MARTINSRIED/MUNICH, Germany, Nov. 9 /PRNewswire-FirstCall/ -- Waltham, Mass. and Princeton, N.J. -- GPC Biotech AG today reported financial results for the third quarter and first nine months ended September 30, 2006.
Quarter over quarter results: third quarter 2006 compared to second quarter 2006
Revenues for the third quarter of 2006 were euro 6.6 million compared to euro 5.6 million for the previous quarter. Research and development (R&D) expenses were euro 20.1 million for the third quarter of 2006 compared to euro 14.5 million for second quarter of 2006. General and administrative (G&A) expenses for the second quarter were euro 6.1 million compared to euro 5.8 million for the previous quarter. The Company’s net loss increased to euro (18.7) million in the third quarter of 2006, compared to euro (15.2) million for the previous quarter. Basic and diluted loss per share was euro (0.57) for the third quarter of 2006 compared to euro (0.46) for the previous quarter.
Comparison to previous year: third quarter 2006 compared to third quarter 2005
Revenues for the three months ended September 30, 2006 increased 214% to euro 6.6 million compared to euro 2.1 million for the same period in 2005. The increase in revenues is due to the co-development and license agreement for satraplatin for Europe and certain other territories with Pharmion that was signed in December 2005. R&D expenses increased 36% for the third quarter of 2006 to euro 20.1 million compared to euro 14.8 million for the same period in 2005. This increase was mainly due to the accrual of a milestone obligation to Spectrum Pharmaceuticals, Inc. in the amount of euro 4.8 million, which will become due upon the acceptance for filing of a New Drug Application for satraplatin by the U.S. FDA and the acceptance of the Marketing Authorization Application (MAA) in Europe. G&A expenses for the third quarter of 2006 increased 32% to euro 6.1 million compared to euro 4.6 million for the same quarter in 2005. G&A expenses for the third quarters of both 2006 and 2005 included a non-cash charge related to a contractual loss on a sublease. This charge was euro 0.9 million for the third quarter of 2006 compared to euro 0.1 million for the same period in 2005. Net loss for the third quarter of 2006 increased 13% to euro (18.7) million compared to euro (16.5) million for the third quarter of 2005. Basic and diluted loss per share was euro (0.57) for the third quarter of 2006 compared to euro (0.55) for the same period in 2005.
First nine months of 2006 compared to first nine months of 2005
Revenues increased 171% to euro 17.6 million for the nine months ended September 30, 2006, compared to euro 6.5 million for the same period in 2005. Research and development (R&D) expenses increased 23% to euro 49.1 million for the first nine months of 2006 compared to euro 39.9 million for the same period in 2005. In the first nine months of 2006, general and administrative (G&A) expenses increased 7% to euro 16.2 million compared to euro 15.1 million for the first nine months of 2005. Net loss for the first nine months of 2006 increased 4% to euro (46.8) million compared to euro (44.9) million for the first nine months of 2005. Basic and diluted loss per share was euro (1.44) for the first nine months of 2006 compared to euro (1.51) for the same period in 2005.
As of September 30, 2006, cash, cash equivalents, marketable securities and short-term investments totaled euro 113.9 million (December 31, 2005: euro 95.2 million), including euro 1.6 million in restricted cash. Net cash burn for the first nine months of 2006 was euro 18.2 million with net cash generated of euro 12.8 million in the first quarter of 2006, net cash burn of euro 16.1 million for the second quarter of 2006 and net cash burn of euro 14.6 million for the third quarter of 2006. Net cash burn/generated is derived by adding net cash provided by (used in) operating activities and purchases of property, equipment and licenses. The figures used to calculate net cash burn are contained in the Company’s unaudited consolidated statements of cash flows for the nine-month period ended September 30, 2006.
“Our revenues more than tripled in the third quarter of 2006 compared to the same period in 2005 due to our co-development and license agreement with Pharmion,” said Mirko Scherer, Ph.D., Senior Vice President and Chief Financial Officer. “With the revenue that we have already recognized this year under the terms of this deal, we are able to increase our guidance for the full year 2006. Originally, we expected to approximately double the 2005 revenue amount of euro 9.3 million to just under euro 19 million. We now expect to book revenues of more than euro 22 million for 2006.”
