OSIR

Osiris Therapeutics, Inc. (OSIR)

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Osiris Therapeutics Inc. (OSIR)

Q3 2012 Earnings Call

November 5, 2012 9:00 am ET

Executives

Randal Mills – President, Chief Executive Officer

Philip Jacoby – Chief Financial Officer

Analysts

George Steinberg (ph) – Anson

Presentation

Operator

Good morning everyone. Welcome to the Osiris Therapeutics Third Quarter Earnings conference call. Before we begin, I would like to remind everyone that this conference may include forward-looking statements that involve uncertainties and risk. Actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the factors described in the sections 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 to turn the conference over to Dr. C. Randal Mills, President and CEO of Osiris Therapeutics. Please go ahead, sir.

Randal Mills

Thank you and good morning. Thank you all for joining us for our third quarter 2012 conference call. Seated alongside me for the entire call, I hope, is Phil Jacoby, our Chief Financial Officer. Today I’ll be providing you with an update on the outstanding work our teams are doing across the company. In therapeutics, I’m going to focus on our lead product, Prochymal or remestemcel-L, which earlier this year, as you know, became the world’s first approved stem cell drug. I’ll also cover the tremendous growth taking place in biosurgery which today are anchored by our Ovation and Gravix product lines. Phil Jacoby will discuss our financial performance over the quarter, and in closing I’ll offer a few summary comments before turning the call over to the operator. So let’s begin.

Earlier this year, we received a landmark approval of Prochymal for the treatment of children with life-threatening graft versus host disease. This was the culmination of 20 years of hard work which along the way produced many firsts for the entire field of stem cell medicine. While the impact of these accomplishments cannot be overstated, we still have much work to do. With Prochymal, that means we will continue to pursue regulatory approvals for graft versus host disease around the world.

Acute GvHD is a devastating disease that kills up to 80% of the children it affects. As a first line of therapy, physicians generally use steroids off-label with a success rate of only about 50%. However, when steroids fail, children with severe GvHD face almost certain death and a median survival of less than 80 days. These are the patients we help with Prochymal. Prochymal has been shown to rescue approximately two-thirds of children with end-stage GvHD and as a result significantly improves survival.

Having now received approvals in Canada and New Zealand, Osiris has two main areas of focus for Prochymal right now. One is to secure appropriate reimbursement for Prochymal and continue the necessary pre-commercialization activities. The other is to gain further approvals in other countries with meaningful transplant programs. During the quarter, Osiris met with reimbursement officials in Ottawa about pricing guidelines for Prochymal. The process consisted of an extensive review to identify potential treatments for the management of GvHD that could serve as a comparator for Prochymal. However, the conclusion was that there were no comparators for Prochymal in this indication and as a result the sponsor is permitted to set the price in the marketplace based on its own risk-benefit assessment. We are currently working with reimbursement specialists in Canada to finalize these pricing plans.

The second major focus for Prochymal is to obtain additional approvals in territories with meaningful transplant programs, and we are working diligently to provide agencies around the world with the information they need. We were pleased to have received notice from Swissmedic that Prochymal will be evaluated under its rapid authorization procedures. This designation typically cuts the evaluation period for promising new drugs in half. Swissmedic approved the use of rapid authorization procedures following its review of summary clinical data for Prochymal. Rapid authorization procedures are only permitted by Swissmedic if the clinical evidence demonstrates a high potential for benefit for a severe, debilitating or life-threatening disease, and where no alternative treatment option exists. We expect to have further regulatory updates regarding Prochymal in the coming months.

Outside of GvHD, enrollment in our Phase III clinical trial evaluating Prochymal in patients with moderate to severe treatment-resistant Crohn’s disease is ongoing. We are now starting to see some increased enrollment as a result of our expansion of the trial into new territories. In addition to Crohn’s, our Phase II trial in acute myocardial infarction continues to generate high-quality outcome data surrounding the benefit of treatment with Prochymal in preventing heart attack patients’ progression to heart failure.

And finally, we were able to end our collaboration agreement with Sanofi after invoking certain dispute resolution procedures. The outcome was highly favorable to Osiris in that we regained all rights to Prochymal and Chondrogen worldwide. There are no further financial responsibilities for either party and Osiris is now free to engage other interested parties for the commercialization rights to Prochymal and Chondrogen.

Turning to biosurgery, the bottom line is that our sales continue to show excellent growth, up more than six-fold from the third quarter of 2011 and 32% over the last quarter alone. Our sales numbers reflect the success we are having strengthening our commercial team and the very real benefit our patients and surgeons are seeing with our best-in-class cell therapy platform of products. In biosurgery, we are leveraging our cell therapy experience to develop and market biologically-based surgical constructs for improved wound healing and tissue regeneration. Instead of systemically infusing the stem cells, as we do with Prochymal, the approach in biosurgery is to make biologically-based constructs and apply them locally where they are needed. This avoids much of the cost associated with systemic treatment.

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