Pharmos Corporation Reports Fourth Quarter and Full Year 2009 Results
ISELIN, N.J., Feb. 22 /PRNewswire-FirstCall/ -- Pharmos Corporation (Pink Sheets: PARS) today reported financial results for the fourth quarter and twelve-month period ended December 31, 2009.
Fourth Quarter Ended December 31, 2009
Pharmos has no revenues at this time. The fourth quarter net income is partly due to a renegotiated milestone requirement that is not expected to be met and the resulting reversal of a previously recorded Q1 charge of $1 million as well as a tax benefit recorded of $3.9 million from the sale of the NJ tax NOL's, which exceeded operating expenses for the quarter.
The Company recorded net income of $4.3 million, or $0.07 per share, for the fourth quarter 2009 compared to a net loss of $1.0 million, or $(0.04) per share, in the fourth quarter 2008.
Research & development (R&D) expenses decreased by $1,665,533 or 91% from $1,821,796 in 2008 to $156,263 in 2009 due to the curtailment of research and development activities at the Israel location, which was closed in October 2008 and the completion of the Dextofisopam Phase IIb clinical trial in September 2009. The decline reflects decreases in virtually every research and development category. The primary reductions include $38,000 in payroll, $84,000 in professional fees and consulting, $1,429,000 in clinical trial costs and $115,000 in various facility related expenses.
General and administrative expenses increased by $157,109 or 57%, from $277,496 in 2008 to $434,605 in 2009. Significant reductions in professional & consulting fees ($171,000) and facility related expenses ($51,000) were offset by increases to miscellaneous expenses of $221,000 as there were credits against miscellaneous income in 2008 which did not occur in 2009, and payroll of $159,000 when comparing 2009 to 2008. Lower professional & consulting fees in 2009 are due to reductions in the utilization of outside counsel of $53,000, reduced audit fees of $74,000 and lower fees of $55,000 related to our Israel entity. The increase in miscellaneous expenses was due to the sale of fixed assets and equipment lease income of $219,000 at our Israel location during 2008. The increase in payroll expenses was the result of an increase in the bonus accrual of $115,000 and higher non cash stock based compensation of $35,000.
Other expense net, decreased by $41,068 from $70,725 in 2008 to $29,657 in 2009. Interest expense decreased by $92,445 from $121,243 in 2008 to $28,798 in 2009 as a result of lower interest expense due to the conversion of the convertible debentures in April 2009. Interest income decreased by $17,336 from $17,599 in 2008 to $263 in 2009 due to the utilization of invested balances and lower interest rates in 2009. Other income (expense) increased by $34,041 from income of $32,919 in 2008 to an expense of ($1,122) in 2009. The majority of income in 2008 was attributable to a $30,000 sale of pharmaceutical drug material from our Israel facility.
The Company's income tax benefit increased by $2,710,355 from $1,204,126 in 2008 to $3,914,481 in 2009. The income tax benefit reflects the sale of a portion of the Company's New Jersey State net operating losses.
Twelve-months Ended December 31, 2009
For the twelve months ended December 31, 2009, Pharmos recorded a net loss of $3.1 million, or $(0.06) per share compared to a net loss of $10.1 million, or $(0.39) per share for the twelve months ended December 31, 2008. Total operating expenses decreased 45% to $6.1 million from $11.1 million.
Research & development (R&D) gross expenses decreased by $4,606,105 or 51% from $9,028,705 in 2008 to $4,422,600 in 2009 due to the curtailment of research and development activities at the Israel location, which was closed in October 2008 and the completion of the Dextofisopam Phase IIb clinical trial in September 2009. The decline reflects decreases in virtually every research and development category. The primary reductions include $762,000 in payroll, $411,000 in professional fees and consulting, $2,976,000 in clinical trial costs and $457,000 in various facility related expenses.
In process research and development costs which were related to the Vela milestone increased by $180,000 from $0 in 2008 to $180,000 in 2009. On April 9, 2009 the last patient was enrolled in the Phase 2b trial thus triggering a milestone of $1 million cash and 2 million shares of Pharmos common stock. The expense of the milestone of $180,000 was reflected in the Q1 2009 results while the payment of the cash portion of the milestone was deferred under an amendment to the acquisition agreement. Under the terms of the Vela acquisition agreement as amended, the 2 million shares were issued on November 2, 2009. The cash portion of $1,000,000 was also expensed in Q1 2009 but was reversed in Q4 2009 since it is not probable that the amended terms will be met in the foreseeable future, which includes receipt of at least a $10 million cash upfront payment. Since the trial results were not successful, no other milestones have been achieved.
