You know a company has great news when its shares rocket more than 125% within an hour after the market opens. That's exactly what happened today with Osiris Therapeutics (NASDAQ: OSIR). Here are the highlights.
Grafix overwhelms
Osiris' great news came from a clinical study of Grafix in treating diabetes-related foot ulcers. Grafix contains living human cells that are applied directly to wounds to help repair them. In the study, Grafix closed three times as many wounds as the current standard of care.
Grafix's efficacy was so overwhelmingly positive that the the pre-specified stopping rules for the study were met. For the primary endpoint, Grafix achieved 62% complete wound closure at 12 weeks, compared with only 21% doing so with conventional treatment.
All secondary endpoints were also met. Particularly impressive was that 80% of patients with wounds that didn't close taking the standard of care treatment saw their wounds close after taking Grafix.
Grafix's safety profile looked good as well, as 66% of patients taking the standard of care treatment experienced at least one adverse event while only 38% of patients taking Grafix had an adverse event.
Dr. C. Randal Mills, CEO of Grafix, summed the success up well "Osiris has established a new standard in diabetic wound care," he sad, and it has "shown that Grafix can heal more patients, in less time, and with fewer complications."
Looking ahead
Here are a few numbers to consider as you contemplate what these results could mean for Osiris. The U.S. has 25 million diabetics, and around 25% of them develop foot ulcers as a result of their diabetes. These foot ulcers result in more hospitalizations than any other diabetic complication. To say that Grafix has tremendous market potential would be a huge understatement.
Grafix isn't the only arrow in Osiris' quiver, either. The company received orphan drug status and fast track designation from the Food and Drug Administration for Prochymal for acute Graft-versus-host disease, or GvHD, and for Crohn's disease. The drug is in phase 3 studies for both indications. Osiris also is in phase 2 development for arthritis drug Chondrogen.
The challenge for Prochymal and Chondrogen is that, even if they ultimately gain approval, the drugs would truly face giants. AbbVie's (ABBV 2.86%) Humira, which treats rheumatoid arthritis and Crohn's disease among other indications, currently stands as the world's top-selling drug. Johnson & Johnson (JNJ 0.50%) also competes in several of the same markets with Remicade, another blockbuster near the top in terms of sales.In GvHD, Osiris would battle Novartis (NVS 0.74%) if it wins approval for Prochymal in that indication.
While Osiris' path to success would probably be difficult trying to gain share from AbbVie, J&J, and Novartis, the good news announced today for Grafix paints a different picture. Assuming Grafix gains regulatory approval (which seems like a really good bet), Osiris would almost certainly leap into the pole position in treating diabetic foot ulcers.
The U.S. market for diabetic foot ulcer treatments now stands at $2 billion annually. With Grafix performing three times better than the current standard of care, I expect Osiris will be able to gain a large chunk of that market. Even after today's massive gains, the company's market cap is still under $800 million. I think the stock could keep climbing.
