Biotech companies grow more business from skin

Skin is in.

With biotech companies racing to find medicines to cure cancer, defeat obesity and treat arthritis, a few companies are finding a lucrative niche in the business of making skin.

It comes from animal bones and tendons and even human cadavers, and it is used to treat severe burns and chronic wounds such as bedsores. When reconstructive and plastic surgery is thrown in, it adds up to a billion-dollar-a-year business.

And the prospects for future growth from Integra LifeSciences and LifeCell are more than skin deep.

The allure for large pharmaceutical companies, analysts said, is the prospect that scientists and doctors may be able to use the same medical technology to do even more work, like mending heart muscles.

"The artificial-skin area, the soft-tissue area, it's amazing space to have a footprint in," said Chris Kaster, an analyst at W.R. Hambrecht in San Francisco.

Whatever the prospects, artificial skin already is helping severe-burn patients survive and recover from their injuries.

Integra's lead product, Dermal Regeneration Template, has been used on nearly 10,000 people. Most of the patients had third-degree burns.

In 1996, only months after Integra LifeSciences won approval for its artificial skin, surgeons put it to the test on Katy Stowe, an Alabama teenager who sustained third-degree burns over 65 percent of her body in a car accident.

Surgeons used a combination of traditional skin grafts and Integra's skin to treat Stowe's burns. Now, six years later, Stowe, a senior at Auburn University in Alabama, said the big difference between the two is the resulting flexibility.

The traditional skin grafts cause scarring and tightness. "Integra feels more like natural skin," Stowe said. "It moves more like the skin you're born with."

At Integra, the artificial skin is formed from layers of silicon, cow collagen — a protein found in tissue and bone — and shark cartilage. It works like scaffolding, supporting the patient's own skin cells and enabling them to regenerate dermal tissue.

While the silicon mimics the epidermis, the body's protective top layer of skin, it's the shark cartilage that plays a critical role, said Kien Nguyen of Ethicon's surgical marketing department.

The cartilage is cross-linked with the collagen, masking the bovine material so the patient's body doesn't reject it. The patient's cells can migrate through the matrix to create new dermal tissue, which grows beneath the epidermis and contains blood vessels and nerves.

"The dermis leads to quality of life. If you have that, it will greatly improve the quality of life for the injured person," Nguyen said.

Integra started selling skin in 1996. After three years of trying to penetrate a broad, segregated market, the company partnered with Ethicon, part of Johnson & Johnson, in an effort to capture more business.

The strategy has worked. Sales hit $19.4 million last year.

They could increase even more now that the Food and Drug Administration said in April the skin could be used in reconstructive surgery — treating scars from old burns.

Kaster, the Hambrecht analyst, predicted sales might hit $27 million next year.

Integra has stretched into other areas, mainly neurosurgery. Today, that line of business generates 74 percent of the company's sales.

Investors are pleased, boosting Integra stock 93 percent last year.

Kaster thinks profits could soar if companies can apply the technology to more specialized uses. Scientists are considering using the same skin-making techniques to repair heart muscles, veins and tendons.

LifeCell, a smaller company that sells artificial skin for burns, already is using its technology to heal injured tendons.

But there are wrinkles: Some are concerned the artificial skin will spread infection and disease to patients.

Earlier this year, Organogenesis, the first company to use human tissue (circumcised infant foreskin) to make artificial skin, recalled some of its product due to bacterial contamination. The product, Apligraf, is used primarily to treat diabetic ulcers.

Paul Thomas, chairman and CEO of LifeCell, said making artificial skin from human tissue was considered an advancement over animal sources. Yet the science remains in its infancy.

"Ultimately," he said, "we may be able to take recombinant human proteins and other elements that make up the human-tissue matrix, put them in a bioreactor and have it come out as human tissue."