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Gentium (GENT) Announces Fourth Quarter and Year End 2009 Results

VILLA GUARDIA (COMO), Italy, March 31 /PRNewswire-FirstCall/ — Gentium S.p.A. (Nasdaq: GENT) today reported financial results for the quarter and year ended December 31, 2009.  The Company reports its financial condition and operating results using U.S. Generally Accepted Accounting Principles (GAAP). The Company’s financial statements are prepared using the Euro as its functional currency. On December 31, 2009, EUR 1.00 = $1.4332.

“Total product sales rose 78 percent in 2009 resulting from the successful implementation of the named-patient program in Europe and cost recovery program in the U.S.,” stated Gary Gemignani, Executive Vice President and Chief Financial Officer of Gentium S.p.A.  “For the fourth quarter 2009, we reported positive operating cash flow.  We expect revenues in 2010 to be in the range of $20 – $25 million and cash flow to be positive in 2010.”

“We are pleased that Defibrotide was selected as one of the highlights at the American Society of Hematology (ASH) conference and more recently at European Bone Marrow Transplant (EBMT) conference,” stated Dr. Khalid Islam, Chief Executive Officer of Gentium S.p.A. “We are currently completing certain preclinical and clinical studies requested by regulatory authorities and we anticipate filing for regulatory approval in the U.S. and Europe by the end of second quarter 2011. With the $7 million upfront payment in connection with our recent expansion of the license and cost sharing agreements with Sigma-Tau and substantial revenues being generated by the named-patient program, we have significantly strengthened our balance sheet.”

Financial Highlights

For the fourth quarter ended December 31, 2009 compared to the prior year’s fourth quarter:

  • Total revenues were EUR 4.05 million, compared with EUR 1.04 million
  • Operating costs and expenses were EUR 4.08 million, compared with EUR 4.88 million
  • Research and development expenses, which are included in operating costs and expenses, were EUR 0.86 million, compared with EUR 1.70 million
  • Operating loss was EUR 0.04 million, compared with EUR 3.84 million
  • Interest income/(expense), net, was EUR (0.01) million, compared with EUR 0.08 million.
  • Pre-tax loss was EUR 0.05 million, compared with EUR 3.45 million
  • Net loss was EUR 0.05 million, compared with EUR 3.45 million
  • Basic and diluted net loss per share was EUR 0.003, compared with EUR 0.23 per share

For the year ended December 31, 2009 compared with the prior year:

  • Total revenues were EUR 10.17 million, compared with EUR 7.44 million
  • Operating costs and expenses were EUR 14.75 million, compared with EUR 27.77 million, which included a write-down of assets of EUR 3.40 million
  • Research and development expenses, which are included in operating costs and expenses, were EUR 3.51 million, compared with EUR 9.57 million
  • Operating loss was EUR 4.58 million, compared with EUR 20.33 million, which included a write-down of EUR 3.4 million in assets
  • Interest income/(expense), net, was EUR (0.11) million, compared with EUR 0.25 million
  • Net loss was EUR 4.53 million, compared with EUR 19.90 million, which included a write-down of EUR 3.4 million in assets
  • Basic and diluted net loss per share was EUR 0.30 compared with EUR 1.33 per share
  • Cash used in operating activities was EUR 5.16 million, compared with EUR 12.78 million
  • Cash and cash equivalents amounted to EUR 1.39 million as of December 31, 2009

Recent Company Highlights

Gentium announced that it amended its existing License and Supply and Cost Sharing Agreements with Sigma-Tau Pharmaceuticals, Inc., to include a license for the prevention indication of Defibrotide in the Americas.  Gentium will continue to own exclusive rights to Defibrotide in Europe and the rest of the world.

In March 2010, Gentium announced management and corporate restructuring changes resulting from a strategic decision to consolidate the Company’s resources and operations within Italy.  Mr. Gary Gemignani, Executive Vice-President and Chief Financial Officer is leaving the Company, effective today, but will provide transitional services through a consulting agreement.

The Company presented an abstract containing the final results for the Phase II/III pediatric prevention trial of Defibrotide for the prevention of VOD at the annual meetings of ASH and EBMT. In the intent to treat analysis Defibrotide demonstrated a 40% reduction in the incidence of VOD within 30 days after SCT, the primary endpoint of the study. In addition, a pre-specified analysis showed that the incidence and severity of acute graft versus host disease by day 100 in allogeneic SCT recipients was significantly reduced from 63% for the control arm to 45% for the prophylaxis arm.

