Pharmos Corporation Reports 2006 Third Quarter Results
Iselin NJ, November 6, 2006 – Pharmos Corporation (Nasdaq: PARS) today reported results for the third quarter ended September 30, 2006. The Company recorded a net loss of $4.2 million, or $0.22 per share, for the third quarter 2006, compared to a net loss of $3.3 million, or $0.17 per share, in the 2005 third quarter. Cash and short-term investments totaled $35.3 million at September 30, 2006.
The acquisition of Vela Pharmaceuticals Inc. (Vela) was a major focus during the quarter. The transaction, completed on October 25, 2006, expands Pharmos’ pipeline with later-stage clinical drug candidates including dextofisopam, a promising and innovative new drug that has demonstrated positive Phase 2a data for the treatment of diarrhea-predominant and alternating-type irritable bowel syndrome (IBS).
The increase in net loss for the third quarter is due primarily to a 27% increase in operating expenses to $4.7 million compared to $3.7 million in the 2005 third quarter. Operating expenses increased due primarily to a 57% increase in general and administrative expenses to $2.7 million compared to $1.7 million in the 2005 third quarter. The increase in general and administrative expenses is largely due to expenses of $0.8 million incurred for professional and other services in connection with a proxy contest and the Vela acquisition. Excluding the proxy contest and acquisition costs, general and administrative costs would have increased by $0.2 million due to increased business development activities. Gross research and development costs increased 7% to $2.3 million from $2.2 million in the third quarter of 2005 due to higher clinical trial costs in connection with the Phase 2a testing of cannabinor in pain indications and a Phase 1 trial with a topical NanoEmulsion drug delivery technology.
For the nine months ended September 30, 2006 (“year-to-date”), Pharmos recorded a net loss of $11.3 million, or $0.60 per share. For the same period in the prior year, the Company essentially broke even primarily due to the receipt in the 2005 first quarter of a $10.7 million non-recurring milestone payment from a former marketing partner. Total year-to-date operating expenses increased by $1.0 million to $12.8 million compared to the prior year same period. The increase in operating expenses is primarily due to year-to-date general and administrative costs of $7.0 million, a $1.8 million increase compared the same period in the prior year. The increase in general and administrative expenses is largely due to expenses of $2.2 million incurred for professional and other services in connection with a proxy contest and the Vela acquisition, and to severance costs, which were partially offset by reduced compensation costs of $0.9 million from workforce reduction compared with the same period in the prior year.
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 positive effect on primary efficacy endpoint (n=141, p=0.033). The Company plans 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) Condensed Consolidated Statements of Operations Three months ended Nine months ended September 30, September 30, 2006 2005 2006 2005 Expenses Research and development, gross $2,338,392 $2,180,137 $6,587,480 $7,225,373 Grants (415,203) (284,185) (1,083,464) (1,015,640) Research and development, net of grants 1,923,189 1,895,952 5,504,016 6,209,733 General and administrative 2,730,064 1,734,493 7,038,607 5,265,239 Depreciation and amortization 77,034 87,841 241,912 301,518 Total operating expenses 4,730,287 3,718,286 12,784,535 11,776,490 Loss from operations (4,730,287) (3,718,286) (12,784,535) (11,776,490) Other income (expense) Bausch & Lomb payment -- -- -- 10,725,688 Interest income 482,907 416,267 1,407,237 1,043,283 Interest expense -- (2,219) -- (165,591) Change in value of warrants 7,051 11,562 28,779 254,246 Other (expense) income (1,224) 0 5,904 (34,723) Other income, net 488,734 425,610 1,441,920 11,822,903 Net income (loss) ($4,241,553) ($3,292,676)($11,342,615) $46,413 Net income (loss) per share - basic ($0.22) ($0.17) ($0.60) $0.00 - diluted ($0.22) ($0.17) ($0.60) $0.00 Weighted average shares outstanding - basic 19,062,945 18,974,338 19,054,413 18,974,120 - diluted 19,062,945 18,974,338 19,054,413 18,974,954 PHARMOS CORPORATION (Unaudited) Condensed Consolidated Balance Sheets September 30, December 31, 2006 2005 Assets Cash and cash equivalents $9,122,377 $10,289,127 Short-term investments 26,209,172 35,748,343 Restricted cash 82,009 79,527 Research and development grants receivable 211,730 734,237 Prepaid expenses and other current assets 810,986 543,109 Total current assets 36,436,274 47,394,343 Advance to Vela 527,302 -- Capitalized merger costs 885,315 -- Fixed assets, net 647,297 742,860 Restricted cash 63,631 62,874 Severance pay funded 928,488 772,199 Other assets 18,496 18,496 Total assets $39,506,803 $48,990,772 Liabilities and Shareholder's Equity Accounts payable $493,529 $519,404 Accrued expenses 1,794,337 575,222 Warrant liability 10,101 38,880 Accrued wages and other compensation 958,656 1,497,781 Total current liabilities 3,256,623 2,631,287 Other liability 34,637 110,904 Severance pay 1,257,910 1,014,647 Total liabilities 4,549,170 3,756,838 Commitments and contingencies Shareholder's Equity Preferred stock, $.03 par value, 1,250,000 shares authorized, none issued and outstanding -- -- Common stock, $.03 par value; 60,000,000 shares authorized, 19,065,783 issued 571,973 571,973 Deferred compensation -- (529,393) Paid-in capital in excess of par 191,630,271 191,093,338 Accumulated deficit (157,244,185) (145,901,558) Treasury stock, at cost, 2,838 shares (426) (426) Total shareholders' equity 34,957,633 45,233,934 Total liabilities and shareholders' equity $39,506,803 $48,990,772