company description · 2014. 3. 14. · injury to the spinal cord can have significant...

†BOLD WORDS IN CONTEXT ARE REFERENCED IN THE GLOSSARY ON PAGES 49‐52. See inside for applicable disclosures.

Company Description

InVivo Therapeutics Holdings Corp. (“InVivo” or “the Company”) is a medical device company developing treatments for spinal cord injury (SCI) and neurotrauma†. Its main initiative is to commercialize improved treatments for SCIs using innovative biomaterials that restore function. The Company’s technologies are based on several decades of research at the Massachusetts Institute of Technology (MIT). InVivo aims to improve the prognosis of SCI patients by helping the spinal cord heal itself before secondary damages, including paralysis, take effect. InVivo’s lead product candidate is a biopolymer scaffold that can be surgically implanted into an injured spinal cord. The Company reported that 100% of primates treated with its scaffold in preclinical studies were up and running on a treadmill within 12 weeks. The device is now poised to enter clinical trials in humans. InVivo’s second product candidate, an injectable hydrogel, is designed to serve as a vehicle for the controlled delivery of pharmaceuticals and regenerative cell therapies directly to the injury site. As well, the Company recently announced its third product candidate, a platform for reducing fibrosis (scarring) in reparative surgical and dermatological applications—continuing the expansion and diversification of its pipeline.

Key Points

To InVivo’s knowledge, it was the first to successfully demonstrate functional improvement in nonhuman primates that were paralyzed in a preclinical SCI model.

InVivo is preparing to initiate a Phase I clinical trial for the “First in Man” use of its biopolymer scaffolding to treat acute SCI (pending FDA approval). The device is expected to be regulated under the Humanitarian Device Exemption (HDE) pathway, which could accelerate its path to commercialization.

The Company has engaged the FDA to discuss its hydrogel in combination with an FDA‐approved medicine to reduce inflammation, called methylprednisolone, to help manage pain in peripheral nerve injuries.

InVivo’s leadership has broad experience developing and commercializing biomaterial products. Recent additions to the team have collectively brought over 100 biomaterials to market.

The Company’s intellectual property includes over 100 issued and filed patent applications globally, believed to act as a barrier to entry for other companies seeking to use biomaterials to treat SCIs and other conditions.

InVivo’s cash position was $16.2 million as of September 30, 2012, following a $20 million public offering in early 2012. The Company has also been awarded a $2 million low‐cost loan from the Commonwealth of Massachusetts.

InVivo Therapeutics Holdings Corp. One Kendall Square Building 1400 East, Floor 4 Cambridge, MA 02139 Phone: (617) 863‐5500 Fax: (617) 863‐5790 www.invivotherapeutics.com

Ticker (Exchange) NVIV (OTC)

Recent Price (12/13/2012) $1.60

Shares Outstanding ~65.9 million

Market Capitalization ~$105 million

Average 3‐month Volume 112,648

Insider Ownership + >5% 36%

Institutional Ownership 12%

Dil. EPS (Qtr. ended 09/30/2012) $0.11

Employees 41

INVIVO'S BIOPOLYMER SCAFFOLD (rendering)

Source: InVivo Therapeutics Holdings Corp.

InVivo'sBiopolymer Scaffold

Spinal Cord

Spinal Cord Injury (SCI) Lesion

EXECUTIVE INFORMATIONAL OVERVIEW® December 13, 2012

InVivo TherapeuticsHoldings Corp.

NVIV-OTC

CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW® PAGE 2

Table of Contents

Executive Overview ....................................................................................................................................................... 3

Growth Strategy ............................................................................................................................................................ 8

Recent Milestones ......................................................................................................................................................... 9

Potential Milestones .................................................................................................................................................... 10

Intellectual Property .................................................................................................................................................... 11

Company Leadership ................................................................................................................................................... 12

Core Story .................................................................................................................................................................... 17

Spinal Cord Injury Overview ................................................................................................................................. 18

Biopolymer Scaffold to Treat Spinal Cord Injury ................................................................................................... 24

Injectable Hydrogel for Local Controlled‐Release Drug Delivery .......................................................................... 33

Platform to Reduce Fibrosis .................................................................................................................................. 37

Biopolymer Scaffold in Combination with Cell Therapies ..................................................................................... 38

Raising Awareness for InVivo and the Neurotrauma Sector ................................................................................ 39

Competition ................................................................................................................................................................. 40

Key Points .................................................................................................................................................................... 44

Historical Financial Results .......................................................................................................................................... 45

Risks and Disclosures ................................................................................................................................................... 48

Glossary ....................................................................................................................................................................... 49


Executive Overview

InVivo Therapeutics Holdings Corp. (“InVivo” or “the Company”) is focused on developing and commercializing novel therapies for spinal cord injuries (SCIs) and neurotrauma. The Company’s platform employs biopolymer scaffolds, a type of biomaterial structure that has been used extensively in the medical field, particularly for tissue engineering and regenerative medicine, to help restore function and aid healing after a traumatic injury to the nervous system. Biomaterials (essentially, any material that interacts with a biological system) are employed for small molecule or cell delivery, to construct artificial organs and prostheses, or to replace bone and tissue, among other applications. In order to be effective, biomaterials must be biologically compatible with the body, avoiding the creation of a toxic, injurious, or immunological response in living tissue. The Company believes that employing biomaterials in SCI treatment as a neuroprotective agent could fuel a paradigm shift in how these injuries are addressed in the future, particularly by treating the underlying causes of acute and chronic spinal injuries versus many treatments today, which primarily address symptoms. InVivo’s platform technology is based on more than 10 years of research by Dr. Robert S. Langer (biography on page 15) and his team at the Massachusetts Institute of Technology’s (MIT) Langer Lab. Dr. Langer is a cofounder of InVivo and currently serves as a member of its Scientific Advisory Board. The Company acquired the technologies, which focus on the use of biomaterials to treat SCIs, through a global licensing agreement with MIT and Harvard’s Children’s Hospital. The licensed technologies, protected by more than 100 patents, can be categorized into three key methodologies for treating SCIs: (1) employing biomaterials alone; (2) using biomaterials in combination with medicines; and (3) using biomaterials and various combinations of cells. Additionally, InVivo has expanded its field of use beyond solely SCIs to also include peripheral nerve, cavernous nerve, epidural, spinal cord tumor, retina repair, cranial nerve, and brain applications. Addressing Critical Unmet Needs in Spinal Cord Injury Treatment The spinal cord serves as the main information pathway between the brain and the rest of the body. As such, injury to the spinal cord can have significant physiological consequences, ranging from chronic pain to the loss of bodily functions (e.g., bladder and bowel dysfunction) or even partial or complete paralysis. SCI is the second leading cause of paralysis. Approximately 1.3 million cases (or 23%) of paralysis conditions are caused by SCI (Source: the Christopher & Dana Reeve Foundation). Presently, an individual with complete paralysis incurs roughly $1 million, on average, in medical expenses in the first year following an injury and up to $6 million during their lifetime, depending on age at the time of injury. Even if the spinal cord does not appear to be severely damaged at first, an SCI can trigger a cascade of natural chemical and cellular responses, including bleeding, inflammation, and scarring. If not adequately controlled, this secondary damage can increase both the size of the tissue lesion as well as the loss of function or paralysis. In many cases, patients may continue to show neurological deficiencies and permanent changes in body functions that continue even after the injury has been stabilized due to the development of the secondary injuries. InVivo estimates that as many as 90% of SCI patients are not initially paralyzed but become so as a result of their secondary injuries (Source: Seeking Alpha’s Geron And InVivo: The Race To Cure Paralysis, October 30, 2011). Believing that there is an unmet need for improved products to protect the spinal cord from secondary damage after a trauma, InVivo is developing methods to mitigate the bleeding, inflammation, and resulting cell death and glial scarring that result from the immune response to an SCI. InVivo’s technologies emphasize protecting the spinal cord (neuroprotection) and supporting subsequent repair and recovery processes (neuroplasticity) in the spared healthy tissue, which can result in functional recovery. In doing so, the Company may be able to help the body locally reorganize communication pathways between the brain, spinal cord, and other areas.


Thus, the Company’s innovative platform technology (overviewed on pages 24‐32) is being developed as a way to help the spinal cord heal itself in a timely manner before secondary injuries take effect. InVivo aims to create new options for care and change how physicians treat SCIs by preventing the causes of long‐term damage rather than just treating symptoms. To the Company’s knowledge, there are no products on the market that address the underlying pathology of SCIs in this manner. Even many next‐generation stem cell therapies in development focus almost exclusively on tissue regeneration, without preventing or resolving the underlying conditions that caused the post‐SCI tissue damage in the first place. InVivo aims to improve a patient’s prognosis and quality of life as well as lower medical costs for patients and insurers. Importantly, the Company’s products are not designed to compete with current treatment options (e.g., spinal fixation devices that are surgically implanted to stabilize the spine). Rather, the Company’s candidates are likely to be complementary to these products, fulfilling the notion that a combination of therapies may create the best clinical outcome. InVivo’s Innovative Product Pipeline InVivo is developing multiple products for the SCI and neurotrauma markets. The Company is currently focused on advancing three product candidates: (1) a biocompatible polymer scaffolding device to treat acute SCIs; (2) a biocompatible hydrogel for the local, controlled release of U.S. Food and Drug Administration (FDA)‐approved medicines, growth factors, and cells; and (3) a platform to reduce fibrosis (scarring) after reparative surgery and in dermatological applications. In the longer term, InVivo plans to explore the potential of its scaffolding technology in combination with cellular therapies to treat chronic SCIs. However, until cell therapies make more progress through the FDA, the Company’s chief focus is on developing biomaterial‐based neuroprotection technologies. Biopolymer Scaffold Device to Treat Acute SCI

InVivo’s lead candidate, its biopolymer scaffold (shown in Figure 1), is designed to mitigate bleeding and inflammation following an SCI. The Company believes that by controlling bleeding and inflammation after an SCI and thus preventing or reducing the secondary damage and scarring that occurs after the initial injury, its scaffold could enable cell signaling in the central nervous system (CNS) to continue to pass through the spared tissue, thereby preserving function in the spinal cord. Scarring following an SCI can consume 100% of the width of the spinal cord at the point of injury. InVivo believes that the preservation of at least 10% of the cord could be sufficient to support cell signaling processes and function below the point of injury.

The Company’s biopolymer‐based scaffolding is designed for surgical implantation into the lesion created during traumatic injury (as depicted in Figure 1). The scaffold is composed of the biopolymer poly lactic‐co‐glycolic acid (PLGA) and the substrate polylysine (PLL), which is considered to be “generally recognized as safe (GRAS)” by the FDA. The biopolymer scaffold is customized to fit each patient’s lesion. It also biodegrades naturally in the body in a manner that is similar to stitches, eliminating the need to extract the device after use. The scaffold is designed to be implanted quickly and easily in less than 30 minutes by the neurosurgeon and is intended to be an adjunct to the standard screw‐rod procedure that occurs when a patient is first admitted to the hospital with an SCI. Through extensive preclinical research, this technology has been shown to support functional locomotor improvement and sustained functional recovery in rodents as early as two weeks after an SCI. It has also demonstrated higher neuromotor function and improved kinematic/EMG data versus the control group in primate studies, and reduced scarring and lesion size with greater neuron survival in a rodent and contusion model of acute SCI. After the implantation of InVivo’s device, primates in preclinical studies that were unable to move their injured hind leg were soon able to walk and be mobile. The Company has reported that 100% of primates treated with its scaffold in preclinical studies were up and running on a treadmill within 12 weeks.

Figure 1


BIOPOLYMER SCAFFOLDING (rendering)

InVivo'sBiopolymer Scaffold

Spinal Cord Spinal Cord Injury (SCI) Lesion


Importantly, studies occurred in African green monkeys that are understood to be over 98% genetically similar to humans and in a rodent contusion model that is believed to closely represent the damage caused in the majority of human SCIs. Altogether, InVivo’s preclinical primate data shows that its scaffold has preserved over 50% of the cord and surviving tissue by addressing the causes of secondary damage. Based on the positive preclinical data in both rodents and non‐human primates, InVivo plans to advance its biopolymer scaffold candidate into human testing as a medical device. Initially, the Company is focused on developing and commercializing its scaffold independently, without including any other FDA‐regulated drugs, for SCI treatment. According to InVivo, this strategy may enable the product to be classified as a Class III medical device (rather than a pharmaceutical or drug/device combination product), which typically has a shorter path to approval than pharmaceutical candidates. Further, based on its communications with the FDA, InVivo expects its scaffolding device to be regulated under the Humanitarian Use Device/Humanitarian Device Exemption (HUD/HDE) pathway, which could further accelerate commercialization. The HUD/HDE pathway is an application process required to obtain approval for an HUD—a device that is intended to treat or diagnose a condition that affects a small population. The Company believes that its candidate is on track to become the first biodegradable polymer scaffold approved to treat SCIs. There are approximately 12,000 new SCI cases each year in the U.S., or approximately 40 cases per million individuals (Source: the National Spinal Cord Injury Statistical Center, February 2012). The global market for acute SCIs is estimated to be in excess of $10 billion (Source: Zacks Investment Research). Ultimately, InVivo anticipates that a small sales force can effectively penetrate the market because currently 80% of SCI’s in the U.S. are treated at 75 Level I Trauma Centers, according to Company estimates. Poised to Enter “First‐in‐Human” Phase I Clinical Trials InVivo has submitted an Investigational Device Exemption (IDE) application to the FDA. Going forward, the Company aims to validate its cleanroom and then manufacture Good Manufacturing Practice (GMP) batches. Ultimately, InVivo plans to submit this information to the FDA as part of its IDE application. Once the IDE is approved, the Company plans to commence a pilot study to evaluate the safety of the polymer scaffold device, with one year patient follow‐up. Based on discussions with the FDA, InVivo expects the trial to include five patients. Planned trial sites include Harvard’s Brigham & Women’s Hospital in Boston, Massachusetts, and the Geisinger Health System in Pennsylvania, followed by rehabilitation at the Spaulding Rehabilitation Network and at the Shepherd Center in Atlanta, Georgia. If clinical results confirm similar improvements in function and quality of life for humans as InVivo’s preclinical data did for primates, the Company expects to have a well‐supported case for regulatory approval. Because the device is being regulated under an HDE, the FDA could approve the product based on data from the pilot clinical study. Nevertheless, if requested by the FDA, InVivo may conduct a larger pivotal human study in 30 acute contusion SCI patients after the pilot study is complete. Injectable Hydrogel for Local, Controlled‐Release Drug Delivery Delivering treatment to address the inflammation and other effects caused by SCIs can pose a significant challenge, particularly in contusion SCIs. InVivo believes that a more targeted and controlled delivery vehicle—such as can be achieved using select biomaterials—could reduce patient risk while continuing to provide an anti‐inflammatory effect. The Company is developing its second candidate, an injectable, gel‐based scaffold, termed a hydrogel, as a technique to locally administer therapeutic agents in SCIs. As depicted in Figure 2, InVivo’s hydrogel may represent a minimally invasive means for injecting anti‐inflammatory medications, such as methylprednisolone, directly to the injury site. As well, the hydrogel self‐assembles into the shape of the wound, filling the cavity and serving as a support for future growth.

Figure 2

BIOCOMPATIBLE HYDROGEL (rendering)



Methylprednisolone is an FDA‐approved treatment to reduce inflammation in SCI patients. However, it is associated with a number of adverse side effects, likely due to its systemic administration (throughout the whole body) at high doses. Patients who receive methylprednisolone systemically have a greater risk of infection, delayed wound healing, pneumonia, and sepsis. In contrast, InVivo is working to deliver this medication locally, not systemically, through a targeted injection directly to the injury site. InVivo estimates that its treatment could benefit over 4.2 million patients annually in the U.S., representing a potential $22 billion market (Source: InVivo’s press release, InVivo Therapeutics Engages FDA With Second Product, A Novel Drug Releasing Hydrogel For Chronic Pain Treatment, July 2, 2012).

Development Status

To date, InVivo has completed preliminary preclinical animal studies with its hydrogel in combination with methylprednisolone, which have validated the potential of the approach and its promise for functional recovery. As well, a preclinical study is ongoing with the Geisinger Health System to evaluate the effectiveness of using the hydrogel for the controlled release of drugs in patients with chronic pain from compression‐induced peripheral nerve damage. InVivo expects the study to be completed by year‐end 2012.

In the third quarter 2012, InVivo initiated discussions with the FDA for its hydrogel in pain management related to peripheral nerve pain. The Company expects the hydrogel to be regulated as a combination drug device, with the therapeutic component offering the primary mode of action. InVivo has submitted a request to meet with the FDA’s Office of Combination Products and the appropriate representatives from the Center for Drug Evaluation and Research (CDER) and the Center for Devices and Radiological Health (CDRH) to discuss the clinical protocol required for FDA approval beyond InVivo’s body of data in primates and the ongoing Geisinger study.

Platform to Reduce Scarring Following Surgery

In August 2012, one of the Company’s neurosurgeons, Amer Khalil, M.D., received a $10,000 grant to investigate the use of InVivo’s hydrogels. Dr. Khali’s project is important not only for InVivo’s hydrogel product but also for its potential to reduce fibrosis (scarring) in post‐surgical and dermatological applications.

After an SCI, patients can develop glial scars, which the body uses to protect and begin the healing process in the nervous system. However, scarring can have both beneficial and harmful effects in the context of neurodegeneration. In particular, glial scars may inhibit recovery after an SCI (Source: The Journal of Neuroscience 28(14): 3814‐3823, 2008).

Preclinical data to date has suggested that InVivo’s scaffolding technology may reduce the amount of scarring following an SCI, which could support physical and functional recovery. This led to the establishment of the third product candidate in InVivo’s portfolio—a platform intended to minimize fibrosis (scarring) in both reparative surgical and dermatological applications (as detailed on page 37). Dr. Khali’s grant is being used to investigate the use of InVivo’s hydrogels to reduce scarring following neurosurgery.

