Forget transplant rejection. For Osiris Therapeutics, which received the first-ever approval of a stem cell therapeutic, investors now are more excited over the potential for topical treatment Grafix to generate sales growth in diabetic foot ulcers following knockout results in a post-marketing trial.
For all the hype surrounding its graft vs host disease therapy Prochymal, it is Osiris’s biosurgery division that has generated the bulk of its revenue, bringing in $7.85m last year from sales of Grafix and surgical wound product Ovation. Shares more than doubled yesterday to a six-year high of $25.44 following news of the readout, which executives believe will give the company the evidence it needs to expand reimbursement to primary-care settings.
Fixing a hole
FDA-approved as a human cell and tissue based product, Grafix is a cellular matrix that delivers mesenchymal stem cells and other regenerative tissues and proteins to acute and chronic wounds. While it has received an all-important Medicare billing code, the Maryland-based company was keen to show its value to payers as the product will be used more frequently by elderly patients with advanced disease.
Most of Osiris’ sales are in private and government-run veterans’ hospitals, said chief executive C. Randall Mills; 80% of the diabetic foot ulcer market, which he valued at $2bn, is in outpatient settings, so the results of the Protocol 302 trial could help support insurance reimbursement in a wider number of facilities and practices.
Earlier this year, Osiris announced it had hired a 10-member direct sales force for Grafix, which it hopes to double in size this year. With such a steep rise in its share price and a cash pile of $27.2m at June 30, it would not be surprising to see Osiris sell more shares to support the hiring of more sales representatives.
Protocol 302 was a trial planned at 266 patients, measuring wound closure at 12 weeks against a placebo dressing and standard of care. It was stopped early after 131 patients were enrolled and an interim analysis following the first 97 patients to complete treatment, with statistical significance achieved on six endpoints.
The study found that 62% of patients treated with Grafix experienced complete wound closure in 12 weeks, compared with 21.3% of patients receiving the standard of care. On secondary endpoints, Grafix resulted in a complete wound closure for 71.4% of patients, compared with 27% in the placebo arm; the average time to complete closure was 42 days for patients treated with Grafix who had closure, compared with 70 days for those in the control arm. Of the patients whose wounds did not heal with standard of care alone, 80% experienced closure once they crossed over into the Grafix arm.
Payers may be more interested in a cost-effectiveness-oriented endpoint, the number of treatments received by Grafix patients before their wounds closed - six vs 12 for placebo-treated patients. In addition, significantly fewer patients had at least one adverse event in the Grafix arm.
Mr Mills said investigators had not completed a full analysis of adverse events. However, because infection is a frequent complication of diabetic foot ulcers, the company believes that explains the difference between the two arms. If infections are reduced, that also should be of great interest to payers.
Taking on Shire
Foot ulcers are the leading complication that results in hospitalisation among diabetics, so payers have an interest in improving outpatient care. It will be up to Osiris’s sales and medical affairs staff to persuade them Grafix is the answer.
Grafix has a worthy opponent in Shire’s Dermagraft, which the UK-based company has nurtured into a $100m-plus product since acquiring Advanced BioHealing in 2011; Connecticut-based Advanced BioHealing, in turn, had acquired Dermagraft from Smith & Nephew.
According to EvaluatePharma’s consensus, Dermagraft is forecast to achieve $240m in sales in 2018, well short of the $2bn Mr Mills thinks the market is worth. Dermagraft is the only product in the space with disclosed sales; others, like Apligraf and Citoprot-P, are in the hands of privately held companies that do not disclose sales (Therapeutic Focus - Diabetic foot ulcer market in need of healing, September 29, 2012). Smith & Nephew recently acquired Healthpoint Biotherapeutics, owner of Regranex, which last reported sales of $65m in 2008, when it was in the hands of Johnson & Johnson (Healthpoint buy to double Smith & Nephew’s US wound operations, November 28, 2012).
Given the growth in the number of diabetics, the frequency with which they experience foot ulcers – up to 25% may experience one – and the potential for severe complications, there would seem to be some room for a product with significantly improved outcomes. Osiris has done the clinical work of demonstrating Grafix’s benefit – it is now up to marketing to follow through on that potential.