SHANGHAI – Cellular Biomedicine Group Inc. (CBMG), of Shanghai, has had a busy month, successfully listing on Nasdaq as the first "pureplay" biotech company from China and closing a $10 million stock transaction.

It also didn't hurt that the company had some good news to share regarding its phase II stem cell trial for knee osteoarthritis (KOA) at the same time.

CBMG is taking the high road, looking to follow international standards for its cellular therapy business, in an attempt to stay above the obstacles littering China's evolving regulatory landscape.

While no blockbuster stem cell treatment has been approved in China yet, CBMG hopes to be the first.

China's reputation in stem cells is a mixed one, with a history of loose regulation that permitted treatment in hospitals, outside the rigors of the CFDA clinical trial process used for new drugs.

Stem cell therapy had been classified as a 3rd Medical Technology, regulated by the then-Ministry of Health (which merged into the National Health and Family Planning Commission, or NHFPC) responsible for overseeing doctors and hospitals. Now, that is no longer the case.

The government put a kibosh on freewheeling stem cell treatment and experimentation in 2011, and the industry has had to remake itself in a time of regulatory uncertainty. (See BioWorld Today, June 23, 2014.)

According to CBMG's chief operating officer, William Cao, who spoke with BioWorld Asia, the policy is still evolving, but it is possible the NHFPC and the CFDA will form a special office to regulate stem cell treatment, still under the category of medical technology but with the requirement that it pass a rigorous three-phrase clinical trial.

CBMG, which has followed U.S. guidelines all along for its Rejoin trial in KOA, has been able to maintain course and continue efforts where others have floundered.

"If the government does come out and make changes, it is unlikely to be more stringent than the U.S. guidelines, which is what we are following right now," Cao said. "Our phase IIb is a randomized, controlled trial."

WITHOUT THE CFDA BOTTLENECK

For extra insurance, CBMG is first testing autologous cells from the patient's own tissue, to ensure success from both regulatory and scientific perspectives.

"Humans know so little about what is going on in the forest [in terms of genetic disease, infection, etc.]," Cao said. "We have to shed all this unknown risk by a simple strategy: autologous.

"I would say all the frontrunners are autologous stem cells, meaning from the patients own body." Cao added. "Therefore, the health hazard, or potential risk to a large population is limited. That is another reason to classify stem cell therapy as a medical device."

For companies pursuing medical device approval, there are unique pros and cons.

On the plus side, Cao said, "it's a shortcut: short time to market, smaller investment and lower risk." But he said the con is that if approved, "you are only allowed to commercialize in that hospital, not blast out to the country. That is the limitation.

"So a company will typically do multicenters for the one disease, and if it proves safe and efficacious within the group of hospitals, then you get a green light to sell in, say, 10 hospitals. That is big enough."

Immune cell therapies have not come under the same scrutiny as stem cells, and they are still considered a 3rd Medical Technology. CBMG is pursuing a phase II trial for late-stage liver cancer, having licensed immunotherapy technology from Neostem Inc. (See BioWorld Today, May 21, 2014.)

"Going into immune cell therapy is easier than stem cells as a beginner. We now have a robust system on how to control the stemness," Cao said. "It is all about quality control; the technical barrier is not difficult for us, and the time to market is more attractive."

REGROWS CARTILAGE AND ALLEVIATES PAIN

CBMG's lead candidate is still Rejoin, the technology that requires taking fat tissue from a patient's stomach or buttocks, in a mixture of mononucleosis cells that comprise about 10 percent of stem cells. From that raw material, over the course of three weeks, the culture cells are expanded until they become a single population of stem cells.

A small portion is then injected into the patient's knee.

Last month, in the six-month follow-up data analysis of phase I/IIa results, the company reported that Rejoin reduced patient discomfort and regenerated damaged knee cartilage.

In as early as three months after treatment, the cartilage volume of the knee joint increased, with a confirmed average of 53.07mm six months after therapy, with reduction of bone marrow lesions in some patients. Following the Western Ontario and McMaster Universities Arthritis Index (WOMAC), the company noted a decrease by 14.69 from baseline.

Knee osteoarthritis, Cao said, affects half of the population older than 60, and half of that population will face disability – meaning some 25 percent of the elderly population will be seriously affected. In 2011, China had 57 million people suffering from KOA, according to the International Journal of Rheumatic Diseases. The condition lacks a cure and can lead to painful knee replacement or amputation.

For the phase IIb study, being led by the Shanghai Renji Hospital, 53 patients have been enrolled in the multicenter, randomized, single-blind trial that is expected to finish by the third quarter of 2015, with the possibility of the treatment being on the market by 2017.

The primary endpoints are knee pain, stiffness and function, with secondary endpoints including cartilage repair, with volume measured by MRI at six months. The treatment is given in two injections.

CBMG uses its Anti-Stromal kit to isolate the cells, which is also approved for sale, though its generates only marginal revenues.

"Anybody can take human fat and process it," Cao explained. "We have know-how and patents on how to process the cells so the cell will grow out in the way we want them . . . we educate them into cartilage precursor cells but retain 'stemness,' so they can have anti-inflammatory effects but can also grow into cartilage."

Cao said unlike many Chinese counterparts in the industry, CBMG's culture medium is animal serum-free, and it has had zero antibiotic contamination.

NASDAQ LISTED

Listing on the Nasdaq, which Cao said he viewed as a great experience for the management team, has not been hindered by reputational challenges that a made-in-China tag sometimes brings with it.

"The controversy has been a positive actually,"Cao said. "People viewed us as this company out of China that had done everything according to U.S. or international standards as a good thing. There are many companies in China doing this – but few are willing to spend money to do clinical trials ...when they can charge patients (for treatment)."

The company listed on June 18 for around $5. On Monday, the company's shares (NASDAQ:CBMG) closed at $17.11.

In an offer to private investors, led by Hong Kong investment banker Francis Leung, the company recently offered about 1.5 million common shares valued at $6.70 per share for a total of $10 million.

"As a matter of fact," Cao said, "in our last $10 million round, investors were competing for money. We never had that before."

Going forward, the company is looking to seek more indications for its fat stem cell platform, going after asthma, as well as seek commercial benefits from its cancer immune therapy.

According to Cao, the firm also is in serious talks with pharmaceutical companies that appreciate the data for KOA but, he admitted, are unaccustomed to the manufacturing model of autologous stem cell therapy, a labor-intensive process done by the hand of lab technicians.

Allogeneic trials, where stem cells from one source are used on multiple patients, are also in the company's plans.

Cao said he sees a bright future ahead for CBMG. "In our space, we are like a kid in a candy store. There are no competitors, so whatever is approved is a matter of pricing and true clinical benefit. We are not just looking at a biomarker, we are a looking at clinical benefits."