Zacks_Analysts' Blog : Osiris Beats Zacks Consensus - Analyst Blog

Osiris Therapeutics Inc. (OSIR) reported third quarter earnings of 12 cents per share, a couple of cents above the Zacks Consensus Estimate but 14.3% below the year-ago earnings.

Revenues for the quarter came in at $10.6 million, above the Zacks Consensus Estimate of $10 million and just shy of the year-ago revenues of $10.8 million.

Quarterly Highlights

Third quarter 2011 revenues included the recognition of $10 million under the company’s agreement with Genzyme, now a part of Sanofi-Aventis (SNY). Biosurgery product sales came in at $331,000.

Research and development (R&D) expenses declined 9.1% during the quarter to $5 million. General and administrative expenses increased marginally to $1.4 million

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, and type I diabetes, most of which are blockbuster indications.

Osiris is working on submitting an application to the US Food and Drug Administration (FDA) for the approval of Prochymal as a treatment for GvHD. The company is also looking to develop a confirmatory program that will increase the chances of meeting the requirements of all regulatory agencies.

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 agency also raised questions regarding post-marketing commitments. Osiris has filed a complete response to the inquiries from the Canadian regulatory authority. However, the company did not provide any timeline regarding a response from the Canadian authority.

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. Data from the diabetes study should be out later this year.

Neutral on Osiris

While we are impressed with the company’s progress in cell-based therapies, we note that any pipeline setbacks would weigh heavily on the stock. In fact, we were disappointed with the company’s failure in gaining first round approval for Prochymal in Canada. We currently have a Neutral recommendation on the stock, which carries a Zacks #3 Rank (short-term Hold rating).