Mr. Lee Buckler reports
REPLICEL CEO PROVIDES UPDATED OUTLOOK
RepliCel Life Sciences Inc. has provided an update to shareholders from its president and chief executive officer R. Lee Buckler.
Now that we have closed our deal with YOFOTO, I am very pleased to provide this updated outlook.
In January, I outlined our progress over the past 24 months and included our goals for 2018 which, I said, would be focused on "... leveraging partnerships to drive the company towards maturation." Last week, we announced we had closed an investment with YOFOTO (China) Health Industry Co. Ltd., which is now a significant shareholder and business partner.
This update is intended to provide shareholders with a sense of what this strategic transaction means for RepliCel and an update on our next steps.
Firstly, let us recap the recent news:
For the past eleven months, we have been working toward securing and closing this partnership in Greater China. The valuation at which the upfront investment was made clearly indicates that YOFOTO believes they will help us create considerably more value in the company over the coming months.
YOFOTO has committed to spending a minimum of $7-million on RepliCel's programs and related infrastructure over the next five years in greater China. This includes it financing technology transfer, manufacturing, regulatory submissions and clinical trials in greater China as well as the commercial launch of our dermal injector in greater China. YOFOTO has told us it expects to spend much more than this minimum. YOFOTO has also committed to over $4.5-million in milestone payments, some of which are precommercial and sales royalties.
In addition to financing clinical development and commercialization in greater China as a licensee, YOFOTO is now a significant investor in RepliCel having invested just over $5-million at 95 cents per common share. RepliCel will use the proceeds from this investment to finance its programs in Europe and North America. Additionally, YOFOTO has financing participation rights for two years to maintain its pro rata ownership position which translates into a likely lead order in any private placement that may be needed in the future.
Near-term commercial opportunity
There are two near-term commercial opportunities for RepliCel programs. Firstly, with sufficiently positive data from the RCH-01 clinical study in Japan, Shiseido may be in a position to launch the product in Japan for the treatment of patients with androgenic alopecia. Secondly, YOFOTO is committed to launching the RCI-02 dermal injector in Hong Kong as soon as it is CE marked. The CE mark also presents a significant new partnering opportunity to secure a commercial partnership for the launch of the device in Europe and other countries recognizing the CE mark approval.
Either or both of these potential commercial launches would transition RepliCel from being a prerevenue development company to generating revenue as a commercial entity. This is a material transition in the minds of many retail and institutional investors and is expected to help offset our future development costs for other products.
Development next steps
RepliCel will focus resources and capacities on three priorities in the near-term:
Finalizing the dermal injector to build the commercial-grade prototypes, test and validate its function, and submit an application for a CE mark to enable its commercial launch;
Engaging in the technology transfer work needed from Europe and Canada to set YOFOTO up in China to prepare for clinical trials there as quickly as possible;
Preparing for next-stage clinical trials.
Partnership and business development update
Many shareholders have been asking about the status of our relationship with Shiseido. This remains unchanged from the information provided in September, 2016. This may or may not change if positive clinical data are announced in the coming weeks from the Japanese clinical study and/or if Shiseido announces an intention to commercially launch the product in Japan. We continue to press for a commercial solution with Shiseido that is mutually beneficial.
With the YOFOTO partnership now in place to begin executing our collaboration, I will be turning attention to other strategic corporate opportunities. I firmly believe we are not done on the deal-making front even in the near term. We are in active and promising discussions with other potential partners which I look forward to providing more insights on in the coming months.
The next 18 months
RepliCel shareholders should expect to see an exciting stream of activity and updates coming out of China (financed by YOFOTO) in addition to RepliCel activity with particular focus on its device commercialization (financed by this recent transaction).
In January, I laid out an ambitious plan for what shareholders should watch for in 2018. We are, without question, behind schedule on many of these items because of how long it took us to get to an executed agreement with YOFOTO and to close the associated financing transaction. Some of these milestones will clearly slip into 2019; others we will double our efforts on to catch up and deliver yet this year.
Near-term catalysts to watch for over the next 15 to 18 months include:
Anticipated announcement of clinical results from the Shiseido-funded pattern baldness study in Japan;
Commercial-grade prototypes of the dermal injector built and available for clinical and functional testing;
Launch of clinical testing of the injector at select clinical sites for limited clinical applications;
CE mark of the dermal injector to be followed by a new level of commercial partnership discussions;
Registration of the RCI-02 CE mark in Hong Kong for a commercial launch of the dermal injector by YOFOTO;
A decision from Shiseido on if and when it intends to launch of the RCH-01 in Japan;
Data from the gene marker identification study continuing at University of British Columbia;
Receipt of grant financing to finance further product development;
Completion of YOFOTO's manufacturing facility in Ningbo, China;
Completion of technology transfer of the two licensed cell therapy programs to YOFOTO;
Guidance from Chinese regulators on approvals for clinical trials of RCS-01 (skin rejuvenation) and RCT-01 (tendon regeneration) in China;
A designation from Chinese regulators for the RCI-02 (dermal injector) in mainland China.
As resources permit, we will continue planning with leading experts in North America, Europe and Asia on:
Establishing a regulatory dialogue with the United States Food and Drug Administration;
Finalizing plans for phase 2 clinical trials;
Additional manufacturing optimization projects as we plan for profitable commercialization.
In summary, we have leveraged our accomplishments in 2017 into a new partnership which brings tremendous value to RepliCel shareholders and puts us on a trajectory for great things to come in the coming year. We have a pipeline of activity and news which I believe will demonstrate significant momentum throughout the remainder of the year as we work to deliver on near-term milestones and catalysts including transitioning into a revenue-generating, commercial-stage company with the launch of our first products.
I look forward to getting back on the road, as time permits, to meet with many of you. As always, I warmly welcome your e-mails, phone calls or meeting requests.
R. Lee Buckler
RepliCel president and chief executive officer
About RepliCel Life Sciences Inc.
RepliCel is a regenerative medicine company focused on developing cell therapies for aesthetic and orthopedic conditions affecting what the company believes is approximately one in three people in industrialized nations, including aging/sun-damaged skin, pattern baldness and chronic tendon degeneration. These conditions, often associated with aging, are caused by a deficit of healthy cells required for normal tissue healing and function. The company's product pipeline comprises RCT-01 for tendon repair, RCS-01 for skin rejuvenation and RCH-01 for hair restoration. RCH-01 is currently being co-developed with, and under exclusive license by, Shiseido for certain Asian countries.
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