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.

Athersys ($ATHX) More News Flow, Does it Matter ?

Athersys (NASDAQ: ATHX) reports more news flow from its data on Multi-stem in stroke. From the press release:

"Medical researchers from The University of Texas Health Science Center at Houston (UTHealth) Medical School presented new research results this morning at the American Heart Association International Stroke Conference that highlight the role of the spleen in the mechanisms underlying how MultiStem reduces damage and enhances functional recovery in animals after an ischemic stroke.

The study illustrated the potential benefits of MultiStem therapy for treating stroke using standard preclinical models. Researchers observed that intravenous administration of MultiStem one day after a stroke resulted in a substantial reduction in brain tissue loss 28 days post-stroke.

The spleen is believed to play a significant role in the body's immune response to the stroke that can result in additional damage following the primary ischemic event. After administration, MultiStem cells limit the inflammatory cascade that results from the initial stroke, thereby reducing the secondary damage that occurs.

These outcomes support prior research at UTHealth, in which researchers found that animals treated with MultiStem showed normal spleen size and increased levels of anti-inflammatory cytokines in the blood whereas animals treated with placebo showed a reduction in spleen size and an increase in inflammatory cytokines in the blood."

Daily Dose Conclusion: Not sure that anyone cares about pre-clinical models in stroke. Athersys is cheap based on market cap but the clinical pathway ahead for multi-stem is not clear and definitive proof of concept, for multi-stem has yet to be established. On the positive side multi-stem looks like it could have utility in a wide range of indications from ulcerative colitis, GvHD, to ischemic disease (cardiovascular, stroke).

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Athersys ($ATHX) : GvHD Phase 1 data is encouraging...

Athersys (NASDAQ: ATHX) announced in their press release positive results from its Phase I clinical trial of MultiStem, its cell therapy product. The trial was administered to individuals undergoing allogeneic hematopoietic stem cell transplants (HSCT) for the treatment of leukemia and related conditions.

Data highlights from the study include:

• The majority of patients participating in the study received transplants from unrelated donors (19 of 36), and nearly all of the patients received peripheral blood stem cell (PBSC) transplants (34 of 36), both of which are associated with a higher risk of GvHD;
• All patients experienced successful neutrophil engraftment (median time of engraftment 15 days), and 86% of patients experienced successful platelet engraftment (median time of engraftment 16 days) which compares favorably to historical clinical experience for this patient population demonstrating a positive impact on blood and immune system recovery;
• Substantial reduction in acute GvHD incidence, relative to historical experience, at the highest single dose (11% grade II-IV GvHD, and 0% grade III-IV GvHD).

These clinical results provide the foundation for further accelerated development of MultiStem for the prevention and reduction of GvHD. Following final review of the data, and subject to input from its key scientific and clinical advisers, Athersys plans to meet with the FDA to discuss plans for the next phase of clinical development. This could include a blinded, controlled phase II/III study of MultiStem for GvHD prophylaxis and HSCT support.

Daily Dose Conclusion: Athersys is building a solid foundation to expand the pipeline in a product with Multistem.

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Athersys (ATHX): Scores Grant Money for TBI and for Formulation

Athersys, Inc. (Nasdaq:ATHX) announced $3.6 million in grant funding (actually two separate grants), one for MultiStem (allogeneic cell therapy), and the second for its clinical utility in treating traumatic brain injury (TBI). This is an area that is getting lots of attention as a result of the wars in Iraq and Afghanistan. Soldiers lucky enough to escape direct injury often suffer very severe TBI as a result of the percussion (force) related injury. The other grant goes to Athersys subsidiary in Belgium, ReGenesys BVBA, $1.2 million (€0.9 million) from the Belgium's Agency for Innovation by Science and Technology (IWT) to further develop cell therapy formulations and manufacturing capabilities.

Daily Dose Conclusion: Non-Dilutive financing is always positive and these micro-cap companies know how to make the dollars work to advance their product portfolio or in the case the potential indications for MultiStem. We believe that there is a significant role for multistem to play in TBI and even in stroke however the development costs and commercial approval in these areas is a long way off.

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MesoBlast ($MSB): FDA Green Lights PII Trial for Type 2 Diabetes

MesoBlast (ASX: MSB) press released FDA approval to move to a PII trial today. Recall that MSB's product is "allogeneic" (other people's cells) and as such is "off-the-shelf" ready. Similar to Athersys and PluriStem approaches. Diabetes is a large market and is often related to an auto-immune condition that results in damage to the insulin producing cells (islets of the pancreas).

The MesoBlast trial will be a randomized, placebo-controlled, 3 month trial that will evaluate a single IV injection of one of three (progressively higher doses of cells) in N=60 (Type II diabetes patients) who show elevated blood glucose levels. Animal data in this indication showed hints of activity. MesoBlast has demonstrated safety with their product in several prior trials.

