MARTINSRIED/MUNICH, Germany and PRINCETON, N.J., Aug. 8 /PRNewswire-FirstCall/ -- GPC Biotech AG today reported financial results for the second quarter and first six months ended June 30, 2007.
First six months of 2007 compared to first six months of 2006
Revenues decreased 35% to euro 7.2 million for the six months ended June 30, 2007, compared to euro 11.0 million for the same period in 2006. The decrease in revenues is mainly due to lower development funding received under the co-development and license agreement with Pharmion for satraplatin in Europe and certain other territories, as well as the expiration of various research collaboration arrangements with ALTANA Pharma. Research and development (R&D) expenses decreased 2% to euro 28.6 million for the first six months of 2007 compared to euro 29.1 million for the same period in 2006. In the first six months of 2007, general and administrative (G&A) expenses increased 129% to euro 23.4 million compared to euro 10.2 million for the first six months of 2006. The increase in G&A expenses is primarily due to the formation of a sales and marketing organization for the U.S., as well as legal expenses related to litigation. The Company also reported restructuring charges of euro 0.9 million in the second quarter of 2007 primarily for employee severance and termination costs related to the closing of its Massachusetts facility. Those charges are included in R&D and G&A expenses. Net loss for the first six months of 2007 increased 52% to euro (42.8) million compared to euro (28.1) million for the first six months of 2006. Basic and diluted loss per share was euro (1.20) for the first six months of 2007 compared to euro (0.87) for the same period in 2006.
Quarter over quarter results: second quarter 2007 compared to first quarter 2007
Revenues for the second quarter of 2007 were euro 3.4 million compared to euro 3.8 million for the previous quarter. R&D expenses increased 19% to euro 15.5 million for the second quarter of 2007, compared to euro 13.0 million in the first quarter of 2007. G&A expenses for the second quarter of 2007 increased 13% to euro 12.4 million compared to euro 11.0 million for the previous quarter. The Company's net loss increased 23% to euro (23.7) million in the second quarter of 2007, compared to euro (19.2) million for the previous quarter. Basic and diluted loss per share was euro (0.66) for the second quarter of 2007 compared to euro (0.54) for the previous quarter.
Comparison to previous year: second quarter 2007 compared to second quarter 2006
Revenues for the three months ended June 30, 2007 decreased 39% to euro 3.4 million compared to euro 5.6 million for the same period in 2006. R&D expenses increased 7% for the second quarter of 2007 to euro 15.5 million compared to euro 14.5 million for the same period in 2006. G&A expenses for the second quarter of 2007 increased 114% to euro 12.4 million compared to euro 5.8 million for the same quarter in 2006. Net loss for the second quarter of 2007 increased 56% to euro (23.7) million compared to euro (15.2) million for the second quarter of 2006. Basic and diluted loss per share was euro (0.66) for the second quarter of 2007 compared to euro (0.46) for the same period in 2006.
Cash position
As of June 30, 2007, cash, cash equivalents, marketable securities and short-term investments totaled euro 93.1 million (December 31, 2006: euro 97.1 million), including euro 1.5 million in restricted cash. Net cash burn for the first six months of 2007 was euro 42.0 million with net cash burn of euro 19.4 million in the first quarter and euro 22.6 million in the second quarter of 2007. Net cash burn is derived by adding net cash used in operating activities and purchases of property, equipment and licenses. The figures used to calculate net cash burn are contained in the Company's unaudited consolidated statements of cash flows for the six-month period ended June 30, 2007.
At June 30, 2007, the Company recorded a receivable in the amount of euro 7.4 million related to the signing of a license agreement with Yakult Honsha Co. Ltd. for satraplatin for Japan. This payment was received in July 2007.
In July 2007, the Company's partner Pharmion announced the acceptance for review by the European Medicines Agency (EMEA) of the Marketing Authorization Application (MAA) for satraplatin in combination with prednisone for the treatment of metastatic hormone-refractory prostate cancer patients whose prior chemotherapy has failed. As a result of this acceptance, GPC Biotech will receive a milestone payment of approximately euro 6.0 million ($8 million) from Pharmion. Also as a result of the acceptance for review of the MAA, GPC Biotech will pay to Spectrum Pharmaceuticals a total of approximately euro 2.4 million ($3.2 million), representing a direct milestone payment plus Spectrum's share of the $8 million milestone payment from Pharmion.
