Company's Amoxicillin PULSYS NDA Filing Expected in December;
Commercial Launch of Keflex 750mg Capsules Underway GERMANTOWN,
Md., Nov. 1 /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
September 30, 2006. Advancis reported third quarter 2006 net Keflex
product sales of $2.4 million, compared to $0.3 million in the
second quarter of 2006 and $1.2 million in the third quarter of
2005. For the first nine months of 2006, revenue from product sales
was $3.6 million, compared to product sales of $3.2 million in the
first nine months of 2005. In addition to product sales of Keflex,
in the prior year Advancis recognized contract revenue and
reimbursed development costs under the Company's prior
collaborative agreements of $6.2 million and $12.0 million for the
three months and nine months ended September 30, 2005,
respectively. Advancis reported research and development (R&D)
expenses in the third quarter of $5.7 million, down from second
quarter 2006 R&D expenses of $6.8 million and third quarter
2005 R&D expenses of $10.0 million. Total expenses for the
third quarter of 2006 were $12.2 million, compared to $11.2 million
in the second quarter of 2006 and $13.6 million in the third
quarter of 2005. Total expenses in the first nine months of 2006
decreased to $33.2 million, from $42.5 million in the first nine
months of 2005. Net loss was $9.9 million for the third quarter,
compared to a net loss of $10.7 million in the second quarter of
2006 and a net loss of $5.9 million in the third quarter of 2005.
Net loss per share applicable to common stockholders during the
third quarter of 2006 was ($0.33), compared to a net loss per share
of ($0.35) in the prior quarter, and a net loss per share of
($0.20) in the comparable quarter of last year. For the first nine
months of 2006, net loss was $28.2 million, or ($0.93) per share,
compared to a net loss of $26.6 million, or ($1.00) per share, in
the first nine months of 2005. "We were very pleased to receive
positive results from our Amoxicillin PULSYS Phase III clinical
trial during the third quarter," stated Edward M. Rudnic, Ph.D.,
president and CEO of Advancis. "We believe the coming months will
be pivotal for Advancis, as we near completion of our NDA filing by
the end of the 2006, manage the commercialization of our Keflex 750
capsules, and move toward a potential approval and launch of
Amoxicillin PULSYS next year. We look forward to successfully
executing upon these milestones and communicating our progress over
the course of the next year." OPERATIONAL HIGHLIGHTS Amoxicillin
PULSYS -- Successful Phase III Results, NDA Filing Update During
the quarter, Advancis announced that its Amoxicillin PULSYS Phase
III clinical trial for the treatment of adults and adolescents with
acute pharyngitis and/or tonsillitis due to Group A streptococcal
infections (commonly referred to as strep throat) achieved its
desired endpoints. Advancis' clinical trial, designed to support
product approval for Amoxicillin PULSYS, included 620 patients in a
double-blind, double-dummy, non-inferiority Phase III trial and was
conducted in 50 investigator sites across the U.S. and Canada. The
Company compared its Amoxicillin PULSYS tablet for the treatment of
pharyngitis/tonsillitis due to S. pyogenes (Group A streptococcus)
delivered in a once-daily, 775 milligram tablet for a period of 10
days to 250 milligrams of penicillin dosed four times daily, for a
total of one gram per day, for 10 days. The trial demonstrated
statistical non-inferiority of Amoxicillin PULSYS therapy versus
the penicillin comparator therapy for the trial's primary endpoints
of bacterial eradication rates for two distinct patient
populations. The trial also demonstrated Amoxicillin PULSYS reached
85 percent bacterial eradication for the "per-protocol" group of
patients, in accordance with U.S. Food and Drug Administration
(FDA) guidance for product approval as first-line pharyngitis
therapy. During the third quarter, Advancis received correspondence
from the FDA's Division of Anti-Infectives Drug Products,
confirming that the regulatory strategy and proposed format for the
Company's NDA (New Drug Application) filing for its Amoxicillin
PULSYS product was acceptable. Advancis believes data from its
recently concluded Amoxicillin PULSYS Phase III trial, along with
existing academic literature data and analysis from the Company's
prior Amoxicillin PULSYS studies, should provide the necessary
clinical data required to support a NDA filing for product
approval. Advancis expects to file a 505(b)(2) NDA with the FDA for
the product candidate in December 2006, and, if approved, to launch
