REYKJAVIK, Iceland, Nov. 8 /PRNewswire-FirstCall/ -- deCODE genetics today announced its consolidated financial results for the quarter ended September 30, 2006. A conference call to discuss the quarter’s results and recent operating highlights will be webcast live tomorrow, Thursday, November 9, at 8:00am Eastern Time/1pm GMT (details below).
Revenue for the quarter ended September 30, 2006 was $8.6 million, compared to $13.2 million for the same period a year ago. The decline is due principally to lower alliance revenues in the 2006 period. For the first nine months of 2006, revenue was $29.1 million, compared to $34.2 million for the first nine months of 2005. At September 30, 2006, the company had $11.8 million in deferred revenue, which will be recognized over future reporting periods.
Net loss for the third quarter 2006 was $23.6 million, compared to $11.4 million for the third quarter last year. Net loss for the first nine months of 2006 was $62.2 million, compared to $41.6 million for the first nine months of last year. These increases are the result principally of higher research and development expense related to the company’s drug and diagnostic development programs. Reported results also reflect share-based compensation under Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123R (FAS 123R) of $1.0 million, or $0.02 per basic and diluted share, for the third quarter 2006, and $3.0 million, or $0.05 per basic and diluted share, for the first nine months of 2006. Reported results for the 2005 comparative periods do not include share-based compensation expense.
Basic and diluted net loss per share was $0.40 for the third quarter 2006, compared to $0.21 for the third quarter 2005. For the first nine months of 2006, basic and diluted net loss per share was $1.11, compared to $0.78 for the first nine months of 2005. At the close of the third quarter 2006, the company had approximately 61.5 million shares outstanding.
At September 30, 2006, the company had $126.8 million in cash and investments, compared to $155.6 million at December 31, 2005.
Research and development expense for proprietary programs was $14.2 million for the third quarter 2006, compared to $11.0 million for the same period last year. For the first nine months of 2006, R&D expense was $42.9 million, compared to $30.1 million for the same period last year. These increases are principally the result of costs associated with the advancement of the company’s product development programs, including drug discovery and clinical trials as well as high-density, genome-wide SNP analyses in several disease areas for which the company is developing diagnostics.
Cost of revenue, which includes costs incurred in connection with collaborative programs and research contracts and grants, was $11.4 million for the third quarter 2006, compared to $9.1 million for the third quarter 2005. For the first nine months of 2006, cost of revenue was $31.7 million, compared to $27.1 million for the first nine months of last year. The increase in our cost of revenue for the 2006 versus 2005 periods is largely due to the growing amount of discovery and development work performed under research grants the company has received from US and European funding agencies.
Selling, general and administrative expense for the third quarter 2006 was $6.9 million, compared to $4.8 million for the same period last year. This increase is the result principally of legal fees incurred in relation to the company’s lawsuit to protect its intellectual property. For the first nine months of 2006, SG&A expenses were $16.6 million, compared to $13.7 million for the first nine months of 2005. SG&A figures for 2006 include share-based compensation expense under FAS 123R amounting to $0.5 million for the third quarter and $1.4 million for the first nine months of 2006. The SG&A figures for the 2005 periods do not include FAS 123R expense.
“In the past few months we have continued to advance our product development work based upon our global leadership in human genetics. We are on track to conclude by the end of this year the Phase IIa trial of our anti- platelet compound DG041 for the prevention of thrombosis and embolism and the single-dose Phase I program for DG051 for the prevention of heart attack. The results we have seen from the first Phase I studies of DG051 suggest that this compound offers a potent means of targeting the leukotriene pathway. We plan to advance it as swiftly as possible at the same time as we examine the reformulation of DG031,” said Kari Stefansson, CEO of deCODE.
