Global Market Commentary

March 20, 2014

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Bioprinting: Applications May Be Closer Than You Think

In previous issues of this letter we’ve commented on 3D printing developments. Companies such as 3D Systems (NYSE: DDD), Stratasys (NASD: SSYS), and ExOne (NASD: XONE) may be familiar to investors who have investigated this new technology. 3D printing, or “additive manufacturing,” is a way of building complex structures through various methods of layering materials, and has proved to be a boon for prototyping and for high-end industrial use. “Desktop” consumer applications seem to be farther away from long-term viability. 3D printing companies are still priced at very high valuations, and investing in them has involved exposure to a lot of volatility. In our opinion, investors must be very alert to new developments if they own these stocks at
current valuations.

Bioprinting

A related technology is “bioprinting,” a process which promises to apply 3D printing techniques to the creation of biological tissues and structures—and perhaps, one day, even whole organs.
We had read about bioprinting before, but our interest was blunted by how far the technology is from being able to print organs for transplants, which is the most dramatic of its potential applications. While we monitor new technological trends, we’re also aware that a promising new technology can be so far from commercial realization that it’s not yet investable.

How It Works

As you might expect from a manufacturing technique that’s still in the early stages of development, innovators in bioprinting are pursuing several different technical approaches. Each approach has strengths and weaknesses, and none of them has become dominant.

The first uses a laser pulse to create precise patterns of viable cells, initially in a petri dish. This technique can produce extremely precise structures, but isn’t very good at creating 3D shapes. The laser itself can also damage cells thermally during the printing process.

The second approach uses what is basically an adapted inkjet printer, with cells being extruded as droplets surrounded by a protective gel. These systems are versatile and affordable, and multiple “print heads” can dispense different cell types (like different colors in a desktop printer). Their drawbacks include the damaging of cells when they pass through the jet’s opening. The structures created by this technique are also not as precise as those created by laser systems.

The third technology extrudes continuous filaments under pressure, with the desired cells being encased in a structure made of some other biomaterial. This technique has been the most promising in terms of making 3D biostructures, but it is also the least precise, and like the others, can subject cells to stress during the printing process.

Most of these techniques are in development by academic institutions, with a few being developed by private companies such as GeSiM (in Germany), Aspect Biosystems (in Canada), regenHU (in Switzerland), and TeVido Biosystems (in the United States). Having noted these companies, we’ll be watching their future development — perhaps going public or being acquired by a publicly-traded firm. (We are not currently recommend ing these companies or any others mentioned in this section for present or future investment, but simply noting
them as significant innovators of potential interest.)

Another Bioprinter

Current Applications

Full-scale organ printing is still probably farther away than fusion power, which some joke has been 30 years away for the last 60 years. But there are many emerging applications that are either ready for commercial implementation now, or will be ready in a much closer timeframe than the starry-eyed “someday” of printed hearts and livers.

The sole publicly-traded pure-play in this space is Organovo (AMEX: ONVO), based in San Diego. The company is aiming to begin commercial production of its first products later this year. They hope to pass a vetting process, begun in January, to ensure that their tissues react to treatment in substantially the same way that “natural” human tissues do.

While Organovo’s founder and researchers do have their sights set on printing synthetic organs, their closer goals are humbler, and show some of the more immediate promise of bioprinting.

“Human Preclinical” Studies

The first immediate application for bioprinted tissues is for clinical research and drug discovery.  

The first stages of any drug development are “preclinical.” That means studies that are done in animal models long before any human patient is dosed. These studies establish some basics of the drug’s toxicology and pharmacokinetics — how a living system takes it up and metabolizes it. Of course, being done most often on rats and mice, these studies are far cheaper than the clinical studies on humans that come next.

However, the animal studies are also less useful. Many potential new drugs are rejected at various points when they get to the clinic, as side effects in human subjects are revealed. Additionally, clinical trials are an enormous component of any pharmaceutical company’s research and development expense. Secular headwinds are beginning to affect pharma and biotech, and many of them are related to R & D.

In addition, the pricing pressures that are on the horizon under the Affordable Care Act will mean that pharma and biotech companies will have to reckon with much thinner profit margins after all their development expenses.

Bioprinting: A Money-Saver

The promise of bioprinting is simply that pharma and biotech companies will be able to get much better preclinical data by performing in vitro tests on biological structures which, even if they aren’t real human organs, will tell them a lot about how human organs might react to their new molecules. And if regulators are ultimately convinced that this cheaper method is more informative, the number of animal studies might be reduced.

And that means potentially saving these companies significant sums of money by helping make sure they bring only the most promising drugs farther down the research pipeline. Any technology that can reduce the number of drug failures in clinical development is likely to be embraced. Companies such as Organovo might hope to reap not just the revenue stream from selling bioprinted “cell assay” products for R & D; they could also contract to receive royalties on drugs that ultimately come to market.

Later this year, Organovo hopes to begin selling its first liver tissues for this purpose. Though this is a far cry from printing a whole liver, it is clearly a technology with immediate application and immediate appeal to pharma and biotech stakeholders.

And as tissue printing becomes more advanced, it will allow further implementation in disease modeling, and even in clinical applications, also potentially generating savings and making pharma R & D more cost-effective.

Burns: Printing Skin

A dramatic clinical application that is almost ready for commercialization is the direct printing of skin on burn victims.

The Department of Defense has (sadly) had the need for a quantum leap in burn treatment as a result of the war in Iraq, where 30 percent of casualties were burn victims. So DOD-funded researchers have developed a machine that can print skin directly onto burns. Current skin grafting technology requires too much time and too much skin to help catastrophic burn victims, but direct bioprinting has so far bypassed those limitations in experiments. Astonishingly, the printed skin cells integrate themselves into the victim’s skin structure and can produce rapid, scar-free healing.

Our Takeaway

Bioprinting is still far from some of its more dramatic possibilities, but we see direct applications that are much closer to realization, including ones with potential attraction to stakeholders who are preparing to operate in what may become a more fiscally austere environment. We will be watching this industry.

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