MARTINSRIED/MUNICH, Germany and PRINCETON, N.J., May 15 /PRNewswire- FirstCall/ -- GPC Biotech AG today reported financial results for the first quarter ended March 31, 2007.
First quarter 2007 compared to first quarter 2006
Revenues decreased 30% to euro 3.8 million for the first quarter ended March 31, 2007, compared to euro 5.4 million for the first quarter 2006. The decrease in revenues is mainly due to lower development funding received under the co-development and license agreement with Pharmion for satraplatin for Europe and certain other territories, which reflects the decrease in research and development (R&D) spending for the first quarter of 2007. R&D expenses decreased 10% to euro 13.0 million for the first three months of 2007 compared to euro 14.5 million for the same period in 2006. This decrease was mainly due to the maturation of the satraplatin SPARC Phase 3 registrational study. In the first quarter of 2007, general and administrative (G&A) expenses increased 150% to euro 11.0 million compared to euro 4.4 million for the first quarter of 2006. This increase is mainly due to expanded activities in marketing and sales and increased legal expenses. Net loss for the first quarter of 2007 increased 49% to euro (19.2) million compared to euro (12.9) million for the first quarter of 2006. Basic and diluted loss per share was euro (0.54) for the first quarter of 2007 compared to euro (0.41) for the same quarter in 2006.
As of March 31, 2007, cash, cash equivalents, marketable securities and short-term investments totaled euro 112.8 million (December 31, 2006: euro 97.1 million), including euro 1.5 million in restricted cash. Net cash burn for the first quarter of 2007 was euro 19.4 million. 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 first quarter ended March 31, 2007.
Quarter over quarter results: first quarter 2007 compared to fourth quarter 2006
Revenues for the first quarter of 2007 decreased 25% to euro 3.8 million compared to euro 5.1 million for the previous quarter. R&D expenses decreased 17% to euro 13.0 million for the first quarter of 2007 compared to euro 15.6 million for the fourth quarter of 2006. G&A expenses for the first quarter of 2007 increased 45% to euro 11.0 million compared to euro 7.6 million for the previous quarter. The Company’s net loss was euro (19.2) million in the first quarter of 2007 compared to euro (17.2) million for the previous quarter. Basic and diluted loss per share was euro (0.54) for the first quarter of 2007 compared to euro (0.51) for the previous quarter.
“For the fiscal year 2007, we confirm our guidance of stable revenues compared to the euro 22.7 million we generated in 2006. We also reiterate our guidance for 2007 of a moderate increase in R&D expenses and a significant increase in G&A expenses due to the buildup of our commercial organization,” said Mirko Scherer, Ph.D., Senior Vice President and Chief Financial Officer. “With cash, cash equivalents and available for sale securities of euro 112.8 million as of March 31, we are in a solid financial position to aggressively move forward with our plans for a possible launch of satraplatin later this year.”
Bernd R. Seizinger, M.D., Ph.D., Chief Executive Officer, said: “We have already had several key achievements in the first few months of 2007, including completion of the NDA submission for satraplatin and its acceptance for filing by the FDA. We are very pleased that FDA has granted the NDA submission priority review status and look forward to an action by the agency in August this year.”
Dr. Seizinger continued: “We are very busy preparing for the possible U.S. launch of satraplatin later this year. With the acceptance of the NDA filing and the assignment of priority review by the FDA, and with the senior management of our U.S. marketing and sales organization in place, we have begun to hire the field sales force. In addition, we continue to move forward satraplatin clinical trials in other oncology indications, as well as our other development and discovery programs.”
Key Achievements: Year-to-Date 2007 * Private placement with institutional investors raising net proceeds of euro 32.6 million * Rolling submission of an NDA for satraplatin completed and accepted for filing by the U.S. FDA * NDA for satraplatin granted priority review status, setting target date for FDA action in August 2007 * Key progression-free survival (PFS) results as well as positive data on pain and PSA response rates from the satraplatin SPARC Phase 3 registrational trial in second-line chemotherapy for hormone-refractory prostate cancer presented at major international oncology and urology meetings * Satraplatin Expanded Rapid Access protocol (SPERA) launched in the U.S.
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 May 15 at 14:00 CEST/8:00 AM ET. The dial-in numbers for the call are as follows:
Participants from Europe: 0049 (0)69 9897 2631 or 0044 (0)20 7138 0813 Participants from the U.S.: 1-718-354-1359 Please dial in 10 minutes before the beginning of the meeting.
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 under review by the U.S. FDA for hormone-refractory prostate cancer patients whose prior chemotherapy has failed. 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, additional information relating to the safety, efficacy or tolerability of satraplatin may be discovered upon further analysis of data from the SPARC trial or analysis of additional data from other ongoing clinical trials for satraplatin. Furthermore, even if these results are confirmed upon full analysis of the trial, 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, 2005 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 does not undertake any obligation to update these forward- looking statements, even if new information becomes available in the future.
