Nastech Announces First Quarter 2008 Financial Results

  
    
  
  
    
      Nastech Pharmaceutical Company Inc. (Nasdaq: NSTK) today reported 
      financial results for the quarter ended March 31, 2008.
    
    
      Revenue for the three months ended March 31, 2008, was $1.3 million, 
      compared to $5.0 million for the three months ended March 31, 2007. The 
      2008 period included $0.1 million in government grant revenue and $0.5 
      million in Nascobal® product sales. The $0.7 
      million in license and research fee revenue was primarily related to 
      amortization of deferred revenue from a $2.0 million payment received in 
      2005 from QOL Medical and revenue from feasibility program partners. The 
      2007 period primarily included revenue from the Company’s 
      collaborations with Procter & Gamble Pharmaceuticals, Inc. and Novo 
      Nordisk A/S.
    
    
      Net loss for the current quarter was approximately $16.5 million or 
      $0.63 per share, as compared to a net loss of $11.5 million or $0.47 per 
      share for the prior year period. The increase in net loss from the prior 
      year period was primarily due to lower revenue and $1.9 million in 
      restructuring charges, discussed below.
    
    
      Research and development expenses for the first quarter of 2008 were 
      approximately $10.9 million, a decrease of $2.0 million versus the first 
      quarter of 2007. In 2007, Nastech initiated Phase 2 clinical trials to 
      evaluate its PYY(3-36) nasal spray in obese 
      patients and its rapid acting insulin nasal spray in patients with type 
      2 diabetes, an efficacy and safety study to evaluate its PTH(1-34) 
      nasal spray for the treatment of osteoporosis and a Phase 1 study for 
      its carbetocin nasal spray for patients with autism, causing a related 
      increase in R&D expenses. Nastech discontinued its PTH(1-34) 
      clinical trial in the first quarter of 2008. Selling, general and 
      administrative expenses increased by $0.5 million to approximately $4.8 
      million for the first quarter of 2008 in comparison to the prior year 
      period, due primarily to increased patent legal expenses, partially 
      offset by reduced personnel-related expenses as management continued to 
      implement its restructuring and cost containment efforts. Nastech 
      recorded a restructuring charge in the first quarter of 2008 of $1.9 
      million, primarily comprised of employee severance and related costs of 
      approximately $1.6 million (of which approximately $0.6 million was paid 
      in the first quarter 2008 and the remainder will be paid in second 
      quarter 2008) and $0.3 million in net clinical trial termination fees 
      related to the termination of the Company’s PTH(1-34) 
      clinical trial as discussed above.
    
    
      Nastech ended the first quarter of 2008 with approximately $24.1 million 
      in cash, cash equivalents and short term investments, compared to $41.6 
      million at the end of 2007, including $2.2 million in restricted cash at 
      each date. In April 2008, Nastech raised net proceeds of approximately 
      $7.2 million in a registered direct offering, adding to the balances 
      reported above at the end of the first quarter.
    
    
      CORPORATE HIGHLIGHTS
    
    
      
        Announced corporate restructuring to reduce costs and bring resources 
        and staff into alignment to achieve key corporate objectives for 2008,
      
      
        Received approximately $7.2 million, net, in a registered direct 
        offering,
      
      
        Initiated U.S. arm of Phase 2 study with the Company’s 
        rapid acting intranasal insulin for diabetes. Final Phase 2 data to be 
        reported at the 68th Scientific Sessions 
        meeting of the American Diabetes Association in San Francisco in June,
      
      
        Completed enrollment of the Phase 2 clinical trail in PYY(3-36) 
        for obesity. Final Phase 2 data to be presented in October,
      
      
        Filed 83 U.S. and European patents pertaining to RNAi,
      
      
        Appointed Scientific Advisory Board for MDRNA Research, Inc., formerly 
        MDRNA, Inc., the Company’s wholly owned RNAi 
        subsidiary,
      
      
        Engaged BMO Capital Markets as Nastech’s 
        strategic advisor to assist the Company in identifying a partner or 
        partners to further develop and commercialize the Company’s 
        intranasal programs through either a sale or licensing transaction.
      
    
    
      Conference Call and Webcast Information
    
    
      Management will host a conference call to review first quarter financial 
      results for the period ended March 31, 2008, and recent business 
      developments. The call is scheduled for today, May 8, 2008, at 4:30 p.m. 
      Eastern Time (1:30 p.m. Pacific Time). To participate in the live 
      conference call, U.S. residents should dial 800-638-5439 and 
      international callers should dial 617-614-3945. The access code for the 
      live conference call is 67443467. To access the 24-hour telephone 
      replay, U.S. residents should dial 888-286-8010 and international 
      callers should dial 617-801-6888. The access code for the replay is 
      97916996.
    
    
      Alternatively, log on to http://www.nastech.com 
      to access a live webcast or the subsequent 30-day archive. Please 
      connect to the Investor section of Nastech's Web site several minutes 
      prior to the start of the live conference call to ensure adequate time 
      for any software download that may be necessary.
    
    
      About Nastech
    
    
      Nastech is a clinical stage biopharmaceutical company focusing on the 
      development and commercialization of innovative therapeutic products 
      based on its proprietary ribonucleic acid interference technology and 
      its proprietary molecular biology-based drug delivery technologies. 
      Nastech and its collaboration partners are developing products for 
      multiple therapeutic areas including diabetes, obesity, osteoporosis, 
      autism, respiratory diseases and inflammatory conditions. Additional 
      information about Nastech is available at http://www.nastech.com.
    
