 1997.Burke said the loan could be repaid in cash or stock at market price,at Advanced Tissue's discretion, within three years.
She said Smith & Nephew is ranked No. 3 in worldwide wound-caresales. It has sales capabilities in more than 90 countries. Dermagraftalso is in a pivotal trial in France for diabetic foot ulcers.
The product will receive expedited review in the U.S., as willDermagraft-TC, for which Advanced Tissue filed a PMA in lateMarch. (See BioWorld Today, April 1, 1996, p. 3.) n
-- Jim Shrine
(c) 1997 American Health Consultants. All rights reserved.