Operating Results

Product sales were EUR 9.70 million for 2009 compared to EUR 5.44 million for 2008, an increase of EUR 4.26 million or 78%. The increase was primarily due to the launch in April 2009 of the named-patient program and the launch in September 2009 of the cost recovery program in the U.S.  Named-patient program and cost recovery program sales, net, for the year ended December 31, 2009 amounted to EUR 4.90 million, which are net of EUR 0.79 million of service fees.

The active pharmaceutical ingredient, or API, revenues slightly decreased from EUR 4.79 million in 2008 to EUR 4.6 million, reflecting the decrease in volume of suglicotide offset by a price increase and higher sales volume of urokinase.

Sales to a related party, Sirton, for the year ended December 31, 2009 and 2008 represented 2% and 12% of the total product sales, respectively. The decrease in sales to a related party was primarily due to the fact that in the second quarter of 2009 the Company terminated the supply agreement with Sirton and entered into direct sales agreements with Sirton’s customers in order to mitigate the risk associated with Sirton’s poor financial condition and terminated the supply agreement with Sirton.

Other revenues were EUR 0.47 million for 2009 compared to EUR 1.99 million for 2008. The decrease versus the prior year is primarily attributable to a decrease in activities that were reimbursed from Sigma Tau under our cost sharing agreement, offset by a milestone payment from Sigma-Tau of $0.35 million for completion of the phase III clinical trial.

Cost of goods sold was EUR 4.0 million for 2009 compared to EUR 5.60 million in 2008. Cost of goods sold as a percentage of product sales, net, was 41% in 2009 compared to 103% in 2008. The percentage decrease is primarily due to higher margins on Defibrotide sold through the named-patient program and price increases in the API business. The Company fully expensed the cost of inventory in the prior year.  Additionally, the higher percentage of cost of goods sold in 2008 was primarily due to the fact that product sales to a related party, Sirton, were not recognized in the amount of EUR 1.08 million due to Sirton’s poor financial condition and concerns over the ability to collect such receivables.

The Company incurred research and development expenses of EUR 3.51 million in 2009 compared to EUR 9.57 million for 2008. Research and development expenses in 2009 and 2008 are net of EUR 0.85 and EUR 0.79 million, respectively, of government grants in the form of a tax credit. The decrease from the prior year is mainly due to completion of clinical trials.

General and administrative expenses were EUR 6.04 million in 2009 compared to EUR 7.67 million in 2008. In 2008, we established a reserve for doubtful in accounts in the amount of EUR 1.78 million, of which EUR 0.68 was released in 2009.  Additionally, the Company had lower payroll costs due to the temporary layoffs under a special public fund used in Italy under the “Cassa Integrazione Guadagni” program and decrease in stock based compensation expenses.

In 2008, the Company recorded an impairment of EUR 3.40 million. Write-down of assets include the write-down of acquired trademarks, marketing authorizations, inventory, and the Company’s patents.  The trademarks and marketing authorizations have been written-down due to the expiration and non-renewal by the Company of the distribution agreement with Crinos S.p.A., which raised concern about the ability to recover the cost of these assets.

Interest income/(expense), net amounted to EUR (0.11) million and EUR 0.26 million in 2009 and 2008, respectively. The decrease in interest income/(expense), net is a result of a lower amounts of invested funds in 2009 compared to the prior period as well as a decrease in interest rates.

Net loss was EUR 4.53 million in 2009 compared to EUR 19.90 million in 2008. The difference was primarily due to increased net sales and higher margins associated with the named-patient and cost recovery programs and a decrease in development activities related to the treatment and prevention studies.

The Company ended the fourth quarter of 2009 with EUR 1.39 million in cash and cash equivalents, compared with cash and cash equivalents of EUR 11.49 million as of December 31, 2008. Absent the need to fund any additional clinical trials, management believes that the Company’s cash and cash equivalents, including the upfront payment received from Sigma-Tau Pharmaceuticals, Inc. in connection with the expansion of the license agreement for Defibrotide in the Americas, together with revenues generated from its named-patient and cost recovery programs, will be sufficient to meet the Company’s obligations for at least the next twelve months.

