Amoxicillin PULSYS NDA Resubmitted in Quarter; $24 Million Raised
in Private Equity Placement Following Quarter-end; Company Begins
Process of Exploring Strategic Alternatives GERMANTOWN, Md., May 8
/PRNewswire-FirstCall/ -- Advancis Pharmaceutical Corporation
(NASDAQ:AVNC), a pharmaceutical company focused on developing and
commercializing novel anti-infective products, today announced
financial and operational results for the quarter ended March 31,
2007. Advancis reported first quarter 2007 revenue of $1.8 million,
up from revenue of $1.2 million in the fourth quarter of 2006 and
$0.9 million in the first quarter of 2006. Advancis reported
research and development (R&D) expenses in the first quarter of
$7.5 million, compared to fourth quarter 2006 R&D expenses of
$6.3 million and first quarter 2006 R&D expenses of $7.2
million. Total expenses for the first quarter of 2007 were $15.5
million, compared to $14.9 million in the fourth quarter of 2006
and $9.7 million in the first quarter of 2006. Net loss was $13.7
million for the first quarter, compared to a net loss of $13.8
million in the fourth quarter of 2006 and a net loss of $7.6
million in the first quarter of 2006. Net loss per share applicable
to common stockholders during the first quarter of 2007 was
($0.38), compared to a net loss per share of ($0.44) in the prior
quarter, and a net loss per share of ($0.25) in the comparable
quarter of last year. "We are very pleased to have our Amoxicillin
PULSYS regulatory process on track," stated Edward M. Rudnic,
Ph.D., president and CEO of Advancis. "Also, we believe our
recently completed financing will allow us to be selective as we
explore potential strategic alternatives over the coming months."
OPERATIONAL HIGHLIGHTS Amoxicillin PULSYS - NDA Submission Update
On February 12, 2007, Advancis received a "refusal to file" letter
from the Food and Drug Administration (FDA) after submitting a New
Drug Application (NDA) for its once-daily Amoxicillin PULSYS
product for the treatment of adults and adolescents with acute
pharyngitis and/or tonsillitis (commonly referred to as strep
throat). In the letter, the FDA requested additional information to
be included in the application relating to the Company's planned
commercial manufacturing processes. Advancis participated in a
meeting with the FDA on February 26, 2007, and obtained clarity on
the additional information that was required for its NDA filing to
be accepted. Advancis subsequently resubmitted its NDA via the
505(b)(2) regulatory pathway on March 23, 2007. The Company has
been notified by the Agency that its NDA has been received, and if
accepted for filing, the application would receive a Prescription
Drug User Fee Act (PDUFA) target action date of January 23, 2008.
Amoxicillin is currently not approved for once-daily dosing to
treat pharyngitis. If approved for marketing, physicians
prescribing Amoxicillin PULSYS would have available the first
once-daily product in the aminopenicillin class for the treatment
of pharyngitis while utilizing approximately one-half the amount of
amoxicillin currently used. About 15 million patients annually seek
relief of sore throat symptoms in the United States. Keflex(R)
Capsules (Cephalexin, USP) - Commercialization Update During the
first quarter, Advancis continued the commercialization of its
recently launched 750mg strength Keflex capsules through a targeted
and dedicated national contract sales force and Advancis district
sales managers. Since its introduction, the number of prescriptions
filled with Keflex 750mg capsules has continued to grow. Based on
prescription data from IMS Health, total prescriptions filled for
Keflex 750mg capsules in the first quarter of 2007 were 65,872
prescriptions, a 70% increase from fourth quarter 2006 total
prescriptions of 38,636. Advancis has streamlined its contract
sales representatives, allocating sales resources to their most
productive areas and eliminating some underperforming territories.
