Pharmos Corporation Reports 2007 First Quarter Results
Iselin NJ, May 10, 2006 – Pharmos Corporation (Nasdaq: PARS) today reported results for the first quarter ended March 31, 2007. The Company recorded a net loss of $4.8 million, or $0.19 per share, for the first quarter 2007 compared to a net loss of $3.0 million, or $0.16 per share, in the first quarter 2006. Cash and short-term investments totaled $22.1 million at March 31, 2007.
The increase in net loss for the first quarter 2007 is due primarily to a 48% increase in operating expenses, which was driven by a 56% increase in gross research and development expenses to $2.9 million compared to $1.9 million in the first quarter 2006.
Gross research and development expenses were up in the first quarter 2007 as a result of ramped up clinical trial-related expenses. The Company spent $0.9 million during the quarter for activities in connection with preparing for commencement of enrollment in its Phase 2b trial of dextofisopam in 480 patients with irritable bowel syndrome (IBS). By mid-May 2007, all of the study’s 50 sites will have been selected and contracted with, the investigator meetings will have been conducted and packaging of the clinical trial supplies will have been completed. Pharmos expects to begin dosing patients in the dextofisopam/IBS Phase 2b study in June 2007.
Gross research and development expenses incurred by Pharmos in the first quarter 2007 also included $0.8 million invested in Phase 2 testing of an i.v formulation of cannabinor, the Company’s leading CB2-selective receptor agonist candidate. In January 2007, Pharmos reported that in a Phase 2a experimentally induced pain model, cannabinor failed to meet the primary endpoint of reducing capsaicin-induced pain. However, the Company subsequently noted that compared to placebo, i.v. cannabinor did exhibit a statistically significant systemic analgesic effect against pressure-induced and heat-induced pain. In April 2007, Pharmos reported that in a separate Phase 2a trial of i.v. cannabinor in acute nociceptive pain in patients undergoing 3rd molar extraction, an analgesic effect was observed at the 12mg dose; however, there was no effect at the higher doses (24mg and 48mg). This was an unexpected pattern of results and the Company continues to explore possible explanations. In both Phase 2a trials, cannabinor was generally well tolerated with no serious adverse events. Pharmos also continued in the first quarter 2007 to conduct basic research and discovery to identify new and potentially more potent CB2-selective agonists.
Additional research and development expenses were incurred in the first quarter 2007 in preparing for a Phase 2a clinical trial with the Company’s NanoEmulsion topical drug delivery vehicle with diclofenac for osteoarthritis pain. Enrollment is expected to commence in mid-2007. Pharmos recorded research and development grant receivables from the Office of the Chief Scientist (OCS) of Israel of $0.3 million in the first quarter 2007, which reduced research and development expenses, and which was essentially unchanged from the OCS grant receivables in the first quarter 2006. Research and development expenses net of grants increased to $2.6 million in the first quarter 2007 from $1.6 million in the first quarter 2006.
Operating expenses in the first quarter 2007 were also negatively impacted by an increase in general and administrative expenses to $2.5 million from $1.8 million in the first quarter 2006. The increase is primarily due to contractual payment obligations associated with the retirement of the Company’s former chief executive officer.
Net Operating Loss Shareholder Notice
Under Internal Revenue Code Section 382 rules, a change in ownership can occur whenever there is a shift in ownership by more than 50 percentage points by one or more five-percent shareholders within a three-year period. When a change of ownership is triggered, the Company’s net operating losses (NOL) asset may be impaired. The Company is currently working with its tax and legal advisors to determine the potential impact of future changes in ownership upon its NOL asset, and requests that all investors contact the Company prior to allowing their ownership interest to reach a five-percent level.
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 (GI/IBS), pain/inflammation, and autoimmune disorders. The Company’s lead product, dextofisopam, has completed Phase 2a testing in IBS, a common GI disorder particularly prevalent in women, with a statistically significant effect compared to placebo on the primary efficacy endpoint of adequate relief (n=141, p=0.033). The Company plans to initiate a Phase 2b study of dextofisopam for the treatment of IBS in 2007. The Company’s core proprietary technology platform focuses on discovery and development of synthetic cannabinoid compounds. Cannabinor, the lead CB2-selective receptor agonist candidate, is undergoing Phase 2a testing in pain. Other compounds in Pharmos’ pipeline are in clinical and pre-clinical studies targeting pain, multiple sclerosis, rheumatoid arthritis and other disorders.
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.
PHARMOS CORPORATION (Unaudited) Consolidated Statements of Operations Three months ended March 31, 2007 2006 Expenses Research and development, gross $2,906,739 $1,867,114 Grants (336,641) (300,635) Research and development, net of grants 2,570,098 1,566,479 General and administrative 2,460,696 1,813,221 Depreciation and amortization 69,568 78,484 Total operating expenses 5,100,362 3,458,184 Loss from operations (5,100,362) (3,458,184) Other income (expense) Interest income 330,158 465,704 Change in value of warrants - 14,104 Other (expense) income 17,109 (24,310) Other income, net 347,267 455,498 Net income (loss) ($4,753,095) ($3,002,686) Net income (loss) per share - basic and diluted ($0.19) ($0.16) Weighted average shares outstanding - basic and diluted 25,563,367 19,037,628 Select Consolidated Balance Sheet Data March 31, 2007 December 31, 2006 Cash and short-term investments $22,081,096 $25,929,686 Working capital $20,055,594 $24,168,153 Shareholder's equity $20,319,070 $24,428,050