BioMimetic Therapeutics (Nasdaq: BMTI) is a stock that I have known (and liked) for quite some time and had meant to get around to writing about for this blog for a few weeks. Ultimately, I suppose it took the deal this week between Medtronic (NYSE: MDT) and Osteotech (Nasdaq: OSTE), as well as an email from a reader, to give the poke in the back that I needed.
BioMimetic is an orthobiologics company with a promising new product family (Augment) designed to improve the bone healing process and, perhaps, soft tissue injuries as well.
The key technology in this is the company's synthetic recombinant human platelet-derived growth factor.I know I tend to err sometimes toward "geek speak", so I will try to keep this a little simple (so, for those more technically-inclined, please forgive the simplification!). Basically, this is a synthetic version of a naturally-occurring protein that activates and accelerates the normal musculoskeletal healing process.
Think of it, then, as something like the synthetic human insulins or human growth factor that is administered to diabetics and those with growth disorders - except that in this case, the protein is being delivered not because the patient cannot produce it on his/her own, but rather as a boost to the healing process.
Put simply, apply BMTI's growth factor to a bone fracture or injury and the fracture/injury will heal faster.
Looking across the spectrum of bone healing, spinal fusion, and sports medicine, this could be a $8B+ annual opportunity. BioMimetic is looking for its first US approval in foot/ankle fusion, but additional applications like long bone repair (the leg or arm, for instance) and spinal fusion are likely to follow. Beyond that, the company is also exploring the use of this technology in soft-tissue repair (cartilage, tendons, etc.).
Phase 3 clinical results in foot/ankle procedures were encouraging. The Augment product demonstrated healing rates that were just as good as autografts (where surgeons harvest bone from elsewhere in the patient's body, like the hip, and use that to fill the void and stimulate healing), but fewer delays in healing, less infection, and substantially less pain. So, it works just as well as the current approach but it has fewer complications and hurts quite a bit less.
So who else is out there in the market? Well, autograft procedures basically require the tools of orthopedic surgery, so that would include Stryker (NYSE: SYK), Biomet (Nasdaq: BMET), Johnson & Johnson (NYSE: JNJ), Zimmer (NYSE: ZMH), Wright Medical (Nasdaq: WMGI) and so on. About 40% or so of most cases end up using autografts.
Outside of autografts, allografts (donor bone) are most common. This is a broad category, and it can mean a host of different graft types, including hard grafts, putties, pastes, and so on. Most orthopedics companies offer these and will often refer to them as "biologics", particularly in those cases where the donor bone has been significantly modified or combined with other ingredients.
Beyond that are more sophisticated biologic products - products like OP-1 from Stryker and InFuse from Medtronic. These, like Augment, are often delivered as grafts laced with growth factors intended to stimulate healing. InFuse is definitely the leader here, though it can be rather expensive at over $4K per procedure.
Ultimately, I think BioMimetic can win on the combination of solid efficacy, better safety, and less cancer risk (there has been some concern about cancer risks with these growth-stimulating biologics). On top of that, the indicated price range of $2,200 - $2,500 should be very competitive and offering the technology in multiple forms (a spreadable sand-like paste, an injectable paste, et al) will appeal to surgeons.
So what are the risks? Well, the product is not approved yet, and will not go in front of an FDA panel until Q1 of 2011. Although I cannot see why the FDA would turn this down, you never can be 100% sure what the FDA will do. Beyond that, there are the normal risks. Can they compete with Medtronic? Will they get favorable reimbursement? Will surgeons use this off-label and damage their reputation?
None of these bother me all that much, though. I think this stock is extremely cheap (likely worth upwards of $20/sh) and I think risk-tolerant investors who can handle a biotech stock (or a quasi-biotech/med-tech stock) should give this one serious consideration. More likely than not, I think this one gets bought out in the next 12 - 18 months.
I do not have much loose cash right now, but this is a stock that I like enough where I am actually considering selling something to raise the cash. So I may soon be eating my own cooking on this one.
Disclosure - I own shares of JNJ.
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