A Cautionary Tale From the Big Medical Business of Knee Pain

Knee pain is a big, big business, not surprisingly.

Here’s an alert from Seeking Alpha, a website covering news on publicly traded companies, that shows starkly what small companies have at stake with cartilage restoration technologies.

In this case, Histogenics apparently developed a treatment called NeoCart. It’s described as a “cell-therapy based implant designed to help restore and heal knee cartilage through the use of a patient's own cells.”

I’ve written here and here about autologous chondrocyte implantation. I’m not sure how NeoCart works exactly, but it sounds a lot like ACI.

Alas, the NeoCart story may have a sour ending. I’ve been skeptical about ACI; I’m doubtful that it will lead to a result better than an old-fashioned microfracture. And sure enough, here are the findings of a study that sent the shares of Histogenics into a nosedive:

NeoCart, when compared to microfracture, was unable to demonstrate a statistically significant improvement in function and pain.

When the news came out, back in September, the stock abruptly plunged more than 75%, to about 60 cents a share. Think of that. If you had invested $100,000 in this company, overnight you wound up with less than $25,000.

Back in September, the CEO of the company hastened to assure investors that the results weren’t as bad as they looked.

If you believed that, if you held on to your stock, thinking “It’s going to rebound now” – and investor psychology shows people do tend to cling to their losers, hoping they’ll recover at least somewhat – you’re in even worse shape now.

Its latest stock price is 11 cents, or about one-fifth of its value in September. Right now it’s trading in the basement of the penny stock dungeon, jerking up and down on vapors and wisps of news.

What’s the upshot here?

Well, if you’ve got money to blow out your, um, ears, you should realize that investing in small companies whose fortunes are riding on unproven medical technologies is always going to be high risk. So caveat investor.

But for me, it’s at least as significant to ponder that maybe surgeons like Scott Dye have it right when they espouse a belief in doing as little surgically to heal bad knees as possible. If you can mend your bad knees without any kind of surgery, so much the better.

But if you’re going to do something to restore lost cartilage, maybe the simpler, less-invasive microfracture, which aims to stimulate your body to heal itself, beats this fancy, complex technology where your cartilage cells are grown in a lab then sutured back into your joints.

Something to ponder.