Osiris stock hurt by report

Stem cell drug's tests disappoint

February 14, 2007|By Tricia Bishop | Tricia Bishop,Sun reporter

Shares of Osiris Therapeutics fell 10 percent yesterday after the company announced that one of its adult stem cell drugs doesn't regenerate knee cartilage as expected. Still, Osiris said the therapy may have uses as an osteoarthritis treatment, according to minimal, undetailed data.

It's the first significant disappointment the Baltimore business has had in a while, having gone public in the summer in one of last year's more successful biotech launches.

Late Monday, the company issued a news release saying six months of early-stage clinical trials involving 55 patients have shown that the injectable adult stem cell drug, Chondragen, is ineffective at regrowing a crescent-shaped piece of knee cartilage called the meniscus.

About 800,000 people injure that part of the knee each year, which would have given Osiris a healthy target market.

Though the data is preliminary and the company has yet to sift through all 1,000 pages of it, the substandard results led Osiris' stock to fall $2.10 yesterday to close at $18.45 on the Nasdaq.

The Fells Point firm's stock initially opened at $11 in August and peaked at $28.56 per share in January.

"We are obviously disappointed that we were unable to detect significant amounts of meniscal regeneration," the company's chief executive, C. Randal Mills, said in a statement.

During a conference call to discuss the results yesterday morning, Mills pointed out that about a third of the patients who were given Chondragen showed at least slight improvement in the condition of their joints and cartilage.

Such results could mean Chondragen has potential as a treatment for osteoarthritis, a degenerative disease that represents the most common form of arthritis, the company said.

Still, Mills struggled to provide the hard-line osteoarthritis data some analysts were looking for.

"I'm a little bit confused," said analyst Joel Sendek, who follows Osiris for Lazard Capital Markets. "I'm trying to get some sense of how the patients improved. When you say 30 percent in the press release, it could be a tiny improvement, it could be a major improvement."

Mills said there were a "couple of fairly dramatic improvements" but didn't elaborate.

Osiris has been testing Chondragen as a potential therapy for meniscus regeneration, but was prepared to make shifts if needed, calling the knee cartilage testing a "surrogate endpoint."

In the biotechnology world, that basically means companies will test a drug as a treatment for whatever will get it on the market the fastest. They could then study it for use in treating other ailments or hope doctors take it upon themselves to prescribe the drug for other illnesses it's not approved to treat.

In animal studies, the meniscus was "able to regrow fast," Mills said, leading the company to choose such regeneration as the surrogate endpoint.

Mills said his team will continue analyzing the preliminary data and await 12-month results before determining a full plan of action, which will likely include testing of Chondragen as an arthritis treatment.


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