By Meg Tirrell - 2012-05-17T20:35:40Z

Osiris Therapeutics Inc. (OSIR) said it won the worlds first approval for a stem-cell drug, gaining clearance in Canada to sell Prochymal for a disease that can attack patients who received bone-marrow transplants.

Prochymal was approved for the treatment of acute graft versus host disease in children for whom steroids havent worked, the Columbia, Maryland-based company said today in a statement. Steroids have a 30 percent to 50 percent success rate, and severe GvHD can be fatal in 80 percent of cases, according to the company.

The therapy uses mesenchymal stem cells derived from bone marrow that can take on different forms, to combat the immune reaction that causes patients to literally peel out of their skin and shed their intestinal lining, Osiris Chief Executive Officer Randal Mills said in a telephone interview. The disease has no equal.

The company hasnt sought approval for this indication in the U.S., where regulators asked for more data before considering whether to allow sales of the drug, Mills said. Prochymal already is used in eight countries, including the U.S., on an expanded-access program basis, which allows patients to receive experimental medicines without participating in clinical trials.

This is the first regulatory approval of a stem-cell drug -- where the active ingredient of the drug is a stem cell -- in the world, Mills said. Its a huge deal for us and a huge deal for the entire field of stem-cell therapy.

Osiris fell less than 1 percent to $5.26 at the close of trading in New York. The shares have declined from an all-time high of $28.56 in 2007 as Osiris faced clinical setbacks, including two studies in 2009 that failed to show statistical improvement of Prochymal versus placebo.

The Canadian approval was based on data showing a clinically meaningful response 28 days after starting therapy for 61 percent to 64 percent of patients treated, Osiris said in the statement.

Prochymal may draw $16.7 million in revenue next year with Canadian approval, estimated Edward Tenthoff, an analyst with Piper Jaffray & Co. He said that while Prochymal, if successful in Canada, would be the first stem-cell drug to receive approval, other regenerative products used for wound-healing that employ stem cells are already on the market, such as Carticel from Sanofis Genzyme unit. That treatment uses a patients own cells to repair cartilage injuries in the knee, and is implanted with surgery, whereas Prochymal is an intravenous, off-the-shelf therapy. The stem cells are derived from bone marrow donations from healthy donors.

Progress in stem-cell research has been halting. Geron Corp. (GERN), based in Menlo Park, California, started the first U.S.- approved trial of human embryonic stem cells before ending the program last year because of research costs and regulatory complexities.

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Osiris Wins Canadian Approval for First Stem-Cell Therapy