The Company also provided updated guidance for the remainder of 2007: - Revenues for the full year 2007 expected to be in the range of euro 17 to 19 million. - Immediate cost-cutting measures have been implemented that are expected to result in approximately euro 10 million in savings through the end of 2007. Additional guidance on expenses is not being provided at this time as the Company continues to evaluate various options. - Year-end 2007 cash, cash equivalents and available-for-sale securities position expected to be approximately euro 60 million.
"Despite the recent setback, we remain in a solid financial position and believe we have sufficient cash under current expectations to carry us through to a potential regulatory submission based on the overall survival analysis," said Mirko Scherer, Ph.D., Senior Vice President and Chief Financial Officer. "With our recent cost-cutting measures alone and anticipated revenues and expenses for the rest of the year, we expect to end 2007 with approximately euro 60 million in cash and equivalents."
"While we have been very disappointed by recent events that led to our withdrawal of the satraplatin NDA, we must move forward," said Bernd R. Seizinger, M.D., Ph.D., Chief Executive Officer. "We are first focused on overall survival results from the satraplatin SPARC trial. Based on that outcome, we plan to work closely with the FDA with the goal of submitting an NDA to the agency as quickly as possible."
Conference call scheduled
As previously announced, the Company has scheduled a conference call to which participants may listen via live webcast, accessible through the GPC Biotech Web site at www.gpc-biotech.com or via telephone. A replay will be available via the Web site following the live event. The call, which will be conducted in English, will be held on August 8 at 14:00 CET/8:00 AM ET. The dial-in numbers for the call are as follows:
European participants: 0049-(0)69-5007-1305 or 0044-(0)20-7806-1950 U.S. participants: 1-718-354-1385
About GPC Biotech
GPC Biotech AG is a publicly traded biopharmaceutical company focused on discovering, developing and commercializing new anticancer drugs. GPC Biotech's lead product candidate satraplatin is currently in a Phase 3 registrational trial in second-line hormone-refractory prostate cancer. Satraplatin was in-licensed from Spectrum Pharmaceuticals, Inc. GPC Biotech is also developing a monoclonal antibody with a novel mechanism-of-action against a variety of lymphoid tumors, currently in Phase 1 clinical development, and has ongoing drug development and discovery programs that leverage its expertise in kinase inhibitors. GPC Biotech AG is headquartered in Martinsried/Munich (Germany) and has a wholly owned U.S. subsidiary headquartered in Princeton, New Jersey. For additional information, please visit GPC Biotech's Web site at www.gpc-biotech.com.
This press release contains forward-looking statements, which express the current beliefs and expectations of the management of GPC Biotech AG. Such statements are based on current expectations and are subject to risks and uncertainties, many of which are beyond our control, that could cause future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Actual results could differ materially depending on a number of factors, and we caution investors not to place undue reliance on the forward- looking statements contained in this press release. In particular, there can be no guarantee that the results from the final analysis of overall survival data from the SPARC trial will be available when anticipated or sufficient to support regulatory approval in the United States or elsewhere. In addition, there can be no guarantee that additional information relating to the safety, efficacy or tolerability of satraplatin will not be obtained upon further analysis of data from the SPARC trial or analysis of additional data from other ongoing clinical trials for satraplatin. Furthermore, we cannot guarantee that satraplatin will be approved for marketing in a timely manner, if at all, by regulatory authorities nor that, if marketed, satraplatin will be a successful commercial product. We direct you to GPC Biotech's Annual Report on Form 20-F for the fiscal year ended December 31, 2006 and other reports filed with the U.S. Securities and Exchange Commission for additional details on the important factors that may affect the future results, performance and achievements of GPC Biotech. Forward-looking statements speak only as of the date on which they are made and GPC Biotech undertakes no obligation to update these forward-looking statements, even if new information becomes available in the future.
Satraplatin has not yet been approved by the FDA in the U.S., the EMEA in Europe or any other regulatory authority and no conclusions can or should be drawn regarding its safety or effectiveness. Only the relevant regulatory authorities can determine whether satraplatin is safe and effective for the use(s) being investigated.
