GERMANTOWN, Md., May 2 /PRNewswire-FirstCall/ -- Advancis Pharmaceutical Corporation , a pharmaceutical company focused on developing and commercializing novel anti-infective products, today announced financial and operational results for the quarter ended March 31, 2006.
Advancis reported first quarter 2006 revenue of $0.9 million, compared to revenue of $1.6 million in the fourth quarter of 2005 and $4.6 million in the first quarter of 2005. Advancis reported research and development (R&D) expenses in the first quarter of $7.2 million, compared to fourth quarter 2005 R&D expenses of $6.3 million and first quarter 2005 R&D expenses of $13.2 million. Total expenses for the first quarter of 2006 were $9.7 million, compared to $8.3 million in the fourth quarter of 2005 and $16.1 million in the first quarter of 2005.
Net loss was $7.6 million for the first quarter, compared to a net loss of $6.4 million in the fourth quarter of 2005 and a net loss of $11.4 million in the first quarter of 2005. Net loss per share applicable to common stockholders during the first quarter of 2006 was ($0.25), compared to a net loss per share of ($0.22) in the prior quarter, and a net loss per share of ($0.50) in the comparable quarter of last year.
“We are very eager to see the outcomes of two upcoming events that we believe will be pivotal for the future of Advancis,” stated Edward M. Rudnic, Ph.D., president and CEO of Advancis. “We believe an FDA action on the application for our new Keflex products will be made in the coming weeks, and we also are getting very close to completing enrollment in our adult Amoxicillin PULSYS Phase III trial. Assuming favorable review of our application and success in our ongoing clinical trial, we believe our Keflex franchise and future Amoxicillin PULSYS products could serve as the foundation for our Company’s long-term success.”
OPERATIONAL HIGHLIGHTS
Amoxicillin PULSYS Phase III Trial
Advancis’ ongoing Phase III clinical trial, designed to support product approval for Amoxicillin PULSYS for the treatment of adolescents and adults with acute pharyngitis and/or tonsillitis due to Group A streptococcal infections, is nearing its enrollment target. The Company’s pivotal study is designed to enroll at least 600 patients in a double-blind, double-dummy, non- inferiority Phase III trial and is being conducted in 50 investigator sites across the U.S. and Canada.
The study began in November of 2005, and has enrolled a total of 544 patients through May 1, 2006. Advancis expects the enrollment to continue through May and to publicly report top-line results in the third quarter of 2006. If successful, Advancis expects to file a 505(b)(2) New Drug Application (NDA) with the Food and Drug Administration (FDA) for the product candidate by year-end 2006 or early 2007.
Product Sales - Keflex(R) (cephalexin capsules, USP)
Advancis reported net Keflex sales of $0.9 million in the first quarter of 2006, compared to $1.6 million in the fourth quarter of 2005 and $1.0 million in the first quarter of 2005.
Last month, the Company announced that the FDA had informed Advancis that its review of the supplemental New Drug Application for additional Keflex products was still ongoing. The Company filed a supplemental NDA for the new products with the FDA on December 20, 2005, and Advancis expects that the FDA will complete its review in the coming weeks. Assuming FDA approval, the Company is preparing for the manufacturing and commercial launch of the additional Keflex products in the third quarter of 2006. An FDA pre-approval inspection is currently in process at our third-party contract manufacturing facility.
Advancis plans to utilize a contract sales organization that will employ a dedicated Keflex sales team; however, a definitive agreement will not be signed unless the Company receives final FDA approval for the line extension products. Advancis expects to begin marketing the new Keflex products nationwide with a targeted sales force of approximately 75 sales representatives beginning as early as the third quarter of 2006.
Advancis acquired the rights to manufacture, market, and sell the Keflex brand of cephalexin in the United States in July of 2004. Cephalexin is the third most prescribed outpatient antibiotic in the United States, with more than 25 million prescriptions written annually. Cephalexin is the number-one most prescribed oral cephalosporin antibiotic and is also the number-one recommended oral antibiotic therapy for uncomplicated skin and skin structure infections.
Keflex PULSYS Product Development
Advancis initiated Phase I studies for the development of a once-a-day Keflex product utilizing the Company’s proprietary PULSYS(TM) technology in late 2005 and completed its second Phase I study in the first quarter of 2006. Based on the results from the studies, Advancis hopes to advance the product candidate into Phase II clinical development in the first half of 2007.
