Pharmos Corporation Reports 2007 Third Quarter Results
Iselin NJ, October 30, 2007 – Pharmos Corporation (Nasdaq: PARS) today reported results for the third quarter ended September 30, 2007. Net loss decreased 17% to $3.5 million, or $0.14 per share, for the third quarter 2007, from a net loss of $4.2 million, or $0.22 per share, in the third quarter 2006. Cash and short-term investments totaled $13.9 million at September 30, 2007.
The decrease in net loss for the third quarter 2007 is due to a 21% decrease in operating expenses to $3.7 million from $4.7 million in the third quarter 2006. Gross research and development expenses increased 16% to $2.7 million compared to $2.3 million in the third quarter 2006. A decrease in research and development grant receivables to $0.2 million in the third quarter 2007 from $0.4 million in the third quarter 2006 impacted net research and development expenses, which totaled $2.5 million compared to $1.9 million in the third quarter 2007 and 2006, respectively. The increase in net research and development expenses was more than offset by lower general and administrative expenses, which decreased 56% to $1.2 million from $2.7 million in the third quarter 2006. The decrease in operating expenses was partially offset by a decrease in net other income to $0.2 million in the third quarter 2007 from $0.5 million in the third quarter 2006, due primarily to a decrease in interest income.
Gross research and development expenses in connection with Pharmos’ leading clinical program, dextofisopam for irritable bowel syndrome (IBS), were $1.1 million for the quarter, during which the Company advanced its ongoing Phase 2b study of dextofisopam. The Phase 2b study, which commenced in June 2007, is expected to enroll approximately 480 female patients with diarrhea-predominant or alternating IBS at up to 55 participating U.S. centers over an 18-month period. Enrollment of patients in the study is currently on schedule.
Additional but relatively minimal research and development expenses were incurred during the quarter in connection with the Company’s commencement in June 2007 of a Phase 2a clinical study of its topical NanoEmulsion drug delivery technology formulated with 3% diclofenac as a treatment for osteoarthritis. Up to eight centers in Israel will enroll a total of approximately 126 subjects over a nine-month period. Gross expenses for other research and development projects in early stages of development for the third quarter 2007 and 2006 were relatively unchanged at $0.9 million.
The decrease in general and administrative expenses is due primarily to lower professional fees and investor relations costs in connection with the Company’s acquisition of Vela Pharmaceuticals, which was ongoing in the third quarter 2006 and completed by the fourth quarter 2006.
For the year-to-date period ended September 30, 2007, Pharmos recorded a net loss of $12.9 million, or $0.51 per share compared to a net loss of $11.3 million, or $0.60 per share in the same period in 2006. The increase in net loss is due to increased operating expenses and a decrease in net other income. Total operating expenses increased 7% to $13.7 million in the current year-to-date period from $12.8 million in the same period in 2006, primarily due to increased research and development expenses and lower grant receivables. Gross research and development expenses increased 41% to $9.3 million from $6.6 million, reflecting increased clinical trial-related activities. Grant receivables decreased to $0.8 million from $1.1 million in the same period in 2006. Higher research and development expenses were partially offset by a 29% decrease in general and administrative expenses to $5.0 million from $7.0 million due to the aforementioned lower professional fees and investor relations costs in connection with the Company’s acquisition of Vela Pharmaceuticals in 2006, as well as to a reduction in insurance costs during the first half 2007. These reductions are offset in part by a $0.3 million consulting fee paid in 2007 to a former officer in accordance with the officer’s employment agreement. Net other income decreased to $0.8 million in the current year-to-date period from $1.4 million in the same period in 2006, due primarily to a decrease in interest income.
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 believes that substantially all of its Federal NOL generated since 1995 are not impaired, and requests that all investors contact the Company prior to allowing their ownership interest to reach a five-percent level.
About Pharmos Corporation
Pharmos Corporation is a biopharmaceutical company that discovers and develops novel therapeutics to treat a range of diseases of the nervous system, including disorders of the brain-gut axis, with a focus on pain/inflammation and autoimmune disorders. The Company’s lead product, dextofisopam, is being studied in a Phase 2b clinical trial in patients with irritable bowel syndrome (IBS). Dextofisopam has completed a Phase 2a IBS study in which it demonstrated a statistically significant effect compared to placebo on the primary efficacy endpoint of adequate relief (n=141, p=0.033) and was very well tolerated. A second clinical program currently in Phase 2a testing is Pharmos’ proprietary NanoEmulsion cream drug delivery system formulated with the NSAID diclofenac, which is being studied as a treatment for pain in patients with knee osteoarthritis. The Company’s core proprietary technology platform focuses on discovery and development of synthetic cannabinoid compounds, especially CB2 receptor-selective (CB2-selective) agonists. PRS-639,058, the leading CB2-selective agonist, has demonstrated promising preclinical data in neuropathic pain. Various other CB2-selective compounds from Pharmos’ pipeline are in preclinical studies targeting pain, multiple sclerosis, rheumatoid arthritis, inflammatory bowel disease 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 Nine months ended September 30, September 30, 2007 2006 2007 2006 Expenses Research and development, gross $2,711,774 $2,338,392 $9,285,543 $6,587,480 Grants (238,123) (415,203) (769,072) (1,083,464) Research and development, net of grants 2,473,651 1,923,189 8,516,471 5,504,016 General and administrative 1,200,594 2,730,064 4,998,725 7,038,607 Depreciation and amortization 57,946 77,034 194,581 241,912 Total operating expenses 3,732,191 4,730,287 13,709,777 12,784,535 Loss from operations (3,732,191) (4,730,287) (13,709,777) (12,784,535) Other income (expense) Interest income 198,703 482,907 753,302 1,407,237 Change in value of warrants - 7,051 11,435 28,779 Other (expense) income (5,067) (1,224) (15,987) 5,904 Other income, net 193,636 488,734 780,724 1,441,920 Net loss ($3,538,555) ($4,241,553) ($12,929,053) ($11,342,615) Net loss per share - basic and diluted ($0.14) ($0.22) ($0.51) ($0.60) Weighted average shares outstanding - basic and diluted 25,600,920 19,062,945 25,588,540 19,054,413 Select Consolidated Balance Sheet Data September 30, 2007 December 31, 2006 Cash and short-term investments $13,863,077 $25,929,686 Working capital $12,166,242 $24,168,153 Shareholder's equity $12,574,484 $24,428,050