PolarityTE: Will This Biotech Be The Next Amazon Or Tesla?

BOCA RATON, Fla. - Aug. 18, 2017 - EntSun -- Jeff Dyer and Hal Gregersen, CONTRIBUTORS -We write about innovation based on research from The Innovator's DNA.

Opinions expressed by Forbes Contributors are their own.

By Jeff Dyer

PolarityTE: Will This Biotech Be The Next Amazon Or Tesla?


Did Johns Hopkins dropouts just deliver the paradigm shift in disruptive biotechnology, a new model for public launch, and the beginning of a biotech boom?

"You realize this is irreversible — right?" Were the last words that Drs. Denver Lough MD, PhD and Ned Swanson MD heard as they handed in their resignations from the world-renowned Johns Hopkins Hospital Department of Plastic and Reconstructive Surgery.

It was really hard to walk away — I had put 17 years into becoming a plastic and reconstructive surgeon and was finally in the foremost program at the world's greatest hospital, surrounded by amazing leaders in the field," said Lough.  "How could I possibly justify giving that up to everyone who had sacrificed so much for me to get there.

But on December 1st of 2016, Lough and Swanson were catapulted instantaneously from coveted Plastic Surgery resident positions to the CEO and COO of Majesco Entertainment Co. in hopes that a merger between a 31-year-old failing gaming company and their own revolutionary technology would provide the field of medicine with the ability to regenerate new tissue — skin, bone, muscle, etc. Lough and Swanson are taking a huge gamble because the culture in the medical community is that you don't leave to try a start-up and then come back if it doesn't work.  Indeed, in 92% of the last 100 life science start-ups to go public, the MD inventor of the flagship product didn't work for the company. This is startling because in virtually 100% of high tech start-ups that go public, the founder-inventor does work for the company and is viewed as a valuable resource (can you imagine Amazon without Jeff Bezos? Tesla without Elon Musk?  Facebook without Zuckerberg?). But the risks of leaving a medical institution are so high — because there is no way back — that most life science inventors don't take the risk.  As a result, most inventors turn their technologies over to VC firms to take them forward — and consequently they typically end up with less than 5% equity in the start-up.  Of the last 50 biotech startups, only about 14% launched without funding from VC firms (and only 4% without either VC or Angel investors). PolarityTE was one of only four life science firms that went public immediately without an Initial Public Offering (IPO). So why were Dr. Lough and Dr. Swanson willing to take the huge risk of leaving lucrative plastic surgery positions with no way back?  And is the way they launched PolarityTE a new superior model for launching a biotech start-up?

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Growing New Skin — And Muscle, And Bone, And …..

"Name one company that regenerates anything. Anything at all. Name one," is a probing request that Lough often makes of those who ask about the company and its vision. The question immediately unveils the reality of the current state of tissue engineering and regenerative medicine. Considering the "regenerative medicine market" is growing with a CAGR of 22.3% and is projected to hit a worldwide market size of around $60 billion by 2020, you would think it would be easy to identify at least one company that can regenerate at least one tissue reliably. But the fact is that no one has yet figured out how to regenerate full functioning tissue. Lough, and PolarityTE, wants to change all that.

Disruption is the word of the moment. It gets applied to new technologies and new business models all the time —often when they are not really a disruptive technology that can overthrow incumbents with a completely unique value proposition.  But PolarityTE's technology — if it works — will be extremely disruptive to incumbents.  Ironically, even with hundreds of products generating significant revenue on the market, the best solution we have in treating a burn or wound remains a technology that has existed for 3,000 years — a skin graft. But skin grafts aren't possible with many burn patients and the skin from one part of the body doesn't match other parts of the body (a skin graft on someone's face doesn't grow facial hair, doesn't breathe and sweat in the same way, and doesn't match the surrounding skin).  Today, one of the most advanced methods to treat wounds is a product named EpiFix® made by the company Mimedx®. EpiFix® is made by taking amnion and chorion (the tissues that make up the amniotic sac that surround a fetus while it's developing in the womb), processing it using specific methods, and placing the manufactured product into the open wound.  This idea evolved with the notion that amnion and chorion are involved in fetal growth, development, and formation, so they could potentially help wound healing.  Lough puts the technology in perspective swiftly, "Tell me one time in human or even mammalian history when amnion or chorion ever grew skin. It's never happened, it doesn't happen. Why are we trying to outsmart the most complex and advanced system that evolved over the lifespan of our planet — the human body?"

