MEDG Medgenics(Regs)

Medgenics (AIM:MEDG) announces its half-yearly report for the six-month period ended 30 June 2008. Highlights for the period Appointment of Lord Steinberg as Non-Executive Director in February 2008. Appointment of Dr. Ehud Shoshani, former CEO of Quintiles, Israel, as Vice President of Clinical Affairs and addition of key scientific and engineering personnel in accordance with its plan and preparation for the Phase I/II clinical trial for EPODURE sustained-action protein therapy to treat anaemia. Successful manufacture of the key 'gutless' adenoviral vector in a GMP (Good Manufacturing Practice) vector production facility. This vector will be used to prepare EPODURE Biopumps capable of producing sufficient daily amounts of erythropoietin (EPO) to meet the Company's requirements for use in its Phase I/II clinical trials in anaemic patients with chronic kidney disease. Completion of the design, fabrication and evaluation of the key proprietary patient contact devices that will be used both to enable Medgenics to conduct its current Phase I/II clinical trial and to assist in future clinical trials. Successful move to a new larger facility, allowing the corporate and R&D operations to be housed in one location. Significant Post-period Highlights Commencement of Phase I/II safety and efficacy clinical trial with EPODURE following receipt of approval from Israel�s Ministry of Health. Financial Summary (in US $; unaudited) Net loss after tax of $2.97 million for the period (2007: $1.04 million) as a result primarily of preparations for and initiation of the Phase I/II clinical trial of EPODURE, including the set up costs associated with the new laboratories and the recruitment of additional R&D staff. R&D costs for the six-month period of $1.63 million (2007: $0.44 million) and general and administrative costs of $1.39 million (2007: $0.64 million). Cash, cash equivalents and short-term investments at 30 June 2008 of $1.74 million (at 31 December 2007: $4.68 million). Dr. Andrew Pearlman, Chief Executive Officer of Medgenics, said: �2008 continues to be an exciting year for Medgenics and we have been focused on preparing for the start of our landmark Phase I/II safety and efficacy trial of our EPODURE Biopump for providing sustained treatment of anaemia in patients with chronic kidney disease. We were pleased to receive approval to start this trial at the end of July, and have been fully engaged in the process of recruiting patients since early August. We have now begun the final screening process of the first patients for this trial who were referred from several cooperating nephrology centers in Israel and we continue on track towards publishing our initial data and findings before the end of the year.� NOTES TO EDITORS: Medgenics, Inc. is a clinical-stage biopharmaceutical company developing its unique tissue-based Biopump platform technology to provide sustained-action protein therapy for the treatment of a range of chronic diseases. Medgenics currently has two products in development based on this technology: EPODURE � producing erythropoietin (EPO) to treat anaemia INFRADURE � producing interferon-alpha (IFN-?) to treat hepatitis C The Company has demonstrated proof of principle of the Biopump treatment procedure in a clinical trial using a short-acting version of EPODURE in anaemic patients. A long-acting version of EPODURE, designed to produce and deliver a therapeutic dose of EPO steadily for six months or more, entered a Phase I/II trial in mid-2008. The Company plans to follow with a clinical trial of INFRADURE in 2009. Medgenics intends to develop its innovative products and bring them to market via multiple strategic partnerships with major pharmaceutical and/or medical device companies, starting with EPODURE and INFRADURE. Beyond these, Medgenics plans to develop and/or out-license a pipeline of future Biopump products targeting the large and rapidly growing global protein therapy market, which is forecast to reach US $87 billion by 2010. Other potential areas include multiple sclerosis (interferon-?), haemophilia (Factor XIII), paediatric growth hormone deficiency (human growth hormone) and diabetes (insulin). Founded in 2000, Medgenics is a US-incorporated company with major operations in Misgav, Israel. Medgenics was admitted to AIM in December 2007 (AIM:MEDG). www.medgenics.com CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS This release contains forward-looking statements, which include all statements other than statements of historical fact, including (without limitation) those regarding the Company�s financial position, business strategy, plans and objectives of management for future operations. These statements relate to future events, prospects, developments and strategies. Forward-looking statements are sometimes identified by their use of the terms and phrases such as �estimate,� �project,� �intend,� �forecast,� �anticipate,� �plan,� �planning," �expect,� �believe,� �will,� �will likely,� �should,� �could,� �would,� �may� or the negative of such terms and other comparable terminology. All such forward-looking statements are based on current expectations and are subject to risks and uncertainties. Should any of these risks or uncertainties materialize, or should any of the Company�s assumptions prove incorrect, actual results may differ materially from those included within these forward-looking statements. Accordingly, no undue reliance should be placed on these forward-looking statements, which speak only as of the date made. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company�s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. As a result of these factors, the events described in the forward-looking statements contained in this release may not occur. Chairman�s Review Medgenics has made important progress during 2008, preparing for and successfully launching its landmark Phase I/II safety and efficacy trial of EPODURE, its lead protein therapy to treat anemia. We were pleased to receive approval from Israel�s Ministry of Health in late July and have begun the trial at the Hadassah University Medical Center in Jerusalem, Israel, where it is being led by Principal Investigator, Dr. Eithan Galun, a veteran of numerous clinical trials. Patient recruitment is ongoing and we remain on track to announce initial data from the trial by the end of the year. This study will involve up to 30 patients with anaemia as a consequence of chronic kidney disease. The primary aim is to assess the safety and efficacy of EPODURE in three controlled dose ranges, in providing sustained, elevated levels of the deficient protein erythropoietin (EPO) and, thereby, in elevating the red blood cell count and haemoglobin levels for up to 4�6 months in those patients