Osiris Therapeutics Reports Fourth Quarter and Full Year 2014 Financial Results: For the Full Year, Revenue Increased 146% and Company Reports Record Revenue in Fourth Quarter.

Osiris Therapeutics, Inc. (NASDAQ:OSIR), the leading cellular and regenerative medicine company focused on developing and marketing products to treat conditions in wound care, orthopaedics and sports medicine, announced today its financial results for the fourth quarter and full year ended December 31, 2014.

Full Year and Fourth Quarter Highlights

• Reported product revenue of $59.9 million in 2014, up 146% from the prior year.
• Increased gross profit from operations from $17.7 to $46.7 million, up 164% from the prior year. Gross margin improved from 73% to 78%.
• Signed strategic commercial partnerships for the Orthopaedics unit, BIO4 TM with Stryker Corporation, and for the Sports Medicine unit, Cartiform® with Arthrex, Inc.
• Improved Medicare reimbursement for Grafix® to over 70% of Medicare insured lives, compared to no reimbursement in 2013.
• Strengthened the leadership team and made significant progress in transforming Osiris to a competitive commercial enterprise through the addition of 106 sales professionals and the creation of marketing, customer service, health policy and reimbursement departments.
• Product revenue for the quarter rose to $19.3 million, a 138% increase compared to fourth quarter 2013.
• Completed the quarter with income from continuing operations of $1.1 million, or $0.03 per share, after recognizing income taxes of $89,000.
• Obtained final letter from FDA confirming the resolution of the issues of the Untitled Letter of September 2013. Osiris submitted an IND for our viable placental membrane for the treatment of chronic wounds and will conduct a confirmatory Phase 3 trial to seek BLA approval.
• Prochymal® submitted to Japanese Health Authorities by our partner Mesoblast, seeking approval for pediatric and adult Graft-versus-Host Disease.

“We continue to grow revenue, add commercial talent and expand our pipeline in our Orthopaedics, Sports Medicine and Wound Care units,” said Lode Debrabandere, Ph.D., President and Chief Executive Officer. “Our investments in wound care resulted in rapid revenue growth in both commercial and federal payor segments with wound care sales quadrupling compared to 2013. We are also looking forward to the launch of both BIO4 and Cartiform in collaboration with Stryker and Arthrex, respectively.”

Fourth Quarter Financial Results

Product revenues during the fourth quarter of 2014 were $19.3 million, compared to $8.1 million during the fourth quarter of 2013, an increase of 138%. Gross margin during the fourth quarter was 78% compared to 73% during the fourth quarter of 2013. Gross profit was $15.1 million during the fourth quarter of 2014 compared to $5.9 million during the same quarterly period of 2013. Income from continuing operations was $1.1 million in the fourth quarter of 2014 after recognizing income taxes of $89,000. As of December 31, 2014, Osiris had $84.2 million of cash, investments and receivables.

Research and development expenses for the fourth quarter of 2014 were $3.9 million, an increase from the $1.9 million incurred in the same period of the prior year. As a result of our increased commercial activity, our selling, general and administrative expenses were $10.0 million for the fourth quarter of 2014, compared to $4.1 million for the same period of the prior year.

Full Year 2014 Financial Highlights

Revenues of $59.9 million were recognized in fiscal 2014, a 146% increase over the prior year. Gross margin increased to 78% from 73% recognized in fiscal 2013, primarily as the result of manufacturing efficiencies. Research and Development expenses of $6.9 million were incurred in fiscal 2014 in furtherance of our Grafix DFU trial and investments in product development. Selling, general and administrative expenses were $38.1 million in fiscal 2014 compared to $15.5 million in fiscal 2013.

We reported a loss from continuing operations of $246,000, after recognizing income tax expense of $193,000. In fiscal 2013, we reported a loss from continuing operations of $1.1 million, after recognizing an income tax benefit of $1.3 million from the partial release of the valuation allowance on our deferred tax assets, which was facilitated by the gain recognized on the sale of our Prochymal assets.

Loss from discontinued operations of $1.5 million was recognized in fiscal 2014. In 2013, we recognized income tax expense of $1.7 million related to the gain on sale. In fiscal 2013, we reported a loss from operations of discontinued operations of $6.7 million.