Financial Support for Planned Product Development and Commercialization

In early 2012, InVivo closed an oversubscribed public offering valued at over $20 million with various Blue Chip institutions, including Fidelity, Special Situations Fund, and Aspire, among others. Since 2009, the Company has raised approximately $36 million in public financing. In October 2012, the Company was awarded a $2 million loan from MassDevelopment’s Emerging Technology Fund to help fund the commercialization of InVivo’s technologies for SCI and other neurotrauma conditions.

The Company is focused on maintaining a cost‐effective business model as it seeks accelerated paths to advance its first candidates to market. In Figure 3 (page 7), InVivo compares the amount of capital raised and estimated time to market for the Company versus several of its competitors developing stem cell therapies. The Company approximates that several of its competitors in the stem cell space have raised $107 million to $929 million in capital for candidates that could take more than 10 years to reach the market, far longer than InVivo’s planned timeframe. As of June 2012, InVivo reported that it has spent roughly $19 million in operations—considerably less than peers in the stem cell space, which the Company estimates have spent over $1 billion collectively and remain years from market.


Corporate Information InVivo was founded in 2005 by Mr. Frank Reynolds and Robert S. Langer, Sc.D., to develop and commercialize new technologies to treat SCIs. The Company’s proprietary technology is based on technology co‐invented by Dr. Langer, a professor at MIT and currently a member of the Company’s Scientific Advisory Board, and Joseph P. Vacanti, M.D., an affiliate of Massachusetts General Hospital. In 2011, Drs. Langer and Vacanti were both included in Thomson Reuters’ list of predictions for the 2011 Nobel Prize in Physiology or Medicine for their pioneering research in tissue engineering and regenerative medicine (Source: Thomson Reuters’ 2011 Citation Laureates). InVivo licenses the intellectual property rights that support its technologies through an exclusive, worldwide license from Harvard’s Children’s Hospital and MIT (detailed further on page 11). As of September 25, 2012, the Company employed more than 40 full‐ and part‐time individuals as well as a number of consultants who assist with R&D and regulatory activities. New Global Headquarters to Support Product Development and Commercialization InVivo recently established new global headquarters in Cambridge, Massachusetts, which consolidated three locations into one cohesive organization. The Company has a multi‐year lease for a 21,000 square foot facility at One Kendall Square in Cambridge. In addition to serving as InVivo’s global headquarters, the facility includes lab space, a vivarium, and a current GMP cleanroom for manufacturing to meet the needs of the Company’s planned clinical studies. These facilities enable the Company to conduct all research in‐house, which InVivo believes could significantly increase the amount of SCI and neurotrauma research completed in 2013 while reducing costs. To the Company’s knowledge, its SCI rodent vivarium is the largest in the world and is the first chronic SCI rodent population globally dedicated to developing scaffold and stem cell therapies for a critically underserved chronic SCI research model. On November 1, 2012, InVivo cut the ribbon on an additional 5,000 square foot area, extending its facility to 26,000 square feet and providing ample room to bring all of the products in its pipeline through the FDA.

Figure 3

INVIVO AIMS TO REDUCE CAPITAL AND TIME TO MARKET VERSUS COMPETITORS

Source: InVivo Therapeutics Holdings Corp., Investor Presentation for Lazard Capital Markets' 9th Annual Healthcare Conference,

Slide 26, November 14, 2012.

Geron

StemCells, Inc.

NeuralStem , Inc.InVivo Therapeutics


Growth Strategy

InVivo is focused on developing product candidates with accelerated paths to market. Initially, the Company is advancing its biopolymer scaffold as an independent product, without the inclusion of cells or pharmaceutical agents. In doing so, InVivo expects the scaffold to be regulated as a Class III medical device (rather than a pharmaceutical or drug/device combination product) under the HUD/HDE pathway and thus is likely to have a more rapid path to approval. InVivo is in the process of finalizing its IDE application for this product and expects that clinical studies could begin in early 2013 (pending FDA approval). The Company also plans to combine its technologies—its biopolymer scaffold and hydrogel—with pharmaceutical agents that are already FDA‐approved in order to minimize regulatory risk and accelerate the approval process. For example, InVivo is combining its biopolymer hydrogel with methylprednisolone, an FDA‐approved steroid that has been used clinically for decades. Sales and Marketing Strategy InVivo plans to take its scaffold to market independently, and believes that the SCI market can be effectively penetrated with a small sales force for major markets in the U.S. and through distributors in foreign markets. The American College of Surgeons has verified over 110 Level I Trauma Centers in the U.S. Verification is a voluntary process whereby the presence of resources required to provide emergency care must be validated. A Level I Trauma Center provides the highest level of surgical care to trauma patients, and is estimated to increase a seriously injured patient’s chance of survival by roughly 20% to 25% (Source: the Lucile Packard Children’s Hospital, 2008). A Level I center is required to have surgeons, emergency physicians, and anesthesiologists available to treat trauma patients 24 hours a day. The Company estimates that the top 75 of these Level I Trauma Centers treat 80% of SCI patients. As such, InVivo does not anticipate a need to partner with a major pharmaceutical or medical device company to gain access to a large sales force. Rather, the Company expects that it could penetrate a vast portion of the market by targeting these 75 Level I Trauma Centers with an in‐house sales team. InVivo anticipates that a sales force of between 20 to 25 representatives could effectively target 90% of the market. The Company’s primary market for its SCI candidates is the emergency physician responsible for handling trauma cases. Since the product is new, InVivo plans to drive adoption by targeting physicians who are thought leaders in the SCI field. Over time, the Company plans to develop solid relationships with orthopedic spine surgeons and neurosurgeons. The Company may also establish medical education programs to target physical medicine and rehabilitation practitioners as well as advocacy groups and online portals to connect with SCI patients. InVivo believes that the branding process that it establishes while commercializing its first product is essential in setting the foundation for brand recognition for subsequent products in the spinal cord and other markets.


Recent Milestones

InVivo has recently achieved a number of corporate milestones as the Company advances its first candidate toward the clinic, as summarized below. Finalized a plan with the FDA for a pilot human clinical study with a biopolymer scaffolding device in SCI

patients Completed an additional primate study in 2011 that confirmed the effects of previous studies Submitted a request to meet with the FDA for a second candidate, a novel injectable hydrogel designed to

release drugs (e.g., methylprednisolone) locally for pain treatment InVivo neurosurgeon Amer Khalil, M.D. was recently awarded an MD Honors Grant to investigate the use of

the Company’s hydrogels to reduce scarring following neurosurgery, which has become InVivo’s third product candidate

Appointed key individuals to its management team to drive product development and commercialization,

including Brian Hess as chief technology officer, Celina Chang as senior scientist, Bill D’Agostino as senior director of manufacturing and engineering, Arthur J. Coury, Ph.D. as an advisor to the CEO, and John Bonasera as director of regulatory affairs

Closed an oversubscribed public offering valued at over $20 million with various Blue Chip institutions,

including Fidelity, Special Situations Fund, and Aspire, among others, for net proceeds of roughly $18.1 million Opened new global headquarters in Cambridge, Massachusetts, at a facility capable of housing all of the

Company’s operations, including a GMP cleanroom, a vivarium, and corporate offices Held the first Langer Summit on Neurotrauma, during which experts from the neurotrauma industry identified

recent innovations in the field as well as opportunities to advance these technologies into the clinic Continued expanding its patent portfolio with the filing of manufacturing and hydrogel patents as well as

broadening the coverage of its portfolio to include peripheral nerve, prostate, retina, and brain applications Published a number of studies covering its preclinical data to date, including the publication from InVivo’s first

non‐human primate study, which earned the 2011 Apple Award from the American Spinal Cord Injury Association for excellence in SCI research

Presented preclinical data on the Company’s biopolymer and hydrogel technologies at key scientific meetings,

including Rick Hansen’s Interdependence 2012 Conference, the Clinical Outlooks for Regenerative Medicine Conference, the 7th Annual Working 2 Walk Science and Advocacy Symposium, and Lazard Capital Markets’ 9th Annual Healthcare Conference


Potential Milestones

InVivo is focused on the advancement of its lead product candidate and has set forth to accomplish the following milestones over the next 12 to 24 months. Commence patient enrollment for a pilot clinical study to evaluate the scaffold‐only device (once IDE approval

is obtained from the FDA) Initiate a larger, pivotal human trial following the completion of the pilot study (if requested by the FDA) Determine a regulatory pathway for the hydrogel/steroid combination Complete the preclinical nerve pain study being conducted with Geisinger Health System to evaluate InVivo’s

injectable biocompatible hydrogel for the treatment of pain File submissions with the FDA for injectable hydrogel to treat peripheral nerve injuries and SCI Figure 4 illustrates InVivo’s anticipated regulatory submission timeline (by year) for its various technologies and targeted applications.

INVIVO'S PAST AND ANTICIPATED REGULATORY SUBMISSION TIMELINE BY YEAR

Figure 4


2012 2013 2014 2015

PGLA‐PLL Scaffold Alone

Injectable Hydrogel with Drugs

Injectable Hydrogel Device Alone

Injectable Hydrogel with Drugs

Injectable Hydrogel Device Alone

Acute SCI:Clinical study anticipated early 2013

Peripheral Nerve Pain: Submission planned Q3 2013

Acute SCI:Submission planned Q3 2013

Fibrosis:Submission planned Q2 2014

Central and Peripheral Nervous Systems:Submission planned Q2 2014


Intellectual Property

InVivo possesses an exclusive global license to 11 issued U.S. patents, four pending U.S. patents, 57 issued international patents, and 34 pending international patents. The patents under the license are co‐owned by the Massachusetts Institute of Technology (MIT) and Harvard’s Children’s Hospital and are collectively referred to as the “CMCC License.” The CMCC License covers the use of any biomaterial scaffolding used as an extracellular matrix substitute for treating SCI alone or in combination with drugs, growth factors, and human stem cells. Additionally, InVivo has expanded its patent portfolio’s Field of Use beyond SCIs to include peripheral nerve, cavernous nerve, epidural, spinal cord tumor, retina repair, cranial nerve, and brain applications. The expansion allows the Company to leverage its technologies to develop novel treatments for unmet medical needs while creating opportunities for additional, diversified revenue streams. Under the license agreement, the Company pays certain fees, royalties, and various milestone payments, as described in the Company’s Form 10‐K filed with the U.S. Securities and Exchange Commission (SEC) on March 24, 2011, and available at http://www.sec.gov/Archives/edgar/data/1292519/000119312511076482/d10k.htm. In addition to holding a worldwide exclusive license, InVivo also holds the right to sublicense the patents. The license extends as long as the life of the last expiring patent or 15 years (whichever is longer), unless terminated earlier by the licensor. The technology supporting the patents is based on over a decade of research by Dr. Robert S. Langer (biography on page 15) and his research team at MIT’s Langer Lab. Dr. Langer, an inventor as well as a professor of chemical and biomedical engineering at MIT, is generally regarded to be a cofounder in the field of tissue engineering. He is a cofounder of InVivo and currently serves as a member of its Scientific Advisory Board. As well, InVivo’s discoveries and improvements while developing manufacturing methods for its scaffolding led to additional patent filings in 2012. The Company applied for patents related to the key processes required to make a nontoxic synthetic biomaterial for spinal cord implantation. The potential for scaffolds in treating SCIs has been established in dozens of publications. Nevertheless, the Company believes that its intellectual property portfolio serves as a barrier to entry for potential competitors. The CMCC License provides InVivo with intellectual property protection for the use of any biomaterial scaffolding as an extracellular matrix substitute in SCI treatment. As such, the Company believes that any extracellular matrix developed to treat SCI could infringe on its patents. As well, the manufacturing‐related patents represent additional barriers to entry into the emerging neurotrauma space. InVivo plans to protect its patent portfolio aggressively and, in doing so, could become the only company to market a biomaterial‐based technology to treat spinal cord conditions. As InVivo continues to extend its patent portfolio, the Company expects to have opportunities to license its technology for different indications and anticipates that it could begin earning payments from larger pharmaceutical entities as early as 2013.


Company Leadership

InVivo’s leadership specializes in over 15 fields of medicine and science and has broad experience developing and bringing biomaterials to market. The Company has recently added key leadership to its management team to further drive product development and commercialization. Recent additions to the team have collectively brought over 100 biomaterials products to market. As well, Dr. Langer’s laboratory at MIT has produced over 50 products (in clinical trials or through clinical trials)—a number of which employ similar biomaterials to InVivo’s scaffold. Biographies of InVivo’s key management are provided below, with the Company’s Board of Directors and Scientific Advisory Board overviewed on pages 14‐15 and pages 15‐16, respectively. Management

Frank Reynolds, Cofounder, Chairman of the Board, Chief Executive Officer, and Chief Financial Officer

Mr. Reynolds founded InVivo in 2005 and currently serves as chairman of the Board, chief executive officer (CEO), and chief financial officer (CFO). In October 2010, Mr. Reynolds successfully took the company public through an Alternative Public Offering. He is the former director of global business development at Siemens Corporation (part of Siemens AG), where he was responsible for new business in over 130 countries. He has over 25 years of executive management experience and was the founder and CEO of Expand The Knowledge, Inc., an information technology consulting company with a focus on life sciences. He is an executive Board member of the Irish American Business Chamber and has served on the Board of the Special Olympics of Massachusetts, Philadelphia Cares, and Wharton Consulting Partners. Mr. Reynolds was awarded the 2010 Irish Life Science 50 Award by the president of Ireland, the 2008 Top 40 Irish‐American Executives Award, Siemens 2005 Global Presidential Award, and the Siemens 2004 Top+ USA Strategy Award. He was featured in the March 2010 and October 2009 issues of Inc. magazine. In March 2011, the Irish Echo, an Irish‐American newspaper, named Mr. Reynolds to its inaugural Irish Small Business 50 list.

Mr. Reynolds suffered a paralyzing injury to his spine in December 1992. While recovering from this injury, he spent years gaining subject matter expertise on the spine and spinal cord. He holds a MBA from MIT Sloan Fellows Program in Global Innovation and Leadership, and an M.S.E. from the University of Pennsylvania. He is also an alumni of the Executive Masters of Technology Management at the Wharton School of Business and holds an M.S. in management information systems from Temple University, an M.S. in health administration from Saint Joseph’s University, and an M.S. in counseling psychology from Chestnut Hill College. He also has a B.S. in marketing from Rider University.

Eric Woodard, M.D., Chief Medical Officer and Scientific Advisory Board Member

Dr. Woodard is chief of neurosurgery at New England Baptist Hospital in Boston, Massachusetts. He received an M.D. from Pennsylvania State University and completed his residency in neurological surgery at Emory University. Following his residency, Dr. Woodard completed a fellowship in complex spinal surgery at the Medical College of Wisconsin under Dr. Sanford Larsen. He is a diplomat of the American Board of Neurological Surgeons. Dr. Woodard was former chief of the Division of Spinal Surgery in the Department of Neurological Surgery at Brigham and Women’s Hospital, where he was assistant professor in surgery at Harvard Medical School. Since joining the medical staff in 2004, Dr. Woodard has continued to practice complex spinal surgery and has established the Neurosurgery Fellowship in spinal surgery at New England Baptist Hospital. He has been an editorial Board member for the Journal of Spinal Disorders, SpineUniverse.com, and is an ad hoc reviewer for Neurosurgery, Journal of Neurosurgery, and the New England Journal of Medicine. Dr. Woodard is a member of numerous professional societies and organizations that include the American Association of Neurological Surgeons, the Congress of Neurological Surgeons, the Joint Section of the American Association of Neurological Surgeons (AANS)/CNS, Spine and Peripheral Nerve, AO Spine North America, the North American Spine Society, Massachusetts Medical Society, and the Racchidian Society. He is a past chairman of the AO Spine North America Board and serves on the Board of AO Spine International. Dr. Woodard has published many articles and book chapters in the field of spine surgery and lectures extensively, both nationally and internationally.


Brian Hess, Chief Technology Officer Mr. Hess, a former Stryker biomaterials product development specialist, joined InVivo as its director of product development in February 2012. In this capacity, Mr. Hess is responsible for managing, developing, and maintaining the pipeline for InVivo’s entire portfolio. Prior to joining the Company, Mr. Hess spent the previous eight years at Stryker Spine, Inc. developing biomaterial technologies for the orthopedic market, and he has led multiple product development teams through the FDA process. Mr. Hess was instrumental in developing HydroSet™, an injectable calcium phosphate‐based bone substitute, from concept to product launch. The product has become a market‐leading bone scaffold, and Stryker awarded Mr. Hess and his team with “Best Technology” and “Best Team Synergy” for their work on this product. Mr. Hess also won several research and development awards during his tenure at Stryker. Most notably he was named “Co‐Innovator of the Year” in 2010 within Stryker Orthopeadics. Jonathan R. Slotkin, M.D., Medical Director and Scientific Advisory Board Member Dr. Slotkin is a clinical neurosurgeon and research scientist with expertise in both complex and minimally invasive spinal surgeries, spinal oncology surgery, and brain tumor surgery. Dr. Slotkin completed residency training in neurosurgery at Harvard Medical School’s Brigham and Women’s Hospital. He performed a fellowship in complex spinal surgery with Dr. Woodard. He is the co‐editor of a two‐volume publication on spinal surgery. Dr. Slotkin is currently a neurosurgeon with the Washington Brain and Spine Institute. His research interests include regeneration and plasticity after SCI, and nanotechnology initiatives for cellular labeling and non‐invasive cell tracking. Dr. Slotkin has authored or co‐authored several peer‐reviewed scientific publications in the areas of repair after SCI in animal models, and in vivo quantum dot labeling of neural stem cells. Dr. Slotkin has expertise in the application of nanotechnology research to clinical neurosurgery and neurology. His work was awarded the Apfelbaum Award for Research by the AANS. Dr. Slotkin has been a featured medical commentator on CNN, MSNBC, and Voice of America, among other media outlets. Rick Layer, Ph.D., Director of Research Dr. Layer is the director of research at InVivo. He was formerly director of program operations with Alseres Pharmaceuticals, Inc. (ALSE‐OTC) where he managed manufacturing and other project operations supporting the development and clinical evaluation of a neuroregenerative, recombinant protein for SCI. Previously, as a research director at Cognetix, Inc., Dr. Layer managed preclinical research programs focused on the development of bioactive peptides for chronic pain and other neurological conditions. Dr. Layer has a B.A. from Gettysburg College, an M.Sc. from the Philadelphia College of Pharmacy & Science, and a Ph.D. in pharmacology from Ohio State University. He was a post‐doctoral fellow in the Laboratory of Neuroscience at the National Institute of Diabetes and Digestive and Kidney Diseases (NIDDK), part of the National Institutes of Health (NIH). With scientific expertise in neuropharmacology and neuroscience, Dr. Layer is the co‐author of 28 peer‐reviewed publications and a co‐inventor on 10 issued patents. Lauren Mitarotondo, Vice President, Operations Ms. Mitarotondo currently serves as InVivo’s vice president, operations. In this capacity, Ms. Mitarotondo leads InVivo’s daily operations, including intellectual property, facilities, human resources, and strategic partnerships. Ms. Mitarotondo joined the Company in 2008 as assistant to the CEO. She held this position for three years before being promoted to her current role in 2011. Ms. Mitarotondo graduated from Boston College in 2008 with a B.A. in English and Italian.