receiving appropriate doses. The first patients are scheduled to receive the lowest dose range of up to 20 Units of EPO per kilogram per day. Once an interim review has confirmed initial safety in at least six patients, higher doses of 40 and 60 Units are planned. EPODURE is based on Medgenics� revolutionary proprietary platform technology for treating certain chronic diseases, whereby a biological �Biopump� is created from patients� own tissue, enabling them to produce their own natural human protein therapy for what we hope will be up to six months or more from a single procedure. We believe this technology has the potential to improve significantly the treatment of such diseases by improving efficacy, reducing side-effects, eliminating frequent injections, improving patient compliance and quality of life and reducing overall healthcare costs associated with existing treatments. We have been able to advance our clinical development activities for EPODURE as a result of the �3.28 million ($6.72 million) fundraising we concluded successfully in December 2007 in conjunction with the Company�s admission to AIM. During the first half of 2008, the Company has incurred a large number of one-off costs including the set-up of new facilities and the design and manufacture of several key elements that were necessary to enable us to commence the Phase I/II clinical trial. We are therefore confident that the funds raised at Admission, together with ongoing Israeli government funding from the Office of the Chief Scientist, as well as the existing letter of credit, are sufficient to enable the Company to continue its current programme of ongoing development and testing of our Biopump platform technology and associated products, focusing on EPODURE with the first set of data expected towards the end of 2008. Our strategy for commercialization is to develop alliances with major partners and to proceed with further clinical trials leading to eventual FDA, EMEA and/or other regulatory approvals and eventual clinical adoption of EPODURE. Furthermore, in the longer-term, we also plan to pursue similar steps towards commercialization of other potential applications of the Biopump platform technology. Pending the success of the Phase I/II trial of EPODURE, our next product is likely to be INFRADURE, which we are developing to produce and deliver interferon-alpha for the treatment of hepatitis C. In preclinical in vitro studies with this product we have already demonstrated that it can produce therapeutically relevant amounts for more than six months. Beyond that, we believe our Biopump technology has the potential to be developed to produce and deliver protein therapies to treat other chronic diseases such as multiple sclerosis (interferon-beta), hemophilia (Factor VIII) and growth failure/muscular atrophy (human growth hormone). Key events during the period The start of the EPODURE Phase I/II trial and initiation of patient recruitment parallels the Company's achievement of several important milestones in recent months, which have been crucial to facilitating the commencement of the trial: We have significantly enhanced the clinical and technical teams that will be driving the trial forward. In particular, we are pleased that Dr. Ehud Shoshani, former CEO of Quintiles, Israel, has joined the Company as Vice President of Clinical Affairs. Dr. Shoshani has 13 years� experience in managing clinical trials. Not only will his experience be highly valuable to Medgenics in completing the preparations for and the launch and the management of our imminent Phase I/II clinical trial for EPODURE, but also, in the development of our future clinical programmes for this and our other pipeline products. We have successfully manufactured the key 'gutless' adenoviral vector in a GMP vector production facility which was a significant achievement for the Company from a technological standpoint. We have tested this vector and are confident that it can be used to prepare EPODURE Biopumps capable of producing sufficient daily amounts of EPO to meet the Company's requirements for use in the trial. The Company has completed the design, fabrication and evaluation of the key proprietary devices required for harvesting patient micro-organs and implanting Biopumps, including EPODURE, back into patients. The Group�s operations were relocated to a new facility in March 2008 in the Teradion Business Park in Misgav, thereby bringing all operations under one roof and representing an important step for enhancing communication among the various departments. Board Appointment Medgenics appointed Lord Leonard Steinberg as Non-Executive Director in February 2008. Lord Steinberg is a Life Peer and a Conservative Party member of the UK House of Lords and is the founder, former Chairman and Life President of Genting Stanley plc (formerly Stanley Leisure plc). He is one of the UK�s most successful and respected businessmen, with substantial experience of the London stock market. We are pleased that he joined the Board of Directors and we look forward to the valuable contribution he will make to the Company. Financial Review of the six-month period to 30 June 2008 (unaudited) Net research and development expenses were $1.63 million (2007: $0.44 million) Group general and administrative expenses were $1.39 million (2007: $0.64 million) Operating loss was $3.02 million (2007: $1.08 million) Loss on ordinary activities before taxation for the period was�$2.97 million (2007: $1.04 million) Loss per share was $0.03 (2007: $0.02) Cash, cash equivalents and short-term investments at the end of the period was $1.74 million (at 31 December 2007: $4.68 million) Consolidated balance sheet has net assets of $0.61 million (at 31 December 2007: $3.33 million) Outlook The start of our Phase I/II clinical trial with EPODURE was a major milestone for the Company and is progressing. Positive results of the trial will be crucial to confirm both the safety and efficacy of EPODURE in anaemia patients, and will more broadly provide proof-of-concept of our innovative Biopump technology for the long-term treatment of chronic diseases. If the results are as we hope and expect, they will support our ambitions of raising significant funds to advance EPODURE into further clinical studies, to enhance our strategic partnering activities and to progress the development of additional Biopump-based therapeutic procedures in other disease areas. All the evidence we have seen on the effectiveness of the Biopump technology in various preclinical studies and our previous clinical study give us confidence that the Phase I/II trial will be successful. We are looking forward to reporting the first preliminary data over the coming months. Eugene A. Bauer, MD Chairman of the Board of Directors 24 September 2008