Osiris Loss Lower Than Expected

Osiris Therapeutics Inc. (OSIR - Analyst Report) reported a third quarter loss of 9 cents per share, narrower than the Zacks Consensus Estimate of a loss of 14 cents. However, year-ago earnings were 12 cents per share. Revenues for the quarter came in at $2.4 million, above the Zacks Consensus Estimate of $2 million but well below the year-ago revenues of $10.6 million.

Quarterly Highlights

Biosurgery product sales came in at $2.2 million, up 32% from the second quarter of 2012.

Research and development (R&D) expenses declined 40.6% from the year-ago period to $3.0 million, mainly due to the completion of enrollment in the myocardial infarction study with Prochymal. General and administrative expenses increased 12% from the year-ago period to $1.6 million due to higher commercial activities in the Biosurgery segment.

Pipeline Update

Osiris has made significant progress with stem cell therapies. The upside potential to lead candidate Prochymal could be enormous. Prochymal gained approval in Canada and New Zealand in the second quarter of 2012 for the treatment of acute graft-vs-host disease (GvHD) in children. Prochymal is the first manufactured stem cell product to gain approval and the first treatment to gain approval for GvHD.

Besides being approved in Canada and New Zealand, we note that the product is available under an Expanded Access Program (EAP) in seven countries including the US. The company is currently finalizing reimbursement plans in Canada. Osiris is working with regulatory agencies across the world to provide them with the information needed to approve Prochymal.

Osiris is studying Prochymal for several indications including Crohn’s disease and acute myocardial infarction, most of which are blockbuster indications.

As far as the Crohn’s disease indication is concerned, Osiris said that enrolment for a phase III study continues.

Meanwhile, the company completed enrolling patients in a phase II trial that is studying Prochymal for the treatment of severe myocardial infarction. Osiris presented encouraging interim data from this trial in the second quarter of 2012.

Regains Osiris Rights

During the third quarter of 2012, Osiris regained global rights to Prochymal and Chondrogen from Genzyme, a Sanofi (SNY - Analyst Report) company. The amicable ending of the dispute between the companies has removed a significant overhang for Osiris. We are positive on this development which will now allow the company to pursue collaboration agreements for Prochymal and Chondrogen with other parties.

We currently have a Neutral recommendation on Osiris, which carries a Zacks #3 Rank (short-term Hold rating). We expect investor focus to remain on the commercialization of Prochymal in Canada and pipeline progress.