John Bonasera, Director of Regulatory Affairs Mr. Bonasera is the director of regulatory affairs at InVivo. He has over 25 years of experience in the medical device industry at Johnson & Johnson’s (JNJ‐NYSE) Ortho Diagnostic Systems, Nova Biomedical Corp., Arrow International, Inc., and BioSphere Medical Inc. He has been responsible for developing regulatory strategies to license medical products in the U.S. and in foreign markets, directing clinical trials, and managing cGMP‐ and E.U.‐compliant quality systems for Class I, II, and III medical products. Mr. Bonasera was formerly director of clinical, regulatory, and quality affairs at Harvest‐Terumo where he led four FDA‐approved IDE clinical investigations of the use of autologous stem cells to treat vascular and cardiac diseases. He has a B.A from the University of Massachusetts in biology and psychology. Board of Directors

InVivo’s Board of Directors oversees the conduct of and supervises the Company’s management. Detailed biographies of these individuals are provided below.

Frank Reynolds, InVivo’s Chairman of the Board, CEO, CFO

Biography provided on page 12.

George Nolen, Lead Director

Mr. Nolen is the former president and CEO of Siemens Corp., the U.S. subsidiary of Siemens AG. Mr. Nolen rose through the ranks during his 26‐year career with Siemens to become the first American selected to manage Siemens’ U.S. operations in January 2004. Mr. Nolen oversaw more than $17 billion in strategic acquisitions, positioning Siemens in several key industries. Prior to his role as CEO, Mr. Nolen served as president of Siemens’ Information and Communications division, overseeing this $2 billion business from 1998 to 2004. As CEO, Mr. Nolen was active in the Business Roundtable, the executive committee of the U.S. Chamber of Commerce, and as a director on the Board of the New York Hall of Science. Currently, he is on the Advisory Board of Madison Capital Partners. Mr. Nolen is also the rector of the Board of Visitors at Virginia Tech University, where he is an alumnus.

Sir Richard Roberts, Ph.D., Director and Scientific Advisory Board Member

Sir Roberts is the chief scientific officer of Massachusetts‐based New England Biolabs, Inc. He obtained a B.Sc. in chemistry in 1965 and a Ph.D. in organic chemistry in 1968. He completed his postdoctoral research at Harvard, where he studied the transfer ribonucleic acids (tRNAs) that are involved in the biosynthesis of bacterial cell walls. From 1972 to 1992, he worked at Cold Spring Harbor Laboratory, reaching the position of assistant director for research. He began work on the newly discovered Type II restriction enzymes in 1972. In the next few years, over 100 such enzymes were discovered and characterized in Sir Roberts’ laboratory. His laboratory has cloned the genes for several restriction enzymes and their cognate methylases, and study of these enzymes has been a major research theme. Sir Roberts has also been involved in studies of adenovirus‐2, beginning with studies of transcription that led to the discovery of split genes and mRNA splicing in 1977. This was followed by efforts to deduce the DNA sequence of the adenovirus‐2 genome and a complete sequence of 35,937 nucleotides was obtained. This latter project required the extensive use of computer methods, both for the assembly of the sequence and its subsequent analysis. His laboratory pioneered the application of computers in this area and the further development of computer methods of protein and nucleic acid sequence analysis continues to be a major research focus. The field of DNA methyltransferases is also an area of active research interest, and crystal structures for the HhaI methyltransferase, both alone and in complex with DNA, have been obtained in collaboration with Dr. X. Cheng. Sir Richard’s current research interests focus on using bioinformatics and genomics to find new enzyme activities and to drive his experimental program. Most recently, he is involved in a large community‐based project called COMBREX aimed at improving the functional annotation of genomes. In 1993, Sir Roberts won the Nobel Prize in Medicine and Physiology.


Adam K. Stern, Director

Mr. Stern joined InVivo’s Board of Directors in 2010. He currently serves as the head of private equity banking at Aegis Capital Corp. and CEO of SternAegis Ventures. Formerly, Mr. Stern held the position of senior managing director of Spencer Trask Ventures, Inc.—the placement agent of InVivo’s offering. He has over 20 years of venture capital and investment banking experience, focusing primarily on the technology and life science sectors of the capital markets. Mr. Stern joined Spencer Trask in September 1997 from Josephthal & Co., members of the NYSE, where he served as senior vice president and managing director of private equity marketing and held increasingly responsible positions from 1989 to 1997. He has been a licensed securities broker since 1987 and a general securities principal since 1991. Mr. Stern currently also sits on the Boards of various closely held companies and one public company, PROLOR Biotech, Inc. (PBTH‐NYSE MKT). Mr. Stern holds a B.A. with honors from the University of South Florida in Tampa. Scientific Advisory Board Sir Richard Roberts, Ph.D., Director and Scientific Advisory Board Member Biography provided on page 14. Robert S. Langer, Sc.D., Cofounder and Scientific Advisory Board Member Dr. Langer is the David H. Koch Institute Professor at MIT. He has written over 1,130 articles and has roughly 800 issued and pending patents worldwide. Dr. Langer’s patents have been licensed or sublicensed to over 220 pharmaceutical, chemical, biotechnology, and medical device companies. He served as a member of the FDA’s SCIENCE Board, the FDA’s highest advisory board, from 1995 to 2002 and as its chairman from 1999 through 2002. Dr. Langer has received over 180 major awards, including the Economist’s Innovation Award in Bioscience in 2011. In 1989, Dr. Langer was elected to the Institute of Medicine of the National Academy of Sciences and, in 1992, he was elected to both the National Academy of Engineering and to the National Academy of Sciences. He is one of few people elected to all three U.S. National Academies and, at age 43, was the youngest in history (to date) to receive this distinction. Forbes (1999) and BioWorld® (1990) have named Dr. Langer as one of the 25 most important individuals in biotechnology globally. Discover (2002) named him as one of the 20 most important people in this area. Forbes (2002) selected Dr. Langer as one of the 15 innovators worldwide expected to “reinvent our future.” Time and CNN (2001) named Dr. Langer as one of the 100 most important people in America and one of the 18 top people in science or medicine in America (America’s Best). Parade (2004) selected Dr. Langer as one of six “Heroes whose research may save your life.” Dr. Langer has received honorary doctorates from Harvard University, the Mt. Sinai School of Medicine, Yale University, the ETH (Switzerland), the Technion (Israel), the Hebrew University of Jerusalem (Israel), the Universite Catholique de Louvain (Belgium), Rensselaer Polytechnic Institute, Willamette University, the University of Liverpool (England), the University of Nottingham (England), Albany Medical College, Pennsylvania State University, Northwestern University, Uppsala University (Sweden), and the University of California‐San Francisco Medal. He received a Bachelor’s degree from Cornell University in 1970 and an Sc.D. from MIT in 1974, both in chemical engineering. Jonathan R. Slotkin, M.D., Medical Director and Scientific Advisory Board Member Biography provided on page 13.


Todd Albert, M.D., Scientific Advisory Board Member

Dr. Albert is the James Edwards Professor and chair of the Department of Orthopedics at Jefferson Medical College in Philadelphia. He is also the president of Philadelphia’s Rothman Institute. Previously, he served as co‐director of reconstructive spine surgery and the Spine Fellowship Program at Thomas Jefferson University. Dr. Albert graduated magna cum laude from Amherst College, and received an M.D. from the University of Virginia’s School of Medicine. He completed a residency in orthopedic surgery at Thomas Jefferson University Hospital (where he was named “Outstanding Chief Resident”) and a fellowship in spinal surgery at the Minnesota Spine Center. Dr. Albert serves on the Boards of several scholarly journals, including Spine, the Spine Journal, and the Journal of Spinal Disorders and Techniques, as well as medical associations, including the American Academy of Orthopedic Surgery, the Cervical Spine Research Society, the Scoliosis Research Society, the International Society for Study of the Lumbar Spine, and the North American Spine Society. He is chair of Network Development for the National Spine Network, a consortium of centers of excellence for spine care throughout the U.S. Dr. Albert has published over 200 scientific articles, authored over 40 book chapters, and presented his research both nationally and internationally. He has published seven textbooks on spinal surgery, including Spine Surgery: Tricks of the Trade; Surgical Approaches to the Spine; Master Cases: Spine Surgery; Physical Examination of the Spine; and Spinal Deformities, the Essentials.

V. Reggie Edgerton, Ph.D., Scientific Advisory Board Member Dr. Edgerton has been the director of the Edgerton Laboratory at the University of California, Los Angeles (UCLA) since 1968 and is a professor in the Department of Physiological Sciences at UCLA. His research is focused on neural control of movement and how this neural control adapts to altered use (including after SCI). He completed a Ph.D. under the direction of Drs. Wayne Van Huss, Rex Carrow, and William Heusner at Michigan State University. Dr. Edgerton’s laboratory is one of six laboratories in the world receiving funding from the Christopher and Dana Reeve Foundation. While a professor at UCLA, Dr. Edgerton has served as chair of the department. He has also served as a visiting professor at the University of Goteborg in Sweden, the Tokyo Metropolitan Neuroscience Institute, and the Panum Institute of the University of Copenhagen. He received a Citation Award by the American College of Sports Medicine, and has served NASA in a number of roles. Dr. Edgerton is on the Science Advisory Council of the Christopher and Dana Reeve Foundation, a merger of the Christopher Reeves Foundation (CRF) and the American Paralysis Association. Dr. Edgerton has co‐authored two books: (1) The Biology of Physical Activity; and (2) An Atlas and Source Book of the Lesser Bushbaby. These books evolved directly from work begun when he was at Michigan State University. In addition, he is the author of approximately 300 research papers. Eric Woodard, M.D., Chief Medical Officer and Scientific Advisory Board Member Biography provided on page 12.


Core Story

InVivo is developing multiple products for the spinal cord injury (SCI) and emerging neurotrauma markets. The Company’s product candidates are based on its biopolymer scaffolding and hydrogel technologies, which are supported by over a decade of research by Dr. Robert S. Langer (biography on page 15) and his research team at MIT’s Langer Lab. InVivo’s SCI technologies are designed to address the underlying pathology of SCIs versus many marketed products, which treat only the symptoms. Additional applications may include SCIs caused by tumor removal, peripheral nerve damage, and postsurgical treatment of transected nerves. To date, two papers have been published that employ InVivo’s materials in the retina, demonstrating the therapy’s potential in this area. The Company’s technology may further be applicable to wound injuries in a military setting that affect the spinal cord. Ultimately, InVivo could develop a line of products to treat the spinal cord based on its current technologies, which could be repurposed for other applications throughout the body. InVivo’s lead candidate is a biopolymer scaffolding device for the treatment of acute SCI, which may have an accelerated path to market if regulated under the Humanitarian Use Device/Humanitarian Device Exemption (HUD/HDE) pathway. To date, the Company has submitted an Investigational Device Exemption (IDE) application to the U.S. Food and Drug Administration (FDA) to commence human clinical studies. At present, InVivo anticipates that it could receive FDA approval to initiate the trial in early 2013. Greater details regarding the research supporting the scaffolding device as well as information about the clinical trial and the Company’s commercialization strategy are provided on pages 24‐32. As well, InVivo recently engaged the FDA to discuss its hydrogel product in combination with methylprednisolone. While this product may have a slightly longer path to market (versus the scaffolding device alone), many researchers suspect that a combination therapy—involving drugs, cells, and a novel delivery vehicle—is likely to be most effective in treating nervous system injuries by addressing multiple parts of the repair problem (Source: Dana Alliance for Brain Initiatives’ The 2006 Progress Report on Brain Research). The Company expects to submit hydrogel‐based applications to the FDA to treat SCI and pain. Additional information about the hydrogel—including potential applications, supporting data, and details for an ongoing preclinical study—are provided on pages 33‐36. InVivo recently announced that it is developing a third candidate to reduce fibrosis (scarring) in surgical procedures and dermatological applications based on benefits observed to date in both rodent and primate models (described on page 37). The Company is also exploring the potential of its scaffolding technology in combination with cellular therapies to treat chronic SCIs (detailed on page 38). InVivo’s chief focus remains developing biomaterial‐based neuroprotection technologies until cell therapies make more progress through the FDA. The Company is capitalizing on a number of channels to raise awareness for its technologies as well as for the emerging neurotrauma market. These initiatives are discussed on page 39.


Spinal Cord Injury Overview

The spinal cord serves as the body’s main information pathway, and constantly receives sensory information from the skin, joints, and muscles, which it then relays to the brain. The spinal cord delivers messages from the brain to the peripheral nervous system (PNS), which extends throughout the rest of the body. Without the spinal cord, the brain cannot communicate with the body. The spinal cord has a core of nerve cells that are surrounded by long nerve fibers carrying signals called axons. The tracts extend the length of the spinal cord, serving to carry signals to and from the brain. The nerve fibers are connected to nerve roots located in between each vertebra, as illustrated in Figure 5. The nerve roots link the CNS to the PNS. Because of its central role coordinating muscle movements and interpreting sensory input for the body, injury to the spinal cord can cause significant damage.

The hard vertebrae are able to protect the soft spinal cord from injury most of the time. However, the cartilage discs between the vertebrae and the passages through which the spinal nerves exit to the rest of the body are areas where the cord is vulnerable to direct injury. In an SCI, the vertebrae of the backbone may become fractured or dislocated, causing traumatic injury to the spinal cord. These injuries can occur at any level of the spinal cord. SCIs impact two key functions of the body: (1) locomotion (walking); and (2) sensory (feeling). The segment of the cord that is affected and the severity of the injury determine which body functions are compromised or lost altogether. While it is possible for the spinal cord to be completely severed—causing paralysis and loss of sensation below the severed section as the cord can no longer relay nerve signals past this point—the majority of injuries are not this severe. More often, an SCI entails fractures and compression of the vertebrae, which can then tear into cord tissue or press down on the axons. Rather than causing complete paralysis below the impacted area, this degree of injury allows some movement and sensation below the affected spinal cord region. While some SCIs cause irreversible damage and paralysis, the effects of others can sometimes be improved with therapy.

Figure 5

SPINAL NERVE STRUCTURES

Source: SpineUniverse.com.

Spinal CordBase of the Brain

Peripheral NervesNerve

Roots

Cauda Equina

Nerve Root

Spinal Cord

Vertebral Body

Neuroforamen


An SCI may be traumatic or non‐traumatic. A traumatic SCI may result from a sudden blow to the spine that fractures, dislocates, crushes, or compresses one or more vertebrae, such as can occur during a fall, sports injury, or car accident. It can also result from a gunshot or knife wound that penetrates and completely or partially severs the spinal cord. In traumatic SCIs, additional damage typically occurs over weeks or days due to bleeding, swelling, inflammation, and fluid accumulation in and around the spinal cord. In contrast, non‐traumatic SCIs may be caused by arthritis, cancer, inflammation or infection, or disk degeneration of the spine. When damage occurs to the upper part of the spine, quadriplegia (paralysis of the majority of the body, including the arms and legs) is the likely result. Damage in the middle back (the thoracic or lumbar areas) can cause paralysis of the lower trunk and lower extremities (called paraplegia). Progression of SCIs In an SCI, damage begins at the moment of injury. Bone fragments, disc material, or ligaments bruise or tear into cord tissue, compressing and damaging axons as well as neural cell membranes. Blood vessels may also rupture, causing heavy bleeding in the gray matter of the spinal cord and potentially spreading to other areas. Historically, physicians and researchers believed that cells died as a direct result of an SCI trauma. However, recent findings have shown that cells in the injured spinal cord also die due to apoptosis, a type of programmed cell death that occurs over the days and weeks after the initial injury. Figure 6 overviews the typical progression of effects following an SCI.