The Company currently has approximately 60 contract sales
representatives and six Advancis district sales managers directly
promoting Keflex 750mg capsules to targeted physicians across the
U.S. Investment Bank Retained to Explore Strategic Alternatives
During the first quarter, Advancis announced that its board of
directors authorized the Company to evaluate various strategic
alternatives to further enhance shareholder value. Advancis has
retained Pacific Growth Equities, LLC, an investment bank focused
on the life sciences industry, to assist in the evaluation of a
full range of strategic alternatives available to the Company.
Strategic alternatives the Company may pursue could include, but
are not limited to, continued execution of the Company's operating
plan, the sale of some or all of the Company's assets, partnering
or other collaboration agreements, or a merger or other strategic
transaction. There can be no assurance that the exploration of
strategic alternatives will result in any agreements or
transactions, or that, if completed, any agreements or transactions
will be successful or on attractive terms. The Company does not
intend to disclose developments with respect to this process unless
and until the evaluation of strategic alternatives has been
completed. Financing Completed, Costs Identified for Reduction in
2007 On April 18, 2007, Advancis announced that it completed the
private placement of 10,155,000 shares of its common stock and
warrants to purchase 7,616,250 shares of common stock, at a price
of $2.36375 per unit. Units sold in the transaction consist of one
share of the Company's common stock and a warrant to purchase 0.75
shares of common stock. The transaction raised approximately $24
million in gross proceeds. Advancis intends to use the proceeds
from the financing to support the regulatory approval process of
its Amoxicillin PULSYS product candidate and for working capital
and general corporate purposes. The warrants have a five year term
and an exercise price of $2.27 per share. Investors in the offering
include existing shareholders and several additional new
institutional investors. Pacific Growth Equities, LLC acted as
placement agent for the transaction. In order to preserve the
Company's resources, it has initiated cost reductions including
personnel reductions, postponement of PULSYS clinical development
programs other than Amoxicillin PULSYS for adults and adolescents,
and elimination of other discretionary spending in 2007. Advancis'
future development efforts for its PULSYS product candidates other
than Amoxicillin PULSYS will be dependent upon its ability to
secure additional capital or to find a partner to help fund their
continued development. FINANCIAL DETAILS -- Total revenue,
resulting entirely from net Keflex product sales, was $1.8 million
in the first quarter of 2007, up from revenue of $1.2 million in
the prior quarter, and $0.9 million for the first quarter of 2006.
The Company recognizes Keflex revenue as product is shipped to
customers. -- 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 $7.5
million, up from $6.3 million in the previous quarter and $7.2
million in the first quarter of 2006. Increased sequential R&D
expenses in the first quarter of 2007 primarily were due to an
increase in development costs associated with the Company's
contract manufacturing site in Clonmel, Ireland. Selling, general
and administrative (SG&A) expenses totaled $7.7 million in the
first quarter of 2007, down from $8.3 million in the fourth quarter
of 2006, and up from $2.5 million in the first quarter of 2006,
which did not include any selling or marketing expenses for Keflex
750mg capsules. Sequential changes in SG&A expenses were lower
in the first quarter of 2007 primarily due to a decrease in market
research costs and legal fees. Stock-based compensation recorded in
the first quarter 2007 was a total of $0.6 million, consisting $0.2
million recorded in R&D expense and $0.4 million recorded in
SG&A expense. In the fourth quarter 2006 and first quarter
2006, total stock-based compensation was an expense of $0.5 million
and $0.9 million, respectively. -- Net loss for the first quarter
of 2007 was $13.7 million. This compares to a net loss of $13.8
million in the fourth quarter of 2006, and $7.6 million in the
first quarter of 2006. -- Net loss per share applicable to common
stockholders for the first quarter of 2007 was ($0.38), compared to
a loss per common share of ($0.44) in the prior quarter and ($0.25)
in the first quarter of 2006. Higher net loss per share in the
first quarter of 2007 compared to prior periods was attributable
mainly to an increase in total expenses during the first quarter of
2007. Per share figures were computed on the basis of an average of
36.4 million shares outstanding in the first quarter of 2007, 31.5
million shares outstanding in the fourth quarter of 2006, and 30.0
million shares outstanding in the first quarter of 2006. -- Cash
and marketable securities decreased by $9.3 million during the
first quarter. Changes were composed of $13.7 million of operating
losses and $0.7 million in loan payments; offset by $1.5 million
for non-cash expenses and $3.6 million for working capital changes
and other items. -- The Balance Sheet at the end of the first
quarter of 2007 reflected $6.0 million of unrestricted cash, cash
equivalents and marketable securities, compared to $15.4 million as
of December 31, 2006, and $22.0 million as of March 31, 2006.
