Pharmos Corporation Reports 2008 Fourth Quarter Results
Iselin NJ, February 27, 2009 – Pharmos Corporation (Nasdaq: PARS) today reported financial results for the fourth quarter and twelve-month period ended December 31, 2008.
Fourth Quarter Ended December 31, 2008
The Company recorded a net loss of $1.0 million, or $0.04 per share, for the fourth quarter 2008 compared to a net loss of $2.7 million, or $0.11 per share, in the fourth quarter 2007. Cash and cash equivalents totaled $4.7 million at December 31, 2008. The decrease in net loss for the fourth quarter 2008 is due primarily to a 45% decrease in operating expenses to $2.1 million from $3.9 million in the fourth quarter 2007. The decline in operating expenses resulted from a 14% decrease in net research and development expenses to $1.8 million compared to $2.1 million in the fourth quarter 2007. Also general and administrative expenses decreased 84% to $0.3 million from $1.7 million in the fourth quarter 2007.
During the fourth quarter, the Company advanced a Phase IIb trial of its lead compound, dextofisopam, in female IBS patients. Costs of $1,443,000 were incurred during the quarter in connection with the trial, comprising CRO-related activities and patient recruitment costs. Dextofisopam was one of the compounds the Company obtained through the acquisition of Vela Pharmaceuticals Inc which closed in October 2006. The continued development of this compound through late-stage clinical testing will significantly increase the research and development expenses going forward.
General and administrative expenses for the fourth quarter of 2008 decreased by 84%, from $1.7 million in 2007 to $0.3 million. The decline reflects decreases in virtually every general and administrative expense category. The primary reductions include a $1,003,000 reduction in payroll, a $222,000 reduction in miscellaneous expenses and an $83,000 reduction in board fees and travel costs. The decrease in payroll costs reflect the impact of the third and fourth quarter 2007 restructuring plans which have reduced the Company’s head count from 51 employees in March 2007 to 5 employees at the end of December 2008. Also there were severance payouts in 2007 to two former executives which totaled $687,000. The decrease in miscellaneous expenses in 2008 result from the gain on the sale of Rehovot fixed assets of $206,000. The decrease in the board fees and travel costs result from board members receiving Company common stock in lieu of cash payments. The 2008 fourth quarter net loss was also favorably impacted by a 26% increase in income tax benefit to $1.2 million in the 2008 fourth quarter compared to $1.0 million in the same period in 2007. The income tax benefit represents funds derived from the sale of State Net Operating Loss carryforwards under the State of New Jersey’s Technology Business Tax Certificate Transfer Program. The Program allows qualified technology and biotechnology businesses in New Jersey to sell unused amounts of net operating loss carryforwards and defined research and development tax credits for cash.
Twelve-months Ended December 31, 2008
For the twelve months ended December 31, 2008, Pharmos recorded a net loss of $10.1 million, or $0.39 per share compared to a net loss of $15.6 million, or $0.61 per share for the twelve months ended December 31, 2007. Total operating expenses decreased 37% to $11.1 million from $17.6 million.
Net research and development expenses decreased 15% to $9.0 million from $10.6 million for the twelve months ended December 31, 2007 primarily related to the Company’s focus of cash resources on the Dextofisopam Phase 2b trial and the downsizing and curtailment of general research and development programs. Dextofisopam costs of $6,673,000 were incurred for the year in connection with the trial, comprising CRO-related activities and patient recruitment costs. These costs were higher in 2008 but the overall research and development expenses were lower due to the decrease of the Rehovot programs.
Also a 71% decrease in general and administrative expenses to $2.0 million from $6.7 million due to the decrease in consulting and professional fees in 2008 result from non recurring 2007 costs related to contractual payment obligations associated with the retirement of the Company’s chief executive officer, severance payouts to three executives in 2007, higher legal and accounting fees in 2007, a one time IRS section 382 tax analysis cost incurred in 2007, a non recurring recruitment fee in 2007 and higher board fees and travel costs in 2007.
The 2008 net loss was also favorably impacted by the above-mentioned 26% increase in income tax benefit to $1.2 million in 2008 compared to $1.0 million in 2007.
