Gentium Spa (AMEX:GNT)
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Gentium S.p.A. (AMEX:GNT) (the "Company") today reported
financial results for the quarter and year ended December 31, 2005.
Highlights of the fourth quarter of 2005 and recent weeks as of the
first week in April 2006 include:
-- Phase III trial in U.S. for treatment of Veno-Occlusive
Disease (VOD) with Multiple Organ Failure (Severe VOD): The
Institutional Review Board (IRB) of the Dana-Farber/Harvard
Cancer Center of Boston, Mass., which is also the IRB for
Dana-Farber Cancer Institute, Massachusetts General Hospital,
Beth Israel Deaconess Medical Center and The Children's
Hospital, has given its approval to participate in the trial.
All four of these institutions are expected to participate in
the trial. Work to compile historical control data will begin
immediately, and the first patients are expected to be treated
by early May 2006;
-- Phase II/III clinical trials in Europe for the prevention of
VOD in children: 30 centers have IRB approval, 11 centers are
open for patient admission, 15 patients are enrolled;
-- Independent Phase I/II study of Defibrotide to treat advanced
and refractory Multiple Myeloma (MM) patients 3 centers have
IRB approval and are open for patient enrollment, 5 patents
are enrolled;
-- Phase II/III clinical trials in Europe for the prevention of
VOD in adults: Investigators meeting scheduled for early Q2,
trial expected to start Q2;
-- The Company has recently engaged the first of several medical
monitors, this one being based in the U.S., to act as a
liaison with investigators, IRB's and CRO's; and,
-- The Company has recently updated its investor presentation,
which can found on its web site at www.gentium.it, including
updated estimates on the market size and pricing for VOD based
on research by Medical Marketing Economics, LLC.
Clinical Highlights and Outlook
Commenting on Gentium's clinical progress during the quarter,
Laura Ferro, M.D., Chairman and Chief Executive Officer, said, "We are
excited to be beginning our Phase III trial for the treatment of
Severe VOD with Defibrotide. We note that Defibrotide addresses a life
threatening disease for which there are currently no treatment
options."
Financial Highlights
The Company reports its financial condition and operating results
using U.S. Generally Accepted Accounting Principles (GAAP). The
Company's manufacturing facility was closed from February through
August 2004 for a major upgrade; therefore, comparison of 2005
operating results with 2004 results may not be meaningful. The
Company's financial statements are prepared using the Euro (EUR), its
functional currency. On December 31, 2005, EUR 1.00 = $1.18.
For the fourth quarter ended December 31, 2005 compared with the
prior year's fourth quarter:
-- Total revenues were EUR 1.44 million, compared to EUR 1.23
million
-- Operating costs and expenses were EUR 3.59 million, compared
to EUR 2.97 million
-- Operating loss was EUR 2.15 million, compared to EUR 1.73
million
-- Interest (income) expense, net, was (EUR 0.05) million,
compared to EUR 2.16 million
-- Pre-tax loss was EUR 1.92 million, compared to EUR 4.00
million
-- Net loss was EUR 2.51 million, compared to EUR 4.00 million
-- Basic and diluted net loss per share was EUR 0.27, compared to
EUR 0.80
For the year ended December 31, 2005 compared with the prior year:
-- Total revenues were EUR 3.64 million, compared to EUR 3.70
million
-- Operating costs and expenses were EUR 11.02 million, compared
to EUR 8.45 million
-- Operating loss was EUR 7.38 million, compared to EUR 4.75
million
-- Interest expense, net, was EUR 4.15 million, compared to EUR
2.20 million
-- Pre-tax loss was EUR 11.78 million, compared to EUR 7.0
million
-- Net loss was EUR 12.43 million, compared to EUR 7.03 million
-- Basic and diluted net loss per share was EUR 1.79 compared to
EUR 1.41
-- Cash used in operating activities was EUR 8.7 million,
compared to EUR 4.1 million
-- Cash and cash equivalents amounted to EUR 12.8 million as of
December 31, 2005.
The Company's Italian GAAP financial statements will be presented
for shareholder approval at the Company's upcoming annual ordinary
shareholders' meeting.
Dr. Ferro commented, "We are pleased to report that the EUR 8.7
million of cash used in operations and our capital expenditures for
the year of EUR 1.3 million are in-line with expectations we set at
the time of our IPO. In 2006 we will have a full year of public
company related expenses as well as a full year of our increased
staffing. In addition, the number of clinical trials we are running
will result in a substantial increase in research and development
spending in 2006. These increased expenses will be partially offset by
the significant decrease in interest expense since our Series A notes
were all converted or redeemed in 2005. However, we still expect a
significantly larger loss in 2006 than in 2005. Currently, we expect
to use approximately EUR 15 million of cash in operating activities
and approximately EUR 1.7 million for capital expenditures."
