Date: Dec 01, 2006 Author: Ryan McBride Source: bizjournals (
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Less than four years ago, Organogenesis Inc. was in bankruptcy -- on the losing end of a deal that had given Novartis AG marketing rights to its bioengineered skin product. Today, the Canton-based company is back.
Three years removed from Chapter 11, Organogenesis has become profitable and no longer relies on funding from Novartis.
And with a revamped strategy, the company's revenue has jumped by double-digits for the past three years. The company opened a research-and-development facility in October in Lyon, France, and plans now include the launch of at least two new products in 2007.
"We built this company back from 13 employees (in 2002), and next year we'll have 240," said Gary S. Gillheeney, chief operating officer and chief financial officer for Organogenesis. He is part of a new executive team overseeing the turnaround. "And we did it from the ground up," he added.
The company -- the first to receive U.S. Food and Drug Administration approval for a living cell-based product, Apligraf -- is now looking to expand its global footprint.
Company CEO Geoff MacKay returned this week from a tour that included stops in South Korea, Japan and China to find an R&D site in Asia. The company in July launched a Swiss subsidiary, Organogenesis Switzerland GmbH, in Zug to serve as its European beachhead, Gillheeney said.
On the strength of sales of Apligraf, a skin replacement for venous leg and diabetic foot ulcers, the private company's sales to hospitals and third-party vendors have increased by more than 30 percent every year since 2003, said Gillheeney, who declined to release exact financial figures.
Next year the company aims to enter the cosmetics market with the release of Revitix, a topical treatment that borrows technology from Apligraf, to remove wrinkles and rejuvenate skin. It also plans in 2007 to offer an anti-microbial wound dressing with dermal scaffolds onto which the body's cells migrate to promote healing.
In part to provide fuel for the company's rapid growth, Gillheeney said, executives are weighing the option of a public stock offering in late 2008 or early 2009. An IPO would also be a liquid event for investors who took the business private as part of a plan to lift the company from bankruptcy in 2003.
Novartis at that time returned the marketing rights of Apligraf to Organogenesis, which included giving the Swiss drug giant royalties of product sales until 2010. Novartis, as part of the deal, granted Organogenesis $3 million in financing to get back on its feet.
Prior to its bankruptcy, Organogenesis had essentially been an R&D and manufacturing operation. Since then, the company revamped its business model and has grown a sales force that now makes up 65 of its 205 employees, said Gillheeney. In fact, the company plans to build its sales force to 100 people by the end of 2007. "It really has been an amazing turnaround," Gillheeney said.
Still, experts say that Organogenesis faces challenges similar to those of other companies in the business of bioengineered tissue products, including a lack of wide acceptance by the medical community and difficulty staying profitable as it invests in the development of new products.
"Organogeneis is a company that had some struggles," said Jonathan Gertler, managing director of the health care group at investment bank Cowen & Co. LLC in Boston. However, he added, the company has formed a commercial model that works for its segment of the bioengineered tissue market.
A challenge of the cell-based tissue business, Gertler said, is that such products require tremendous amounts of capital to commercialize. Also, the medical community historically has clung to treatments with a longer track record of safety and common usage, such as skin grafts.
Yet Organogenesis competes with several companies offering skin-replacement products. A few of them include Healthpoint Ltd., a Texas-based maker of a biologically derived material for wound healing; New York's Advanced Biohealing Inc., which says it plans to release a skin replacement product next year; and Integra LifeSciences Holding Corp., a Plainsboro, N.J.-based medical-device firm that makes a tissue-engineered "matrix" to cover wounds. Genzyme Corp. of Cambridge also markets a skin replacement for burn victims called Epigraf, which is made in combination with a patient's own cells.
Nevertheless, analysts project rapid growth in this burgeoning market. The U.S. market for tissue engineered skin replacements and wound repair modulators was $195 million in 2004 and is expected to reach $481 million within eight years, according to a market study by Medtech Insight, a medical industry analysis firm in Newport Beach, Calif.