About VOD

Veno-occlusive disease is a potentially life-threatening condition, which typically occurs as an important complication of stem cell transplantation. Certain high-dose conditioning regimens used as part of SCT can damage the lining cells of hepatic blood vessels and so result in VOD, a blockage of the small veins of the liver that leads to liver failure and can result in significant dysfunction in other organs such as the kidneys and lungs (so-called severe VOD). SCT is a frequently used treatment modality following high-dose chemotherapy and radiation therapy for hematologic cancers and other conditions in both adults and children. There is currently no approved agent for the treatment or prevention of VOD in the US or the EU.

About Gentium

Gentium S.p.A., located in Como, Italy, is a biopharmaceutical company focused on the development and manufacture of drugs to treat and prevent a variety of diseases and conditions, including vascular diseases related to cancer and cancer treatments. Defibrotide, the Company’s lead product candidate, is an investigational drug that has been granted Orphan Drug status by the U.S. FDA and Orphan Medicinal Product Designation by the European Commission both to treat and to prevent VOD and Fast Track Designation by the U.S. FDA to treat VOD.

Cautionary Note Regarding Forward-Looking Statements

This press release contains “forward-looking statements.” In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of these terms and other comparable terminology. These statements are not historical facts but instead represent the Company’s belief regarding future results, many of which, by their nature, are inherently uncertain and outside the Company’s control. It is possible that actual results, including with respect to the possibility of any future regulatory approval, may differ materially from those anticipated in these forward-looking statements. For a discussion of some of the risks and important factors that could affect future results, see the discussion in our Form 20-F filed with the Securities and Exchange Commission under the caption “Risk Factors.”

    GENTIUM S.p.A.
    Balance Sheets
    (in thousands, except share data)
                                                     As of December 31,
                                                  2008              2009
    Cash and cash equivalents              EUR  11,491     EUR     1,392
    Accounts receivable                            625             3,213
    Accounts receivable from related
     parties, net                                  816               501
    Inventories, net                               907             1,551
    Prepaid expenses and other current
     assets                                      1,682             1,431
                                                 -----             -----
    Total Current Assets                        15,521             8,088

    Property, manufacturing facility and
     equipment, at cost                         21,019            21,262
    Less: Accumulated depreciation              10,268            11,545
                                                ------            ------
    Property, manufacturing facility and
     equipment, net                             10,751             9,717

    Intangible assets, net of amortization          95                76
    Available for sale securities                  510               263
    Other non-current assets                        24                23
    Total Assets                           EUR  26,901     EUR    18,167
                                                ======            ======

    Accounts payable                       EUR   5,823     EUR     4,379
    Accounts payable to Crinos                   4,000                 -
    Accounts payables to related parties           325               286
    Accrued expenses and other current
     liabilities                                   810             1,907
    Current portion of capital lease
     obligations                                    65                67
    Current maturities of long-term debt         1,346               408
                                                 =====               ===
    Total Current Liabilities                   12,369             7,047

    Long-term debt, net of current
     maturities                                  3,268             3,098
    Capital lease obligation                       158                91
    Termination indemnities                        655               601
                                                   ===               ===
    Total Liabilities                           16,450            10,837

    Share capital (EUR 1.00 and no par
     value as of December 31, 2008 and
     2009, respectively; 18,454,292 and
     18,302,617 shares authorized as of
     December 31, 2008 and 2009,
     respectively; 14,956,317 shares
     issued and outstanding at December
     31, 2008 and 2009)                         14,956           106,962
    Additional paid in capital                  90,619                 -
    Accumulated other comprehensive loss           (17)                -
    Accumulated deficit                        (95,107)          (99,632)
    Total Shareholders' Equity                  10,451             7,330
                                                ------             -----
    Total Liabilities and Shareholders'
     Equity                                EUR  26,901     EUR    18,167
                                                ======            ======

    GENTIUM S.p.A.
    Statements of Operations
    (Unaudited, in thousands, except per share data)

                    For the Three Months Ended           For the Year Ended
                            December 31,                     December 31,
                         2008           2009            2008             2009
    Product sales
     to related
     party            EUR  96         EUR  -        EUR  651         EUR  195
    Product sales
     to third
     parties              944          3,714           4,792            9,507
                          ---          -----           -----            -----
    Total product
     sales              1,040          3,714           5,443            9,702
    Other revenues          -             61              25              129
    Other revenues
     from related
     party                  -            274           1,970              337
                          ---            ---           -----              ---
    Total Revenues      1,040          4,049           7,438           10,168