    
      Nastech Forward Looking Statements
    
    
      Statements made in this news release may be forward-looking statements 
      within the meaning of Federal Securities laws that are subject to 
      certain risks and uncertainties and involve factors that may cause 
      actual results to differ materially from those projected or suggested. 
      Factors that could cause actual results to differ materially from those 
      in forward-looking statements include, but are not limited to: (i) the 
      ability of Nastech or a subsidiary to obtain additional funding; (ii) 
      the ability of Nastech or a subsidiary to attract and/or maintain 
      manufacturing, research, development and commercialization partners; 
      (iii) the ability of Nastech, a subsidiary and/or a partner to 
      successfully complete product research and development, including 
      preclinical and clinical studies and commercialization; (iv) the ability 
      of Nastech, a subsidiary and/or a partner to obtain required 
      governmental approvals; and (v) the ability of Nastech, a subsidiary 
      and/or a partner to develop and commercialize products that can compete 
      favorably with those of competitors. Additional factors that could cause 
      actual results to differ materially from those projected or suggested in 
      any forward-looking statements are contained in Nastech's most recent 
      periodic reports on Form 10-K and Form 10-Q that are filed with the 
      Securities and Exchange Commission. Nastech assumes no obligation to 
      update and supplement forward-looking statements because of subsequent 
      events.
    
    
      Financial Tables Follow
    
    
      
        
          
            NASTECH PHARMACEUTICAL COMPANY INC. AND SUBSIDIARIES
          
          
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
          
          
            (In Thousands, Except Per Share Data)
          
        
      
      
        
        
        
           
        
      
      
        
        
        
          Three Months Ended
        
      
      
        
        
        
          March 31,
        
      
      
        
        
        
           
        
        
          2007
        
        
           
        
        
           
        
        
           
        
        
          2008
        
        
           
        
      
      
        
        
        
          
            (Unaudited)
          
        
      
      
        
          Revenue
        
        
        
        
        
        
        
      
      
        
          License and research fees
        
        
          $
        
        
          4,672
        
        
        
        
        
        
          $
        
        
          682
        
        
        
      
      
        
          Government grants
        
        
        
        
          100
        
        
        
        
        
        
        
        
          93
        
        
        
      
      
        
          Product revenue
        
        
           
        
        
          220
        
        
           
        
        
        
        
           
        
        
          488
        
        
           
        
      
      
        
          Total revenue
        
        
           
        
        
          4,992
        
        
           
        
        
        
        
           
        
        
          1,263
        
        
           
        
      
      
        
          Operating expenses:
        
        
        
        
        
        
        
      
      
        
          Cost of product revenue
        
        
        
        
          59
        
        
        
        
        
        
        
        
          164
        
        
        
      
      
        
          Research and development
        
        
        
        
          12,874
        
        
        
        
        
        
        
        
          10,926
        
        
        
      
      
        
          Selling, general and administrative
        
        
        
        
          4,285
        
        
        
        
        
        
        
        
          4,802
        
        
        
      
      
        
          Restructuring
        
        
           
        
        
          ---
        
        
           
        
        
        
        
           
        
        
          1,917
        
        
           
        
      
      
        
          Total operating expenses
        
        
           
        
        
          17,218
        
        
           
        
        
        
        
           
        
        
          17,809
        
        
           
        
      
      
        
          Loss from operations
        
        
        
        
          (12,226
        
        
          )
        
        
        
        
        
        
          (16,546
        
        
          )
        
      
      
        
          Other income (expense):
        
        
        
        
        
        
        
      
      
        
          Interest income
        
        
        
        
          957
        
        
        
        
        
        
        
        
          293
        
        
        
      
      
        
          Interest and other expense
        
        
           
        
        
          (271
        
        
          )
        
        
        
        
           
        
        
          (265
        
        
          )
        
      
      
        
          Net Loss
        
        
          $
        
        
          (11,540
        
        
          )
        
        
        
        
          $
        
        
          (16,518
        
        
          )
        
      
      
        
          Basic and diluted net loss per share:
        
        
        
        
        
        
        
      
      
        
          Net loss per common share — basic and 
          diluted
        
        
          $
        
        
          (0.47
        
        
          )
        
        
        
        
          $
        
        
          (0.63
        
        
          )
        
      
      
        
          Shares used in computing net loss per share - basic and diluted
        
        
           
        
        
          24,549
        
        
           
        
        
        
        
           
        
        
          26,211
        
        
           
        
      
    
    
      
        
          Selected Balance Sheet Data (In Thousands)
        
        
          December 31,

          
            2007
          
        
        
          
             
          
        
        
          March 31,

          
            2008
          
        
      
      
        
        
        
        
        
        
        
          (Unaudited)
        
      
      
        
          Cash, cash equivalents and investments

          
            (includes restricted cash of $2,155)
          
        
        
          $
        
        
          41,573
        
        
        
        
        
        
          $
        
        
          24,122
        
        
        
      
      
        
          Accounts receivable, net
        
        
        
        
          324
        
        
        
        
        
        
        
        
          353
        
        
        
      
      
        
          Property and equipment, inventories and other assets
        
        
        
        
          19,719
        
        
        
        
        
        
        
        
          18,993
        
        
        
      
      
        
          Total assets
        
        
        
        
          61,616
        
        
        
        
        
        
        
        
          43,468
        
        
        
      
      
        
          Working capital
        
        
        
        
          31,111
        
        
        
        
        
        
        
        
          15,881
        
        
        
      
      
        
          Accumulated deficit
        
        
        
        
          (194,865
        
        
          )
        
        
        
        
        
        
          (211,383
        
        
          )
        
      
      
        
          Stockholders’ equity
        
        
           
        
        
          39,220
        
        
           
        
        
           
        
        
           
        
        
          24,124