The initial physical trauma sets off a second phase of adverse effects, which includes a number of biochemical and cellular events that kill neurons, strip axons of myelin, and trigger an inflammatory immune system response. Typically, immune system cells that circulate in the blood cannot enter the brain or spinal cord due to the blood‐brain barrier (BBB), which separates the circulatory system from the central nervous system. However, when the BBB is breached as a result of injury, immune system cells can invade the brain or spinal cord and trigger an inflammatory response that causes fluid accumulation (swelling) and the influx of immune cells (e.g., neutrophils, T‐cells, macrophages, and monocytes). The second wave can continue to cause damage for days or weeks, sometimes extending the damage several segments above or below the original injury and exacerbating the original tissue lesion. Within minutes of an SCI, the spinal cord swells significantly at the point of injury. The swelling can reduce or cut off blood flow to the spinal column, preventing oxygen from reaching the spinal cord tissue and impacting the body’s ability to self regulate. As a result, blood pressure drops, sometimes dramatically, and interferes with the electrical activity of neurons and axons. Collectively, these effects can cause a condition called “spinal shock,” in which even undamaged areas of the spinal cord can become temporarily disabled and lose their ability to communicate normally with the brain. Because of this broad, indirect effect, complete paralysis may develop—lasting up to several days (depending upon the severity of the injury). Spinal shock is believed to occur in approximately half of SCIs, although neurologists differ on the extent and impact of spinal shock (Source: the National Institute of Neurological Disorders and Stroke [NINDS]).

TYPICAL PROGRESSION OF A SPINAL CORD INJURY

Figure 6

~21 day process

Loss of motor control

and sensory function



The secondary effects of the injury increase the degree of scarring and the size of the tissue lesion beyond what was directly caused by the initial injury. Axons that are stripped of myelin or that become disconnected from the brain lose their ability to function. This effect worsens as glial cells cluster to form a scar, creating a physical barrier that inhibits any axons that could have otherwise regenerated from reconnecting to the brain. While some axons may remain unharmed, without a supporting network, these are typically not sufficient to convey meaningful information to the brain. SCIs Can Impact Other Areas of the Body Depending on the location of the injury, a number of biological processes can be affected by an SCI, leading to medical complications such as chronic pain, bladder and bowel dysfunction, and an increased susceptibility to respiratory and heart conditions. A patient’s recovery and quality of life is highly dependent on addressing these complications. Figure 7 overviews a selection of the side effects that can occur as a result of an SCI.

Immediate Therapies for Spinal Cord Injuries Immediate treatment has the potential to reduce long‐term effects. Later treatment usually includes medication and rehabilitation therapy. Any individuals with suspected SCIs should be stabilized and immobilized to prevent further injury to the spine. Once the patient arrives at the emergency room, the primary focus is to assess and treat any respiratory complications, which occur in roughly one‐third of patients with injury to the neck region (Source: NINDS). Additionally, medical staff must address low blood pressure (hypotension), internal and external bleeding, and neurogenic shock and other potentially lethal effects of SCIs.

Once life‐threatening emergencies are addressed, physicians can realign the spine using a rigid brace or axial traction to stabilize the spine and prevent additional damage. When treating SCI patients, physicians focus on decompressing and stabilizing the spinal column. Decompression entails removing bone or other structures that are pressing on the spinal cord. Once decompression is completed, pedicle screws and rods are implanted to stabilize the spine (as shown in Figure 8). InVivo estimates that this surgery costs $68,000, based on Medicare reimbursement data. It is important to note that stabilization surgery does not prevent the advancement of bleeding and inflammation or the progression of secondary injury and does not address the resultant paralysis.

� Autonomic dysreflexia (a l ife‐threatening reflex action) � Limited reproductive and sexual function

� Bladder and bowel problems � Neurogenic pain

� Blood clots � Pressure sores (or ulcers)

� Breathing problems � Spasms

� Irregular heart beat and low blood pressure � Ventilator‐associated pneumonia

POTENTIAL ADVERSE EFFECTS OF SPINAL CORD INJURIES

Figure 7

Source: the National Institute of Neurological Disorders and Stroke (NINDS).

Source: www.thebackcenter.net.

PEDICLE SCREWS AND RODS

Figure 8

Pedicle Screw

Rod


As well, within eight hours of the injury, patients are often administered methylprednisolone—a steroid that is known to have anti‐inflammatory effects. The steroid appears to suppress immune cell activity, mitigating damage to nerve cells and reducing inflammation near the injury. To date, the National Acute Spinal Cord Injury Studies (NASCIS) II and III, a Cochrane Database of Systematic Reviews article of all randomized clinical trials, and other published reports have supported improved motor function and sensation in SCI patients who received high doses of methylprednisolone within eight hours of injury (Source: Medscape® Reference, part of WebMD® LLC). Ultimately, the outcome to any SCI is directly correlated to the degree of spared spinal cord tissue and the quantity of functioning axons—more axons equates to a lesser disability. A combination of effective emergency care, aggressive treatment, and comprehensive rehabilitation can minimize damage to the CNS and may even restore a degree of physical functioning. Advances in Spinal Cord Injury Research and Treatment Research surrounding SCI has sought to understand the underlying biological mechanisms that inhibit or promote new growth in the spinal cord, including how neurons and axons grow in the CNS and why they can no longer regenerate after an SCI. Using this information as a platform, researchers are focusing on four key principles of spinal cord repair to develop treatments and therapies for SCIs: (1) preventing secondary damage to nerve cells following the initial injury; (2) replacing damaged nerve cells; (3) stimulating the regrowth of axons past injured areas and targeting their connections appropriately; and (4) retraining neural pathways within the spinal cord and CNS to help restore body functions. Once an SCI has occurred, the molecular and cellular environments of the spinal cord change over the course of several weeks or even months. A key goal of SCI therapy is neuroprotection, which may minimize the damage of the SCI and improve an individual’s outcome. Potentially in the future, another objective may be regeneration of healthy spinal cord tissue. Effective SCI treatment regimens must employ a combination of therapies to address and adapt to the different types of damage that can occur during and after the injury. Researchers are developing and evaluating a number of techniques to improve SCI outcomes—including minimizing scar tissue, facilitating the regrowth of nerve fibers, circumventing growth inhibition, nurturing regrowth through tissue engineering and nerve/cell transplantation, employing growth factors, and employing stem cells to replace damaged cells. A selection of these therapies is described in the Competition Section on pages 40‐43. Researchers, such as InVivo, are studying techniques to provide the scaffolding or substrate necessary to support axon growth across an injured area of the spinal cord. Newly developed biocompatible materials (or “biomaterials”) can also be used to help fill the cavities inside the spinal cord that result from an injury, in essence, forming a “bridge” across the damaged region. As well, these biomaterials can serve as a supportive environment for regrowing nerve fibers, blood vessels, and supporting tissues. The transplanted tissue provides physical support for neurons to regrow. Adding growth factors—vitamins or hormones that stimulate the growth of nerve fibers—into the scaffold can further improve neuron regrowth.

Market Opportunity In a recent study initiated by the Christopher & Dana Reeve Foundation, nearly 5.6 million people in the U.S. are living with paralysis. Figure 9 (page 22) highlights the common causes of paralysis in the U.S. noting that SCI is the second leading cause of paralysis to date. Approximately 1.3 million cases of paralysis (or 23%) are caused by SCI, slightly behind strokes (1.6 million or 29% of paralysis cases). There are approximately 12,000 new SCI cases per year in the U.S., or roughly 40 cases per million individuals (Source: the National Spinal Cord Injury Statistical Center, February 2012). The cost of managing the care of SCI patients is approximately $4 billion annually.


Since 1973, the National Spinal Cord Injury Statistical Center (NSCISC) at the University of Alabama has been commissioned by the U.S. government to maintain a national database of SCI statistics. The NSCISC has projected an annual SCI incidence growth rate of 1% due to a growing U.S. population and escalated societal risks that include faster highway speed limits (with vehicle crashes accounting for 40.4% of SCIs), increased gun ownership, and expanding participation in extreme sports. As well, falls and work‐related accidents account for a portion of SCIs. The financial effect of an SCI, according to the NSCISC, is significant and varies greatly due to the severity of injury. First year costs can range from $321,720 to $985,774, with 87.9% of SCI patients discharged from hospitals to private homes. That said, however, only a small fraction of patients ever regain full function because current medical interventions address only the symptoms of SCI rather than the underlying neurological pathology. These costs place an incredible financial burden on families, insurance providers, and government agencies. Figure 10 provides data on the cost of care for an SCI patient, including a summary of the average yearly expenses as well as the estimated lifetime costs by age at injury.

CAUSES OF PARALYSIS IN THE U.S. (out of 5,596,000 paralysis cases)

Figure 9

Source: the Christopher and Dana Reeve Foundation's "One Degree of Separation: Paralysis and Spinal Cord Injury in the United States."

First Year Each Subsequent Year 25 Years Old 50 Years Old

High Tetraplegia (C1‐C4) $1,023,924 $177,808 $4,543,182 $2,496,856

Low Tetraplegia (C5‐C8) $739,874 $109,077 $3,319,533 $2,041,809

Paraplegia $499,023 $66,106 $2,221,596 $1,457,967

Incomplete Motor Function at Any Level $334,170 $40,589 $1,517,806 $1,071,309

Figure 10

COST OF CARE FOR A SPINAL CORD INJURY PATIENT

(in February 2012 dollars)

EXPENSES

AVERAGE YEARLY

(discounted at 2%)

Source: the National Spinal Cord Injury Statistical Center's Spinal Cord Injury Facts and Figures at a Glance, February 2012.

Note: These figures do not include any indirect costs, such as losses in wages, fringe benefits, and productivity, which average $69, 204 per year in

February 2012 dollars but vary substantially based on education, severity of injury, and pre‐injury employment history.

COSTS BY AGE AT INJURY

ESTIMATED LIFETIME

SEVERITY OF INJURY


InVivo’s first biopolymer device for acute SCI (detailed on pages 24‐32) is anticipated by the Company to begin human clinical trials in early 2013. Since there are no products on the market today that cure paralysis caused by SCI, the market opportunity for InVivo’s technology could be significant. The Company estimates the total addressable market for acute SCIs could approximate $10 billion annually (Source: InVivo’s press release, “InVivo Therapeutics Reports Third Quarter 2012 Financial Results, Provides Business Update,” November 14, 2012). InVivo believes that its products offer significant growth potential with mitigated risk due to the shorter regulatory approval process that exists for medical devices as well as potential margins that could eventually be achieved, which the Company anticipates could be on par with that of a pharmaceutical product.


Biopolymer Scaffold to Treat Spinal Cord Injury

Injury to the spinal cord not only causes cell death but additional damage is incurred as a result of a series of secondary effects resulting from the body’s natural inflammatory and immune responses, which can last for several weeks. Limiting or preventing these secondary effects is essential to a patient’s recovery process and quality of life post‐injury. InVivo is developing a novel biopolymer scaffold device—alone and in combination with human neural stem cells (hNSCs), growth factors, and cells (described on page 38)—to limit bleeding and inflammation (reducing the secondary damage caused by SCIs) and support the body’s repair and recovery process in the wake of an SCI. InVivo and its MIT tissue engineering experts designed the scaffold using nanotechnology‐based processes to develop an extracellular matrix replacement to fill the tissue deficit. The scaffold mimics the gray and white matter of the spinal cord. Gray matter (named for its appearance) is the collection of nerve cell bodies (neurons) in the center of the spinal cord. This region is surrounded by “white matter”—nerve processes (axons) covered with an insulating substance called myelin that is white in appearance. The ratio of white to gray matter varies throughout the spinal cord. As shown in Figure 11, the biopolymer scaffold is placed in an injured region, serving as a physical support upon which neuronal growth and repair can occur. The product works by reducing glial scarring and sparing healthy spinal cord tissue, thereby enabling neuroplasticity—the process whereby spinal cord signals are rerouted from the brain through the spared tissue to the spinal cord regions below the point of injury.

Presently, there are no medications or surgical procedures that treat the underlying paralysis caused by an SCI. When treating SCI patients, physicians focus on decompressing and stabilizing the spinal column by implanting pedicle screws and rods in a surgery that costs approximately $68,000 but does not prevent the worsening of bleeding and inflammation, the progression of secondary injury, or address the resultant paralysis. InVivo believes that its technology, when used in addition to decompression and stabilization, could prevent or minimize secondary injury and restore function in SCI patients. The scaffold could be implanted quickly and easily by the neurosurgeon in less than thirty minutes as an adjunct to the screw‐rod procedure. Similar to tissue plasminogen activator (tPA) in stroke patients, which can dissolve stroke‐causing blood clots to improve an individual’s prognosis and functional recovery versus untreated patients if administered within hours of the onset of symptoms, InVivo’s scaffolding technology may spare tissue by mitigating bleeding and inflammation and subsequently restoring function to SCI patients.

The Brown‐Sequard

Injury Model mimics

a spinal cord injury

with 50% removal

of the spinal cord

RENDERING OF INVIVO'S BIOPOLYMER SCAFFOLD DEVICE AND POTENTIAL APPLICATION

Figure 11

InVivo's Biopolymer Scaffold The Scaffold Is Surgically Implanted at the SCI Site


InVivo's Scaffold


InVivo’s biopolymer scaffold is designed for implantation or injection into an acute SCI lesion, as shown in Figure 12. In a penetrating injury scenario, neurosurgeons initially perform a laminectomy to decompress the spinal cord, followed by the implantation of pedicle screws to stabilize the spinal column. The neurosurgeon then has access to implant InVivo’s scaffold—which is customized to fit the patient’s lesion prior to surgical implantation or injection—into the spinal cord. Ultimately, a dural seal is placed above the scaffold.

The scaffold is composed of the biopolymer poly lactic‐co‐glycolic acid (PLGA) and the substrate polylysine (PLL), which is generally recognized as safe (GRAS) by the FDA. As well, PLGA is FDA approved for use in various applications, including surgical sutures, drug delivery, and tissue engineering, and has been used clinically in the past. Since it is biocompatible, it does not harm living tissue. A biodegradable scaffold’s rate of degradation and its physical structure influence the body’s inflammatory response. Whereas fast degradation rates result in high concentrations of potentially inflammatory molecules, slower rates of degradation, as seen with InVivo’s scaffolding device, garner a significantly smaller immune response. The polymer used in InVivo’s scaffolding device is also biodegradable. Similar to dissolvable stitches (or absorbable sutures), which are naturally decomposed by the body and typically do not require a follow‐up visit to remove, biodegradable polymers do not require an additional visit to the physician for extraction after use. Once implanted, InVivo’s device provides therapeutic benefit and subsequently degrades naturally inside of the body at a controlled rate over approximately 12 weeks. Benefits Provided by the Biopolymer Scaffold InVivo’s biopolymer scaffolding is designed to prevent and mitigate the secondary injuries caused by inflammatory responses following an SCI. The presence of biomaterials can create a cell surface signaling role, which may have an essential function in reducing inflammation. The Company believes that the principal areas of mechanism to reduce inflammation involve an action—the cell surface activation (signaling)—as well as the physical role of filling the lesion caused by SCI. Once implanted into an SCI lesion, InVivo’s biopolymer scaffold inhibits cellular signaling by inflammatory cytokines, which are responsible for signaling the body’s immune response to injury. Implantation of the device also decreases nitric oxide‐associated radical formation and macrophage activation. Macrophages are thought to be part of the negative inflammatory response after injury. As such, inhibiting cell signaling in this region may reduce secondary effects caused by bleeding and inflammation. The Company’s scaffolding device is customized to fit each lesion, bridging any opening or gap created as a result of the injury. In turn, it serves as a matrix that supports growth and repair, while reducing the amount of physical cavitation and tissue loss. Moreover, as a synthetic extracellular matrix, the device promotes survival of surrounding neurons that were not damaged or killed as a result of the initial injury. In turn, by minimizing secondary effects and the destruction of surviving neurons, the scaffolding technology prevents astrogliosis (an abnormal increase in the number of astrocytes) and thus reduces glial scar formation. To date, these benefits have been observed in both rodent and primate models (as discussed under Scientific Support on pages 26‐29).

Figure 12

RENDERING OF INVIVO'S SPINAL CORD TREATMENT PROCEDURE FOR PENETRATING INJURY


1) Laminectomy decompresses

2) To stablize spinal column, pedicle screws

3) Customized scaffold is implanted in wound

4) Dural seal is applied on top of the scaffold


Scientific Support Creating preclinical models that accurately depict the effects of SCIs and their reaction to therapy poses a significant challenge. Rodent models are widely varied in their recovery from SCIs. However, complete cord transections in non‐human primates and other larger vertebrate models are not always feasible due to animal care concerns (Source: Journal of Neuroscience Methods 188: 258‐269, 2010). A rodent study completed by researchers at the Massachusetts Institute of Technology (MIT) and Harvard Medical School demonstrated the potential of the Company’s biopolymer scaffold to treat SCIs alone or in combination with hNSCs (laying the foundation for another product candidate as described on page 38). Throughout the study, researchers evaluated the rodents’ ability to voluntarily move muscles (neuromotor skills). Scores were recorded based on the Basso‐Beattie‐Bresnahan scale, a 20‐point scale with 0 indicating no voluntary motor function and 20 representing a full neuromotor recovery. Data collected from the study found that animals with the surgical implant exhibited neuromotor improvement as early as two weeks after the injury, while rodents receiving stem cell injections showed no therapeutic effect. While data collection for all animals ceased by week 10, the rodents had sustained their neuromotor recovery at one year with no adverse reactions. The complete results of the study were published in the Proceedings of the National Academy of Sciences. Although this study demonstrated the device’s potential, InVivo believes that data collected from nonhuman primates more accurately represent a product’s efficacy in humans. To date, the Company’s biopolymer scaffold has been evaluated in two primate studies, as summarized below. In the primate studies, a portion of the animal’s spinal cord was removed to create paralysis in one of the primate’s hind limbs, followed by surgical implantation of the Company’s device. InVivo’s first primate study involved four African green monkeys and was conducted at the St. Kitts Biomedical Research Foundation in the West Indies. Because the anatomy and neurophysiological characteristics of the spinal cord are highly similar in this type of primate and in humans, African green monkeys have been validated as an acceptable regulatory indicator of potential hazards in humans and can be used to support the regulatory transition into human studies (Source: Nature Medicine 13[5]: 561‐566, May 2007). The pilot study was designed to evaluate the ability of the model SCI to assess the therapeutic efficacy of the Company’s technologies. The model SCI entailed surgically removing the left half of the spinal cord between T9 and T10 (lateral hemisection), as shown in Figure 13. This model resulted in paralysis of the left hind limb and loss of sensory function in the right hind limb (called Brown‐Séquard syndrome) while maintaining bowel and bladder function.

