Athersys Inc. shares more than double on Pfizer agreement to develop inflammatory bowel disease therapy

Updated 5:00 p.m.

CLEVELAND, Ohio — Biopharmaceutical company Athersys Inc. is in line for up to $111 million in revenue through an agreement with a Pfizer Inc. unit to develop and market a stem cell therapy for patients who suffer from inflammatory bowel disease (IBD).

The agreement validates the capabilities of MultiStem — the Athersys stem cell therapy — to treat patients with a variety of inflammatory and autoimmune diseases, Gil Van Bokkelen, Athersys president and chief executive, said during a conference call with investors Monday morning.

“We think that having Pfizer as our partner is an important statement about the quality of the work that we’re doing, the strength of our science and technology, the distinctive profile of our stem cell platform and ultimately what it might mean for patients,” Van Bokkelen said in answer to a question.

It’s also a shot in the arm for Athersys, which has for years been investing in its development programs in stages, trying to make its cash stretch far enough to cover products like MultiStem, as well as drug candidates the company discovers through a proprietary technology.

What happens when Athersys is unable to find development partners? In March, the company shelved a promising drug to treat obesity because it couldn’t land a partner to share the rising cost of drug development. The company still is looking for partners to develop MultiStem to help heart attack and stroke victims, as well as leukemia patients who have rejected bone marrow treatments.

On the Pfizer side, the deal could be the first product development collaboration by a big pharmaceutical company that uses an adult stem cell therapy to leapfrog admitted shortcomings in conventional drug treatments for a disease.

Investors approved of the agreement announcement, sending Athersys shares up 140 percent to $2.40 on the NASDAQ Stock Market.

Since its founding in the mid-1990s, Athersys has developed one commercial product — adult stem cells for research purposes. MultiStem has not yet been approved for use in humans, though Athersys is conducting clinical trials for three different applications of its therapy. Biologic products, such as stem cell therapies, typically take more than a decade to develop.

In the early 2000s, Athersys emerged as a promise for a bright economic tomorrow in Northeast Ohio, then struggling with the effects of the dot.com bust, a brief recession and the slow death of the steel industry, among other industries.

By 2002, the biopharmaceutical company had raised $100 million in capital and created 125 jobs. Athersys was looking more and more like it could help the region solve its job-loss problems. But the following year, the company started having growing pains.

Saying it needed to raise $100 million for expansion, Athersys considered moving some or all of its operations to high-tech corridors in Minnesota or North Carolina. Then, after a lucrative drug-development deal fell through, Athersys cut its staff by one-third, to about 65.

Today, the company that went on to raise $65 million through a reverse initial public offering in 2007 and its 35 employees are trying to find partners to help pay for developing their stem cell and drug products.

Under its latest deal, Athersys would receive $6 million from Pfizer Regenerative Medicine when the unit of the large drug company begins developing MultiStem to treat sufferers of inflammatory bowel disease, a collection of severe inflammatory and autoimmune disorders such as ulcerative colitis and Crohn’s disease. The disorders affect more than 2 million patients in the United States, Europe and Japan, often debilitating them and causing repeated surgeries, Van Bokkelen said.

“MultiStem is an innovative biologic product that is manufactured from human stem cells obtained from adult bone marrow or other non-embryonic tissue sources,” Van Bokkelen said. “MultiStem has the potential to deliver therapeutic benefit in several ways, such as the reduction of inflammation, protection of damaged or injured tissue and the formation of new blood vessels.”

Unlike traditional stem cell therapy that ” aim to achieve wholesale, direct replacement of damaged tissue,” MultiStem produces factors “that act to regulate the immune system, protect damaged or injured cells and promote tissue repair and healing in other ways,” he said. As such, “MultiStem exhibits a more drug-like profile” than other cell therapies, doing their work in several ways and then clearing from the body over time.

For Pfizer’s research unit, MultiStem offers a new way to develop treatments for degenerative disease. Pfizer Regenerative Medicine was launched in 2008. Its U.S. hub is in Cambridge, Mass.

“Pfizer is committed to the development of new medicines that have the potential to fundamentally improve the quality of clinical care in areas of need. We are delighted to work with Athersys to develop MultiStem for inflammatory bowel disease,” said Ruth McKernan, chief scientific officer for Pfizer Regenerative Medicine, in a joint press release. “This is an innovative new area and our collaboration with Athersys represents a cornerstone of Pfizer’s stem cell and regenerative medicine strategy.”

The Pfizer unit would pay for research and support during the initial phase of the collaboration, the companies said in their release. Athersys could receive milestone payments of up to $105 million for reaching development, regulatory and commercial goals.

Pfizer would be responsible for development, regulatory and commercialization work for MultiStem IBD and would pay Athersys royalties on worldwide sales of products. In a later phase, Athersys could elect to co-develop MultiStem IBD, sharing development and commercialization expenses and profits.