We reported basic and diluted losses from continuing operations of $0.01 per share compared to basic loss from continuing operations of $0.04 per share for fiscal 2013. We ended the year with current assets of $98.1 million and current liabilities of $10.3 million.

Webcast and Conference Call

A webcast and conference call to discuss the financial results is scheduled for today, March 5, at 9:00 a.m. ET. To access the webcast, visit the Investor Relations section of the company's website at http://investor.osiris.com/events.cfm. Alternatively, callers may participate in the conference call by dialing (877) 303-6133 (U.S. participants) or (970) 315-0493 (international participants).

An archive of the webcast will be available approximately two hours after the completion of the call. To access the archived webcast, visit the Investor Relations section of the company's website at http://investor.osiris.com/events.cfm.

About Osiris Therapeutics

Osiris Therapeutics, Inc., based in Columbia, Maryland, is the world leader in researching, developing and marketing regenerative medicine products that improve health and lives of patients and lower overall healthcare costs. Having developed the world’s first approved stem cell drug, the company continues to advance its research and development in biotechnology by focusing on innovation in regenerative medicine – including bioengineering, stem cell research and viable tissue based products. Osiris has achieved commercial success with products in orthopaedics, sports medicine and wound care, including BIO4, Cartiform and Grafix.

Osiris, Grafix, and Cartiform are registered trademarks of Osiris Therapeutics, Inc. BIO4 is a trademark of Stryker Corporation (NYSE: SYK). More information can be found on the company's website, www.Osiris.com. (OSIR-G)

Forward-Looking Statements

This press release contains forward-looking statements. Forward-looking statements include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as "anticipate," "believe," "continue," "ongoing," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project" or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. Examples of forward-looking statements may include, without limitation, statements regarding any of the following: our product development efforts; our clinical trials and anticipated regulatory requirements, and our ability to successfully navigate these requirements; the success of our product candidates in development; status of the regulatory process for our product and product candidates; implementation of our corporate strategy; our financial performance; our product research and development activities and projected expenditures, including our anticipated timeline and clinical strategy for marketed Biosurgery products (including Grafix, BIO4 and Cartiform) and Biosurgery products under development; our cash needs; patents, trademarks and other proprietary rights; the safety and ability of our products and potential products to address medical needs; our ability to supply a sufficient amount of our marketed products or product candidates and, if approved or otherwise commercially available, future products, to meet demand; our ability to commercialize and distribute our current and any future marketed products, including our ability and the ability of end users to obtain reimbursement from Medicare and other third party payors; our relationships with collaborating partners; our ability to maintain and benefit from our collaborative arrangements; our costs to comply with governmental regulations; our plans for sales and marketing; our plans regarding facilities; types of regulatory frameworks we expect will be applicable to our products and potential products; and results of our scientific research. Additional risks and uncertainties related to the prior sale of our ceMSC assets to Mesoblast include typical business transactional risks, the risk of changing relationships with customers, suppliers or employees, the risk associated with the disposition of our ceMSC assets and the increased relative dependence on and importance of our other business including our Biosurgery business, the risk that we may not be able to fully benefit from the transaction through milestone payments or royalties, payment risks, including the risk associated with receipt of equity as consideration, in lieu of cash, and the risk of dependence on others to achieve results upon which milestone or royalty payments to us are conditioned. In addition to all of the risks otherwise applicable to us and our business, there are numerous risks and uncertainties related to our collaborative relationships. For example, in the case of our Exclusive Service Agreement with Stryker for the commercialization of BIO4 these risks include, among others, typical business transactional risks, Stryker’s early termination rights, the ability of Stryker to successfully market and promote BIO4, the ability of Osiris to successfully fulfill its supply obligations, and the risk of dependence on others to generate sales of allograft services for BIO4. Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Our actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the factors described in the section entitled "Risk Factors" in our Annual Report on Form 10-K and other Periodic Reports filed on Form 10-Q, with the United States Securities and Exchange Commission. Accordingly, you should not unduly rely on these forward-looking statements. We undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this press release or to reflect the occurrence of unanticipated events.