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Mixed interim Phase II data with Prochymal chronic obstructive pulmonary disease - good safety, not-so-great efficacy - laid a ball of confusion on Wall Street's doorstep that prompted sharply differing opinions about the future of the adult mesenchymal stem cell candidate from Osiris Therapeutics Inc.

Doubt was only made stronger by the fact that the drug has fizzled before. Backers of Osiris felt their faith shaken this spring when Prochymal failed in Crohn's disease. Osiris quit a pivotal Phase III study in that indication when the trial was only 60 seats away from the 270-patient enrollment goal. (See BioWorld Today, March 30, 2009.)

Study design was blamed. Crohn's patients refractory to existing treatment are enrolled and randomized to receive either one of two doses of Prochymal or placebo in a four-week induction trial. Patients who responded at day 28 could sign up for a second study, in which they would be randomized to get Prochymal or placebo for longer-term maintenance.

Fair enough, but maybe some of the patients - hopeful of making their way into the second study - over-reported their responses. They had a reason to do so: Even if they suspected they were getting placebo, they had a chance at getting randomized into the drug group the second time around.

Too many trial subjects claiming improvement when they hadn't actually gotten better could account at least partly for the larger than expected placebo response that caused Osiris to start the trial over.

"We don't know that anything, from a drug standpoint, went wrong in the Crohn's trial," said, C. Randal Mills, president and CEO of Columbia, Md.-based Osiris. If some patients did mis-report, "I don't blame them," he said. "These are very sick patients. For them, the next stop is the operating room."

The much-smaller COPD Phase II study was never expected to answer the Crohn's questions. It was, though, expected to offer some clues to Prochymal's worth in GvHD, and did. For one thing, the six-month Phase II study turned up no toxicity related to infusions, which has long been a dose-limiting bane of mesenchymal stem cells.

"If you put enough of them in really fast, they can clog up in the lungs," Mills said. The effect has not been seen in humans, but was a worry when Osiris launched a placebo study in acute myocardial infarction, he added.

"What we saw was the exact opposite of what we were worried about," he said - patients' pulmonary function improved over placebo. "As we looked deeper into the patients, [we found] it was the patients who had risk factors for COPD, and compromised pulmonary function like you see in COPD, that were responding."

This was fairly interesting, but not especially valuable. "There was no way Prochymal would ever compete against something like a fast-acting inhaler," Mills noted. "It would be like bringing a battleship to a knife fight." And Osiris still could not distinguish whether Prochymal was causing underlying, structural changes. Disease modification in COPD would break entirely new ground.

So, for the Phase II COPD trial, Osiris screened out a patient segment that might muddy the waters. Researchers barred any patients who showed a response to a traditional anti-inflammatory agent. "We gave them a fast-acting bronchodilator, and if they had reversal of disease, they were excluded," Mills said. "That way, we would know that if we saw a change, we could be more confident the change was being driven by structural, disease-modifying effects of the drug," rather than by Prochymal's anti-inflammatory effects.

Even though efficacy failed to ring the statistical bell, Prochymal apparently has activity, and was safe, which should bode well for the GvHD push.

True, the dose was lower than in GvHD studies, of which there are two. In the COPD trial, patients got about 1 million cells per kilogram at each of four infusions. In the Phase III studies, 190 randomized patients with acute GvHD are getting six infusions of 2 million cells per kg; 244 patients randomized with steroid-refractory disease get eight infusions of the same dose.

But since the moderate-to-severe COPD patients enrolled in the trial already had weakened lung function, if Prochymal was going to cause problems in that department, it probably should have done so for them.

"These patients were fully immune competent and we gave them repeated doses of Prochymal," Mills said. "No one had a reaction. It confirms something we have been seeing previously. This is by far the patient [population] with the most severe pulmonary disease we've ever treated, and they tolerated the drug beautifully."

Prochymal might work in another pulmonary disorder such as idiopathic pulmonary fibrosis, Mills said. This possibility will be explored. Meanwhile, eyes have turned to GvHD. In the COPD trial, the drug significantly dropped C-reactive protein levels, a reliable marker of inflammation, and an important measure in GvHD.

"Everything in GvHD is on track," Mills said. The pharmacokinetic CRP findings in the COPD trial were particularly heartening in light of Osiris' already-begun rolling BLA for Prochymal, the chemistry, manufacturing and controls aspect of which can be "pretty tricky" with a cell-therapy product. Osiris expects to finish the BLA by year's end.

GvHD results should roll out well before then, most likely by the end of September. "Absent something that would change our mind, we fully expect to go back into Crohn's disease," Mills said, and reams of data from the GvHD experiments will help with that.

"Overall, it's becoming progressively more difficult to say the drug doesn't do anything, which used to be the rallying cry for the doubters, who would say that whatever you're seeing is anecdotal," he said. Mills allowed, though, that an effective drug doesn't mean the trial will succeed. "We learned that pretty well in Crohn's disease," he said.

Skeptics remain, and one of the more severe is analyst Joel Sendek, at Lazard Capital Markets. "Prochymal fails again," he wrote in a June 24 research report, after the COPD data were unveiled. Sendek pointed to a lack of randomized data for the use of the compound in acute GvHD, plus the failures in Crohn's and COPD, as reasons for predicting a negative result in the front-line GvHD Phase III trial. "Potential Prochymal efficacy in refractory GvHD will not be enough to drive profitability," Sendek wrote.

In a quarterly report, Sendek sounded more sanguine, Mills said. "He's predicting it works in GvHD, but if it gets approved in GvHD, he's saying it doesn't have a big market," Mills said, estimating the potential in North America (where Osiris has exclusive rights) at $200 million to $250 million. The opportunity is about the same outside the U.S., where Osiris gets escalating royalties from partner Genzyme Corp., of Cambridge, Mass.

The late 2008 deal with Genzyme brought $130 million up front and as much as $1.25 billion in milestone payments. Also included is Chondrogen, a Phase I/II mesenchymal adult stem cell candidate for osteoarthritis of the knee. (See BioWorld Today, Nov. 5, 2008.)

Of the potential market in GvHD for Prochymal, Mills said: "It's a great start - better than a poke in the eye with a sharp stick." The compound could prove to have strong effects where other drugs have fallen short, he added, "but I'm not one who bashes the Remicades and Humiras of the world." Abbott, of Abbott Park, Ill., makes the anti-TNF-alpha drugs Humira (adalimumab) and Remicade (infliximab).

Mills gets Humira every other week for severe psoriatic arthritis. "Some of my bones are going away and others are fusing together," he said, calling the Abbott compound a miracle drug. "I went from not being able to get out of bed to being completely asymptomatic in five days." Before Humira, there had been a question whether he could even return to work.

That work - including the advancement of Prochymal - is slow going. "I don't really care whether [Sendek] thinks the stock price will go up or down" with the approval in GvHD, Mills said. "Whatever's going to happen is going to happen," and will be transient anyway, he said. Other analysts, including Edward A. Tenthoff at Piper Jaffray and Charles C. Duncan at JMP Securities, are more upbeat.

"We have some retail investors who are very frustrated with us," Mills said. They want more aggressive touting of the company's pipeline, which he said would only achieve "a momentary effect on the stock price." With strong financial resources - Osiris had about $55 million in cash and short-term investments at the end of March - plus a lucrative contract from the U.S. Department of Defense to develop Prochymal for acute radiation syndrome, the company can feel fairly secure.

Mills said the company will use internal discipline to keep doing what it's always done.

"Nobody has any patience these days, but we do," Mills said. "Probably to the chagrin of almost everyone out there, on every side, we have a company that is long-term oriented. It has to be. We don't have another way out."

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