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Invitrocue (ASX: IVQ) – The next step in predicting cancer treatment outcomes (Part 1)

NDF Research provides independent research coverage of ASX-listed Life Science companies, selected highlights of their research on Invitrocue are provided below:

Invitrocue is a Singapore-based company that was founded in 2012 to commercialise two technologies for 3D cell culture, HepatoCue and 3D CelluSponge. These technologies are used to develop in vitro liver models to improve toxicology testing. Invitrocue also offers a clinical service called Onco-PDO, a tool for selecting the right drugs from an in vitro model of a patient’s tumour. Invitrocue is leveraging on its expertise and know-how in 3D cell culture to grow patient-derived cancer cells in its scaffolds and other platforms to test them against a range of cancer therapies. With Onco-PDO, the way is open for low-cost personalised cancer medicine, where the market opportunity lies in the billions. We value Invitrocue at 7.3 cents base case and 24.4 cents per share optimistic case. Our target price of 16 cents per share sits at the midpoint of our valuation range. We see Invitrocue being re-rated by further data showing the power of Onco- PDO, and the commencement of clinical studies to validate Onco-PDO ahead of regulatory approval.

Rating           Risk                       Current price       Target price

Buy                  Speculative             $0.10                           $0.16

Daily Turnover:        ~A7,000

Market Cap:               A$48.5m

Shares Issued:            485.5m

52-Week High:           $0.11

52-Week Low:           $0.06

Invitrocue is a Singapore-based bioanalytics company with global operations in Australia, Asia and Europe, whose products and services help predict the effect of drugs in human tissue before they are used in people. The company was founded in 2012 as a spin-out from A*STAR, the Singapore government’s prestigious Agency for Science, Technology and Research, to commercialise ‘3D cell culture’ technology developed by Professor Hanry Yu and colleagues at A*STAR’s Institute of Bioengineering and Nanotechnology. In 2018 Invitrocue has two major businesses – a liver model business and a cancer model business. The liver models are primarily used by pharma companies to analyse the in vitro toxicity of drug compounds, while the cancer models are used by physicians to develop a drug regimen suitable for individual patients.

What is Invitrocue’s field of 3D cell culture and why is the company’s technology potentially valuable? Traditionally, when clinicians and research scientists want to study human tissue, they first culture the relevant cells in a lab plate. This results in a so-called ‘2D cell culture’ where the cells spread out in two dimensions. While valuable, 2D cell culture has drawbacks in that cells generally interact with each other in three dimensions, meaning that 2D cell culture models do not accurately reflects all aspects of tissue as it naturally occurs. Hanry Yu and colleagues have created two distinct ‘3D cell culture’ systems that can overcome many of the traditional drawbacks of 2D systems. For its 3D liver model, Invitrocue’s technology is valuable because it provides a better model to study the potential toxicity profile of drugs. For its 3D cancer models, which it calls Onco-PDOs, the value lies in the ability to run biological simulations that help determine what drugs or drug combinations actually work for individual cancer patients.

Why are Invitrocue’s liver models important? One of the more important functions performed by the liver is filtration of the blood to remove toxins. Consequently, before a drug can enter clinical studies ahead of gaining marketing authorisation or regulatory approval, its developers need to assure that it will not be hepatoxic, that is, damaging to the liver. Invitrocue’s 3D liver model provides an early way of being able to predict a drug’s hepatoxicity profile. For the company, the model provided an initial product with which to start up, and continues to be a core business.

Why are Invitrocue’s cancer models important? The striking thing about cancer is its heterogeneity. The baffling variety of gene mutants involved in any one cancer means that every tumour is slightly different. This means, in turn, that different drugs and drug combinations will work for different patients. The ability of Invitrocue’s Onco-PDO cancer platform to replicate a patient’s own cancer in the laboratory for the purpose of running various drug dosing simulations models and predicting treatment response, opens up a low-cost way of providing such ‘personalised medicine’. Invitrocue screened its first commercial customer in Singapore in April 2018.

What is the business model for Invitrocue? Invitrocue charges for the reagents and other consumables used in creating its models as well as fees for analysing the data which the models generate. We believe the global market opportunity for the 3D liver model is worth at least US$500m while for Onco-PDO the opportunity is a multi-billion dollar one.