GPC Biotech AG Condensed Consolidated Statements of Operations (U.S. GAAP) Three months ended Six months ended in thousand euro, June 30, June 30, except share and per 2007 2006 2007 2006 share data (unaudited) (unaudited) (unaudited) (unaudited) Collaborative revenues (a) 3,320 5,425 7,082 10,823 Grant revenues 67 194 144 194 Total revenues 3,387 5,619 7,226 11,017 Research and development expenses 15,527 14,535 28,567 29,054 General and administrative expenses 12,376 5,800 23,399 10,177 Amortization of intangible assets 90 71 181 143 Total operating expenses 27,993 20,406 52,147 39,374 Operating loss (24,606) (14,787) (44,921) (28,357) Other income (expense), net (68) (1,473) 89 (2,147) Interest income 1,049 1,085 2,077 2,036 Interest expense (40) (22) (67) (44) Net loss before cumulative effect of change in accounting principle (23,665) (15,197) (42,822) (28,512) Cumulative effect of change in accounting principle - - - 433 Net loss (23,665) (15,197) (42,822) (28,079) Loss per share before change in accounting principle (0.66) (0.46) (1.20) (0.88) Cumulative effect of change in accounting principle - - - 0.01 Basic and diluted loss per share (0.66) (0.46) (1.20) (0.87) Shares used in computing basic and diluted loss per share 36,106,533 33,103,667 35,776,752 32,220,336 (a) Revenues from related party Collaborative revenues - 1,870 - 3,344 See accompanying notes to unaudited condensed consolidated financial statements. GPC Biotech AG Condensed Consolidated Balance Sheets (U.S. GAAP) in thousand euro, except share data and per share data June 30 December 31 Assets 2007 (unaudited) 2006 Current assets Cash and cash equivalents 44,939 38,336 Marketable securities and short-term investments 46,577 57,186 Accounts receivable 11,061 11 Accounts receivable, related party - 395 Prepaid expenses 960 1,299 Other current assets 3,235 2,970 Total current assets 106,772 100,197 Property and equipment, net 4,626 4,259 Intangible assets, net 219 405 Other assets, non-current 1,009 1,127 Restricted cash 1,538 1,531 Total assets 114,164 107,519 Liabilities and shareholders' equity Current liabilities Accounts payable 3,679 2,262 Accrued expenses and other current liabilities 17,964 14,346 Current portion of deferred revenue 8,367 7,240 Current portion of deferred revenue, related party - 896 Total current liabilities 30,010 24,744 Deferred revenue, net of current portion 13,446 9,103 Convertible bonds 3,098 3,108 Other liabilities, non-current - 3,389 Shareholders' equity Ordinary shares, euro 1 non-par, notional value: Shares authorized: 62,695,630 at June 30, 2007 and December 31, 2006 Shares issued and outstanding: 36,253,053 at June 30, 2007 and 33,895,444 at December 31, 2006 36,253 33,895 Additional paid-in capital 368,370 328,171 Subscribed shares 1,529 334 Accumulated other comprehensive loss (2,250) (1,755) Accumulated deficit (336,292) (293,470) Total shareholders' equity 67,610 67,175 Total liabilities and shareholders' equity 114,164 107,519 See accompanying notes to unaudited condensed consolidated financial statements. Condensed Consolidated Statements of Cash Flows (U.S. GAAP) Six months ended June 30, 2007 2006 in thousand euro (unaudited) (unaudited) Cash flows from operating activities Net loss (42,822) (28,079) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 862 891 Amortization 180 143 Compensation cost for stock option plans and convertible bonds 5,823 3,246 Loss accrual on sublease contract (100) 1,013 Cumulative effect of change in accounting principle - (433) Change in accrued interest income on marketable securities and short-term investments (351) (170) Bond premium amortization 105 378 Other than temporary impairment on marketable securities - 390 (Gain)/loss on disposal of property and equipment (43) (23) Changes in operating assets and liabilities: Accounts receivable (11,050) 31,325 Accounts receivable, related party 395 1,436 Other assets, current and non-current 117 (1,127) Accounts payable 1,473 (401) Deferred revenue 5,470 (7,126) Deferred revenue, related party (896) (3,037) Other liabilities and accrued expenses, current and non-current 144 (1,287) Net cash (used in) provided by operating activities (40,693) (2,861) Cash flows from investing activities Purchases of property, equipment and licenses (1,269) (742) Proceeds from the sale of property and equipment 45 45 Proceeds from the sale or maturity of marketable securities and short-term investments 11,000 5,000 Purchases of marketable securities and short-term investments - (5,976) Net cash provided by (used in) investing activities 9,776 (1,673) Cash flows from financing activities Proceeds from issuance of shares, net of payments for