General and administrative expenses decreased by $428,773 or 22%, from $1,965,243 in 2008 to $1,536,470 in 2009. The decrease in general and administrative expenses is due to a reduction in expenses in almost every expense category. Significant reductions were seen in employee compensation ($200,000), professional & consulting fees ($294,000), facility related expenses ($90,000) and offset by an increase to the miscellaneous expenses of $155,000 when comparing 2009 to 2008. The overall decline in employee headcount from 14 employees at the beginning of 2008 to 4 employees at the end of 2009 accounts for the decline in the employee compensation. Lower professional & consulting fees in 2009 are due to reductions in the utilization of outside counsel of $102,000, reduced audit fees of $71,000 and lower fees of $121,000 related to our Israel entity. Finally we incurred an increase in miscellaneous expenses in 2009 over 2008 as credits against miscellaneous expenses were greater in 2008 than in 2009. In 2008 we recorded gains of fixed assets and equipment lease income of $259,000 and in 2009 we reduced our expenses by $100,000 for an accrued marketing expense that will not be paid.
Other expense net, increased by $628,083 from $193,348 in 2008 to $821,431 in 2009. Interest expense decreased by $265,202 from $490,537 in 2008 to $225,335 in 2009 as a result of lower interest expense due to the conversion of the convertible debentures in April 2009. Interest income decreased by $247,339 from $255,751 in 2008 to $8,412 in 2009 due to the utilization of invested balances and lower interest rates in 2009. Debt conversion expense increased by $596,104 from $0 in 2008 to $596,104 in 2009 which is attributable to the convertible debentures retired in April 2009. The conversion of the debentures at a reduced conversion price resulted in a debt conversion expense of $596,104. Other income (expense) increased by $49,842 from income of $41,438 in 2008 to an expense of (8,404) in 2009. The majority of income in 2008 was attributable to a $30,000 sale of pharmaceutical drug material from our Israel facility while the expenses in 2009 were attributable to translation losses on foreign currency.
The Company's income tax benefit increased by $2,710,355 from $1,204,126 in 2008 to $3,914,481 in 2009. The income tax benefit reflects the sale of a portion of the Company's New Jersey State net operating losses.
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 (IBS), pain/inflammation, and autoimmune disorders. The Company's lead product in development is Dextofisopam for the treatment of IBS which has been developed through Phase 2b clinical trials. The Company also has a proprietary technology platform focusing on discovery and development of synthetic cannabinoid compounds with a focus on CB2 receptor selective agonists. Various CB2-selective compounds from Pharmos' pipeline have completed preclinical studies targeting pain, multiple sclerosis, rheumatoid arthritis, inflammatory bowel disease and other disorders. These are available for licensing / partnering.
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
Condensed Consolidated Statements of Operations
Three months ended Twelve months ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Expenses
Research and
development $156,263 $1,821,796 $4,422,600 $9,028,705
In-process
acquired
research and
development (1,000,000) - 180,000 -
General and
administrative 434,605 277,496 1,536,470 1,965,243
Depreciation
and amortization 2,031 16,723 8,314 106,236
----- ------ ----- -------
Total operating
expenses (407,101) 2,116,014 6,147,384 11,100,184
-------- --------- --------- ----------
Income (Loss)
from operations 407,101 (2,116,014) (6,147,384) (11,100,184)
------- ---------- ---------- -----------
Other (expense)
income
Debt conversion
expense - - (596,104) -
Interest income 263 17,599 8,412 255,751
Interest expense (28,798) (121,243) (225,335) (490,537)
Other income
(expense) (1,122) 32,919 (8,404) 41,438
------ ------ ------ ------
Other expense,
net (29,657) (70,725) (821,431) (193,348)
------- ------- -------- --------
Income (Loss)
before income
taxes $377,444 ($2,186,739) ($6,968,815) ($11,293,532)
Income tax
benefit (3,914,481) (1,204,126) (3,914,481) (1,204,126)
Net income (loss) $4,291,925 ($982,613) ($3,054,334) ($10,089,406)
========== ========= =========== ============
Net income (loss)
per share
-basic and diluted $0.07 ($0.04) ($0.06) ($0.39)
===== ====== ====== ======
Weighted average
shares outstanding
-basic and
diluted 57,370,926 26,207,452 47,445,014 25,934,973
========== ========== ========== ==========
Select Consolidated Balance Sheet Data
December 31, 2009 December 31, 2008
----------------- -----------------
Cash and cash equivalents $4,629,486 $4,730,282
Working capital $4,238,033 $4,232,549
Shareholders' equity $3,271,891 $341,219
SOURCE Pharmos Corporation
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