Pharmos Corporation Reports 2005 First Quarter Results
Iselin NJ, April 28, 2005 – Pharmos Corporation (Nasdaq: PARS) today reported financial results for the first quarter ended March 31, 2005.
In the first quarter Pharmos received a gross milestone payment of $12.3 million from a former marketing partner. As a result of this non- recurring milestone event, the Company recorded positive income and cash flow for the quarter. The recorded net income was $6.7 million, or $.07 per share, compared to a net loss of $5.9 million, or $.07 per share for the first quarter of 2004. Cash and cash equivalents totaled $54.3 million at March 31, 2005.
Operating expenses in the 2005 first quarter were $4.4 million, 2% lower than the first quarter of 2004. Gross research and development expenses fell 39% in the 2005 first quarter to $2.5 million, primarily due to a reduction in clinical trial costs in connection with a large-scale Phase III trial and an exploratory Phase IIa trial, both of which were underway in the 2004 first quarter and completed in the 2004 fourth quarter. The reduction in clinical trial expenses was partially offset by a $0.8 million reduction in grant funding and by an additional $0.8 million in general and administrative expenses in the 2005 first quarter compared to the 2004 first quarter.
General and administrative expenses rose to $1.8 million compared to $1.0 million in the 2004 first quarter reflecting higher professional fees, compensation, and consulting and insurance expenses. Increases in accounting fees in connection with Sarbanes-Oxley compliance and legal expenses drove the increase in professional fees in the 2005 first quarter. The increase in compensation is attributed to the amortization of deferred compensation retention award agreements for key executives. Increased consulting and insurance fees were primarily due to higher business development consulting expenses and increased insurance rates and coverage, respectively.
Other income, net, was $11.1 million in the 2005 first quarter compared to net other expense of $1.5 million in the 2004 first quarter, primarily due to the aforementioned milestone payment received by Pharmos from a former marketing partner in the 2005 first quarter. In addition, interest expense decreased $1.3 million to $0.2 million in the 2005 first quarter in connection with a reduced average outstanding balance of Convertible Debentures issued in September 2003 that were repaid in full on March 31, 2005.
“We’ve made significant progress in realigning our business focus and balancing our human and financial resources on our most promising clinical programs,” said Haim Aviv, Ph.D., Chairman & CEO. “With recent management changes and current cash reserves, we are well positioned to expand our product pipeline and advance new drug candidates into clinical development. We remain on track to launch a new clinical program in pain this year with cannabinor and to advance other early stage candidates that have yielded very promising new data in models of pain, rheumatoid arthritis, multiple sclerosis and inflammatory bowel disease.”
Pharmos management will host a conference call to discuss the 2005 first quarter results at 11:00 AM Eastern Daylight Time today. A live webcast of the conference call will be available at and will be archived for a limited time afterwards.
Pharmos discovers and develops novel therapeutics to treat a range of indications, in particular neurological and inflammation-based disorders. The Company recently completed a Phase IIa trial for its neuroprotective drug candidate, dexanabinol, from its tricyclic dextrocannabinoid platform technology, as a preventive agent against post-surgical cognitive impairment. Other compounds from Pharmos’ proprietary synthetic cannabinoid library, primarily CB2-selective receptor agonist compounds, are in pre-clinical studies targeting pain, multiple sclerosis, rheumatoid arthritis and other disorders. Clinical development in pain indications is expected to commence during 2005.
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.
Pharmos Corporation (Unaudited) Consolidated Statements of Operations Three Months Ended March 31, 2005 2004 Expenses Research and development, gross $2,504,639 $4,117,186 Grants (19,576) (816,256) Research and development, net of grants 2,485,063 3,300,930 (exclusive of depreciation and amortization shown separately below) General and administrative 1,794,711 1,037,711 (exclusive of depreciation and amortization shown separately below) Depreciation and amortization 114,925 149,794 Total operating expenses 4,394,699 4,488,435 Loss from operations (4,394,699) (4,488,435) Other income (expense) Bausch & Lomb milestone payment, net 10,725,688 - Interest income 269,496 163,947 Interest expense (160,546) (1,443,939) Derivative gain (loss) 230,931 (167,083) Other income (expense), net 6,657 (5,291) Other income (expense), net 11,072,226 (1,452,366) Net income (loss) $6,677,527 ($5,940,801) Net income (loss) per share - basic $.07 ($ .07) - diluted $.07 ($ .07) Pharmos Corporation (Unaudited) Consolidated Balance Sheets March 31, December 31, 2005 2004 Assets Cash and cash equivalents $54,323,340 $49,014,530 Restricted cash - 4,846,155 Research and development grants receivable 565,680 1,537,782 Debt issuance costs - 45,648 Prepaid expenses and other current assets 1,058,269 262,810 Total current assets 55,947,289 55,706,925 Fixed assets, net 895,029 987,451 Restricted cash 140,181 139,594 Severance pay funded 833,730 811,926 Other assets 18,946 18,946 Total assets $57,835,175 $57,664,842 Liabilities and Shareholders' Equity Accounts payable $961,852 $2,462,162 Accrued expenses 671,637 1,155,413 Warrant liability 67,024 297,955 Accrued wages and other compensation 920,859 756,488 Convertible debentures, net - 4,765,540 Total current liabilities 2,621,372 9,437,558 Other liability 61,471 39,412 Severance pay 1,189,037 1,197,039 Total liabilities 3,871,880 10,674,009 Commitments and contingencies Shareholders' equity Preferred stock, $.03 par value, 1,250,000 shares authorized, none issued and outstanding - - Common stock, $.03 par value; 150,000,000 shares authorized, 95,137,076 and 95,137,076 issued, in 2005 and 2004, respectively 2,854,112 2,854,112 Deferred compensation (1,407,431) (1,701,122) Paid in capital 188,811,199 188,809,955 Accumulated deficit (136,294,159) (142,971,686) Treasury stock, at cost, 14,189 shares in 2005 and 2004, respectively (426) (426) Total shareholders' equity 53,963,295 46,990,833 Total liabilities and shareholders' equity $57,835,175 $57,664,842
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