Osiris Therapeutics, Inc. (OSIR)

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Osiris Therapeutics (OSIR)

Q1 2013 Earnings Call

May 07, 2013 9:00 am ET


Charles Randal Mills - Chief Executive Officer, President and Director

Philip R. Jacoby - Chief Financial Officer, Treasurer and Corporate Secretary


Edward A. Tenthoff - Piper Jaffray Companies, Research Division



Good morning, everyone, and welcome to the Osiris Therapeutics First Quarter 2013 Earnings Conference Call.

Before we begin, I would like to remind you that -- I would like to remind everyone that this conference may include forward-looking statements that involve uncertainties and risks. Actual results could differ materially from those anticipated in forward-looking statements, for many reason, including the factors described in the section entitled Risk Factors in our filings with the Securities and Exchange Commission.

As a reminder, today's conference is being recorded.

I would now like to turn the conference over to Dr. C. Randal Mills, President and CEO of Osiris Therapeutics. Please go ahead, sir.

Charles Randal Mills

Thank you, guys, very much for joining us for our First Quarter 2013 Earnings Call. We're going to continue with the format that we used last quarter, going through a little bit less of a script and then more of a presentation format. For the call today, I'll be making some initial remarks regarding our performance, and then I'm going to turn the call over to Phil who will talk a little bit on our financial performance. I'll go through some of our products after Phil's comments and then, obviously, close that with questions, like we always do. So with that said, let's get started with it.

For those of you who are new to the story -- we feel in the call that we do have a fair number of people that are new to the story. Osiris is the clear leader in stem cell medicine. And we've gotten to that position not through anything other than a very hard and committed work to the space. So we were founded 20 years ago. We came out of Case Western University. And for 20 years, we've been doing nothing but working on the development of cell therapies and, specifically, mesenchymal cell therapies. We commercialized the world's first stem cell product, Osteocel, back in 2005. We have the world's first and only approved stem cell drug, Prochymal. We currently have 4 products on the market. We have a very strong intellectual property position, with 50 patents issued in the United States and, corollary to those, patents issued around the world.

Importantly, we have over 1,500 patients worth of data collected in clinical trials. And that includes over 2,000 years of patient follow-up. And the reason I say "importantly" around that is, because in cell therapy and cell medicine, those who control the data and who have the data to demonstrate the safety and efficacy of a drug have the ability to do more work with those drugs faster with the regulatory agencies. And so this is clearly a very important point for us.

Perhaps more important than that, though, is the validation we're seeing in the marketplace. So we now have over 100,000 patients that we've treated commercially with our products. We are continuously manufacturing and selling our products, and that has led us to a gross margin, not a theoretical gross margin but a real gross margin, that we're pleased to report this quarter of 72%, up 200 basis points from the last quarter.

Looking back at this last quarter, some recent highlights and developments, it was a very busy for -- quarter for us commercially, as we expect and hope will be going forward. So this quarter, we were able to launch Cartiform, our viable cell therapy cartilage product for acute cartilage injury. We established a direct sales force for Grafix. We were able to receive the Orphan Drug designation title back from the EMA. Very importantly, we were able to grow revenues this quarter 38% over last quarter to $4.1 million, representing a 257% growth rate over the quarter in the previous year. Again, as I mentioned, we're very pleased that, not only are we experiencing top line growth, but our manufacturing people are doing what's necessary in order for us to realize the increased gross margins, again 200 basis points increase to 72%. And finally, we ended the quarter with a very strong balance sheet, again no debt, and $34.9 million in cash, receivables and investments.

Let's look specifically at some of the product sales performance for the quarter. So for this quarter, product revenue was at $4.1 million, again up 38% from the previous quarter, up over 250% from the prior year. Below that, you can see the gross margin and how the gross margin is tracking along at an almost accelerated pace to that, from only $0.25 million dollars -- or $0.75 million of gross margin last year, $2.1 million of gross margin in the fourth quarter and to $2.9 million of gross margin. And in fact, our gross margin, we generated off of product revenue was equal to our entire product revenue for the fourth quarter of 2012, and so we're pleased with that. And then along the bottom, you can see how we're still making very steady improvement in percent gross margins, so 66% to 70% to 72%. So all around, from a financial standpoint, from a sales standpoint, from a manufacturing and execution standpoint, a very solid quarter.

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