the product around year-end 2007. Keflex(R) Capsules (Cephalexin,
USP) -- Launch Update During the quarter, Advancis commenced the
commercialization of its new 750mg strength of Keflex capsules
through a targeted and dedicated national contract sales force of
75 sales representatives and eight Advancis district sales
managers. Advancis contract sales representatives began directly
promoting Keflex 750mg capsules to targeted physicians as well as
providing patient starter samples in late July 2006. The Company
began shipping Keflex 750mg in bottles of 50 capsules to retail
pharmacies nationwide in July for initial inventory stocking, and
now believes that it has Keflex 750mg stocked in a total of
approximately 25,000 U.S. pharmacies. Although still early in the
launch of Keflex 750mg, Advancis believes the product is being
well-received in the market and intends to evaluate its progress
over the coming months before providing 2007 Keflex sales guidance
or additional market share forecasts. Advancis believes the new
Keflex 750mg strength provides healthcare professionals a more
convenient way to deliver a total daily dose of 1500mg per day, by
providing them an option to prescribe just two daily doses of the
750mg capsules. Keflex is approved for adult dosages ranging from
one to four grams per day in divided doses; however, the majority
of prescriptions are currently written for cephalexin 500mg three
times daily -- totaling 1500mg per day. Advancis Corporate Name
Infringement Case During the quarter, Advancis announced that the
United States District Court for the District of Delaware issued an
Opinion and Order ruling that the Advancis corporate name is
infringing the sanofi-aventis trademark. In December 2003, Aventis
and Aventis Pharmaceuticals, Inc., now part of sanofi- aventis,
brought an action against Advancis, alleging, in essence, that the
Advancis corporate name is infringing the plaintiff's trademark and
seeking injunctive relief. A trial was held in May 2005, and the
Court issued its decision on September 26, 2006, ruling in favor of
sanofi-aventis. No monetary damages were associated with the
decision, and the Company does not believe there will be a
significant financial impact involved from complying with the
Court's decision. The Court's decision deferred an injunction and
instead asked the two parties to jointly submit a proposed Order to
the Court. On October 27, 2006, Advancis jointly submitted a
proposed Permanent Injunction and Order with sanofi-aventis,
pursuant to the Court's request. Per the proposed Order, Advancis
agreed to surrender its trademark registrations for the "Advancis"
name and, by June 30, 2007, to cease using the name in connection
with its future business. Advancis believes the joint Order allows
for a sufficient period of time to select a new corporate name and
to effect an orderly transition to its new corporate identity
without significant hardship or financial impact to the Company.
Advancis has begun the process to select its new corporate name and
expects to reach a conclusion by early 2007. FINANCIAL DETAILS *
Total revenue, resulting entirely from net Keflex product sales,
was $2.4 million in the third quarter of 2006, compared to revenue
of $0.3 million in the prior quarter. Third quarter 2006 Keflex
revenue included approximately $1.7 million for products that were
delivered to customers as Keflex 750mg initial inventory stocking.
The Company generally recognizes revenue upon delivery of the
product to a customer, typically a wholesaler. However, the Company
deferred the recognition of revenue of approximately $0.3 million
in the quarter due to certain incentives provided during the launch
period. Higher sequential Keflex product sales compared to the
prior quarter were mainly due to the orders for initial stocking as
well as subsequent sales of the Company's recently launched 750mg
strength in the third quarter. Total revenue for the third quarter
of 2005 was $7.4 million, consisting of both Keflex product sales
and revenue recognized under the Company's prior collaboration for
Amoxicillin PULSYS. No similar collaboration revenue was recognized
in 2006. Net Keflex sales totaled $3.6 million in the first nine
months of 2006, up from $3.2 million in the first nine months of
2005. * Operating expenses. Third 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 $5.7
million, down from $6.8 million in the previous quarter and $10.0
million in the third quarter of 2005. Decreased sequential R&D
expenses compared to the second quarter of 2006 primarily were due
to a decrease in third quarter clinical trial expenses, as the
Company concluded its Phase III trial for Amoxicillin PULSYS.
