Fibrocell Out-licenses Skin Disease Gene Therapy, Stock Rises

Shares of Fibrocell Science, Inc. FCSC soared an impressive 42.7% after the company announced that it has completed a collaboration agreement with New Jersey-based, privately held Castle Creek Pharmaceuticals to develop/commercialize its gene therapy candidate, FCX-007. The candidate is being developed for the treatment of recessive dystrophic epidermolysis bullosa (RDEB), a rare, genetic skin disorder.

In fact, so far this year, shares of Fibrocell have surged 69.3%, outperforming the industry’s increase of 8.6%.

Currently there are no approved treatments for RDEB. If FCX-007 wins a nod, then it will be a potentially transformative treatment option for the given skin disorder. Last month, the FDA provided guidance on the design aspects of Fibrocell’s proposed phase III study on FCX-007 named DEFI-RDEB in a Type-B meeting. The company expects to initiate the evaluation in second-quarter 2019.

Under the above-mentioned deal, Castle Creek gains an exclusive license to commercialize FCX-007 in the United States and will be solely responsible for all the development and manufacturing costs up to $20 million prior to the filing of the biologics license application (BLA). However, if the development cost exceeds $20 million, then the surplus spending will be shared 70% by Castle Creek and 30% by Fibrocell, respectively.

For the out-licensed rights to FCX-007, Fibrocell will receive an upfront payment of $7.5 million. Fibrocell is also entitled to earn $2.5 million once the first patient is enrolled in the phase III study and another $30 million upon the candidate’s FDA approval and its subsequent commercialization.

However, Fibrocell will retain the sole ownership of the rare pediatric disease priority review voucher (PRV), which may be granted upon approval. The company will also be responsible for the clinical development, regulatory interactions and the manufacturing of FCX-007 under a future supply agreement with Castle Creek.

Notably, Fibrocell is developing FCX-007 in collaboration with Intrexon Corporation XON under the company’s exclusive channel collaboration. As a result, Intrexon will receive 50% of all the upfront fees from Fibrocell as well as the profit share payments from Castle Creek.

The deal looks a good strategic fit for Fibrocell as the upfront and milestones that it received will boost its cash position. The extra cash can be used by the company for funding another candidate called FCX-013, currently being developed to treat moderate to severe localized scleroderma.

Zacks Rank & Other Stocks to Consider

Fibrocell currently sports a Zacks Rank #1 (Strong Buy). Other stocks worth considering from the healthcare sector include Merus N.V. MRUS and PDL BioPharma, Inc. PDLI, both carrying the same top Zacks Rank of 1 as Fibrocell. You can see the complete list of today’s Zacks #1 Rank stocks here.

Merus’ loss per share estimates have been narrowed 28% for 2019 and 30.7% for 2020 over the past 60 days. The stock has rallied 17.5% year to date.

PDL BioPharma’s earnings estimates have been revised 100% upward for 2019 and 30% for 2020 over the past 60 days. The stock has surged 31% year to date.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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