Following the quarter-end, Advancis completed a private placement
of equity resulting in approximately $22.3 million of net proceeds
to the Company. FINANCIAL GUIDANCE AND FUTURE CASH REQUIREMENTS
Advancis' estimates for its 2007 financial results remain
unchanged; however, earnings per share estimates have been updated
and now include the effect of the 10,155,000 common shares issued
in the Company's private placement financing which closed on April
18, 2007. As previously announced, in order to preserve corporate
resources, the Company has initiated cost reductions including
personnel reductions, postponement of PULSYS clinical development
programs other than Amoxicillin PULSYS for adults, and elimination
of other discretionary spending. Total revenue for 2007 is expected
to be approximately $10 million to $14 million, resulting from
Keflex product sales. Net loss for the year is expected to be
between $36 million and $40 million, or approximately $0.82 to
$0.92 per diluted common share, based on approximately 43.7 million
outstanding shares. Non-cash charges for 2007, consisting primarily
of stock- based compensation expenses and depreciation and
amortization, are expected to be approximately $7 million. Total
cash used in 2007 is estimated to be between $25 and $33 million.
These 2007 estimates are forward-looking statements that involve
risks and uncertainties, and actual results could vary materially.
CONFERENCE CALL The Company has scheduled a conference call for
today, Tuesday, May 8, 2007 at 10:30 AM ET. During the call, Dr.
Edward Rudnic, president and CEO, and Robert Low, vice president,
finance and 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 8, 2007
beginning at 12:30 PM ET and will be accessible until Tuesday, May
15, 2007 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 8091179. 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 (NASDAQ:AVNC) 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, 2007 and March 31, 2006
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 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 2007 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) raise
additional capital and continue as an ongoing concern, (2) increase
Keflex 750 sales, (3) obtain FDA approval for its Amoxicillin
PULSYS product candidate, (4) successfully reduce costs, (5)
maintain compliance with its outstanding credit facility with
Merrill Lynch Capital, (6) reach profitability, (7) prove that the
preliminary findings for its product candidates are valid, (8)
receive required regulatory approvals, (9) successfully conduct
clinical trials in a timely manner, (10) establish its competitive
position for its products, (11) develop and commercialize products
that are superior to existing or newly developed competitor
products, (12) develop products without any defects, (13) have
sufficient capital resources to fund its operations, (14) protect
its intellectual property rights and patents, (15) implement its
sales and marketing strategy, (16) successfully attract and retain
collaborative partners, (17) successfully commercialize and gain
market acceptance for its Keflex products, (18) successfully obtain
sufficient manufactured quantities of its drug products at
acceptable rates, and (19) 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 CONDENSED STATEMENTS
OF OPERATIONS (Unaudited) Three Months Ended March 31, 2007 2006
Product sales $1,773,037 $860,231 Costs and expenses: Cost of
product sales 233,635 52,585 Research and development 7,528,872
7,201,200 Selling, general and administrative 7,688,652 2,472,587
Total expenses 15,451,159 9,726,372 Loss from operations
(13,678,122) (8,866,141) Interest income 134,027 293,762 Interest
expense (193,895) (24,971) Other income 75,000 1,000,000 Net loss