Decreased year-over-year R&D expenses resulted mainly from a
reduced number of ongoing clinical trials in third quarter 2006
versus third quarter 2005. Selling, general and administrative
(SG&A) expenses totaled $6.1 million in the third quarter of
2006, up from $4.5 million in the second quarter of 2006 and $3.5
million in the third quarter of 2005. Increased SG&A expenses
in the third quarter were primarily due to selling and marketing
costs of approximately $3.3 million, in association with the launch
of the Company's new Keflex 750mg product. Keflex launch costs were
$1.7 million in the second quarter of 2006, and no such marketing
costs were incurred in the third quarter of 2005. Stock-based
compensation recorded in the third quarter 2006 was a total of $1.1
million, of which, $0.6 million was recorded in R&D expense and
$0.5 million was recorded in SG&A expense. In the second
quarter 2006 and third quarter 2005, total stock-based compensation
expense was $0.9 million and ($0.2) million, respectively. * Net
loss for the third quarter of 2006 was $9.9 million. This compares
to a net loss of $10.7 million in the second quarter of 2006, and
$5.9 million in the third quarter of 2005. Higher net loss in the
third quarter of 2006 versus the prior year was mainly attributable
to reduced revenue and increased expenses resulting from the
Company's activities supporting the launch of its new Keflex 750mg
capsules. * Net loss per share applicable to common stockholders
for the third quarter of 2006 was ($0.33), compared to a loss per
common share of ($0.35) in the prior quarter and ($0.20) in the
third quarter of 2005. Per share figures were computed on the basis
of an average of 30.3 million shares outstanding in the third
quarter of 2006, 30.3 million shares outstanding in the second
quarter of 2006, and 29.6 million shares outstanding in the third
quarter of 2005. * Cash and marketable securities decreased by $8.3
million during the third quarter. Changes were composed of $9.9
million of operating losses and $0.5 million of loan payments;
offset by $2.1 million of non-cash depreciation, amortization, and
stock-based compensation. * The Balance Sheet at the end of the
third quarter of 2006 reflected $12.6 million of unrestricted cash,
cash equivalents and marketable securities, compared to $20.9
million as of June 30, 2006, and $29.4 million as of December 31,
2005. FINANCIAL GUIDANCE Advancis' financial guidance is unchanged
from recently updated forecasts. Total revenue for 2006 is expected
to be approximately $7 million to $10 million, resulting from sales
of all Keflex products. Net loss for the year is expected to be
between $37 million and $40 million, or approximately $1.21 to
$1.31 per diluted common share. Non-cash charges for 2006,
consisting primarily of stock-based compensation expenses and
depreciation and amortization, are expected to be approximately $7
million. These forecasts include an estimated $3 million non-cash
impact from expensing of stock options under SFAS 123R. Cash, cash
equivalents, and marketable securities at the end of 2006 are
expected to be approximately $4 million to $6 million. As
previously stated, given suitable market conditions and favorable
financing terms, the Company may consider raising additional
capital during 2006 or 2007. CONFERENCE CALL The Company has
scheduled a conference call for today, Wednesday, November 1, 2006
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 November 1, 2006 beginning at 12:30
PM ET and will be accessible until Wednesday, November 8, 2006 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 9742528. 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) Capsules (Cephalexin, 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. Keflex is currently available in 250mg capsules, 500mg
capsules, 750mg capsules, and powder for oral suspension. Keflex is
contraindicated in patients with known allergy to the cephalosporin
group of antibiotics. Before therapy with cephalexin is instituted,
careful inquiry should be made to determine whether the patient has
had previous hypersensitivity reactions to cephalexin,
cephalosporins, penicillins, or other drugs. Keflex should be
administered with caution in the presence of markedly impaired
renal function or a history of gastrointestinal disease,
particularly colitis. More information on Keflex and prescribing
information are available at http://www.keflex.com/ This
announcement contains historical financial information as of and
for three-month and nine-month periods ended September 30, 2006 and
September 30, 2005 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 expected milestone or expense reimbursement payments; 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 the full year of 2006
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) reach profitability, (2) prove that the preliminary findings
for its product candidates are valid, (3) receive required
regulatory approvals, (4) successfully conduct clinical trials in a
timely manner, (5) establish its competitive position for its
products, (6) develop and commercialize products that are superior
to existing or newly developed competitor products, (7) develop
products without any defects, (8) have sufficient capital resources
