Osiris is banking on universal cell

January 03, 2001|By Julie Bell | Julie Bell,SUN STAFF

Osiris Therapeutics Inc., once hailed as a bellwether for Baltimore's biotechnology industry only to fall on rough times, now hopes that it has achieved the kind of scientific breakthrough needed to combat investor skepticism.

The company, which has labs and offices in Fells Point, develops products deigned to regenerate human connective tissues such as muscle, bone and cartilage. Its experimental products, two of which are being tested in patients, are derived from stem cells, the progenitor cells that lead to all others in the body.

While the ability to repair damaged heart muscle or to regenerate injured neurons might seem like something out of science fiction, research in the field has been advancing at a number of companies. Among them are: Publicly traded Geron Corp. of Menlo Park, Calif.; NeuralStem Biopharmaceuticals Ltd. of College Park; and PPL Therapeutics PLC, another public company, which cloned the sheep Dolly.

Until recently, Osiris didn't have evidence to show that it might be able to regenerate tissue without using stem cells harvested from the bone marrow of patients or their "matched" relatives. And that, investors worried, would make Osiris' products too costly and inconvenient to be of much use.

"What we've been able to show over the last year is that mesenchymal stem cells are not recognized by the immune system," Osiris Chief Executive Officer Annamarie B. Moseley said, referring to the kind of stem cells Osiris uses.

Early evidence suggests that the cells don't spur patients' bodies to reject the resulting tissues - no matter who donated the stem cells.

"As a result," she said, "these cells have the ability to be used in a broad way without the need for matching."

The company is focusing on "off the shelf" products that can be made from adult stem cells harvested from unrelated donors, then stored until a patient needs them.

The approach would cut the cost of producing Osiris' products 10- to 20-fold, making the prices more in line with traditional therapies, the company said. It also may make it possible for the stem cell products to be used in emergencies.

Still, it remains to be seen whether the preliminary evidence of Osiris' advances, presented at a recent series of scientific conferences, will be enough to attract investors.

Osiris needs an infusion of money because the company has only enough funds to keep operating through the middle of this year, Moseley has said.

"Certainly, this increases the probability of them raising money," said Stefan D. Loren, a Legg Mason Wood Walker analyst, after reviewing Osiris' written presentations showing its potential to generate off the shelf products.

But yesterday, as Loren sat in his downtown Baltimore office watching biotech stocks fall on a computer monitor full of blinking red, he said raising money for a biotech company won't be easy.

"Right now, a lot of the biotech investment community seems to be in retrenchment mode," he said.

Osiris was hailed as a key to local efforts to build a strong presence in biotechnology in 1995 when it was lured from Cleveland to Baltimore with a $3 million state-backed loan and other incentives.

Osiris most recently raised money last year, garnering $16.5 million from private investors despite a host of recent challenges.

In 1999, it lost a key contract with Novartis AG. The contract had meant $10 million a year in salary subsidies for employees doing research related to osteoporosis and arthritis.

The company cut 40 positions as a result, leaving it with 80. CEO James R. Burns resigned in September 1999, leaving relatively new Senior Vice President Moseley as the interim and, later, permanent CEO.

Moseley, a former director of clinical gene therapy at Novartis company SyStemix and an experienced clinical and regulatory affairs executive, put plans for a company stock offering on hold to allow Osiris to move its research along.

"That they've been able to sustain themselves, despite that loss, is a positive thing," Martha Connolly, senior biotechnology specialist in the state Department of Business and Economic Development, said about the Novartis contract.

Despite the financial pressures, Connolly regards Osiris as well-positioned in part because its stem-cell research comes at a time when government and public acceptance of the experimental therapy is growing.

Osiris also avoids some of the most vehement opposition because it uses stem cells derived from the bone marrow of adults, rather than using cells from embryos.

Two Osiris products now undergoing human testing are OsteoCel and Allogen. OsteoCel, in the first of the FDA's three testing phases, is designed to grow bone where it has been surgically removed, such as in bone cancer surgery.

Allogen is designed to grow the spongy stroma of the bone marrow, where blood cell development takes place.

The treatment has been undergoing tests as a method for improving cancer patients' recovery from bone marrow transplants and chemotherapy.

The company now plans to move Allogen into the third and final phase of human tests required by the Food and Drug Administration.

Because Allogen already is so far along in development, however, Osiris plans to bring it to market initially as a "family" product, meaning stem cells will be extracted from the marrow of the patient or a relative.

The extracted cells are then returned to the lab where the number of them is expanded using Osiris' proprietary process before being shipped back to the hospital and infused into the patient, where they make their way to the marrow and create stroma.

The company already is laying plans to turn OsteoCel into a "universal" off-the-shelf product for future testing.

All in all, Moseley said about 2000, "I would say it's probably a turning point year for us." But then, she acknowledged, Osiris still has a long way to go.

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