Gentium Reports Second Quarter Financial Results and Clinical Update.VILLA GUARDIA (COMO Como (kō`mō), city (1991 pop. 87,059), capital of Como prov., Lombardy, N Italy, at the southwest end of Lake Como, near the Swiss border. It is an important tourist center and is noted for its silk industry. ), Italy Italy (ĭt`əlē), Ital. Italia, officially Italian Republic, republic (2005 est. pop. 58,103,000), 116,303 sq mi (301,225 sq km), S Europe. -- Gentium Gentium (Latin: of the nations) is an open Unicode serif typeface designed by Victor Gaultney and released under the SIL Open Font License [OFL],[1] which permits modification and redistribution. S.p.A. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :GENT) (the "Company") today reported financial results for the three and six months ended June June: see month. 30, 2006. Highlights of the second quarter of 2006 and recent weeks include: --Raised $22.1 million (gross proceeds) in a follow-on fol·low-on adj. Following as a related or consequent aspect or development: "Such contracts involve follow-on sales of maintenance services" Christian Science Monitor. equity offering led by ThinkEquity Partners, LLC ThinkEquity Partners LLC is a U.S. investment banking firm based in San Francisco, California. ThinkEquity was founded in 2001 with a mission to be the pre-eminent growth focused research-centric investment bank. In April 2007, the firm was merged into Panmure Gordon & Co. ; --Listed the Company's American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Depository The place where a deposit is placed and kept, e.g., a bank, savings and loan institution, credit union, or trust company. A place where something is deposited or stored as for safekeeping or convenience, e.g., a safety deposit box. Shares (ADS) on the NASDAQ National Market System (now the NASDAQ Global Market); --Highlighted Defibrotide Defibrotide is a deoxyribonucleic acid derivative (single stranded) derived from cow lung or porcine mucosa. It is an anticoagulant with a multiple mode of action (see below). Pharmacokinetics Defibrotide is available as an oral, intravenous, and intramuscular formulation. at a Symposium symposium In ancient Greece, an aristocratic banquet at which men met to discuss philosophical and political issues and recite poetry. It began as a warrior feast. Rooms were designed specifically for the proceedings. at the XXII World Congress of the International Union of Angiology angiology /an·gi·ol·o·gy/ (an?je-ol´ah-je) the study of the vessels of the body; also, the sum of knowledge relating to the blood and lymph vessels. an·gi·ol·o·gy n. ; --Publication of two independent pediatric pediatric /pe·di·at·ric/ (pe?de-at´rik) pertaining to the health of children. pe·di·at·ric adj. Of or relating to pediatrics. studies of Defibrotide; --Strengthened U.S. presence with appointment of New York-based CFO See Chief Financial Officer. , Gary Gary, city (1990 pop. 116,646), Lake co., NW Ind., a port of entry on Lake Michigan; inc. 1909. Gary was founded by the U.S. Steel Corporation, which purchased the land in 1905 and landscaped it for a city. Gemignani; --Phase III clinical trial in the U.S. for treatment of Veno-Occlusive Disease ve·no-oc·clu·sive disease n. An inflammatory condition, especially of the liver, characterized by the occlusion and destruction of tiny veins. (VOD See video-on-demand. VoD - video on demand ) with Multiple Organ Failure (Severe VOD): commenced enrollment; expected to be conducted at approximately 30 clinical centers; Institutional Review Board (IRB IRB See: Industrial Revenue Bond ) approval has been received from 10 centers and four are open for patient enrollment;; --Phase II/III clinical trials in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). for the prevention of VOD
in children: 30 centers have IRB approval and 20 centers are open for
patient enrollment; 30 patients have been enrolled;--Independent Phase I/II study of Defibrotide to treat advanced and refractory refractory Material that is not deformed or damaged by high temperatures, used to make crucibles, incinerators, insulation, and furnaces, particularly metallurgical furnaces. Multiple Myeloma multiple myeloma A malignant proliferation of abnormal plasma cells that populate the marrow-containing bones of the body. The affected plasma cells produce myeloma protein, a monoclonal antibody that replaces normal antibodies in the blood, thereby increasing susceptibility patients: 4 centers have IRB approval; 14 patients have been enrolled; --Phase II/III clinical trials in Europe for the prevention of VOD in adults: investigator's meeting was held in Hamburg Hamburg, city, Germany Hamburg (häm`b rkh), officially Freie und Hansestadt Hamburg (Free and Hanseatic City of Hamburg), city (1994 pop. (Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). ) on
March 22, 2006; anticipate initiation of these studies by the fourth
