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Actionable news in OSIR: Osiris Therapeutics, Inc.,

Third Quarter 2015

) that it had undertaken a review of the timing of revenue recognition under contracts with its distributors. As a result of this review, the Company determined to correct the revenue recognition forthreecontracts, which resulted in a decrease in product revenues of$1.8million in the first quarter of 2015, a decrease in product revenues of$1.0million in the second quarter of 2015, an increase in product revenues of$0.8million in the third quarter of 2015 and a decrease in product revenues of$1.1million in 2014. Each of these transactions are net of applicable cost of sales. These corrections were reflected in the Third Quarter 2015 Form10-Q filed with the Securities and Exchange Commission (the SEC) on November16, 2015.

While the impact of these modifications to the Companys revenue recognition practices for certain distribution contracts is immaterial to its annual financial statements for the year ended December31, 2014, the impact on the quarterly periods ending March31, 2015 and June30, 2015 is material. As a result, the Company will restate its previously issued interim financial statements for first quarter and second quarter of 2015 through the filing of amended Quarterly Reports on Form10-Q for the quarters ended March31, 2015 and June30, 2015. These amended quarterly reports will be filed with the SEC as soon as administratively possible. On November16 2015, management of the Company, in consultation with the Audit Committee of the Board of Directors and the Companys independent registered public accounting firm, concluded that investors should no longer rely on the Companys previously issued financial statements for the quarterly periods ended March31, 2015 and June30, 2015 and on any prior earnings releases or other communications relating to such periods.

Background

Under US GAAP, revenue is generally recognized when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed and determinable, and collectability is probable. The Company previously recognized revenue under these three distributor contracts which was reflected in the Companys audited financial statements in its Annual Report on Form10-K for the year ended December31, 2014 and its unaudited financial statements in its Quarterly Reports on Form10-Q for the quarters ended March31, 2015 and June30, 2015.

Upon subsequent review in connection with the Companys review of its third quarter 2015 financial statements, the Company determined, in consultation with its independent registered public accounting firm, that the transactions did not meet certain conditions for revenue recognition in the fourth quarter of 2014, and the first and second quarters of 2015. For one transaction in the fourth quarter of 2014, the Company determined that the persuasive evidence of an arrangement was not met until January2015 and the price was not fixed and determinable in the quarter that the revenues were previously recognized, nor was it determined to be fixed and determinable as of the first quarter of 2015. As a result, the Company is required to account for the contract with this distributor under the cash basis of accounting, which means that revenues are recognized when cash receipts are actually received. Correcting this revenue recognition error in one contract will result in an increase in product revenues of approximately $0.8 million, net of cost of sales, in the third quarter of 2015 and a decrease in product revenues of approximately $1.1 million, net of cost of sales, in the fourth quarter of 2014. The approximate $0.3 million difference between the $0.8 million increase in product revenues for the third quarter of 2015 and the $1.1 million decrease in product revenues in 2014 will not be included as an accounts receivable as of the end of the third quarter of 2015, but will be recorded as product revenue in future periods when and if such amounts are actually received.

The Company also sold product to the same distributor during the first quarter of 2015. The Company is also recognizing this sale on the cash basis of accounting. Correcting this revenue recognition error will result in a decrease in product revenues of approximately $0.8 million, net of...


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