Osiris: Promising Stem Cell Research, Questionable Management

by H.S. Ayoub
BioHealth Investor.com

While investors must research the history of any company’s management and executives, it is even more imperative in the biotech industry.

Cutting edge medical research is both risky and expensive, so it is imperative that investors seek those tiny biotechs that are managed by individuals with positive historical backgrounds.

Osiris Therapeutics (OSIR) could not have been involved in a riskier and more highly debatable field than stem cell research. But the company focuses on adult stem cells, not embryonic or fetal stem cells, which tend to be more contraversial.

The company is also different than the rest of the publically traded stem cell companies in that it is conducting multiple late stage clinical trials. Most of the others have yet to initiate any human trials, let alone late stage studies. StemCells Inc (STEM) has just initiated early phase human trials with its stem cells just last year.

Osiris stock has also been on a tear since debuting on the Nasdaq last year. At its all time high in January it was up almost three fold!

Back on October 24 however, Herb Greenberg of MarketWatch.com, completely downplayed the company’s potential. In his article he exposes the financialy trumultous history of the company’s co-founder, the swiss capitalist Peter Friedli, and suggests that the company’s research might have been over hyped.

Alas, Mr. Greenberg was right, as Osiris released disappointing phase I/II results of Chondrogen, a stem cell derived therapy for ligament regenerative therapy. While the study was aimed at proving the safety of Chondrogen, data was also collected to see whether there was any volume increase in the miniscus of the knees of patients. There was no significant difference in the volume of the miniscus between patients taking Chondrogen and those on placebos after six months.

Investors were obviously disappointed as the stock lost more than 10% on the day, and currently stands at just above $17. The stock reached its all time high of almost $30 just a few weeks ago in January!

One miss does not kill a company, especially since Osiris is still conducting other late stage trials using stem cells. But the background history of its co-founder, and the disappointing results of the Chondrogen trial makes Osiris stock seem a little too risky at the moment.

It would be wise to be patientand wait for more study results to be released, especially those from late stage trials.

It would also be interesting to see how management acts in tough times. Keep an eye out for insider trades in the next few months. Any insider selling and Osiris stock could prove Mr. Greenberg was right once again.

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