ISELIN, N.J., March 15 /PRNewswire-FirstCall/ -- Pharmos Corporation today reported financial results for the fourth quarter and twelve month period ended December 31, 2005.
For the fourth quarter ended December 31, 2005, Pharmos reported a net loss of $3.0 million, or $0.16 per share compared to a net loss of $4.8 million, or $0.25 per share for the same period in 2004. Total operating expenses decreased $1.5 million to $3.9 million in the 2005 fourth quarter from $5.4 million in the 2004 fourth quarter. Net research and development expenses were $2.0 million in the 2005 fourth quarter, a reduction of $1.4 million compared to the same period in 2004. General and administrative expenses were $1.9 million in the 2005 fourth quarter, relatively unchanged from the 2004 fourth quarter. Other income (expense), net, was favorable by $0.3 million in the 2005 fourth quarter compared to the same period in 2004 due to decreased interest expenses in connection with the September 2003 convertible debt and increased interest income. Interest income improved and interest expense declined compared to the same period in 2004 as a result of the convertible debt maturity in the 2005 first quarter. The market to market valuation of warrants decreased $0.4 million in the 2005 fourth quarter as a result of the significant price drop of Pharmos common stock in the 2004 fourth quarter compared to the 2005 fourth quarter.
The net loss for the year was $2.9 million, or $0.15 per share in 2005 compared to a net loss of $22.0 million, or $1.22 per share in 2004. The substantial decrease in net loss is primarily attributable to the receipt by Pharmos of a $10.7 million net milestone payment from a former marketing partner in the 2005 first quarter, which resulted in positive income for the Company for the first nine months of 2005. The 2005 net loss was also favorably impacted by a 21% decrease in operating expenses to $15.7 million from $19.9 million in 2004, driven by lower clinical trial-related costs. Cash and short term investments totaled $46.0 million at December 31, 2005.
Net research and development expenses decreased 37% to $8.2 million, a reduction of $4.7 million compared to 2004. The primary research and development expenditures in 2005 were related to development of the Company's CB2-selective platform, including initiation of Phase I clinical testing of cannabinor, Pharmos' lead product candidate for the treatment of pain indications. Research and development expenses were lower in 2005 compared to 2004 primarily due to a reduction in clinical trial expenses associated with a large-scale Phase III trial and an exploratory Phase IIa trial, both of which were completed in the 2004 fourth quarter. Pharmos recorded research and development grants from the Office of the Chief Scientist of Israel's Ministry of Industry and Trade of $1,406,508 during 2005, which reduced gross research and development expenses.
General and administrative expenses for 2005 were $7.2 million compared to $6.4 million in 2004. The year over year increase was due primarily to higher compensation, insurance and professional fees by $0.9 million, $0.4 million and $0.2 million, respectively, in 2005 compared to 2004. The increase was partially offset by a reduction in consultant expenses of $0.7 million. The compensation increase is attributed to the amortization of deferred compensation from Retention Award Agreements issued in September 2004. The increase in insurance is attributable to higher insurance rates. Higher professional fees are attributed to legal fees related to class action lawsuit defense, which were partially offset by lower accounting fees. Decreased consulting expenses reflected the absence in 2005 of non-cash charges incurred in 2004 for stock options and to reduced pre-marketing consulting fees in 2005.
Other income (expense), net, increased by $14.8 million in 2005 to income of $12.3 million from an expense of $2.5 million in 2004. Income of $10.7 million, net, was recognized in connection with a non-recurring milestone payment received from Bausch & Lomb, a former marketing partner, in the 2005 first quarter. Interest expense decreased by $3.5 million to $0.2 million in 2005 compared to $3.7 million in 2004 primarily due to the substantially reduced average outstanding balance and maturity at March 31, 2005 of convertible debt issued in September 2003. Interest income increased by $0.8 million to $1.5 million in 2005 from $0.7 million in 2004 as a result of higher average cash balances and interest rates.
Pharmos discovers and develops novel therapeutics to treat a range of indications including neurological and inflammatory disorders. The Company's core proprietary technology platform focuses on discovery and development of synthetic cannabinoid compounds. Cannabinor, the lead CB2-selective receptor agonist candidate, is scheduled for Phase II testing in pain indications during 2006. Other compounds from Pharmos' proprietary synthetic cannabinoid library are in pre-clinical studies targeting pain, multiple sclerosis, rheumatoid arthritis and other disorders.
