Tuesday, January 13, 2015
Amarantus Acquires Rights To MS Diagnositic
By Jason Napodano, CFA & David Bautz, PhD
On Monday, January 12, 2015, Amarantus Bioscience Holdings, Inc. (AMBS) announced the acquisition of DioGenix, Inc., a company with a pipeline of diagnostics tests focused on immune-mediated neurological diseases, such as multiple sclerosis (MS). We view this deal as a real positive for Amarantus, as DioGenix will be merged into Amarantus Diagnostics and serve as a foundational asset for the company’s growing neuro-diagnostic business.
Brief overview of multiple sclerosis
Multiple sclerosis (MS) is a chronic, debilitating disease of the central nervous system that is mediated by an abnormal response of the immune system to myelin, the insulating layer that surrounds nerve fibers. This results in the formation of scar tissue (sclerosis), with a subsequent interference in the communication between the brain, spinal cord, and other areas of the body. This process may also lead to the deterioration of the nerve cells themselves, a condition that is not reversible.
There are a number of symptoms associated with MS, depending upon the location of the affected nerves. Symptoms can include:
- Optic neuritis: The most common type of involvement of the visual pathways. It typically presents as acute eye pain that is followed by variable vision loss affecting mainly central vision.
- Sensory symptoms: These are common in almost every MS patient at some time during the course of the disease. Symptoms include decreased light touch perception, numbness, tingling, pins-and-needles, and swelling of the limbs or trunk.
- Vertigo: A relatively common symptom of MS as it is reported in approximately 30 to 50 percent of patients.
- Tingling or pain in different parts of the body: Pain is a common symptom in patients with MS, with many different types of pain reported such as dysesthetic pain (unpleasant, abnormal sense of touch), back pain, and Lhermitte’s sign (an electrical sensation that runs down the back and into the limbs).
- Extreme fatigue: typically described as physical exhaustion that is unrelated to the amount of activity performed. Many patients complain of feeling exhausted when waking up, even after a good night’s rest.
- Bowel/bladder/sexual function: It is very common for patients with MS to have problems with constipation, urinary incontinence, and sexual dysfunction.
- Problems with memory or concentration: cognitive dysfunction is rare and is usually only encountered in severely affected individuals, however a larger number of MS patients have cognitive impairment that includes problems with abstract conceptualization, short-term memory, attention, and speed of information processing.
The pattern and course of the disease is characterized by the following patterns:
1) Primary progressive: Characterized by disease progression from the onset with occasional plateaus and temporary minor improvements. It makes up approximately 10 percent of cases at onset. Patients typically experience a steady decline in function from the beginning and never have acute attacks.
2) Relapsing remitting: Relapsing-remitting MS (RRMS) is characterized by clearly defined relapses with full recovery. There is no disease progression during the periods between relapses. This type of MS accounts for approximately 85 to 90 percent of MS cases at onset. However, most patients will then progress into secondary progressive phase.
3) Secondary progressive: Characterized by an initial relapsing-remittance phase followed by progression with or without occasional relapses, minor remissions, and plateaus. Studies suggest that most patients with RRMS will go on to develop secondary progressive MS.
4) Progressive relapsing: Characterized by progressive disease from the onset, with clear acute relapses, with or without full recovery. Disease progression continues to occur during the periods between disease relapses.
Significant unmet need for better MS diagnosis
Currently, in order for a diagnosis of MS to occur a patient is analyzed according to the following criteria: 1) at least two different lesions in the white matter of the CNS, 2) at least two different episodes in the disease course, and 3) chronic inflammation of the CNS as determined by analysis of the cerebrospinal fluid (CSF). Having one or more of these criteria allows a general diagnosis of MS.
In 2010, the International Panel on the Diagnosis of Multiple Sclerosis generated updated diagnostic criteria that included specific guidelines for using magnetic resonance imaging (MRI), visual evoked potentials (VEP), and cerebrospinal fluid analysis in order to more rapidly diagnose MS (Polman et al., 2011). The overall goal of diagnostic guidelines is to get a diagnosis of MS achieved as early as possible to allow for better counseling of patients and earlier treatments, as early treatment reduces the frequency and severity of new MS flares with a subsequent decrease in chronic disability.
The current diagnostic standard for MS includes analysis of cerebrospinal fluid (CSF) for the presence of oligoclonal bands (OCB) coupled with MRI and a comprehensive set of clinical tests to rule-out other neurological diseases. Unfortunately, with no single diagnostic test available, misdiagnosis of MS is a persistent problem with the OCB test having a reported overall accuracy of anywhere from 54-69% (OCB can be present in many other diseases including Lyme Disease and Guillen-Barre Syndrome). This results in a large number of patients receiving treatment who ultimately do not need it as well as delays in getting the proper treatments for MS patients, thus leading to a significant burden on both the patients and the overall health care system.
MSPrecise®
DioGenix has been developing MSPrecise® as a proprietary test for the diagnosis of patients with RRMS at first clinical presentation. The test relies on the evaluation of immune cells collected from CSF and examines them for the presence of DNA mutations in certain immunoglobulin genes using next-generation DNA sequencing. A simple scaled score is then produced that a neurologist can use to differentiate patients with MS from those with other neurological diseases.