The scientific information discussed in this press release related to satraplatin is investigative. 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 Martin Braendle Director, Investor Relations & Corporate Communications Phone: +49 (0)89 8565-2693 ir@gpc-biotech.com In the U.S.: Laurie Doyle Director, Investor Relations & Corporate Communications Phone: +1 609 524 5884 usinvestors@gpc-biotech.com Additional Media Contacts: In Europe: Maitland Brian Hudspith Phone: +44 (0)20 7379 5151 bhudspith@maitland.co.uk In the U.S.: Russo Partners, LLC David Schull Phone: +1 212 845-4271 david.schull@russopartnersllc.com - Financials follow - Condensed Consolidated Statements of Operations (U.S. GAAP) Three months ended March 31, in thousand euro, except share and 2007 2006 per share data (unaudited) (unaudited) Collaborative revenues (a) 3,762 5,398 Grant revenues 77 - Total revenues 3,839 5,398 Research and development expenses 13,040 14,519 General and administrative expenses 11,023 4,377 Amortization of intangible assets 91 72 Total operating expenses 24,154 18,968 Operating loss (20,315) (13,570) Other income (expense), net 157 (674) Interest income 1,028 951 Interest expense (27) (22) Net loss before cumulative effect of change in accounting principle (19,157) (13,315) Cumulative effect of change in accounting principle - 433 Net loss (19,157) (12,882) Loss per share before change in accounting principle (0.54) (0.43) Cumulative effect of change in accounting principle - 0.02 Basic and diluted loss per share (0.54) (0.41) Shares used in computing basic and diluted loss per share 35,441,336 31,317,316 (a) Revenues from related party Collaborative revenues - 1,474
See accompanying notes to unaudited condensed consolidated financial statements.
Condensed Consolidated Balance Sheets (U.S. GAAP) in thousand euro, except share data and per share data March 31, December 31, Assets 2007 2006 (unaudited) Current assets Cash and cash equivalents 64,903 38,336 Marketable securities and short-term investments 46,362 57,186 Accounts receivable 2,330 11 Accounts receivable, related party - 395 Prepaid expenses 1,342 1,299 Other current assets 3,012 2,970 Total current assets 117,949 100,197 Property and equipment, net 4,472 4,259 Intangible assets, net 311 405 Other assets, non-current 1,110 1,127 Restricted cash 1,535 1,531 Total assets 125,377 107,519 Liabilities and shareholders’ equity Current liabilities Accounts payable 2,155 2,262 Accrued expenses and other current liabilities 15,485 14,346 Current portion of deferred revenue 7,097 7,240 Current portion of deferred revenue, related party - 896 Total current liabilities 24,737 24,744 Deferred revenue, net of current portion 8,999 9,103 Convertible bonds 3,178 3,108 Other liabilities, non-current 3,163 3,389 Shareholders’ equity Ordinary shares, euro 1 non-par, notional value: Shares authorized: 62,695,630 at March 31, 2007 and December 31, 2006 Shares issued and outstanding: 35,948,448 at March 31, 2007 and 33,895,444 at December 31, 2006 35,948 33,895 Additional paid-in capital 363,427 328,171 Subscribed shares 664 334 Accumulated other comprehensive loss (2,112) (1,755) Accumulated deficit (312,627) (293,470) Total shareholders’ equity 85,300 67,175 Total liabilities and shareholders’ equity 125,377 107,519
See accompanying notes to unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows (U.S. GAAP) Three months ended March 31, in thousand euro 2007 2006 (unaudited) (unaudited) Cash flows from operating activities Net loss (19,157) (12,882) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation 423 434 Amortization 90 71 Compensation cost for stock option plans and convertible bonds 2,566 1,560 Cumulative effect of change in accounting principle - (433) Change in accrued interest income on marketable securities and short-term investments (157) (82) Bond premium amortization 52 199 Gain on disposal of property and equipment (43) (28) Changes in operating assets and liabilities: Accounts receivable (2,320) 31,325 Accounts receivable, related party 395 1,436 Other assets, current and non-current (86) (1,425) Accounts payable (92) (1,774) Deferred revenue (247) (3,414) Deferred revenue, related party (896) (1,203) Other liabilities and accrued expenses, current and non-current 772 (974) Net cash (used in) provided by operating activities (18,700) 12,810 Cash flows from investing activities Purchases of property, equipment and licenses (657) (327) Proceeds from the sale of property and equipment 45 - Proceeds from the sale or maturity of marketable securities and short-term investments 11,000 - Net cash provided by (used in) investing activities 10,388 (327) Cash flows from financing activities Proceeds from issuance of shares, net of payments for cost of transaction 32,632 36,080 Proceeds from issuance of convertible bonds 262 140 Payments for cancellation of convertible bonds (4) - Proceeds from exercise of stock options and convertible bonds 2,143 426 Cash received for subscribed shares 330 - Net cash provided by financing activities 35,363 36,646 Effect of exchange rate changes on cash (467) (209) Changes in restricted cash (17) (14) Net increase/(decrease) in cash and cash equivalents 26,567 48,906 Cash and cash equivalents at the beginning of the period 38,336 30,559 Cash and cash equivalents at the end of the period 64,903 79,465
