deCODE genetics Announces Third Quarter 2008 Financial Results
PR Newswire - Thursday 11/06/2008 4:27 PM ET
REYKJAVIK, November 6 /PRNewswire-FirstCall/ -- deCODE genetics (Nasdaq: DCGN) today announced its consolidated financial results for the quarter ended September 30, 2008. A conference call to discuss the quarter's results, recent operating highlights and a strategic update will be webcast live tomorrow, Friday, November 7, at 8:00am EST/1pm GMT (details below).
Operating loss for the third quarter 2008 was $11.3 million, compared to $22.2 million for the third quarter 2007. Operating loss for the first nine months of 2008 declined to $44.4 million from $65.7 million for the first nine months of 2007.
Net loss for the quarter ending September 30, 2008 was $17.9 million, compared to $24.2 million for the third quarter 2007. Net loss for the first nine months of 2008 was $62.9 million, compared to $63.1 million for the first nine months of last year. In addition to operating loss, net loss figures for the periods presented include interest expense and, in the 2008 periods, unrealized loss resulting from the revaluation of the company's auction rate securities investments. The nine-month figure for 2007 also includes a one-time payment deCODE received related to the settlement of an intellectual property suit.
Basic and diluted net loss per share was $0.29 for the third quarter 2008, compared to $0.40 for the same quarter in 2007. For the first nine months of 2008, basic and diluted net loss per share was $1.03, unchanged from that for the first nine months of last year. At the close of the third quarter 2008, the company had approximately 61.8 million shares outstanding.
Revenue for the third quarter this year was $12.0 million, compared to $10.9 million for the same period a year ago. For the first nine months of 2008, revenue was $42.0 million, compared to $27.1 million for the same period last year. As of September 30, 2008, the company had $17.7 million in deferred revenue that will be recognized over future reporting periods. The period-on-period increase in revenue for the third quarter and first nine months of 2008 was driven principally by growth in the company's genomic services business, which includes the company's diagnostics, deCODEme(TM) personal genome analysis, and contract genotyping businesses.
Research and development expense was $5.7 million for the third quarter of this year, compared to $14.1 million for the same period last year. For the first nine months of 2008, R&D expense was $26.3 million, compared to $41.3 million for the first nine months of 2007. Our research and development expense in the first nine months of this year reflects the conclusion of clinical pharmacology studies in our most advanced drug development programs, preparations for the IND filing for our PDE4 modulator DG071, the launch of our prostate cancer, glaucoma and breast cancer tests, and the advancement of gene and target discovery work in a range of major disease areas.
Selling, general and administrative expense for the third quarter of 2008 was $6.7 million, compared to $7.1 million for the 2007 period. For the first nine months of the year, SG&A expense was $21.0 million in 2008 and $19.4 million in 2007.
At September 30, 2008, the company had liquid funds available for operating activities (cash and cash equivalents together with current investments) of $11.8 million, as compared to $23.7 million at June 30, 2008 and $64.2 million at December 31, 2007. The net utilization of liquid funds in the three and nine-month periods ended September 30, 2008 was $12.0 million and $52.4 million, respectively. At September 30, 2008, the company had $35.5 million in cash, cash equivalents and investments, comprised of the $11.8 million in cash and cash equivalents, as well as $5.5 million in restricted investments in U.S. Treasury Bills and $18.2 million in illiquid, non-current investments in auction rate securities. At December 31, 2007, the company had $94.1 million in cash, cash equivalents, restricted cash equivalents, and investments.
The company is undertaking a review of its long-term business strategy with the goal of sharpening the focus of its business, selling assets, securing partnerships, and utilizing the resources generated to support product development and marketing efforts in its core business. The company has utilized a 30-day grace period for the scheduled October 15 interest payment on its 3.5% Senior Convertible Notes due 2011 and is reviewing methods for making this payment. Given its current liquid assets, and without paying the interest on its Notes from its present funds, the company must obtain further financial resources through either the implementation of strategic alternatives, corporate partnerships, or the sale of or loans secured by its auction rate securities in order to continue operations beyond the end of this year. The company is focused on reducing expenses and speeding the evaluation of its strategic options in order to obtain the resources to do so.
deCODE has significant operations in Iceland and pays a large proportion of its fixed costs in Icelandic krona, while its sales are generally denominated in US dollars and its reporting currency is the US dollar. During the third quarter and beginning of the fourth quarter the global financial crisis caused significant economic turmoil in Iceland. As a result, the value of the Icelandic krona has declined significantly versus the US dollar. The turmoil in the Icelandic financial sector and economy as a whole have not to date had any significant adverse impact on deCODE or its day to day operations. deCODE is monitoring closely the situation in Iceland, the principal impact of which for the company has been to decrease the dollar value of our krona-denominated costs. deCODE's most significant operating expenses denominated in krona include salaries and rental payments on our leased facilities and capital equipment. In as far as the krona decreases in value versus the U.S. dollar that portion of our overall operating expenses that are payable in krona will decrease.
