Osiris Beats on Lower Expenses – Analyst Blog

Osiris Therapeutics (OSIR) reported first quarter earnings of 7 cents per share, well above the Zacks Consensus Estimate of a net loss of 1 cent and the year ago loss of 24 cents. Even though revenues declined 10.2%, performance was driven by lower operating expenses.

 

Revenues, generated from collaborative agreements, research licenses, and government contracts declined to $11.4 million in the reported quarter. First quarter 2010 revenues included the recognition of $10 million in revenue under the company’s agreement with Genzyme Corporation (GENZ) for the development and commercialization of Prochymal and Chondrogen. Osiris also earned a milestone payment of $1 million under its agreement with JCR Pharmaceuticals for Prochymal in Japan.

 

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 $0.08 million from its contract with the Department of Defense (DoD) to develop Prochymal for the treatment of acute radiation syndrome. The balance revenues were in the form of royalties from the sale of mesenchymal stem cells (MSCs) for research purposes.

 

Research and development expenses declined significantly during the quarter to $6.6 million. The completion of clinical work associated with the company’s phase III studies led to the decline in R&D spend.

 

General and administrative expenses declined to $1.8 million, down from the $2.9 million recorded in the prior year period. The decline is primarily attributable to reductions in non cash share-based compensation expense.

 

Osiris exited the quarter with $91.2 million in cash, short-term investments and receivables.

 

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. The company has orphan drug designation in the US for the diabetes indication.

 

On the first quarter call, Osiris said that it has been given the green signal by the US Food and Drug Administration to develop a statistical analysis plan (SAP) for Prochymal for the treatment-resistant graft versus host disease (GVHD) indication in pediatric patients. The analysis will be included in the company’s Biological License Application (BLA).

 

As far as the Crohn’s disease indication is concerned, Osiris said that it will resume enrolling patients for the phase III study. The decision was based on an interim analysis that was conducted recently.

 

Meanwhile, the company 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.

 

While we are impressed with Osiris’ progress in cell based therapies, we note that any pipeline setbacks would weigh heavily on the stock. We remain Neutral on the stock while we await more clinical data.