In a research report released Tuesday, Brean Capital analyst Jason Wittes downgraded shares of Osiris Therapeutics, Inc. (NASDAQ:OSIR) from a Hold to a Sell rating, while setting a price targt of $8.00, which represents a potential downside of 27% from where the stock is currently trading. Osiris shares reacted to the downgrade, dropping 21.53% to $10.97 on heavy volume, making it among the top losers today.

Wittes explained, “While we have been cautious on the name as a result of elevated DSO’s and extended payment terms, indicating the potential for channel stuffing, the belated release of the recent 10-Q gives us more concern, as it shows evidence of aggressive accounting, particularly in regard to revenue recognition. Specifically, there are 3 restatements from distributor relationships—two in addition to the initial one called out on their earnings conference call. In aggregate these changes only amount to about $3.9 million in sales shifted between quarters, and $2.8 million in sales removed, which by default improves DSOs, but as the chart below illustrates, newly re-stated sales implies the company has missed 3 out of the last 4 quarters.”

“We do have real concerns over plateauing of Grafix revenues and heavy discounting of Bio4 by SYK, which doesn’t bode well for the future of that partnership. We are lowering our 2016 outlook to $110 million from $120 million to reflect these concerns, as well as the rebasing of 2015 revenues. This represents only 13% revenue growth for FY16, which makes it hard to justify its current 3-4x EV sales multiple on 2016. We think this growth rate is closer to a more normalized 2-3x multiple or about $8, but have some concerns that major write downs could drop the valuation below 1x, or below $5,” the analyst continued.

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Jason Wittes has a total average return of 2.6% and a 58.2% success rate. Wittes is ranked #1247 out of 3847 analysts.

Taking the other route, Piper Jaffray’s Edward Tenthoff rates OSIR a Buy, with a $28 price target. With a return potential of 64%, the stock’s consensus target price stands at $18.

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