Statements made in this press release related to the business outlook and future financial performance of the Company, to the prospective market penetration of its drug products, to the development and commercialization of the Company's pipeline products and to the Company's expectations in connection with any future event, condition, performance or other matter, are forward-looking and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties which may cause results to differ materially from those set forth in these statements. Additional economic, competitive, governmental, technological, marketing and other factors identified in Pharmos' filings with the Securities and Exchange Commission could affect such results.
PHARMOS CORPORATION Consolidated Statements of Operations For the three months ended For the year ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2005 2004 2005 2004 Expenses Research & development, gross $2,342,920 $4,018,504 $9,568,293 $16,335,334 Grants (390,868) (706,719) (1,406,508) (3,446,677) Research & development, net of grants 1,952,052 3,311,785 8,161,785 12,888,657 General & administrative 1,900,052 1,923,779 7,165,291 6,413,803 Depreciation and amortization 80,294 134,321 381,812 577,691 Total operating expenses 3,932,398 5,369,885 15,708,888 19,880,151 Loss from operations (3,932,398) (5,369,885) (15,708,888) (19,880,151) Other income (expense) Bausch & Lomb payment, net - - 10,725,688 - Interest income 471,595 207,867 1,514,878 658,010 Interest expense (731) (461,156) (166,322) (3,705,535) Change in value of warrants 4,829 381,497 259,075 525,074 Other (expense) income 10,214 (1,853) (44,937) (9,939) Other income (expense), net 465,479 126,355 12,288,382 (2,532,390) Loss before income taxes (3,466,919) (5,243,530) (3,420,506) (22,412,541) Income tax benefit (490,634) (444,774) (490,634) (444,774) Net loss ($2,976,285) ($4,798,756) ($2,929,872)($21,967,767) Net loss per share - basic and diluted ($0.16) ($0.25) ($0.15) ($1.22) Weighted average shares outstanding - basic and diluted 18,974,338 18,863,990 18,974,175 18,033,358 PHARMOS CORPORATION Consolidated Balance Sheets December 31, 2005 2004 Assets Current Assets Cash and cash equivalents $10,289,127 $49,014,530 Short-term investments 35,748,343 - Restricted cash 79,527 4,846,155 Research and development grants receivable 734,237 1,537,782 Prepaid expenses and other current assets 543,109 262,810 Debt issuance costs - 45,648 Total current assets 47,394,343 55,706,925 Fixed assets, net 742,860 987,451 Restricted cash 62,874 139,594 Severance pay funded 772,199 811,926 Other assets 18,496 18,946 Total assets $48,990,772 $57,664,842 Liabilities and Shareholder's Equity Current liabilities Accounts payable $519,404 $2,462,162 Accrued expenses 575,222 1,155,413 Warrant liability 38,880 297,955 Accrued wages and other compensation 1,497,781 756,488 Convertible debentures, net - 4,765,540 Total current liabilities 2,631,287 9,437,558 Other liability 110,904 39,412 Severance pay 1,014,647 1,197,039 Total liabilities 3,756,838 10,674,009 Commitments and contingencies Shareholder's Equity Preferred stock, $.03 par value, 1,250,000 shares authorized, none issued and outstanding - - Common stock, $.03 par value; 60,000,000 shares authorized, 19,065,784 and 19,027,809 issued in 2005 and 2004, respectively 571,973 2,854,112 Deferred compensation (529,393) (1,701,122) Paid-in capital in excess of par 191,093,338 188,809,955 Accumulated deficit (145,901,558) (142,971,686) Treasury stock, at cost, 2,838 shares (426) (426) Total shareholders' equity 45,233,934 46,990,833 Total liabilities and shareholders' equity $48,990,772 $57,664,842
Pharmos CorporationCONTACT: Gale Smith of Pharmos U.S., +1-732-452-9556, or, Irit Kopelov ofPharmos Israel, +011-972-8-940-9679, or Investors: John Quirk,+1-646-536-7029, or Media: Janine McCargo, +1-646-536-7033, both of TheRuth Group, Inc.
Web site: http://www.pharmoscorp.com/
