HOUSTON, Aug. 6, 2007 (PRIME NEWSWIRE) -- Encysive Pharmaceuticals (Nasdaq:ENCY) today announced financial results for the second quarter ended June 30, 2007.
"We continue to make progress commercializing Thelin(r) (sitaxentan sodium) in Europe, and recognize there is much more work to do including launches in additional countries, before we will have fully realized the value of Thelin(tm). We have significantly reorganized the Company in order to better manage the challenges ahead, and are taking the appropriate steps in order to maximize the value of the assets we have while reducing our expenses," said George W. Cole, President and CEO of Encysive Pharmaceuticals. "While we were very disappointed in the Food and Drug Administration's (FDA) decision to not approve Thelin(tm) at this time, we will continue to work to obtain approval."
Second Quarter 2007 Financial Overview
* Revenues of $8.9 million for the second quarter of 2007,
compared to $3.7 million for the second quarter of 2006,
reflected approximately $2.0 million in Thelin(r) European
sales and a year-over-year increase in Argatroban royalty
income of approximately $3.0 million. The growth in Argatroban
royalty income, which was responsible for the year-over-year
increase in revenues, was due to higher sales of Argatroban and
a corresponding higher royalty rate, as cumulative sales
reached a higher royalty tier within the agreement. Since the
Argatroban royalty income is used to pay the outstanding
Argatroban notes, the royalty income is not available to fund
our operational requirements.
* For the second quarter of 2007, the Company reported a net
loss of $33.9 million, or $0.50 per basic and diluted share,
compared to a net loss of $28.0 million, or $0.48 per basic
and diluted share, for the same period in 2006. The net loss
for the second quarter included a restructuring charge of
approximately $7.9 million as described in more detail below.
* Research and development spending for the second quarter of
2007 of $16.7 million, was higher than last year's R&D spending
in the second quarter of $14.7 million, due to ongoing
long-term safety studies of Thelin(tm) (STRIDE-3), the Phase II
study evaluating Thelin(tm) in diastolic heart failure, Phase II
dose-ranging study of oral TBC3711, the Company's
next-generation, highly selective endothelin receptor
antagonist, in resistant hypertension, and support of global
Thelin(tm) regulatory submissions.
* Sales and marketing expenses were $9.6 million for the current
quarter as compared to $11.8 million for the second quarter in
2006. General and administrative expenses were $6.3 million
for the second quarter of 2007, as compared to $5.4 million
during the same period in 2006. We expect these expenses to
decrease going forward as a result of the restructuring of the
organization.
* Cash, cash equivalents and accrued interest at June 30, 2007
was $65 million, compared to $43.8 million at December 31,
2006. The June 30 balance includes $27.1 million in net
proceeds from the Company's equity line of credit with
Azimuth Opportunity, Ltd., approximately $10.2 million of
previously restricted cash, related to the Argatroban notes
received upon the resolution of a United Kingdom tax
withholding issue, and approximately $4.3 million in
Argatroban royalties which was used to pay principal and
interest on the Argatroban notes on July 2.
At the end of the second quarter the Company announced that it is implementing a strategic restructuring in order to focus its resources on its most promising assets. The Company's U.S. workforce was reduced by approximately 150 employees, including its U.S. sales force. The Company also eliminated the position of Chief Operating Officer.
Cash severance payments were provided to employees directly affected by the workforce reduction. The Company estimates that it will record approximately $15 million in restructuring and severance costs in 2007, of which approximately $7.9 million was recorded in the second quarter. The Company also expects that, as a result of the strategic restructuring, its ongoing quarterly operating expenses will be approximately $20 million in Q3 2007, reducing to approximately $15 million in Q4 2007.
Q2 and Recent Company Highlights
* On June 15, the Company announced that it received a third
approvable letter from the FDA for Thelin(tm) (sitaxsentan
sodium), which is under review for the treatment of pulmonary
arterial hypertension (PAH). In this third approvable letter,
the FDA stated that Encysive's development program for
Thelin(tm) did not demonstrate the evidence of effectiveness
needed for approval. The FDA did note, however, that the
Thelin(tm) development program provides some evidence that
Thelin(tm) improves exercise tolerance in PAH. The FDA
encouraged the Company to conduct an additional study to
demonstrate the drug's effectiveness in exercise capacity as
measured by change in six-minute walk distance.
