What if we can grow fully functional skin, hair follicles and all, with just a biopsy? It’s been done successfully in large animal studies already, and one biotech firm called PolarityTE Inc. (NASDAQ: ) is now trying it for the first time on humans. In just a few weeks, we’ll find out if it works.

The company, now a year-old $140M startup, just announced the first applications of its skin-regenerating SkinTE™ platform on its initial batch of patients. Included are those with burn wounds, surgical reconstructions, and unsightly scars. Some involved have even had their already-healed skin grafts removed and replaced with the experimental technology.

It sounds like a hustle, but it’s being backed by some of the biggest names in biotech, including former Teva

Teva Pharmaceutical (NYSE: ) Chairman Dr. Phillip Frost who owns nearly half a million shares and Medivation founder Dr. Steven Gorlin, now part of Pfizer (NYSE: ).

The system itself is actually pretty simple to understand. In the case of minor cuts and scrapes, skin fully regenerates with little to no scarring. Full skin regeneration is possible because of cells called LGR cells, or leucine-rich repeat-containing G-protein cells. These cells communicate with other skin cells through chemical signaling to determine which kinds of skin cells are needed at different layers within the wound, be they dermal, subdermal, epidermal, or hair follicles. In minor wounds, LGR cells can signal across the wound for fully functional skin regeneration.

But with serious injuries like major burns or large surgical scars, LGR cells cannot chemically signal across the area of the wound. The result is an area of disorganized, undifferentiated skin cells that serve as little more than a barrier. Hair is lost, sensation is dull at best, thickness, color and texture are all off.

Standard skin grafts, while obviously better than an open wound, are little more than aided scarring. Partial thickness autologous skin grafts only take the upper layers of skin, and full thickness skin grafts, while more fully functional, are risky for patients and unfeasible for larger wounds.

The company’s founder Dr. Denver Lough, while working at Johns Hopkins Hospital Department of Plastic and Reconstructive Surgery, discovered that the protein human alpha defensin 5 (HAD5) induces LGR cells to proliferate and migrate into wound beds, in theory enabling full skin regeneration. Basically, a biopsy is seeded with LGR cells using HAD5, grown in vitro, and then applied to the site of injury. Soon after Lough made the discovery, he resigned from Johns Hopkins to found PolarityTE, pulling along many JHU physicians along with him including the director of the JHU burn center Dr. Stephen Milner, who now serves as the Chief Clinical Officer.

The same cellular mechanisms can, in theory, be applied to many tissues in the human body, with LGR cells directing the polarized regeneration of cartilage, bone, muscle, and blood vessels. PolarityTE has products in the proof-of-concept and preclinical stages for each of these applications, which could end up becoming a turnkey solution to all manner of injuries and illnesses like cardiovascular disease, muscle injury, arthritis caused by the thinning of cartilage between joints, etc.



No FDA Approval Required

It’s not just the technology itself, but the regulatory framework in which it operates that makes PolarityTE’s platform disruptive. There are no clinical trials required here, meaning no Phase I, Phase II, or prohibitively expensive Phase III years-long regulatory processes involved. SkinTE™ is regulated under an FDA regime that requires no pre-market clearance, save a post-market regulatory follow-up. That means SkinTE™ can go to market whenever PolarityTE’s sales team feels it is ready to do so. With the application of SkinTE™ to its first patients, that process has already begun exactly one year since the company went public in December 2016. The same minimal regulations apply to all of its regenerative products in development.



Finances

There is one potential weak point in the case for PolarityTE. It is low on cash, for now. As of August, the company has only $3.5 million. Though the sale of its SkinTE™ kits to burn centers across the country has already begun, we do not know the hard numbers on its sales forecasts or margins yet. Nevertheless, the company is moving forward quickly and just announced a move to a 200,000 ft2 facility to expand manufacturing capabilities in anticipation of demand. There will probably be some equity financing ahead to fund a full-scale rollout, which could dilute the holdings of current investors somewhat.

Regardless, the biggest influence on the stock price going into 2018 will be results reported on the initial patient batches as data comes in. If results are positive, PolarityTE will likely refinance on the back of that news at an elevated share price in order to fund a full marketing plan.

If results are negative, then this will obviously put into question PolarityTE’s entire business model, making early data a likely binary event. Investors will find out the answer in a matter of months.