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Osiris Therapeutics

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CEO Randy Mills has a funny way of speaking about Prochymal, his company's experimental stem-cell therapy for graft versus host disease (GVHD).

On a conference call Wednesday morning, Mills described Prochymal as a "high-end drug" and a "powerful, complex agent" that is helping patients with GVHD "above and beyond" the drugs currently used to treat the disease.

Yet what Mills won't say is that

Prochymal failed two phase III studies

in GVHD last September.




In the phase III study of patients with steroid-refractory GVHD, the Prochymal response rate was 35% compared to a 30% response rate for placebo -- a result that wasn't close to being statistically significant, with a p value of 0.30. (A p value of 0.05 or less would have been required for the study to be a success.)

The phase III study in newly treated GVHD patients was even uglier, with Prochymal patients doing worse than placebo patients (a 45% response rate for Prochymal vs. 46% response rate for placebo with a p value of 0.80).

There was also no difference in survival between Prochymal patients and those treated with placebo in either study.

Yet, five months later, Mills is still pumping Prochymal, refusing to acknowledge that his company's only drug doesn't work. On Wednesday, Mills' bamboozlement was aided and abetted by a nauseating display of sycophancy from sell-side analysts Ted Tenthoff of Piper Jaffray and JMP Securities' Charles Duncan.

Each of these analysts merrily went along with Mills' charade, allowing him to spout nonsense about Prochymal's benefit in data-mined GVHD patient subgroups from the phase III studies, without once questioning Mills on the validity of these conclusions.

Duncan took his groveling to new lows when he actually congratulated Mills for "making progress with regulators."

Duncan was referring to Mills' fanciful discourse at the onset of Wednesday's conference call, in which Mills described Osiris' attempt to seek U.S. Food and Drug Administration approval for Prochymal in GVHD based on two failed phase III studies.

"We're having active, ongoing discussions about the scope of the data in the Biologics License Application. It's been a truly interactive, productive process and it's working very well," said Mills, regarding Osiris' meetings with FDA regulators.

Mills was asked for a timeline. When did he think Osiris would be able to complete the Prochymal approval filing? When would he provide investors with an update?

Mills replied, "At this time, I don't have anything factual I can say."

It was the only true thing Mills said all morning.

No Surprise in Novelos Study Failure

(At 11:03 AM EST)

Shares of

Novelos Therapeutics


sank more than 80% Wednesday after the company announced the failure of a late-stage lung cancer drug study.

Patients with non-small cell lung cancer who were treated with Novelos' experimental drug NOV-002 in combination with first-line chemotherapy did not live longer than similar patients treated with chemotherapy alone, according to results from a phase III study disclosed by Novelos.

Novelos shares plunged $1.34, or 82%, to 30 cents in early Wednesday trading.

"We are very disappointed that our pivotal Phase 3 lung cancer trial did not meet the primary survival endpoint," said Harry Palmin, Novelos' CEO, in a statement. "In retrospect, it appears our simulations were inaccurate due to trial data deviating from our statistical model, the impact of censoring patterns, and control arm survival exceeding our expectations based on historical precedents."

That's an interesting concession for Palmin to make now because last December, he was claiming that the

NOV-002 study took longer to complete

than expected. This suggested to him that patients treated with NOV-002 were living longer and that the study would be a success.

In fact, it seems as if the control-arm patients in the study lived longer than Novelos expected. That's always a huge risk for any cancer study using overall survival as a primary endpoint, and it was a big reason why

I cautioned investors in January against buying into Novelos

based on Palmin's exhortations.

The case for NOV-002 wasn't helped either by the thin and not-entirely-convincing

phase II data

generated by phase II studies conducted in Russia.

Novelos didn't provide detailed data from the failed NOV-002 study, but said results will be presented later this year at a medical meeting.

-- Reported by Adam Feuerstein in Boston.

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Adam Feuerstein writes regularly for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;

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