Osiris Therapeutics, Inc. (OSIR)

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Osiris Therapeutics Inc. (OSIR)

Q3 2007 Earnings Call

November 12, 2007 9.00 a.m. ET


C. Randal Mills - President and Chief Operating Officer

Cary Claiborne - Chief Financial Officer


Ted Tenthoff - Piper Jaffray

Bino Pathiparampil - Thomas Weisel

Bill Tanner - Leerink Swann

“Unidentified Analyst” - Jefferies & Company



Please stand by. Good morning, everyone. Before we begin, I would like to remind everyone that this conference call may include forward-looking statements that involve uncertainties and risks. Actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the factors described in the section entitled Risk Factors in our filing with the Securities and Exchange Commission. As a reminder, today's call is being recorded.

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

C. Randal Mills - President and Chief Operating Officer

Thank you. Good morning, and welcome to our third quarter conference call. Today I'll be providing an update of our business. Cary will then provide an overview of our financial performance. I'll briefly outline our priorities for the coming months, and then we'll take your questions.

I'm very pleased to report that we made excellent progress during the third quarter. We experienced continued strong growth of 60% in our Osteocel business and reached a significant milestone of having treated our 10,000th patient with the product. We strengthened our financial position by securing a $30 million debt/equity financing commitment from our Chairman, Peter Friedli. We initiated a Phase III pivotal trial evaluating Prochymal as a first-line treatment for acute graft-versus-host disease. And we expanded our pipeline entering the Phase II trial for type 1 diabetes and received a $4 million funding commitment from the Juvenile Diabetes Research Foundation.

Let me start with our lead program, Prochymal. Patient enrollment continues in the Phase III pivotal trial for steroid refractory GVHD. The trial now has 70 sites active in the United States, Canada, Europe and Australia, and we anticipate completing enrollment in the second quarter. Additionally, we announced the initiation of our stand-alone Phase III trial using Prochymal as a first-line treatment for acute GVHD in conjunction with steroid therapy.

There were three factors that affected our decision to pursue this course of action. First and foremost, the data from our Phase II trial evaluating Prochymal in the same indication was very strong, giving us added confidence in the product's ability to achieve the approvable endpoints. Second, this patient population, relatively speaking, is more abundant. The acute GVHD population is more than twice that of a steroid refractory GVHD population. And third, there exists significant efficiencies between the two trials, with 70 bone marrow transplant centers already initiated for the steroid refractory trial, the majority of the clinical infrastructure is in place and ready to go. To reiterate, this is a stand-alone registration trial, and we believe that its addition is a significant risk mitigating factor and bolsters Prochymal's overall chances for approval.

As for our Crohn's program, we continue to enroll patients in our Phase III trial evaluating Prochymal for the treatment of moderate to severe Crohn's disease that is not responsive to anti-TNF therapy. We currently have 23 sites active and have approximately 15 more in the final stages of initiation.

Last month, we announced plans to evaluate Prochymal in the setting of type 1 diabetes. As you may be aware, there is a growing body of research that supports the use of mesenchymal stem cells for treating a number of autoimmune and inflammatory diseases. An active and interested research community extends well beyond the excellent work being done internally here at Osiris.

One area being studied is type 1 diabetes. Earlier in the year, we were approached by the Juvenile Diabetes Research Foundation or JDRF, asking if we would be willing to conduct a clinical trial with Prochymal, and if promising, pursue licensure. Following our own research in the field, we determined that there was a reasonably good chance of success and made the decision to partner with JDRF in this meaningful endeavor.

We were able to call upon our extensive preclinical data, safety database, and establish GMP compliant manufacturing process to quickly secure an IND for Prochymal in the treatment of type 1 diabetes, and we're clear to initiate a Phase II trial in under 30 days. To support this program, the Juvenile Diabetes Research Foundation has committed to provide $4 million in funding. We are in the process of selecting clinical sites for the trial and continued to move forward with initiation efforts.

This is a great example of the tremendous value that resides within Osiris. It has been created through the years of high-quality, cutting-edge research and development. We are now in a position to leverage our considerable assets to develop the right partnerships, quickly expand our field of addressable markets, then unlock significant value for the company.

Now turning to Osteocel. During the quarter, Osiris continued to see strong growth in our Osteocel product line that resulted from our earlier efforts to expand our manufacturing capacity. Sales of Osteocel increased 60% over the same period of last year to $4 million. During the quarter, we reached a significant clinical milestone for Osteocel as well, with the 10,000th patient having received the product. This provides significant validation for the commercial utility of Osiris's products and has no equal in the field of stem cell therapeutics.

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