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Like most industries in biotechnology, cell therapy is broad with various stages of development. It is a space that is showing great promise and has created a growing level of interest by the day. Cell therapy is unique because it is such a relatively new approach, one that we continue to advance each day as leaders emerge. One of the more respected opinions and leaders of the space is Stephen Potter, a man who has been involved in the space since its infancy.

Most recently, Potter was the senior vice president of Operations and Corporate Development for Osiris Therapeutics, Inc. (NASDAQ:OSIR), responsible for both the launch and management of its Bio-Surgery segment and was part of the senior leadership responsible for the first ever approved stem cell therapy Prochymal. Now, he has begun a new chapter, and has moved his expertise to NeoStem (NASDAQ:NBS), where he has joined the Board of Directors in hopes of helping to take the company to the next level. Last week, Potter and I spoke about a variety of cell therapy related topics, including the past, current development, and where the space is going. As a result, I am sharing this conversation.

Brian Nichols

You have had a very widespread career in the cell therapy space: First as the Senior Vice President of Business Development for DuPont's (NYSE:DD) pharmaceutical subsidiary, then as Senior Vice President of Corporate and Business Development at Genzyme. Most recently, you were the Senior Vice President of Operations and Corporate Development at Osiris Therapeutics, and now you have joined the Board of Directors at NeoStem. During your long and accomplished career, what are a few trends that you have witnessed in cell therapy? Do you have a story that could explain how far we've come since your leadership tenure began?

Stephen Potter

Perhaps the most important trend in cell therapy is that the conversation has changed from, "Will cell therapy ever be relevant?" to, "Which one?" My first real exposure to cell therapy was at Genzyme and the focus was, "Can you turn cells into new tissues?" Genzyme's product - carticel - was a breakthrough innovation, but very challenging for the surgeon to use (two surgical procedures). The search for another cell source led to a great deal of effort studying the MSC (Mesenchymal Stem Cells) since they turn into cartilage pretty well.

The science team spent a lot of time investigating if MSCs could turn into other tissues such as nerves, cardiac cells, or islet cells; and while things seemed promising in the petri dish, in vivo they had limited to no function based on the know-how that existed at the time. That may still happen (there are some interesting case studies such as autologous cartilage cells, bladders, and tracheas), but there is an enormous amount of scientific and clinical progress still needed before that becomes mainstream. The breakthrough is the depth of understanding on the benefits of using cells for their intrinsic therapeutic benefit (i.e. more like a drug instead of replacement parts). What we have come to understand is that many cells are responsive to injury and other signals and will put out multiple paracrine factors that can be beneficial to healing that will allow certain cells to be used today-without complex manipulations or modifications. The idea is to augment and harness what the cells are already doing.

Brian Nichols

What is another important change?

Stephen Potter

Another important change is we seem to be more accurate in how we describe what is being done. Long ago, everything was a "stem cell" regardless of source, which conjured up a wonderful sense of future potential, but wasn't very helpful in getting to a therapy. Now we talk MSC, HSC, IPS, ESC, etc., which I think reflects a better understanding that, like most other therapeutic modalities, effective cell therapy will be about finding the right cell for the right indication delivered to the right spot at the right time. Certain cells will do certain things well and it is doubtful that one type of cell will do everything well (much like any other technology). I am also starting to believe that the debate over which is better between "auto" vs. "allo" is misplaced. There is going to be room for both based on the application, the cell capabilities, and the medical need.

Brian Nichols

In a previous conversation, you explained that there has been and is currently a "transition" in place. Can you explain this "transition" in cell therapy?

Stephen Potter

A decade ago, everything was about the future promise of what cells could do. Now there are thousands of clinical investigations and trials on a huge range of tough diseases using a wide range of cells, approaches, and delivery. Many of these efforts are in later stages of development, meaning they have gone through multiple trials, have determined that they can be safely delivered, and now the issue is to figure out where they can be effective. Cell therapy seems to have reached a point that is similar to other technologies - some will work, some won't - but you need to do the well-designed and well-controlled trial work to find out.

Brian Nichols

How close would you say that we are to seeing an FDA approval in cell therapy? When do you think this could occur and do you think that any of the current products in development could see an FDA approval?

Stephen Potter

It is important to clarify what you mean by cell therapy - there are already many therapies where cells are either the primary or one of the primary modes of action. A bone marrow transplant is cell therapy and so are chondrocytes for cartilage repair. There are a lot of tissue-based products - such as the ones we launched at Osiris - whereas placental products naturally have a combination of cells, growth factors, and extracellular matrix that can create enormous benefits to patients in wound, spine, and orthopedics. All of these are "approved" since they are operating within well-defined regulatory boundaries. Presumably, the basis of the question is an adult stem cell gaining a traditional drug approval under the 351 regulatory pathways. I think it is possible you see something in the next year or two. The Osiris product, Prochymal, which has been approved by Canada and New Zealand, has undergone an excruciating review by those respected regulatory authorities. If you have steroid refractory GvHD with GI and Liver involvement, the data suggests you want Prochymal as a part of your treatment. With their Expanded Access Program (EAP), Prochymal is now the leading second line agent in steroid refractory pediatric GvHD. So hopefully in the next year or so, they will have success at the FDA in GvHD. Small rare indications probably have the best chance for early approval. Larger indications, like cardiac, are going to require big Phase III trials, so those are likely quite a few years away.

