Pharmos
Corporation Reports 2003 Third Quarter Results
Phase
III Brain Injury Study Advances with 750 Patients Enrolled
Iselin, NJ, November 5, 2003
- Pharmos Corporation (Nasdaq: PARS and Nasdaq Europe:
PHRM) today reported financial results for the third quarter
and nine month period ended September 30, 2003. During
the third quarter, net loss decreased 23% to $4,189,016,
or $ .06 per share compared to a net loss of $5,448,564,
or $ .10 per share in the third quarter 2002. The tightened
net loss was due primarily to decreased operating expenses,
in particular those related to research and development
and to a lesser extent selling, general and administrative
expenses. Cash and cash equivalents, including restricted
cash of $21,060,000, totaled $37,507,6392 at September
30, 2003, which includes net proceeds from a convertible
debt transaction completed at the end of the quarter.
Operating expenses in the third quarter
2003 decreased 32% to $3,695,117 compared to the third
quarter 2002. Research and development expenses fell 37%
in the quarter to $2,598,758, primarily due to the absence
of regulatory-related professional and consulting expenses
that were recorded in the third quarter 2002. The absence
of these expenses helped offset rising costs in connection
with the Company’s clinical operations, in particular
its Phase III clinical trial of dexanabinol for traumatic
brain injury (TBI), in which the number of patients and
centers have increased. Selling, general and administrative
expenses in the third quarter 2003 decreased 13% to $931,066
as a result of redeploying internal resources that were
related to general and administrative activities into
research and development efforts, and a company-wide cost
containment program initiated in early 2003. The decrease
in operating expenses in the third quarter was partially
offset by higher other expenses, primarily those resulting
from the recording of a derivative charge pursuant to
accounting requirements in connection with warrants issued
in the Company’s March 2003 private placement.
“In the third quarter, we continued
to focus our resources on the development of dexanabinol
for brain injury, now in late stage clinical testing with
over 80% of patient enrollment achieved,” said Haim
Aviv, Ph.D., Pharmos Chairman and CEO. “We are gratified
that fast track designation was granted by the FDA as
it validates our view that dexanabinol addresses an unmet
medical need for a serious disease.”
“We are very happy with another recent
regulatory accomplishment, the acceptance for review by
the FDA of a New Drug Application for a product we sold
to Bausch & Lomb, bringing us closer to potential
future milestone payments,” said Gad Riesenfeld,
Ph.D., President & COO. “The experience we gained
in moving this entire program from the development stage
through regulatory approvals has been extremely valuable.”
The product now under FDA review is a loteprednol etabonate
(LE) and tobramycin ophthalmic suspension and is part
of the LE ophthalmic business that Bausch & Lomb acquired
from Pharmos in 2001. Terms of the transaction included
the agreement by Bausch & Lomb to make future payments
to Pharmos for certain future extensions of the LE formulation,
with the payments based on the date of market introduction.
Roughly 71%, or $2.5 million, of total gross
research and development expenses recorded in the third
quarter 2003 were incurred in connection with the Phase
III trial of dexanabinol for TBI. To date, about 750 of
approximately 900 total patients have been enrolled in
approximately 80 U.S. and international centers participating
in the pivotal study. Data are expected in the second
half 2004. The Company has also progressed in its Phase
IIa trial of dexanabinol for prevention of cognitive impairment
in heart by-pass surgery, in which approximately 70 patients
have been enrolled to date in several centers in Israel,
with results expected around mid 2004. No approved treatment
currently exists for either TBI or post-surgical cognitive
impairment, each of which represents substantial market
opportunities.
For the nine months ended September 30,
2003, Pharmos reported a net loss of $13,002,340, or $.20
per share compared to a net loss of $13,767,656, or $.24
per share for the same period in 2002. The lower net loss
is due primarily to decreased operating expenses, in particular
those related to research and development, and to lower
selling, general and administrative expenses. Research
and development expenses in the nine months ended September
30, 2003 fell 11% to $8,955,387, primarily due to the
absence of regulatory-related professional and consulting
expenses that were recorded in the same period in 2002.
The absence of these expenses offset rising costs in connection
with the Company’s clinical operations, in particular
its Phase III clinical trial of dexanabinol for TBI. Selling,
general and administrative expenses in the nine months
ended September 30, 2003 decreased 13% to $2,535,997 as
a result of redeploying internal resources that were related
to general and administrative activities into research
and development efforts, and a company-wide cost containment
program initiated in early 2003. The decrease in operating
expenses was partially offset by higher other expenses,
primarily those resulting from the recording of a derivative
charge pursuant to accounting requirements in connection
with warrants issued in the Company’s March 2003
private placement. The derivative charge was partially
offset by higher interest income and lower costs in interest
expense.
