Zacks_Analysts' Blog : Osiris Profits Rise on Lower Costs - Analyst Blog

Osiris Therapeutics Inc. (OSIR) reported fourth quarter earnings of 13 cents per share, beating the Zacks Consensus Estimate of 9 cents and the year-ago loss of a cent. Fiscal 2010 earnings of 40 cents per share also beat the Zacks Consensus Estimate of 13 cents and the year-earlier loss of 72 cents. Earnings were mainly driven by lower operating expenses.

Revenues for the quarter came in at $10.7 million, in line with the Zacks Consensus Estimate and the prior-year figure. Annual revenues declined 3% year over year to $43.0 million, also meeting the Zacks Consensus Estimate.

Full year revenues declined due to a lower contribution from the US Department of Defense (DoD) contract during 2010.

Quarterly Highlights

Fourth 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 also earned $0.7 million from its collaborative agreement with the Juvenile Diabetes Research Foundation (JDRF) for the development of Prochymal for type I diabetes.

The company recorded $84,000 from sales of wound care products by its Biosurgery division.

Research and development (R&D) expenses declined significantly during the quarter to $5.0 million. The completion of all clinical work related to phase III trials of Prochymal for graft versus host disease (GvHD) led to the decline in R&D spend. General and administrative expenses were lower at $1.8 million from $2.1 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 GvHD, Crohn’s disease, acute myocardial infarction, chronic obstructive pulmonary disease, 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 GvHD indication in pediatric patients to the US Food and Drug Administration (FDA). The analysis will be included in the company’s Biological License Application (BLA). A pre-BLA meeting was held with the FDA in February. The regulatory body has asked Osiris to submit additional information prior to filing for approval of Prochymal as a treatment for GvHD.

Meanwhile, Osiris is seeking approval for Prochymal in Canada for GvHD. In January, Health Canada informed Osiris that it had a few questions on the candidate for the said indication. The company has filed a response to the regulatory body’s questions. Osiris had filed a New Drug Submission (NDS) with Health Canada during the second quarter of 2010. The candidate has been granted priority review by Heath Canada.

Moreover, Osiris received orphan drug status from the Swiss and the Australian regulatory bodies for Prochymal as a treatment for GvHD.

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 in the primary endpoint.

Meanwhile, the company completed enrolling patients in two of its phase II studies, one of which will evaluate Prochymal in patients with new onset type I diabetes. The second phase II trial is studying Prochymal for the treatment of severe myocardial infarction. Osiris expects to report data from this trial in the fourth quarter 2011/first quarter 2012.

Our Take

We currently have a Neutral recommendation on Osiris, which is supported by a Zacks #3 Rank (short-term Hold rating). While we are impressed with the company’s progress in cell based therapies, we note that any pipeline setback would weigh heavily on the stock.