Ex-Harvard Bio Prez Leads Spin-Off’s Plan to Make Engineered Organs
David Green had led Holliston, MA-based Harvard Bioscience (NASDAQ: HBIO) for almost two decades when he was faced with a big career choice. The company was about to spin off a new firm that would take with it an ambitious technology Harvard Bio had been developing to make engineered organs—a high-risk, high-reward project. Green had the chance to lead either one company or the other, but not both.
“It’s genuinely exciting stuff,” Green says of the organ project. “It makes great cocktail party conversation, it’s a great story to tell your children.”
Suffice it to say, Green chose to go with the spin-off. Late last year, he became the president, CEO, and chairman of the newly-created Harvard Apparatus Regenerative Technology (NASDAQ: HART). In his new role he’s spearheading a mission worthy of science fiction: to create replacement organs that incorporate a patient’s own cells.
It’s a big departure from Green’s previous post at the stable Harvard Bio, a 113-year-old company that’s best known for selling scientific instruments used in various researcher labs. HART, in contrast, is now developing artificial tracheas for patients whose own windpipe was damaged by injury or disease. It’s the first step in a big plan to offer a whole line of engineered organs, including hollow ones such as esophagi, heart valves, and even eventually whole hearts or lungs.
The potential benefit of such technology for patients who need transplants is huge. Donor organs are notoriously scarce and those lucky enough to receive one must take powerful immunosuppressants for the rest of their lives to prevent rejection. If HART’s plan succeeds it could provide a virtually limitless supply of replacement organs that, because they’d be built with each patient’s own cells, would eliminate the risk of rejection.
But HART is still at the stage where the risk of failure is very real. None of the company’s technology is yet approved by regulators in either the U.S. or Europe, though it has been used to treat a handful of people on an experimental basis or under “compassionate use” exemptions, which are granted for gravely ill patients with no other options. HART still has to conduct the necessary trials, amass clinical data, and prove its engineered organs are safe and effective—not to mention convincing surgeons to try them—before its vision can become a commercial reality.
It wouldn’t be the first time that Green pulled off a dramatic transformation. He first joined Harvard Bio—then known as Harvard Apparatus—as its president in 1996, after multi-year stints as a brand manager for household products with Unilever and as a consultant with Monitor Co. He co-led a management buyout of the company with then CEO Chane Graziano, took the company public in 2000, and then engineered a variety of acquisitions and licensing deals. The net result: Harvard Bio, which generated about $8 million in annual revenue when Green got there, took in more than $100 million last year.
Along the way, Green took on an unusual project, a stab at regenerative medicine that didn’t necessarily fit with the core business of Harvard Bio. Green says that Harvard Bio had been selling equipment used to test the physiology of organs while they’re preserved outside the body—a method commonly used by pharmaceutical companies to see the impact a drug candidate might have on, say, a heart or a lung. But in 2008, a Massachusetts General Hospital surgeon named Harald Ott called Harvard Bio and asked if the company could tweak that organ research equipment so it could be used to help regenerate organs instead.
The company obliged, and started working with the hospital on technology that could be used to grow organs outside the body. Around that time, Green read a paper in The Lancet, a top-tier medical journal, from a team led by Paolo Macchiarini, then a thoracic surgeon at Hospital Clinic in Barcelona, Spain. The group had prepared a new trachea for a woman named Claudia Castillo with the help of a new type of bioreactor—a device that could keep cells sterile and alive long enough to grow into and around a scaffold.
This wasn’t a typical transplant, in which an organ would be harvested from a deceased donor and transferred directly to the patient. Macchiarini and his colleagues instead stripped the donor trachea of all of its cells first, leaving just a collagen tube. They then used the tube as a scaffold upon which to build the new organ, placing it in the bioreactor and seeding it with cells derived from the patient’s own bone marrow and airway. After incubating the trachea in the bioreactor for four days, Macchiarini implanted it into Castillo.
Green was floored by the paper. He e-mailed Macchiarini and wound up licensing the bioreactor technology from two of his colleagues, Sara Mantero and Adelaide Asnaghi, engineers at the University of Milan who invented the technology. Harvard Bio brought the device in-house, looking for ways to refine it for commercial use.
“At that point, we looked at ourselves as a bioreactor company,” Green says.
Harvard Bio, however, quickly made a few key realizations. Green says, that it didn’t make any sense to sell bioreactors on their own without also providing scaffolds for the organs that doctors would want to grow in them. Though Macchiarini’s team had succeeded in using a cadaver organ as a scaffold for Castillo’s new trachea, using a synthetic scaffold made out of rubbery nanomaterials would eliminate the need to find a donor organ.
Such scaffolds were occasionally being made in academic labs, but those lacked the quality control procedures necessary for making commercial medical products, Green says. Harvard Bio also collaborated for a time with an Ohio-based startup called Nanofiber Solutions, which constructed scaffolds out of polymers like PET. Harvard Bio used Nanofiber’s scaffolds to create tracheas for four patients, but Green says that three of them have since had to be replaced because they were essentially collapsing inward. (Nanofiber, for its part, disputes this part of the story. The two companies have clashed over intellectual property in the past, according to the Columbus Business First.)
