Celgene's And Osiris' IP Positions Weakened By Pluristem's Pivotal Patent

| About: Pluristem Therapeutics, (PSTI)
This article is now exclusive for PRO subscribers.

Intellectual property is an invaluable asset for a biotechnology company, where a large percentage of operating costs go to research and development in hopes of creating the next big drug. This investment could easily be compromised when another firm encroaches on an invention by making a similar claim using "borrowed" technology in hopes of drug commercialization. Pluristem Therapeutics, Inc. (NASDAQ:PSTI), with recent news of a major patent granted in the U.S. using placental cells to treat peripheral artery disease (PAD), an ischemic condition, faces this challenge with a competitor trying to do the same.

The instigator is Celgene Corporation (NASDAQ:CELG), purveyor of thalidomide in its redesigned forms that has been lucky to avoid the scandal of birth defects in the cancer patients that take its drugs. In 2002, Celgene purchased Anthrogenesis, a New Jersey company banking cord blood that developed a way to recover stem cells from placental tissue. Renamed Celgene Cellular Therapeutics, this subsidiary is now conducting a Phase I, multicenter clinical trial to evaluate safety and efficacy of an intramuscular injection of human placental cells in patients with PAD. Sound familiar?

Ischemic disease creates obstacles to arterial blood flow and reduces blood supply to muscles and organs. Pluristem's broad patent language covers PAD and critical limb ischemia, for which it has two ongoing clinical trials, in addition to ischemia of the heart, brain and kidneys, and medical conditions involving cartilage, connective tissue, and bone. A lot of clinical bases are covered in this one important patent.

A search of Celgene's patent portfolio reveals intellectual property surrounding the recovery of stem cells from a human placenta after birth (its first in the subject technology, from 2006) and a later patent (issued in 2011) that's geared toward collection methods and using stem cells in assays and for transplanting. Nowhere is there mention of PAD, or any other therapeutic use. By contrast, Pluristem's newly-granted patent has language that clearly addresses several disease indications, including PAD, which Celgene does not, setting the stage for a possible patent fight.

The power of the placenta is fast becoming the method of choice in stem cell development. Besides Celgene, another contender is Osiris Therapeutics, Inc. (NASDAQ:OSIR) which makes Grafix out of human placental tissue with commercial marketing of the material since 2010 in Canada and New Zealand for treating diabetic foot ulcers, acute and chronic wounds, and burns. Recently, 97 patients in an interim analysis of a larger study showed complete wound closure using Grafix compared to standard treatment - 62% versus 21%, respectively. Pipelines of the two companies, however, do not overlap much so potential patent infringement and future royalty arrangements are unlikely.

As testimony to stem cell research and development achieving greater status, Novartis AG (NYSE:NVS) just announced a licensing arrangement with privately-held Regenerex for access to its technology for kidney transplantation to augment in-house cell therapy platforms in blood cancers. As stem cell science becomes more mainstream, Pluristem's opportunities for corporate partnerships increase significantly.

Important to mainstreaming, especially for commercialization, is that manufacturing cell therapy products must be economical and consistent, something often lacking in biologic formulations trying to convert to a large scale. Pluristem has already achieved this, and more. The 3D matrix contained within its bioreactors replicate the composition of bone marrow, where cells can interact better in a favorable chemical environment. Pluristem holds exclusive patents and essentially has a monopoly on the expansion of mesenchymal stem cells in three dimensions, no matter where the cells come from. Companies like Osiris and Mesoblast Limited (NYSE:MSB) are using less-optimal 2D technology and would be required to seek a licensing agreement from Pluristem should they want to transition out of the petri dish to industrial scale.

The biotechnology landscape, like that of larger pharmaceutical companies, is filled with cross-licensing when patents overlap each other. I believe Pluristem has a good chance, with its newly-granted intellectual property, of garnering such agreements, particularly from Celgene whose own patents represent a scatter-shot of collection methodologies with no concrete disease indications. Also, Pluristem is ahead of Celgene in PAD trials, a good time for both companies to talk.

Disclosure: I am long PSTI, CELG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.