Replacing Insulin Cells Works. Keeping The Cells Alive Is the Trick

A look at the three approaches competing to help beta cell replacement survive the immune system

Issued on behalf of AVAI Bio, Inc.

LAS VEGAS, Sept. 08, 2026 (GLOBE NEWSWIRE) -- Biotech Insider News Commentary - Type 1 diabetes has an unusual property among serious diseases: the science of curing it is largely solved. Put working insulin-producing beta cells back into a person, and their body will begin to regulate glucose again. That is not a hypothesis anymore. It has been demonstrated in humans, repeatedly, with patients coming off insulin entirely. The obstacle is not whether replacement cells work. It is that the immune system destroys them, and the drugs that stop the immune system from doing so carry costs of their own.

Companies mentioned in today’s commentary include: Avaí Bio, Inc. (OTCQB: AVAI), Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX), and Sana Biotechnology, Inc. (Nasdaq: SANA).

Key Takeaways

The cure works, but only under the cover of immunosuppression. In a published trial of a stem cell-derived islet therapy, all 12 patients regained insulin production and ten of the twelve stopped using injected insulin entirely. Every one of them requires chronic immunosuppressive drugs to keep those cells alive.

Three approaches are competing to remove that requirement. Accept the immunosuppression and improve it, gene-edit the cells so the immune system does not see them, or physically wall the cells off inside a capsule. All three are currently being pursued, by different companies, with different risk profiles.

Avaí Bio is in the third camp. On August 12, 2026, its joint venture Insulinova signed a Research and Option Agreement with Ospedale San Raffaele in Milan to combine OSR’s stem cell-derived beta cells with Austrianova’s Cell-in-a-Box^® encapsulation technology.

The partner is the credential. The program will be led by Professor Lorenzo Piemonti, Director of the Diabetes Research Institute at OSR, along with Dr. Valeria Sordi, Head of its Beta Cell Differentiation Unit. Insulinova funds the work and supplies the encapsulation equipment and materials.

This is a research agreement, not a clinical milestone. No trial has been announced, no regulatory pathway has been disclosed, and no timeline was given. The question being tested is whether encapsulated beta cells survive and function while being shielded, which is exactly the question the field has not yet answered.

Why Insulin Was Never the Answer

Insulin therapy is a hundred-year-old workaround. It keeps people alive, and modern pumps and continuous monitors have made it far better than it was, but it does not restore the thing that was lost. A healthy pancreas adjusts insulin continuously, in response to glucose, without the person thinking about it. Injected insulin approximates that with a lag, and the consequences of getting the dose wrong run from unpleasant to fatal.

Beta cell replacement attacks the actual deficit. Transplanting islet cells that sense glucose and secrete insulin on demand restores the feedback loop rather than imitating it. Donor islet transplantation has existed for years and proved the concept, but it has always been limited by supply, because cadaver pancreases are scarce, and by the same immune problem that limits everything else in this field.

Stem cell-derived islets solved the supply problem. Manufacturing insulin-producing cells from a renewable stem cell line means the constraint is production capacity rather than organ donors. That change is what moved beta cell replacement from a niche procedure for the most severe cases toward something that could, in principle, be offered broadly.

What it does not solve is rejection. The immune system in a person with Type 1 diabetes has already destroyed their own beta cells once. Introducing new ones, from any source, invites it to do so again, and to treat the transplant as foreign tissue on top of that. Which leaves the field with one question and three answers.

Approach One: Accept the Immunosuppression

The furthest advanced approach takes the drugs as the price of entry. Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX) reported data from the Phase 1/2 portion of its FORWARD trial of zimislecel, formerly VX-880, an allogeneic stem cell-derived, fully differentiated islet cell therapy infused into the hepatic portal vein. Among 12 patients with Type 1 diabetes and impaired hypoglycemic awareness followed at least a year, all 12 showed restored insulin secretion measured by C-peptide.

The rest of the result is what made it notable. All 12 stopped having severe hypoglycemic events. All met glycemic control targets of A1C below 7% and time in range above 70%. Exogenous insulin use fell by an average of 92%, and ten of the twelve came off insulin altogether. The data were presented at the American Diabetes Association annual meeting and published in the New England Journal of Medicine.

Zimislecel requires chronic immunosuppressive therapy to protect the transplanted cells from rejection. That is a real cost: infection risk, kidney effects, cancer risk over time, and a lifelong drug regimen traded for a lifelong insulin regimen. It is a trade many patients with severe hypoglycemia would take, and Vertex has moved the program into a Phase 3 with global regulatory submissions expected in 2026. It is not a trade the wider Type 1 population would obviously take.