cost of transaction 32,633 36,080 Proceeds from issuance of convertible bonds 345 140 Payments for cancellation of convertible bonds (24) - Proceeds from exercise of stock options and convertible bonds 5,384 560 Cash received for subscribed shares - - Net cash provided by financing activities 38,338 36,780 Effect of exchange rate changes on cash (784) (359) Changes in restricted cash (35) (30) Net increase/(decrease) in cash and cash equivalents 6,602 31,857 Cash and cash equivalents at the beginning of the period 38,337 30,559 Cash and cash equivalents at the end of the period 44,939 62,416 See accompanying notes to unaudited condensed consolidated financial statements GPC Biotech AG Consolidated Statements of Changes in Shareholders' Equity (in thousand euro, except share data) Ordinary shares Additional Paid-in Subscribed Shares Amount Capital Shares Balance at December 31, 2005 30,151,757 30,152 284,931 - Components of comprehensive loss: Net loss Change in unrealized gain on available-for-sale securities Accumulated translation adjustments Total comprehensive loss Issuance of shares 2,860,000 2,860 33,220 Exercise of stock options and convertible bonds 138,446 138 442 Cumulative effect of change in accounting principle (433) Compensation cost for stock options and convertible bonds 3,246 Balance at June 30, 2006 (unaudited) 33,150,203 33,150 321,406 - Balance at December 31, 2006 33,895,444 33,895 328,171 334 Components of comprehensive loss: Net loss Change in unrealized gain on available-for-sale securities Accumulated translation adjustments Total comprehensive loss Issuance of shares 1,564,587 1,565 31,068 Exercise of stock options and convertible bonds 793,022 793 3,725 1,195 Compensation cost for stock options and convertible bonds 5,406 Balance at June 30, 2007 (unaudited) 36,253,053 36,253 368,370 1,529 Accumulated Other Total Comprehensive Accumulated Shareholders' Loss Deficit Equity Balance at December 31, 2005 (2,093) (229,457) 83,533 Components of comprehensive loss: Net loss (28,079) (28,079) Change in unrealized gain on available-for-sale securities 471 471 Accumulated translation adjustments (58) (58) Total comprehensive loss (27,666) Issuance of shares 36,080 Exercise of stock options and convertible bonds 580 Cumulative effect of change in accounting principle (433) Compensation cost for stock options and convertible bonds 3,246 Balance at June 30, 2006 (unaudited) (1,680) (257,536) 95,340 Balance at December 31, 2006 (1,755) (293,470) 67,175 Components of comprehensive loss: Net loss (42,822) (42,822) Change in unrealized gain on available-for-sale securities 146 146 Accumulated translation adjustments (641) (641) Total comprehensive loss (43,317) Issuance of shares 32,633 Exercise of stock options and convertible bonds 5,713 Compensation cost for stock options and convertible bonds 5,406 Balance at June 30, 2007 (unaudited) (2,250) (336,292) 67,610 See accompanying notes to unaudited condensed consolidated financial statements GPC Biotech AG Notes to the Unaudited Condensed Consolidated Financial Statements 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of GPC Biotech AG (the "Company") have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"), applicable to interim financial reporting, specifically Accounting Principles Board Opinion No. 28 "Interim Financial Reporting". These unaudited condensed consolidated financial statements do not include all information and disclosures required for a complete set of financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three month and six-month periods ended June 30, 2007, are not necessarily indicative of results to be expected for the full year ending December 31, 2007. The balance sheet at December 31, 2006 has been derived from the audited consolidated financial statements at that date, but does not include all of the information required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 2006.
2. New Accounting Pronouncements
As of January 1, 2007, GPC Biotech adopted FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109" (FIN 48). The Company has certain deferred tax assets as a result of several years of losses from operations. Management determined that it was not probable that sufficient future taxable income would be available to realize those deferred tax assets. Therefore, management recognized a full valuation allowance for those deferred tax assets.
The Company's policy is to accrue interest and penalties on the tax obligations and classify them as current or noncurrent depending on when the amount is anticipated to be paid. Currently, the Company does not take any other tax positions nor has any interest or penalties.