Ultimately Harvard Bio decided it would have to manufacture the scaffolds itself. And in early conversations with the FDA it became clear that in order to win regulatory approval the company would also have to control the process of seeding patient’s cells into the scaffolds to create the engineered organs, Green says. If the company simply supplied the scaffolds and bioreactors to doctors and left the seeding process up to them the risk of contamination would be too high and quality control would be lacking, he says.
So Harvard Bio set aside the idea of selling tools for making tracheas and began focusing on a plan for supplying the organs themselves. The idea is that a surgeon would select the scaffold that best fit a particular patient from a menu of size options and send the company some of the patient’s cells. Harvard Bio would take care of the seeding and incubation steps and, within a few days, ship a completed organ back to the surgeon, who would perform the implantation.
The growing project shifted Harvard Bio’s center of gravity. While the company kept selling its lab instruments, it was also investing heavily in what was fast becoming a full-scale organ engineering business. The project was an outlier, and a burden on Harvard Bio’s cash resources.
“I really believed it was necessary to split the companies up,” Green says.
So on Dec. 1, 2012, HART, filed an S-1 with the Securities and Exchange Commission. The plan was originally for Harvard Bio to give HART a $10 million investment and offer public investors 20 percent of the spin-off through an IPO (Harvard Bio would sell the rest later). Instead, in October, the companies decided to make it a clean break. Harvard Bio instead gave its shareholders one HART share for every four Harvard Bio shares that they already owned, kicked in $15 million, and essentially washed its hands of the regenerative medicine project.
In the process, a few of Harvard Bio’s key leaders fled to HART. Thomas McNaughton, Harvard Bio’s CFO, took up the same role at HART, and onetime Harvard Bio CEO Graziano joined HART’s board as a director.
With the team in place, now it’s on to the hard part—moving beyond a few last-resort surgeries, to establishing engineered organs as real options for patients.
To date, HART’s bioreactors have been used to prepare tracheas for just eight patients, each of whom had been given less than six months to live at the time of surgery. Though three of the patients had to undergo a second surgery to replace a trachea made with a Nanofiber scaffold, according to Green, six of the original eight are still alive, and that the two deaths weren’t related to the transplant.
Green is encouraged by the fact that Castillo is still alive five years after her surgery with an “excellent quality of life” and that she has never had to take immunosuppressive drugs. The second patient to receive one of the engineered airways, Andemariam Beyene, had been given just two weeks to live before the surgery but is still alive, with a job and a family, two and a half years later, Green adds.
In commercializing engineered tracheas, HART wants to target patients like Beyene who have trachea cancer, as well as those who have suffered tracheal trauma or who were born without a windpipe. That’s about 6,500 patients annually worldwide, a market the company estimates at about $300 million, according to SEC filings. It would then branch out into other engineered organs.
Still, there are some big steps to complete before HART can turn this into a business.
First, there’s the regulatory challenge. HART’s engineered trachea is viewed as a “combination” product by the FDA, meaning it involves elements of both a device and, because it contains human cells, a biologic. No such products have yet been approved by the FDA, says Green, though Winston Salem, NC-based Tengion is currently running a clinical trial of a similarly engineered replacement ureter.
While seeking approval for a combination product doesn’t necessarily mean HART has to run more trials than it would be necessary a traditional medical device, it does mean that the standards for quality control are heightened. While a defibrillator might inspect, say, every 10th device, HART would have to test every single engineered trachea before it went into a patient. That’s because the cells incorporated in the organ could harbor a harmful bacteria or viruses, Green says.
So far, just three of the eight patients who have received HART’s engineered tracheas did for so as part of a clinical trial, according to Green. That trial that is being conducted in Russia. HART’s also planning to start two European trials this year, and still has to get the FDA’s consent to begin enrolling patients in a study in the U.S.
HART plans to use the results of these studies, and its compassionate use cases, to build enough of a data package to file for regulatory approval in both the U.S. and Europe. HART has said publicly that it aims to have its engineered trachea approved in Europe in 2016, and in the U.S. a year later, so its real day of reckoning is a ways away.
Should HART face that day successfully, Green estimates that it could sell each engineered trachea for between $100,000 to $200,000. And he believes HART would have a solid argument for getting the technology covered by insurance because an artificial trachea could save a life while reducing healthcare costs—say, for people with “late-stage” blockages of the trachea who are constantly getting infections and requiring hospital care.
“These patients typically cost hundreds of thousands of dollars to treat today,” he says.
Despite the regulatory, manufacturing, and reimbursement challenges ahead, Green is confident that he made the right choice in spinning out from Harvard Bio along with HART. He sees the transplants that have succeeded so far as validation that it’s more a matter of time before his new company gets where it wants to go.
“If someone had tried to hire me from Harvard Bio to run a startup biotechnology company, I probably wouldn’t have been that interested,” he says. “But because we already had human data, we basically know the product works.”