COLUMBIA, Md. ( TheStreet) -- The failure of Osiris Therapeutics' ( OSIR) stem cell drug Prochymal in two late-stage clinical trials Tuesday was an easy pickup for anyone digging into the shoddy work and shortcuts taken by the company in its previous clinical trials.

Osiris used easy-to-achieve endpoints, liberal definitions of response and enrolled relatively healthy patients in phase II studies of Prochymal in graft-vs.-host disease (GVHD).

It's no surprise, then, to see the phase III studies of Prochymal come up short, especially since these larger studies were designed with stricter, more difficult-to-achieve efficacy endpoints. This is why Osiris was a short at $17 in my old biotech investment newsletter, full disclosure.

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.

Osiris shares were off 34% to $8.05 in Tuesday trading, but that still overvalues the company. Prochymal has now failed or otherwise produced negative/equivocal data in studies involving GVHD, knee cartilage damage, Crohn's disease and heart attack.

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