Advancis’ once-daily Keflex PULSYS product candidate is designed to increase the convenience of cephalexin therapy, which is currently dosed two to four times daily for a period of seven to 14 days. There is currently no once-daily cephalexin product approved for marketing in the United States.
FINANCIAL DETAILS * Total revenue, resulting entirely from net Keflex product sales, was $0.9 million in the first quarter of 2006, compared to revenue of $1.6 million in the prior quarter. Revenue totaled $4.6 million for the first quarter of 2005, consisting of Keflex product sales and revenue recognized under the Company’s prior collaboration with Par Pharmaceutical Companies for Amoxicillin PULSYS. * Operating expenses. First quarter research and development expenses, primarily consisting of salaries, stock-based compensation, and related expenses for personnel and the costs of the Company’s clinical trials and research initiatives, were $7.2 million, up from $6.3 million in the previous quarter and down from $13.2 million in the first quarter of 2005. Increased sequential R&D expenses in the first quarter of 2006 primarily were due to an increase in first quarter clinical trial expenses. Decreased year-over-year R&D expenses resulted mainly from a reduced number of ongoing clinical trials in first quarter 2006 versus first quarter 2005. Selling, general and administrative (SG&A) expenses totaled $2.5 million in the first quarter of 2006, up from $1.8 million in the fourth quarter of 2005, and down from $2.8 million in the first quarter of 2005. Sequential changes in SG&A expenses were primarily due to increased stock-based compensation in the first quarter. Stock-based compensation recorded in the first quarter 2006 was a total of $0.9 million, consisting of $0.7 million for employees under SFAS 123R (effective January 1, 2006) and $0.2 million for consultants. Of the total $0.9 million, $0.4 million was recorded in R&D expense and $0.5 million was recorded in SG&A expense. In the fourth quarter 2005 and first quarter 2005, total stock-based compensation was a benefit of $0.1 million and an expense of $0.5 million, respectively. * Other income of $1.0 million represents the advance payment received in 2005 from the potential buyer of the Company’s Keflex assets which were retained in accordance with the agreement-in-principle. * Net loss for the first quarter of 2006 was $7.6 million. This compares to a net loss of $6.4 million in the fourth quarter of 2005, and $11.4 million in the first quarter of 2005. * Net loss per share applicable to common stockholders for the first quarter of 2006 was ($0.25), compared to a loss per common share of ($0.22) in the prior quarter and ($0.50) in the first quarter of 2005. Lower net loss per share in the first quarter of 2006 compared to 2005 was attributable to a lower net loss and an increase in the weighted average number of shares outstanding due to the Company’s private placement of common stock in the second quarter of 2005. Per share figures were computed on the basis of an average of 30.0 million shares outstanding in the first quarter of 2006, 29.7 million shares outstanding in the fourth quarter of 2005, and 22.7 million shares outstanding in the first quarter of 2005. * Cash and marketable securities decreased by $7.4 million during the first quarter. Changes were composed of $8.9 million of operating losses and $0.4 million for changes in working capital and other items, offset by $1.9 million of non-cash depreciation, amortization, and stock-based compensation. * The Balance Sheet at the end of the first quarter of 2006 reflected $22.0 million of unrestricted cash, cash equivalents and marketable securities, compared to $29.4 million as of December 31, 2005, and $22.3 million as of March 31, 2005. FINANCIAL GUIDANCE
Advancis’ financial guidance is unchanged from prior forecasts. Total revenue for 2006 is expected to be approximately $5 million, resulting from sales of currently-approved Keflex products. This forecast assumes no revenue contribution from any potential new Keflex products currently under FDA review. If and/or when any such new products may be approved for marketing, the Company will provide updated revenue guidance at that time.
Net loss for the year is expected to be between $30 million and $35 million, or approximately $1.00 to $1.20 per diluted common share. Non-cash charges for 2006, consisting primarily of stock-based compensation expenses and depreciation and amortization, are expected to be approximately $7 million. These forecasts include an estimated $3 million non-cash impact from expensing of stock options under SFAS 123R.
Advancis anticipates that its current funds, together with expected sales of existing Keflex products, will be sufficient to support its currently planned operations through 2006 and into the first quarter of 2007. Given suitable market conditions and favorable financing terms, the Company may consider raising additional capital during 2006.
