About the Author IPOdesktop

During the IPO season Francis Gaskins, editor of IPOdesktop.com & director of research for Equities.com, regularly appears on CNBC TV, Bloomberg, thestreet.com & other financial cable channels. On the day of the Visa IPO he appeared on four cable TV financial shows including Bloomberg & CNBC. Over the past five years he has been quoted over 500 times by such financial media as the Wall Street Journal, Bloomberg, Reuters, Associated Press, USA Today among others. Those quotes are available at IPOdesktop.com. His varied personal interests include violin playing. For example, he is concertmaster of the Palisades Symphony. He also holds an MBA from Harvard Business School (finance) and an AB from Princeton University (economics).

IPO Preview: Histogenics

Based in Waltham, MA, Histogenics (NASDAQ:HSGX) scheduled a $60 million IPO on Nasdaq with a market capitalization of $151 million at a price range midpoint of $14 for Wednesday, Dec. 3, 2014.

The full IPO calendar is available at IPOpremium

SEC Documents

Manager, Joint-managers: Cowen and Company, Needham & Company, Canaccord Genuity
Co-managers: BTIG

End of lockup (180 days): Tuesday, June 2, 2105
End of 25-day quiet period: Tuesday, Dec. 28, 2014


HSGX is a regenerative medicine company focused on developing and commercializing products in the musculoskeletal segment of the marketplace.

HSGX’s first product candidate, NeoCart, is being investigated in a Phase 3 clinical trial.


Accumulated deficit ($mm)





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annualizing Sept 9 mos











Neutral plus

Regenerates cartilage

Entering Phase 3 trials

If Phase 3 trials are successful, it could be a big stock

Caveat: High cash burn rate relative to market cap: P/E of -5.1

Price to book: 2.8

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.


HSGX is a regenerative medicine company focused on developing and commercializing products in the musculoskeletal segment of the marketplace.

HSGX’s first product candidate, NeoCart, is being investigated in a Phase 3 clinical trial. NeoCart utilizes various aspects of HSGX’s regenerative medicine platform to develop an innovative tissue implant intended to treat tissue injury in the field of orthopedics, specifically cartilage damage in the knee.

NeoCart is an investigational product and has not been approved for sale in any jurisdiction, including the United States.

HSGX has no other products that are approved for sale in the United States and currently HSGX is not selling any other products that may be approved for sale in other jurisdictions.

Regenerative medicine platform

HSGX’s regenerative medicine platform provides the tools to develop NeoCart. HSGX’s regenerative medicine platform combines expertise in the following areas:

Cell processing: the handling of a tissue biopsy, extraction of cells, and expansion of the cells

Scaffold: three-dimensional structures that enable the proper distribution of cells and organize cells in their natural environment to support tissue formation

Tissue engineering: the use of a combination of cells, engineering and materials to improve or replace biological functions

Bioadhesives: natural, biocompatible materials that act as adhesives for biological tissue, and

Growth factors: naturally occurring substances capable of stimulating cellular growth, proliferation and differentiation.

Cartilage-like implant

NeoCart is a cartilage-like implant created using a patient’s own cartilage cells through a series of tissue engineering processes.

First, the patient’s cells are separated from a tissue biopsy specimen extracted from the patient by a surgeon and multiplied in HSGX’s laboratory.

The cells are then infused into HSGX’s proprietary scaffold that provides structure for the developing implant. Before NeoCart is implanted in a patient, the cell- and scaffold construct undergoes a bioengineering process in HSGX’s Tissue Engineering Processor (NYSE:TEP). HSGX’s TEP is designed to mimic the conditions found in a joint so that the implant is prepared to begin functioning like normal healthy cartilage prior to implantation.

When NeoCart is implanted, a bioadhesive is used to anchor NeoCart in the cartilage injury and seal the implant to the surrounding native cartilage interface.

The use of the bioadhesive eliminates the need for complicated suturing. HSGX believes that the Phase 1 and Phase 2 clinical trials provide preliminary evidence for the safety of the NeoCart implant and improvement in pain and function in patients treated with NeoCart.

