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For the nine months ended September 30, 2008, the Company reported a netloss of $25.0 million ($0.40 loss per share), as compared to a net loss of$25.5 million ($0.42 loss per share) for the nine months ended September 30,2007. Total cash and short-term investments as of September 30, 2008 were$45.2 million compared to $46.5 million as of December 31, 2007. The net cashburn for the nine months ended September 30, 2008 was $18.9 million beforeconsideration of the equity financing completed in the third quarter.
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The following outlines key achievements completed since our last update:
-- Achieved favorable results from the second stage of a Phase IIaclinical trial of its pandemic VLP vaccine candidate. The vaccinedemonstrated strong neutralizing antibody titers across all three dosestested, exhibiting increasing antibody titers with the escalation of the dose.To date, no serious adverse events have been reported with the final safetydata to be completed by the end of this year.
-- Commenced as planned, our seasonal influenza vaccine Phase IIa doseranging study in September. The Phase IIa randomized, placebo controlledclinical trial will evaluate the safety and immunogenicity of different dosesof our VLP seasonal vaccine in healthy adults, who will receive a singleinjection of either a placebo or a VLP vaccine dose of 5 mcg, 15 mcg or 30mcg. We are on plan to report top line results for this study for bothimmunogenicity and safety by the end of the year.
-- Completed an equity financing of $17.6 million in net proceeds througha registered direct offering of common stock and warrants.
-- Announced our second discovery program for respiratory syncytial virus("RSV"). RSV is the most commonly identified cause of lower respiratory tractinfection in very young children and in certain risk groups, particularly inadults over 65 years of age. As there is no current marketed vaccine for thisdisease, we believe this program addresses a significant unmet medical need.
-- Decided to delay our seasonal influenza dose ranging study in theelderly (>65 years of age) from Q4 2008 to next year, pending top line resultsfrom our ongoing seasonal influenza study in healthy adults. We have observeda slightly different safety profile (non-serious adverse events) from ourPhase IIa trial of our pandemic VLP vaccine, and plan to review and analyzethe dose response curve as well as the safety data from the healthy adultseasonal trial before commencing a study in the elderly.
"We continue to make good progress in our clinical development programs,"said Novavax Chief Executive Officer Dr. Rahul Singhvi. "We now have twovaccines in Phase II clinical trials and plan to have at least one of our twodiscovery vaccines in preclinical studies by the end of this year. Efforts toadvance our Varicella Zoster ("Shingles") discovery program are alsoprogressing. Both of these programs are challenging targets withmulti-billion dollar markets and we believe our VLP approach has the potentialto create credible vaccine candidates for these debilitating diseases. Ourrecently completed equity financing has strengthened our balance sheet andwill enable us to further advance our seasonal influenza program throughcritical Phase II clinical studies, as well as advance our discovery vaccinecandidates into late preclinical studies."
2008 Financial Results
Revenue from continuing operations for the third quarter ended September30, 2008 was $0.2 million compared to $0.8 million for the same period in2007, a decrease of $0.6 million. The change year over year was primarily dueto higher contract research revenues in 2007.
There were no costs of products sold from continuing operations in thethird quarter of 2008 due to the classification of Estrasorb manufacturinginto discontinued operations, as compared to cost of products sold of aninsignificant amount related to Gynodiol sales in the third quarter of 2007.
Research and development costs for the third quarter of 2008 were $8.7million compared to $5.8 million in the third quarter of 2007, an increase of$2.9 million or 50%. The increase in the third quarter of 2008 as compared to2007 was due to higher research and development spending to support theCompany's pandemic influenza and seasonal vaccine clinical trials, as well asadditional supporting pre-clinical studies for our seasonal influenza programconducted during the third quarter of 2008. These increases were primarilyfor increased personnel, facility costs and outside expenses (includingsponsored research, clinical research organization costs and consultingagreements) associated with expanded preclinical studies, human trial studycosts, testing and process development, manufacturing and quality-assuranceand quality-control related activities.
General and administrative costs were $1.3 million in the third quarter of2008 as compared to $3.1 million in the prior year. The decrease of $1.8million in the third quarter of 2008 as compared to the third quarter of 2007was principally due to a correction related to a cumulative adjustment forcharges made to the allowance for former board of directors' notes receivables(a reduction in expenses of $1.2 million), as well as other reductions inemployee related costs. During the third quarter, we concluded that the notesreceivables from former directors should be classified as a reductionstockholders' equity and not an asset as recorded in previous periods.
As a result, losses from continuing operations before net interest incomewas $9.7 million as compared to a loss in 2007 of $8.1 million, or an increasein total losses of $1.6 million.
Interest expense, net of interest income was $0.6 million in the thirdquarter of 2008, as compared to interest income, net of interest expense of$0.3 million for the third quarter of 2007. The change was principally due tolower average cash and short-term investment balances as compared to the prioryear, as well as a reduction in interest income due to the above mentionedreclass of former board of directors' receivables.
Accordingly, the loss from continuing operations was $10.3 million ascompared to $7.8 million in the 2007 comparable quarter.
Discontinued operations are a result of the Company's decision todiscontinue manufacturing of Estrasorb as of December 31, 2007. In February2008, the Company entered into an asset purchase agreement with Gracewayproviding for the sale of certain assets related to Estrasorb. Novavax alsoentered into a supply agreement with Graceway which required the Company tomanufacture additional quantities of Estrasorb. The manufacturing wascompleted as planned in August 2008, and all associated income and expensesfor this activity have been classified as discontinued operations. Incomefrom discontinued operations was $2.5 million in the third quarter of 2008 asall deliverables related to the Graceway agreements were completed. Lossesfrom discontinued operations in the third quarter of 2007 were $1.2 milliondue to excess costs over transfer for production of Estrasorb during thatperiod.
