CARLSBAD, Calif., May 12 Isis Pharmaceuticals,Inc. (Nasdaq: ISIS) today announced its financial results for the quarterended March 31, 2008. The Company finished the quarter with a pro forma netoperating loss (NOL) of $5.1 million, excluding compensation expense relatedto stock options, compared to a pro forma NOL of $18.5 million in the firstquarter of 2007. This 73% reduction in NOL was driven primarily bysignificantly increased revenue from Isis' successful partnering activities.On a GAAP basis, Isis recorded a 2008 loss from operations for the quarter of$8.8 million, compared to $20.9 million in the first quarter of 2007, a 58%decrease. Isis remains on track to meet its 2008 guidance for a NOL,excluding non-cash compensation expense, of less than $15 million.
"Isis ends the first quarter of 2008 in the strongest financial positionin our history, and we are on track to meet our NOL and cash guidance for theyear. As a result of recent transactions, both Ibis and Regulus are fullyfunded and are tangible examples of the value being created through oursatellite company strategy," said B. Lynne Parshall, Chief Operating Officerand Chief Financial Officer of Isis. "In addition to the significant cashposition with which we ended 2007, we have received $192 million in cash sofar in 2008 to end the quarter with nearly $340 million."
Results of Operations
The 58% decrease in the Company's loss from operations for the firstquarter of 2008 compared to the first quarter of 2007 was primarily a resultof a significant increase in revenue in 2008 from Isis' corporatepartnerships, offset in part, by higher expenses associated with the expansionof the companies' key programs and an increase in non-cash stock compensationexpense reflecting the increase in Isis' stock price from the first quarter of2007 to the first quarter of 2008. The reasons for the decrease in theCompany's pro forma loss from operations were the same as those for thedecrease in the Company's loss from operations according to GAAP other thanthe effect of non-cash compensation expense related to stock options. Thereconciliation of pro forma and GAAP measures is explained later in thisrelease.
Total revenue for the first quarter of 2008 was $21.4 million compared to$2.5 million for the first quarter of 2007. Revenue was significantly higherin the first quarter of 2008 due to the addition of revenue from newcollaborations. As part of Isis' new strategic relationship with GenzymeCorporation, Genzyme purchased $150 million of Isis stock at $30 per share.Isis is amortizing the premium on the stock, $100 million calculated using aBlack-Scholes option valuation model, over the four-year period of thecollaboration beginning in the first quarter of 2008. Also contributing tothe increase in Isis' revenue was an increase in Ibis' revenue, which isdiscussed further in the Ibis Biosciences section below.
On a pro forma basis, operating expenses for the quarter ended March 31,2008 were $26.4 million compared to $21.0 million for the same period in 2007.Isis has expanded its clinical development programs as its drugs advance indevelopment, resulting in an increase in operating expenses of $1.5 million inthe first quarter of 2008 compared to the first quarter of 2007.Additionally, Ibis' operating expenses have increased by $2.2 million tosupport the growth of its commercial business and the cost of activities toachieve milestones as part of Abbott's investment and purchase option. Alsocontributing to the increase in operating expenses was $1.5 million ofexpenses associated with Isis' joint venture, Regulus, which are expected toincrease over the year as Regulus increases its staffing and operations.
On a GAAP basis, Isis' operating expenses for the quarter ended March 31,2008 were $30.2 million compared to $23.4 million for the same per