“We are also advancing our work in diagnostics, building on our discoveries in type 2 diabetes, heart attack and prostate cancer to turn our gene discovery capabilities into major commercial opportunities in reference lab services and diagnostic kits. Our strategic goal is to generate maximum value from our genetics work, and the execution of this strategy requires us to find the optimal mix of proprietary and partnered product development. With several major therapeutic and diagnostic programs advancing swiftly, we are aggressively pursuing alliances that will enable us to spread risk and manage cost. Jakob Sigurdsson, whom we have recently hired to oversee this effort, has a proven track record of leveraging core strengths to maximize commercial potential. We look forward to sharing with you our progress in the months ahead,” Dr. Stefansson concluded.
Recent highlights include: Research and Development -- PAD: DG041. The company is conducting a Phase IIa clinical trial for DG041, deCODE’s developmental anti-platelet compound for the prevention of thrombosis and embolism. The trial is examining safety and tolerability, dosing, and the effect of different dose levels on platelet function and a range of serum biomarkers associated with atherosclerosis. The trial is randomized, double-blind, placebo- controlled, and has enrolled more than 140 patients with intermittent claudication due to peripheral artery disease (PAD), or atherosclerosis of the extremities. The target for DG041 is encoded by a gene deCODE has linked to risk of arterial disease, and the trial is expected to conclude by year-end. -- Heart attack: DG051. deCODE is conducting Phase I clinical trials of DG051, a first-in-class, small-molecule inhibitor of leukotriene A4 hydrolase (LTA4H) discovered by deCODE’s chemistry unit and being developed for the prevention of heart attack. LTA4H is encoded by one of the genes in the leukotriene pathway deCODE has linked to increased risk of heart. The at-risk versions of these genes confer increased risk of heart attack by increasing the production of the pro- inflammatory molecule leukotriene B4 (LTB4). DG051 is designed to decrease risk of heart attack by decreasing the production of LTB4, and in preclinical studies DG051 has been shown in human blood ex vivo to be a potent inhibitor of LTB4 production. The data emerging from the Phase I studies have been encouraging, and the company expects to conclude Phase I by the end of the year. -- Heart attack: DG031. In October deCODE voluntarily suspended its Phase III clinical trial for DG031 (veliflapon), the company’s developmental compound for the prevention of heart attack, in order to address an unexpected formulation problem. Routine testing of clinical supplies revealed that over time the tablets being used in the trial appeared to dissolve more slowly. This did not raise any safety concerns, but the company believed that this change might eventually cause the tablets to release too little drug, potentially limiting the effect of the compound and undermining the trial’s chances of success. deCODE is currently exploring alternative manufacturing processes. -- Diagnostics. deCODE is advancing the application of its gene discoveries to the development of DNA-based diagnostic tests for common diseases. The company has begun to expand upon its pathbreaking discoveries in several disease areas by conducting high-density whole- genome SNP association analyses. The company also hopes to have a CLIA-certified facility by next year, through which it can offer reference-laboratory diagnostic services. Under its partnership with Illumina, deCODE is also working to develop and market diagnostic kits for several common diseases. Personnel -- Jakob Sigurdsson. deCODE has appointed Jakob Sigurdsson as Senior Vice President, Corporate Development. Mr. Sigurdsson holds a BS degree in chemistry from the University of Iceland and an MBA from the Kellogg School of Management at Northwestern University. He previously held senior positions in the United States and Europe for Rohm and Haas Company, a NYSE-listed specialty materials company. Mr. Sigurdsson has served for the past two years as CEO and President of Alfesca, a multinational foods group with major operations in Iceland, the UK, France and Spain and annual turnover of $800 million. -- Peter Goodfellow. In September deCODE appointed Dr. Peter Goodfellow to its Board of Directors. Dr. Goodfellow was until recently Senior Vice President for Discovery Research at GlaxoSmithKline, a position he held for the past six years. Prior to this post, he held senior positions at SmithKline Beecham, the Balfour chair in genetics at Cambridge University and research positions at the Imperial Cancer Research Fund. Dr. Goodfellow received his doctorate from Oxford University and held a postdoctoral fellowship at Stanford University. Legal Proceedings -- Intellectual property suit. deCODE has filed suit in Federal District Court in Philadelphia against five former employees for misappropriation of deCODE trade secrets and intellectual property. The five were recruited and four are currently employed by the Center for Applied Genomics (CAG), a business unit of the Children’s Hospital of Philadelphia (CHOP), which is also a defendant in the case. deCODE is seeking a preliminary injunction to prevent defendants from using or benefiting from deCODE proprietary systems or information. The hearing on the motion for a preliminary injunction is expected to resume this month. About deCODE
deCODE genetics is a global leader in applying human genetics to develop drugs for common diseases. Our population approach has enabled us to discover and target key biological pathways involved in conditions ranging from heart attack to cancer. We are turning these discoveries into new medicine to better treat and prevent many of the biggest challenges to public health. deCODE is delivering on the promise of the new genetics.(SM) Visit us on the web at www.decode.com.