to fund its operations, (9) protect its intellectual property
rights and patents, (10) implement its sales and marketing
strategy, (11) successfully attract and retain collaborative
partners, (12) successfully commercialize and gain market
acceptance for its Keflex products, (13) successfully obtain
sufficient manufactured quantities of its drug products at
acceptable rates, and (14) 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 Nine Months Ended
September 30, September 30, 2006 2005 2006 2005 Revenues: Product
sales $2,369,975 $1,159,986 $3,566,563 $3,190,340 Contract revenue
- 3,326,024 - 4,027,778 Reimbursement of development costs -
2,915,303 - 8,010,690 Total revenues 2,369,975 7,401,313 3,566,563
15,228,808 Costs and expenses: Cost of product sales 440,159 87,555
517,765 266,332 Research and development 5,737,047 9,992,697
19,700,263 33,461,337 Selling, general and administrative 6,069,529
3,491,049 13,001,312 8,745,466 Total expenses 12,246,735 13,571,301
33,219,340 42,473,135 Loss from operations (9,876,760) (6,169,988)
(29,652,777) (27,244,327) Interest income 221,333 319,484 747,921
755,898 Interest expense (241,735) (29,736) (292,018) (93,246)
Other income - - 976,815 - Net loss $(9,897,162) $(5,880,240)
$(28,220,059) $(26,581,675) Basic and diluted net loss per share
$(0.33) $(0.20) $(0.93) $(1.00) Shares used in calculation of basic
and diluted net loss per share 30,302,628 29,630,500 30,209,948
26,657,679 ADVANCIS PHARMACEUTICAL CORPORATION CONDENSED BALANCE
SHEETS (Unaudited) September 30, December 31, 2006 2005 ASSETS
Current assets: Cash and cash equivalents $7,892,656 $18,116,968
Marketable securities 4,716,385 11,314,090 Restricted cash -
418,244 Accounts receivable, net 2,133,737 756,764 Notes receivable
from officer - 121,500 Inventories, net 1,330,067 219,451 Prepaid
expenses and other current assets 533,642 797,253 Total current
assets 16,606,487 31,744,270 Property and equipment, net 12,404,505
14,450,627 Restricted cash 870,480 1,182,680 Deposits and other
assets 1,351,825 884,312 Intangible assets, net 8,666,746 9,535,003
Total assets $39,900,043 $57,796,892 LIABILITIES AND STOCKHOLDERS'
EQUITY Current liabilities: Accounts payable $2,901,596 $1,686,487
Accrued expenses and advances 7,826,538 7,071,731 Lines of credit
and short-term debt 7,644,391 895,204 Deferred product revenue
270,061 - Total current liabilities 18,642,586 9,653,422 Lines of
credit - noncurrent portion - 597,208 Note payable 75,000 75,000
Accrued severance - noncurrent portion - 1,235,394 Deferred
contract revenue 11,625,000 11,625,000 Deferred rent and credit on
lease concession 1,264,560 1,268,857 Total liabilities 31,607,146
24,454,881 Stockholders' equity: Preferred stock - - Common stock
303,050 297,652 Capital in excess of par value 147,303,642
144,766,213 Deferred stock-based compensation - (623,051)
Accumulated deficit (139,315,367) (111,095,308) Accumulated other
comprehensive loss 1,572 (3,495) Total stockholders' equity
8,292,897 33,342,011 Total liabilities and stockholders' equity
$39,900,043 $57,796,892 ADVANCIS PHARMACEUTICAL CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended
September 30, 2006 2005 Cash flows from operating activities: Net
loss $(28,220,059) $(26,581,675) Adjustments to reconcile net loss
to net cash used in operating activities: Depreciation and
amortization 2,949,486 3,048,707 Stock-based compensation 2,861,585
682,692 Deferred rent and credit on lease concession (4,297) 44,721
Amortization of premium on marketable securities 222,332 286,765
Loss on disposal of fixed assets 23,185 - Recognition of advance
payment for potential sale of Keflex (1,000,000) - Changes in:
Accounts and notes receivable (1,255,473) (19,061) Inventories
(1,110,616) (139,366) Prepaids and other current assets 220,484
659,998 Deposits other than on property and equipment - (147,101)
Accounts payable 1,215,109 (2,042,093) Accrued expenses and accrued
severance 608,590 2,983,812 Deferred revenue 270,061 2,211,532 Net
cash used in operating activities (23,219,613) (19,011,069) Cash
flows from investing activities: Advance payment for potential sale
of Keflex intangible assets - 1,000,000 Purchase of marketable
securities (13,274,560) (10,055,729) Sale and maturities of
marketable securities 19,655,000 13,705,000 Purchases of property
and equipment (50,653) (1,433,826) Deposits on property and
equipment (250,000) (543,843) Proceeds from sale of fixed assets
25,000 - Restricted cash 730,444 6,603 Net cash provided by
investing activities 6,835,231 2,678,205 Cash flows from financing
activities: Proceeds from issuance of debt, net of issue costs
7,792,976 - Payments on lines of credit (1,913,062) (760,180)
Proceeds from private placement of commons stock, net of issue
costs - 25,754,389 Proceeds from exercise of common stock options
280,156 23,015 Net cash provided by financing activities 6,160,070
25,017,224 Net (decrease) increase in cash and cash equivalents
(10,224,312) 8,684,360 Cash and cash equivalents, beginning of
period 18,116,968 10,395,757 Cash and cash equivalents, end of
period $7,892,656 $19,080,117 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.keflex.com/
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