CONFERENCE CALL
The Company has scheduled a conference call for today, Tuesday, May 2, 2006 at 10:30 AM ET. During the call, Dr. Edward Rudnic, president and CEO, and Robert Low, vice president, finance and acting CFO, will discuss quarterly results and other corporate activities. Investors can call 1-800-813-8504 (domestic) and 1-706-643-7752 (international) prior to the 10:30 AM start time and ask for the Advancis Pharmaceutical conference call hosted by Dr. Rudnic. A replay of the call will be available on May 2, 2006 beginning at 12:30 PM ET and will be accessible until Tuesday, May 9, 2006 at 5:00 PM ET. The replay call-in number is 1-800-642-1687 for domestic callers and 1-706-645-9291 for international callers. The access number is 8563765.
The conference call will also be broadcast simultaneously on the Company’s website, http://www.advancispharm.com. Investors should click on the Investor Relations tab and are advised to go to the website at least 15 minutes early to register, download, and install any necessary audio software. The call will also be archived on the Advancis website.
About Advancis Pharmaceutical Corporation:
Advancis Pharmaceutical Corporation is a pharmaceutical company focused on the development and commercialization of anti-infective drug products that fulfill substantial unmet medical needs in the treatment of infectious disease. The Company is developing a portfolio of anti-infective drugs based on its novel biological finding that bacteria exposed to antibiotics in front-loaded staccato bursts, or “pulses,” are killed more efficiently and effectively than those under standard treatment regimens. Based on this finding, Advancis has developed a proprietary, once-a-day pulsatile delivery technology called PULSYS(TM). By examining the resistance patterns of bacteria and applying its delivery technologies, Advancis has the potential to redefine infectious disease therapy and significantly improve drug efficacy, shorten length of therapy, and reduce drug resistance versus currently available antibacterial products. For more on Advancis, please visit http://www.advancispharm.com.
About Keflex:
Keflex(R) (cephalexin capsules, USP) is a first-generation cephalosporin antibiotic shown to be active against strains of both gram-positive and gram- negative aerobes in vitro and in clinical infections. Keflex is indicated for treatment of the following infections: respiratory tract infections, otitis media, skin and skin structure infections, bone infections, and genitourinary tract infections. More information on Keflex and prescribing information are available at http://www.advancispharm.com/products/keflex.
This announcement contains historical financial information as of and for three-month periods ended March 31, 2006 and March 31, 2005 that is unaudited, and Advancis assumes no obligation to update this information based on new information or future performance except as may be specifically required by applicable law or regulation. The unaudited annual financial information is subject to audit by independent accountants on an annual basis following the close of each calendar year.
This announcement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. These statements are based on Advancis’ current expectations and assumptions. These statements are not guarantees of future performance and are subject to a number of risks and uncertainties that would cause actual results to differ materially from those anticipated. The words, “believe,” “expect,” “intend,” “anticipate,” and variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward- looking. Statements in this announcement that are forward-looking include, but are not limited to, statements about the Company’s product development and commercialization schedule, including, particularly, future plans with respect to its Amoxicillin PULSYS products; any statements regarding expected milestone or expense reimbursement payments; Dr. Rudnic’s comments and expectations concerning the Company; the Company’s initiatives to develop improved antibiotics; the Company’s existing and anticipated collaborative agreements; and any financial forecasts and projections for the full year of 2006 and thereafter included under the Financial Guidance section of this announcement.
The actual results realized by Advancis could differ materially from these forward-looking statements, depending in particular upon the risks and uncertainties described in the Company’s filings with the Securities and Exchange Commission. These include, without limitation, risks and uncertainties relating to the Company’s financial results and the ability of the Company to (1) reach profitability, (2) prove that the preliminary findings for its product candidates are valid, (3) receive required regulatory approvals, (4) successfully conduct clinical trials in a timely manner, including its ongoing Amoxicillin PULSYS Phase III trial, (5) establish its competitive position for its products, (6) develop and commercialize products that are superior to existing or newly developed competitor products, (7) develop products without any defects, (8) have sufficient capital resources to fund its operations, (9) protect its intellectual property rights and patents, (10) implement its sales and marketing strategy, (11) successfully attract and retain collaborative partners, (12) successfully develop, receive regulatory approval, and commercialize any new Keflex products, and (13) retain its senior management and other personnel. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today’s date. Advancis undertakes no obligation to update or revise the information in this announcement, whether as a result of new information, future events or circumstances or otherwise.
