Osiris Therapeutics Inc. raised $50 million to fund ongoing clinical trials of its three adult stem cell-based products, the first of which, Prochymal, could hit the market as early as 2007 in graft-vs.-host disease.

The aggregate private investment round of equity and convertible debt was arranged by Friedli Corporate Finance Inc., of Zurich, Switzerland, a venture capital firm founded by Peter Friedli, who also helped establish Osiris.

Since its inception in 1992, Osiris has raised a total of about $200 million. President and CEO Randal Mills said the latest financing reflected the growing confidence of investors in the company's "detailed and focused plan to commercialize our three clinical programs," which includes Prochymal, the first and only stem cell-based product to receive fast-track designation by the FDA.

The $50 million is expected to carry the Baltimore-based company through 2006, and move at least two products - most likely Prochymal and Chondrogen, a stem cell formulation to repair damaged tissue in the knee joint - into pivotal trials. Mills said the company's goal is to be the first to successfully commercialize a stem cell product.

As of now, Osiris is the only firm to have advanced a stem cell therapy into Phase II development. Prochymal is being tested as a treatment for graft-vs.-host disease (GVHD), a life-threatening complication suffered by bone marrow transplant patients whose bodies reject the transplanted material. An estimated 30 percent of patients who undergo a bone marrow transplant die due to GVHD.

Prochymal "works by selectively targeting the areas of rejection," and acting as an anti-inflammatory, Mills told BioWorld Today. Those cells "don't distribute universally in the body, but specifically target areas of inflammation so you avoid the global immunosuppression that comes along with products like steroids," as well as the potential side effects.

The mechanism of action proved so effective in preclinical studies that Osiris plans to file investigational new drug applications to evaluate Prochymal in other indications, such as rheumatoid arthritis, Crohn's disease and acute organ rejection.

Osiris retains all marketing rights to Prochymal, except in Japan, where it has licensed the product to JCR Pharmaceuticals Co. Ltd., of Ashiya, Japan.

The company's second product, Provacel, is enrolling heart attack patients in a Phase I study. Designed as an intravenously administered therapy, Provacel focuses specifically on the area affected by the heart attack and repairs damaged heart tissue, Mills said, adding that, in preclinical studies, the product showed that it could prevent the progression of heart failure.

"Of our three products, that one will probably take the longest [to develop] because the disease is so complex and the patient population is so diverse," he said. "The goal is to have Phase I fully enrolled this year, and be able to start on Phase II by the end of next year."

The company has partnered with Natick, Mass.-based Boston Scientific Corp. to commercialize Provacel.

Osiris' third product, Chondrogen, which recently received approval to begin a Phase I/II study, is "probably the product we get the most calls about," Mills said.

Chondrogen is designed as a treatment for people who have had damage to the meniscus, the cartilage in the knee between two major bones that Mills said "sort of acts like a shock absorber." It is also a tissue that frequently gets torn or damaged, with an estimated 800,000 people in the U.S. undergoing knee surgery every year to remove the meniscus.

Though menisectomies are the standard of care, patients who have that cartilage removed are at risk of developing osteoarthritis. Osiris' product, designed to be administered by injection a week following surgery, aims to regenerate the meniscus. In preclinical studies, Chondrogen demonstrated regeneration of the meniscus within six weeks, Mills said.

Because the active ingredient remains the same in all three products, the FDA allowed Osiris to start with a Phase I/II trial in Chondrogen, and the therapy is expected to reach pivotal trials by the end of 2006.

Osiris selects mesenchymal stem cells derived from bone marrow taken from healthy donors between the ages of 18 and 32. Each donation can yield several thousand patient treatments. The products are developed in a manufacturing facility, frozen and are available for injection or infusion into patients without typing or matching. Since the products can be universally used, they can be kept in hospital pharmacies for acute care.

"When patients walk into the emergency room, the doctor can evaluate them and then have the product brought down and infused into the patient within the hour," Mills said. "No other stem cell technology out there has that ability. Other forms require matching to a cell bank" or the use of autologous cells taken from the patient and processed for several weeks in a laboratory.

As opposed to embryonic stem cells, which have provoked contentious debate but remain as yet untested in human trials, Osiris' mesenchymal stem cells have a safety profile built on studies going back to 1998, and those adult stem cell-based products "deserve a fair amount of respect from the medical community because of the promise they've shown," Mills said.

All three of Osiris' lead products are being developed using the work of Arnold Caplan, of Case Western Reserve University, one of the pioneers of stem cell research who has demonstrated the potential of mesenchymal stem cells to work in various indications without requiring related human donors. The company of 45 employees has worked to take the research into practical application.

"In 1992, it was clear this company was ahead of its time," Mills said. "Now everyone is talking about stem cells, but we've been doing it for 13 years."