Figure 13

INVIVO'S BIOPOLYMER SCAFFOLD SURGICALLY IMPLANTED INTO A PRIMATE HEMISECTION

Source: the Journal of Neuroscience Methods 188: 258‐269, 2010.

Scale Bar = 10 mm


The Company selected neurosurgeons who specialize in treating humans (versus primates) to perform the primate surgeries: Dr. Eric Woodard, InVivo’s chief medical officer and chief of neurosurgery at New England Baptist Hospital; and Dr. Jonathan R. Slotkin, the Company’s medical director and Scientific Advisory Board member who is also a neurosurgeon at the Washington Brain and Spine Institute. Detailed biographies for Drs. Woodard and Slotkin are provided on pages 12‐13. Drs. Woodard and Slotkin are expected to serve as principal investigators for the human clinical study (overviewed on pages 30‐31) and perform the implantation of the scaffold devices in enrolled patients. For the study, researchers implanted the scaffold alone in one primate, two primates received scaffolds with hNSCs, and one primate received no implant and served as the placebo base. The monkeys were placed in a see‐through ambulation chamber for four‐minute periods to video record movement at various points throughout the study (postoperative days 2, 3, 4, 6, and 10 and then weekly for 6 weeks and prior to sacrifice), followed by four minutes of upright standing encouraged with a food reward. The recordings enabled blind reviewers to perform qualitative and quantitative assessments of gait and posture deficiencies. Neuroscientists monitored the animals for six weeks post‐injury and evaluated the neuromotor performance of their hind legs using a 20‐point neuromotor observational scale for the hind limb of primates (developed by InVivo), which parallels the Basso‐Beattie‐Bresnahan scale for rodents. Similarly, a score of 0 indicates no voluntary muscle function after injury, a score over 8 demonstrates an ability to bear weight, and 20 represents a complete recovery. Similar to the rodent study, surgical implantation of the scaffold alone resulted in improved efficacy and functional recovery versus the control monkey (as illustrated in Figure 14). Visual observance of the primates that had an SCI and received treatment with InVivo’s scaffold—alone or in combination with stem cells—showed that the animals recovered the ability to walk with their backs parallel to the ground versus controls, which recovered partially but did not have a full ability to move their back hind leg. Additionally, the two monkeys that received scaffold with hNSCs showed increased neuromotor activity versus the control.

This study was considered a landmark study as, to the Company’s knowledge, it was the first to successfully demonstrate functional improvement in nonhuman primates that were paralyzed after an SCI model. As well, the study laid out a guideline for evaluating InVivo’s scaffolds. Prior to this study, InVivo did not know of any roadmap to guide the evaluation of its products and, to the Company’s knowledge, no SCI research team had conducted a successful primate study or any primate study comprising more than four primates in a cohort. The method and results of this study were published in the Journal of Neuroscience Methods in 2010. The Company’s former chief science officer, Dr. Christopher Pritchard, Ph.D., was awarded the American Spinal Injury Association’s

Figure 14

NEUROMOTOR PERFORMANCE IN INVIVO'S FIRST NON‐HUMAN PRIMATE STUDY AND THE PRIOR RODENT STUDY


Open‐field Walking Score from the Rodent Study (2002)

Left Hind Limb Neuromotor Performance from the St. Kitts Primate Pilot Study (2008)

scaffold plus cells scaffold alone cells alone lesion control

BB

B S

core

s

Days post Injury Days post Injury

Pri

mat

e N

euro

mo

tor

Fu

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Sca

le

0 7 14 21 28 35 42 49 56 63 70 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44

20

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12

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8

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8

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0


2011 Apple Award for his contributions to the article entitled Establishing a model spinal cord injury in the African green monkey for the preclinical evaluation of biodegradable polymer scaffolds seeded with human neural stem cells. Co‐authors of the paper included several members of InVivo’s team—Jonathan Slotkin, Frank Reynolds, Robert Langer, and Eric Woodard—as well as Dou Yu, Haining Dai, Matthew Lawrence, Roderick Bronson, and Yang D. Teng. Following the Company’s initial primate study, the primates evaluated in InVivo’s studies have been evaluated on treadmills and implanted with wireless electromyograms (EMGs) to collect biometric data in addition to behavioral data. The EMGs were used to monitor six muscles associated with walking. An additional primate study, also conducted by the St. Kitts Biomedical Research Foundation, has been completed. In addition to determining the feasibility and reliability of this preclinical model of SCI, the study was designed to evaluate the safety and efficacy of the scaffold device in a non‐human primate model and to establish assessment measures for future testing. The 12‐week study evaluated the Company’s biopolymer scaffold alone and in combination with growth factors or InVivo’s second candidate (a biocompatible hydrogel with methylprednisolone [overviewed on pages 33‐36]). Behavioral data was collected from 16 African green monkeys receiving these therapies and devices. The same surgically induced SCI model employed in the first primate study (T9/T10 thoracic lateral hemisection) was applied to all 16 monkeys, resulting in the Brown‐Séquard syndrome. Subsequently, four monkeys received the biopolymer scaffold alone, four received the scaffold soaked in growth factors (15 µg each of epidermal growth factor [EGF] and basic fibroblast growth factor [bFGF]), four received the hydrogel with the methylprednisolone, and four controls received no treatment. Drs. Woodard and Slotkin performed the surgical procedures. Improvements were evaluated using quantitative EMG and kinematic analysis, InVivo’s 20‐point, blinded neuromotor scoring system, and histological and immunohistochemical staining on cross sections of the spinal cord. Initial results from the study showed that the three treatment groups demonstrated higher neuromotor function (as illustrated in Figure 15) as well as improved kinematic and EMG data versus the control group.

NEUROMOTOR SCORES FROM INVIVO'S SECOND NON‐HUMAN PRIMATE STUDY

Figure 15



Principal Component Analysis (PCA) is an assessment designed to serve as a balanced measurement of primate ambulatory function, and takes into account various qualified kinematic, EMG, and gait parameters. In InVivo’s second primate study, post‐injury PCA scores varied significantly between the treated and untreated (control) monkeys 12 weeks following implantation (as shown in Figure 16).

A 2011 Primate Study Confirms Therapeutic Effect of InVivo’s Scaffold In September 2011, InVivo announced preliminary results from a rodent contusion model of acute SCI (versus the rodent hemisection model), which indicated that the Company’s biopolymer scaffold device exhibited a therapeutic effect. The contusion injury model is believed to more accurately represent the damage caused in the majority of human SCIs. Rodents treated with a biopolymer scaffold demonstrated reduced scarring and lesion size and higher neuron survival. The results from this rodent study were consistent with InVivo’s prior published peer‐reviewed findings in both rodent and non‐human primate hemisection models completed during 2008 and 2009. This study included wireless EMG and kinematic technologies to monitor electrical activity in the muscles in the legs of the animals. The study confirmed that the improvement in motor function observed in the treatment group was attributable to the biopolymer scaffolding alone and was not due to spontaneous recovery. The Company plans to submit the data to a peer‐reviewed journal for publication. InVivo Continues to Advance its Candidate Toward the Clinic Based on the positive preclinical data in both rodents and non‐human primates, InVivo plans to advance its biopolymer scaffold candidate into human testing as a device. Initially, the Company is focused on developing and commercializing its scaffold independently, without including any other FDA‐regulated drugs, for SCI treatment. This strategy is expected to enable the product to be classified as a Class III medical device (rather than a pharmaceutical or drug/device combination product), which typically has a shorter path to approval than pharmaceutical candidates. The Company believes that its candidate is on track to become the first biodegradable polymer scaffold approved to treat SCIs. InVivo is taking the appropriate measures to prepare for its first clinical studies in humans. In mid‐2011, the Company submitted an IDE application to the FDA for its biopolymer scaffolding device. The IDE must be approved before clinical testing can commence. As of October 2012, InVivo reports that the FDA has not put up any barriers or requested additional information that could delay the start of the study. InVivo aims to validate its cleanroom and manufacture Good Manufacturing Practice (GMP) batches and submit this information to the FDA as part of its IDE application.


INVIVO'S SCAFFOLD RESULTED IN HIGHER PCA SCORES VERSUS CONTROL AT WEEK 12

Figure 16


Ongoing Communication with the FDA

InVivo has stated that the FDA has agreed to an open dialogue with the Company as it looks to gain approval for its first product candidate, and has confirmed that the scaffold will be regulated as a medical device (Source: InVivo’s press release, “InVivo Therapeutics Releases Letter to Shareholders,” October 12, 2012). In April 2012, the Company met with FDA officials to discuss its IDE application and feedback relating to the proposed design and clinical protocol for the study. Based on this meeting, InVivo expects its scaffolding device to be regulated under the Humanitarian Use Device/Humanitarian Device Exemption (HUD/HDE) pathway, which should accelerate commercialization. The HUD/HDE pathway is an application process required to obtain approval for an HUD—a device that is intended to treat or diagnose a condition that affects less than 4,000 individuals in the U.S. annually.

The HUD/HDE pathway streamlines the approval process and focuses primarily on issues of safety and scientific soundness. While similar to a premarket approval (PMA) application, it does not require demonstration of efficacy. Thus, the HUD provision of the HDE incentivizes companies that seek to develop devices to treat or diagnose these smaller patient populations by potentially providing a shorter (and less costly) path to approval. Nevertheless, an application must include sufficient support demonstrating that the device is safe, and prove that the health benefit outweighs the risks or side effects (relative to currently available treatments) and that there are no similar products on the market.

Once an HDE is approved, the HUD can be marketed in facilities that have a local Institutional Review Board (IRB) that has approved the use of the device to treat or diagnose the specific disease.

Anticipated Pilot Clinical Studies in Humans

InVivo plans to initiate an open‐label pilot human clinical trial to evaluate the safety and efficacy of the device in acute SCI patients with thoracic injuries. Pending FDA approval of the IDE, InVivo expects to commence the trial in early 2013. Based on discussions with the FDA, InVivo expects the trial to include five patients—a factor that could accelerate the scaffold’s path to commercialization. At present, the Company plans to follow participants for one year, with patients enrolling and receiving treatment at Harvard’s Brigham & Women’s Hospital in Boston, Massachusetts, and through the Geisinger Health System in Pennsylvania, followed by rehabilitation through the Spaulding Rehabilitation Network and at the Shepherd Center in Atlanta, Georgia. Figure 17 illustrates the planned sites for the pilot clinical trial.

Secondary endpoints for the study include motor and sensory recovery—evaluating the device’s ability to protect and support spinal tissue and prevent secondary injury in acute SCI patients. Importantly, InVivo expects to release data as patients are treated.

Because the device is being regulated under an HDE, the FDA could approve the product based on data from the pilot clinical study. Nevertheless, if requested by the FDA, InVivo may conduct a larger pivotal human study in 30 acute contusion SCI patients after the pilot study is complete. Results that drastically improve the quality of life of patients—restoring bicep use or bladder or bowel function—may allow the Company to apply for approval through the FDA’s HDE protocol, given sufficient data to support the safety of the device and its proposed benefits.

Figure 17

ANTICIPATED CLINICAL SITES AND REHABILITATION CENTER FOR THE HUMAN PILOT STUDY

Clinical Sites in Massachusetts and Pennsylvania Rehabilitation Center in Georgia

Sources: InVivo Therapeutics Holdings Corp., Crystal Research Associates, LLC, and the respective centers' websites.


Celina Chang, the Company’s senior scientist, is responsible for leading the execution and review of experiments per GMP and GLP regulations, and undertaking the analysis of various cultured cells for InVivo’s chronic SCI therapies. Her experience has included process improvement for a three‐dimensional polymer matrix embedded with cells at Pervasis as well as advancing various regenerative medicine and stem cell therapies at Ortec International. Clinical and Commercialization Strategy In primate models, InVivo’s technology has allowed animals to recover from being unable to move their hind leg to locomoting. While the Company looks to replicate these results in humans, this degree of improvement surpasses the results necessary to garner FDA approval. Addressing any of the major challenges of paralysis—such as bicep or bladder function—could significantly improve a patient’s quality of life. For example, a patient’s inability to move their biceps often requires costly 24‐hour care as the individual is unable to perform many daily functions independently, including eating or drinking. If the only improvement from treatment was the restoration of bicep function, allowing the patient to perform a number of daily activities, the medical care costs significantly decrease from just that one improvement by eliminating the need for 24‐hour care. Similarly, SCI patients who have lost bladder function are often catheter dependent, which is costly and significantly increases a patient’s risk of a urinary tract infection. Restoring bladder or bowel function to these patients could also significantly improve quality of life and reduce medical costs of treating these adverse effects of paralysis. The Company believes that once safety of the device is established, any significant motor or sensory improvement or restoration of bowel and bladder function could support a regulatory approval. In preparation for trial, InVivo has assembled a team of FDA current GMP (cGMP) experienced experts, with recent hires in biomaterials engineering, biomaterials manufacturing, regulatory affairs, quality affairs, and project management. InVivo’s regulatory initiatives are led by John Bonasera, director of regulatory affairs. Mr. Bonasera has over 25 years of experience in the medical device industry at Johnson & Johnson’s Ortho Diagnostic Systems, Nova Biomedical, Arrow International, and Biosphere Medical. He has been responsible for developing regulatory strategies to license medical products in the U.S. and in foreign markets, directing clinical trials, and managing cGMP‐ and E.U.‐compliant quality systems for Class I, II, and III medical products. In addition, the Company consults Janice Hogan, a managing partner at Hogan Lovells US LLP with over 25 years of experience representing spine industry companies to the FDA, including Johnson & Johnson’s DePuy Spine, Synthes Spine, Abbott Spine, Stryker Spine, and Medtronic Spine. Manufacturing Preparations InVivo is focused on ramping up its cGMP facility within its new global headquarters to manufacture biopolymer scaffoldings for the planned clinical studies and potentially for commercialization of its products. As InVivo’s scaffold candidate employs FDA‐approved polymers and other GRAS ingredients, the Company believes that it can obtain its raw materials from suppliers that already have received manufacturing clearance from the FDA. The Company has appointed Bill D’Agostino as senior director of manufacturing and engineering. His experience, which spans 15 years at Covidien plc (COV‐NYSE) and seven years at Angiotech Pharmaceuticals Inc. (ANPMF‐OTC), includes every stage of the product life cycle. In his career, Mr. D’Agostino has launched more than 100 new polymer products, and has a wealth of expertise on technologies such as hydrogels and biodegradable sutures. InVivo’s team has developed a proprietary manufacturing process to produce its three‐dimensional scaffolding device according to GMP standards for its human clinical trials. The Company’s discoveries and improvements to its manufacturing process resulted in key patent filings during 2012, including patents related to the processes required to make a nontoxic synthetic biomaterial for spinal cord implantation, which InVivo believes may represent additional barriers of entry for others seeking to enter the emerging neurotrauma market.


Product Pricing Strategy The cost of care for an individual with complete paralysis in the first year is roughly $1 million, on average. Novel products, such as InVivo’s, which have the potential to restore function and eliminate the need for 24‐hour care, could result in a significant savings to the healthcare system. A lack of effective therapies on the market to treat SCIs may provide InVivo with the opportunity for premium pricing of its scaffolding device. InVivo may price its product at $60,000 per unit, but notes that the price could ultimately exceed $100,000 per unit. The Company anticipates that its gross margins could surpass 85%. InVivo’s biopolymer scaffolding device is designed to complement the current standard of care (the screw‐rod procedure)—with only one surgery required to perform both treatments. The Company estimates that the screw‐rod procedure costs an average of $68,000 (based on Medicare reimbursement data) but does not prevent the worsening of bleeding and inflammation or the progression of secondary injury and does not address the resultant paralysis. In most cases, the Company expects the sale price of its product to be in addition to the $68,000 cost of the base spine surgery. Ease of Market Penetration InVivo estimates that 80% of SCIs are treated in roughly 75 Level I Trauma Centers in the U.S., thus negating the need to strategically license the product to reach the desired market. The Company approximates that a sales team of roughly 20 individuals could be sufficient for the U.S. market. Spine surgeons will likely be the primary initial target.


Injectable Hydrogel for Local Controlled‐Release Drug Delivery

InVivo’s technology also has application to neurological conditions beyond SCI. Addressing this opportunity, the Company is focused on developing its second candidate—an injectable hydrogel that serves as a scaffold and medium for the timed release and local delivery of a range of therapeutics—to treat acute and sub‐acute neck, back, and leg pain and related conditions. InVivo estimates that this treatment could benefit over 4.2 million patients annually in the U.S., representing a potential $22 billion market. The Company believes that its hydrogel addresses several specific limitations of current therapies: (1) it allows predictable sustained release of therapeutic molecules; and (2) it exhibits the novel property of syneresis, or shrinkage, that significantly enhances its safety profile in neurological applications. The hydrogel is poly(ethylene glycol) (PEG) based and its physical properties include controlled gelation and other qualities that support controlled‐release mechanisms. The hydrogel provides a minimally invasive means to administer medication directly to an injury site, potentially reducing the inflammatory environment that causes further cell death (secondary damage) following an acute SCI. Figure 18 illustrates a rendering of the administration of the hydrogel through a syringe into the damaged spinal cord region. InVivo operates under the principle that, in order to be most effective, CNS therapies must directly target an area of the CNS—such as the spinal cord, peripheral nerves, brain, or other nervous system tissue—and include a time‐release mechanism. The injectable version of InVivo’s technology is a hydrogel that supports local, controlled‐release drug delivery and may provide InVivo with new opportunities to treat a variety of different SCI scenarios. For example, patients who are victims of major accidents may have other life‐threatening injuries (e.g., brain injuries and collapsed lungs) that may prevent or postpone undergoing immediate back surgery. Importantly, InVivo’s hydrogel technology can be administered via injection versus requiring implantation during surgery—a factor that may lead to significant uptake. This strategy facilitates spinal cord treatment within hours of the injury and can be performed despite other severe injuries. As well, it allows emergency room physicians to focus on treating and stabilizing other life‐threatening injuries. In August 2012, one of the company’s neurosurgeons, Amer Khalil, M.D., was selected as the winner of an MDH Research Award, a grant from MDHonors, to investigate the use of InVivo’s hydrogels. Dr. Khali received a $10,000 grant for his project, entitled “Spinal cord repair using biomaterial‐based drug‐releasing strategies for reducing scarring and promoting regeneration.” Dr. Khali’s project is important not only for InVivo’s hydrogel product but also for its potential to reduce fibrosis (scarring) (overviewed on page 37). How the Hydrogel Works Figure 19 (page 34) illustrates a contusion injury in the thoracic region of the spinal cord with and without hydrogel treatment. If left untreated, the span of the injury can expand as secondary effects cause further damage and cell death (shown in the middle of Figure 19). InVivo’s hydrogel can be injected into the injured area using a radiographic guided syringe, mitigating secondary damage by delivering anti‐inflammatory medicine directly where it is needed. InVivo plans to focus on delivering FDA‐approved medicines. The Company believes that the combination of the device and already‐approved therapies could accelerate the candidate’s regulatory path. InVivo is initially advancing its hydrogel in combination with the widely used steroid methylprednisolone, which is an FDA‐approved treatment option for SCI patients. In the future, the Company aims to use its hydrogel to deliver additional therapeutic agents.