Intellectual property

HSGX’s intellectual property portfolio is currently composed of 23 issued patents and 11 patent applications in the United States that HSGX owns, and 23 issued patents and three patent applications in the United States that HSGX licenses from academic institutions and business entities.

HSGX also has over 100 counterpart patent and patent applications owned or licensed in certain foreign jurisdictions.

This portfolio of owned and in-licensed patents and patent applications covers aspects of: HSGX’s implants, including NeoCart and HSGX’s protein implants, HSGX’s tissue engineering processor, HSGX’s adhesives, HSGX’s growth factors, methods of delivery of therapeutic agents and promoters for increased expression of protein, HSGX’s method for treatment of ligament and tendon injuries, surgical tools for placing HSGX’s implants, and HSGX’s bone composites.

The patents that cover the listed technologies have statutory expiration dates between 2014 and 2030.


HSGX faces potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical, biotechnology and regenerative medicine companies, academic institutions, governmental agencies and public and private research institutions.

The competitive landscape in the field of articular cartilage repair is emerging and has stimulated a substantial amount of interest from companies developing tissue repair solutions. Companies have employed a variety of approaches to meet the goals of cartilage repair.

The approaches, which represent the scientific evolution of the field, can be generally categorized in five ways: (1) non-cell-based, such as Arthrosurface’s HemiCAP, (2) uncultured cell-based (with or without scaffold), such as Zimmer’s DeNovo NT, Arthrex’s BioCartilage and Osiris’ Cartiform, distributed exclusively with Arthrex, (3) cultured cell-based (without scaffold), such as Aastrom’s Carticel and ISTO’s RevaFlex, (4) cultured cell- and scaffold-based, such as Aastrom’s MACI and the Aesculap division of B. Braun Medical’s NovoCart 3D, and (5) cultured cell- and scaffold-based incorporating tissue engineering, such as NeoCart.

For knee cartilage repair and regeneration, the market is large and growing, driven by more knee injuries in an increasingly active population.

Worldwide, many products are commercially available, but the majority of these products are currently only available in the EEA, with Carticel, which was approved by the FDA in 1997, whose label restricts it for use in salvage cases, being the only cartilage repair product to gain U.S. approval through a regulated path to market.

RevaFlex and NovoCart 3D are in U.S. clinical development, which, based on HSGX’s internal analysis of publicly available information, HSGX believes may be approved in 2020 and 2023, respectively, but their early clinical data has not been published in highly regarded peer-reviewed journals.

Although minimally-modified cells such as DeNovo NT, which launched in the United States in 2007, and acellular cartilage matrix products such as Cartiform and Arthrex’s BioCartilage and are available in the United States, their path to market did not require a rigorous regulatory path and their clinical data to date has been sparse and commercial uptake limited. Product-less procedures such as debridement and microfracture continue to dominate the U.S. market.

5% shareholders pre-IPO

Wilmslow Estates Limited 26.9%

Sofinnova Venture Partners VIII, L.P. 27.0%

Split Rock Partners II, LP 18.0%

Altima Restructure Fund Limited 6.9%

Entities Affiliated with Boston Millennia Partners 5.9%

Garheng Kong, M.D., Ph.D. 26.9%


No dividends are planned.

Use of proceeds

HSGX expects to receive $53 million from its IPO and use it for the following:

$16.0 million to fund, develop and advance NeoCart through its currently enrolling Phase 3 clinical trial

$2.9 million for development work associated with its ECC with Intrexon to leverage their proprietary synthetic biology technology platform for the development of genetically modified chondrocyte cell therapeutics for the treatment or repair of damaged hyaline cartilage in humans

$5.1 million to build out its manufacturing capabilities and develop potential process improvements in making NeoCart and

The remainder for general and administrative expenses (including personnel-related costs), potential future development programs, early-stage research and development, capital expenditures and working capital and other general corporate purposes.

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