Following this logic, Lough points out that the only way we are ever going to regenerate the largest most intricate organ in the human body, skin, is to start with the most obvious component — skin.  Skin grows skin, and the only skin a patient's body is going to accept, without altering the immune system response, is its own skin.  PolarityTE uses its proprietary technique developed by Lough that pulls specific stem cells and surrounding tissue from a patient's body to create the a first of its kind skin regeneration product, SkinTE.  The technology then induces what is called polarization, which is the process through which skin forms, and it is placed immediately back on the patient within 24-48 hours from the initial harvest biopsy.  All layers of the skin regenerate — epidermis, dermis, appendages, and even the hair that grows from the skin.  The stem cells get their "polarity", their instructions from the neighboring skin cells as to what kind of skin they are supposed to be, and then voila: you have fully functional skin.  The patient's body won't reject it because it's the patient's own (autologous) cells that generated the skin.  So there is little risk. Using the patient as the most advanced bioreactor in existence, the construct can regenerate skin in the exact form that is present everywhere else on the body.  What is truly remarkable, is that the technology has demonstrated it can be carried over to all the tissues in the body, including bone (OsteTETM), muscle (MyoTETM), blood vessels (AngioTETM), cartilage (CartTETM), and so on. As if the $30 billion wound care market wasn't large enough, spreading into each additional market containing their pipeline of products allows PolarityTETM to target a variety of interdependent markets such as wound care, regenerative medicine, organ transplantation and cancer research. Growing new skin, bone, and muscle, is truly revolutionary — and deserves the "disruptive" label.

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Led By The Inventors

Of course, the big question is: can they pull it off?  Time will tell.  Placing the innovators at the helm of a new company isn't a new concept, and is commonplace in tech companies. Research by Jeff Dyer, Hal Gregersen, and Clayton Christensen (authors of The Innovator's DNA and creators of the innovation premium metric Forbes uses to rank the world's most innovative companies) shows that companies are 3X more likely to make Forbes list of 100 most innovative companies when they are led by an innovative founder. This is especially true among high tech companies like Amazon (Bezos), Facebook (Zuckerberg), Salesforce (Benioff) and Tesla (Musk). Not surprisingly, innovative companies are led by people who get innovation. But the question remains, why is this model so rare in biotech?

As previously suggested, the main reason that medical innovators and inventors don't leave their medical institutions to start companies is that it is too risky.  But wasn't it risky for tech pioneers like Steve Jobs, Paige and Brin, and Zuckerberg to start their businesses?  The answer, actually, is "not really."  Jobs was a drop-out from Reed College when he launched Apple.  Paige and Brin were Ph.D students at Stanford; Zuckerberg was an undergraduate at Harvard.  What did they forego (in terms of financial opportunity cost) in order to launch their ventures?   Not much.  In contrast, Lough was two years from finishing his plastic residency. He already had requests for his services upon graduation, at lucrative salaries, as an academic plastic and reconstructive surgeon.  His 17 years of investment in specialized education that was about to pay off.  By leaving to launch PolarityTE he chose to voluntarily walk away from that.

It is interesting that the culture of academic medicine, and especially academic surgery, has rooted itself in a culture that contains elements that more closely mirrors the military hierarchical and seniority system rather than the free-thinking, patient-centered atmosphere that is sometimes portrayed to outsiders or in the media. Walking away from medicine prior to completing specialty training (residency), as Lough and Swanson did, results in a form of ex-communication. Therefore, the threshold to leave medicine and pursue a different venture is extremely high for most because they've invested so much time (e.g., at least a decade) and money (e.g., hundreds of thousands of dollars in student loan debt) in their education and training to become a doctor.

Click here for more information on the innovative creation of PolarityTE and how it may change the future of medicine