RENDERING OF HYDROGEL INJECTION

Figure 18



There Are No Approved Therapies to Directly Address Acute Spinal Cord Injuries Delivering medicine to address the inflammation and other effects caused by SCIs can pose a significant challenge, particularly in acute SCIs that result in contusion (bruising). According to a recent report by GlobalData, no treatment options for acute SCIs have been approved by the FDA or the European Medicines Agency (Source: GlobalData’s Acute Spinal Cord Injury Therapeutics ‐ Pipeline Assessment and Market Forecasts to 2019, May 2012). To fill this void in the market, off‐label drugs such as methylprednisolone sodium succinate are prescribed to treat inflammation in acute SCI and reduce swelling in the spinal cord. However, the perceived benefit to systemic administration of high doses of methylprednisolone has become controversial due to its associated adverse side effects, which can include a greater risk of infection, delayed wound healing, pneumonia, and sepsis—complications that can severely impact an SCI patient’s recovery process and quality of life. Some physicians prescribe other off‐label drugs, such as anticoagulants and antibiotics, among others—all of which have limitations in treating acute SCI. A window of opportunity exists for new entrants into the space that can improve the recovery of acute SCI patients in a safe manner (Source: GlobalData’s Acute Spinal Cord Injury (ASCI) Therapeutics ‐ Pipeline Assessment and Market Forecasts to 2019, May 2012). InVivo believes that a more targeted and controlled delivery vehicle—such as its hydrogel—could significantly reduce a patient’s risk of these symptoms while continuing to provide an anti‐inflammatory effect with the delivery of methylprednisolone. Importantly, InVivo’s hydrogel is designed to fill the tissue cavity caused by the initial injury and prevent the progression of secondary injury. Potential Advantages of Controlled, Local Delivery of Methylprednisolone via InVivo’s Hydrogel The Company anticipates that directly targeting methylprednisolone to the injury site may reduce the risk of its adverse side effects. Additionally, controlling the release of methylprednisolone and reducing the dosage that is released into the body at once may further reduce the harmful effects experienced by patients. In developing the hydrogel, the Company is focused on closely synchronizing the release of the therapeutic agents to address the period of the body’s peak inflammatory response to the injury. To this extent, InVivo has designed the hydrogel to release therapeutic agents over a minimum of 10 days.


A RENDERING OF A CONTUSION INJURY WITH AND WITHOUT HYDROGEL TREATMENT

Figure 19

Initial Injury Untreated Injury Injury with InVivo's Hydrogel

A contusion injury in the thoracic region causes a wound beneath

the lamina

Without treatment, inflammation and bleeding cause secondarydamage, increasing the injury

InVivo's hydrogel is designed to be injected directly into the injury to prevent or reduce secondary

damage

Hydrogel


Potential Applications Many of the effects seen in spinal cord tissue after an SCI are also observed in other areas of the body. InVivo believes that it can transfer the science and knowledge that it has learned about the spinal cord to other applications. As such, the Company is developing the hydrogel in applications that are complementary to SCI research, including time‐released drug delivery for peripheral and cavernous (prostate) nerve applications and back pain. For example, epidurals are a peripheral nerve application as these injections are often used to treat spinal nerve irritation caused when tissues press against a nerve. Epidural injections deliver steroids or other anti‐inflammatory medications and are most commonly used to treat radicular pain, which is a radiating pain that is transmitted away from the spine by an irritated spinal nerve, as well as nerve compression in the neck (cervical spine). Epidurals dissipate quickly into the blood system and can provide pain relief to SCI patients for several months. However, InVivo believes that the delivery of an epidural via its novel hydrogel may increase the duration of effect, requiring patients to receive fewer shots annually. The Company has created a scientific model for its hydrogel drug‐releasing technology for the FDA relating to applications in peripheral nerve systems. InVivo’s hydrogel could also be combined with cells to treat chronic SCI patients, where existing scar tissue could be removed and replaced with the hydrogel technology (overviewed on page 38). Preclinical Data to Date Supports the Hydrogel’s Potential An article published in the Journal of Biomaterials and Nanobiotechnology in January 2011 summarizes the underlying research and development of the hydrogel product. Research to date has highlighted the potential of hydrogels for transdermal drug delivery and wound dressing (Source: Journal of Biomaterials and Nanobiotechnology, 2: 85‐90, 2011). Findings from a study evaluating the hydrogel’s ability to overcome limitations associated with systemic administration of high‐dose methylprednisolone supported the candidate’s potential in SCI and neurosurgical applications in the intraparenchymal and peridural regions of the spinal cord. Under physiological conditions, the liquid transformed into a gel within minutes. Once gelation occurred, the hydrogel exhibited mechanical properties similar to soft human tissues.

The authors of the study, which included Dr. Woodard, determined that drug dosage for local administration could be prescribed on a patient‐by‐patient basis without affecting the hydrogel’s release time or volume. Additionally, syneresis—the contraction of a gel accompanied by the separating out of liquid—may ensure that the hydrogel does not apply pressure or compress surrounding neural elements in neurosurgical applications. In addition, hydrogel incorporating an oligolysinepeptide was coated onto tissue culture plates with murine mesenchymal stem cells. Three plates treated with the hydrogel demonstrated improved cell adhesion versus an untreated plate. Cell adhesion can aid in the recovery process following an SCI. Dr. Woodard also co‐authored a study performed to evaluate the hydrogel’s ability to control the release of small‐molecule therapeutics in intraparenchymal and peridural applications and overcome the challenges of existing synthetic polymeric hydrogels. While these technologies present a promising delivery platform for various diseases and traumatic injuries, they are associated with two main challenges: (1) post‐injection swelling; and (2) a limited ability to guide cellular interactions. Research to date has shown that InVivo’s PEG‐based polymeric hydrogel does not cause swelling after injection and demonstrates a higher compatibility with human tissue. As well, the hydrogel may also support cell adhesion.


Ongoing Preclinical Study to Evaluate the Hydrogel with Controlled‐Release Drugs in Peripheral Nerve Injury In early 2012, InVivo entered into a research partnership with Geisinger Health System to conduct a preclinical study. InVivo’s medical director and Scientific Advisory Board member, Dr. Jonathan Slotkin, is director of spinal surgery and SCI research at Geisinger Health System’s Neurosciences Institute. The study, to be conducted jointly at the Tapinos Lab of Molecular Neuroscience at the Weis Center for Research and at the Slotkin Lab of Spinal Cord Injury Research at the Neurosciences Institute, is designed to evaluate the effectiveness of using the hydrogel for the controlled release of drugs in patients with chronic pain from compression‐induced peripheral nerve damage. Molecular and behavioral data from rodents that receive the hydrogel treatment with drug therapy is expected to be compared to the injectable scaffold alone, injectable drug therapy alone, and a control group receiving no injection. The Company expects to complete the study in the first quarter 2013. InVivo expects to submit data from this study to the FDA in 2013. This future milestone is noteworthy as it could represent the Company’s first technology designed to treat degenerative neurological conditions outside of the spinal cord. Development Status Beyond the ongoing clinical study in peripheral nerves, InVivo has completed initial animal studies evaluating the Company’s hydrogel in combination with methylprednisolone, validating the candidate as a promising technology platform. InVivo is evaluating the hydrogel in peripheral nerve applications, such as epidural delivery for pain management, as well as cavernous nerve applications. In the third quarter 2012, InVivo initiated discussions with the FDA for its hydrogel in pain management related to peripheral nerve pain. The Company expects the hydrogel to be regulated as a combination drug device, with the therapeutic component offering the primary mode of action. InVivo has submitted a request to meet with the FDA’s Office of Combination Products and the appropriate representatives from the Center for Drug Evaluation and Research (CDER) and the Center for Devices and Radiological Health (CDRH) to discuss the clinical protocol required for FDA approval beyond InVivo’s body of data in primates and the ongoing Geisinger study. Ultimately, the Company aims to partner with a global leader in pain therapies to bring this product to market. Peripheral Nerve Compression Market The nerves stemming from the spinal cord into other areas of the body compose the Peripheral Nervous System. If these nerves are compressed (by muscles, connective tissue, or otherwise), they can become agitated and inflamed over time. This can result in chronic pain, tingling, and numbness in the extremities for patients, and can significantly impact an individual’s quality of life and ability to function on a daily basis. Depending on the severity of the symptoms, patients may receive therapeutic injections for pain management. Lower back pain is the fifth most common reason that patients visit the doctor (Source: American Academy of Family Physicians, April 2012). Pain in the leg, neck, or arm is also a common complaint among patients. InVivo estimates that 3.2 million injections are administered annually to treat chronic pain related to peripheral nerve compression, and approximates that the market for time‐released anti‐inflammatory therapies, such as its hydrogel, to be roughly $22 billion annually.


Platform to Reduce Fibrosis

Following the initial physical trauma of an SCI, a number of biochemical and cellular events occur that kill neurons. While many neurons die as a result of the initial injury, some neurons remain healthy and intact immediately after. Nevertheless, the surviving neurons may also be killed over time as the dying neurons send out signals that cause apoptosis. As well, the body begins to repair itself by forming a dense scar tissue that gradually fills the damaged tissue lesion. Scar tissue that develops as a result of an SCI inhibits neuronal growth going forward. Many patients experience an abnormal increase in the number of astrocytes—a type of supporting (glial) cell in the nervous system—due to the destruction of nearby neurons. This reaction is called astrogliosis, and can lead to the formation of glial scars (gliosis). The glial scar is the body’s mechanism to protect and begin the healing process in the nervous system; however, it can have both beneficial and harmful effects in the context of neurodegeneration. In particular, glial scars may inhibit physical and functional recovery of the central nervous system after injury or disease. Preclinical data to date has suggested that InVivo’s scaffolding technology may reduce the amount of scarring following an SCI, which could support physical and functional recovery. Figure 20 illustrates monkey spinal cords near a lesion following hemi‐section surgical injuries. On the left side of Figure 20, the spinal cord of a monkey that has not received treatment shows extensive astrogliosis (in red) throughout the tissue. On the right, a monkey treated with a scaffold shows reduced gliosis versus the control. Cell nuclei were labeled with DAPI and are shown in blue in the Figure.

An unmet need exists for a treatment that can minimize scarring after both reparative and plastic surgery procedures. The ability of the scaffolding technology to dramatically reduce scarring led to the foundation of the third product in InVivo’s portfolio—a platform intended to minimize fibrosis (scarring) in both reparative surgical and dermatological applications. Dr. Khali’s $10,000 grant is being used to investigate the use of InVivo’s hydrogels to reduce scarring following neurosurgery.

INVIVO'S SCAFFOLD REDUCES SCARRING (GLIOSIS) IN ANIMAL SCI MODELS

Figure 20



Biopolymer Scaffold in Combination with Cell Therapies

In the longer term, InVivo is exploring the potential of its scaffolding technology in combination with cellular therapies to treat chronic SCIs. Until cell therapies make more progress through the FDA, the Company’s principle focus is developing biomaterial‐based neuroprotection technologies. Stem cells are unspecialized cells that have the ability to develop into every type of cell in the body and, as such, hold potential to treat a range of diseases and injuries. When a stem cell divides, each new cell has the potential either to remain a stem cell or to become another type of cell with a more specialized function (e.g., a muscle, blood, or brain cell). In addition, in many tissue types, stem cells can repair damaged areas, dividing as needed to replenish other cells. Embryonic stem cells—the most primitive of these cells as they are obtained from embryos (fetuses)—have shown potential in treating a range of currently incurable diseases, such as diabetes, stroke, and heart disease, although research remains at an early stage. Efforts on adult stem cells are less advanced. Because stem cells can develop into any type of cell, they may be able to replace damaged tissue in the spinal cord after an injury. To date, stem cells that have been transplanted into SCIs primarily advance into the cells that produce scar tissue. For a therapy to be successful, scientists must learn how to control the development of stem cells into specific cell types (e.g., neurons and glial cells), which can be used to replace cells that have been damaged or killed due to an SCI and restore function to injured individuals. As well, one of the main challenges of stem cell therapies in animal models is that the stem cells frequently die after implantation. Stem cells that are implanted following an injury are subject to a hostile environment that includes oxidative free radical stress, lipid peroxidation stress, tissue cavitation, and physical tissue loss. Employing stem cells as a therapy has been hampered by an inability to effectively deliver and maintain stem cells in this inhibitive environment. In recent years, SCI research has focused on the viability and promise of stem cells and other cell‐based therapies that may deliver regenerative benefits to a damaged spinal cord. However, InVivo believes that these technologies do not address the engineering problem associated with SCIs, including the cell death and tissue cavitation that occurs within 48 hours of an injury. Nevertheless, the Company expects that the combination of tissue engineering and the use of biomaterials to address cavitating and necrotic tissue in the nervous system is essential in effective SCI treatment. This may serve as a foundation upon which cells can be delivered to promote subsequent growth and regeneration. Accordingly, InVivo is developing its scaffolding technology in combination with cell therapies to treat both acute and chronic SCIs. This may be achieved by seeding cells onto the scaffold and then inserting the scaffold into the injured spinal cord. The Company believes that the scaffolding device is necessary for various cell types, such as human neural stem cells (hNSCs), to survive and function following transplantation into the body, as it imitates the adhesion of cells to the body’s extracellular matrix. InVivo believes that the regeneration benefits potentially offered by cell therapies are an important component of effectively treating the chronic SCI population. While effective acute SCI therapies may only require neuroprotection and neuroplasticity, therapies for the chronic patient population must also support regeneration in the spinal cord. Researchers believe that a combination therapy will likely be most effective in treating the chronic population. By combining its scaffolding technologies with cells, the Company may be able to deliver the full trifecta of benefits—neuroprotection, neuroplasticity, and regeneration—which may be essential to improving the quality of life of chronic patients by addressing the underlying causes of their paralysis. In chronic patients, scarring could be removed and replaced with InVivo’s scaffolding technology, which bridges healthy tissue to healthy tissue, in combination with stem cells or other cellular therapies to support regeneration.


Raising Awareness for InVivo and its Target Markets

InVivo’s technologies have been showcased by management through a number of news features in 2012, including Bloomberg TV’s “Taking Stock with Pimm Fox” program and Fox Business Network’s “Markets Now” program, in addition to programming on each of the channels shown in Figure 21.

In July 2012, InVivo held its inaugural Langer Summit on Neurotrauma in North Falmouth, Massachusetts, which is designed to provide a forum for researchers to discuss the challenges faced by treatments in development for SCI and other neurological conditions as well as the options for advancing these therapies into the clinic. This year’s event was chaired by the Company’s cofounder, Robert S. Langer, Sc.D. To InVivo’s knowledge, this summit is the first of its kind dedicated to furthering the use of biomaterial scaffold technology in nervous system injury, cancer, and chronic pain applications. Complementing these efforts, the Company established an annual grant for inventors developing new treatments for neurotrauma.

Beyond its own summit, the Company has presented its technology and data at a number of investor conferences and key scientific meetings. In 2012, CEO Frank Reynolds presented InVivo’s technology at the Aegis Healthcare Conference, the 14th Annual Rodman and Renshaw Healthcare Conference, OneMedForum, the Marcum MicroCap Conference, the Sidoti Semi‐Annual New York Micro‐Cap Conference, the BOCEMb Noble Financial Capital Markets’ 8th Annual Equity Conference, and the 4th Annual BioTech Showcase.

Additionally, in May and June 2012, InVivo presented preclinical data on InVivo’s biopolymer scaffolding and hydrogel technologies at two key scientific conferences: (1) Rick Hansen’s Interdependence 2012 conference in Vancouver; and (2) the Clinical Outlooks for Regenerative Medicine Conference in Boston.

Reflecting the Company’s dedication to improving SCI treatment, InVivo sponsored the 7th annual Working 2 Walk Science & Advocacy Symposium on November 1‐3, 2012, in Irvine, California. InVivo’s research and development manager, biomaterials—Alex Aimetti, Ph.D.—spoke on behalf of the Company at the symposium. The symposium, held by Unite 2 Fight Paralysis, brings together SCI research scientists, practitioners, investors, and consumers to discuss current research and strategies that are accelerating progress toward cures for paralysis. InVivo also supports the Greater Boston Chapter of the National Spinal Cord Injury Association on an annual basis and served as a Champion‐level sponsor at the organization’s RISE Above Paralysis Gala in March 2012.