See accompanying notes to unaudited condensed consolidated financial statements
Consolidated Statements of Changes in Shareholders’ Equity (U.S. GAAP) (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 77,476 77 368 Cumulative effect of change in accounting principle (433) Compensation cost for stock options and convertible bonds 1,560 Balance at March 31, 2006 (unaudited) 33,089,233 33,089 319,646 - 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 488,417 488 1,842 330 Compensation cost for stock options and convertible bonds 2,346 Balance at March 31, 2007 (unaudited) 35,948,448 35,948 363,427 664 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 (12,882) (12,882) Change in unrealized gain on available-for-sale securities 130 130 Accumulated translation adjustments (123) (123) Total comprehensive loss (12,875) Issuance of shares 36,080 Exercise of stock options and convertible bonds 445 Cumulative effect of change in accounting principle (433) Compensation cost for stock options and convertible bonds 1,560 Balance at March 31, 2006 (unaudited) (2,086) (242,339) 108,310 Balance at December 31, 2006 (1,755) (293,470) 67,175 Components of comprehensive loss: Net loss (19,157) (19,157) Change in unrealized gain on available-for-sale securities 72 72 Accumulated translation adjustments (429) (429) Total comprehensive loss (19,514) Issuance of shares 32,633 Exercise of stock options and convertible bonds 2,660 Compensation cost for stock options and convertible bonds 2,346 Balance at March 31, 2007 (unaudited) (2,112) (312,627) 85,300
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 period ended March 31, 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. In accordance with FIN 48, management determined that it is more likely than not that sufficient future taxable income will not 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.
3. Related Party Disclosures
ALTANA Pharma AG (“ALTANA Pharma”) is no longer a related party with 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 highly unlikely. A three member arbitration panel has been selected and the matter is currently scheduled to be heard by the panel in July 2007. 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 1.9 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.
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 process and (2) produce quantities of 1D09C3 bulk drug substance for clinical development and commercial supply. Pursuant to the agreement, GPC Biotech is required to make certain payments over a period of 7 (seven) years. These payments will be charged to research and development expenses as services are rendered.
Contingent Gains
The Company is entitled to receive a net milestone payment of approximately euro 5.1 million upon the acceptance for filing of the first Marketing Authorization Application (MAA) with the European Medicines Agency (EMEA) and a net milestone payment of approximately euro 12.4 million upon the approval of the first MAA with EMEA. These contingent gains will be recognized as revenue when the milestones are achieved.
5. Loss per Share
Basic loss per common share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed using the weighted average number of common and dilutive common equivalent shares from stock options and convertible debt using the treasury stock method. For all periods presented, diluted net loss per share is the same as basic net loss per share, as the inclusion of weighted average shares of common stock issuable upon the exercise of stock options and convertible debt would be antidilutive.
6. Comprehensive Loss
Comprehensive loss was euro 19.5 million and euro 12.9 million for the three months ended March 31, 2007 and 2006, respectively. Comprehensive loss is composed of net loss, unrealized gains and losses on marketable securities and short-term investments and cumulative foreign currency translation adjustments. Accumulated other comprehensive loss at March 31, 2007 and 2006 reflected euro 0.5 million of unrealized gains and euro 0.1 million of unrealized losses on marketable securities and short-term investments and euro 2.6 million and euro 2.0 million of cumulative foreign currency translation loss adjustments, respectively.
7. Shareholders’ Equity
On January 24, 2007, the Company issued 1,564,587 new ordinary shares at euro 21.50 per share for a total net amount of euro 32.6 million through a private placement. GPC Biotech received the proceeds from the placement after registration of the corresponding capital increase in the German commercial register in February 2007.
At March 31, 2007, members of the management board and employees of the Company had subscribed to 120,990 ordinary shares with a total value of euro 663,700, which has been included in shareholders’ equity. The subscribed shares represent amounts paid for exercises of stock options for which ordinary shares have not been issued at March 31, 2007. The ordinary shares are expected to be registered and issued by June 30, 2007.
During the three months ended March 31, 2007, members of the management board and employees of the Company exercised some of their fully vested options and convertible bonds, receiving 488,417 new ordinary shares of the Company.
8. Additional Disclosures
General and Administrative Expenses
Gener
