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Technology – Strong 47 patent position

Osiris (NASDAQ:OSIR) was founded on the basis of technology that promised development of stem cell treatments. More precisely that meant Dr. Caplan (one of the founders) first described cells that were stuck to the plate, after culturing cells isolated from the bone marrow. Not only did he notice their capacity to adhere but also their ability to differentiate into different types of cells. Today, decades after the discovery and further research efforts, we know a little bit more about these cells.

They are called Mesenchymal Stem Cells (MSC) and unlike stems cells talked about in media, the ones whose current research development just got restarted by the federal government, these stem cells (MSCs), are not a part of moral debates. They are isolated from healthy adult donors and still have the capacity to differentiate. They can be precursors to a number of mesodermal tissues such as bone, cartilage, fat and muscle. They are rare and currently they are thought to be present in the bone marrow at 1 to 100,000 ratio, compared to the rest of cells within. A few studies have shown that in their nascent state they have the ability to suppress the immune response, which would make them attractive therapeutics for inflammatory disease.

Clinical Trials - Exude Confidence with Minor Drawbacks

Supporting immune suppression phenomenon of MSC, Osiris has Prochymal in three phase III trials for three different indications; acute and steroid refractory Graft versus Host Disease and Crohn's disease. Prochymal finished recruitment of patients for Clinical Trial for the Treatment of Chronic Obstructive Pulmonary Disease and is recruiting patients for their Phase II Type I Diabetes trial and just finished Phase I Clinical Trial for the Treatment of Damaged Myocardium Following an Acute Myocardial Infarction. The postulate of all these indications is that they are all caused by some sort of inflammation that is detrimental to the body; hence suppressing it by Prochymal could be a valid treatment option. There is also another formulation of MSC called Chondrogen tested in knee repair in Phase I/II.

Acute Graft versus Host Disease

Phase II trial showed a 74% of patients treated with Prochymal and steroids had a complete response; compared to 35% of patients who had a complete response to steroids alone (please note that this study didn't compare Prochymal and steroids vs. steroids alone but rather referenced response rates of another study that treated patients with steroids alone).

Steroid-refractory acute GvHD

They are recruiting for Phase III trial, but there is no information on Phase II on their website or

Crohn's Disease

Phase II evaluated 10 patients (who failed all other current therapies) and showed statistically significant reduction in Crohn's Disease Activity Index or CDAI of scores of 105 points by day 28 from 341 to 236 (p=0.004).

Chronic Obstructive Pulmonary Disease (COPD)

Phase I is finished, however nothing is reported on it. They are recruiting for Phase II.

Damaged Myocardium Following an Acute Myocardial Infarction (AMI)

Unlike with COPD there is ample data published about this Phase I. Outcomes seem very favorable and include improvements in arrhythmic events (less), premature ventricular contractions (less), ejection fraction, lung function and their overall condition at six months as compared to those receiving placebo.

Type 1 Diabetes

Enrolling patients for Phase II, and no results of Phase I available.

Acute Radiation Syndrome (ARS)

Procymal is also being developed for use in ARS (similar symptoms to AGvHD) as needed by the Department of Defense.

Chondrogen Trial for Knee Repair

Phase I/II showed that patients who received Chondrogen experienced a statistically significant reduction in pain as compared to those receiving the control, hyaluronic acid HA as well as lower rates of bone degeneration.

Products – The one they had was sold, but better times seem to be coming


The first bone matrix product to provide all three bone growth properties: Osteoconduction, osteoinduction and osteogenesis. It is used by surgeons instead of autografts. It generated $9 mil. in 2007 and expected $15 mil. in 2008. It was sold to NuVasive, Inc. (NASDAQ:NUVA) in Mid 2008 for $35 mil. with additional $50 mil in milestone payments, associated with certain provisions.

Business Development – Confident, Genzyme (GENZ)-Risk Share and No Cash Issues

The exact rational for Osteocel sale may lie in company's fairly short cash supply at the time, and strong belief in their pipeline. Meaning, any additional private investor funding (provided it existed in the midst of financial crisis) would be dilutive, and raising cash in a public offering would probably prove to be much more difficult than just a year earlier. So, a potential gain from the pipeline outweighed the loss of single cash producing product.

Just a few months after the sale of Osteocel they struck a deal with Genzyme Corp. by entering a strategic alliance for the development and commercialization of Prochymal and Chondrogen. They have been chosen as, what seems to be a trend lately, a risk sharing partner. Many big Pharma and Biotech companies are seizing their pipeline building by uncontrolled acquisition of small biotech companies, but rather they enter into much cheaper deals of co-development, and eventually profit sharing.

In the case of Osiris-Genzyme partnership, Osiris will commercialize Prochymal and Chondrogen in the United States and Canada, and Genzyme will commercialize the treatments in all other countries. For that privilege Genzyme hands over an upfront payment of $130 million to Osiris, plus potential $1.25 billion in milestone payments.

Osiris is responsible for the clinical development costs for all ongoing trials, as well as future trials for additional indications through completion of phase 2 development. Osiris and Genzyme will share the cost of future Phase 3 and 4 clinical trials, with a 60 percent Osiris / 40 percent Genzyme split.

In today's financial turmoil, Osiris is pretty stable. Maybe just a year ago, its leaders might have not been so calm and on the track. However, today its belief in itself and Genzyme's willingness to share both the risks and the profits, does signal faith but caution as well.

So far the published results on its clinical trials are very encouraging, which one would expect as it chose to publish them. However, for some there is no data, but the company is still going forward with them. So is no news bad news? Maybe, but we cannot be decisive or dismissive of no-benefit-reported Phase I and Phase II trial. As it stands, even if only the trials with the reported benefits actually led to an approved use for that indication, the company would be a fantastic success. MSCs seem to do the immuno-suppressive trick. However, teasing out their perfect benefit might not be trivial.