Brian Nichols

Last year in particular was huge for cell therapy as you were part of the first ever approved product with a cell therapy as the main component, Prochymal. What is it that Osiris has done to put them ahead of the curve?

Stephen Potter

Osiris is fond of saying that they are not an overnight success and have just celebrated their 20th anniversary. They are ahead of the curve because they have done the hard work needed to develop a drug product from the lab, through the pre-clinical work, through multiple trials, and through regulatory filing. This is a company that was formed around the MSC and that is all they have focused on - they probably know more about the clinical use of MSCs than anyone on the planet. They have something like 2000 patient-years of data, GMP production, and a 98,000 page BLA. The FDA required that the first several hundred patients get full body CT scans to make sure there was nothing growing in the wrong place. That was a big concern in the early day, and is another indication how far the industry and regulatory agencies have come - at least with MSCs and autologous applications, there is no real concern about safety. It's now about demonstrating efficacy. Osiris treated Prochymal like any other drug product and did the work necessary to advance it through the clinic.

Brian Nichols

There's little doubt that as the industry continues to grow there will be leaders who emerge, some will succeed and some will fail. Since you have had such a meaningful experience in the industry, what are few companies that you expect to lead the pack and that will emerge as "leaders" in cell therapy?

Stephen Potter

That is a tough question. The industry is still really in its infancy and major breakthrough or compelling clinical outcome could propel anyone to the forefront. You have to put Osiris on the list given their IP position and how far ahead they are clinically. Their growing revenue base has the potential to create a sustainable (cash positive) business. I think NeoStem has the potential to be a leading player: Some very interesting and diverse technologies, a later-stage trial in a very relevant indication (cardiac) with strong IP and a cell type that, from a large number of scientific papers, has demonstrated angiogenic properties and the potential positive impact on left ventricular heart function, and a manufacturing business that is growing well and has the potential to both contribute to the development of the company's therapies and provide some relevant cash flow to support the business.

Manufacturing is going to be a key issue in the cell therapy industry, and having a strong capability there will be important. Hard to ignore Mesoblast given the cash that the company has on hand and money just raised- that is going to allow Mesoblast to do a lot of interesting work in MSCs. Advanced Biohealing [now Shire (NASDAQ:SHPG)] and Organogenesis, which just got approval for a dental product, have a lot of revenues and have been very successful. Osiris and Mimedix are doing some very interesting work in tissue-based products. I am sure I am missing some (including big pharma - if they step in to the business in a big way, that could be a game-changer given the resources they can bring). Genzyme is still a player with [its] cartilage business and Histogenics is in a Phase III trial for a next generation cartilage product with an SPA (special protocol assessment). Baxter (NYSE:BAX) has a Phase III cardiac trial underway. This is why I am convinced that the industry is reaching an "inflection point" - there is so much interesting stuff going on.

Brian Nichols

Now, you are off to explore new ventures and have joined the Board of Directors at NeoStem. What is it at NeoStem that you find appealing and what do you hope to accomplish in this new role?

Stephen Potter

I think NeoStem has a very interesting business model. The company has a number of exciting therapeutic programs based on different cell technologies, including a Phase II cardiac program. The early data and literature for this are quite compelling. NeoStem has a solid IP to back up its program, and PCT to provide a revenue base and manufacturing expertise that will be particularly important in the cell therapy industry. PCT has the opportunity to benefit from the growth in the industry and could reach a level whereby it could throw off significant earnings to financially contribute to supporting the therapeutic programs. It also positions NeoStem to be a partner with other interesting opportunities and evaluate early stage technologies it may want ownership of or in. There are no guarantees of success, but with a 14-year business history, serving over 100 clients, PCT seems to have positioned itself well. The emerging regenerative medicine field is becoming important to large pharma, and one thing I hope I can do is assist the company in finding partnerships and position itself to expand the platform and maximize the value to shareholders.

Brian Nichols

I find contract manufacturing to be a potentially lucrative business in the next five years, but it's also an under-the-radar business. What do you foresee in this particular segment, and in particular with PCT?

Stephen Potter

As I mentioned above, manufacturing is going to be particularly important in cell therapy where it is often described that the "process is the product". How you handle the cells is important to the final product and its therapeutic potential. I find it interesting that PCT was actually the source of Amorcyte and the Phase II cardiac program that NeoStem has underway. Understanding how to be efficient and cost-effective and plan early for commercialization is a skill that few have experienced successfully or understand. Having manufacturing is an important capability to bring to the table with a proprietary therapy and, thus, puts PCT in a good position. So far, PCT's growth would indicate the company has a compelling story to tell. If the industry is really at an inflection point, as I believe, a solid manufacturing capability will be a real advantage.

Source: Cell Therapy Leader Stephen Potter Talks Osiris, NeoStem And The Industry Itself