Bernd R. Seizinger, M.D., Ph.D., Chief Executive Officer, said: “In the third quarter of 2006, we achieved a landmark event in the corporate history of GPC Biotech, with the announcement of positive results on progression-free survival from our Phase 3 registrational trial with our lead anticancer drug candidate satraplatin. These results will form the basis of our NDA filing, which we expect to submit to the FDA in the next six to twelve weeks, with the goal of filing by the end of this year. They will also serve as the basis for our partner Pharmion to move forward with the MAA filing in Europe in the first half of 2007. We are also moving forward aggressively to further build our marketing and sales infrastructure in the U.S. for the commercialization of satraplatin.”
Highlights from the third quarter of 2006 and later * Positive results announced from satraplatin pivotal Phase 3 SPARC trial -- Highly statistically significant results seen for progression-free survival endpoint (p<0.00001) -- 40% reduction in risk of disease progression seen with satraplatin compared to control * New clinical trials opened with satraplatin -- Phase 2 randomized study evaluating satraplatin in combination with Tarceva(R) (erlotinib) in patients with advanced non-small cell lung cancer -- Phase 1/2 study evaluating satraplatin in combination with radiation therapy and Xeloda(R) (capecitabine) in patients with rectal cancer -- Phase 1 study evaluating satraplatin in combination with Gemzar(R) (gemcitabine) in patients with advanced solid tumors * In vitro data presented evaluating satraplatin in combination with Tarceva at the EORTC-NCI-AACR meeting on molecular targets and cancer therapeutics Conference call scheduled
As previously announced, the Company has scheduled a conference call to which participants may listen via live webcast, accessible through the GPC Biotech Web site at http://www.gpc-biotech.com or via telephone. A replay will be available via the Web site following the live event. The call, which will be conducted in English, will be held on November 9th at 14:00 CET/8:00 AM EST. The dial-in numbers for the call are as follows:
European participants: 0049 (0)69 5007 1307 or 0044 (0)20 7806 1955 U.S. participants: 1-718-354-1388 About GPC Biotech
GPC Biotech AG is a publicly traded biopharmaceutical company focused on discovering, developing and commercializing new anticancer drugs. GPC Biotech’s lead product candidate -- satraplatin -- is an oral platinum-based compound that has shown highly statistically significant results for progression-free survival in a Phase 3 registrational trial as a second-line chemotherapy treatment in hormone-refractory prostate cancer. The U.S. FDA has granted fast track designation to satraplatin for this indication, and the rolling NDA submission process for this compound is underway. Satraplatin was in-licensed from Spectrum Pharmaceuticals, Inc. GPC Biotech is also developing a monoclonal antibody with a novel mechanism-of-action against a variety of lymphoid tumors, currently in Phase 1 clinical development, and has ongoing drug development and discovery programs that leverage its expertise in kinase inhibitors. GPC Biotech AG is headquartered in Martinsried/Munich (Germany), and its wholly owned U.S. subsidiary has sites in Waltham, Massachusetts and Princeton, New Jersey. For additional information, please visit GPC Biotech’s Web site at http://www.gpc-biotech.com.
This press release contains forward-looking statements, which express the current beliefs and expectations of the management of GPC Biotech AG, including summary statements relating to topline results of the SPARC trial and summary statements relating to the potential efficacy and safety profile of satraplatin. Such statements are based on current expectations and are subject to risks and uncertainties, many of which are beyond our control, that could cause future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Actual results could differ materially depending on a number of factors, and we caution investors not to place undue reliance on the forward-looking statements contained in this press release. In particular, there can be no guarantee that topline results from the satraplatin Phase 3 clinical trial in second-line hormone refractor prostate cancer will be confirmed upon full analysis of the results of the trial and additional information relating to the safety, efficacy or tolerability of satraplatin may be discovered upon further analysis of data from the SPARC trial or analysis of additional data from other ongoing clinical trials for satraplatin. Furthermore, even if these topline results are confirmed upon full analysis of the trial, we cannot guarantee that satraplatin will be approved for marketing in a timely manner, if at all, by regulatory authorities nor that, if marketed, satraplatin will be a successful commercial product. We direct you to GPC Biotech’s Annual Report on Form 20-F for the fiscal year ended December 31, 2005 and other reports filed with the U.S. Securities and Exchange Commission for additional details on the important factors that may affect the future results, performance and achievements of GPC Biotech. Forward-looking statements speak only as of the date on which they are made and GPC Biotech does not undertake any obligation to update these forward-looking statements, even if new information becomes available in the future.
