Shares of Osiris Therapeutics Inc. (OSIR) have appreciated as much as 20% over the past five days as traders and investors are placing their bets ahead of the impending release of late-stage trial results of the company's stem cell drug candidate, Prochymal. The stock is currently trading around $14 as of this writing.
Prochymal is an intravenously administered formulation of mesenchymal stem cells obtained from the bone marrow of healthy adult donors and is designed to provide therapeutic benefit by controlling inflammation, promoting tissue regeneration, and preventing scar formation.
The stem cell biologic, Prochymal, is evaluated in three indications, including steroid refractory acute Graft vs. Host Disease, or GvHD, newly diagnosed acute GvHD, and also Crohn's disease. Prochymal is the only stem cell therapeutic currently designated by FDA as both an Orphan Drug and Fast Track product.
GvHD is a potentially life threatening complication that arises in approximately 50% of all patients who receive bone marrow transplants as treatment for some form of blood cancer, such as leukemia. GvHD may affect the digestive system, skin, liver and other body systems.
There are no approved treatments for GvHD, and steroids are commonly used to control symptoms of GvHD. However only 35% of patients with GvHD respond to steroids and mortality can exceed 85% for patients that do not respond to steroids, according to the company.
Prochymal is also being tested in other indications -- Type I Diabetes Mellitus, Acute Myocardial Infarction and Chronic Obstructive Pulmonary Disease, all of which are under phase II studies.
Chondrogen is yet another Osiris' biologic drug candidate. The drug, which is under phase I/II study, is being tested as a potential treatment for regeneration of the *meniscus in the knee and prevention of osteoarthritis. (*The meniscus is a crescent shaped cushion in the knee that helps provide stability to the joint).
Prochymal in steroid refractory Graft-versus-Host Disease
In the phase III trial for steroid refractory GvHD, Prochymal is administered twice per week for four consecutive weeks. The study involves 244 patients who are not responding to steroid therapy.
The primary trial endpoint is complete resolution of GvHD for at least 28 day duration. Six-month survival is a key secondary endpoint.
Under the expanded access program, Prochymal is made availabe to children 2 months to 17 years in age who are suffering from steroid refractory GvHD.
According to the company, the active ingredient in Prochymal is adult mesenchymal stem cells, or MSCs. The cells in this product are from normal healthy adult volunteer donors, and are not derived from a fetus, embryo or animal. Since these cells are universally compatible, similar to Blood Type O, the MSCs may be used without tissue type matching for specific patients.
Prochymal in acute Graft-versus-Host Disease
In the phase III trial for acute GvHD, Prochymal is evaluated as an add-on therapy to steroids for the first-line treatment of acute GvHD. The trial, which involves 192 patients, investigates patient response to a total of six infusions of Prochymal during the first four weeks of the study.
The primary endpoint is the proportion of patients who achieve a complete response at day 28 and who survive to day 90 without the addition of a second line therapy.
According to Osiris, in a phase II trial for acute GvHD, which enrolled 32 patients, 94% responded after receiving two infusions of Prochymal, with 23 patients, or 74% achieving a complete response, meaning the patients had experienced total clinical resolution of the disease. Six patients, or 19% had a partial response and 2 patients, or 6% did not respond. In the phase II study, in addition to standard care including steroids, patients were given two infusions of Prochymal, three days apart at the onset of moderate to severe GvHD.
Prochymal in Crohn's disease
As recently as March 27, Osiris stopped enrollment in a phase III study, which is testing Prochymal as a potential treatment for Crohn's disease due to a systemic design flaw in the trial. Shares plummeted 31% to a low of $12.62 that day following the news. The data from the trial is expected to be used in redesigning future studies.
Billion-dollar Deal
Last November, Osiris crafted a $1.38 billion deal with Genzyme Corp. (GENZ) for the development and commercialization of Prochymal and Chondrogen, marking the first major deal for adult stem cell-based therapeutics.
The deal called for Genzyme to make $130 million up-front payment to Osiris, and an additional $1.25 billion in milestone payments. If approved, Osiris will commercialize Prochymal and Chondrogen in the United States and Canada, while Genzyme will commercialize the treatments in all other countries.
Based on the results of the planned phase II/III trial of Chondrogen, Genzyme may elect to opt-out of further Chondrogen development, at which point all rights to Chondrogen will revert to Osiris with no further obligation by either company. But if Genzyme elects to continue with Chondrogen development, Osiris would be eligible to receive up to $100 million in development and regulatory milestones based on certain clinical trial results and regulatory approvals.
In 2007, Genzyme and Osiris entered into a collaboration to develop Prochymal for acute radiation syndrome. In January 2008, the companies were awarded a $224.7 million contract by the U.S. Department of Defense to develop Prochymal for acute radiation syndrome.
Considering the anti-inflammatory properties and tissue regeneration capabilities of adult stem cells, Prochymal is seen as a viable medical countermeasure to treat multi-component syndromes caused by high levels of radiation exposure in the event of nuclear terrorism and other radiological emergencies.
Osiris also has a partnership with Juvenile Diabetes Research Foundation, or JDRF, to conduct a phase II clinical trial evaluating Prochymal as a treatment for type 1 diabetes mellitus. As per the deal, the JDRF is obligated to pay a total of $4 million in funding to Osiris.
Osiris received $2.0 million of the contingent milestones during 2008 and expects to receive the remaining $2.0 million in 2009 and 2010.
Almost a one-trick pony?
In order to focus on launching its core product Prochymal, in May 2008, Osiris sold its biologics business Osteocel to medical device maker NuVasive for $35 million up front and an additional $50 million in milestone payments.
Though the company has yet another drug under development (Chondrogen), Osiris' fortunes can be expected to rise or fall based on the success of its lead drug candidate - Prochymal, which is under advanced stage of development.
A Quick Look At Balance Sheet
For the second-quarter ended June 30, 2009, Osiris' net loss narrowed to $9.7 million or $0.30 per share from $15.4 million or $0.48 per share, in the year-ago quarter, thanks to four-fold rise in revenue.
The company generates revenue from collaborative agreements, research licenses, and a government contract. Revenue for the quarter rose to $10.5 million from $2.5 million in the comparable quarter a year before.
As of June 30, 2009, Osiris had $120.8 million of cash, short-term investments and accounts receivable. The total cash does not include the $15.0 million milestone payment Osiris expects to receive from NuVasive.
Bottom Line
For Osiris, if trial results pan out the way they are expected, then the company's gamble on Prochymal success will pay off and will have a positive impact on its stock price as well. However, as with most pharmaceutical companies, there is no guarantee because the investigational drugs could either turn out as big money earners or they could flame out in clinical testing. Stay tuned...
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