Genzyme and Osiris Form Adult Stem Cell Mega-Partnership

Wall Street Journal, November 5, 2008

The biotech companies Osiris Therapeutics and Genzyme announced their signing of a collaboration for the commercialization of two adult stem cell products. According to the agreement, Osiris will commercialize the proprietary products Prochymal and Chondrogen in the U.S. and Canada, while Genzyme will commercialize the products throughout the rest of the world. Genzyme will make an upfront payment of $130 million to Osiris in additon to milestone and royalty payments that are estimated to be worth approximately $1.3 billion. Prochymal and Chondrogen are therapies that use allogeneic (in which the donor and recipient are different people) adult mesenchymal stem cells derived from bone marrow. Both of the products are late-stage treatments for a wide variety of diseases.

Although Osiris developed the therapies, Genzyme will provide the financial support for further marketing and commercialization of the products. This strategic alliance will leverage the leadership position that Osiris enjoys in the development of novel adult stem cell therapies, as well as Genzyme's regulatory and marketing infrastructure outside of the U.S. and its expertise in the commercialization of cell therapies.

Genzyme and Osiris are already strategic allies and this is not their first collaboration. In 2007, the two companies forged an alliance to develop Prochymal for acute radiation syndrome, which resulted in both companies being awarded a $224.7 million contract in January of 2008 by the U.S. Department of Defense to develop Prochymal for the treatment of radiation-induced medical conditions related to warfare and terrorism. Once Prochymal is approved by the FDA for such indications, the Pentagon will buy 20,000 doses at $10,000 each.

According to Dr. Henri A. Termeer, Genzyme's chairman and CEO, "This partnership further strengthens Genzyme's late-stage pipeline of products with the potential to support our growth beyond 2011. Osiris is the clear leader in stem cell technology, which holds the promise to transform standards of care in a number of therapeutic areas in which Genzyme already has a strong presence."

Similarly, Dr. C. Randal Mills, president and CEO of Osiris, adds, "Today Genzyme and Osiris have forged a powerful partnership in the emerging field of stem cell therapy. This relationship greatly enhances our ability to effectively introduce this groundbreaking technology on a global basis."

As stated by Edward Tenthoff, an analyst at Piper Jaffray & Co., the deal is the largest ever in the field of stem cell therapy. The stem cells under consideration are exclusively adult stem cells, which are derived from mature tissues instead of embryos. According to Tenthoff, "This is a huge validation. This is a major win for everyone involved."

Osiris is an adult stem cell company which was founded in 1992 and went public in 2006. Yesterday the company's stock gained 43 cents, or 2.8%, settling at $15.93 a share after the company announced a third-quarter profit of $5.3 million. Its products focus on the treatment of inflammatory, orthopedic and cardiovascular condtions. The company's adult stem cell product Prochymal is the only stem cell therapeutic product currently designated by the FDA as both an Orphan Drug and as a Fast Track product. Prochymal is currently being evaluated in three separate phase III clinical trials, two of which are for graft vs. host disease (GvHD) and the third of which is for Chron's disease, both of which are potentially fatal conditions. Prochymal is also in phase II clinical trials for the regeneration of pancreatic beta islet cells in patients with type I diabetes and for the repair and regeneration of damaged lung tissue in patients with chronic obstructive pulmonary disease. Data from all clinical trials are expected in 2009. Prochymal has also been approved to begin phase II clinical trials as a treatment for the regeneration of cardiac tissue following myocardial infarction. Additionallly, Chondrogen has also been approved to begin phase II and III clinical trials for osteoarthritis of the knee. Osiris currently has 47 U.S. patents, each with one or more foreign counterparts.

Genzyme, the world's largest maker of drugs for rare genetic disorders, is well known for commercializing first-in-class biotechnologies. Founded in 1981, today Genzyme has a staff of more than 10,000 employees around the globe, with revenues of $3.8 billion. In 2007 Genzyme was awarded the National Medal of Technology, which is the highest honor awarded by the President of the United States for technological innovation. In addition to its large orthopedic franchise, Genzyme's products are focused on rare genetic disorders, kidney disease, cancer, transplant and immune disease, diagnostic testing, cardiovascular disease, neurodegenrative diseases, endocrinology and other medical specializations in which patient needs are not adequately met. Most recently, Genzyme has also begun developing Mozobil, a novel proprietary product which stimulates the mobilization of the body's own endogenous stem cells. Genzyme's latest agreement with Osiris marks a major expansion by Genzyme into the field of cell transplant therapies.

As novel proprietary late-stage adult stem cell treatments which have already been shown to control inflammation, to prevent scarring and to promote tissue regeneration, both Prochymal and Chondrogen have the potential to treat a vast range of diseases. The mutual collaborative development and commercialization of these two adult stem cell therapies, by two of the most prominent biotech industry leaders, signifies an important milestone not only in the histories of these two leading companies, but also in the maturation of the adult stem cell industry. As David Meeker, executive vice president for Genzyme, explains, "The technology has evolved to a point where we have a level of confidence where we're willing to make the deal. We'll be working on the clinical development going forward and preparing for commercial launch."

The partnership involves stem cell therapies which consist exclusively of adult stem cells, not embryonic stem cells, since embryonic stem cells have proven to be highly problematic in the laboratory and have therefore never advanced to the clinical stage.