If Invitrocue is so good, why is it capitalised at only A$48.5m/US$37.8m? Invitrocue is relatively new as a public company, having only listed on ASX in early 2016. We think the story has yet to be widely publicised to investors, in part because the company is based in Singapore whereas its investor based is mostly in Australia. We also think that as knowledge spreads of the bioanalytic power of Invitrocue’s models, and as revenue for the business grows, Invitrocue stock will be well-placed to re-rate. We believe that Invitrocue can serve as a ‘poster child’ for Singapore’s vibrant biotechnology sector, which is one of the most productive in the world but is not represented by many publicly traded companies.

Ten reasons to look at Invitrocue

1) Onco-PDO is a powerful tool for personalised medicine in cancer. With recently-published data suggesting that patient-derived organoids can be as effective as patient-derived xenografts in selecting drugs specific for a tumour, we believe that Invitrocue is well placed to become a world leader in the field of personalised medicine in cancer through Onco-PDO.

2) Personalised medicine in cancer is a large market opportunity. With ~US$120bn spent annual on drugs to treat cancer, we believe there is at least aUS$2bn market opportunity awaiting any tool that can help tailor the right drugs to the right patients.

3) Clinical data is coming for Onco-PDO. Invitrocue has published two milestones scientific papers in the prestigious journals Nature Medicine and Nature Communications using more than 200 laboratory and clinical data points. More clinical partnerships are being set up globally in all key cancer indications and markets, including Australia, Singapore, Hong Kong, Japan, Germany and the UK. More recently, the company published another two peer-reviewed papers describing its ability to build in vitro lung cancer and liver cancer organoids.

4) Commercial readiness. The company is in the process of setting up a global network of Onco-PDO joint laboratories with key leading scientific and clinical thought leaders. This approach will not only fast track its clinical validation but builds a ready channel for commercialisation. Invitrocue has received its first commercial patients in 2018.

5) The regulatory hurdles are low for Onco-PDO. Since Onco-PDO is, in effect, a biological decision support system to guide the on-label use of approved drugs, there is no immediate need to seek regulatory approval before marketing the product. This makes it relatively easy for Invitrocue to grow early revenue, Obviously, once the product transitions to a kit-based form, a mere 510(k) approval in the US market would be all that is required, and achievement of this clearance plus a CE Mark can then take the business to the next level.

6) Invitrocue is rapidly expanding the reach of Onco-PDO, with 2018 a year in which the team is expected to attract key opinion leaders to advocate for its use in various cancers. We expect that it can be introduced in Europe and North America by around 2020.

7) HepatoCue provides better tools for evaluating liver tox. The ability to better understand the hepatotoxicity profile of a drug is worth >US$500m, a market which Invitrocue is well placed to go after with HepatoCue.

8) The rise of liver disease is increasing the value of HepatoCue as a diagnostic tool. With Hepatitis B and NASH, among other conditions, representing a heavy disease burden, Invitrocue’s 3D liver models may potentially be used to screen for novel drug compounds in what is an important and potentially lucrative area of unmet medical need.

9) Invitrocue is growing sales. The revenue base, while small (ie only S$0.8m in calendar 2017), is growing quickly, reflecting the relative ease with which Invitrocue can gain early commercial users from its foundation technologies.

10) Invitrocue has a solid management team. CEO Dr Steven Fang previously built Cordlife, a successful Singapore-based cord blood bank. Backing Fang is a quality board that includes founder Professor Hanry Yu.

11) Invitrocue has upside on our numbers. We value Invitrocue at 7.3 cents base case and 24.4 cents per share optimistic case. Our target price of 16 cents per share sits at the midpoint of our valuation range.

Invitrocue is a player in the multi-billion-dollar field of cell culture. 

Cell culture is a fundamental building blocks of today’s pharmaceutical and biotechnology industries. When a biotech company or an academic lab is working on a new drug or vaccine, early in the process it will need to engage in cell ‘culture’, which is the growing of particular cell type in an artificial environment. In cell culture, cells extracted from a human or other organism are proliferated in a vessel such as a dish, plate or flask using a ‘culture medium’ to supply the necessary nutrients and a ‘substrate’ to which the cell needs to be connected in some way before it can grow. Often the substrate is the surface of the vessel itself. Without cell culture there could be no modern biotech industry, since it is fundamental to the way many drugs and vaccines are produced, while for drug and vaccine research the tools of cell culture are critical – as well as allowing the normal physiology and biochemistry of cells to be studied, cells need to be cultured in order to be able to see if a drug or vaccine candidate is working as expected, or if it will have toxic side effects. When scientists use the term in vitro, Latin for ‘in glass’, they mean a study on cells obtained from culture, which they generally perform before moving to in vivo studies in animals. We estimate that cell culture is a >US$20bn market globally.

