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Osiris Therapeutics, Inc.’s shares continued to gain ever since the company announced its agreement for the sale of its culture-expanded mesenchymal stem cell (ceMSC) business.

Last week, the company entered into an agreement with a wholly-owned subsidiary of Mesoblast Limited under which Osiris will sell its ceMSC business including Prochymal for up to $100 million. Osiris will be entitled to royalty payments as well. Shares are up about 5.8% since the agreement was announced.

$50 million will be received by Osiris on the closing of the deal with the remaining $50 million falling due as and when milestones (development and regulatory) are achieved by Mesoblast. Mesoblast will be responsible for all future development costs for the ceMSC business.

While a part ($35 million) of the initial $50 million payment will be made in cash, the balance ($15 million) and other milestone payments may be made in cash or stock.

Osiris will also be entitled to receive single to low double-digit royalties on sales of products derived from the ceMSC technology. Osiris has also retained a license to all transferred intellectual property necessary to run its other businesses.

This deal will provide Osiris with pro forma cash, investments and receivables of about $82 million and the company expects to report a profit this year.

Osiris currently carries a Zacks Rank # 2 (Buy). The sale of the ceMSC business will not only provide Osiris with cash, it will also allow the company to focus on its Biosurgery segment, which has been gaining traction over the past few quarters. Currently marketed products include Grafix and Ovation for tissue repair. Biosurgery product revenues came in at $7.8 million in 2012, significantly above $1.3 million in 2011. The company intends to continue increasing its focus on the development and commercialization of products in this segment.

Other stocks that currently look attractive include Isis Pharmaceuticals, Inc. , Actelion Ltd. and Cornerstone Therapeutics Inc. . All three are Zacks Rank # 1 (Strong Buy) stocks.

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