The scientific information discussed in this press release related to satraplatin is preliminary and investigative. Satraplatin has not yet been approved by the FDA in the U.S., the EMEA in Europe or any other regulatory authority and no conclusions can or should be drawn regarding its safety or effectiveness. Only the relevant regulatory authorities can determine whether satraplatin is safe and effective for the use(s) being investigated.
Gemzar(R) (gemcitabine) is a registered trademark of Eli Lilly and Company.
Tarceva(R) (erlotinib) is a registered trademark of OSI Pharmaceuticals, Inc.
Xeloda(R) (capecitabine) is a registered trademark of Hoffmann-La Roche AG.
GPC Biotech AG Martin Braendle Director, Investor Relations & Corporate Communications Phone: +49 (0)89 8565-2693 ir@gpc-biotech.com In the U.S.: Laurie Doyle Director, Investor Relations & Corporate Communications Phone: +1 781 890 9007 X267 or +1 609 524 1000 usinvestors@gpc-biotech.com Additional Media Contacts: In Europe: Maitland Noonan Russo Brian Hudspith Phone: +44 (0)20 7379 5151 bhudspith@maitland.co.uk In the U.S.: Noonan Russo David Schull Phone: +1 858 546-4810 david.schull@eurorscg.com - Financials follow - Condensed Consolidated Statements of Operations (U.S. GAAP) in thousand euro, except share and per share data Three months ended Nine months ended September 30, September 30, 2006 2005 2006 2005 (unaudited) (unaudited) (unaudited) (unaudited) Collaborative revenues (a) 6,480 2,126 17,303 6,494 Grant revenues 86 - 280 - Total revenues 6,566 2,126 17,583 6,494 Research and development expenses 20,072 14,768 49,126 39,904 General and administrative expenses 6,070 4,599 16,247 15,115 In-process research and development - - - 683 Amortization of intangible assets 70 160 213 420 Total operating expenses 26,212 19,527 65,586 56,122 Operating loss (19,646) (17,401) (48,003) (49,628) Other income (expense), net (105) 240 (2,252) 2,341 Interest income 1,084 686 3,120 2,462 Interest expense (21) (22) (65) (89) Net loss before cumulative effect of change in accounting principle (18,688) (16,497) (47,200) (44,914) Cumulative effect of change in accounting principle - - 433 - Net loss (18,688) (16,497) (46,767) (44,914) Loss per share before change in accounting principle (0.57) (0.55) (1.45) (1.51) Cumulative effect of change in accounting principle - - 0.01 - Basic and diluted loss per share, in euro (0.57) (0.55) (1.44) (1.51) Shares used in computing basic and diluted loss per share 33,208,042 30,091,361 32,554,200 29,762,459 (a) Revenues from related party Collaborative revenues 2,483 2,047 5,827 6,304
See accompanying notes to unaudited condensed consolidated financial statements.
Condensed Consolidated Balance Sheets (U.S. GAAP) in thousand euro, except share data and per share data September 30, 2006 Assets (unaudited) December 31, 2005 Current assets Cash and cash equivalents 49,695 30,559 Marketable securities and short-term investments 62,628 63,061 Accounts receivable - 31,326 Accounts receivable, related party - 1,436 Prepaid expenses 1,543 1,333 Other current assets 2,668 3,920 Total current assets 116,534 131,635 Property and equipment, net 3,644 4,103 Intangible assets, net 527 1,072 Other assets, non-current 1,131 838 Restricted cash 1,566 1,615 Total assets 123,402 139,263 Liabilities and shareholders’ equity Current liabilities Accounts payable 1,261 2,141 Accrued expenses and other current liabilities 14,870 11,274 Current portion of deferred revenue, related party 1,753 5,228 Current portion of deferred revenue 10,159 19,548 Total current liabilities 28,043 38,191 Deferred revenues, related party, net of current portion - 975 Deferred revenue, net of current portion 10,086 12,053 Convertible bonds 2,380 2,334 Other liabilities, non-current 3,724 2,177 Shareholders’ equity Ordinary shares, euro 1 non-par, notional value; Shares authorized: 62,695,630 at September 30, 2006 and 53,780,630 at December 31, 2005 Shares issued and outstanding: 33,263,398 at September 30, 2006 and 30,151,757 at December 31, 2005 33,264 30,152 Additional paid-in capital 323,716 284,931 Accumulated other comprehensive loss (1,587) (2,093) Accumulated deficit (276,224) (229,457) Total shareholders’ equity 79,169 83,533 Total liabilities and shareholders’ equity 123,402 139,263
