With one product on the market, another in late-stage clinical trials, and a fresh IPO, Osiris Therapeutics is front and center among companies commercializing adult stem cells. But until recently, the 15-year-old Baltimore-based firm has developed its technology in fits and starts and no one is quite sure how it works. The question on the minds of many scientists and investors: Will Osiris emerge as a biotech industry leader?

Osiris’ product candidates are mesenchymal stem cells made from adult volunteer bone marrow donors. The company extracts the cells from the marrow, expands them in culture, and administers them to patients through either infusion or injection or embedded in a carrier matrix. Unlike autologous products extracted on a patient-by-patient basis and used only to treat that individual, MSCs can be expanded and stored to treat many patients. According to the company, one 60-cc donation of bone marrow can produce about 5,000 doses of product. The doses are also stable, and so can be frozen, shipped and inventoried at the point of care. Plus, MSCs are immunologically silent, and so can be used in any patient without typing or matching, even in acute-care settings.

Unlike embryonic stem cells, MSCs are readily available and their acquisition and use does not present any ethical controversy. “I think MSCs are the next population of stem cells likely to be in the clinical armamentarium,” says Dave Scadden, professor of medicine at Harvard Medical School and co-director of the Harvard Stem Cell Institute. (Hematopoietic stem cells from closely matched donors have long been used to treat cancers of the blood.)

Osiris has advanced its leading candidate, Prochymal, into late-stage (Phase III) trials to treat severe refractory graft-versus-host disease (GvHD), a disease that causes life-threatening immune system reactions in the skin, gastrointestinal tract, and kidney after a bone marrow transplant. It is also readying a Phase III program for Prochymal in Crohn’s disease, a GI tract disorder. Data suggest that MSCs can regenerate intestinal tissue damaged by Crohn’s that is necessary for absorbing nutrients. Along the way, Osiris has obtained Fast Track designations and Orphan Drug status from the U.S. Food and Drug Administration for Prochymal, which will expedite regulatory reviews and give the company seven years of marketing exclusivity. 

It has also opened trials of two other MSC formulations: Provacel, for acute coronary disease, and Chondrogen, to regenerate torn knee cartilage and prevent the arthritis that often follows.

The emphasis on product development at Osiris is something new. Stem cell research is still in its early stages, and until recently, the company had focused on basic science rather than clinical testing. When current CEO Randy Mills took the helm in 2004, the market potential in its three areas of focus—inflammation, orthopedics and acute cardiovascular disease—had become clear. What was missing, according to Mills, was a sense of direction, a vision of how to go from research to commercialization, and—most important—a sense of urgency. “Every day that we’re not on the market, people die,” he says.

Since then, Osiris has been dramatically revamped. The entire executive team has joined since 2003, as have roughly two-thirds of the current workforce of approximately 115. Their mandate is clear: Get products to market.

It’s a bold and risky course. No one is quite sure how MSCs work, which makes it difficult to set appropriate end points for later-stage trials. Mills points out that MSCs possess three main attributes: They can repair or regenerate connective tissue including bone, tendon, cartilage, ligament, fat and stroma; they are anti-fibrotic, which prevents scarring and apoptosis; and they have potent anti-inflammatory effects, suppressing the production of TNF-alpha and upregulating production of IL-10 and IL-4. But how much of a therapeutic effect Osiris’ MSCs contribute is far from clear.

While MSCs appear to have activity in acute cardiovascular injury, for example, “we don’t know the mechanism,” Scadden says. “It appears it is not through cells incorporating into the tissue and becoming cardiomyocytes.” Nor is there published evidence about the degree of engraftment at the site of an injury or insult, although it is clear that MSCs infused into a patient do migrate there.

“I would caution against using engraftment as a short-term indication of efficacy,” says Josh Hare, chief of cardiology at the University of Miami School of Medicine and the lead investigator in Osiris’ Phase I study of MSCs infused after a heart attack. There is, however, a growing recognition that other biology may be at work. The cells may stimulate endogenous repair or release factors that do other things—perhaps including paracrine signaling (in which a cell receives a stimulatory signal from an MSC in close proximity to it).

In addition, the properties of MSCs may differ according to their source, says Dario Fauza, assistant professor of surgery at Harvard Medical School, whose research aims to engineer MSCs derived from fetal tissue or amniotic fluid for surgical use in children. “Not all MSCs are created equal. They proliferate at different rates, they have different plasticity potential, and whether fetal- or bone-marrow-derived MSCs are better has yet to be seen.” Fauza also believes that amniotic fluid is an overlooked source of stem cells. “It’s a lot easier to isolate MSCs from amniotic fluid than from other sources, and amniotic MSCs behave in a more favorable way for regenerative therapy than other MSCs, including those from bone marrow,” he says.

Comparing different types of MSCs is also “a big undertaking,” according to Hare. “These are huge, multiyear, multimillion-dollar experiments. So we haven’t seen head-to-head comparisons. It hasn’t been done yet.”