ADVANCIS PHARMACEUTICAL CORPORATION STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, 2006 2005 Revenues: Product sales $860,231 $999,875 Contract revenue - 416,667 Reimbursement of development costs - 3,210,114 Total revenues 860,231 4,626,656 Costs and expenses: Cost of product sales 52,585 76,031 Research and development 7,201,200 13,239,645 Selling, general and administrative 2,472,587 2,829,562 Total expenses 9,726,372 16,145,238 Loss from operations (8,866,141) (11,518,582) Interest income 293,762 162,078 Interest expense (24,971) (32,099) Other income 1,000,000 - Net loss $(7,597,350) $(11,388,603) Basic and diluted net loss per share $(0.25) $(0.50) Shares used in calculation of basic and diluted net loss per share 30,043,084 22,747,503 ADVANCIS PHARMACEUTICAL CORPORATION BALANCE SHEETS (Unaudited) March 31, December 31, 2006 2005 ASSETS Current assets: Cash and cash equivalents $13,096,792 $18,116,968 Marketable securities 8,870,902 11,314,090 Restricted cash 385,789 418,244 Accounts receivable, net 222,370 756,764 Notes receivable from officer 121,500 121,500 Inventories, net 516,800 219,451 Prepaid expenses and other current assets 816,697 797,253 Total current assets 24,030,850 31,744,270 Property and equipment, net 13,798,281 14,450,627 Restricted cash 1,182,680 1,182,680 Deposits 1,134,312 884,312 Intangible assets, net 9,245,584 9,535,003 Total assets $49,391,707 $57,796,892 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable 1,733,655 1,686,487 Accrued expenses and advances 5,864,068 7,071,731 Lines of credit - current portion 830,656 895,204 Total current liabilities 8,428,379 9,653,422 Lines of credit - noncurrent portion 412,735 597,208 Note payable 75,000 75,000 Accrued severance - noncurrent portion 686,511 1,235,394 Deferred contract revenue 11,625,000 11,625,000 Deferred credit on lease concession 1,271,765 1,268,857 Total liabilities 22,499,390 24,454,881 Stockholders’ equity: Preferred stock - - Common stock 302,695 297,652 Capital in excess of par value 145,284,200 144,766,213 Deferred stock-based compensation - (623,051) Accumulated deficit (118,692,658) (111,095,308) Accumulated other comprehensive loss (1,920) (3,495) Total stockholders’ equity 26,892,317 33,342,011 Total liabilities and stockholders’ equity $49,391,707 $57,796,892 ADVANCIS PHARMACEUTICAL CORPORATION STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, 2006 2005 Cash flows from operating activities: Net loss $(7,597,350) $(11,388,603) Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 988,366 1,001,306 Stock-based compensation 860,094 518,309 Deferred rent and credit on lease concession 2,908 23,257 Amortization of premium on marketable securities 132,762 129,924 Advance payment for sale of Keflex in other income (1,000,000) - Changes in: Accounts receivable 534,394 (29,349) Inventories (297,349) (123,330) Prepaids and other current assets (19,444) 371,903 Deposits other than on property and equipment - (100,000) Accounts payable 47,168 (123,933) Accrued expenses and accrued severance (732,409) 1,983,571 Deferred contract revenue - 1,123,219 Net cash used in operating activities (7,080,860) (6,613,726) Cash flows from investing activities: Purchase of marketable securities (6,727,999) - Sale and maturities of marketable securities 9,040,000 3,000,000 Purchases of property and equipment (46,600) (782,512) Deposits on property, equipment or intangible assets (250,000) - Restricted cash 32,454 (5,232) Net cash provided by investing activities 2,047,855 2,212,256 Cash flows from financing activities: Payments on lines of credit (249,021) (260,468) Proceeds from exercise of common stock options 261,850 18,206 Net cash provided by financing activities 12,829 (242,262) Net decrease in cash and cash equivalents (5,020,176) (4,643,732) Cash and cash equivalents, beginning of period 18,116,968 10,395,757 Cash and cash equivalents, end of period $13,096,792 $5,752,025
Advancis Pharmaceutical Corporation
CONTACT: Robert Low, Vice President, Finance & Acting CFO,+1-301-944-6690, rlow@advancispharm.com, or Bob Bannon, Senior Director,Investor Relations, +1-301-944-6710, rbannon@advancispharm.com, both ofAdvancis Pharmaceutical Corporation
Web site: http://www.advancispharm.com/
