One-year positive data released Tuesday by Osiris Therapeutics ( OSIR) from an ongoing study of its stem-cell treatment for knee repair should raise concerns about the results' reliability.

Surgical patients with osteoarthritis injected with the stem-cell therapy known as Chrondrogen experienced a statistically significant reduction in knee pain compared with control patients given an injection of hyaluronic acid, according to Osiris' analysis of one-year data from a phase II study.

But data from this same study were decidedly more negative when first disclosed last February. The disparity between Tuesday's results and those from 10 months ago is at least partly the result of changes made to the group of patients analyzed.

Osiris chose not to disclose Tuesday that the osteoarthritis patients who appear to have benefited from Chrondrogen make up just more than half of the 55 patients originally enrolled in this phase II study. The company also failed to mention that measurement of pain reduction was a secondary endpoint, not the primary endpoint, of the study.

That didn't stop Osiris shares from jumping more than 15% on Tuesday to $11.84.

Osiris' announcement also comes after the departure of its chief financial officer, which was disclosed the day after Thanksgiving.

Osiris is developing therapies derived from mesenchymal stem cells (MSCs), a form of adult stem cell capable of differentiating into tissues that provide rigidity or stability in the body -- bone, cartilage, fat, tendon or muscle. MSCs may also possess anti-inflammatory properties and appear not to activate an immune response when transplanted into an unrelated or unmatched host.

Chrondrogen is one of these MSC-derived therapies, which Osiris hopes to develop into a product that could be used to repair damaged or torn knee tissue, or even as an effective treatment for osteoarthritis.

Last February, Osiris released the first results from a phase II study of 55 patients who were undergoing surgery to repair a torn or damaged meniscus, the spongy, shock-absorbing cartilage between the tibia and femur.

Osiris injected Chrondrogen into the knees of half the patients with the hope that stem cells in Chondrogen would implant in the knee and regenerate into new meniscus tissue. But after six months, patients given Chondrogen showed no increase in meniscus volume compared with patients given a placebo injection, the company reported.

The results announced Tuesday come from the same study, which has now been followed out one year.

In patients with meniscus damage and osteoarthritis at the time of surgery, a single injection of Chrondrogen led to a statistically significant reduction in pain compared with patients injected with hyaluronic acid, a therapy already approved for treatment of osteoarthritis, Osiris stated. (Hyaluronic acid is also marketed by Genzyme ( GENZ).)

Furthermore, changes to bone in the knee joints that are associated with osteoporosis were reported in 21% of control patients but only 6% of Chrondrogen-treated patients.

While these results suggest a positive signal of efficacy for Chrondrogen, Osiris failed to disclose that it gleaned these data from a retrospective analysis of a subgroup of patients in the trial.

An Osiris spokeswoman confirmed that Tuesday's data were derived from 55% of the 55 patients in the trial who had osteoporosis. She wouldn't say if Osiris had followed the progress of all 55 patients in the study for one year, nor would she say what the pain-reduction data would have looked like if all patients in the study has been analyzed and reported.

Last Friday, Osiris announced the departure of its CFO Cary Claiborne to "pursue new professional opportunities," the company said. Clairborne submitted his resignation on Nov. 16, according to a Securities and Exchange Commission filing, but the company chose to wait for the day after Thanksgiving to make the announcement.

Osiris is running out of cash, so the loss of the CFO isn't particularly helpful. The company ended the third quarter with $22 million in cash, burning about $10 million to $11 million a quarter. Osiris did receive a $30 million financing "commitment" from founder and Chairman Peter Friedl at the beginning of October, but the company hasn't said if it has drawn down any of the money.

Last month, Osiris and its bankers were trying to rustle up interest in another equity financing, according to one institutional investor who was approached by the company. So far, however, nothing's been announced.
Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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