Axys Pharmaceuticals Reports First Quarter 2001 Financial Results.Business Editors/Health & Medical Writers SOUTH SAN FRANCISCO South San Francisco, city (1990 pop. 54,312), San Mateo co., W Calif.; inc. 1908. South San Francisco has several industrial parks; its manufactures include medical supplies and equipment, foods, paint, paper products, consumer goods, and clothing. , Calif.--(BW HealthWire)--May 7, 2001 Axys Pharmaceuticals, Inc. (Nasdaq: AXPH) today reported revenues for the quarter ended March 31, 2001 of $3.1 million, more than double the $1.4 million reported in the first quarter of 2000. The increase is due to milestones earned from Merck & Co. (NYSE NYSE See: New York Stock Exchange :MRK MRK Merck & Company (stock symbol) MRK Mayer-Rokitansky-Kuster (anomaly) MRK Manual Remote Keying ) and Aventis S.A. (NYSE:AVE), marking progress made in the company's cysteine cysteine (sĭs`tēn), organic compound, one of the 20 amino acids commonly found in animal proteins. Only the l-stereoisomer participates in the biosynthesis of mammalian protein. protease inhibitor protease inhibitor (prō`tē-ās'), any of a class of drugs that interfere with replication of the AIDS virus (HIV), by blocking an enzyme (protease) necessary in the late stages of its reproduction. research programs. Axys also reported a net loss of $18.1 million, or $0.48 per share, for the first quarter of 2001. Included in these results was a $9.0 million non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. representing the write-off of an investment in Akkadix Corporation. Axys' investment in Akkadix resulted from the exercise by Bay City Capital of a contractual right to exchange their holdings in the agricultural biotech company for Axys common stock and also resulted in an increase in Axys' ownership percentage from 31% to 44%. Without the Akkadix-related charge, the Axys net loss was approximately $9 million, or $0.24 per share, for the first quarter of 2001. This compares with a loss of $8.5 million, or $0.26 per share, for the same period in 2000. Commenting on the write-off, David E. Riggs, senior vice president and chief financial officer said, "Last quarter, in accordance with the equity method of accounting, Axys recognized a charge of $2.8 million representing substantially all of our investment in Akkadix. In March, Axys received an additional 2.7 million shares of Akkadix preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. in exchange for issuing new shares of Axys common stock. This exchange of shares was the result of the exercise of a contractual option extended by Axys to Bay City Capital, in connection with its original equity investment in Akkadix. Since we do not anticipate realizing any future value from the Akkadix investment, we recorded a non-cash charge of approximately $9 million in the first quarter representing the fair value of Axys common stock exchanged for Akkadix preferred stock. Axys does not expect to make further investments in Akkadix." First quarter 2001 operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. were $11 million, compared to $10.1 million incurred in the comparable quarter last year. Research and development expenses were $8.9 million in first quarter of 2001, compared to $7.9 million for the same period in 2000. The increase in research and development was associated with APC (1) (American Power Conversion Corporation, West Kingston, RI, www.apcc.com) The leading manufacturer of UPS systems and surge suppressors, founded in 1981 by Rodger Dowdell, Neil Rasmussen and Emanual Landsman, three electronic power engineers who had worked at MIT. 2059 clinical development expenses. Axys said it does not expect to incur further development expense for the compound and is concentrating on the oral tryptase program with Bayer. Paul J. Hastings, president and chief executive officer of Axys, noted: "We are still encouraged by the ongoing oral tryptase program at Bayer, and for the time being, the bulk of the tryptase efforts will be focused there. The time and expense of performing additional preclinical studies preclinical studies, n.pl a term used to describe research done before a clinical study. May be laboratory or epidemiologic research. to support the re-entry RE-ENTRY, estates. The resuming or retaking possession of land which the party lately had. 2. Ground rent deeds and leases frequently contain a clause authorizing the landlord to reenter on the non-payment of rent, or the breach of some covenant, when the of APC 2059 into long-term clinical trials has significantly delayed the program. We have decided not to pursue the development of APC 2059 for ulcerative colitis ulcerative colitis Inflammation of the colon, especially of its mucous membranes. The inflamed membranes develop patches of tiny ulcers, and the diarrhea contains blood and mucus. or asthma on our own, but would consider partnering the program with a company better equipped to perform the necessary additional work." On January 1, 2001, Axys adopted Financial Accounting Standards Board Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). No. 133 - Accounting for Derivative Instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. and Hedging Activities (FAS 133). Under the new pronouncement, the company is required to account for the change in market value of derivative instruments. At March 31, 2001, the company held two derivative instruments. The first was a stock option plan covering a small portion of the company's investment in Discovery Partners International, Inc. ("DPII DPII Discovery Partners International, Inc. "). Axys allows certain employees to participate in this investment. The change in fair value of these options was included in operating expenses, and resulted in a non-cash credit of $1.1 million for the first quarter of 2001. The second was a warrant held by Axys, the change in fair value of which was included in other income (expense) and resulted in a non-cash expense of approximately $978,000 at the end of the first quarter of 2001. Axys ended the first quarter with cash, cash equivalents and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has of $29.4 million. In addition, Axys holds 7.4 million shares of DPII, valued on March 31 at more than $47 million and secured construction financing of approximately $11 million for its new medicinal chemistry building. In February, Axys announced receipt of a milestone payment from Merck & Co. for meeting a pre-agreed milestone in the development of a compound being studied for use in the treatment of osteoporosis, a disease that affects an estimated 40 percent of women over the age of 50. The compound