The company believes that the current cash and cash equivalents totaling $4.7 million as of December 31, 2008 will be sufficient to support the currently planned continuing operations through at least March 31, 2009. The company is actively pursuing efforts to raise additional capital but there can be no assurance that such efforts will be successful.
About Pharmos Corporation
Pharmos discovers and develops novel therapeutics to treat a range of indications including specific diseases of the nervous system such as disorders of the brain-gut axis (IBS), pain/inflammation, and autoimmune disorders. The Company’s lead product in development, dextofisopam, is undergoing Phase 2b testing in IBS patients. Dextofisopam has completed a Phase 2a IBS study in which it demonstrated a statistically significant effect compared to placebo on the primary efficacy endpoint of adequate relief (n=141, p=0.033). The Company also has a proprietary technology platform focusing on discovery and development of synthetic cannabinoid compounds with a focus on CB2 receptor selective agonists. Various CB2-selective compounds from Pharmos’ pipeline have completed preclinical studies targeting pain, multiple sclerosis, rheumatoid arthritis, inflammatory bowel disease and other disorders. These are available for licensing / partnering. On February 18, 2009, Pharmos Corporation and its Israeli subsidiary, Pharmos Ltd., entered into an Asset Purchase Agreement with Reperio Pharmaceuticals Ltd. for the sale of the patent rights and technical know-how related to the compound known as PRS-639,058 and certain follow-on molecules.
Safe Harbor Statement
Statements made in this press release related to the business outlook and future financial performance of Pharmos, to the prospective market penetration of its drug products, to the development and commercialization of its pipeline products and to its expectations in connection with any future event, condition, performance or other matter, are forward-looking and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause results to differ materially from those set forth in these statements. Additional economic, competitive, governmental, technological, marketing and other factors identified in Pharmos’ filings with the Securities and Exchange Commission could affect such results.
www.pharmoscorp.com
PHARMOS CORPORATION
Condensed Consolidated Statements of Operations
Three months ended Twelve months ended
December 31, December 31,
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2008 2007 2008 2007
Expenses ---------- ---------- ---------- ----------
Research and
development,
gross $1,821,796 $2,172,023 $9,028,705 $11,457,566
Grants - (42,970) - (812,042)
Research and ---------- ---------- ---------- ----------
development, net of
grants 1,821,796 2,129,053 9,028,705 10,645,524
General and
administrative 277,496 1,699,876 1,965,243 6,698,601
Depreciation and
amortization 16,723 40,553 106,236 235,134
Total operating ---------- ---------- ---------- ----------
expenses 2,116,014 3,869,482 11,100,184 17,579,259
---------- ---------- ---------- ----------
Loss from operations (2,116,014) (3,869,482) (11,100,184) (17,579,259)
---------- ---------- ---------- ----------
Other (expense)
income
Interest income 17,599 156,166 255,751 938,312
Change in value of
warrants - - - 11,435
Interest expense (121,243) - (490,537) -
Other income
(expense) 32,919 60,762 41,438 47,905
Other (expense) ---------- ---------- ---------- ----------
income, net (70,725) 216,928 (193,348) 997,652
---------- ---------- ---------- ----------
Loss before income
taxes ($2,186,739) ($3,652,554) ($11,293,532) ($16,581,607)
Income tax benefit (1,204,126) (955,782) (1,204,126) (955,782)
Net loss ($982,613) ($2,696,772) ($10,089,406) ($15,625,825)
========== ========== =========== ===========
Net income (loss)
per share
- basic and diluted ($0.04) ($0.11) ($0.39) ($0.61)
========== ========== =========== ===========
Weighted average
shares outstanding
- basic and
diluted 26,207,452 25,600,920 25,934,973 25,591,660
========== ========== ========== ===========
Select Consolidated Balance Sheet Data
December 31, 2008 December 31, 2007
-------------------------------------
Cash and short-term investments $4,730,282 $11,168,309
Working capital $4,232,549 $9,504,348
Shareholder's equity $341,219 $9,984,665