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
ASSETS
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
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
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
Revenues:
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
share:
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
Operating
Activities:
Net loss EUR (3,447) EUR (48) EUR (19,904) EUR (4,525)
Adjustments
to reconcile
net income
to net cash
provided by
(used in)
operating
activities:
Write-down of
intangible
assets (396) - 2,175 -
Write-down of
inventory 1,228 19 1,228 19
Unrealized
foreign
exchange
loss/(gain) (11) 25 (337) (223)
Depreciation
and
amortization 335 330 1,699 1,300
Stock based
compensation 379 329 1,973 1,386
Loss on fixed
asset disposal - 2 7 2
Allowance/
(release) for
doubtful accounts 16 (271) 1,783 (684)
Loss on
marketable
securities - 2 - 2
Changes in
operating
assets and
liabilities:
Accounts
receivable (363) (1,009) (1,001) (2,603)
Inventories (105) (651) (625) (663)
Prepaid
expenses and
other current
and noncurrent
assets 960 507 568 524
Accounts payable
and accrued
expenses 216 1,416 (310) 363
Termination
indemnities (3) - (31) (54)
Net cash
provided by
(used in)
operating
activities (1,191) 651 (12,775) (5,156)
------ --- ------- ------
Cash Flows
From Investing
Activities
Capital
expenditures (5) - (437) (245)
Intangible
assets
expenditures - - (154) (3)
Sales of
marketable
securities - 262 - 262
Acquisition of
Crinos Assets - - - (4,000)
Net cash
provided by
(used in)
investing
activities (5) 262 (591) (3,986)
--- --- ---- ------
Cash Flows
From Financing
Activities:
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
financing
activities (359) (222) (1,417) (1,173)
---- ---- ------ ------
Increase/
(Decrease)
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
equivalents,
beginning of
period 13,099 704 25,964 11,491
Cash and cash
equivalents,
end of
period EUR 11,491 EUR 1,392 EUR 11,491 EUR 1,392
------ ----- ------ -----
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