Shares in Osiris Therapeutics have fallen over 21% after the US firm halted a late-stage trial of its Crohn's disease treatment Prochymal, which it hopes will become the first stem cell therapy to be given full approval.

The Maryland-based company has chosen to end enrollment at 210 patients (out of a planned 270) in a Phase III study evaluating Prochymal because it believes “there is a design flaw in the trial resulting in significantly higher than expected placebo response rates”. The decision was made after the trial’s final scheduled interim analysis showed that “one of the two Prochymal dose arms had crossed a futility boundary”, Osiris said, and the primary endpoint of remission would not be achieved because of the high placebo response rate”.

However the company noted that the latest analysis “continued to show no serious safety concerns with the therapy” and was not a factor in the decision to stop enrollment. Chief executive Randal Mills said that “after careful discussion with the US Food and Drug Administration, we elected to discontinue enrollment rather than attempt to re-power the trial”.

He added that “we will keep the trial blinded and expect a solid data package for use in designing future trials in Crohn’s disease and to bolster Prochymal’s safety database”. The therapy, which consists of mesenchymal stem cells derived from bone marrow, is partnered with Genzyme Corp, and the latter’s chief executive David Meeker said that Osiris’ decision is “prudent and will enable a more efficient path forward”.

Prochymal is studying the drug in a number of other indications, notably graft versus host disease, chronic obstructive pulmonary disease, myocardial infarction and diabetes. However, analysts are split as to whether Prochymal is going to prove to be an effective treatment in any indication.

Bill Tanner at Leerink Swann thinks the slide in Osiris’ stock is something of an over-reaction and does not reflect the therapy’s effectiveness. However Lazard Capital Markets analyst Joel Sendek was quoted by Reuters as saying that "I don't think the drug works very well, and I have not seen any evidence that the drug works in Crohn's disease".

He added that Osiris “has moved too fast in the late-stage studies. They had very few early- and mid-stage data".