"Over the past few months we have continued to bring forward new products for treating and preventing common diseases. Utilizing the expertise of our protein crystallography and medicinal chemistry units we have filed an IND on an exciting new PDE4 modulator for Alzheimer's disease that has the potential to avoid some of the side effects of earlier compounds. We have also just launched the first DNA-based test for risk of the common forms of breast cancer, a test which promises to improve the way in which we target intensive screening and thus to catch more cancers earlier. At the same, in a global economic climate in which there is limited access to capital for companies of our size, we believe that the best way to develop and capture the value of our capabilities and product portfolio is to sharpen the focus of our business. We are therefore in the process of reviewing our long-term strategy and will be sharing with you the results of this process in the weeks ahead," said Kari Stefansson, CEO of deCODE.
Recent highlights include:
Product Development
- DG071 for Alzheimer's and cognition deficits. In October 2008 we filed
an investigational new drug (IND) application for DG071, a novel small-
molecule modulator of phosphodiesterase 4 (PDE4), being developed for
Alzheimer's and other cognitive disorders. The compound is being
developed as a new and potentially safer means of targeting PDE4 to
combat memory loss and cognitive deficits associated with Alzheimer's
disease and other disorders in which neural signaling is reduced or
impaired. First and second generation PDE4 inhibitors such as rolipram,
cilomilast, and roflumilast caused significant side effects, including
nausea and vomiting, at therapeutic doses in human clinical trials.
Data generated at deCODE suggest that the observed side effects were
closely correlated with the binding of these molecules in the PDE4
enzymatic active site competitively with cAMP. As cAMP is of critical
importance to neuronal signaling, the goal of deCODE's program has been
to discover compounds that would modulate PDE4 activity via an
allosteric mechanism to improve safety and tolerability. Towards this
goal, the decode biostructures team solved multiple novel co-crystal
structures of PDE4D & PDE4B containing regulatory domains with bound
ligands. Those structures allowed the deCODE chemistry team to identify
a novel binding site for allosteric modulators in the PDE4 regulatory
domain. In animal models, DG071 has been shown to significantly improve
learning and long- and short-term memory at doses that offer a wide
margin for safety and tolerability.
- deCODE Breast Cancer. In October, deCODE launched deCODE
BreastCancer(TM), the company's latest DNA-based disease risk test, for
assessing individual risk of the common forms of breast cancer and
personalizing screening and treatment strategies. The seven markers
measured by the test, discovered by deCODE and others, contribute to
the incidence of an estimated 60 percent of all breast cancers. The
test integrates data from discovery and replication studies published
in major peer-reviewed journals and involving nearly 100,000 breast
cancer patients and healthy volunteers from many populations. The test
can identify the roughly 5 percent of women who are at a greater than
20 percent lifetime risk of the common forms of breast cancer (about
twice the average risk in the general population), and the 1 percent of
women whose lifetime risk is roughly 36 percent (about three-times
average). According to American Cancer Society guidelines, women with a
lifetime risk of 20 percent or greater should receive annual MRI breast
screenings in additional to mammograms, and women at 15 to 20 percent
lifetime risk should talk with their doctors about the benefits and
limitations of adding MRI screening to their yearly mammogram.
Target Discovery
- Bladder cancer. deCODE and colleagues in the Netherlands discovered two
common single-letter variants in the human genome (SNPs) that confer
increased risk of urinary bladder cancer. Approximately 20% of people
of European descent carry two copies of the first variant, a version of
a SNP on chromosome 8q24, putting them at a 50% higher risk of
developing bladder cancer than those without the variant. Individuals
who carry two copies of a common version of another SNP on chromosome 3
were found to be at a 40% higher risk of the disease than non-carriers.
These are the best-replicated genetic variants ever linked to bladder
cancer risk, and the study analysed genotypic data from more than
40,000 patients and controls from Iceland, the Netherlands and eight
other European countries. These findings were folded into deCODEme and
may be combined with other risk variants to develop a disease-risk
diagnostic test.
- Skin cancer. deCODE discovered common versions of two single-letter
variations in the human genome (SNPs) that confer risk of basal cell
carcinoma (BCC), the most common cancer among people of European
ancestry. Unlike the four sets of SNPs previously found by deCODE to
confer risk of BCC and cutaneous melanoma, these new variants are not
linked to fair pigmentation traits that also make certain people prone
to freckling and sunburn. These SNPs, both located on chromosome 1, may
therefore provide new insight into an underlying biological mechanism
causing BCC, independent of the impact of exposure to ultraviolet (UV)
radiation in sunlight. Approximately 2% of people of European descent
carry two copies of the risk versions of both SNPs, and are at a 170%
greater risk of BCC than those who do not carry the risk variants.
