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JUSTIFICATION AND APPROVAL FOR USE OF OTHER THAN FULL AND OPEN COMPETITION

1. Contracting Activity.

The Justification and Approval (J&A) is executed by the Naval Medical Logistics Command (NMLC), 693 Neiman Street, Fort Detrick, MD 21702, on behalf of the requesting agency, Naval Medical Research Center (NMRC), 503 Robert Grant Avenue, Silver Spring, MD 20910.

2. Description of the Action Being Approved.

Approval is requested to add additional work to current contract N62645-13-C-4014 with Stemnion, Inc., 100 Technology Drive, Suite 200, Pittsburgh, PA 15219, on a sole source basis for continued research and development efforts in support of NMRC’s Cellular Combat Wound Initiative.

3. Description of Supplies/Services.

The objective of NMRC’s Advanced Medical Development (AMD) Program for the additional work is to obtain a novel cellular wound healing technology that will accelerate and improve healing of combat-related injuries and their associated chronic wounds. NMRC AMD seeks to use Amnion-derived Multi-potent Progenitor cells (AMP Cells) and their secreted cytokine solution (ACCS) to decrease loss of tissue, obtain more rapid wound closure, and decrease scarring. Applications include burn wounds, eye injuries, and therapies designed to strengthen suture sites. It is expected that the benefits of therapies developed to care for wounded servicemen and women will be immediately applicable to civilian patients across a broad spectrum of needs that range from burn victims to adults afflicted with the slow-healing wounds typical of Type II diabetes.

The proposed additional work continues to build on Stemnion’s successful preparation and development of materials for research and clinical trials, ACCS research and development, AMP Cell proliferation and differentiation, immunology, and completed and ongoing clinical trials (Periodontitis, Radiation Dermatitis, Diabetic Full Thickness Burns, and Dry Eye). Stemnion’s efforts continue to demonstrate safety in the treatment regimens pursued and have set the stage to proceed to the next round of clinical trials. The proposed contract efforts include:

- Preparation and Development of Materials for Research and Clinical Trials.

- Analytical assay development that ensure lot-to-lot reproducibility of ACCS and AMP Cells.

- Immortalized cells development and production.

- Facilities planning to expand ACCS production.

- Immunology regarding the effect of AMP cells on Natural Killer (NK) and Natural Killer T (NKT) cells and the effect of AMP cells on B lymphocytes.

- Formulation and Delivery of lyophilized and/or spray dried powder.

- Pre-clinical Animal Studies to evaluate ACCS control of systemic vascular permeability

- Phase 2 Dry Eye Clinical Trial.

The period of performance for the entire contract based on the additional work to be performed is expected to be 19 April 2013 to 30 September 2017.

4. Statutory Authority Permitting Other Than Full and Open Competition.

10 U.S.C. 2304(c)(1) (as implemented by FAR 6.302-1), One responsible source and no other supplies or services will satisfy agency requirements.

5. Rationale Justifying Use of Cite Statutory Authority.

Stemnion, Inc. has 33 patents approved and over 30 patents pending in the United States with an additional 7 patents approved and over 30 patents pending in other countries that are directly related to the AMP cell and ACCS cytokine solution therapies that are entering Food and Drug Administration (FDA) Phase I and Phase II clinical trials. Stemnion is positioning itself to have a first-in-class, FDA- approved product for use in wound healing and, eventually, other clinical applications as well.

While other companies may be able to produce their own products based on their own proprietary technology and cells, it would be very difficult for a company to develop a generic version of Stemnion’s product for several reasons.

