The discussion and conclusions presented in this document are based on the results of preclinical studies and are not intended to represent any approved or commercially available device(s).

The Case Behind CoreoGraft® Being A Co-Lead Product At Hancock Jaffe

By Daniel Carlson – March 20, 2019

This is an exciting quarter for Hancock Jaffe Laboratories, Inc. (“HJLI”). As we have written in the past, HJLI has begun in-human testing of its VenoValve®, a potential cure for deep vein severe chronic venous insufficiency, a debilitating condition afflicting 2.4 million people in the U.S. and with few treatment options. But it is HJLI’s second product, the CoreoGraft®, which also recently began a pre-clinical trial this quarter at the Texas Heart Institute, for which we are equally excited.  The CoreoGraft® is a potential solution to a problem that has plagued coronary bypass patients and their treating physicians for many years. We believe that the CoreoGraft® has enough upside that it could be considered a co-lead product for HJLI. Can a development stage, medical device company with a $30 million market cap have two potential blockbuster products? After reading about the CoreoGraft®, we think that you will agree that the answer is “yes”.

The Case Behind CoreoGraft® Being A Co-Lead Product At Hancock Jaffe

Imagine that you wake up in the morning with chest pain, shortness of breath and feeling lightheaded. Chances are, you may be one of the 735,000 people in the U.S. each year that are suffering a heart attack.  After going to the emergency room or your general practitioner, a series of tests is ordered, and the tests indicate that you have multiple blocked coronary arteries. Although cardiac stents have become the norm if one or two arteries are blocked, coronary artery bypass surgery remains the treatment of choice for patients with multiple blocked arteries. Approximately 200,000 coronary artery bypass graft (“CABG”) surgeries take place each year in the U.S. That number is expected to increase as our population continues to age.

CABG surgeries are invasive. Arteries around heart are accessed via an incision along the sternum known as a sternotomy. Once the incision is made, the sternum (chest) is divided (“cracked”) to access the heart and its surrounding arteries. In most instances, doctors prefer to use the left internal memory artery (“LIMA”), an artery running inside the ribcage and close to the sternum, to re-vascularize the left side of the heart.

Use of the LIMA to revascularize the left descending coronary artery (affectionately called the “widow maker”) has become the gold standard for revascularizing the left side of the heart during CABG surgery. For the right side of the heart, and where additional grafts are needed on the left side, the current standard of care is to harvest the saphenous vein from the patient’s leg to be cut into pieces and used as bypass grafts around the heart. Unfortunately, saphenous vein grafts (“SVGs”) are not nearly as effective as the LIMA for revascularizing the heart.

Historically, doctors would stop the heart during bypass surgery and use a heart lung machine to sustain the patient during the surgery. Once the grafts are sewn in place, doctors would “shock” the heart to restart it and remove the patient from the heart lung machine. Today, some doctors prefer to perform the CABG surgery “off-pump” (about 13% of CABG surgeries are performed “off-pump”), meaning that they perform the operation while the heart is still beating. CABG surgeries cost between $70,000 and $200,000 and the average recovery time is 6 to 12 weeks. Although CABG surgeries have become safer over the years due to improved surgical techniques, and CABG surgeries have saved millions of lives, there is still a major problem with CABG surgeries that is yet to be solved. That problem is high SVG failure rates.

While the LIMA is known for excellent short term and long-term patency, ten to forty percent of SVGs that are used as conduits for CABAG surgeries fail within the first year after the CABG surgery. A significant percentage fail within the first 30 days. At 10 years, the SVG failure rates can be as high as 75%. By “failure”, we mean that the graft becomes blocked or “occluded”, depriving the heart of necessary blood flow. Yes, that is the same problem that the CABG surgery was supposed to solve. So, after undergoing the entire invasive CABG surgery and even before the end of the average recovery period, the patient may begin to experience some of the same symptoms that necessitated the CABG surgery in the first place.

SVG failure is such a big problem that scientists have spent years attempting to discover the causes.  What researchers have determined is that there are two main causes of SVG failure: size mismatch, and a thickening of the interior of the SVG that begins immediately following the harvest procedure. Size mismatch occurs because the diameter of SVGs is often significantly larger than the diameter of the coronary arteries around the heart. This “size mismatch” causes flow disturbances, leading to graft thromboses and graft failure. The thickening of the cell walls of SVGs occurs when a layer of endothelial cells on the inner surface of the SVG is disturbed beginning at the harvesting procedure, starting a chain reaction which causes the cells to thicken and the inside of the graft to narrow, resulting in blood clots and graft failure.

Hancock Jaffe’s CoreoGraft® is an off the shelf conduit that could potentially be used to revascularize the heart instead of harvesting the saphenous vein from the patient’s leg. In addition to avoiding the invasive and painful SVG harvest process, HJLI’s CoreoGraft® will more closely match the size of the arteries around the heart, eliminating graft failures that occur due to size mismatch. In addition, with no graft harvest needed, the hope is that HJLI’s CoreoGraft® will also reduce or eliminate the inner thickening that burdens and leads to failure of SVGs.

Although the CoreoGraft® study at the Texas Heart Institute starting this quarter is a pre-clinical animal study, HJLI did implant CoreGrafts in humans several years ago in Europe when they had a CE Mark for the product. Although not under the controlled conditions of a clinical study, the CoreoGraft® results were very encouraging. In the U.K., CoreoGraft®s were implanted in several of the sickest patients who would not survive a graft harvesting procedure and with no other viable options. Several of the patients lived more than 1 year with no evidences of graft failures.

In addition to providing an alternative to SVGs, the CoreoGraft® could be used in situations where making grafts using the patients’ own arteries and veins is not a viable option. For example, women undergoing radiation treatment for breast cancer are known to have a higher incidence of heart disease. Radiation is also known to damage the LIMA, making it unsuitable to be used as a graft. For breast cancer survivors that are in need of CABG surgery, the CoreoGraft® could be a life saving option.

Another example is for patients undergoing a second CABG surgery. Due in large part to SVG failures, patients are often in need of second CABG surgeries. If the SVG was used for CABG surgery #1, the patient may have insufficient veins to harvest. While the CoreoGraft® may start out as a product for patients with no other options, if the CoreoGraft® establishes good short term and long-term patency rates, it could become the graft of choice for all CABG patients.

HJLI’s CoreoGraft® study at the Texas Heart Institute is focused on short term patency rates.  CoreoGraft®s will be implanted and monitored using Transonic flow monitors. HJLI expects to have data from the study available in June of 2019. If the study is successful, the next step would be a Pre-FDA meeting to determine what additional pre-clinical studies would be necessary before in-human testing in the U.S.

Assuming a successful FDA outcome, the CoreoGraft® would then launch into the additional trials necessary to obtain the data for FDA clearance on first-in-human trials. That trial would likely be a potential 2020 milestone and one of very big significance to investors in Hancock Jaffe. As we have discussed, the market opportunity is substantial and there is really no competition in the space.

Is it possible that between the CoreoGraft® and VenoValve, Hancock Jaffe will have two FDA approved products on the market in the next couple years, with both going after large indications and no approved competition? The answer in our opinion is a resounding, “Yes!” With a current market cap of around $33 million, if HJLI can pull off two successful product launches, investors should be well rewarded for their early stage involvement.