selected by Merck is a potent and selective inhibitor of Cathepsin K, a cysteine protease protease /pro·te·ase/ (pro´te-as) endopeptidase. pro·te·ase n. Any of various enzymes, including the proteinases and peptidases, that catalyze the hydrolytic breakdown of proteins. that has been demonstrated to play a key role in bone resorption. In March, Axys achieved a research milestone from Aventis, recognizing successful completion of a pivotal in vivo in vivo /in vi·vo/ (ve´vo) [L.] within the living body. in vi·vo adj. Within a living organism. in vivo adv. proof-of-concept study which confirmed the mechanism of action for inhibitors of orally administered Cathepsin S. The collaboration with Aventis is focused on development of Cathepsin S inhibitors for potential applications in treating inflammation and autoimmune disease autoimmune disease, any of a number of abnormal conditions caused when the body produces antibodies to its own substances. In rheumatoid arthritis, a group of antibody molecules called collectively RF, or rheumatoid factor, is complexed to the individual's own gamma , including rheumatoid arthritis rheumatoid arthritis Chronic, progressive autoimmune disease causing connective-tissue inflammation, mostly in synovial joints. It can occur at any age, is more common in women, and has an unpredictable course. , asthma, atherosclerosis, COPD COPD chronic obstructive pulmonary disease. COPD abbr. chronic obstructive pulmonary disease Chronic obstructive pulmonary disease (COPD) and rhinitis Rhinitis Definition Rhinitis is inflammation of the mucous lining of the nose. Description Rhinitis is a nonspecific term that covers infections, allergies, and other disorders whose common feature is the location of their symptoms. . In April, Axys announced the publication of a paper in the Journal of Molecular Biology The Journal of Molecular Biology is a scientific journal published weekly by Elsevier, under the Academic Press imprint. It publishes original scientific research concerning studies of organisms or their components at the molecular level. describing the basis of a new technology for designing competitive and fully reversible serine protease inhibitors. The paper was authored by a team of seventeen Axys scientists led by Bradley Katz, Ph.D. Axys believes this new technology has broad application, and is currently applying this technology to the development of urokinase urokinase /uro·ki·nase/ (UK) (u?ro-ki´nas) u-plasminogen activator; an enzyme in the urine of humans and other mammals, elaborated by the parenchymal cells of the human kidney and acting as a plasminogen activator. inhibitors for cancer and Factor VIIa inhibitors for thrombosis. Axys Pharmaceuticals, Inc., an integrated small molecule drug discovery and development company, has a broad pipeline of products for chronic therapeutic applications that are partnered with world-class pharmaceutical companies and a proprietary product portfolio in oncology. Axys is also building shareholder value through investments in affiliated businesses that leverage the Axys technologies. Currently, these companies include Discovery Partners International, Inc. (Nasdaq:DPII), a chemistry services company; and DNA DNA: see nucleic acid. DNA or deoxyribonucleic acid One of two types of nucleic acid (the other is RNA); a complex organic compound found in all living cells and many viruses. It is the chemical substance of genes. Sciences, a genetics company. Except for the historical information contained herein, this press release contains forward-looking statements that involve risks and uncertainties which could cause Axys' actual results to differ materially from those discussed here, including the risks inherent in early stage development and the reliance on the efforts of collaborative partners, the risk that Axys collaborations will not be successful, the risk that clinical trials will not proceed as anticipated or may not be successful, the risk that Axys will not be successful in entering into new collaborations, market risk associated with Axys' substantial ownership interest in Discovery Partners International, Inc. and Axys' investments in its other affiliated businesses, competition and marketing risk, and general economic conditions that may affect Axys' actual results and developments. Additional factors that could cause or contribute to such differences include, but are not limited to, those discussed in the sections entitled "What Factors Could Cause Our Results to Differ Significantly from Those You Might Expect?" and "What Other Matters Should Stockholders Consider with Respect to Axys?" in the Axys' SEC Reports, including Axys' report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended December 31, 2000. For more information about Axys Pharmaceuticals, Inc., please visit the company's website at http://www.axyspharm.com.
AXYS PHARMACEUTICALS, INC.
Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three months ended March 31,
2001 2000(a)
--------- --------
Collaboration and license revenue $ 3,070 $ 1,414
-------- --------
Operating expenses:
Research and development 8,929 7,858
General and administrative 3,242 2,814
Non-cash compensation expense (income) (1,051) -
Restructure charge - (545)
-------- --------
Total operating expenses 11,120 10,127
-------- --------
Operating loss (8,050) (8,713)
Other income (expense) (10,980) 374
-------- --------
Loss from continuing operations, before
cumulative effect (19,030) (8,339)
Cumulative effect of change in
accounting principle 972 -
Discontinued operations - (153)
-------- --------
Net loss $(18,058) $ (8,492)
======== ========
Basic and diluted net loss per share from
continuing operations, before cumulative effect $ (0.51) $ (0.26)
======== ========
Basic and diluted net loss per share from
cumulative effect $ .03 $ -
======== ========
Basic and diluted net loss per share from
discontinued segments $ - $ -
======== ========
Basic and diluted net loss per share $ (0.48) $ (0.26)
======== ========
Shares used in computing basic and diluted net
loss per share 37,345 32,067
(a) The 2000 results of the Company's former subsidiaries, Axys
Advanced Technologies and PPGx, have been reclassified in
accordance with APB 30 - Reporting the Results of
Operations-Reporting the Effects of a Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions.
Balance Sheet Data
March 31,
2001 December 31,
(unaudited) 2000
---------- -----------
Cash, cash equivalents & marketable investments $ 29,430 $ 41,776
Total assets 110,710 118,696
Accumulated deficit (285,413) (267,355)
Total stockholders' equity 71,657 79,565
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