Washington Editor

Osiris Therapeutics Inc. won a contract potentially worth $224.7 million from the Department of Defense (DoD) to develop its mesenchymal stem cell therapy Prochymal to treat gastrointestinal injuries resulting from radiation exposure.

News of the award sent shares of Osiris (NASDAQ:OSIR) up 10.3 percent Friday, to close at $13.86.

However, Buffalo, N.Y.-based Cleveland BioLabs Inc. was not so lucky in the competitive contract bid for its proposal for Protectan CBLB502. News that the firm lost the contract sent its shares (NASDAQ:CBLI) tumbling 58.6 percent Friday, or $4.69, to close at $3.31.

The DoD contracts with biotech companies, said Joel Sendek from Lazard Capital Markets of New York in an investor note, "tend to disappoint investors long term."

Under the award to Columbia, Md.-based Osiris, the DoD will pay the firm $24.7 million to cover the future development costs of Prochymal, a formulation of adult stem cells derived from bone marrow, as a countermeasure for acute radiation syndrome (ARS).

The military will pay Osiris up to $4.2 million of those funds this year to cover the firm's development expenses and overhead costs, Osiris CEO Randal Mills told BioWorld Today.

The remaining $20.5 million will be allocated under an invoice process as the firm incurs expenses, he added.

The DoD has agreed to purchase up to 20,000 doses, in 5,000-dose increments, at $10,000 per dose once the stem cell therapy achieves FDA approval for the ARS indication, Mills explained.

Osiris partnered with Cambridge, Mass.-based Genzyme Corp. last July to jointly develop Prochymal as a medical countermeasure to nuclear terrorism and other radiological emergencies.

The DoD contract marks the first award under the collaboration, which was formed after Osiris earlier in 2007 had submitted a response to a DoD request for proposal (RFP) to develop medical radiation countermeasures, Mills noted.

Under its collaboration with Osiris, Genzyme is entitled to receive 15 percent of net sales from the ARS development program, which means the Massachusetts firm could bank up to $30 million in net sales from the DoD contract, Mills said.

Since Prochymal already is in Phase III clinical trials for the treatment of Crohn's disease and graft-vs.-host disease (GVHD) and in a Phase II trial for Type I diabetes, most of the work demonstrating safety and efficacy in humans has been completed, Mills explained. Because it is unethical to test the efficacy of a countermeasure to radiation in humans, the product is being tested in animals to confirm efficacy for the ARS indication, he added. (See BioWorld Today, Oct. 18, 2007.)

Osiris plans to meet with DoD officials in the near future to finalize its development plan moving forward for the ARS indication, Mills said.

The firm plans to first submit a biologics license application to the FDA for the GVHD indication, which it anticipates doing by the end of the year, followed by an application for the therapy in Crohn's disease before seeking approval for the ARS indication, Mills said.

However, he noted, the application for the radiation indication is contingent on how quickly the DoD wants Osiris to proceed with its ARS program under the contract.

John Parker, a former commanding general of the U.S. Army Medical Research and Material Command at Fort Detrick, Md., and a member of Osiris' medical countermeasure advisory board, called the DoD contract for Prochymal "a major breakthrough" in the military's efforts in securing a countermeasure for radiation exposure.

"Although we have vaccines and antibiotics for bacterial and viral diseases and we have some countermeasures for chemical exposures, we have been extraordinarily weak in any kind of a prophylactic or medicine, vaccine or therapeutic that we could use for persons who were exposed to acute radiation at various levels," he said in an interview.

Current treatments for radiation exposure include potassium iodide, which protects the thyroid gland from radiation exposure, and in extreme cases, bone marrow transplantation, Parker noted.

"The big advantage of Prochymal is it is a concentration of mesenchymal cells that are actually taken from bone marrow through a very specific process that Osiris has," he explained. "Their people multiply those mesenchymal cells and then put them into suspension. And when it's given to a human being, those cells migrate to the place of inflammation, be it a laceration, be it all sorts of things where cells are in trouble or dying, and these cells migrate on their own to those particular places and they stabilize the inflammation. That's a very, very important mechanism of action that we haven't seen in other therapeutics."

Another advantage of Prochymal, Parker said, is that because it is a therapy invented to treat conditions besides radiation exposure, "it has a medical reason to be besides being a tool for us to use in the case of weapons of mass destruction."

But the greatest benefit of the product, he maintained, is that it does not have to be administered directly or even within an hour or two after a person has been exposed to radiation to be effective and, therefore, gives the treating health care provider "a broad range of time" to determine when it is best to treat the patient.

Mills noted that tests of Prochymal have shown that the product has at least a two-year shelf life. But, he added, the product's stability testing program is ongoing and therefore, "it could actually have a longer shelf life" than currently known.

The DoD contract award to Osiris, Mills said, "serves as a great validation of the merit and the true excellence that this company has built in its products and capabilities and specifically for this indication for Prochymal. In a world where there's more hype than progress surrounding stem cell therapies actually coming to market for treating real human conditions, I think Prochymal really stands out as a clear exception to that, and I think this is just further validation of that."

Prochymal was selected by the DoD, Mills said, in an "open and competitive" RFP process in which many companies "washed out earlier in the process."

Cleveland BioLabs said in a statement Friday that it was "very surprised" by the DoD's decision not to award the firm the contract for its radiation exposure treatment Protectan CBLB502. The company noted that it met with military officials in July and was "reaffirmed" of the positive feedback it received two months later.

The firm said it is requesting a debriefing so that it can "better understand" the DoD's decision and vowed to continue its development of the investigational product for the radiation indication.

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