Figure 21

A SELECTION OF THE NEWS PROGRAMS THAT HAVE FEATURED INVIVO'S TECHNOLOGY IN 2012

Sources: InVivo Therapeutics Holdings Corp. and Crystal Research Associates, LLC.


Competition

InVivo competes with large‐cap pharmaceutical companies, specialty biotechnology firms, academia, government agencies, and private or public research organizations developing products for SCI as well as various neurotrauma indications. Current treatments largely focus on addressing the symptoms. In contrast, InVivo is developing products that address the underlying pathology of the condition by protecting the spinal cord and minimizing secondary injury that causes cell death while promoting neural plasticity of the spared healthy tissue. To InVivo’s knowledge, there are no approved therapies to do so. Nevertheless, if approved, InVivo expects its products to be complementary—not competitive—to existing therapies, with a combination therapy potentially creating the best clinical outcome. As well, InVivo believes that its biomaterial patents may represent a key barrier to entry going forward. There are a number of therapies in development to treat acute SCIs, including neuroregenerative agents, neuroprotective molecules, stem cell therapies, synthetic basic fibroblast growth factors (bFGFs), and neuroprotective molecules, the majority of which are neurorestorative and are in the early stages of development. In contrast to available treatments, these therapies focus on protecting surviving nerve cells from further damage and/or stimulating the regrowth and connection of axons. As of May 2012, intelligence firm GlobalData identified 14 molecules in development to treat acute SCIs, all of which were first‐in‐class (Source: GlobalData’s Acute Spinal Cord Injury Therapeutics ‐ Pipeline Assessment and Market Forecasts to 2019, May 2012). As well, there are companies developing cell‐based therapies that emphasize regeneration to treat chronic SCI, including Geron, Neuralstem, and StemCells—although Geron recently announced its plans to focus on oncology while seeking partners for its existing stem cell programs. InVivo believes that stem cells must have scaffolds to hold them in place to effectively integrate cells into a traumatized spinal cord (representing a specific barrier to entry). As well, leading candidates in this field, such as Geron’s human embryonic stem cell therapy, are currently in the early phases of clinical testing and remain years away from market. The profiles on the accompanying pages are not intended to represent an exhaustive summation of potential competitors to InVivo but rather an example of other companies that are also focusing on addressing SCIs. Figure 22 lists several competitors for InVivo, followed by overviews of each company’s current technologies and products.

Acorda Therapeutics, Inc. ACOR (NASDAQ) $25.29 $21.04 ‐ $27.74 475,418 $1.02 B

Asubio Pharmaceuticals, Inc. Closely held — — — —

Athersys, Inc. ATHX (NASDAQ) $1.01 $0.95 ‐ $2.33 419,839 $53.6 M

BioAxone BioSciences, Inc. Closely held — — — —

Geron Corporation GERN (NASDAQ) $1.44 $0.91 ‐ $2.99 1,253,580 $188.3 M

Neuralstem, Inc. CUR (NYSE Amex) $1.18 $0.42 ‐ $1.96 1,741,460 $80.2 M

Novartis AG NVS (NYSE) $63.07 $51.20 ‐ $64.07 1,577,190 $152.5 B

StemCells, Inc. STEM (NASDAQ) $1.81 $0.59 ‐ $2.67 1,305,490 $67.8 M

Source: Yahoo! Finance.

Company

COMPETITION

Figure 22

Market Cap.Avg. Vol.

(3 month)

52‐week RangeLast Trade

(12/13/2012)

Symbol (Exchange)


Acorda Therapeutics, Inc. (ACOR‐NASDAQ) Headquartered in Hawthorne, New York, Acorda is a biotechnology company focused on treating multiple sclerosis (MS), SCIs, and related nervous system disorders. The company markets AMPYRA® (dalfampridine) Extended Release Tablets, a potassium channel blocker to improve walking in MS patients as well as Zanaflex Capsules® (tizanidine hydrochloride) to manage spasticity. Additionally, Acorda is developing therapies that may aid in regeneration and repair of the spinal cord and brain. The company has licensed worldwide development and commercialization rights to AC105, a magnesium formulation that has received Fast Track designation in the U.S. for acute SCI treatment and has demonstrated neuroprotective qualities in preclinical studies. In particular, the agent improved locomotor function in SCI and cognitive function in traumatic brain injury when administered within four hours of injury. As well, Acorda has completed Phase I safety testing and is preparing to initiate a Phase II clinical program in SCI, with the potential to enter into other CNS applications. The company may pursue Orphan Drug designation in Europe and abroad. Acorda is also evaluating glial growth factor 2 (GGF2), a Phase I neuregulin growth factor designed to stimulate repair in nervous and cardiac systems, with studies ongoing in heart failure, peripheral nerve injury, and stroke. In August 2012, the company released preclinical data demonstrating that treatment with GGF2 improved erectile function in an animal model following a cavernous nerve injury. Asubio Pharmaceuticals, Inc. (Closely held) Asubio is a research and development company with headquarters in Paramus, New Jersey. The company’s pipeline includes three Phase II candidates, two of which are available for licensing (SUN11031 for cachexia and SUN13834 for atopic dermatitis). The third candidate, SUN13837, is a small molecule in clinical development for the treatment of acute SCI. SUN13837 is similar in mechanism to basic fibroblast growth factor (bFGF) in that it is thought to bind with FGF receptors to induce the intracellular signaling events—providing its positive properties but without the complication of stimulating cell proliferation. As well, unlike bFGF, SUN13837 has high aqueous and lipid solubility, making it more likely to cross biological membranes than a large protein such as bFGF, enabling it to be administered via peripheral intravenous injection. In preclinical studies, SUN13837 demonstrated neuroprotective and axonal outgrowth properties—effects that could reduce neuronal damage and improve recovery following acute SCI. In April 2012, Asubio initiated a landmark Phase II clinical trial with SUN13837 in newly diagnosed acute SCI patients. The trial could include 164 patients from 60 acute trauma centers across the U.S. and Canada. Athersys, Inc. (ATHX‐NASDAQ) Athersys is a biopharmaceutical company with headquarters in Cleveland, Ohio. The company is developing candidates to treat inflammatory and immune conditions, cardiovascular disorders, and neurological indications using its stem cell product platform, MultiStem®, which relies on adult‐derived “off‐the‐shelf” stem cells. Athersys’ clinical‐stage programs for MultiStem include treatments for inflammatory bowel disease (Phase II clinical trial being conducted in partnership with Pfizer Inc. [PFE‐NYSE]), ischemic stroke (ongoing Phase II clinical trial), damage caused by myocardial infarction (Phase II authorized by FDA), and to prevent graft‐versus‐host disease (Phase I completed with Orphan Status). In October 2012, the company announced new research demonstrating potential benefits from MultiStem following a preclinical rodent model of SCI, which included accelerated recovery, improved locomotor function and fine motor tests, and improved bladder function. This research built on previous data, which demonstrated MultiStem’s ability to reduce inflammation and promote the regrowth of neurons at the injury site, and was published in the Journal of Neuroscience. BioAxone BioSciences, Inc. (Closely held) Dania Beach, Florida‐based BioAxone BioSciences is focused on developing drugs for unmet medical needs. The company is primarily focused on commercializing its lead compound, Cethrin™, a biologic drug in development to treat acute SCI. In line with this strategy, BioAxone BioSciences recently acquired all of the assets of Canada‐based BioAxone Therapeutic Inc., which developed Cethrin. Cethrin targets the Rho signaling pathway, which has been investigated as a target for various degenerative diseases and is intended to foster axon regeneration in the injured spinal cord. A 48‐patient Phase I/IIa clinical trial across nine sites in the U.S. and Canada demonstrated


results that indicated both safety and efficacy of Cethrin treatment. Data from the trial was published in the Journal of Neurotrauma. In December 2011, Cethrin was named a Top Ten Neuroscience Project to watch by Elsevier Business Intelligence and Windhover Conferences. Cethrin may have other applications beyond SCI. To date, BioAxone BioSciences has completed proof‐of‐concept for use of its recombinant protein products for bone repair, traumatic brain injury, degenerative eye disease, and glioblastoma. The company seeks a development/financing partner to accelerate development of Cethrin going forward, including a Phase IIb trial. BioAxone BioSciences also has patented small molecule inhibitors and a transport sequence available for licensing. BioAxone BioSciences closed a financing for an undisclosed amount in February 2012. Geron Corporation (GERN‐NASDAQ) Headquartered in Menlo Park, California, Geron develops treatments for cancer and other chronic degenerative diseases. The company is advancing anticancer therapies through multiple Phase II clinical trials and has several cell therapy candidates from differentiated human embryonic stem cells for multiple indications, including CNS disorders, heart failure, and diabetes, among others. Geron has also initiated a Phase I clinical trial in SCI with GRNOPC1, which is derived from human embryonic stem cells. This was the first FDA‐approved clinical trial of a cellular therapy derived from human embryonic stem cells to be initiated. In preclinical studies, GRNOPC1 was found to improve functional locomotor behavior after implantation in the injury site seven days after injury, and essentially fill the lesion site with myelinated rat axons crossing the lesion nine months after injury. Nevertheless, in November 2011, Geron announced that it was transitioning its corporate strategy to focus on oncology, while seeking partners for its existing stem cell programs (including GRNOPC1). As part of this strategy, the company closed enrollment for the GRNOPC1 trial, while continuing to follow the five enrolled patients for up to 15 years. Neuralstem, Inc. (CUR‐NYSE Amex) Based in Rockville, Maryland, Neuralstem is a biotherapeutics company using a patented process to grow neural stem cells to treat CNS diseases. Neuralstem’s proprietary human neural stem cell technology isolates stem cells from CNS tissue of the developing human brain and spinal cord and expands these cells in the laboratory. Neuralstem’s human spinal cord stem cells (HSSCs) may promote and support repair, regeneration, and reorganization of injured spinal cord segments. In preclinical studies, rats with ischemia‐induced SCI as well as surgically transected spinal cords recovered a significant amount of motor function after transplantation with Neuralstem’s cells. In one study published in CELL, transplanted neural stem cells turned into neurons that grew axons over long distances (connecting above and below the point of severance) and appeared to make reciprocal synaptic connectivity with the host rat spinal cord neurons in the gray matter for several segments below the injury. The initial product candidate of this therapeutic platform is a spinal cord cell line. Neuralstem has completed a Phase I clinical safety trial for ALS and was awarded Orphan Status designation by the FDA. Interim data to date has supported the feasibility and tolerability of the intraspinal transplantation procedure and of the cells themselves (Source: Neuralstem press release, October 9, 2012). Neuralstem has submitted an IND application to the FDA to initiate a Phase I safety trial of its HSSCs for chronic SCI. It planned to target chronic SCI patients with an American Spinal Injury Association (ASIA) grade A level of impairment one‐to‐two years post‐injury. The proposed clinical trial will likely evaluate the safety of Neuralstem’s cells and proprietary spinal cord delivery platform and floating cannula in up to 16 SCI patients, with cells transplanted directly in and around the injury site. Trial protocol includes extensive physical therapy to guide newly formed nerves to their proper connections and functionality. In September 2012, Neuralstem granted its first licenses for use of its spinal cord delivery platform and floating cannula to deliver therapeutic agents to the spinal cord to Salt Lake City‐based Q Therapeutics, Inc. The devices have been in use since 2010 in a Phase I trial and were shown to be safe.


Novartis AG (NVS‐NYSE) Headquartered in Basel, Switzerland, Novartis is a global healthcare company with a diverse portfolio of medicines, eye care, generic pharmaceuticals, preventive vaccines, diagnostic tools, over‐the‐counter drugs, and animal health products. In the neurotrauma sector, the company has a monoclonal antibody called ATI355. A Phase I trial was completed in September 2011, which evaluated the acute safety, tolerability, feasibility and pharmacokinetics of ATI355 in acute SCI patients. No information could be found publicly pertaining to the study’s results. Nevertheless, on Novartis’ website, the company has stated that the next planned filing for ATI355 will not occur until at least 2016. StemCells, Inc. (STEM‐NASDAQ) Newark, California‐based StemCells is working to develop stem cell therapies to treat degeneration occurring in the CNS, liver, and pancreas. Unlike Geron, which uses embryonic stem cells, StemCells employs human neural stem cells. The Company has developed a HuCNS‐SC® product candidate (purified human neural stem cells) to potentially treat a broad range of diseases and disorders of the CNS. StemCell’s HuCNS‐SC cells are in clinical development for the treatment of SCI, dry age‐related macular degeneration (AMD), and Pelizaeus‐Merzbacher Disease (PMD). The HuCNS‐SC cells may have further therapeutic application to multiple CNS disorders. In 2010, StemCells secured authorization to conduct the world’s first neural stem cell trial in severe SCI. The Phase I/II trial is designed to assess both safety and preliminary efficacy in patients with varying degrees of paralysis who are 3 to 12 months post‐injury. The company has reported interim six‐month data from the first patient cohort in the trial, which included three complete SCI patients and showed a favorable safety profile as well as “considerable gains” in sensory function in two out of three patients (versus pre‐transplant baselines). As well, in September 2012, StemCells enrolled the first patient with an incomplete SCI as the first patient (of four) in the second cohort of the trial.


Key Points

InVivo is focused on developing products based on its biopolymer scaffolding and hydrogel technologies. The Company’s candidates are designed to address the underlying pathology (versus symptoms) of neurotraumas, mitigating the bleeding, inflammation, and resulting cell death and glial scarring that can result from the body’s natural responses to these events.

In preclinical testing, InVivo’s scaffold supported functional locomotor improvement, sustained functional recovery, higher neuromotor function and improved kinematic/EMG data versus controls in primate studies, and reduced scarring and lesion size with greater neuron survival in a rodent contusion model of acute SCI. To InVivo’s knowledge, it was the first to restore functional improvement in non‐human primates that were paralyzed after an SCI model.

o After implanting InVivo’s device, primates that were unable to move their injured hind leg were able to walk and be mobile. The Company has reported that 100% of primates treated with its scaffold in preclinical studies were up and running on a treadmill within 12 weeks.

InVivo is preparing for its first human study in SCI patients with its lead candidate—a biopolymer scaffold device—pending FDA approval of its IDE application, which is expected in early 2013.

o The Company expects the device to have an accelerated path to approval via the Humanitarian Device Exemption (HDE) pathway. Once approved, InVivo anticipates that it could penetrate the market with a small sales force, as an estimated 80% of SCIs in the U.S. are treated at 75 Level I Trauma Centers.

InVivo has engaged the FDA for its second product, an injectable hydrogel designed to locally release a range of molecules, including methylprednisolone. The Company expects to submit applications to the FDA for the treatment of SCIs and chronic pain from peripheral nerve injuries.

o InVivo is conducting a preclinical study with Geisinger Health System to evaluate its hydrogel in treating pain caused by peripheral nerve compression, which is expected to be completed in early 2013.

o The Company’s neurosurgeon Amer Khalil, M.D. has been awarded an MD Honors Grant to investigate the use of InVivo’s hydrogels to reduce scarring following neurosurgery.

InVivo’s intellectual property covers the use of any synthetic biomaterial as well as the combination of any biomaterial with any drug, growth factor, or stem cells to treat SCIs, as well as parts of the peripheral nervous system, the cranial nerve, the brain and retina, and the cavernous nerve. The Company recently filed patents related to the key processes required to make a nontoxic synthetic biomaterial for spinal cord implantation. InVivo believes that its intellectual property serves as a barrier to entry in the emerging neurotrauma space.

InVivo’s leadership has broad experience developing and bringing biomaterials to market. Dr. Robert Langer’s laboratory at MIT has produced over 50 products (in clinical trials or through clinical trials)—a number of which employ similar biomaterials to InVivo’s scaffold. The Company has added key leadership to its management team to further drive product development and commercialization. Recent additions to InVivo’s team have collectively brought over 100 biomaterials products to market.

o InVivo’s development team has experience in biomaterials engineering, current Good Manufacturing Practices (cGMP) manufacturing, regulatory and quality affairs, and project management.

In July 2012, InVivo held its inaugural Langer Summit on Neurotrauma, which brought together leading minds in the field to discuss recent innovations and opportunities.

The Company has new global headquarters in Cambridge, Massachusetts, which includes a cGMP cleanroom as well as a vivarium, laboratories, and corporate offices. InVivo is focused on ramping up its cGMP facility to support manufacturing of biopolymer scaffoldings for clinical trials and commercial requirements.

InVivo’s cash position was $16.2 million at September 30, 2012, following a $20 million public offering in early 2012. The Company has been awarded a $2 million low‐cost loan from the Commonwealth of Massachusetts.


Historical Financial Results

Figures 23, 24, and 25 provide a summary of InVivo’s key historical financial statements: its Consolidated Statements of Operations, Balance Sheets, and Statements of Cash Flows.

