Many medical device companies are considered solid investments because they are in a space that has a broad reach. This is especially the case for those companies that offer advanced products.
Such is the case for Osiris Therapeutics (NASDAQ: OSIR). However, the regenerative medicine products that it develops, manufactures, markets and distributes may be stalled due to a slew of issues that are having a significant, negative effect on the company and its stock. This includes its Grafix products, cryopreserved placental membranes that are used to treat hard-to-treat acute and chronic wounds.
In this piece, I’ll go over Osiris’ issues as a warning that you should steer clear of this medical device company’s stock in the short-term.
In mid-July of last year, investors in were likely celebrating the company’s stock reaching an all-time high of $23.67 per share. However, today investors in the company, or at least those who continued to hold the stock, are likely not in such a good mood. This is due to the series of events that have occurred over the last year that have led to the stock now trading at all-time lows.
On the verge of losing its listing on the NASDAQ, company officials are reportedly in the midst of taking steps to not only get back in the good favor of NASDAQ officials, but also get back in the good graces of investors.
Osiris researches, develops, manufactures, markets and distributes regenerative medicine products in the U.S.
· Loss of national sale’s head
The events that have bogged down the company, and wreaked havoc on its stock, relate to many issues that are uncommon to most publicly-traded company. They include employing as head of its national sales department who is now being prosecuted for federal crimes while working for his previous employer.
Federal prosecutors brought charges against Todd Clawson in March due to his role in a sales scheme. While at Advance Bio Healing, (ABH), Clawson allegedly provided kickbacks to doctors in order to induce them to use ABH’s products. The kickbacks allegedly included all sorts of luxuries, including “speaking fees,” and, in one case, Def Leppard tickets.
Federal prosecutors charged Clawson earlier this month with bribery, conspiracy to commit criminal conflicts of interest and health care fraud. He no longer works for Osiris.
After Clawson left ABH, he began work at Osiris as the head company’s national sales group. Osiris had seen its sales improve substantively to $60 million in 2014 from $24 million in 2013, when Clawson came aboard. While federal prosecutors work through their case against Clawson while he was with ABH, investors must deal with the loss of Clawson, a senior sales executive, which could be a distraction for the company and result in disruptive changes in Osiris’ salesforce and its practices.
· When it rains it pours
To be clear, Clawson has not been charged with any wrongdoing while working at Osiris. Regardless, it appears that Osiris needs no help in hurting itself. Its own mishandling of its financials has led to many concerns that its books are very much out of whack.
The NASDAQ sent a letter to Osiris this month warning that the company faced being delisted over failing to file its 10K on a timely basis with the Securities and Exchange Commission.
The specific problems the company experienced dealt with accounting issues that seem to have led to it submitting unreliable financials for the first and second quarters of 2015. Still unable to sort all this out, in mid-March, the company notified NASDAQ of its failure to timely file its annual report. NASDAQ responded by threatening to delist it. The letter from NASDAQ, dated March 17, 2016, requires Osiris to submit a plan within 60 days to address being in compliance with NASDAQ’s filing requirements for continued listing. The company has stated that it intends to submit the plan of compliance as soon as practicable. Easy calculation places that deadline date in early May.
Osiris is completing an accounting review of contracts with distributors that were previously reported in its audited annual financial statements for the year ended Dec. 31, 2014, and its unaudited interim financial statements for quarterly periods in 2015. It is also completing amendments to certain periodic reports previously filed with SEC. It is also changing to an independent registered public accounting firm.
Next month will be key in determining whether you should consider investing in Osiris because that is when we’ll learn about the company’s fate with the NASDAQ.