Why Pittsburgh biotech company Carmell Therapeutics is going public

Why is Carmell Therapeutics, poised to become the newest public company in the Pittsburgh region, taking that big step? CEO Randy Hubbell said it's the right move for the Pittsburgh-based biotech company, which is a spinout of Carnegie Mellon University and is getting ready for the day when its first products will be commercialized.

Carmell, which began in 2008, fits in a space that isn't easily categorized in the life sciences industry. It has developed plasma-based bioactive materials, which go into the body and safely deliver biologic medicine to either help bones or tissues heal quickly.

"We are a platform technology, which is delivering growth factors to an injured site to regrow tissue (and) is going to be used in multiple therapeutic areas to treat multiple needs," Hubbell said. That could be bones from traumatic fractures, it could be foot/ankle or spinal fusion, dental bone grafts, tissue from a severe wound or the hair loss from androgenetic alopecia. Carmell's key, at its heart, is a substance placed locally in an area that needs to have tissue regrown.

Carmell announced earlier this week it had filed a registration statement to the U.S. Securities and Exchange Commission, the latest step in what Hubbell said was a yearlong process of getting ready to go public. Carmell could go public in the fourth quarter of this year or early next year with a listing on Nasdaq.

It's the latest milestone for the company, which is based on the South Side at River Park Commons

Carmell's pipeline includes two product candidates, the bone healing accelerant (BHA) and tissue healing accelerant (THA), that are considered biologics by the U.S. Food and Drug Administration. BHA has received fast-track designation for a study called HEAL II for tibia fracture healing, which will begin in the second quarter of 2023. It also expects a phase-two study for BHA's use in foot/ankle fusion.

But after years of raising money — $22 million so far — the company's leadership has determined that Carmell's strategy would be better suited as a public biotech company instead of continuing to raise money as a private company.

Hubbell said Carmell has had success in raising money privately, but it's time consuming and nonefficient because the process doesn't often reward the company when it reaches milestones.

"You really are beholden to the few private investors you are able to find as a fit with your story," Hubbell said. "We don't necessarily fit well with a lot of private investors."

Hubbell said that's because private institutional investors are often looking for companies that have more narrowly focused applications that could increase the possibility of the firm or the product being acquired. But Carmell Therapeutics, he said, is in this for the long haul.

"We have a big vision. This is a big idea. We're looking to add multiple markets. … To be able to go after that, we will need to conduct clinical programs, and those clinical programs require capital, and the public markets are going to be a more efficient way to bring in capital to execute those," Hubbell said.

Carmell also differs from a lot of other biotech companies because of its strategy, which will be as an OEM manufacturer: Manufacturing its products in Pittsburgh and then sending them to as-yet-unnamed distributors, who will sell it for use by others. Because Carmell's cost of manufacturing are low — it's not like a cell therapy company that has expensive raw materials — it will be able to offer gross profit margins for both Carmell and the distributor. That also means the commercial marketing and sales won't be handled by Carmell, but instead by the distributor.

That change in strategy came about after Hubbell joined the company as CEO in 2016. He said Carmell, which is getting its approval from the FDA in the more rigorous area of biologics, can best leverage its technology by producing it in PIttsburgh and licensing it for use in multiple therapeutic areas. That will require Carmell to raise a lot less capital.

"The most value to our investors is being a clinical regulatory development company and not trying to be a commercial organization in every therapeutic area," Hubbell said. "We still reserve the right to do that (as a commercial organization) because my team and I have tremendous commercial experience. If that is something that we want to do, we have that capability."

Carmell has about 16 employees now, mostly in Pittsburgh.

"We'll be doubling that over the next year or so as we start to escalate our development program," Hubbell said. "We should have a good footprint of 25-30 in Pittsburgh and a handful out of Pittsburgh."

And the plans are to remain at River Park Commons, where Hubbell said the owner, Ron Tarquinio, has been extremely supportive.

"He's taken the ride with us," Hubbell said. He said there's room for expansion at the Sidney Street location as it scales up manufacturing.

Paul J. Gough

Reporter

Pittsburgh Business Times

Randy Hubbell
Chairman of the Board, CEO & President

Carmell Therapeutics
2403 Sidney Street, Suite 300
Pittsburgh, PA 15203
Office Phone (412) 894-1875

Cell Phone (215) 688-6196
www.carmellrx.com