If addressing such basic scientific questions once absorbed Osiris’ scientists, that’s no longer the case. “Osiris is a little less mechanistically inclined,” Hare says. “As a small biotech, they need to develop their drugs ASAP with the funds they have—just go for broke with clinical end points and hope they’ve picked the right ones.”

In July 2006, just three years after completing its first human study, Osiris initiated a pivotal 240-patient Phase III trial of Prochymal in steroid-refractory acute GvHD, for which it expects to see interim results in 2008. The goal is to show that MSCs can positively affect GvHD when other immunosuppressive agents have failed. Osiris does not plan to seek a marketing partner for Prochymal, according to Mills, in part because it is already developing relationships with most of the bone marrow transplant centers that would use the drug, through its Prochymal clinical trials programs.

Osiris currently has the only GvHD stem cell program beyond Phase I. And it recently presented Phase II data showing that more than twice as many patients respond to Prochymal as would be expected to respond to steroids alone.

But these early data are not the same as a head-to-head controlled comparison with established treatments, nor is moving into Phase III by itself evidence of efficacy—once in initial trials, that decision is up to the drug sponsor, not the regulator. What Osiris does see is an immediate and clear opportunity: There is currently no approved drug to treat GvHD.

The newly aggressive Osiris—and CEO Mills in particular—also saw an opportunity in orthopedics with Osteocel, a composition of unexpanded MSCs embedded in a matrix of cancellous bone. Delivered to the site of a fracture or other bone defect, much like growth factors or bone morphogenetic protein (BMP), it is designed to stimulate bone growth. Since it is marketed as a human tissue for transplantation, Osteocel is not regulated by the FDA and did not need to go through clinical trials.

The concept of Osteocel had been in development since Osiris’ inception, when companies like Creative Biomolecules and Genetics Institute were developing BMP. “One of the first things Osiris learned about the MSC was that it had a good ability to regenerate bone tissue,” says Mills. “That was data out of Case Western Reserve University in the early 1990s.” (The Osiris technology is grounded in inventions made at Case Western that were licensed to the company in 1992.)

At the time, however, approaching orthopedics companies—accustomed to thinking about metal devices, not biologics—with a stem cell that could regenerate bone was “a difficult sell.” By the time Mills arrived at Osiris, Osteocel was seldom mentioned. “I was the accelerant,” he says. Mills came from Alachua, Florida-based Regeneration Technologies, which processes human tissues for grafting, so he was familiar with the use of autologous grafts and cadaver bone in orthopedics.

Osiris claims that Osteocel is the only commercially available product made with viable mesenchymal stem cells, though the efficacy of the cells is still clinically unproven. Currently, only a handful of orthopedists have experience with it. Sales for the most recent quarter stood at just over $2 million, which Mills attributes to supply constraints. The company is currently addressing these through new tissue supply agreements. Mills has said that annual sales of Osteocel could eventually reach $75 million. But just getting an off-the-shelf stem cell product to market overcomes a hurdle other companies have yet to face. It also provides Osiris with a commercial infrastructure—one of Mills’ prime directives.

Osiris’ August 2006 IPO, at $10 per share, netted $35.8 million. After peaking at just over $29 in January 2007, the stock fell into the low teens during the next two months, in part due to disappointing early efficacy data on Chondrogen. The shares rose a month later on promising Phase I data on Provacel presented at a major clinical meeting before settling again around $13-14, where they were trading in early July. Osiris recently bolstered its cash on hand, which was $29.5 million at the end of the first fiscal quarter, via a June 2007 $20-million private placement at $11.38 per share, which should give it the capital to finance currently planned activities through most of 2008.

By then, it expects to have completed enrollment in the pivotal trial of Prochymal in chronic GvHD, advanced the drug candidate into Phase III in acute GvHD, and completed an interim analysis of its next trial in Crohn’s disease. It could also get a boost in 2007 from one-year follow-up data of its completed Phase I trial of Provacel.

It’s clear that Osiris is nearing a make-or-break point with Prochymal, which Mills says represents “the bulk of the value of the company.” Whether or not Prochymal makes it to market, though, the pragmatism reflected in the revival of Osteocel may be what serves Osiris best. Many years of basic and applied research lie ahead before we will know which stem cells are best for treating which diseases, how best to deliver them, and whether it is possible to scale stem cell production at levels sufficient for commercial success. In the end, a positive clinical result is more valuable to patients and investors than explaining the mechanism by which these powerful cells act. And in the meantime, Osiris has a leverage point with its experience in processing and packaging marrow-derived MSCs. It is also a step ahead in getting to the clinic with therapeutic applications, where those questions can be asked and answered. Its business model also allows for large-scale commercialization, Mills points out, adding that “It’s a revolutionary cell therapy model that drives value for the company.” 

Mark Ratner is a contributing writer to Windhover Information’s journals, IN VIVO and START-UP, and a contributing editor to Nature Biotechnology.