Vertex knows this and has said so by its actions. The company has publicly described research-stage programs pursuing alternative immunosuppressive regimens, gene-edited hypoimmune islet cells, and devices to encapsulate islet cells. It also ran a cells-plus-device program, VX-264, and reported that the data showed more work needs to be done to advance it. That is a useful and sobering data point for anyone evaluating the encapsulation approach, and it cuts both ways: the largest company in the field considers encapsulation worth pursuing, and its first attempt did not deliver.

Approach Two: Hide the Cells

Sana Biotechnology, Inc. (Nasdaq: SANA) has taken the genetic route. Its hypoimmune platform edits cells so that the immune system does not recognize them as foreign in the first place, removing the need for immunosuppressive drugs rather than managing them.

The company reported 12-month clinical results from an investigator-sponsored study of UP421, an allogeneic primary islet cell therapy engineered with that technology and transplanted into a patient with Type 1 diabetes without any immunosuppression. The cells were reported as safe and well tolerated, evading immune detection and continuing to function a year after transplant. Twelve-week results from the same study were published in the New England Journal of Medicine.

Sana is now applying the tested technology to SC451, a hypoimmune-modified, stem cell-derived therapy intended as a one-time treatment with the stated goal of normal blood glucose with no insulin and no immunosuppression. It has also announced a collaboration with Mayo Clinic to advance SC451 development, in connection with which Mayo made an equity investment of approximately US$25.0 million with an option for approximately US$25.0 million more.

The caveat is scale. The UP421 results are from a very small number of patients in an investigator-sponsored setting, and gene editing adds manufacturing and regulatory complexity that a physical barrier does not. But it is the most direct assault on the immunosuppression problem anyone has landed in a human so far.

Approach Three: Build a Wall

The third approach genetically modifies stem cells to become insulin-producing cells and then encapsulates them to effectively wall them off from the immune system. This is where Avaí Bio, Inc. (OTCQB: AVAI) sits, through Insulinova, its joint venture with Singapore-based Austrianova.

On August 12, 2026, the two companies announced that Insulinova had entered a Research and Option Agreement with Ospedale San Raffaele, the Milan university hospital and IRCCS research institute, to develop an encapsulated cell therapy for Type 1 and insulin-dependent Type 2 diabetes. The program brings together three pieces: OSR’s expertise in producing stem cell-derived insulin-producing beta cells, Austrianova’s Cell-in-a-Box encapsulation technology, and Insulinova’s role in advancing the combination toward a clinical trial product.

The stated objective is precise and worth quoting for what it does not claim. The collaboration will evaluate whether encapsulation can support beta cell survival and function while providing immune protection, with the long-term goal of reducing or potentially avoiding the need for systemic immunosuppression. Insulinova provides full funding, its proprietary encapsulation equipment, specialized encapsulation materials, technical expertise, and scientific support. OSR contributes stem cell differentiation and beta cell replacement expertise, research personnel and laboratory facilities.

"Stem cell-derived beta cells represent a promising approach to restoring insulin production in people with diabetes, but protecting transplanted cells from immune-mediated damage remains a major challenge," said Dr. Valeria Sordi, Head of the Beta Cell Differentiation Unit at OSR. "This collaboration will allow us to investigate whether the Cell-in-a-Box encapsulation platform can provide a suitable environment for stem cell-derived beta cells while preserving their viability and function."

"This agreement represents a significant milestone in the advancement of our diabetes program," said Chris Winter, Chief Executive Officer of Avaí Bio. "By bringing together OSR’s internationally recognized expertise in stem cells and beta cell replacement with the technologies and capabilities of our joint venture, Insulinova, we have established a strong framework to advance this program toward commercialization."

"Cell-in-a-Box was developed to overcome one of the fundamental challenges in cell therapy, protecting therapeutic cells while allowing them to function normally," said Dr. Brian Salmons, Chief Executive Officer of Austrianova. "Combining that technology with OSR’s expertise in producing stem cell-derived beta cells creates an exciting opportunity to develop a next-generation therapy for diabetes."

Avaí Bio describes itself as an emerging biotechnology company focused on identifying genetically modified cell lines and, through joint venture and licensing agreements, developing innovative cell-based therapies. Austrianova specializes in cell encapsulation, GMP-grade cell products and cell line development, and cites more than 50 peer-reviewed publications and partnerships with global pharmaceutical and biotechnology companies.

