Market, Competition and Opportunity

Knee cartilage injuries can be caused either by acute or repetitive trauma due to daily function, including those caused by sports activity. Knee cartilage does not usually heal by itself when injured. Without treatment, cartilage injuries may progress and cause degeneration of joints, osteoarthritis, and possibly require total knee replacement. The cartilage repair market in general, is a large sector of orthopedic medicine today and currently represents an estimated overall market opportunity in excess of 980,000 arthroscopic knee procedures in the United States per year, as of 2006, with an estimated 400,000 procedures being attributed to focal articular cartilage defects.

Currently, the standard of care procedure for cartilage injuries is microfracture surgery, which involves cleanup of the wound and creation of tiny punctures in the underlying bone. Because the cartilage produced from microfracture surgery tends to be fibrous, the cartilage is more prone to deterioration after a short period of time, with such relief from microfracture surgery lasting on average between eight to fourteen months. Unlike microfracture surgery, treatment using GelrinC does not produce fibrous cartilage, but instead has been shown to grow hyalin cartilage, which is the autologous natural cartilage of the patient. Beyond microfracture surgery, current commercial therapies for cartilage repair generally involve the use of autologous cells harvested from the patient’s own healthy tissue.

This approach has numerous disadvantages including the need for expensive cell expansion facilities and the requirement for two surgical procedures. The price for such autologous procedures is approximately $40,000 in the United States. There are also allogeneic cartilage products (BioCartilage and Neo) sourced from cadavers, which, based on our experience, are not preferred by surgeons except for in unique cases. There is also another technology, CartiHeal’s Agili-C, which was recently approved by the FDA that utilizes pre-formed implants that consist of a two layer plug. This implants require special fitting and drilling into the injury lesion.

GelrinC will offer a cost effective, off-the-shelf product that is simple to use, requiring a 10-minute procedure and from the Company’s experience with patients who have been treated thus far, an average two week recovery period.