INTERCYTEX (ICX)

Previous Stock Tip

These companies are all previous recommendations from the Red Hot Portfolio that I have subsequently recommended and then sold from the portfolio at a later date. By no means are these companies intended to be buy recommendations for you to go out and invest money towards their shares. For the opportunity to start making serious money from the recommendations I am making now, just start your no obligation trial!

INTERCYTEX (ICX): Damage Limitation - Nov 2007

RHPS Recommendation – SELL

Having staged a small rally in the summer the share price has slipped below 50p. This is an ominous sign, and with shares in innovative medical technology companies very hard to value, share price momentum becomes especially important. So cut our losses. SELL.

INTERCYTEX (ICX): Important Trials Ahead - Oct 2007

RHPS Recommendation – BUY

Intercytex is on target to recruit the 396 patients that it needs for trials of its wound-healing product. The next stage of its work on skin grafts will assess their long-term benefits, and Intercytex will also trial larger pieces of artificial skin. Wrinkle remover Vavelta is undergoing trials at London’s Cranley Clinic for Dermatology, while tests are under way to optimise the delivery of the dermal papilla cells that can stimulate

hair growth. Preliminary results show ‘substantial increases in hair count’. A high risk BUY up to 60p.

INTERCYTEX (ICX): This is no sci-fi fantasy! Coming to a hospital near you – the man who grows human skin! -

RHPS Recommendation – BUY

If you were listening to Radio 4 at about 7.50am on June 26 you will have heard an interview with Dr Paul Kemp. Dr Kemp has devoted his life to the growth of human skin in the laboratory, and last month he announced a breakthrough. For the first time living human skin, made in a laboratory, had been fully integrated into the human body.

Here is what was done. A portion of skin, about one inch in diameter, was scraped off the arm of six brave volunteers. This wound was then filled by a skin replacement product called ICX-SKN, made by Dr Kemp’s company Intercytex. After 28 days the scar was healed. Not only did it look good, but close inspection – which involved once more cutting this section of skin from the patient so that it could be examined three-dimensionally – proved that it had fully meshed with the patient’s own skin cells. This sounded impressive to me – but more importantly it impressed Dr Stephen L Minger, a Director of the Stem Cell Biology Laboratory at the Wolfson Centre, and a world expert in regenerative medicine. He described these results as “a real breakthrough in the field of wound healing and regenerative medicine in general. To have an off-the-shelf skin replacement product that can be used in large numbers of patients will revolutionise the treatment of burned and skin damaged patients.”

ICX-SKN is made by taking fibroblasts, a type of cell that provides a structural framework for tissue and plays a critical role in wound healing, and using them to manufacture human collagen in a skin-like structure. This is a living product that is produced in sheets and can then be placed upon a wound. At present the normal treatment for patients with surgical incisions or severe burns is a skin graft. This involves literally scraping a patch of skin from one part of the body and replacing it elsewhere, a gruesome process that basically replaces one wound with another, causes extensive scarring and increases the risk of infection.

Other living skin graft alternatives exist but these all biodegrade in situ within a matter of weeks. So this is a truly exciting medical breakthrough, and the next stage is to repeat the experiment on larger wounds. But in the course of the radio interview, what really made me sit up was Dr Kemp’s opinion that in just five years time this same method of regenerative medicine will become a cure for baldness. Such is our vanity that the number of hair restoration procedures carried out worldwide is rising fast, with an increasing proportion of women joining the fun. But the number would be vastly larger if the process was not so excruciating. Today, hair restoration is achieved by ripping a strip of skin from the back of the head, laboriously extracting the follicles one by one and then planting them back on to the top.

Intercytex is developing a hair regeneration procedure that starts by taking a very small sample of skin from the back of the head. From this it extracts the “dermal papilla”, the cells at the base of the follicle which have hair inductive properties. These are then taken to a laboratory and multiplied before being injected back into the top of the head. The multiplication of cells is the easy part. What is more difficult is to ensure that in the process the cells retain their properties; and to inject them successfully back into the patient. Intercytex has now completed Phase I trials, which demonstrated that 71% of patients had increased hair numbers after treatment. Now it is undergoing Phase II trials, which it hopes will confirm the efficacy of the process and optimise the formulation and the method of delivering the cells back into the scalp. Preliminary data is expected before the end of the year, but already the product is demonstrating some of the attractions of Intercytex’s strategy.

First of all, by concentrating on cell therapies for the skin Intercytex avoids invasive drugs that can be both ineffective and have dangerous side effects. Secondly, some areas of skin treatment are not regulated as medicines, making it much easier to bring them to market. And thirdly, because cells are intrinsically safe and the desired outcomes are very clear cut, clinical trials require only a small sample of patients and can be relatively short.

Intercytex is optimistic that it will soon have its first product on the market. This is Vavelta, a product that is not classified as a medicine. In an area of regulation that is somewhat confused, aging skin is not regarded as a disease – unlike baldness, which is – and the replacement of cells is considered to be a procedure rather than a treatment. So Intercytex is hoping to launch Vavelta before the end of the year, and recently introduced the product to specialists at the Facial Aesthetic Conference and Exhibition in London. The next step will be to appoint practitioners, and the first thing they will have to do is to overcome any prejudices that may have been caused by Isolagen.

Isolagen was a treatment that involved injecting collagen cells grown from patients’ own skin taken from behind the ear. Seven thousand patients in the UK paid £4,500 each for this treatment and many are so dissatisfied that they are considering legal action. Vavelta works in a different way. It does not take a skin “seed” from the patient’s own body, but instead repopulates the skin with young active cells. The well-established source of these – and this is regulated by the FDA – are the discarded foreskins of babies, and such is Intercytex’s ability to multiply cells that it needs only two of these each year. The end product comes in five vials of collagen-producing cells, which the aesthetic medicine practitioner must inject carefully into the face, at a cost to the patient of about £3,000.

Vavelta incorporates the same cells, allogeneic human fibroblasts, which are used in Intercytex’s “ICX-SKN” skin graft replacement and in another product, “ICX-PRO”, a treatment for chronic wounds.

Chief Financial Officer Richard Moulson explained this to me, referring to a presentation complete with hideous photographs of open wounds and ulcers. ICX-PRO is a form of gell in which human fibroblasts are suspended in a solution of fibrin. The fibrin is gradually absorbed into the skin, leaving the fibroblasts to stimulate the healing of the wound. Phase II trials showed a benefit to 80% of patients, and Intercytex is now conducting Phase III trials on a larger, and more statistically significant sample. Final data should be available in the middle of next year after which, all being well, Intercytex will be free to demonstrate the advantages of ICX-PRO over similar products such as Smith & Nephew’s Dermagraft. These advantages include a shorter manufacturing time, ease of handling such that a nurse can apply the product, and the fact that it can be stored in a fridge for up to 21 days, rather than having to be frozen at –80ºC.

Clearly the market for all of these products is enormous, but as with so many companies at Intercytex’s stage of development the issue is funding. Intercytex raised £13.7m at its AIM launch in February 2006, and last month raised a further £12m. With this cash being burnt at a rate of about £10m per year, Intercytex should have enough to see it through until 2009. By then it hopes to be generating revenues from the sale of Vavelta, while its other products should be much closer to commercial realisation.

RHPS Verdict: Regenerative medicine has great promise but the difficulty has been to integrate cells back into the body. That is why Intercytex has made such a breakthrough. This is a high risk play, but we are at least able to get into these shares at little more than half of the 108p at which they were floated on AIM last February – despite the progress that has been made since. BUY.

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