These SNPs were immediately incorporated into deCODEme(TM).
Corporate Development and Finance
- Strategic Review. Last month, deCODE announced that it is conducting a
review of its long-term business strategy. deCODE has utilized its
capabilities in medicinal chemistry, structural biology and human
genetics to develop product and intellectual property portfolios in
both therapeutics and DNA-based diagnostics. The goal of this strategic
review is to optimize the value of these assets for its shareholders by
sharpening the focus of its business, selling non-core assets, securing
strategic partnerships, and utilizing the resources generated to
underpin product development and marketing efforts in its core
business. The company has engaged the Stanford Group Company to assist
in evaluating strategic alternatives and in executing swiftly on the
results of this review through the identification of buyers and
partners for non-core business units, programs and intellectual
property. deCODE plans to provide an update on this process in
tomorrow's conference call. In order to provide more time for the
completion of this review and the execution of alternatives including
the sale of assets, deCODE announced that it had elected to utilize a
30-day grace period for the scheduled October 15 interest payment on
its outstanding 3.5% Senior Convertible Notes due 2011. Failure to pay
the interest within 30 days of the due date will constitute an event of
default. If an event of default occurs and is continuing, the trustee
or the holders of at least 25% in aggregate principal amount of the
notes then outstanding may declare the notes due and payable at their
principal amount together with accrued interest.
- Nasdaq Notification. deCODE has requested a hearing before a Nasdaq
Listing Qualifications Panel to present a plan for regaining compliance
with Nasdaq Marketplace Rule 4450(b)(1)(A), which requires a minimum
market value of listed securities of $50 million. On October 31, 2008,
deCODE received a Staff Determination Letter from The Nasdaq Stock
Market LLC indicating that the Company had not regained compliance with
this rule during the time period provided by Nasdaq in a previous
notice as disclosed in the Company's press release dated October 6,
2008, and therefore its Common Stock is subject to delisting from The
Nasdaq Global Market at the opening of business on November 11.
Following the hearing request, the Company's common stock will continue
to be listed on The Nasdaq Global Market pending the conclusion of the
hearing process and during any extension period which may be granted by
the Panel. It is expected that the hearing would be held within 45
days. The Panel has discretion to grant an extension not to exceed 180
days from the date of the Staff notification for the Company to regain
compliance with applicable listing standards. There can be no assurance
that the Panel will grant the Company's request for continued listing.
About deCODE
deCODE is a bio-pharmaceutical company developing drugs and DNA-based tests to improve the treatment, diagnosis and prevention of common diseases. Its lead therapeutic programs, which leverage the company's expertise in chemistry and structural biology, include DG041, an antiplatelet compound being developed for the prevention of arterial thrombosis; DG051 and DG031, compounds targeting the leukotriene pathway for the prevention of heart attack; and DG071 and a platform for other PDE4 modulators with therapeutic applications in Alzheimer's disease and other conditions. deCODE is a global leader in human genetics, and has identified key variations in the genome (SNPs) conferring increased risk of major public health challenges from cardiovascular disease to cancer. Based upon these discoveries deCODE has brought to market a growing range of DNA-based tests for gauging risk and empowering prevention of common diseases. Through its CLIA-registered laboratory, deCODE is offers deCODE T2(TM) for type 2 diabetes; deCODE AF(TM) for atrial fibrillation and stroke; deCODE MI(TM) for heart attack; deCODE ProCa(TM) for prostate cancer; deCODE Glaucoma(TM) for a major type of glaucoma; and deCODE BreastCancer, for the common forms of breast cancer. deCODE is delivering on the promise of the new genetics.SM Visit us on the web at decode.com; on our diagnostics site at decodediagnostics.com; for our pioneering personal genome analysis service, integrating the genetic variants included in these tests and those linked to another twenty common diseases, at decodeme.com; and on our blog at decodeyou.com.
Conference Call Information
A conference call, during which deCODE President and CEO Kari Stefansson and CFO Lance Thibault will discuss third quarter financial results and recent operating highlights, will be webcast tomorrow, Friday, November 7, at 8:00am US Eastern Standard Time/1pm GMT. The webcast can be accessed via the Investors section of deCODE's website, decode.com, or through earnings.com. A replay of the call will be available on these websites for at least one week following the call. A digitized telephone replay of the call can be accessed for the week following the call by dialing 1-800-475-6701 from the US, or +1-320-365-3844 from outside the US. The access code is 967723. |
