Zacks_Analysts' Blog : Osiris EPS Up on Lower Costs - Analyst Blog

Osiris Therapeutics (OSIR) reported third quarter earnings of 14 cents per share, well above the Zacks Consensus Estimate of a profit of 4 cents and the year-ago loss of 19 cents. Results were mainly driven by lower operating expenses. Revenues of $10.8 million were just above the Zacks Consensus Estimate of $10 million.

Quarter in Detail

Revenues from collaborative agreements, research licenses, and government contracts increased 0.9% to $10.7 million in the reported quarter. Third quarter 2010 revenues included the recognition of $10 million under the company’s agreement with Genzyme Corporation (GENZ) for the development and commercialization of Prochymal and Chondrogen.

Osiris earned $0.2 million from its collaborative agreement with the Juvenile Diabetes Research Foundation (JDRF) for the development of Prochymal for type I diabetes, and $0.4 million from its contract with the Department of Defense (DoD) to develop Prochymal for the treatment of acute radiation syndrome.

The company recorded $99,000 in sales of wound care products by its Biosurgery division.

Research and development expenses declined significantly during the quarter to $5.5 million. The completion of enrolment in phase III studies and a reduction in site and patient costs led to the decline in R&D spend. General and administrative expenses declined to $1.3 million, down from the $1.5 million recorded in the prior year period.

Pipeline Update

Osiris has made significant progress with stem cell therapies. The upside potential to lead candidate Prochymal could be enormous. Osiris is studying Prochymal for several indications including acute and steroid refractory graft versus host disease (GvHD), Crohn’s disease, acute myocardial infarction, chronic obstructive pulmonary disease (COPD), and type I diabetes, most of which are blockbuster indications. Osiris has orphan drug designation in the US for the diabetes indication.

Osiris has submitted a statistical analysis plan (SAP) for Prochymal for the treatment-resistant graft versus host disease (GVHD) indication in pediatric patients to the US Food and Drug Administration. The analysis will be included in the company’s Biological License Application (BLA). Osiris intends to conduct a formal pre-BLA meeting with the FDA in early 2011.

Meanwhile, Prochymal is currently being reviewed by Health Canada for GvHD. Osiris had filed a New Drug Submission (NDS) with Health Canada during the second quarter. The candidate has been granted priority review by Heath Canada and a response is expected in mid-to-late January 2011.

As far as the Crohn’s disease indication is concerned, Osiris said that enrolment for a phase III study continues. An interim analysis of the study showed that one of the Prochymal dosage arms achieved statistical significance for the primary endpoint.

Meanwhile, Osiris completed enrolling patients in its phase II study, which will evaluate Prochymal in patients with new onset type I diabetes. Finally, patient enrolment is ongoing in a phase II trial that will study Prochymal for the treatment of severe myocardial infarction. The trial should be fully enrolled in the first quarter of 2011.

Our Take

Osiris currently has a Zacks #1 Rank (short-term “Strong Buy” rating). Lead pipeline candidate, Prochymal, has the potential to be a sort of wonder drug for various inflammatory or tissue damage indications. Approval in Canada in early 2011 would be a major boost for the stock. Meanwhile, the sales opportunity for Chondrogen, the company’s second pipeline candidate, could also be significant. We view the company’s collaboration agreement with large-cap biotech Genzyme as a positive.