Brean Capital Initiates Coverage On Osiris Therapeutics

Brean Capital initiated coverage on Osiris Therapeutics, Inc. OSIR Monday with a Buy rating and $19 price target.

Analyst Difei Yang liked “the company for bringing the pharmaceutical quality of clinical research to the wound care space and as it also appears that Osiris has successfully transitioned from a stem cell R&D company to a wound care, commercial stage company.

“The growth in revenue and EPS is mainly coming from Grafix, which we believe is likely to enjoy a high growth rate for the foreseeable future. As a result, we expect the company to turn profitable in 2015. In our opinion, the stock is attractively valued and we believe there may be opportunities for multiple expansion as the newly marketed wound care products are currently valued similarly to other lower-margin medical products.”

Yang noted that “the new biotech-based wound care products carry a gross margin that approaches those of therapeutics (78 percent, vs. 30-40 percent for wound care)” and Yang left “aside this potential upside” to establish the target price by “using analysis of the comparable group only.”

Yang saw several near-term catalysts that could lift the shares to the next level: 1) additional clinical study results on venous leg ulcers are expected in 2015; 2) quarterly revenue growth of Grafix with an expanded sales force, if Q1 2015 revenue beats our forecast...Since Q1 revenue drives the revenue forecast for the rest of the year, a good Q1 quarter could significantly improve our outlook for 2015; and 3) read-out on Grafix confirmatory study is expected in H2 2016.”

Osiris Therapeutics closed Monday at $15.08, up 0.94 percent.