Daily Dose Conclusion: MesoBlast recognizes that their cell therapy product may have multiple uses and multiple indications. MesoBlast had a BIG WIN when Cephalon invested in their therapy (since acquired by Teva). With that said the market cap of MesoBlast peaked back in November and has come down sharply (>40%) as investors have struggled with the high valuation. The cardiology data presented at AHA seemed to mark the peak. Valuations for Mesoblast versus other Allogeneic companies in the space such as Athersys and PluriStem are tough to understand.

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Which Cell Therapy companies present the best value?

Which Cell Therapy companies present the best value?

We developed an analysis using public filings and annualizing the most recent quarters as of 12/31/11. As such, the accuracy is subjective to our proprietary algorithm, and this list is not mean to be all comprehensive.

We conclude that ex leaders Dendreon and MesoBlast make the space very inexpensive. The sample below represents just over $500 million in market cap for eight of the selected public companies (ex DNDN and MSB). These companies have 3 - PIII trials, 5 PII trials and several P1 trials (based on these crude metrics).

We conclude that is worth investors time to understand among these companies in terms of what they are doing and the associated probabilities of success of their trials. Recent data peaks from the Cardiology space suggests that Baxter (BAX) and their CD34 cell type may be very viable. NeoStem has a very similar approach. The retrenchment in MesoBlast shares since that company presented data at AHA in November is of concern. Cytori, Aastrom, Athersys all have active programs in cardiology while Athersys lead program is partnered with Pfizer for Ulcerative Colitis and Aastrom is entering a Phase 3 trial in CLI.

By price ($), Osiris, MesoBlast, and Dendreon are the highest $ priced stocks:

But that starts to change as we migrate to market cap:

And if we eliminate Mesoblast and Dendreon we get a better picture of the rest of the field:

And that picture changes as we adjust for debt and cash: (enterprise value). In all fairness here, we know that NeoStem with $20-$30 million in value from their China generic company, could be the cheapest name and others are / will raise capital but ex China, Athersys is the “cheapest name”.

Looking at R&D spending: IMUC, Prima and NeoStem are among the most efficient but in fairness one must adjust for the fact that Aastrom is embarking on a pivotal trial versus Prima just starting their P3 and NeoStem their P2.

Revenues: Here we have excluded NeoStem’s $65 million from China which means PCT (Cell Therapy CMO) is running at close to $10 million in annual revenues (currently).

ARM Panel shines light on the Cell Therapy Cardiovascular Space

This morning in SanFransico the ARM panel on cardiovascular medicine is taking place. NeoStem (Amorcyte), MesoBlast (MSB), Athersys (ATHX) and Cytori (CYTX) are presenting their cell therapy approaches. We will follow up with comments from this panel and the panels that follow throughout the day. In other news NeoStem announced the expansion of their IP for AMR-001 (their CD34+ cell therapy product) beyond STEMI (heart attacks) and to all ischemic (vascular insufficiency) diseases. We looked at the patent and we see this as a landmark expansion in the space. Immunocelluar (IMUC) also had news today, raising capital (aprox $9.4 mln) which will be used to fund the development of their dendritic approach to brain cancer (glioblastoma). We note that IMUC is working with NeoStem's CMO subsidiary, Progenitor Cell Therapy (PCT).

Athersys (ATHX): New IP that Protects MultiStem (but does not block others) !

Athersys (ATHX) announced earlier in the week a new patent has been granted (U.S. patent 8,075,881) that covers the use of "non-embryonic multipotent stem cells for the treatment of cardiovascular conditions including myocardial infarction, or heart attack, congestive heart failure, myocardial ischemia and other heart conditions".

From the company's press release: "The patent also provides protection for multiple techniques for delivering the stem cells to treat the conditions. Athersys also announced the issuance in 2011 of more than 25 patents in the U.S. and other countries covering non-embryonic multipotent stem cells, their production, and usage.

The issued patents cover Athersys' proprietary MultiStem has demonstrated therapeutic potential to treat a broad range of indications in the cardiovascular, neurological, and inflammatory and immune condition disease areas. Athersys currently has four clinical stage programs in acute myocardial infarction, ulcerative colitis, hematopoietic stem cell transplant support and ischemic stroke using its MultiStem product candidate."

We reviewed the IP claims as many questions were raised about how this IP impacts other companies also pursuing the use of adult stem cells in cardiology, MesoBlast, Cytori, NeoStem, Baxter and we found a few claims that narrow the Athersys IP around a specific cell type where the IP specifies this is for cells that are "mononuclear, centrifuged, and depleted (of CD45 and GlyA). The remaining cells are plated and, with successive doublings in culture, becoming more homogenous - by 10 doublings. So what does this all mean? It means that Athersys has IP to protect MultiStem but this is really not "blocking IP" that locks anyone else out of the space.