    Operating costs
     and expenses:
    Cost of goods sold  1,279            872           5,596            4,002
    Research and
     development        1,696            855           9,569            3,512
    General and
     administrative     1,308          2,078           7,668            6,036
    Depreciation and
     amortization         153            210             998              916
    Charges from
     related parties       93             69             537              279
    Write-down of
     acquired assets      351              -           3,403                -
                          ---            ---           -----              ---
                        4,880          4,084          27,771           14,745
    Operating loss     (3,840)           (35)        (20,333)          (4,577)
                       ------            ---         -------           ------

    Foreign currency
     exchange gain
     (loss), net          310             (1)            173              162
    Interest income
     (expense), net        83            (12)            256             (110)

    Loss before
     income tax
     expenses          (3,447)           (48)        (19,904)          (4,525)

    Income tax
     expense                -              -               -                -
    Net loss      EUR  (3,447)      EUR  (48)    EUR (19,904)      EUR (4,525)

    Shares used
     in computing
     net loss per
     share, basic
     and diluted   14,956,317 EUR 14,956,317  EUR 14,956,263   EUR 14,956,317

    Net loss per
     Basic and
     diluted net
     loss per
     share         EUR  (0.23) EUR    (0.003) EUR      (1.33) EUR       (0.30)

    GENTIUM S.p.A.
    Statements of Cash Flows
    (in thousands)
                       For the Three Months Ended        For the Year Ended
                               December 31,                 December 31,
                           2008           2009           2008          2009
    Cash Flows From
    Net loss         EUR (3,447)       EUR (48)   EUR (19,904)   EUR (4,525)
     to reconcile
     net income
     to net cash
     provided by
     (used in)
    Write-down of
     assets                (396)             -          2,175             -
    Write-down of
     inventory            1,228             19          1,228            19
     loss/(gain)            (11)            25           (337)         (223)
     amortization           335            330          1,699         1,300
    Stock based
     compensation           379            329          1,973         1,386
    Loss on fixed
     asset disposal           -              2              7             2
     (release) for
     doubtful accounts       16           (271)         1,783          (684)
    Loss on
     securities               -              2              -             2
    Changes in
     assets and
     receivable            (363)        (1,009)        (1,001)       (2,603)
    Inventories            (105)          (651)          (625)         (663)
     expenses and
     other current
     and noncurrent
     assets                 960            507            568           524
    Accounts payable
     and accrued
     expenses               216          1,416           (310)          363
     indemnities             (3)             -            (31)          (54)
    Net cash
     provided by
     (used in)
     activities          (1,191)           651        (12,775)       (5,156)
                         ------            ---        -------        ------

    Cash Flows
     From Investing
     expenditures            (5)             -           (437)         (245)
     expenditures             -              -           (154)           (3)
    Sales of
     securities               -            262              -           262
    Acquisition of
     Crinos Assets            -              -              -        (4,000)
    Net cash
     provided by
     (used in)
     activities              (5)           262           (591)       (3,986)
                             ---           ---            ----        ------

    Cash Flows
     From Financing
    Proceeds from
     long-term debt         147             -               -             -
    Proceeds from
     warrant and
     stock option
     exercises, net           -             -              38             -
    Repayment of long-
     term debt             (485)         (205)         (1,216)       (1,108)
    Repayment of
     short term
     borrowings               -             -            (279)            -
    Principal payment
     of capital lease
     obligation             (21)          (17)           (107)          (65)
    Proceeds from
     long term debt           -             -             147             -
    Net cash used in
     activities            (359)         (222)         (1,417)       (1,173)
                           ----          ----          ------        ------

     in cash and
     cash equivalents    (1,555)          691          (14,783)     (10,315)
    Effect of exchange
     rate on cash and
     cash equivalents       (53)           (3)             310          216
    Cash and cash
     beginning of
     period              13,099           704           25,964       11,491
    Cash and cash
     end of
     period          EUR 11,491     EUR 1,392       EUR 11,491    EUR 1,392
                         ------         -----           ------        -----
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