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Osiris Therapeutics (OSIR)

Q2 2012 Earnings Call

July 30, 2012 9:00 am ET


Charles Randal Mills - Chief Executive Officer, President and Director

Philip R. Jacoby - Chief Financial Officer, Treasurer and Corporate Secretary


Edward A. Tenthoff - Piper Jaffray Companies, Research Division

Eun K. Yang - Jefferies & Company, Inc., Research Division



Good morning, everyone. Welcome to the Osiris Therapeutics Second Quarter and Full Year 2012 Earnings Conference Call.

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Before we would begin, I would like to remind everyone that this conference may include forward-looking statements that involve uncertainties and risks. Actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the factors described in the section entitled Risk Factors in our filings with the Securities and Exchange Commission.

As a reminder, today's call is being recorded.

I would now like turn the conference over to Dr. C. Randal Mills, President and CEO of Osiris Therapeutics. Please go ahead, sir.

Charles Randal Mills

Thank you. Good morning. Thank you for joining us for our second quarter 2012 conference call. Today, I'd like to provide you with an update on Prochymal, our intravenous stem cell therapy, which made history in the second quarter by becoming the world's first stem cell drug approved by an internationally recognized regulatory agency. I will then discuss the exciting momentum we are gaining in our Biosurgery division. Phil Jacoby, our Chief Financial Officer will provide you with an update of our financial performance over the last quarter. And in closing, I will offer a few comments before turning the call over to the operator for questions.

I see that there are many new callers on the line today, so let me start by providing you with a little perspective on how we developed Prochymal.

We were 20 years ago with a mission to responsibly develop and commercialize the stem cell-based therapy to address significant unmet medical needs. In 1992, we began performing the necessary laboratory work to enter human trials with mesenchymal stem cells. After 6 years of bench work, we initiated our first Phase I human clinical trial with MSCs in 1998. Since that time, Osiris has achieved many firsts in the field of stem cells including the first stem cell product to be awarded Fast Track status by the FDA; the first stem cell drug to be granted orphan drug status by FDA and EMA; the first Expanded Access Program to be approved for a stem cell drug, enabling patients all over the world to receive treatment with Prochymal; and finally, with Prochymal becoming the world's first approved stem cell drug and the first drug specifically approved for the management of acute GvHD.

None of these firsts happened because we took a shortcut. In fact, because it was the first stem cell therapy to be reviewed, the standards to which we were held were, in most cases, higher than that of a traditional drug. These accomplishments, instead, are the result of 20 years of hard work and determination.

With approvals in Canada and New Zealand, our work is transitioning into the commercial phase. Essential focus of this effort is ensuring fair but sufficient reimbursement for the product. Given Prochymal's 20-year development history and enormous development costs, premium pricing is appropriate. Fortunately, there are a number of factors that favorably impact reimbursement discussions around Prochymal. GvHD is a rare disease with an inherently limited market. It is an acute disease, meaning that patients typically receive treatment for only 1 to 2 months, unlike the life-long care required for many of the enzyme replacement therapies. It is the only drug approved for GvHD. And lastly, because the disease is most often lethal absent successful intervention, and treatment with Prochymal has been shown to be both clinically and -- clinically meaningful and improve survival.

For those of you who are not familiar with acute GvHD, it is a devastating disease that kills up to 80% of the children affected. It is a complication of bone marrow transplantation, and when T cells in the graft attack the host, its victims endure blistering of the skin, intestinal hemorrhage and liver failure. This makes GvHD the leading cost of transplant-related mortality with a median survival of only 80 days. Generally, steroids are used as a first line of therapy with a success rate of about 50%. When steroids fail, treatment options are limited.

It is in this setting where Prochymal can save lives. With Prochymal, we have been able to rescue 63% of children and significantly improve their chances of survival. To date, our initial meetings regarding reimbursement have been positive, but we have a few more to go. At this time, we anticipate Prochymal to be commercially available with reimbursement in Canada later this year.

Outside of Canada and New Zealand, we continue to work with regulatory agencies around the world to provide GvHD patients in those territories with access to our first-in-class off-the-shelf stem cell drug. We are working diligently to provide each agency with the information they need to approve Prochymal.

In addition to GvHD, Prochymal is also in development for Crohn's disease, acute myocardial infarction and type 1 diabetes. We continue to enroll patients in our Phase III clinical trial evaluating Prochymal in patients with moderate to severe treatment-resistant Crohn's disease. We've expanded the number of countries and clinical sites with approximately 20 leading centers to enroll up to 330 patients. This double-blind placebo-controlled trial is evaluating Prochymal's ability to induce remission in a patient population refractory to steroids and biologics for which there is clearly an unmet medical need.

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