Renovo's Ferguson Heads for Crunch Year in Confident Mood

Wednesday, September 08, 2010

Renovo (LON:RNVO) told us earlier today Juvista, its potentially ground-breaking treatment for scarring, was safe in patients being treated after the removal of scar growths called keloids.

However as expected the phase I trial was unable to establish whether Juvista had any effect on scar reduction or the re-occurrence of the growth.

There are occasions where an early safety study of this kind will reveal signs of efficacy. 

However many more do not. In Renovo’s case the outcome is hardly surprising as the trial was restricted to just 30 patients in the top dose.

The company is clear that it hit its ‘primary objectives’ covering the safety aspects.

‘We had to find out whether Juvista made the keloid worse,’ said chief executive Mark Ferguson.

‘The answer was definitely not. There are no safety issues at all. That was the whole purpose of the trial. 

‘The implication of that is our entire programme remains on track and on schedule.’

Interesting as it is, this early work on keloids is of far less importance than the pivotal European phase III study on Juvista’s use after scar revision surgery.

Renovo has recruited 350 patients to the efficacy trial, and it is scheduled to report its findings in the first half of next year.

A positive result ought to be transformational for the group – though the market seems almost irrationally cautious about the prospects of the company and its lead product.

The current valuation of the firm is a little over £42 million. At the end of June Renovo held £56 million in cash.

And by the middle of next year, when the EU phase III trial has reported, the group has pledged to have at least £25-£30 million of that money left.

This is a very deliberate strategy of chief executive Ferguson and his team.

‘We want to make Renovo an attractive investment,’ he told Proactive Investors. 

‘We want to create for the investor an asymmetric risk. 

‘If you think the Juvista phase III trial is going to be positive, then it (the share price) should be multiples of where it is today. 

‘If the phase III trial is a failure then basically there is more or less the cash value of the company in the share price that you have paid for. 

‘The downside is minimal because there are still the other programmes and the cash.’

‘But I’m trying to put myself in the place of the investor here.’

The company has partnered with FTSE 100 drugs firm Shire (LON:SHP) to develop Juvista and exploit its commercial potential.

The deal could be worth as much as US$825 million in milestone payments and royalties and the company has already received US$125 million.

The next payment – a more modest sum of US$5 million – ought to come in the second half of next year, when Shire gets its clinical trials in the US underway.

The group will then receive a further US$25 million when it submits Juvista for approval to the US Food & Drug Administration, followed by a payment of between US$50 million and US$150 million on approval.

However, the terms of the deal have altered with Shire keeping the rights to develop and sell Juvista in the US, Canada and Mexico, but winning the option to licence it out to a third party.

In return Renovo has wrestled back the rights to the scarring treatment for the rest of the world. 

This, Ferguson says, gives the company a great deal more flexibility than the original deal had allowed.

Renovo is yet to decide whether it will market and sell Juvista itself in Europe, or find a partner. 

However the chief executive is adamant that outside the company’s home market, the partnership model works best.

‘It would be unreal of us to think we could sell directly into a country such as China,’ Ferguson said.  

Juvista was discovered in the late 1980s as part of Ferguson’s work at Manchester University on cleft palate.

The emphasis of the work has so far been on scar revision, where a plastic surgeons attempts to improve the appearance of post-operative scarring.

However there are all sorts of potential alternative uses from varicose vein treatment to cosmetic surgery.

However, there have been two failures of Juvista – in mole removal and breast augmentation.

Ferguson is unperturbed and unsurprised by the setbacks. In neither case was the optimum dose used, he says.

Rightly the emphasis from an investors’ standpoint at least has been on the potentially ground-breaking Juvista.

But Renovo is not a one product company – far from it. 

There is Adaprev, which is being developed to treat tendon scarring after injury that can lead to recurring pain and loss of movement in the affected digit.

Currently 44 patients are being recruited to the first of two trials which are required for Adaprev’s approval as a medical device.

The first trial will report in the second half of next year.

And there is Prevascar, where tests are being carried out on dark skinned patients where scars are inflamed. 

However, a potential hidden gem is Juvidex, where phase II clinical trials revealed it may help accelerate skin healing and reduce redness.

But here Renovo is taking a rather unconventional route to market by developing Juvidex as a cosmetic and a potential treatment for sunburn or for use after a skin peel.

‘We considered the data and decided we could get to market quicker and make more money by developing Juvidex as cosmetic rather than as a pharmaceutical.

‘The fact is you’d pay roughly the same price for either.

‘So we will partner with a company and are in discussions at present time. We believe a deal could be concluded soon. 

‘It is likely to be a royalty on sales but the sales could be significant. 

‘Our partner could have the cosmetic product on the market within a year of doing the deal.’