Osiris (OSIR): Look's Like Sanofi (acquired Genzyme) is saying No to Prochymal

News is swirling on Osiris Therapeutics (NASDAQ: OSIR) that Sanofi (SNA) in the post Genzyme (GENZ) acquisition will discontinue Prochymal for GvHD. Prochymal is a mesenchymal cell (MSC) that is allogeneic. Similar to what Athersys (ATHX) is developing with multi-stem. Osiris has struggled with GvHD and even Biodefense company Soligenix (SNGX), just reverse split 20:1, saw Orbec, a locally acting steroid that had every indication of success fail when the pivotal trial was halted for futility. In Biotech land we often say that the "graveyard is full of companies who tried to develop xxx for yyy indication", in this case its GvHD.

We would advise investors to try to understand the following when evaluating a new cell therapy:

What is it? What we mean is "what is the active ingredient". An allogeneic MSC means a lot of things, it’s a heterogeneous cell population, and as such, just not that well defined, so from a starting point, other than saying there is a paracrine effect where the cells act like cellular Advil, it’s a tough climb to say, what is it ?

Next - What does it do exactly ? or What is the Biological Mechanism of Action (MOA) and as such, what is the clinical effect that will be measured in the trial ? How closely related are they ? Again, these are critical elements that the FDA will look for beyond, I squirt it in, and it works. Don't forget dose, homing, and integration.

Thus far developers of cell therapy seem to be struggling with these questions with a few exceptions. Baxter (BAX) and NeoStem (NBS) stand out, with a highly defined cell product (CD34+/CXCR4) cells for Preservation of Heart function. Islet BioSciences stands out with their porcine islet cells (pig) for diabetes.

Daily Dose Conclusion: OSIR has approx. $50 mln in cash as of Sept. 2011 against a $160 mln market cap. Prochymal is still being developed for a number of other indications from Crohn's disease, Type 1 diabetes and Cardiovascular indications. With that said, we need to do more analysis to understand the probabilities of success in these areas given the questions (what is it, MOA, clinical effect) that we raise above.