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Osiris wins defense pact for therapy

The Baltimore Sun

Osiris Therapeutics Inc. said yesterday that it has won a $224.7 million contract from the Defense Department to develop and stockpile Prochymal, its adult stem cell therapy, to treat gastrointestinal damage caused by radiation exposure.

Prochymal, which is made from mesenchymal stem cells found in adult bone marrow, is in late-stage human clinical trials for other uses, including the treatment of Crohn's disease.

The government will pay Columbia-based Osiris and its partner, Cambridge, Mass.-based Genzyme Corp., $24.7 million to develop the stem cell therapy to treat acute radiation syndrome, or radiation sickness, a potentially fatal condition that could be inflicted by a nuclear bomb or other radiological threat.

High doses of radiation in a short amount of time can damage cells in the skin, gastrointestinal tract and bone marrow and result in death within days or months. Prochymal works at the cellular level to repair damaged tissue and stimulate growth of healthy tissue.

If Prochymal is approved by the Food and Drug Administration, the Defense Department would purchase up to 20,000 doses in four 5,000-dose increments for troops and civilians, Osiris said, worth $200 million.

Osiris' share of that would be $170 million - a big payoff for a biotech company that has yet to be profitable. It lost nearly $45 million in 2006 and $32.3 million in the first three quarters of last year.

But the company has at least a year's worth of clinical trials to complete before it can even apply to the government for market approval, said Osiris President and Chief Executive Officer C. Randal Mills.

While the therapy has passed tests for safety in humans, it must undergo efficacy testing in animals.

"It's very exciting and very promising, but there is a lot of work ahead of us," Mills said.

It is the first such award for the two companies since they announced a partnership to develop Prochymal for the U.S. government and its allies for emergency preparedness. Genzyme is a subcontractor to Osiris under the agreement.

Genzyme spokesman Bo Piela said his company will be reimbursed by Osiris at cost for any development work Genzyme does and would earn royalties worth 15 percent of sales if approved for the Defense Department's use.

While an important contract, Mills said it would represent a small segment of business the company hopes to generate from Prochymal. He believes the stem cell therapy could be developed for a variety of ailments, including diabetes, heart disease and chronic obstructive pulmonary disorder.

Prochymal is currently in phase III testing - the final hurdle a drug must pass to gain market approval - for the treatment of Crohn's disease, an inflammation of the digestive tract, a market Mills estimates is worth $500 million in the U.S. alone.

It also is in phase III testing to treat graft-versus-host disease, in which immune cells from transplanted bone marrow attack the recipient's body.

Osiris has one product on the market, Osteocel, which stimulates bone growth. It had $5.3 million in sales through the first three quarters of 2007.

This most recent award is "tremendous validation about the depth that this company has been able to develop Prochymal through," Mills said.

Osiris stock closed up 30 cents yesterday at $12.57 per share in trading on the Nasdaq.


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