Osiris Pharmaceuticals Inc.'s latest data boost for already-marketed Grafix – a cell-repair matrix made of mesenchymal stem cells for diabetic foot ulcers (DFUs) that helped the company to $5.3 million in second-quarter biosurgery sales – likely will translate to a sizeable revenue hike, as reimbursement catches on.

Shares (NASDAQ:OSIR) of the Columbia, Md.-based firm reflected the optimism Tuesday, closing at $25.44, up $14.78, or 138.7 percent.

The company said the trial's pre-specified stopping rules for overwhelming efficacy had been met. For the primary endpoint, 62 percent of patients on Grafix, which entered the market in 2010 for burns and wound healing, showed complete closure in DFUs, compared to only 21 percent (p < 0.0001) given conventional treatment, for a relative improvement of 191 percent.

"There are so many things that surprised us – the infection, the safety, the crossover data," said Randal Mills, president and CEO of Osiris, during a conference call with investors.

"The other thing, too, is outside of just publications and the like, we're going to be releasing more data from this trial as we get it," Mills said. "We've received the top-line data here. There's a lot more data in this trial that we need to receive and fully understand," especially in the realm of safety, where Grafix also seemed to shine.

Mills told BioWorld Today later that, "out of everything, I would say the primary endpoint [win] was the least surprising. It was thoroughly gratifying, but we started the trial before we had results from two other pilot trials. Both of them came in with response rates, complete closure rates, in the 70 percent range. So, when this trial came in at that response rate, it was around what we thought." The most recent trial was powered for a 50 percent closure rate, which meant 20 percent of statistical upside.

Enrolled were 131 patients, and the interim analysis was done on the first 97 to finish. The blinded portion of the trial is quitting immediately, with all patients offered Grafix as therapy.

All top-line secondary endpoints were also met, including time to complete closure (42 days vs. 70 days, p = 0.017), complete wound closure for patients receiving all scheduled treatments (n = 79, 71.4% vs. 27%, p = 0.0001), and number of treatments to closure (6 vs. 12, p = 0.0001). Patients on placebo were 74 percent more likely to experience an adverse event vs. those on Grafix (66 percent vs. Grafix 38 percent, p = 0.008).

Most eye-opening for Mills were the efficacy rate in the worst-off patients, and the clues that Grafix might prevent infection. "We were able to take the patients who were treated on standard of care, after they had gone through 12 weeks of failing therapy, switch them to Grafix, and get exactly the same response rate as if we had started them on Grafix right away," he said.

The lowered adverse events, especially infections, make up the piece that particularly intrigues Mills. "I cannot wait to find out more about it," he said. "We've got to go through the data, and we've got to understand [them]," but if the indicators are correct, Grafix could be even more important than first believed. Grafix is "already in a different category," but focused benefit against infection could put the treatment in a "stratospherically" separate realm, Mills said. Aside from being dangerous, infections double the cost of patient care.

Profitability in 2014?

Available DFU therapies, each of which sells more than $100 million annually, leave much to be desired. Dermagraft (human fibroblast-derived dermal substitute, Shire plc) has a 30 percent relative effect on DFUs vs. 18 percent for the control arm in trials. For Apligraf (bi-layered, cell-based product, Organogenesis Inc.), the numbers are 56 percent vs. 38 percent. For Regranex (becaplermin, Healthpoint Biotherapeutics Inc.), the comparison is 50 percent vs. 35 percent. Of those, Dermagraft is the leader, selling about $154 million per year, followed by Apligraf.

About 25 million Americans have diabetes, and about 25 percent of them will get DFUs, which are the leading cause of hospitalization for diabetes patients, and which precede 85 percent of amputations. Of the amputees, 65 percent will not survive five years.

More data from the Grafix trial could roll out during the Symposium on Advanced Wound Care (SAWC) in April 2014. "SAWC is going to be tight, but if we can get a late-breaker in there, we're going to do that," Mills said. Another possibility is the Desert Foot conference, slated for this November in Phoenix.

First used for burns, especially burns on the face and on areas where patients want to avoid scarring, Grafix "quickly took off when the plastic surgeons saw they could use it with their most difficult-to-treat wounds," Mills said. They include DFUs, for which Grafix (derived from human placental amnion) is commonly used in an in-patient setting under the Diagnostic Related Group guideline.

But, for Medicare and private insurers who handle those in the outpatient setting, efficacy had to be proven in the way that the latest trial achieved. Of the $2 billion DFU market, about 80 percent comprises outpatients.

Nailing down the new reimbursement is "a process for us that starts immediately, but it's going to take months to work through," Mills said. "The certainty of getting the reimbursement is no longer in question. It's just a matter of timing."

Jefferies analyst Eun Yang, in a research report, upped Grafix's sales estimates as a result of the latest trial's outcome. "We now expect Grafix to achieve about $60 million in 2015 sales, vs. $23 million [forecast] previously," Yang wrote.

Grafix is not alone in the Osiris hopper. At the start of the year, Osiris won orphan drug status from the European Medicines Agency for Prochymal (remestemcel-L) as a treatment of acute graft-vs.-host disease (GvHD). The allogeneic stem cell therapy is approved in Canada and New Zealand for acute GvHD in children and is available in the U.S. and six other countries under an expanded-access program. (See BioWorld Insight, July 9, 2012.)

Experiments are ongoing with intravenous Prochymal, including Phase III studies in GvHD and Crohn's disease. It's the only stem cell therapy to gain orphan and fast-track status from the FDA. Phase II trials are under way in repair of heart tissue following a heart attack, the protection of pancreatic islet cells in patients with Type I diabetes, and the repair of lung tissue in patients with chronic obstructive pulmonary disease. The firm also has Chondrogen, an injectable formulation of mesenchymal stem cells, in the works for knee arthritis.

Osiris continues its march toward profitability, maybe as soon as next year. Biosurgery sales in the latest quarter's report beat the estimates – not for the first time – of Piper Jaffray analyst Edward Tenthoff, growing 31 percent sequentially and 225 percent year-over-year. "We recently raised our biosurgery sales forecast to $21 million in 2013 and $28 million in 2014," he wrote in a research report.

The company's biosurgery sector also includes Ovation, another cell-repair matrix, for bone and spine fusion, and recently launched Cartiform (cryopreserved human allograft tissue) for cartilage repair. "Unlike Osteocel, which Osiris sold to Nuvasive Inc. for about $90 million in 2008, Osiris intends to keep these products, but may sign select distribution agreements," Tenthoff noted.

Osiris' arrangement for Osteocel, a product designed to preserve the native stem-cell population in marrow-rich bone, brought $35 million in an up-front payment at the closing of the deal, and as much as $50 million in future milestone payments. In a separate agreement worth up to about $52 million to Osiris, the company agreed to manufacture and supply San Diego-based Nuvasive with Osteocel for up to 18 months. (See BioWorld Today, May 12, 2008.)

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