Pharmos Corporation Reports 2008 Third Quarter Results

Friday, November 7, 2008 General News
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ISELIN, N.J., Nov. 6 Pharmos Corporation(Nasdaq: PARS) today reported results for the third quarter ended September30, 2008. The Company recorded a net loss of $2.8 million, or $0.11 per share,for the third quarter 2008 compared to a net loss of $3.5 million, or $0.14per share, in the third quarter 2007. Cash and cash equivalents totaled $6.1million at September 30, 2008.

The decrease in net loss for the third quarter 2008 is due primarily to a26% decrease in operating expenses to $2.8 million from $3.7 million in thethird quarter 2007. The decline in operating expenses resulted from a 16%decrease in gross research and development expenses to $2.3 million comparedto $2.7 million in the third quarter 2007. Also general and administrativeexpenses decreased 64% to $0.4 million from $1.2 million in the third quarter2007.

During the third quarter, the Company advanced a Phase IIb trial of itslead compound, dextofisopam, in female IBS patients. The Phase IIb trial isexpected to enroll approximately 480 patients in about 70 sites in the UnitedStates. Costs of $1,734,000 were incurred during the quarter in connectionwith the trial, comprising CRO-related activities and patient recruitmentcosts. The company is currently using two CRO's to enhance enrollment in thePhase IIb trial, using a variety of advertising tactics. The Company iscurrently behind its originally planned enrollment and now expects top linedata to be available in the second half of 2009. Dextofisopam was one of thecompounds the Company obtained through the acquisition of Vela PharmaceuticalsInc which closed in October 2006. The continued development of this compoundthrough late-stage clinical testing will increase the research and developmentexpenses going forward.

A Phase 2a clinical trial with the Company's NanoEmulsion deliverytechnology for topical application of analgesic and anti-inflammatory agentscommenced in June 2007 targeting 126 patients. Top line results are expectedin the fourth quarter of 2008.

General and administrative expenses for the third quarter of 2008decreased by 64%, from $1.2 million in 2007 to $0.4 million. The declinereflects decreases in virtually every general and administrative expensecategory. The primary reductions include a $468,000 reduction in payroll, a$93,000 reduction in consultant and professional fees and a $93,000 reductionin BOD fees. The decrease in payroll costs reflect the impact of the thirdand fourth quarter 2007 restructuring plans which have reduced the Company'shead count from 51 employees in March 2007 to 11 employees at the end ofSeptember 2008. The decrease in consulting and professional fees in 2008result from a decline in legal costs and investor relation costs, and a onetime IRS section 382 tax analysis cost incurred in 2007. The decrease in theBOD meeting costs result from board members receiving Company common stock inlieu of cash payments.

For the first nine months ended September 30, 2008, Pharmos recorded a netloss of $9.1 million, or $0.35 per share compared to a net loss of $12.9million, or $0.51 per share for the nine months ended September 30, 2007.Total operating expenses decreased 35% to $9.0 million from $13.7 million.Gross research and development expenses decreased 22% to $7.2 million from$9.3 million for the nine months ended September 30, 2007 primarily related tothe Company's focus of cash resources on the Dextofisopam Phase 2b trial andthe downsizing and curtailment of general research and development programs.Also a 66% decrease in general and administrative expenses to $1.7 millionfrom $5.0 million due to the decrease in consulting and professional fees in2008 result from non recurring 2007 costs related to contractual paymentobligations associated with the retirement of the Company's chief executiveofficer, higher legal and accounting fees in 2007, a one time IRS section 382tax analysis cost incurred in 2007, a non recurring recruitment fee of $42,000in 2007 and higher BOD meeting costs in 2007.

The company believes that the current cash and cash equivalents totaling$6.1 million as of September 30, 2008 will be sufficient to support thecurrently planned continuing operations through at least December 31, 2008.The company is actively pursuing efforts to raise additional capital but therecan be no assurance that such efforts will be successful.

About Pharmos Corporation

Pharmos discovers and develops novel therapeutics to treat a range ofindications including specific diseases of the nervous system such asdisorders of the brain-gut axis (GI/IBS), pain/inflammation, and autoimmunedisorders. The Company's lead product in development, dextofisopam, isundergoing Phase 2b testing in IBS patients. Dextofisopam has completed aPhase 2a IBS study in which it demonstrated a statistically significant effectcompared to placebo on the primary efficacy endpoint of adequate relief(n=141, p=0.033). The Company also has a proprietary technology platformfocusing on discovery and development of synthetic cannabinoid compounds witha focus on CB2 receptor selective agonists. Various CB2-selective compoundsfrom Pharmos' pipeline have completed preclinical studies targeting pain,multiple sclerosis, rheumatoid arthritis, inflammatory bowel disease and otherdisorders. Pharmos is also working to commercialize its proprietaryNanoEmulsion drug delivery system, which is in clinical-stage development fortopical application of analgesic and anti-inflammatory agents.

Safe Harbor Statement

Statements made in this press release related to the business outlook andfuture financial performance of Pharmos, to the prospective market penetrationof its drug products, to the development and commercialization of its pipelineproducts and to its expectations in connection with any future event,condition, performance or other matter, are forward-looking and are madepursuant to the safe harbor provisions of the Securities Litigation Reform Actof 1995. Such statements involve risks and uncertainties that may causeresults to differ materially from those set forth in these statements.Additional economic, competitive, governmental, technological, marketing andother factors identified in Pharmos' filings with the Securities and ExchangeCommission could affect such results.PHARMOS CORPORATION (Unaudited) Condensed Consolidated Statements of Operations Three months ended Nine months ended September 30, September 30, -------------------------------------------------- 2008 2007 2008 2007 ---------- ---------- ---------- ---------- Expenses Research and development, gross $2,298,882 $2,711,774 $7,206,909 $9,285,543 Grants - (238,123) - (769,072) ---------- ---------- ---------- ---------- Research and development, net of grants 2,298,882 2,473,651 7,206,909 8,516,471 General and administrative 436,758 1,200,594 1,687,747 4,998,725 Depreciation and amortization 24,853 57,946 89,514 194,581 ---------- ---------- ---------- ---------- Total operating expenses 2,760,493 3,732,191 8,984,170 13,709,777 ---------- ---------- ---------- ---------- Loss from operations (2,760,493) (3,732,191) (8,984,170) (13,709,777) ---------- ---------- ---------- ---------- Other (expense) income Interest income 43,061 198,703 238,152 782,146 Change in value of warrants - - - 11,435 Interest expense (122,580) - (369,294) - Other income (expense) (4,340) (5,067) 8,519 (12,857) ---------- ---------- ---------- ---------- Other (expense) income, net (83,859) 193,636 (122,623) 780,724 ---------- ---------- ---------- ---------- Net income (loss) ($2,844,352) ($3,538,555) ($9,106,793) ($12,929,053) ========== ========== ========== ========== Net income (loss) per share - basic and diluted ($0.11) ($0.14) ($0.35) ($0.51) ========== ========== ========== ========== Weighted average shares outstanding - basic and diluted 26,023,311 25,600,920 25,842,264 25,588,540 ========== ========== ========== ========== Select Consolidated Balance Sheet Data September 30, 2008 December 31, 2007 ------------------ ----------------- Cash and short-term investments $6,135,987 $11,168,309 Working capital $4,908,939 $9,504,348 Shareholder's equity $1,315,698 $9,984,665

SOURCE Pharmos Corporation

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