Operating Results and Trends
As noted above, the Company's manufacturing facility was closed
from February through August 2004 for a major upgrade; therefore,
comparisons of 2005 operating results with 2004 results may not be
meaningful.
The fluctuation in product sales revenue for the three- and
twelve-month periods compared with the prior year is primarily the
result of changes in demand by our principal customer, Sirton, who
experienced a slight increase in demand from its principal customer,
Crinos, and for the twelve-month period due to a decrease in sales in
2005 compared to 2004 from a customer in Korea. Total revenues for the
year ended December 31, 2005 were less than in 2004, in spite of an
increase in product sales during the twelve-month period, because of
milestone payments earned in 2004.
Cost of goods sold increased during the three- and twelve-month
periods compared with the prior-year period. The increase is mainly
due to a revision of estimated lives on the Company's manufacturing
facilities and equipment which resulted in lower depreciation expense
in the fourth quarter offset by an inventory write-off and an increase
in quality control costs. Additionally, in the fourth quarter of 2004
the Company expensed some batch costs associated with the start-up of
the revamped manufacturing plant.
Research and development spending increased during the three- and
twelve-month periods in 2005 compared to 2004 primarily due to the
costs for the Company's Phase II trial in the U.S. for the treatment
of Severe VOD and preparations for the Company's Phase III trial.
Additionally, during the fourth quarter of 2005 the Company incurred
expenses in connection with the preparation of its Phase II/III trial
for prevention of VOD in children.
The Company increased its employee headcount from 35 at the end of
2004 to 55 at December 31, 2005. Other general and administrative
expense increases were primarily the result of building corporate
infrastructure, public company expenses and an increase in internally
provided administrative services to replace administrative services
previously provided by affiliates, which began to occur in the second
quarter. These factors also account for the decrease in charges from
affiliates during the periods.
In the fourth quarter of 2004 and the first quarter of 2005, the
Company issued approximately $8.0 million of convertible notes. As a
result, interest expense increased substantially in 2005. In
conjunction with the Company's initial public offering, $2.9 million
of these notes were converted into common equity and the balance was
repaid in June and July of 2005. The Company incurred interest expense
of EUR 4.3 million, which included non-cash interest expense of EUR
3.8 million from amortization of the issue discount and issue costs on
these notes during the year ended December 31, 2005.
In conclusion, Dr. Ferro said, "The coming year promises to be an
important one for Gentium as we continue to move our product
candidates forward toward future potential commercial use."
About Gentium
Gentium, S.p.A., located in Como, Italy, is a biopharmaceutical
company focused on the research, discovery and development of drugs to
treat and prevent a variety of vascular diseases and conditions
related to cancer and cancer treatments.
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 may differ, possibly 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 Prospectus filed with
the Securities and Exchange Commission under Rule 424(b)(5) under the
caption "Risk Factors."
NOTE: All figures in tables are in EUR unless otherwise stated.
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GENTIUM S.p.A.
Balance Sheets
(in thousands, except share data)
As of As of
December December
31, 2004 31, 2005
--------- ---------
ASSETS
Cash and cash equivalents 2,461 12,785
Receivables 9 8
Receivables from related parties 1,490 1,867
Inventories 886 1,628
Prepaid expenses and other current assets 1,617 918
--------- ---------
Total Current Assets 6,463 17,206
Property, manufacturing facility and
equipment, at cost 16,152 17,456
Less: Accumulated depreciation (7,609) (8,825)
--------- ---------
Property, manufacturing facility and
equipment, net 8,543 8,631
Intangible assets, net of amortization 243 267
Other non-current assets 660 9
--------- ---------
Total Assets 15,909 26,113
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
Bank overdraft 100 -
Accounts payable 3,927 2,644
Payables to related parties 1,498 542
Short-term bank borrowings 2,690 -
Accrued expenses and other current
liabilities 432 1,063
Current maturities of long-term debt 2,781 916
Convertible notes payable, net of discount 2,082 -
Deferred income 564 283
--------- ---------
Total Current Liabilities 14,074 5,448
Long-term debt, net of current maturities 3,361 2,485
Termination indemnities 548 706
--------- ---------
Total Liabilities 17,983 8,639
--------- ---------
Share capital (par value: EUR 1.00;
13,300,100 and 12,690,321 shares authorized,
5,000,000 and 9,610,630 shares issued at
December 31, 2004 and 2005, respectively) 5,000 9,611
Additional paid in capital 5,834 33,197
Accumulated deficit (12,908) (25,334)
--------- ---------
Total Shareholders' Equity (Deficit) (2,074) 17,494
--------- ---------
Total Liabilities and Shareholders' Equity 15,909 26,113
========= =========
GENTIUM S.p.A.
