Advanced Tissue Sciences Inc. said Friday that it is asking theFDA for permission to expand clinical testing of its Dermagraftliving skin replacement to include treatment of diabetic anddecubitus ulcers.

ATS's Dermagraft has been clinically tested under aninvestigational device exemption (IDE) for treatment of severeburns and chronic venous skin ulcers since early 1991.

"It shows two new applications for the same product," said GailK. Naughton, executive vice president and chief operatingofficer for ATS, formerly Marrow-Tech Inc. "Dermagraft is alsogoing to play an important role in scar revision (reduction) andsurgical incisions."

But the two proposed ulcer applications could sharply expandDermagraft's potential patient population. ATS figures that theproduct might prove useful for about 1 million U.S. patientsdiagnosed each year with the three forms of ulcers, in additionto about 25,000 patients with severe burns (those requiringskin grafts of more than 3 square feet).

If they are ultimately granted market approval, the new ulcerapplications could take the product into potential markets thatinvestment analysts project could be nearly double the size ofsevere burns alone. The combined markets for a replacementskin to treat severe burns and ulcers could exceed $1.5 billion,according to a recent report from SmithBarney analyst DeniseGilbert.

The company's stock (NASDAQ:ATIS) was up 50 cents a shareon Friday to $11.13.

Advanced Tissue is intentionally mum on forecasting potentialmarkets or sales for its flagship product and, for now at least, issharing exact clinical study statistics with only the FDA andphysicians at 12 medical centers who are participating in thetrials. It has approval to start trials at 12 more centers.

"Our approach is to play this conservatively," said James P.Linton, director of investor and public relations of the La Jolla,Calif.-based company.

What ATS researchers did tell a scientific meeting back in Aprilwas that Dermagraft had performed well in answering four topconcerns of burn surgeons. The Dermagraft sheets had takenhold in a variety of wound depths, showed no rejectionproblem, supported the wound's closure by allowing themigration of the body's own epithelial cells, and were notassociated with any increased rate of infections.

Data on long-term outcomes of the patients, such as skinscarring or thickening at the treatment site, have not beendisclosed. More data will probably be disclosed near year's end,as ATS completes enrollments in the studies, Linton said. Todate, about 75 patients have been treated, and the companyfigures it will need a total of 125 eligible patients to completethe study.

ATS uses a patented three-dimensional biodegradable mesh asa culture system to grow Dermagraft. It has reported that theproduct is physiologically similar to human dermis, containingsecreted matrix compounds, collagen, fibronectin and severalgrowth factors considered important in the wound-healingprocess.

While ATS attempts to move Dermagraft into new markets, thecompany is looking to retain most of the marketing rights. "Weknow we want to keep the burn market for ourselves,"Naughton said. The company will be considering partners forsome Dermagraft applications, but largely based on theirmarketing strengths.

"Our decision would not be based on money," Naughton said."We have enough cash to bring all of the Dermagraftopportunities through clinicals and into the market."

The company raised about $31 million from a public stockoffering last February, leaving it with $43.9 million in cash asof last April. It reported a $6.8 million loss for the year endedlast Jan. 31.

In addition to replacement skin, ATS is developing technologiesfor growing human tissue for other applications, among themcartilage, oral mucosa (gum), bone marrow and liver. It expectsto sign a definitive agreement this month for a previouslyannounced $21 million acquisition of Neomorphics Inc., whichis developing human tissue and organ replacements.

In replacement skin, ATS's primary competition isOrganogenesis Inc. and BioSurface Technologies Inc., both ofCambridge, Mass.

Organogenesis' Graftskin, a full-thickness skin replacement, isin multicenter clinical trials for burn treatment and in otherhuman trials for dermatology surgery applications. BioSurface'sAutograft is a replacement skin developed by patentedtechnologies for culturing the patient's own cells.

-- Ray Potter Senior Editor

(c) 1997 American Health Consultants. All rights reserved.

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