Osiris Therapeutics' shareholders approved yesterday the sale of the stem cell drugmaker's only product line, a bone-regeneration treatment called Osteocel, in a transaction worth up to $137 million, which will be used for the company's next generation of drugs.
In April, Columbia-based Osiris announced plans to find a buyer for the business. It secured a deal with San Diego's NuVasive Inc. in May.
The funds will be used to further Osiris' core business: developing biologic drug candidates in the inflammatory, orthopedic, and cardiovascular areas from mesenchymal stem cells. Such cells are found in the bone marrow of adults and capable of differentiating into various tissue, including bone and heart.
Osiris widely is considered the company most near to bringing a stem-cell product to market in the U.S., with three expensive, final-stage clinical trials under way for a treatment called Prochymal.
"Osteocel was a good first generation product for the company, and Prochymal is really the next generation," said Osiris Chief Executive C. Randal Mills.
Though Osteocel is expected to raise $15 million in revenue this year and $25 million next, it has a peak annual sales potential of about $75 million per year, Osiris has said. Still, that's not enough to pay for the company's estimated operating expenses, according to investment bank Jefferies & Co. In a research report filed in May, analysts predicted Osiris will spend nearly $80 million this year and $90 million in 2009.
"We view the sale of Osteocel as a positive for [Osiris]" in large part because it "mitigates a near-term financing risk," the analysts wrote. The firm expects Osiris to realize about $110 million, taking margins into account, from the sale by the end of 2009.
As part of yesterday's transaction, NuVasive paid $35 million in cash for Osiris' business assets, along with the contract rights for the development, manufacturing and sale of a second-generation treatment called Osteocel XC.
Milestone payments
During the next year and a half, Osiris could earn an additional $37.5 million in milestone payments. It also will manufacture and supply Osteocel to NuVasive during that time, earning as much as $52 million in revenue from NuVasive. Around the end of next year, Osiris will then transfer its manufacturing equipment and facilities to the California company, among other things, for a final payment of $12.5 million.
