Sernova Cell Pouch Technology Re-Invents Traditional Diabetes Care

Last week, a New York Times article by Elisabeth Rosenthal accused the medical industry of, “borrowing business models from technology companies like Apple,” pointing out that “the captive audience of Type 1 diabetics has spawned lines of high-priced gadgets and disposable accoutrements.”

“A steady stream of new models and updates often offer dubious improvement,” writes Rosenthal, “colored pumps; talking, bilingual meters; sensors reporting minute-by-minute sugar readouts.”

Sernova, however, is a clinical stage company developing a medical technology capable of disrupting the current market for Type 1 diabetes treatment and may reduce costs for patients and insurance providers while improving patient quality of life.

Type 1 diabetes is an autoimmune disease that causes the pancreas to stop producing insulin, a hormone that enables people to get energy from food. It occurs when the body’s immune system attacks and destroys the insulin-producing cells in the pancreas called islets.

As many as three million Americans live with Type 1 diabetes, and more than 15,000 new cases are diagnosed every year, mostly children.

Sernova’s “Cell Pouch” is an implantable medical device placed under the skin, which provides an ideal environment for the survival of therapeutic cells, which can release proteins, or hormones into the bloodstream as required. For their diabetes treatment Sernova would replace the islets that have been lost, restoring the metabolic function of the pancreas and potentially eliminating the need for insulin injections.

Of significant importance, Sernova has just released very encouraging longer term (over 180 days) interim data on its ongoing clinical trial in patients with diabetes receiving an islet transplant showing that the Cell Pouch with islets is safe and biocompatible far beyond the initial up to 30 day results presented in September, 2013. This data is important because it shows the Cell Pouch with therapeutic cells can be safely placed under the skin and is a positive sign that the Cell Pouch could be used for multiple diseases involving a need for a hormone or protein replacement. The earlier results also showed that the islets within the Cell Pouch are well connected with blood vessels and can make insulin, glucagon and somatostatin, key hormones in the control of blood sugar levels.

“The Cell Pouch is unique in that that the design encourages tissue and small blood vessels to grow into it forming natural tissue chambers,” states Sernova President and CEO Dr. Philip Toleikis in an exclusive interview with Financial Press, “With the Pouch placed into the body, at the medically appropriate time, we introduce therapeutic cells into the new tissue chambers formed and the islets connect to the surrounding blood vessels and start functioning similar to the pancreas.”

Sernova’s patented device is designed to replace the need for either insulin injections, or an insulin pump including the ‘artificial pancreas.’ The therapeutic cells in the device monitor the blood sugar levels and produces insulin. Toleikis claims, if the human testing is successful, it may potentially offer a radical improvement on the widespread “Edmonton Protocol” treatment.

“The Edmonton protocol is a procedure for patients with hypoglycemia unawareness or unstable diabetes where insulin-producing donor islets are infused into a blood vessel in the liver and the patients remain on antirejection medicines,” states Toleikis, “While this procedure helps these patients for a while, the bloodstream is not a natural environment for islets which lose function over time. Our Cell Pouch product provides an organ-like environment for islets, similar to the pancreas, which we believe, has numerous benefits to placing islets into the blood vessel.”

The therapeutic cells placed into the Cell Pouch can be protected from immune attack by antirejection agents or proprietary local immune technology, which may reduce or eliminate the need for antirejection agents.

“We are first testing the safety and efficacy of the Cell Pouch on Type 1 diabetic patients who are suffering from “hypoglycemia unawareness”, explains Toleikis, “These patients lack internal regulatory stimuli that would tell them when their blood sugar is too low. This ‘alarm system failure’ can result in loss of consciousness, seizures or death.”

For some time scientists have known how to isolate islets from donated organs, and insert them into the body where they start to perform their native functions, such as producing insulin.

Sernova’s first indication is Type 1 diabetes, but they are also working on a product in collaboration with Medicyte Gmbh for patients with hemophilia who lack the ability to produce an anti-clotting protein called Factor VIII. Without the ability of the blood to clot, even the small breaks in blood vessels that occur with daily activity can have devastating consequences.

“Currently there is a small number of companies that produce the Factor VIII protein but the market is about $5 billion/year,” stated Toleikis. “Selected hemophilia patients are getting infusions three times a week, for an average cost of over $100,000 dollars a year. Sernova in a collaboration with Medicyte Gmbh is working on cells which when placed into the Cell Pouch can produce and release Factor VIII into the blood stream. We are currently in pre-clinical studies with this application.”

The potential commercial applications for the Cell Pouch create many potential revenue opportunities for Sernova shareholders. The technological platform is easily expandable into new clinical indications.

Sernova recently took an important step in its corporate evolution with the appointment of biotech innovator Frank Holler to its board of directors. Mr. Holler founded and/or helped develop numerous successful biopharma companies including ID Biomedical, Angiotech Pharmaceuticals, and Xenon Pharmaceuticals. Holler also has extensive experience in capital market contacts.

According to Dr. Toleikis, Sernova plans to seek development partners, such as a large pharmaceutical or medical device company for the Cell Pouch in its major applications including diabetes and hemophilia. This development would be extremely beneficial to investors and patients alike as it would likely help speed the development processes to product approval and launch, helping Sernova’s products reach their true value in the marketplace.

Sernova is trading at .28 with a market capitalization of $36 million.