Traditionally cell culture was ‘2D cell culture’, that is, the cells were grown in a two-dimensional ‘monolayer’ on a flat polystyrene or glass dish, or inside the wells of a culture plate, to which the cells adhered. 2D cell culture is quick, simple, and well understood, having been performed routinely for the best part of a century. So long as the environmental conditions are the same in each dish, 2D cell culture can in many cases provide valuable clues about what one compound is doing to cells as opposed to another compound. The trouble with 2D cell culture is that it doesn’t reflect what happens in vivo, where cells grow in a complex three-dimensional microenvironment, interacting with each other and with the surrounding ‘extracellular matrix’ (ECM), and where blood vessels continuously supply nutrients to the cells and take away their waste products. This means that 2D cultured cells can be considerably different from what such cells would be like if cultured in 3D9, leading to poor predictability of the performance of a drug in vivo. That awareness has increased the demand in recent years for 3D cell culture systems, which is where Invitrocue believes it can be a world leader.

‘3D cell culture’ is rapidly emerging as a research tool. In 3D cell culture, which first emerged in the 1980s, cells are grown in ways that mimic the actual three-dimensional conditions to be found in the body. One common theme in 3D cell culture is the ‘scaffold’ made from a porous biocompatible material that allows cells to sit in an ECM-style three-dimensional architecture while being cultured12. Another common theme is the ‘bioreactor’, that is, a vessel that can precisely controls the environmental conditions required for cell culture, including temperature, pH, nutrient supply, and waste metabolite removal13. 3D cell culture is still emerging as a cell culture paradigm and is therefore a relatively small part of the cell culture market worth perhaps US$4bn, but it is growing quickly, probably at 20% p.a.

Invitrocue wants to be a player in the 3D cell culture market. Invitrocue was formed in 2012 to commercialise its 3D liver models and a 3D cell culture system that are the brainchild of Professor Hanry Yu of the National University of Singapore (NUS). As well as his Chair at NUS, Yu also maintains a laboratory at the Institute of Bioengineering and Nanotechnology (IBN), one of 18 research institutes maintained by A*STAR, the Singapore government’s Agency for Science, Technology and Research. It was the Yu Group at IBN that created HepatoCue and 3D CelluSponge in roughly the five years to 2011. In each case, the Yu Group at IBN had been seeking ways to develop better culture hepatocytes, that is, liver cells, allowing more accurate in vitro models of the liver that could be highly useful in toxicology testing. With Onco-PDO, the way is now opening to develop the potential of in vitro cancer models, highly useful in devising personalised cancer treatments.

Invitrocue is being built on two major 3D cell  culture systems  HepatoCue is a 3D cell culture system for liver cells. Invitrocue’s initial technology, which originated from the Yu Group around 2006, represented one of the first genuine 3D solutions for culture of hepatocytes, hence the name ‘HepatoCue’. Hepatocytes are difficult to culture in a 2D format because the bunching together of the cells on the culture plate tends to cause their ‘de-differentiation’ into cells that are not liver-specific. Part of the ‘3D’ solution to this problem had been known for a long time: If hepatocytes were glued to the substrate with a sugar called galactose, for which there is a natural receptor on the hepatocytes, these cells would proceed to form spheroids, that is, sphere-like constructs. Being three-dimensional, these spheroids could maintain high levels of cellular functionality. The downside to this approach was twofold: Firstly, the spheroids would frequently detach from the substrate. Secondly, the envelope of these spheroids was so tight that not enough oxygen and nutrients could get inside to help maintain the constituent cells. Around 2006 Hanry Yu and his colleagues at IBN solved these problems simply by adhering the spheroids to the substrate with two glues rather than one – galactose plus a peptide called RGD. The latter glue was, as its name suggests, made up of the three-amino acids arginine (R), glycine (G) and aspartate (D), and had a long history of use as an adhesive peptide in the biomaterials field. When the galactose-plus-RGD combination was used with PET (ie polyethylene terephthalate, the well-known plastic) as the substrate, the result was a monolayer of well-nourished 3D hepatocyte spheroids that stayed glued to the substrate. A*STAR filed for patent protection over this platform and the work was published shortly thereafter in the journal Biomaterials. Five years later, in 2011, the Yu lab was able to show that changing the ratio of RGD to galactose in the glue would allow ‘tethered spheroids’ that didn’t have to stay glued to the PET substrate – and therefore were more truly three-dimensional – but were of such size as to allow nutrients to penetrate. What the Yu lab had created was a 3D cell culture system for liver cells that would work seamlessly with the traditional and low-cost 2D multi-well screening platforms used the world over and would therefore be highly scalable as a testing platform. The only downside as far as being a tool to evaluate liver toxicity was that HepatoCue could only be used for acute testing, since the spheroids would break down after a week or so.

