Untapped Potential in Healthcare Worth Billions

In the U.S., 1.7 million patients are diagnosed with sepsis each year according to the CDC and 300,000 of those develop septic shock. This is a major health challenge, larger than both breast cancer (268,600 new cases estimated in 2019) and prostate cancer (174,650 new cases in 2019). Of all patients diagnosed with sepsis, 250,000 die every year. Yet, despite attempts to come up with a new therapy, there are no FDA-approved treatments for this disease with the only recent improvement in sepsis care is the development of consensus guidelines for treatment.



Sepsis may result from an infection, but often the infection source cannot be identified. While antibiotics may resolve a confirmed infection, they do not prevent the development of the inflammatory process that leads to uncontrolled cellular and organ damage. Septic shock claimed the lives of Pope John Paul II, Christopher Reeve and Mohammad Ali and most recently, caused a scare for Whoopi Goldberg, whose bout of pneumonia triggered a case of near-fatal septic shock. While little progress has been made for its recognition, there is one Company in North America that has a treatment that is used outside the United States and is working through the Regulatory process in the US. The treatment is virtually alone in this field - Spectral Medical Inc., (TSX: EDT, OTC: EDTXF, Forum).

This biotech Company is in Phase III trials with the first treatment for patients with septic shock guided by a companion diagnostic. Spectral is seeking U.S. FDA approval for its unique product for the treatment of patients with septic shock, Toraymyxin (PMX). PMX is a therapeutic device that uses a process whereby endotoxin is removed from the blood stream [hemoadsorption]. Endotoxin is known to be one of the causes of sepsis. Patients are identified using the Company’s Endotoxin Activity Assay (EAA), the only FDA cleared diagnostic for the risk of developing sepsis related to endotoxin activity. The EAA delivers results in 30 minutes.

The Company is specifically targeting the roughly 150,000 patients threatened by endotoxin septic shock, annually in the United States. Endotoxin in the bloodstream comes in one of two ways, either from a bacterial infection or leakage from the gut where there is approximately 25 grams of endotoxin (enough to kill thousands of people) normally but in the presence of serious illness the normal barrier keeping the endotoxin in the gastrointestinal tract breaks down and the toxin is absorbed into the bloodstream.

While this may be a very specific facet of the health care sector, there are massive implications. What the Spectral Medical team is working on offers immense market potential that could save the lives of thousands of Americans each year. Spectral Medical is a hidden treasure among other medical operations as it offers a diagnostic and therapeutic tool with the leading chance of securing federal approval. This is a key difference that sets Spectral Medical apart from other companies that have attempted and failed sepsis trials is that Spectral Medicals approach is to determine who is toxemic and therefore can be effectively treated. This is a logical approach that is unique in sepsis.



Company President and CEO Dr. Paul Walker, former Chief of surgery at the University Health Network in Toronto, gave an extensive interview with Stockhouse Editorial on Spectral’s operations and described the invention of the endotoxin activity diagnostic and its combination with the therapeutic device.

The therapeutic device is a hemoperfusion cartridge invented in Japan and used there since 1995 to treat patients with sepsis and presumed endotoxemia. It is currently registered in 28 countries and being used to treat endotoxin septic shock, but has not been approved in the United States. Spectral has the exclusive license for the PMX cartridge in the U.S.
Over the last 20 years, major pharmaceutical companies have tried to develop a sepsis therapy but have not succeeded. The products used in these trials were not guided by a diagnostic and did not result in improved outcomes.

the PMX cartridge device works by having blood pumped through fibers in a cartridge that are specially treated to trap endotoxins and then return the healthier blood back into the patient. There have already been at least 170,000 patients treated with this therapy around the world.

The EUPHRATES trial, a randomized blinded trial run in North American hospitals did not meet top line objectives for reduction in 28 day mortality. However, a sub-group analysis demonstrated that in patients with endotoxin activity levels between 0.6 and 0.9 there was a significant reduction in mortality. When the EAA was greater than 0.9 the level of endotoxin activity was simply too great to be treated with the protocol being tested. This represented only about 20 per-cent of enrolled patients. In an interactive process with the FDA, it was decided that this group was clinically significant but that a follow on trial would be needed. The Tigris trial protocol has been approved by the FDA as an open label randomized trial with 150 patients from key sites that also participated in the EUPHRATES trial.

Running the trial in established sites as an “open label” trial is a key assist for Spectral, meaning this round will be less expensive and more straightforward. The 10 major sites were all also part of the last trial and have the infrastructure in place to continue.


There is a stable commercial opportunity here, as Spectral has no direct competitors in this area of treatment for septic shock. The commercial opportunity is large with a potential market of $2 Billion (USD) per year with attractive margins.

Once approved, Spectral could have market exclusivity for six to 10 years given that this is the first in class product and a Class III device, meaning that any competitive product would have to run a similar trial to gain approval.



During the course of the EUPHRATES trial it became clear that using current dialysis machines available, mostly for chronic hemodialysis, was not ideal for the hemoperfusion product.

Therefore, Spectral has developed a state of the art Renal Replacement Therapy instrument, that can be used for CRRT, in the ICU as well as for hemoperfusion when the PMX gains approval.

Spectral Medical has now formed a wholly owned subsidiary called Dialco to commercialize this product line.



In 2013, Spectral acquired the North American rights to the Renal Replacement Therapy (RRT) blood purification technology, manufactured by Infomed SA. Recently branded as SAMI, Spectral obtained regulatory clearance by the FDA and regulatory approval by Health Canada regulatory approval early in 2018, which includes an RRT machine and the associated disposables. The RRT blood pump SAMI, will be marketed to the North American Hospital Critical Care Dialysis (acute renal dialysis) market segment. Recently, Spectral Medical has extended the agreement with Infomed SA to include SAMI’s “sister” technology called DIMI. DIMI will be promoted to the North American chronic kidney dialysis market with a focus on the home hemodialysis (HHD) segment. Because of this expanded agreement, Spectral Medical Inc. has created a separate wholly owned subsidiary called Dialco Medical Inc., (Dialco) to operate the SAMI/DIMI business. This report provides a summary of Dialco’s business opportunities for the SAMI and DIMI RRT platforms within the North American dialysis market.

Dialco’s plan is to enter the hospital Intensive Care (acute dialysis) niche market with SAMI. Although this market niche is not large and has high barriers to entry, it is a good market to highlight Dialco’s superior technology and achieve near-term break-even sales. In March 2019, the company recorded its first sales transaction in this market niche. Going forward, the larger market opportunity for Dialco will be in the home hemodialysis (HHD) market segment. While HHD represent around $400 million in industry revenues today, the market has seen the opportunity to convert a large portion of the $4 billion in-clinic dialysis market to home use. This could signal a potential strong growth in the HHD segment in the years to come. DIMI was specifically designed for home use, and has disruptive advantages over its competitors, which should facilitate faster home adoption.

Dialco has adopted the slogan - “your new partner in Dialysis” to showcase its willingness to collaborate with various partners to accelerate product adoption and sales.

Conclusion

Spectral Medical Inc. has increasing revenues and is worth a further look by investors as it builds towards its 150-patient trial, with results expected in two years. Spectral Medical Inc. is an undervalued Canadian biotech already making moves to bring an FDA approved therapy to market for septic shock, and to be a leader in the CRRT market in hospitals and a leader in the in the rapidly growing market for home dialysis.



FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.