See accompanying notes to unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows (U.S. GAAP) in thousand euro Nine months ended September 30, 2006 (unaudited) 2005 (unaudited) Cash flows from operating activities Net loss (46,767) (44,914) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 1,324 2,997 Amortization 213 420 Compensation cost for stock option plans and convertible bonds 5,124 5,001 Loss accrual on sublease contract 1,956 2,894 Acquired in-process research and development - 683 Cumulative effect of change in accounting principle (433) - Change in accrued interest income on marketable securities and short-term investments (328) (23) Bond premium amortization 468 430 Other-than-temporary impairment on marketable securities 390 - Gain on disposal of property and equipment (23) (80) Changes in operating assets and liabilities: Accounts receivable, related party 1,436 813 Accounts receivable 31,326 (30) Other assets, current and non-current 959 1,062 Accounts payable (814) 1,713 Deferred revenue, related party (4,450) (3,899) Deferred revenue (11,356) 333 Other liabilities and accrued expenses 3,791 2,195 Net cash used in operating activities (17,184) (30,405) Cash flows from investing activities Purchases of property, equipment and licenses (979) (3,482) Proceeds from the sale of property and equipment 45 113 Proceeds from the sale or maturity of marketable securities and short-term investments 20,445 35,803 Purchases of marketable securities and short-term investments (19,906) (31,408) Net cash (used in) / provided by investing activities (395) 1,026 Cash flows from financing activities Proceeds from issuance of shares, net of payments for cost of transaction 36,080 - Proceeds from issuance of shares in asset acquisition, net of payments for costs of transaction - 10,412 Proceeds from issuance of convertible bonds 140 - Payments for cancellation of convertible bonds - (8) Proceeds from exercise of stock options and convertible bonds 1,032 347 Net cash provided by financing activities 37,252 10,751 Effect of exchange rate changes on cash (490) 1,470 Changes in restricted cash (47) 1,039 Net increase/(decrease) in cash and cash equivalents 19,136 (16,119) Cash and cash equivalents at the beginning of the period 30,559 59,421 Cash and cash equivalents at the end of the period 49,695 43,302 Supplemental Information: Cash paid for interest 8 76 Non-cash investing and financing activities: Net assets acquired in exchange for shares in connection with asset acquisition - 2,667
See accompanying notes to unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Changes in Shareholders’ Equity (U.S. GAAP)
in thousand euro, except share data Ordinary shares Accumulated Other Accumulated Total Additional Compre- Share- Paid-in hensive holders’ Shares Amount Capital Loss Deficit Equity Balance as of December 31, 2004 28,741,194 28,741 266,074 (2,732) (167,250) 124,833 Components of comprehensive loss: Net loss (44,914) (44,914) Change in unrealized gain on available-for-sale securities (362) (362) Accumulated translation adjustments 1,343 1,343 Total comprehensive loss (43,933) Issuance of shares in asset acquisition 1,311,098 1,311 11,768 13,079 Exercise of stock options and convertible bonds 64,693 65 288 353 Compensation costs, stock options and convertible bonds 5,001 5,001 Balance as of September 30, 2005 (unaudited) 30,116,985 30,117 283,131 (1,751) (212,164) 99,333 Balance as of December 31, 2005 30,151,757 30,152 284,931 (2,093) (229,457) 83,533 Components of comprehensive loss: Net loss (46,767) (46,767) Change in unrealized gain on available-for-sale securities 636 636 Accumulated translation adjustments (130) (130) Total comprehensive loss (46,261) Cumulative effect of change in accounting principle (433) (433) Issuance of shares 2,860,000 2,860 33,220 36,080 Exercise of stock options and convertible bonds 251,641 252 874 1,126 Compensation costs, stock options and convertible bonds 5,124 5,124 Balance as of September 30, 2006 (unaudited) 33,263,398 33,264 323,716 (1,587) (276,224) 79,169
See accompanying notes to unaudited condensed consolidated financial statements.