$(13,662,990) $(7,597,350) Basic and diluted net loss per share
$(0.38) $(0.25) Shares used in calculation of basic and diluted net
loss per share 36,383,312 30,043,084 ADVANCIS PHARMACEUTICAL
CORPORATION CONDENSED BALANCE SHEETS (Unaudited) March 31, December
31, 2007 2006 ASSETS Current assets: Cash and cash equivalents
$5,530,115 $14,856,738 Marketable securities 514,009 522,723
Accounts receivable, net 1,067,321 303,514 Inventories, net
2,165,252 2,077,390 Prepaid expenses and other current assets
1,634,794 1,682,685 Total current assets 10,911,491 19,443,050
Property and equipment, net 11,148,785 11,764,627 Restricted cash
872,180 872,180 Deposits and other assets 1,764,644 1,548,585
Intangible assets, net 8,087,908 8,377,327 Total assets $32,785,008
$42,005,769 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current
liabilities: Accounts payable $7,049,328 $2,285,736 Accrued
expenses and advances 7,641,917 7,817,224 Lines of credit and
short- term debt 6,222,222 6,888,889 Note payable - 75,000 Deferred
product revenue 189,000 189,000 Total current liabilities
21,102,467 17,255,849 Deferred contract revenue 11,625,000
11,625,000 Deferred rent and credit on lease concession 1,241,239
1,252,900 Total liabilities 33,968,706 30,133,749 Commitments and
contingencies Stockholders' equity (deficit): Preferred stock,
undesignated - - Common stock, par value 364,019 363,625 Capital in
excess of par value 165,200,569 164,593,930 Accumulated deficit
(166,748,452) (153,085,462) Accumulated other comprehensive loss
166 (73) Total stockholders' equity (deficit) (1,183,698)
11,872,020 Total liabilities and stockholders' equity (deficit)
$32,785,008 $42,005,769 The accompanying notes are an integral part
of these financial statements. ADVANCIS PHARMACEUTICAL CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended
March 31, 2007 2006 Cash flows from operating activities: Net loss
$(13,662,990) $(7,597,350) Adjustments to reconcile net loss to net
cash in operating activities: Depreciation and amortization 951,897
988,366 Stock-based compensation 580,711 860,094 Deferred rent and
credit on lease concession (11,661) 2,908 Amortization of premium
on marketable securities 8,953 132,762 Recognition of advance
payment for potential sale of Keflex - (1,000,000) Changes in:
Accounts receivable (763,807) 534,394 Inventories (87,862)
(297,349) Prepaid expenses and other current assets 47,891 (19,444)
Deposits other than on property and equipment, and other assets
194,087 - Accounts payable 4,763,592 47,168 Accrued expenses and
advances (270,989) (732,409) Deferred product and contract revenue
- - Net cash used in operating activities (8,250,178) (7,080,860)
Cash flows from investing activities: Purchase of marketable
securities - (6,727,999) Sale and maturities of marketable
securities - 9,040,000 Purchases of property and equipment (19,592)
(46,600) Deposits on property and equipment (397,876) (250,000)
Restricted cash - 32,454 Net cash provided by (used in) investing
activities (417,468) 2,047,855 Cash flows from financing
activities: Payments on lines of credit (666,667) (249,021)
Proceeds from exercise of common stock options 7,690 261,850 Net
cash provided by (used in) financing activities (658,977) 12,829
Net decrease in cash and cash equivalents (9,326,623) (5,020,176)
Cash and cash equivalents, beginning of period 14,856,738
18,116,968 Cash and cash equivalents, end of period $5,530,115
$13,096,792 DATASOURCE: Advancis Pharmaceutical Corporation
CONTACT: Robert Low, Vice President, Finance & CFO,
+1-301-944-6690, , or Bob Bannon, Vice President, Investor
Relations, +1-301-944-6710, , both of Advancis Pharmaceutical
Corporation Web site: http://www.advancispharm.com/
http://www.advancispharm.com/products/keflex
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