* In July, the Company and officials from the FDA held a formal
Class A preliminary dispute resolution meeting regarding the
June 15 approvable letter. This meeting complies with the
FDA's guidance on formal dispute resolution, which requires
that a sponsor meet with the division reviewing its New Drug
Application (NDA) prior to requesting formal dispute resolution.
* Also in July, the Company announced that it had retained the
investment banking firm of Morgan Stanley to assist in
evaluating its strategic alternatives to maximize shareholder
value.
* In May 2007, Health Canada's Therapeutic Products Directorate
granted marketing approval for Thelin(tm) (sitaxentan sodium)
100 mg tablets for patients with PAH. The Company is now
seeking reimbursement approval in Canada and anticipates
commercial launch of the product later this year.
* The Company announced the commercial availability of Thelin(r)
for PAH in the Republic of Ireland and in The Netherlands in
April 2007. The European Commission's centralized licensing
procedure permits Encysive to market Thelin(r) in all 27
member states of the European Union. Thelin(r) will be
commercialized in other European countries as local
government reimbursement approvals are obtained.
* In June 2007, the Company announced that George W. Cole has
been promoted to the position of President and Chief Executive
Officer and has also been elected as a member of the Board of
Directors.
* In July 2007, Richard A. Goeggel became the Company's
Principal Accounting Officer after Gordon H. Busenbark resigned
as Chief Financial Officer of the Company. The Company has
not announced its plans regarding the CFO position.
* The Company announced in June its plans to close STRIDE-3 in
the U.S. and Latin America by year end. European, Canadian
and Australian sites will continue to operate. STRIDE-3 is an
open label trial of Thelin(tm) in PAH.
* The Company also said in June that it intends to continue with
the clinical development of TBC3711, Encysive's
second-generation endothelin antagonist. A Phase II dose
ranging study in resistant hypertension is currently underway.
In addition, there is an I.V. formulation of TBC3711 in
development for an undisclosed indication. The Company also
continues enrolling a Phase II proof of concept study of oral
Thelin(tm) as a treatment for diastolic heart failure. The
Company is also completing activities to maintain the value of
its Chemokine C-motif Receptor 9, (CCR9 receptor antagonist)
and its two late stage pre-clinical programs against an
undisclosed target.
* As of June 1, 2007, the Company had closed an aggregate of
five draw down requests under the stock purchase agreement
with Azimuth Opportunity Ltd. and had received aggregate gross
proceeds of approximately $45.4 million, and net proceeds of
approximately $44.9 million after deducting estimated
offering expenses. As a result of the five draw down requests,
the Company has issued the maximum number of shares of the
Company's common stock permitted to be issued under the stock
purchase agreement and the stock purchase agreement terminated
pursuant to its terms.
* In May, Encysive announced its plans to participate in three
European medical conferences during 2007, and that it would
provide educational funding to two rheumatology-related
organizations -- EULAR Scleroderma Trials and Research (EUSTAR)
group and the Outcome Measures in Rheumatology (OMERACT)
initiative, in order to further advance its commitment to
scientific research and medical education for PAH and related
diseases.
Upcoming Events
September 1-5 European Society of Cardiology (ESC), Vienna September 15-19 European Respiratory Society (ERS), Stockholm
Conference Call Information
Encysive will host a conference call today, Monday, August 6 at 4:30 p.m. ET, to discuss second quarter 2007 financial results. You may access the call either through the call-in number below or through the audio webcast. The access number for the call is:
Number: (612) 288-0340
Passcode: Encysive Pharmaceuticals
This call is being webcast and can be accessed via Encysive's web site at www.encysive.com.
A replay of the webcast will be available on the Company's web site through September 6, 2007. Additionally, a replay of the call will be available until Friday, August 10, 2007 at 11:59 p.m. ET. The call replay can be accessed by calling:
Number: (320) 365-3844
Access Code: 881446
About Encysive Pharmaceuticals
Encysive Pharmaceuticals Inc. is a global biopharmaceutical company engaged in the discovery, development and commercialization of novel, synthetic, small molecule compounds to address unmet medical needs. Our research and development programs are predominantly focused on the treatment and prevention of interrelated diseases of the vascular endothelium and exploit our expertise in the area of the intravascular inflammatory process, referred to as the inflammatory cascade, and vascular diseases. To learn more about Encysive Pharmaceuticals please visit our web site: http://www.encysive.com.
