2008 may be year of stem cell gains

The Baltimore Sun

After years of heated debate and painstaking research, 2008 is shaping up to be a critical year in the development of stem cell therapies.

And in the forefront is Columbia's Osiris Therapeutics, which has three final-phase human trials under way that it hopes will lead to approval of stem cell drugs.

"All the main technologies will be in humans in the next year," after years of laboratory and animal research, said I. Richard Garr, president and CEO of Rockville-based Neuralstem Inc., which this month announced its first clinical trial for a drug developed from neural stem cells.

And Osiris is among the farthest along, if not the farthest, he said.

Much of the Osiris action centers on Prochymal, a drug made from adult stem cells, which it is testing for a wide range of diseases.

"I don't believe our stem cell - nor do I believe any stem cell - will treat all things in all people," said C. Randal Mills, president and chief executive officer of Osiris, which has headquarters in Columbia and some labs in Baltimore.

But that hasn't deterred Osiris from testing Prochrymal to treat gastrointestinal disorder, diabetes, heart attacks, chronic obstructive pulmonary disorder, radiation sickness and the rejection reaction that can result from a bone marrow transplant.

A lot more will be learned in 2008 about whether Prochrymal can, in fact, treat so many disparate conditions. Three pivotal Phase 3 trials - the last step before seeking Food and Drug Administration approval to market a drug - are under way already for Prochrymal, and some preliminary results will be available in the first half of the year.

Some analysts are bullish on the prospects for Osiris - one predicts the share price will double by the end of 2008 - while others are skeptical, thinking results so far for the company's stem cell drugs have been less than overwhelming.

Prochymal, administered as an intravenous drip, contains a particular kind of stem cells, called mesenchymal stem cells, from adult bone marrow. All stem cells, whether from adults or embryos, have the potential to divide and form more specialized cells.

Mesenchymal stem cells, Mills said, normally help with tissue repair and inflammation control - processes that make them potentially useful for a variety of diseases.

"We don't ask the stem cells to do anything they don't normally do," he said.

Two of the three pivotal trials are testing Prochrymal for graft-versus-host disease (GvHD), a severe, potentially fatal, condition that occurs when the immune cells in transplanted bone marrow attack the recipient. One trial is as an initial treatment, the other as a fallback.

The third trial involves Crohn's disease, an inflammation of the digestive tract.

In all three, Osiris has been given fast-track approval by the FDA, paving the way for the drugs to get to market more quickly if the testing shows success.

Osiris is also partnering with Genzyme Corp., based in Cambridge, Mass., to test Prochrymal in acute radiation syndrome, a disease that is somewhat similar to GvHD.

The company is also planning a late-phase trial for Chondrogen, which uses the same mesenchymal stem cells, but in injectable form. The company recently reported positive results from a mid-stage trial of Chondrogen as a treatment for knee pain caused by osteoarthritis.

Osiris already has one product on the market, considered the first approved adult stem cell product. Called Osteocel, it has been used in more than 10,000 patients to stimulate bone growth - for example, after a fracture - since it was cleared for market in 2005.

Osteocel produced $5.3 million in sales through the first three quarters of this year. That's not nearly enough to make Osiris profitable; it spent $24.5 million on research and development and booked a loss of $32.3 million over the three quarters. But the company had $39.2 million in cash and short-term investments as of Sept. 30 and last week announced it had raised an additional $11.8 million in a private placement of shares.

The market potential for Osiris' drug candidates could be enormous.

The company hasn't indicated how it would price Prochrymal or Chondrogen, but Mills said GvHD is potentially a $130 million market in the United States. Given that there are about 4,000 cases of GvHD a year from bone marrow transplants, that implies a price of $4,000 for a course of treatment.

Mills estimates potential U.S. markets for Procrymal for Crohn's disease at $500 million, and for heart attack and chronic obstructive pulmonary disorder at $2 billion to $3 billion each. If Chondrogen is approved as a treatment for osteoarthritis, Mills said, it would be "the biggest of the markets," with 21 million patients, but he declined to estimate a dollar figure.

Of course, to reach those markets, Osiris has to convince the FDA that its drugs are safe and effective. Analysts have opposing takes on the mid-phase trials.

"We believe the breadth of the applicability of stem cell-based therapies will emerge over the next 12-24 months as data from numerous clinical trials becomes available," William Tanner, an analyst with Leerink Swann & Co. wrote in a recent research note. He said the shares, which have traded between $10 and $15 most of the year, could be worth $27 to $31 by the end of 2008.

That would put the stock closer to its highs during the 16 months since it went public in August 2006. The share price peaked at $28.56 on Jan. 12, but dropped below $15 by February, and has generally remained there since.

On the other hand, Joel Sendek, an analyst with Lazard Capital Markets, wrote this month that recent GvHD results appear "modest." Sendek said, "Unlike Osiris management, we do not view Prochymal as a breakthrough in GvHD." For example, Sendek wrote, a recent report by Osiris noted response to GvHD by 12 children who received it under "compassionate use" rules, and that five of the 12 had died within 100 days.

"While the science is really interesting and there's some reason to be optimistic," Adam Feuerstein, a senior columnist for TheStreet.com, said in an interview, "they've looked at the data in some unconventional ways." He said some of the Prochymal trials "use a very liberal definition of response, but that kind of stops at the FDA. The FDA is not going to be fooled."

Mills defends his research, which he said has shown consistent statistical significance. As for the GvHD use on children, he said, "None of the kids would have lived, and seven of them lived. Is that important?"

bill.salganik@baltsun.com

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