What This Agreement Is, and What It Is Not

The distinction matters more here than in most announcements, so it is worth being blunt about it. This is a research and option agreement. It funds laboratory work to test whether a combination functions. It is not a clinical trial, not an IND-enabling program, and not a regulatory filing. No trial has been announced, no development timeline has been disclosed, and no date for a data readout was given.

What it does establish is access. A microcap company with a joint venture and an encapsulation platform has secured a working relationship with one of Europe’s leading beta cell replacement groups, and is paying for the program rather than licensing into someone else’s. Whether that access converts into a therapy depends on results that do not yet exist.

It is also worth holding the failure rate of this field in view. Vertex, with vastly greater resources, ran an encapsulation program and reported that more work was needed. Encapsulation has to solve several problems at once: keep immune cells out, let oxygen and nutrients in, let insulin out fast enough to be useful, and avoid the fibrotic response that the body mounts against foreign material. Any one of those failing sinks the approach.

What to Watch

For Avaí Bio, the meaningful next event is evidence rather than another agreement. A first quantitative readout from the OSR and Insulinova work, or the disclosure of a development plan with dates attached, would tell investors something that a partnership announcement cannot. Neither was disclosed on August 12.

For the sector, the near-term marker is regulatory. Zimislecel submissions were expected in 2026, and an approval would make a stem cell-derived islet therapy a commercial product rather than a trial result, with immunosuppression attached. That would set the benchmark every immunosuppression-free approach, whether gene-edited or encapsulated, must beat on convenience rather than on efficacy.

The prize explains the effort. A therapy that restores glucose regulation without lifelong immunosuppression would not be an incremental improvement on insulin. It would be a functional cure for a disease that affects millions and consumes a lifetime of daily management. That is why three separate technical strategies are being funded simultaneously, and why the failures along the way have not slowed the field down.

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Article Sources:

[1] Avaí Bio, Inc. and Austrianova news release dated August 12, 2026, "Avaí Bio and Austrianova Announce Research Collaboration with San Raffaele Hospital to Advance Encapsulated Cell Therapy for Diabetes," distributed via GlobeNewswire, together with the Company’s corporate disclosures. Company filings are available on EDGAR at www.sec.gov.

[2] Public disclosures, clinical data presentations and filings of the referenced companies (Vertex Pharmaceuticals Incorporated and Sana Biotechnology, Inc.), including data presented at the American Diabetes Association annual meeting and published in the New England Journal of Medicine, as cited in the body of this article.

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Cautionary Note Regarding Research-Stage Programs. The Research and Option Agreement described in this article is a laboratory research collaboration. It is not a clinical trial, an investigational new drug application, or a regulatory filing, and no clinical trial, development timeline, regulatory pathway or data readout date has been disclosed in connection with it. The encapsulated cell therapy described is investigational, has not been approved by the United States Food and Drug Administration or any other regulatory authority for any indication, and has not been demonstrated to be safe or effective in humans. Nothing in this article should be read as a claim of therapeutic benefit, efficacy, safety or approval. Descriptions of the Cell-in-a-Box technology, the Insulinova joint venture, the parties’ respective contributions and the objectives of the collaboration are as disclosed by the companies and have not been independently verified by the publisher. Statements regarding potential commercialization are forward-looking and are not assurances of any outcome. Avaí Bio, Inc. is a development-stage company whose securities trade on the OTCQB marketplace; such securities are typically thinly traded, may be highly volatile, and the Company has experienced a wide trading range over the past twelve months. The Company will likely require additional capital, which may not be available on acceptable terms and which could dilute existing holders.

Cautionary Note Regarding Referenced Companies and Institutions. References to Vertex Pharmaceuticals Incorporated and Sana Biotechnology, Inc. are provided solely as scientific and sector context. Those companies are not peers, competitors, or financial comparables of Avaí Bio, Inc. They are substantially larger, better capitalised companies with clinical-stage programs, and their clinical results, regulatory progress, collaborations and share performance are not indicative of Avaí Bio, Inc.’s prospects or of any outcome for the research collaboration described in this article. Clinical results reported for zimislecel and UP421 were achieved with different technologies by different companies and say nothing about whether encapsulation will work. None of those companies is involved in the production or distribution of this article, and no partnership, affiliation, sponsorship, or endorsement is implied. References to Ospedale San Raffaele, Vita-Salute San Raffaele University, Mayo Clinic, the American Diabetes Association and the New England Journal of Medicine describe institutions, meetings and publications referenced in the underlying disclosures and do not imply any endorsement of any company or security by those institutions.

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