DioGenix has reported consistently positive test performance from past studies of MSPrecise® that compared MSPrecise® to published performance testing and experimental controls. Specifically, DioGenix examined a total of 334 subjects who were enrolled in the validation study of MSPrecise®. Fifty-nine subjects were determined as either "RRMS" or "not RRMS" having a variety of other neurological diseases that mimic the presentation of MS. MSPrecise® scores for 52 of these 59 patients were definitive while scores for the remaining 7 patients were deemed to be inconclusive based on the results of past studies. The 81% standalone diagnostic accuracy of the test was highly significant (p < 0.001), with sensitivity and specificity reported to be 86% and 71%, respectively.
In addition, DioGenix examined the combined results of MSPrecise® with OCB testing and found the combined accuracy increased to 92% (p < 0.001, sensitivity = 96% and specificity = 83%). These results are clearly an improvement over the OCB test in classifying early-stage RRMS patients.
Terms of the deal very favorable for Amarantus
As payment for acquiring DioGenix, Amarantus is issuing registered shares of common stock valued at $8 million as well as paying up to $900,000 for associated transaction costs. In addition, Amarantus will pay up to $2 million in milestone payments based on the achievement of sales milestones. In conjunction with the transaction, Amarantus completed the Series E Preferred Stock offering and raised an additional $1 million, with the funds to be used to pay for the costs associated with the closing of the DioGenix acquisition.
Importantly, in November 2014 DioGenix was awarded a $7.45 million “Grow NJ Assistance Tax Credit” to facilitate the construction of a laboratory in Camden, NJ. These tax credits can be sold in whole or in part for a minimum of 75% of face value (≥ $5.6 million). Amarantus is intending on evaluating the possible sale of these credits, which could potentially drive the total acquisition cost of this deal down to approximately $2 million.
Conclusion
We believe MSPrecise® is a good fit for Amarantus and will serve as a solid foundation upon which to build a successful diagnostics business. As we mentioned in our “15 Biotech Name for 2015” article, Amarantus has been discussing the possibility of spinning out LymPro into a separately traded diagnostic division in 2015. In the article we state that the company would need to package LymPro with another diagnostic product in CNS, and we believe that MSPrecise® certainly fits the criteria. At this point, we would not be surprised to see the spin-out of Amarantus Diagnostics sometime in the next six months, a move we feel could unlock significant value for shareholders.
Amarantus Acquires Rights To MS Diagnositic
By Jason Napodano, CFA & David Bautz, PhD
On Monday, January 12, 2015, Amarantus Bioscience Holdings, Inc. (AMBS) announced the acquisition of DioGenix, Inc., a company with a pipeline of diagnostics tests focused on immune-mediated neurological diseases, such as multiple sclerosis (MS). We view this deal as a real positive for Amarantus, as DioGenix will be merged into Amarantus Diagnostics and serve as a foundational asset for the company’s growing neuro-diagnostic business.
Brief overview of multiple sclerosis
Multiple sclerosis (MS) is a chronic, debilitating disease of the central nervous system that is mediated by an abnormal response of the immune system to myelin, the insulating layer that surrounds nerve fibers. This results in the formation of scar tissue (sclerosis), with a subsequent interference in the communication between the brain, spinal cord, and other areas of the body. This process may also lead to the deterioration of the nerve cells themselves, a condition that is not reversible.
There are a number of symptoms associated with MS, depending upon the location of the affected nerves. Symptoms can include:
- Optic neuritis: The most common type of involvement of the visual pathways. It typically presents as acute eye pain that is followed by variable vision loss affecting mainly central vision.
- Sensory symptoms: These are common in almost every MS patient at some time during the course of the disease. Symptoms include decreased light touch perception, numbness, tingling, pins-and-needles, and swelling of the limbs or trunk.
- Vertigo: A relatively common symptom of MS as it is reported in approximately 30 to 50 percent of patients.
- Tingling or pain in different parts of the body: Pain is a common symptom in patients with MS, with many different types of pain reported such as dysesthetic pain (unpleasant, abnormal sense of touch), back pain, and Lhermitte’s sign (an electrical sensation that runs down the back and into the limbs).
- Extreme fatigue: typically described as physical exhaustion that is unrelated to the amount of activity performed. Many patients complain of feeling exhausted when waking up, even after a good night’s rest.
- Bowel/bladder/sexual function: It is very common for patients with MS to have problems with constipation, urinary incontinence, and sexual dysfunction.
- Problems with memory or concentration: cognitive dysfunction is rare and is usually only encountered in severely affected individuals, however a larger number of MS patients have cognitive impairment that includes problems with abstract conceptualization, short-term memory, attention, and speed of information processing.
The pattern and course of the disease is characterized by the following patterns:
1) Primary progressive: Characterized by disease progression from the onset with occasional plateaus and temporary minor improvements. It makes up approximately 10 percent of cases at onset. Patients typically experience a steady decline in function from the beginning and never have acute attacks.