The first is that Stemnion’s products are very complex biologicals which would be hard to replicate. Stemnion was chosen because of their cell and conditioned media possess unique properties that are not found in products from other companies. Secondly, Stemnion’s confidential, proprietary process would be difficult, if not impossible to copy. Thirdly, the Affordable Care Act provides for 12 years of data exclusivity for new biologicals such as Stemnion’s products. Therefore, once Stemnion’s product is FDA-approved, even if a company were able to make a similar product (termed a “biosimilar”) they would still have to wait 12 years before being allowed to rely on data generated by Stemnion to obtain FDA approval. This would force a company interested in producing a biosimilar to commit millions of dollars and years of research to generate their own preclinical and clinical data.

There are wound healing products currently on the market. Other similar cell products, however, are generated from very invasive procedures such as bone marrow donation. These procedures are extremely painful and the numbers of cells isolated are limited. Stemnion, however, isolates their cells from placentas that are discarded after childbirth. This source is basically limitless. Stemnion’s product development is mature (Technology Readiness Level of 7). They have an Investigation New Drug (IND) application approved by the FDA and have carried out a phase I safety study in partial thickness burns and have or are currently conducting clinical trials related to periodontitis, radiation dermatitis, diabetic full thickness burns, and dry eye. The data from several animal models has demonstrated efficacy. The clinical studies that Stemnion is conducting and proposing to conduct are civilian analogues of military relevant injuries. The financial significance is very high due to the potential impacts across a broad range of injuries that can potentially be treated with this product. As an example for the treatment of traumatic wounds, the number of debridements can be reduced from an average of three to two, the net savings for a typical military treatment facility would be $2 million per year based on 2007 cost figures.

In addition, obtaining a comparable therapy from another bio-technology firm would require exactly the high-cost and multi-year investment that NMRC has already invested in Stemnion. Specifically, $6.8 million under cooperative agreement 1406-04-09-CA-21172 award of the Department of Interior, $9.7 million under contract D11PC19761 awarded by Department of Interior, $8.3 million under contact N62645-12-C-4009 awarded by NMLC, and $30.8 million under current contact N62645-13-C-4014 where the additional work is anticipated to be added. Replicating that investment with another company – given the precedent of Stemnion’s own experience – would pose a prohibitive cost to the Government and require a similar investment of time and resources.

Based on the Government’s knowledge, the use of Stemnion is justified due to the company’s advanced progress within the maturity model of new therapies and the number of approved patent application in the United States and worldwide. The core research and development for AMP cells and ACCS cytokine solution has progressed to a first in-man clinical trial and they have currently undertaken a regimen of FDA human clinical trials (e.g., periodontitis, radiation dermatitis, diabetic full thickness burns, and dry eye).

For these reasons, Stemnion, Inc. is the only company that can perform the additional tasks needed to continue the research under current contract N62645-13-C-4014.

6. Description of Efforts Made to Solicit Offers from as Many Offerors as Practible.

A sources sought notice was synopsized on the Federal Business Opportunities (FBO) website on 18 May 2015 and only Stemnion, Inc. expressed an interest in this requirement. No additional market research was conducted because it was not practicable for the reasons discussed in paragraph 5 above, for any company other than Stemnion, Inc. to provide the required supplies and services. Additionally, a notice of intent to award to Stemnion, Inc. was issued on the FBO website on 03 June 2015. NMLC received a capability statement from Astarte Biologics, LLC via email on 12 June 2015. The contracting officer reviewed this capability statement and determined that the submission was incomplete due to missing the critical element of cost. Further, Astarte Biologics, LLC. stated that they may be helpful for the additional work provided. Astarte Biologics, LLC. did not express that they would be able to perform all of the necessary additional work. Therefore, it is NMLC’s intention to proceed with the sole source

7. Determination of Fair and Reasonable Cost.

The Contracting Officer will perform a cost analysis in order to determine that the anticipated cost to the Government of the services covered by the Justification and Approval will be fair and reasonable.

8. Actions to Remove Barriers to Future Competition.

For the reasons set forth in Paragraph 5, NMLC has no plans at this time to compete future contracts for the type of services covered by this document. If another potential source emerges, NMLC will assess whether competition for future requirements is feasible.