U.S. Deal Boosts Radiation Drug
Monday, January 7, 2008
For 16 years, a Columbia biotechnology company has been developing a drug, consisting of adult stem cells derived from healthy bone marrow samples, to treat severe inflammatory diseases that can destroy the body's organs.
On Thursday, publicly traded Osiris Therapeutics scored a new customer it hopes will help it bring the treatment to market. It won a contract from the Defense Department potentially worth $224.7 million to develop the drug Prochymal to treat military personnel who are exposed to radiation from nuclear or radiological attacks.
News of the contract helped Osiris shares jump $1.29, or 10.3 percent, to close Friday at $13.86.
Chief executive C. Randal Mills said the Pentagon contract would help facilitate the company's efforts to aim the treatment at a variety of diseases. "If you can clear the hurdles to get into the market, you make it easier for the rest of the therapies to reach patients," Mills said.
Prochymal is in late-stage human trials to treat graft-versus-host disease, a severe inflammatory condition afflicting some leukemia victims who reject bone marrow transplants, and a more common though less severe condition, Crohn's disease. It is in an earlier stage of testing for treatment of Type 1 diabetes. The drug is administered intravenously.
William Tanner, an analyst with health-care research firm Leerink Swann, said other government agencies, notably the Department of Health and Human Services, might be interested in stockpiling the drug as a precaution against a terrorist attack.
"The commercial opportunity can be very big," Tanner said. Osiris is a client of his firm.
Osiris expects to apply for Food and Drug Administration approval for treatment of graft-versus-host by the end of the year and within the next 18 months for radiation treatment. Most of the money in the Pentagon contract is contingent on the company receiving FDA approval for the radiation treatment.
Osiris won the contract over Cleveland Biolabs, whose shares fell 58.6 percent Friday, to $3.31. Cleveland Biolabs said in a statement that it was "very surprised" by the decision and would ask the Pentagon for a debriefing.
Retired Maj. Gen. John S. Parker, a doctor and an Osiris adviser, said Prochymal, while a good step forward, is not the ultimate medical treatment for a mass radiological attack.
"The holy grail would be that we could give something to a population like a vaccine that would give them a long-term protection," he said. "The other thing is this drug has to be given by an intravenous route. The holy grail would be that you could give it by tablet or orally . . . so we could distribute it in a mass way."
Treatment with Prochymal costs $10,000 per dose, and the Pentagon plans to buy up to 20,000 doses. Osiris will pay a 15 percent commission from the Pentagon contract to a Massachusetts biotech company, Genzyme, which is helping to develop the drug.
Osiris sells Osteocel, a stem cell treatment to stimulate bone growth after injury, which was approved by the FDA in 2005. Osiris sold $4 million of the drug in the third quarter and reported a loss of $10.4 million in the same period.
While showing strength last week, Osiris's stock has lagged over the past year, down more than half from its peak.
To create Prochymal, Osiris scientists in labs in Baltimore and Walkersville spend six months extracting mesenchymal stem cells from adult bone marrow and then test it.
The mesenchymal stem cells lessen inflammation by replacing damaged cells, and therefore repairing damaged tissue. Recovery for graft-versus-host disease can take three to 10 days.
The company declined to say how much it has spent on research and development.