Scimitar Equity Blog

OSIR’s alliance is at risk on Genzyme takeover, however …

OSIR’s alliance with Genzyme (GENZ) may be in jeopardy, states Piper Jaffray analyst Edward Tenthoff on 2/16/11. “Sanofi could walk away from alliances with OSIR after GENZ acquisition but, has 40% of funding for Phase III trials and $1.25B in potential milestones. GENZ represented $40m of $44.5m in total revenue for OSIR in 2009, $6.7m of $10m in total revenue for OSIR in 2008”.

• OSIR has an agreement with GENZ for the development and commercialization of  Chondrogen. Chondrogen is being evaluated in clinical trials for regeneration of the meniscus and prevention of osteoarthritis in the knee. Clinical research demonstrates that an injection of Chondrogen in patients with osteoarthritis significantly reduces pain and the likelihood of degenerative bone changes associated with osteoarthritis (OA) is also reduced. 2 different dose levels of Chondrogen were evaluated in the Phase I/II trial;
• Under the terms of the agreement, OSIR will commercialize Prochymal in the US and Canada with GENZ rights to commercialize the therapies in all other countries and to develop Prochymal as a medical countermeasure to nuclear terrorism and other radiological emergencies. The agreement provides for GENZ to receive a royalty on sales of Prochymal, limited to those sales made under contract to US or allied governmental agencies for emergency preparedness.

The Bottom Line: The change in control or contractual agreements is usually spelled out from original collaboration. So, OSIR is now provided with many options and past funding has enabled continued development with late stage opportunities to re-partner or go it alone. Remember, the US government, DoD and Homeland Security has potential interests. Osiris (OSIR) closed trading up ( 2/16/11)$0.10 or 1.44% at $7.06 and opened at $7.07 (2/17/11) up again $0.02 or 0.28% to $7.09. However, the short position as a % of float has increased to 12.30%. From, our 2/7/11 and blog on 2/2/11: OSIR’s share price (had) dropped as with many stem cell companies but maintains positive cash flow with revenues covering operating costs. But, a low beta of 0.20 is coupled with a float of 15.18M that is 46.3% of shares outstanding.  A healthier benefit is a 53.68% insider holding. OSIR has a 52 week low of $5.39 and a 52 week high of $9.24. The stock’s 50-day moving average is lower to 7.14 and its 200-day moving average is also lower at 7.31 from $7.35. The prediction is OSIR will post $0.09 EPS for Q4/10. OSIR has a market cap of $281.83M with an enterprise value of $155.57.  Average volume (3 mos) is a hair lower at 93,164 while 10 day volume is also a hair lower to 64,838 versus 99,643 compared to 2/1/11 volume of 77,400.  Analysts’ estimates trend lower to $5.00 from $5.25 and a mean target of $5.70 from $5.88.

Disclosure: I have no positions in OSIR, and no plans to initiate any position.