The total net loss when combining the loss from continuing anddiscontinued operations was $7.8 million (representing a loss of $.12 pershare) or a decrease of $1.2 million over the net loss recorded in the thirdquarter of 2007 of $9.0 million (representing a loss of $0.15 per share).
As of September 30, 2008, the Company had $45.2 million in cash andshort-term investments as compared to $46.5 million as of December 31, 2007, anet burn rate of $18.9 million for the nine months ended September 30, 2008excluding the cash infusion from the equity financing completed in the thirdquarter of 2008 (net proceeds of $17.6 million). The net decrease in cash andshort-term investments of $1.3 million was principally due to operating lossesincurred in the nine months ended September 30, 2008 and capital spending forour new GMP pilot plant facility, mostly offset by upfront cash received fromthe sale of assets to Graceway recorded in the first quarter of 2008, theleasehold reimbursement through extending our corporate headquarters leasereceived in June 2008, and the equity financing consummated in the thirdquarter of 2008. The Company believes that with the closing of its equityfinancing, combined with its cash and short-term investments balance atSeptember 30, 2008, it has sufficient funds to execute its current businessplans through the third quarter of 2009, assuming it will have to pay aminimum of $11 million in the third quarter of 2009 for the elimination of thecurrent convertible debt due in July 2009. Novavax expects to accessadditional cash through the potential sale of equity securities, othernon-dilutive financing, or potential partnering agreements.
About Novavax
Novavax, Inc. is a clinical stage biotechnology company, creating novelvaccines to address a broad range of infectious diseases worldwide usingadvanced proprietary virus-like particle (VLP) technology. The Companyproduces these VLP based, potent, recombinant vaccines utilizing new, andefficient manufacturing approaches. Additional information about Novavax isavailable at www.novavax.com and in the Company's various filings with theSecurities and Exchange Commission.
Conference Call
Novavax's management will host its quarterly conference call at 10:00 a.m.Eastern time today. The live conference call will be accessible via Novavax'swebsite at www.novavax.com under Investor/Events or by telephone at(866) 793-1308 (U.S. or Canada) or (703) 639-1310 (International). An archiveof the conference call will be available on Novavax's website approximatelyone hour after the event for 90 days. A replay of the conference call willalso be available by telephone beginning 1pm EST. November 10, 2008 throughmidnight November 13, 2008. To access the replay, dial (888) 266-2081 andenter pass code 1290008.
Forward Looking Statements
Statements herein relating to future development results and performance,conditions or strategies and other matters, including expectations regardingproduct and clinical developments, are forward-looking statements within themeaning of the Private Securities Litigation Reform Act. Novavax cautions thatthese forward-looking statements are subject to numerous assumptions, risksand uncertainties, which change over time. Factors that may cause actualresults to differ materially from the results discussed in the forward-lookingstatements or historical experience include risks relating to the early stageof Novavax's product candidates under development; current results may not bepredictive of future pandemic results, results of our seasonal influenzavaccine or any other vaccine that we may develop; further testing is requiredbefore regulatory approval can be applied for and the FDA may not approve avaccine even if further trial results are similar to those disclosedpreviously by the company; uncertainties relating to clinical trials,including possible delays initiating or completing the trials and safety andimmunogenicity results; dependence on the efforts of third parties;competition for clinical resources and patient enrollment from drug candidatesin development by other companies with greater resources and visibility; andrisks that we may lack the financial resources and access to capital to fundour operations including further clinical trials. Further information on thefactors and risks that could affect Novavax's business, financial conditionsand results of operations, is contained in Novavax's filings with the U.S.Securities and Exchange Commission, which are available at http://www.sec.gov.These forward-looking statements speak only as of the date of this pressrelease, and Novavax assumes no duty to update forward-looking statements.NOVAVAX, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share information) (unaudited) Three months ended Nine months ended September 30, September 30, 2008 2007 2008 2007 Revenues: Net product sales $- $52 $- $(71) Contract research and development 142 710 925 1,019 Royalties, milestone and licensing fees 52 52 69 111 Total revenues 194 814 994 1,059 Operating costs and expenses: Cost of products sold - 12 - 163 Research and development 8,655 5,778 18,469 13,423 General and administrative 1,265 3,085 7,675 11,044 Total operating costs and expenses 9,920 8,875 26,144 24,630 Loss from continuing operations before interest (expense) income, net (9,726) (8,061) (25,150) (23,571) Interest (expense) income, net (604) 291 (597) 1,427 Loss from continuing operations (10,330) (7,770) (25,747) (22,144) Income (loss) from discontinued operations 2,488 (1,196) 778 (3,404) Net loss $(7,842) $(8,966) $(24,969) $(25,548) Basic and diluted net loss per share: Loss per share from continuing operations $(0.16) $(0.13) $(0.41) $(0.36) Gain per share from discontinued operations $0.04 $(0.02) $0.01 $(0.06) Net loss per share $(0.12) $(0.15) $(0.40) $(0.42) Basic and diluted weighted average number of common shares outstanding 66,521,776 61,399,455 62,820,068 61,311,478 SELECTED BALANCE SHEET DATA (in thousands) As of June 30, As of December 31, 2008 2007 (unaudited) Cash and cash equivalents $36,794 $4,350 Short-term investments 8,450 42,139 Total current assets 46,681 49,016 Working capital 16,496 42,810 Total assets 89,519 91,291 Short term debt 21,676 - Long term debt 200 21,369 Stockholders' equity 56,132 63,065
SOURCE Novavax, Inc.