Statements of Operations
(Unaudited, in thousands, except per share data)
For the Three Months For the Year Ended
Ended December 31, December 31,
--------------------- ---------------------
2004 2005 2004 2005
---------- ---------- ---------- ----------
Revenues:
Sales to affiliates 1,151 1,360 2,870 3,260
Third party product
sales - 6 243 101
---------- ---------- ---------- ----------
Total product sales 1,151 1,366 3,113 3,361
Other income and
revenues 82 70 583 280
---------- ---------- ---------- ----------
Total Revenues 1,233 1,436 3,696 3,641
Operating costs and
expenses:
Cost of goods sold 1,126 1,199 2,579 2,920
Charges from affiliates 750 266 1,665 1,047
Research and development 461 1,512 2,922 4,629
General and
administrative 592 571 1,194 2,309
Depreciation and
amortization 37 40 89 118
---------- ---------- ---------- ----------
2,966 3,588 8,449 11,023
---------- ---------- ---------- ----------
Operating loss (1,733) (2,152) (4,753) (7,382)
Foreign currency exchange
gain (loss), net (98) 186 (55) (249)
Interest income (expense),
net (2,165) 49 (2,192) (4,148)
---------- ---------- ---------- ----------
Pre-tax loss (3,996) (1,917) (7,000) (11,779)
Income tax expense
(benefit):
Current (113) - 65 -
Deferred 65 (598) (37) (646)
---------- ---------- ---------- ----------
(48) (598) 28 (646)
---------- ---------- ---------- ----------
Net loss (4,004) (2,515) (7,028) (12,425)
========== ========== ========== ==========
Net loss per share:
Basic and diluted net loss
per share (0.80) (0.27) (1.41) (1.79)
========== ========== ========== ==========
Weighted average shares
used to compute basic net
loss per share 5,000,000 9,391,449 5,000,000 6,933,104
========== ========== ========== ==========
Weighted average shares
used to compute diluted
net loss per share 5,000,000 9,391,449 5,000,000 6,933,104
========== ========== ========== ==========
GENTIUM S.p.A.
Statements of Cash Flows
(Unaudited, in thousands)
For the Three For the Year
Months Ended Ended
December 31, December 31,
--------------- ----------------
2004 2005 2004 2005
------- ------- ------- --------
Cash Flows From Operating Activities:
------- ------- ------- --------
Net loss (4,004) (2,515) (7,028) (12,425)
------- ------- ------- --------
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Unrealized foreign exchange loss 313 - 313 575
Depreciation and amortization 386 208 743 1,315
Non cash interest expense 1,972 - 1,972 3,837
Deferred income taxes (benefit) (9) 598 (37) 646
Write down of inventory to net
realizable value - 161 50 291
Stock based compensation 379 216 379 579
Changes in operating assets and
liabilities:
Accounts receivable (1,098) (966) 981 (376)
Inventories 423 (106) 534 (1,033)
Prepaid expenses and other current
assets (659) (206) (1,784) (149)
Accounts payable and accrued
expenses 102 696 359 (1,793)
Deferred income (152) (67) (353) (281)
Termination indemnities 24 13 19 158
Income taxes payable (123) - (304) -
------- ------- ------- --------
Net cash used in operating activities (2,446) (1,968) (4,119) (8,657)
------- ------- ------- --------
Cash Flows From Investing Activities:
Capital expenditures (823) (239) (5,178) (1,263)
Intangible expenditures (19) (63) (163) (124)
------- ------- ------- --------
Net cash used in investing activities (842) (302) (5,341) (1,387)
------- ------- ------- --------
Cash Flows From Financing Activities:
Capital contribution - - - 3,900
Proceeds from long-term debt 2,350 - 5,205 -
Repayments of long-term debt (67) (111) (374) (581)
Proceeds from Series A
convertible Notes 4,477 - 4,477 1,459
Repayment of Series A
convertible Notes - - - (4,221)
Proceeds (repayment) of
affiliate's loan (800) - 2,200 (2,200)
Proceeds (repayment) from bank
overdrafts and short-term
borrowings (779) - 390 (2,790)
Proceeds from initial public
offering and private placement,
net of offering expenses - 8,154 - 24,801
------- ------- ------- --------
Net cash provided by financing
activities 5,181 8,043 11,898 20,368
------- ------- ------- --------
Increase in cash and cash equivalents 1,893 5,773 2,438 10,324
Cash and cash equivalents, beginning
of period 568 7,012 23 2,461
------- ------- ------- --------
Cash and cash equivalents, end of
period 2,461 12,785 2,461 12,785
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