On June 14, 2007, the Financial Accounting Standards Board ("FASB") ratified EITF 07-3, "Accounting for Non-Refundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities". EITF 07-3 requires that all non-refundable advance payments for R&D activities that will be used in future periods be capitalized until used. In addition, the deferred research and development costs need to be assessed for recoverability. EITF 07-3 is applicable for fiscal years beginning after December 15, 2007 and is to be applied prospectively without the option of early application. The Company will evaluate the impact, if any, of EITF 07-3 on its financial statements.
3. Related Party Disclosures
ALTANA Pharma AG ("ALTANA Pharma") is no longer a related party to the Company because the board membership of Dr. Bernd Seizinger at ALTANA Pharma ended December 31, 2006. Therefore, transactions consummated with ALTANA Pharma from and after January 1, 2007, are no longer classified as transactions with a related party.
4. Commitments and Contingencies
Contingent Commitments and Contingent Losses
From time to time, the Company may be party to certain legal proceedings and claims which arise during the ordinary course of business. The Company also has other contingencies relating to potential milestone payments. Legal proceedings and contingent commitments are subject to various uncertainties and the outcomes are difficult to predict. GPC Biotech may incur significant expense in defending these or future legal proceedings and in fulfilling these contingencies, however, in the opinion of management, the ultimate outcome of these matters will not have material adverse effects on the Company's financial position, results of operations or cash flows. In accordance with SFAS No. 5, "Accounting for Contingencies", the Company makes a provision for a liability when it is both probable that a liability has been incurred at the date of the financial statements and when the amount of the loss is reasonably estimable. With respect to a number of the items listed below, management has determined that a loss is not probable or the amount of the loss is not reasonably estimable, or both.
Arbitration Proceedings
On December 12, 2006, the Company was notified by Spectrum Pharmaceuticals Inc. ("Spectrum"), that Spectrum had initiated an arbitration proceeding with the American Arbitration Association ("AAA") in the United States to resolve a dispute between the companies under the co-development and license agreement for satraplatin. In the course of the arbitration proceedings, Spectrum has made several claims of breach of contract, including (1) an assertion that it is entitled to a payment from GPC Biotech of approximately euro 9.0 million relating to payments received by GPC Biotech under the co-development and license agreement between GPC Biotech and Pharmion GmbH entered on December 19, 2005, (2) a claim that GPC Biotech has not used commercially reasonable efforts to obtain regulatory approval and to promote the distribution of satraplatin in Japan, and (3) a claim that GPC Biotech has not negotiated with Spectrum in good faith regarding the co-promotion of satraplatin in the United States. Spectrum is also seeking a declaration that GPC Biotech's alleged breaches of contract provide a basis for termination of the co-development and license agreement. The Company believes that Spectrum's claims have no merit and is therefore contesting such claims vigorously. Management assessed the prospect of an unfavorable outcome of this arbitration as less than probable. The hearing was completed on July 13, 2007 and closing arguments are scheduled for the end of August 2007. The Company cannot predict when the arbitration panel will issue its ruling on the dispute.
Fees which the Company pays to its external legal advisors and for other services associated with this arbitration process are expensed in the period when such legal and other services are rendered.
Marketing Approval of Satraplatin in the U.S. and Europe
Upon receiving marketing approval for satraplatin in the U.S. and/or Europe, the Company is required to make the following payments:
* Under the Company's agreement with a third party, GPC Biotech is obligated to make milestone payments for each of these approvals in a total amount of approximately euro 6.7 million. * The Company has a cash bonus plan to retain the Company's employees in which the total payout may lead to an increase in personnel expenses of up to euro 1.8 million. * The Company issued stock appreciation rights (SARs) to senior management, the members of the Supervisory Board, and certain employees. These SARs would entitle the holder to cash payments if the performance condition has been met.
Acceptance of NDA Filing
On April 16, 2007, the U.S Federal Drug Administration (FDA) accepted the Company's filing of the New Drug Application (NDA) for satraplatin for patients with hormone-refectory prostate cancer (HRPC) whose prior chemotherapy has failed. In connection with this acceptance, the Company was required to pay approximately euro 2.9 million to a third party. This payment was made in May 2007, however, charged to research and development expense in 2006 when the occurrence of this event was deemed probable.
Development and Supply Agreement
GPC Biotech is the owner and licensee of certain technology and patent rights regarding the monoclonal antibody known as 1D09C3. In March 2007, GPC Biotech entered into a development and supply agreement with a biologics supplier under which the biologics supplier agreed to: (1) develop a high- productivity cell line and develop and scale-up a robust manufacturing pro