Period from

November 28,

2005

(inception) to

September 30,

2012 2011 2012 2011 2012

Operating expenses:

Research and development 1,374,852$ 1,016,865$ 3,622,800$ 3,045,426$ 12,506,634$

General and administrative 1,466,049 1,196,455 4,433,929 3,095,877 12,685,466

Total operating expenses 2,840,901 2,213,320 8,056,729 6,141,303 25,192,100

Operating loss (2,840,901) (2,213,320) (8,056,729) (6,141,303) (25,192,100)

Other income (expense):

Other income — — — — 383,000

Interest income 13,061 4,778 27,842 7,539 47,891

Interest expense (12,454) — (28,147) (7,150) (1,094,478)

Derivatives gain (loss) 10,869,209 5,275,591 21,436,653 6,559,835 (8,581,508)

Other income 10,869,816 5,280,369 21,436,348 6,560,224 (9,245,095)

Net income (loss) 8,028,915$ 3,067,049$ 13,379,619$ 418,921$ (34,437,195)$

Net income (loss) per share, basic 0.12$ 0.06$ 0.21$ 0.01$ (1.01)$

Net income (loss) per share, diluted 0.11$ 0.06$ 0.19$ 0.01$ (1.01)$

Weighted average number of common

shares outstanding, basic 65,109,037 51,889,111 62,357,300 51,743,138 34,226,324

Weighted average number of common

shares outstanding, diluted 74,157,957 54,269,856 71,734,784 54,198,981 34,226,324


(Unaudited)

CONSOLIDATED STATEMENTS OF OPERATIONS

InVivo Therapeutics Holdings Corp. (A Developmental Stage Company)

Figure 23

September 30,

Three Months Ended

September 30,

Nine Months Ended


September 30, December 31,

2012 2011

Unaudited

ASSETS:

Current assets:

Cash and cash equivalents 15,549,609$ 4,363,712$

Restricted cash 634,750 547,883

Prepaid expenses 126,259 104,022

Total current assets 16,310,618 5,015,617

Property and equipment, net 2,024,524 520,482

Other assets 153,014 166,139

Total assets 18,488,156$ 5,702,238$

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current l iabilities:

Accounts payable 1,141,267$ 567,195$

Loan payable‐current portion 106,911 50,578

Capital lease payable‐current portion 37,353 30,724

Derivative warrant l iabil ity 10,800,855 35,473,230

Accrued expenses 761,939 618,369

Total current l iabilities 12,848,325 36,740,096

Loan payable‐less current portion 139,750 83,794

Capital lease payable‐less current portion 11,119 38,042

Total l iabil ities 12,999,194 36,861,932

Commitments and contingencies

Stockholders’ equity (deficit)

Common stock, $0.00001 par value, authorized 200,000,000 shares at September

30, 2012 and December 31, 2011; issued and outstanding 65,635,400 and

53,760,471 shares at September 30, 2012 and December 31, 2011, respectively. 656 538

Additional paid‐in capital 39,925,749 16,656,830

Deficit accumulated during the development stage (34,437,443) (47,817,062)

Total stockholders’ equity (deficit) 5,488,962 (31,159,694)

Total l iabil ities and stockholders’ equity (deficit) 18,488,156$ 5,702,238$

As of

CONSOLIDATED BALANCE SHEETS


Figure 24



Period from

November 28,

2005

(inception) to

September 30,

2012 2011 2012

Cash flows from operating activities:

Net income (loss) 13,379,619$ 418,921$ (34,437,195)$

Adjustments to reconcile net income (loss) to net cash

used in operating activities:

Depreciation and amortization expense 218,579 101,599 456,206

Non‐cash derivatives (gain) losses (21,436,653) (6,559,835) 8,581,508

Non‐cash interest expense — — 962,834

Common stock issued to 401(k) plan 60,906 — 102,568

Common stock issued for services 24,750 200,676 234,201

Share‐based compensation expense 823,617 622,141 2,623,969

Changes in operating assets and l iabil ities:

Restricted cash (86,867) (155,000) (634,750)

Prepaid expenses (22,237) (28,306) (116,208)

Other assets — (75,000) (200,000)

Accounts payable 574,072 216,862 1,141,267

Accrued interest payable — — (15,256)

Accrued expenses 143,570 111,534 761,939

Net cash used in operating activities (6,320,644) (5,146,408) (20,538,917)

Cash flows from investing activities:

Purchases of property and equipment (1,709,496) (241,995) (2,340,204)

Net cash used in investing activities (1,709,496) (241,995) (2,340,204)

Cash flows from financing activities:

Proceeds from issuance of convertible notes payable — — 4,181,000

Proceeds from convertible bridge notes — — 500,000

Principal payments on capital lease obligation (20,294) 118,057 (45,068)

Proceeds from (repayment of) loans payable 112,289 (17,353) 246,661

Proceeds from issuance of common stock and warrants 19,124,042 10,434 33,546,137

Net cash provided by financing activities 19,216,037 111,138 38,428,730

Increase (decrease) in cash and cash equivalents 11,185,897 (5,277,265) 15,549,609

Cash and cash equivalents at beginning of period 4,363,712 8,964,194 —

Cash and cash equivalents at end of period 15,549,609$ 3,686,929$ 15,549,609$


Figure 25

September 30,

Nine Months Ended


(Unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS


Risks and Disclosures

This updated Executive Informational Overview® (EIO) has been prepared by InVivo Therapeutics Holdings Corp. (“InVivo” or “the Company”) with the assistance of Crystal Research Associates, LLC (“CRA”) based upon information provided by the Company. CRA has not independently verified such information. Some of the information in this EIO relates to future events or future business and financial performance. Such statements constitute forward‐looking information within the meaning of the Private Securities Litigation Act of 1995. Such statements can only be predictions and the actual events or results may differ from those discussed due to the risks described in InVivo’s statements on Forms 10‐K, 10‐Q, and 8‐K, as well as other forms filed from time to time. The content of this report with respect to InVivo has been compiled primarily from information available to the public released by the Company through news releases, Annual Reports, and U.S. Securities and Exchange Commission (SEC) filings. InVivo is solely responsible for the accuracy of this information. Information as to other companies has been prepared from publicly available information and has not been independently verified by InVivo or CRA. Certain summaries of activities and outcomes have been condensed to aid the reader in gaining a general understanding. CRA assumes no responsibility to update the information contained in this report. In addition, CRA has been compensated by the Company in cash of seventy‐two thousand five hundred dollars and one hundred fifty thousand restricted shares for its services in creating and updating the base report, for quarterly updates, and for printing costs. For more complete information about the risks involved in an investment in the Company, please see InVivo’s most recent Form 10‐K filed on March 15, 2012, for the fiscal year ended December 31, 2011: http://www.sec.gov/Archives/edgar/data/1292519/000119312512116041/d267182d10k.htm. A description of Risk Factors for InVivo was also made available in Crystal Research Associates’ initial base report, an Executive Informational Overview® published on December 19, 2011. The 2011 EIO can be accessed at: http://www.crystalra.com/Portals/150154/docs/NVIV_EIO_12-19-2011.pdf. Investors should carefully consider the risks and information about InVivo’s business, as described in the Company’s Form 10‐K filed with the SEC on March 15, 2012. Investors should not interpret the order in which considerations are presented in this or other filings as an indication of their relative importance. The risks and uncertainties overviewed in InVivo’s Form 10‐K are not the only risks that the Company faces. Additional risks and uncertainties not presently known to InVivo or that it currently believes to be immaterial may also adversely affect the Company’s business. If any of such risks and uncertainties develops into an actual event, InVivo’s business, financial condition, and results of operations could be materially and adversely affected, and the trading price of the Company’s shares could decline. This report is published solely for information purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy any security in any state. Past performance does not guarantee future performance. Additional information about InVivo and its public filings, as well as copies of this report, can be obtained in either a paper or electronic format by calling (617) 863‐5500.


Glossary

Acute SCI—A traumatic injury that results in a bruise (also called a contusion), a partial tear, or a complete tear (called a transection) in the spinal cord. Apoptosis—A form of cell death in which a programmed sequence of events leads to the elimination of old, unnecessary, unhealthy cells. Also called programmed cell death. Astrocytes—A type of glial cell responsible for neurotransmission and neuronal metabolism. Astrogliosis—An abnormal increase in the number of astrocytes due to the destruction of nearby neurons, typically because of hypoglycemia or oxygen deprivation (hypoxia). Axons—The long, thin extensions of nerve cells that conduct impulses away from the cell body. Biocompatible—Not harmful to living tissue, such as certain materials used in surgical implants. Biomaterials—A natural or synthetic material, such as a polymer or metal, that is suitable for introduction into living tissue to repair damaged or diseased parts. Biopolymer Scaffold—An artificial structure composed of polymers produced by living organisms that is used in tissue engineering to support three‐dimensional tissue formation. Depending on the polymer used, scaffolds vary in degradation time, composition, surface properties, three dimensional structures, and mechanical stimuli. Blinded—A trial where the participants and investigators are unaware as to whether they are in the experimental or control arm of the study. Blue Chip—A nationally recognized, well‐established, and financially sound company. Brown‐Séquard Syndrome—An incomplete spinal cord injury where only half of the cord has been damaged. This results in motor loss on the same side as the lesion and sensory loss on the opposite side. Cavitation—The formation of cavities in a body tissue or an organ. Cervical—The part of the spine in the neck region. Class III Medical Device—A device for which insufficient information exists to assure safety and effectiveness solely through the general or special controls of Class I or Class II devices. A Class III device requires Premarket Approval (PMA), which is a scientific review to ensure the device’s safety and efficacy, in addition to the general controls of Class I. Class III devices are usually those that support or sustain human life, are of substantial importance in preventing impairment of human health, or which present a potential, unreasonable risk of illness or injury. Examples of Class III devices include an implantable pacemaker, pulse generators, HIV diagnostic tests, and automated external defibrillators. Contusion—Damage to the spinal cord produced by pressure from displaced bone and/or soft tissues or swelling within the spinal canal. Spinal cord contusions result in a cavity or hole in the center of the spinal cord. Cytokines—Small proteins released by immune cells that have a specific effect on the interactions between cells, communications between cells, or on cell behavior. Dural Seal—Material, such as from a cow, collagen, or the patient, which is sewn into an opening in the dura (the tough, outermost membrane enveloping the brain and spinal cord).


Embryonic Stem Cells—Undifferentiated cells from the embryo that have the potential to become a wide variety of specialized cell types. Extracellular Matrix—The material composed of structural proteins, specialized proteins, and proteoglycans found around cells. Fast Track—An FDA designation that accelerates the approval of investigational new drugs undergoing clinical trials. Such status is often given to agents that show promise in treating serious, life‐threatening medical conditions for which no other drug either exists or works as well. Functional Recovery—The recovery of motor movement or sensation. Glial Cells—Supportive cells in the brain and spinal cord that insulate nerve cells from each other. Glial cells are the most abundant cell types in the central nervous system (CNS). Glial Scarring—A physical and molecular barrier surrounding the injured area of the spinal cord that may prevent axons from regenerating. Gray Matter—The grayish tissue of the brain and spinal cord that contains nerve cell bodies, dendrites, and bare axons. Growth Factors—Substances, such as a vitamins or hormones, that are required for the stimulation of growth in living cells. Human Neural Stem Cells (hNSCs)—Stem cells that normally give rise to its three major cell types: nerve cells (neurons) and two categories of non‐neuronal cells—astrocytes and oligodendrocytes. Humanitarian Device Exemption (HDE)—An approval process through the FDA allowing a medical device to be marketed without requiring evidence of effectiveness. The FDA calls a device approved in this manner a Humanitarian Use Device (HUD). Hydrogel—A gel where the liquid constituent is water. Investigational Device Exemption (IDE)—An FDA designation that allows an investigational device to be used in a clinical study in order to collect safety and efficacy data required to support a Premarket Approval (PMA) application or a Premarket Notification (510[k]) submission. Intraparenchymal—Situated or occurring within the parenchyma (the functional tissue of an organ). Kinematic/EMG Data—Data used to create a graphic record of the mechanics relating to pure motion (kinematics) or of the electric currents associated with muscular action (electromyogram [EMG]). Laminectomy—A surgical operation to remove the back of a vertebrae, usually to give access to the spinal cord or to relieve pressure on nerves. Level I Trauma Center—Trauma centers are ranked by the American College of Surgeons (ACS) from Level I (comprehensive service) to Level III (limited care). A Level I center offers the highest level of surgical care to trauma patients with a full range of specialists and equipment available 24 hours a day. A Level I center also has a research program and is considered to be a leader in trauma education and injury prevention. Locomotor—The ability to move, including by walking, running, or jumping. Lumbar—The part of the spine in the middle back, below the thoracic vertebrae and above the sacral vertebrae.


Macrophages—A type of white blood cell that engulfs foreign material. Macrophages have a key role in the immune response to foreign invaders, such as infectious microorganisms. Macrophages also release substances that stimulate other cells of the immune system. Methylprednisolone—A steroid used to reduce inflammation and improve recovery after an SCI. Monocytes—White blood cells that have a single nucleus and can engulf foreign material. Monocytes emigrate from blood into the tissues of the body and evolve into macrophages. Myelin—A structure of cell membranes that forms a sheath around axons, insulating them and speeding conduction of nerve impulses. Neuregulin—A family of proteins that have been shown to have diverse functions in the development of the nervous system and have multiple essential roles in vertebrate embryogenesis, including cardiac development, Schwann cell and oligodendrocyte differentiation, some aspects of neuronal development, and the formation of neuromuscular synapses. Neuromotor—Pertaining to the effects of nerve impulses on muscles. Also known as neuromuscular. Neuron—The structural and functional unit of the nervous system. Also called a nerve cell. Neuroplasticity—A process where functional recovery (the recovery of motor movement or sensation) may occur through the rerouting of signaling pathways to the spared healthy tissue. Neurotrauma—Mechanical injury to a nerve. Neutrophils—A type of white blood cell. Off‐label—The legal use of a prescription drug to treat a disease or condition for which the drug has not been approved by the FDA. Orphan Drug—A medication in development that seeks to treat an Orphan Disease, which is a rare illness affecting fewer than 200,000 people, or a common disease that has been ignored because it is less prominent in the U.S. compared with developing nations. According to the National Institutes of Health (NIH), there are approximately 7,000 of these diseases. Paraplegia—A condition involving complete paralysis of the legs. Pedicle Screws—A type of instrumentation that is inserted into a vertebral body during spinal surgery. Pelizaeus‐Merzbacher Disease (PMD)—A fatal neurodegenerative disorder that primarily affects young children. Peridural—Occurring or applied around the dura mater (which is the tough, translucent membrane that protects the brain and spinal cord). Peripheral Nerve—A nerve that is outside of the CNS. It is found in the skin or other surface parts of the body. Poly Lactic‐Co‐Glycolic Acid (PLGA)—A copolymer that is used in a host of FDA‐approved therapeutic devices as a result of its biodegradability and biocompatibility. Polylysine (PLL)—An essential amino acid obtained by the hydrolysis of proteins and required by the body for optimum growth. Polymer—A naturally occurring or synthetic compound formed by joining smaller, usually repeating, units linked by covalent bonds. These compounds often form large macromolecules (e.g., polypeptides, proteins, and plastics).


Quadriplegia—A condition involving complete paralysis of the legs and partial or complete paralysis of the arms. Radicular Pain—Pain radiating into the lower or upper extremities. This pain is often deep and steady. It is reproducible with activities such as sitting or walking. Radicular pain may be accompanied by muscle weakness, numbness and tingling, and loss of specific reflexes. Regenerative—Able to repair, regrow, or restore tissues. Reparative—A type of plastic surgery that can include repair of scars, wounds, cleft palates/lips, and traumatic injuries to the face and hands, among others. Screw‐Rod—A surgical procedure whereby pedicle screws and rods are implanted to stabilize the spine. The pedicle is a strong portion of the spinal vertebral bone that connects the front of the spine to the back of the spine. There is one pedicle on each side of each vertebral bone. Placing a screw into the pedicle bone of the vertebral body is an effective technique to fixate the spine. Once pedicle screws are placed at several levels of the spine, a rod connects them together on each side, giving the spine considerable extra strength. Spasticity—Increased tone in muscles of the arms and legs (due to lesions of the upper motor neurons). Spinal Shock—A temporary physiological state that can occur after an SCI in which all sensory, motor, and sympathetic functions of the nervous system are lost below the level of injury. Spinal shock can lower blood pressure to dangerous levels and cause temporary paralysis. Stem Cell—Special cells that have the ability to grow into any one of the body’s more than 200 cell types. Unlike mature cells, which are permanently committed to their fate, stem cells can both renew themselves and create cells of other tissues. T‐cells—A type of white blood cell. Also called lymphocytes, they make up part of the immune system and help the body fight diseases or harmful substances. Thoracic—The part of the spinal column from the base of the neck to roughly six inches above the waist. The thoracic region of the spinal column contains 12 vertebrae. Transected—To cut or divide crossways. Tissue Plasminogen Activator (tPA)—A protein that is made by the body and that helps dissolve blood clots. It can also be made in the laboratory and is used in the treatment of heart attack and stroke. It is being studied in the treatment of cancer. Vertebrae—The 33 hollow bones that make up the spine. Vivarium—An enclosure, container, or structure adapted or prepared for keeping animals under seminatural conditions for observation or study.


Intentionally Blank.


About Our Firm: Crystal Research Associates, LLC is an independent research firm that provides institutional‐quality research on small‐ and mid‐cap companies. Our firm’s unique and novel product, the Executive Informational Overview® (EIO), is free of investment ratings, target prices, and forward‐looking financial models. The EIO presents a crystal clear, detailed report on a company (public or private) in a manner that is easily understood by the Wall Street financial community. The EIO details a company’s product/technology/service offerings, market size(s), key intellectual property, leadership, growth strategy, competition, risks, financial statements, key events, and other fundamental information.

Crystal Research Associates is led by veteran Wall Street sell‐side analyst Jeffrey Kraws, who is well known by the international financial media for his years of work on Wall Street and for providing consistent award‐winning analyses and developing long‐term relationships on both the buy‐side and sell‐side. He has been consistently ranked on Wall Street among the Top Ten Analysts for pharmaceutical stock performance in the world for almost two decades as well as ranked as the Number One Stock Picker in the world for pharmaceuticals by Starmine and for estimates from Zacks. Additionally, Mr. Kraws has been 5‐Star ranked for top biotechnology stock performance by Starmine.

Corporate Headquarters:

880 Third Avenue, 6th Floor

New York, NY 10022

Office: (212) 851‐6685

Fax: (609) 395‐9339

Satellite Office Location:

2500 Quantum Lakes Drive, Suite 203

Boynton Beach, FL 33426

Office: (561) 853‐2234

Fax: (561) 853‐2246

EXECUTIVE INFORMATIONAL OVERVIEW®

company description · 2014. 3. 14. · injury to the spinal cord can have significant...

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