Cytori - Crohn's Disease = Payday??

Today, Cytori Therapeutics expanded its Celution® System CE Mark and received additional indications-for-use for:

• Breast reconstruction;

• Repair of soft tissue defects, and

• The facilitation of healing certain types of wounds, such as those resulting from Crohn’s disease

...more good news for a company that appears to be somewhat unappreciated by the market.

The most interesting aspect of the release, in my humble opinion, was the approval related to Crohn's disease. What makes this so interesting, you ask? Aside from the obvious therapeutic value and potential revenues of a multi-billion dollar disease, this is one indication that we actually have a comparable benchmark that investors can look at to gauge value.

In December 2009, Athersys (ATHX) and Pfizer reached an agreement on the stem cell therapy Atherys had been developing for the same disease. Only Athersys was seemingly years away from commercialization at the time. Here are the salient excerpts form the press release:

Athersys, Inc. (Nasdaq:ATHX) announced today that it has entered into an agreement with Pfizer Inc. (PFE) to develop and commercialize MultiStem(R) for the treatment of Inflammatory Bowel Disease ("IBD").... Under the terms of the agreement, Athersys will receive an up-front cash payment of $6 million from Pfizer, as well as research funding and support during the initial phase of the collaboration. In addition, Athersys is also eligible to receive milestone payments of up to $105 million upon the successful achievement of certain development, regulatory and commercial milestones. Pfizer will have responsibility for development, regulatory and commercialization and will pay Athersys tiered royalties on worldwide commercial sales of MultiStem IBD products. Alternatively, in lieu of royalties and certain commercialization milestones, Athersys may elect to co-develop with Pfizer and the parties will share development and commercialization expenses and profits/losses on an agreed basis beginning at phase III clinical development.

Inflammatory Bowel Disease is a group of inflammatory and autoimmune conditions that affect the colon and small intestine, typically resulting in severe abdominal pain, weight loss, vomiting and diarrhea. The most common forms of the disease include Ulcerative Colitis and Crohn's disease, which are estimated to affect more than two million people in the U.S., major European countries and Japan. Chronic IBD can be a severely debilitating condition, and advanced cases may require surgery to remove the affected region of the bowel, and may also require temporary or permanent colostomy or iliostomy. In many cases, surgery does not achieve a permanent cure, and patients suffer a return of the disease.

Ok, so Pfizer paid Athersys $6,000,000 up front and agreed to pay up to a total of $105,000,000 if Athersys reached certain milestones. Nice deal is for a stem cell therapy that appears to be several years away from commercialization. By the way, Athersys soared form $1.00 to $6.25 on the news.

So back to Cytori, and again, let me stress that this is just one therapy in a platform of potential therapies. Well, if Athersys got such a sweet deal on the long term potential of a Crohn's disease therapy, what is Cytori's CE Mark for commercialization in 35 countries worth TODAY??? I don't KNOW but it sure seems pretty lucrative. Go ahead and due your own due diligence and and let me KNOW what YOU think!

BP Acquires Verenium's Cellulosic Ethanol Interests for

Acknowledging that the cellulosic ethanol business is a capital intensive industry requiring deep pockets that it didn't have, Verenium finally threw in the towel today and sold off all its biofuels assets to its biofuels partner, BP, for $98,300,000. Importantly, Verenium will retain its commercial enzyme business, including its biofuels enzymes products and have the right to develop its own lignocellulosic enzyme program. Verenium will also retain select R&D capabilities, as well as rights to access select biofuels technology developed by BP using the technology it is acquiring from Verenium through this agreement.

I'd venture to speculate that the disastrous BP oil spill played into Verenium's decision to throw in the towel. As BP oil continued to gush into the gulf, the hoped for DOE loan guarantee for the VRNM/BP flagship commercial cellulosic ethanol plant in Highlands Florida became more doubtful due to unprecedented political pressures on BP. Verenium will now re-focus back to its basic business of enzyme technology where it has had recent success with both royalty and product sales growth. The $98 million dollar payment will allow Verenium to clear out almost all of the long term convertible debt on its balance sheet if it chooses to do so.

This ends a disastrous chapter in the history of Verenium, a company formed by the ill fated June 2007 merger of Diversa, a once high flying enzyme biotechnology company and Celunol Corporation - a developer of cellulosic ethanol process technologies, that wiped out hundreds of millions in Diversa shareholder value while management continued to get paid handsomely. It will be interesting to see how the valuation the stock market places on the growth prospects of the enzyme business without the overhang of the capital intensive and risky cellolosic business. We'll find out more today during Verenium's conference call but I'd view this as a definitive positive in a company that has lacked any substantiate positive shareholder news for years.