2) Relapsing remitting: Relapsing-remitting MS (RRMS) is characterized by clearly defined relapses with full recovery. There is no disease progression during the periods between relapses. This type of MS accounts for approximately 85 to 90 percent of MS cases at onset. However, most patients will then progress into secondary progressive phase.
3) Secondary progressive: Characterized by an initial relapsing-remittance phase followed by progression with or without occasional relapses, minor remissions, and plateaus. Studies suggest that most patients with RRMS will go on to develop secondary progressive MS.
4) Progressive relapsing: Characterized by progressive disease from the onset, with clear acute relapses, with or without full recovery. Disease progression continues to occur during the periods between disease relapses.
Significant unmet need for better MS diagnosis
Currently, in order for a diagnosis of MS to occur a patient is analyzed according to the following criteria: 1) at least two different lesions in the white matter of the CNS, 2) at least two different episodes in the disease course, and 3) chronic inflammation of the CNS as determined by analysis of the cerebrospinal fluid (CSF). Having one or more of these criteria allows a general diagnosis of MS.
In 2010, the International Panel on the Diagnosis of Multiple Sclerosis generated updated diagnostic criteria that included specific guidelines for using magnetic resonance imaging (MRI), visual evoked potentials (VEP), and cerebrospinal fluid analysis in order to more rapidly diagnose MS (Polman et al., 2011). The overall goal of diagnostic guidelines is to get a diagnosis of MS achieved as early as possible to allow for better counseling of patients and earlier treatments, as early treatment reduces the frequency and severity of new MS flares with a subsequent decrease in chronic disability.
The current diagnostic standard for MS includes analysis of cerebrospinal fluid (CSF) for the presence of oligoclonal bands (OCB) coupled with MRI and a comprehensive set of clinical tests to rule-out other neurological diseases. Unfortunately, with no single diagnostic test available, misdiagnosis of MS is a persistent problem with the OCB test having a reported overall accuracy of anywhere from 54-69% (OCB can be present in many other diseases including Lyme Disease and Guillen-Barre Syndrome). This results in a large number of patients receiving treatment who ultimately do not need it as well as delays in getting the proper treatments for MS patients, thus leading to a significant burden on both the patients and the overall health care system.
MSPrecise®
DioGenix has been developing MSPrecise® as a proprietary test for the diagnosis of patients with RRMS at first clinical presentation. The test relies on the evaluation of immune cells collected from CSF and examines them for the presence of DNA mutations in certain immunoglobulin genes using next-generation DNA sequencing. A simple scaled score is then produced that a neurologist can use to differentiate patients with MS from those with other neurological diseases.
DioGenix has reported consistently positive test performance from past studies of MSPrecise® that compared MSPrecise® to published performance testing and experimental controls. Specifically, DioGenix examined a total of 334 subjects who were enrolled in the validation study of MSPrecise®. Fifty-nine subjects were determined as either "RRMS" or "not RRMS" having a variety of other neurological diseases that mimic the presentation of MS. MSPrecise® scores for 52 of these 59 patients were definitive while scores for the remaining 7 patients were deemed to be inconclusive based on the results of past studies. The 81% standalone diagnostic accuracy of the test was highly significant (p < 0.001), with sensitivity and specificity reported to be 86% and 71%, respectively.
In addition, DioGenix examined the combined results of MSPrecise® with OCB testing and found the combined accuracy increased to 92% (p < 0.001, sensitivity = 96% and specificity = 83%). These results are clearly an improvement over the OCB test in classifying early-stage RRMS patients.
Terms of the deal very favorable for Amarantus
As payment for acquiring DioGenix, Amarantus is issuing registered shares of common stock valued at $8 million as well as paying up to $900,000 for associated transaction costs. In addition, Amarantus will pay up to $2 million in milestone payments based on the achievement of sales milestones. In conjunction with the transaction, Amarantus completed the Series E Preferred Stock offering and raised an additional $1 million, with the funds to be used to pay for the costs associated with the closing of the DioGenix acquisition.
Importantly, in November 2014 DioGenix was awarded a $7.45 million “Grow NJ Assistance Tax Credit” to facilitate the construction of a laboratory in Camden, NJ. These tax credits can be sold in whole or in part for a minimum of 75% of face value (≥ $5.6 million). Amarantus is intending on evaluating the possible sale of these credits, which could potentially drive the total acquisition cost of this deal down to approximately $2 million.
Conclusion
We believe MSPrecise® is a good fit for Amarantus and will serve as a solid foundation upon which to build a successful diagnostics business. As we mentioned in our “15 Biotech Name for 2015” article, Amarantus has been discussing the possibility of spinning out LymPro into a separately traded diagnostic division in 2015. In the article we state that the company would need to package LymPro with another diagnostic product in CNS, and we believe that MSPrecise® certainly fits the criteria. At this point, we would not be surprised to see the spin-out of Amarantus Diagnostics sometime in the next six months, a move we feel could unlock significant value for shareholders.