GPC Biotech AG Notes to the Unaudited Condensed Consolidated Financial Statements 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of GPC Biotech AG (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), applicable to interim financial reporting, specifically Accounting Principles Board Opinion No. 28 “Interim Financial Reporting”. These unaudited condensed consolidated financial statements do not include all information and disclosures required for a complete set of financial statements. However in the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three-month and nine-month periods ended September 30, 2006 are not necessarily indicative of results to be expected for the full year ending December 31, 2006. The balance sheet at December 31, 2005 has been derived from the audited consolidated financial statements at that date, but does not include all of the information required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 2005.
Certain prior period amounts in the statement of operations and statement of cash flows have been reclassified to conform to current period presentation. The Company has reclassified investments in money market funds from marketable securities and short-term investments to cash and cash equivalents in prior periods. Accordingly, the Company has revised the classification to exclude euro 33.8 million from marketable securities and short-term investments at September 30, 2005 and to include such amount under cash and cash equivalents. In addition, the Company has reclassified the purchase and sale of these investments in money market funds and their foreign currency effects in its consolidated statements of cash flows, which decreased cash used in investing activities by euro 31.2 million and decreased cash used in operations by euro 2.6 million for the nine months ended September 30, 2005. The reclassifications had no impact on the Company’s results of operations or its overall financial position.
2. New Accounting Pronouncements
In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48"). FIN 48 is an interpretation of FASB Statement No. 109, “Accounting for Income Taxes,” and it seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. In addition, FIN 48 requires expanded disclosure with respect to the uncertainty in income taxes and is effective as of the beginning of 2007 fiscal year. The Company is currently evaluating the impact, if any, that FIN 48 will have on its financial statements.
On September 15, 2006 the FASB issued FASB Statement No. 157 on fair value measurement. The standard provides guidance for using fair value to measure assets and liabilities. The standard also responds to investors’ requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. The standard applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value in any new circumstances. The Company believes that this new standard does not have a material impact on its financial statements.
3. Share-based Compensation
Prior to January 1, 2006 the Company accounted for stock options and convertible bonds under the expense provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123"). As of January 1, 2006, the Company adopted SFAS No. 123 (Revised 2004) “Share-Based Payment” (“SFAS 123R”) using the modified-prospective-transition method. Under that transition method, compensation cost recognized in 2006 includes: (a) compensation costs for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. Results for prior periods have not been restated.
Prior to the adoption of SFAS 123R, the Company recorded all forfeitures of share-based compensation in the statements of operations as they occurred. Upon adoption of SFAS 123R, the Company estimated the forfeitures of unvested share-based compensation at January 1, 2006, and recorded a cumulative effect of change in accounting principle in the statement of operations in the amount of euro 0.4 million.
The Company has three share-based compensation plans: a stock option plan, a convertible bond plan and stock appreciation rights (SARs). These plans have been described in the footnotes to the consolidated financial statements for the year ended December 31, 2005. Compensation costs charged to research and development and general and administrative expense for the nine-month period ended September 30, 2006 and 2005 were euro 5,124,000 and euro 5,001,000, respectively. As SFAS 123R has been adopted using the modified-prospective-transition method, stock-based compensation costs for the three-month and nine-month periods ended September 30, 2005 have not been adjusted for the effects of adopting SFAS 123R as of the beginning of that period.
The fair value of instruments issued under the share-based compensation plans was calculated using an option pricing model. The following table summarizes the assumptions used in calculating the fair value in the nine-month period ended September 30, 2006 and 2005:
Period granted 2006 2005 Risk-free rate 2.90% 2.90% Dividend yield 0.0% 0.0% Volatility 60.36% 77.81% Option grant valuation method Multiple option Single option Estimated life Vesting period 4 years plus 1.04 years
Under SFAS 123R, SARs will continue to be accounted for as liability awards, however the timing of the recognition of the award expense is different than before the adoption. The ultimate expense for SARs, if any, is the same after the adoption of SFAS 123R as before the adoption.
As a result of adopting SFAS 123R on January 1, 2006, the Company’s loss before income taxes and net loss for the nine months ended September 30, 2006, is euro 382,000 lower than if it had continued to account for share-based compensation under SFAS 123. Basic and diluted loss per share for the nine months ended September 30, 2006 are euro 0.01 lower than if the Company had continued to account for share-based compensation under SFAS 123.
4. Commitments and Contingencies
As of September 30, 2006, the Company accrued for two milestone obligations to a third party whereby an amount of euro 4.8 million was