3D CelluSponge is a highly effective scaffold for 3D cell culture. We noted above that one of the major themes of contemporary research into 3D cell culture systems is scaffolds that can mimic the ECM. The thinking is that a porous structure, whether made of natural or synthetic material, can allow seeded cells to produce a new functional matrix, so long as the starting cells can adhere to the scaffold and so long as the pores are large enough allow the right diffusion of nutrients, metabolites and soluble factors into the scaffold. Around 2008 the Yu Group at IBN, which has a strong interest in tissue engineering, invented a scaffold for such an application made from hydroxypropyl cellulose, a biocompatible polymer polysaccharide commonly used in the pharmaceutical industry. They found that that it was possible to take this material and turn it into a hydrogel scaffold with pores large enough to grow new tissue by modifying it with allyl isothiocyanate, a sulphur-containing chemical known for bringing the ‘heat’ to wasabi, horseradish and mustard. The Yu Group published the engineering process for their cellulosic hydrogel scaffold, which they called 3D CelluSponge, in the journal Biomaterials in 201026. The Yu Group believed that their new scaffold had merit because it was cellulosic and because it was a hydrogel. Cellulose doesn’t break down easily and cellulose-based materials are easy to source28, while hydrogels, that is, polymer networks with high water content, have long been regarded as ideal scaffolds for tissue engineering because of their ability to simulate soft tissue. That said, all sorts of polymeric scaffold candidates are described in the tissue engineering literature, which begged the question as to what was so good about the Yu Group’s new scaffold that it merited forming a company around it? That question had been partly answered a few months before the Biomaterials paper by another paper in Regenerative Medicine from a group at Singapore’s Nanyang Technological University. The Nanyang group had used 3D CelluSponge, coated with collagen, to culture mesenchymal stem cells, the stem cells in all our bodies that originate in bone marrow and give rise to a variety of cell types. The Nanyang group were able to show that those cells, inside 3D CelluSponge, could successfully differentiate into neural cells. What this showed was that the kind of cellulosic hydrogel the Yu Group had created had replicated the complex three-dimension environment needed to engineer new nerve tissue. Then in 2011 the Yu Group at IBN showed that the 3D CelluSponge, when coated with galactose, could grow long-lasting hepatocyte spheroids. Not only did Yu et. al. now have a validated liver model for sub-acute toxicity testing – the gap left by the relative instability of HepatoCue spheroids – but the mesenchymal stem cell work suggested a broad potential application for the platform.

HepatoCue and 3D CelluSponge allowed Invitrocue to start up as a provider of liver modelling services. Invitrocue’s initial thinking was that liver models would provide sizeable growth opportunities for the new A*STAR spinout. The world’s pharma industry spends US$150bn on R&D, and one of the factors that can support new drug candidates emerging from this spend is an understanding of potential liver toxicity. When a drug will cost more than US$2bn to develop34, any low-cost tool to improve R&D effectiveness can prevent large downstream losses. The market for liver toxicology has been estimated at US$1.3bn35, and Invitrocue has enjoyed modest revenues in its start-up years from supplying its models.

3D CelluSponge has opened up a huge opportunity in personalised cancer medicine. We noted above that Invitrocue’s scientists had identified a broad potential application for the 3D CelluSponge platform. The one that has emerged with the biggest potential upside for shareholders is as a tool for personalised cancer medicine, for which the commercial and clinical upside is immense.

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NDF Research’s work is commissioned by the listed companies it covers, and NDF Research has received or will receive payment for the preparation of such work. Please refer to the bottom of the research notes as published on NDF Research’s web site for risks related to the companies being covered, as well our General Advice Warning, disclaimer and full disclosures. Also, please be aware that the investment opinion in this report is current as at the date of publication but that the circumstances of the company may change over time, which may in turn affect our investment opinion.



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