Conference Call Information
A conference call, during which deCODE President and CEO Kari Stefansson and CFO Lance Thibault will discuss third quarter financial results and recent operating highlights, will be webcast tomorrow, Thursday, November 9, at 8:00am Eastern Time/1pm GMT. The webcast can be accessed via the Investors section of deCODE’s website, www.decode.com, or through www.earnings.com. A replay of the call will be available on these websites for at least one week following the call. A digitized telephone replay of the call can be accessed for the week following the call by dialing 1 800 475 6701 from the US, or +1 320 365 3844 from outside the US. The access code is 846803.
Condensed Consolidated Statements of Operations (unaudited) For the three months For the nine months ended September 30, ended September 30, 2006 2005 2006 2005 in thousands, except per share amounts Revenue $8,566 $13,197 $29,059 $34,157 OPERATING EXPENSES Cost of revenue 11,357 9,149 31,666 27,082 Research and development - proprietary programs 14,178 10,989 42,902 30,069 Selling, general and administrative 6,938 4,840 16,597 13,692 Total operating expense 32,473 24,978 91,165 70,843 Operating loss (23,907) (11,781) (62,106) (36,686) Interest income 1,834 1,631 4,882 4,284 Interest expense (1,728) (1,686) (5,135) (5,775) Other non-operating income and (expense), net 169 466 111 (3,461) Net loss $(23,632) $(11,370) $(62,248) $(41,638) Basic and diluted net loss per share: $(0.40) $(0.21) $(1.11) $(0.78) Shares used in computing basic and diluted net loss per share 59,616 53,741 56,333 53,685 Condensed Consolidated Balance Sheet Data (unaudited) At September At December 30, 2006 31, 2005 in thousands Cash and investments $126,831 $155,554 Total assets 189,551 206,758 Total liabilities 223,245 216,095 Total shareholders’ deficit (33,694) (9,337)
Any statements contained in this presentation that relate to future plans, events or performance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results, and the timing of events, to differ materially from those described in the forward-looking statements. These risks and uncertainties include, among others, those relating to technology and product development, integration of acquired businesses, market acceptance, government regulation and regulatory approval processes, intellectual property rights and litigation, dependence on collaborative relationships, ability to obtain financing, competitive products, industry trends and other risks identified in deCODE’s filings with the Securities and Exchange Commission deCODE undertakes no obligation to update or alter these forward-looking statements as a result of new information, future events or otherwise.
Contacts: deCODE genetics Joy Bessenger Edward Farmer +354 570 1900 +354 570 1900 +1 (212) 481 3891 +1 212 343 2819 ir@decode.isinfo@decode.is
deCODE genetics
CONTACT: Joy Bessenger, +354-570-1900, +1-212-481-3891, ir@decode.is, orEdward Farmer, +354-570-1900, +1-212-343-2819, info@decode.is, both ofdeCODE genetics
Web site: http://www.decode.com/