The Encysive Pharmaceuticals Inc. logo is available at http://media.primezone.com/prs/single/?pkgid=843
This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected. Among those risks, trends and uncertainties are: unexpected delays in regulatory approval of Thelin(tm) by the FDA in the U.S. and our other products under development, including TBC3711; the unpredictability of the duration and results of regulatory review of new drug applications and investigational new drug applications by the FDA; decisions by the FDA regarding whether and when to approve our NDA for Thelin; our estimate of the sufficiency of our existing capital resources; our ability to raise additional capital to fund cash requirements for future operations; the availability of sufficient funds to commercialize Thelin(tm) in the U.S. should it be approved by the FDA; market acceptance of Thelin(tm) in the EU, Canada and Australia and the actual rate of acceptance; the impact of reimbursement policies and governmental regulation of prices for Thelin(tm) in the EU, Canada and Australia; our inability to predict revenues from Thelin(tm) and our expense levels in 2007 and beyond; the ability of our subsidiary to repay the notes secured by royalties on the sales of Argatroban; our ability to execute our revised strategic plan and the impact of reducing our workforce on our strategic plan; our ability to enter into or consummate a definitive transaction as a result of evaluation of strategic alternatives or our ability to maximize stockholder value through this process; the actual costs incurred in our restructuring; our ability to retain key personnel; our ability to manufacture and sell any products, potential drug candidates, their potential therapeutic effect, market acceptance or our ability to earn a profit from sales or licenses of any drug candidate; and our ability to discover new drugs in the future, as well as more specific risks, trends and uncertainties facing Encysive such as those set forth in its reports on Forms 8-K, 10-Q and 10-K filed with the U.S. Securities and Exchange Commission. Given these risks, trends and uncertainties, any or all of these forward-looking statements may prove to be incorrect. Therefore you should not rely on any such forward-looking statements. Furthermore, Encysive undertakes no duty to update or revise these forward-looking statements. The Private Securities Litigation Reform Act of 1995 permits this discussion.
ENCYSIVE PHARMACEUTICALS INC. AND SUBSIDIARIES
UNAUDITED SELECTED FINANCIAL DATA
Amounts in thousands (except per share data)
Consolidated Summary of Operations
----------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2007 2006 2007 2006
---- ---- ---- ----
Revenues $ 8,937 $ 3,662 $ 14,345 $ 7,223
Operating expenses:
Cost of goods sold 411 -- 477 --
Research and development 16,685 14,676 34,184 33,055
Sales and marketing 9,590 11,767 20,476 21,603
General and
administrative 6,277 5,364 11,893 11,106
Restructuring Expense 7,942 -- 7,942 --
-------- -------- -------- --------
Total expenses 40,905 31,807 74,972 65,764
-------- -------- -------- --------
Operating loss (31,968) (28,145) (60,627) (58,541)
Investment income 840 1,085 1,635 2,384
Interest expense (2,744) (978) (4,788) (1,958)
--------- --------- --------- ---------
Loss before cumulative
effect of change in
accounting principle $(33,872) $(28,038) $(63,780) $(58,115)
Cumulative effect of
change in accounting
principle -- -- -- 107
-------- -------- -------- --------
Net loss $(33,872) $(28,038) $(63,780) $(58,008)
Net loss per common share
Basic and diluted $ (0.50) $ (0.48) $ (0.99) $ (0.99)
======== ======== ======== ========
Weighted average common
shares
Outstanding: basic and
diluted 67,558 58,465 64,617 58,368
======== ======== ======== ========
Condensed Consolidated Balance Sheets
-------------------------------------
June 30, 2007 December 31, 2006
------------- -----------------
Assets:
Cash, cash equivalents and
accrued interest $ 65,033 $ 43,798
Restricted cash 97 --
Other assets 25,609 19,339
---------- ---------
Total assets 90,739 63,137
========== =========
Liabilities and stockholders'
deficit
Current liabilities 34,012 26,854
Long-term debt 186,038 130,000
---------- ---------
Total liabilities 220,050 156,854
Stockholders' deficit (129,311) (93,717)
---------- ---------
Liabilities and stockholders'
deficit $ 90,739 $ 63,137
========== =========