Osiris lays wider loss to IPO, testing costs

The Baltimore Sun

After disappointing drug results and a stock downgrade from a major financial firm, Osiris Therapeutics Inc. detailed yesterday how it doubled its loss last year, blaming increased clinical trial efforts and charges associated with its initial public offering of stock in August.

Loss for the year was $45 million, compared with $20 million in 2005. For the quarter that ended Dec. 31, the company lost $12.7 million, compared with $8.1 million for the final quarter of 2005.

The earnings information, first detailed in a news release late Monday and then discussed during a conference call with analysts yesterday morning, didn't do much to move investors. Shares of the Baltimore biotech, which is developing drugs from adult stem cells, closed up 47 cents to $17.74 in trading on the Nasdaq.

Osiris' stock opened at $11 in August and peaked at $28.56 per share in January.

"Stocks move based on the expectation of future earnings, and in the biotech industry, there's obviously a long tale of what investors believe regarding a given company's pipeline," said Thomas G. Kamp, president of Cornerstone Capital Management, a Minnesota financial firm that invests in Osiris. "In Osiris' case, they have a number of different promising opportunities."

One in particular has been drawing attention from analysts and the Food and Drug Administration, which has given the drug, Prochymal, a fast-track status to help speed development as a treatment for Crohn's disease. That disease is characterized by chronic intestinal inflammation and affects more than half a million Americans.

Still, early clinical results last week suggested that another of Osiris' drugs derived from adult stem cells, Chondragen, doesn't regenerate knee cartilage as expected, sending the stock tumbling 10 percent, even though the data were inconclusive.

And two days later, shares fell 5 percent on news that analyst Joel D. Sendek, with financial firm Lazard Capital Markets, downgraded the Baltimore biotech's stock to "sell," though two other analysts ranked the shares as "outperform" and "hold."

Sendek reiterated his "sell" rating yesterday, and also lowered his prediction for the stock price in a year, from $14 to $12, based in part on a doctors' survey suggesting that Prochymal's potential in Crohn's disease is "overstated."

Osiris said yesterday that its increased annual loss could be attributed to costs associated with the company's six clinical trials. It is testing stem cells taken from the bone marrow of adult volunteers as treatments for Crohn's disease, knee cartilage regeneration, heart attack and a deadly condition associated with certain transplants.

Such research and development expenses rose to $37.6 million for the year, compared with $16.9 million in 2005, and they're likely to keep rising. It can take a billion dollars and a dozen years to prepare a drug for commercialization.

Osiris' chief executive officer, C. Randal Mills, refused to outline specifics, telling an analyst from Lazard Capital Markets that company policy is "to not provide financial guidance."

Osiris also recognized about $7.7 million in charges connected to the IPO and to debt refinancing done in October.

Revenue from the Fells Point company's only marketed product, a bone-regeneration treatment called Osteocel, was $8.3 million for the year and $3 million for the fourth quarter. That compares with annual sales of $957,000 and fourth-quarter sales of $700,000 in 2005.

Overall, Mills said, he was pleased with the year's performance. The company completed patient enrollment in five clinical trials, reported results for four of them, showed drug promise in three of those, moved two programs into late-stage development with fast-track status and more than doubled its Osteocel sales.

"We are very excited about the future and deeply committed to the development of this technology," Mills said.


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