Gad Riesenfeld, Ph.D., President and COO,
and Robert Cook, Executive Vice President and CFO, will
host a conference call to discuss the 2003 third quarter
results at 2:00 pm Eastern Time on Thursday, November
6, 2003. A live webcast of the conference call will be
available at http://www.firstcallevents.com/service/ajwz393327157gf12.html
and will be archived for a limited time afterwards.
Pharmos discovers, develops, and commercializes
novel therapeutics to treat a range of indications, in
particular neurological and inflammation- based disorders.
The Company's first neuroprotective product is dexanabinol,
a tricyclic dextrocannabinoid, currently undergoing clinical
testing as a treatment for TBI and as a preventive agent
against post-surgical cognitive impairment. Other dextrocannabinoid
compounds and selective CB2 receptor agonist compounds
from Pharmos' proprietary synthetic cannabinoid library
are being studied in pre-clinical programs targeting,
pain, multiple sclerosis and other disorders.
Statements made in this press release related
to the business outlook and future financial performance
of the Company, to the prospective market penetration
of its drug products, to the development and commercialization
of the Company's pipeline products and to the Company's
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 which 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.
(Tables
attached)
Pharmos Corporation Financial Highlights
Condensed Statements of Operations
For the three months ended For the nine months ended
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
2003 2002 2003 2002
Revenues - - - -
Expenses
Research &
development,
net $2,598,758 $4,148,848 $8,955,387 $10,016,149
Selling, general
& administrative 931,066 1,076,057 2,535,997 2,907,645
Depreciation &
amortization 165,293 170,063 505,486 516,787
Total operating
expenses 3,695,117 5,394,968 11,996,870 13,440,581
Other income (expense)
Interest income 52,629 127,496 948,045 442,276
Other (expense)
income, net (19,625) 5,346 (44,346) 3,148
derivative loss (457,090) - (1,529,636) -
Interest expense (69,813) (186,438) (379,533) (772,499)
Other expense,
net (493,899) (53,596) (1,005,470) (327,075)
Net loss ($4,189,016) ($5,448,564) ($13,002,340) ($13,767,656)
Net loss per share
- basic and diluted ($0.06) ($0.10) ($0.20) ($0.24)
Weighted average
shares outstanding
- basic and
diluted 71,083,346 56,583,958 64,789,797 56,534,870
Condensed Balance Sheets at
Sep. 30, 2003 Dec. 31, 2002
Assets
Cash and cash equivalents $16,447,392 $19,579,287
Other receivables 505,099 698,800
Restricted cash 9,692,308 2,199,999
Debt issuance costs 1,219,623 -
Prepaid expenses and other current assets 327,943 323,991
Total current assets 28,192,365 22,802,077
Fixed assets, net 1,343,534 1,792,322
Restricted cash 11,367,692 60,000
Debt issuance costs 142,925 -
Other assets 42,533 32,283
Total assets $41,089,049 $24,686,682
Liabilities and Shareholders' Equity
Accounts payable $2,414,594 $3,742,460
Accrued expenses 3,409,158 3,241,581
Warrant liability 1,576,590 -
Accrued wages and other compensation 1,004,228 999,647
Convertible debentures, net 14,985,775 3,446,658
Total current liabilities 23,390,345 11,430,346
Other liability 10,000 10,000
Convertible debentures, net 2,543,383 -
Total liabilities 25,943,728 11,440,346
Commitments and contingencies
Preferred stock, $.03 par value,
1,250,000 shares authorized, none
issued and outstanding - -
Common stock, $.03 par value;
110,000,000 shares authorized,
71,372,231 and 56,574,849 issued
and outstanding in 2003 and 2002,
respectively 2,141,168 1,697,246
Deferred compensation (79,992) (119,988)
Paid in capital 128,604,965 114,187,558
Accumulated deficit (115,520,394) (102,518,054)
Treasury stock, 14,189 shares held
in 2003 and 2002 (426) (426)
Total shareholders' equity 15,145,321 13,246,336
Total liabilities and shareholders'
equity $41,089,049 $24,686,682
Contacts:
Gale T. Smith – U.S.
732.452.9556
Gale.Smith@pharmos-us.com
Irit Kopelov – Israel
08-940-9679
iritk@pharmos.com
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