quarter of 2006; and--In August Axcan Pharmaceuticals Inc ("Axcan") announced it was not filing for regulatory approval for mesalazine mesalazine /me·sal·a·zine/ (me-sal´ah-zen) mesalamine. mesalazine, mesalamine 5-aminosalicylic acid; the active anti-inflammatory component of sulfasalazine when used in the treatment of inflammatory bowel disease. in the U.S. and Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. markets, the rights of which the Company sold to Axcan in 2002; under the terms of the agreement the Company would have been entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: to receive future milestone payments and a royalty stream; Axcan's decision had no impact on the Company's current period financial statements and the Company does not believe that this will have a material effect on its future operating results. Clinical Highlights and Outlook Commenting on Gentium's clinical progress during the quarter, Laura Ferro, M.D., Chairman and Chief Executive Officer, said, "Throughout the second quarter of 2006 we made considerable progress on both the clinical and corporate fronts. The clinical potential for Defibrotide continues to gain increased recognition within the scientific and medical communities as evidenced by the full-day symposium held at the World Congress of the International Union of Angiology. These comprehensive discussions provided further elucidation e·lu·ci·date v. e·lu·ci·dat·ed, e·lu·ci·dat·ing, e·lu·ci·dates v.tr. To make clear or plain, especially by explanation; clarify. v.intr. To give an explanation that serves to clarify. of Defibrotide's mechanism of action and its potential for other indications. and highlighted Defibrotide's potential therapeutic value. During the quarter there were two peer-reviewed publications from two independent pediatric studies of Defibrotide to treat and prevent Severe VOD, which were very encouraging and underscored the potential of Defibrotide in treating these very sick pediatric patients pediatric patient Child, see there ." Dr. Ferro continued, "Our clinical development programs are advancing, specifically with the initiation of patient enrollment in our U.S. pivotal Phase III Noun 1. phase III - a large clinical trial of a treatment or drug that in phase I and phase II has been shown to be efficacious with tolerable side effects; after successful conclusion of these clinical trials it will receive formal approval from the FDA trial of Defibrotide to treat Severe VOD. We have secured IRB approvals at a number of key clinical sites and four of 30 clinical sites have begun enrolling patients. We expect to remain on track to complete patient enrollment in this trial during the first half of 2007. "During the quarter we were pleased to achieve a number of important corporate milestones. We strengthened our management team as well as our U.S. corporate presence with the addition of Gary Gemignani as our Chief Financial Officer in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of . As our clinical development and business activities increase, we believe that adding more executives in the U.S. will add to our ability to meet the development timetable we have established. We strengthened our balance sheet by raising $22.1 million in gross proceeds, which allows us to support our clinical development programs and gives us the capital to negotiate new drug development and licensing agreements from a position of strength," concluded Dr. Ferro. Financial Highlights The Company reports its financial condition and operating results using U.S. Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ). The Company's financial statements are prepared using the Euro as its functional currency. On June 30, 2006, EUR EUR In currencies, this is the abbreviation for the Euro. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 1.00 = $1.27. For the second quarter ended June 30, 2006 compared with the prior-year's second quarter: --Total revenues were EUR 1.15 million, compared with EUR 1.17 million --Operating costs and expenses were EUR 4.41 million, compared with EUR 2.89 million --Research and development expenses, which are included in operating costs operating costs npl → gastos mpl operacionales and expenses, were EUR 1.98 million, compared with EUR 1.08 million --Operating loss was EUR 3.26 million, compared with EUR 1.73 million --Interest income (expense), net, was EUR 0.09 million, compared with (EUR 2.1) million --Pre-tax loss was EUR 3.23 million, compared with EUR 4.29 million --Net loss was EUR 3.23 million, compared with EUR 4.30 million --Basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. net loss per share was EUR 0.32 compared with EUR 0.81 per share For the six months ended June 30, 2006 compared with the comparable prior-year period: --Total revenues were EUR 2.10 million, compared with EUR 1.83 million --Operating costs and expenses were EUR 8.35 million, compared with EUR 4.75 million --Research and development expenses, which are included in operating costs and expenses, were EUR 3.60 million, compared with EUR 1.73 million --Operating loss was EUR 6.25 million, compared with EUR 2.92 million --Interest income (expense), net, was EUR 0.14 million, compared with (EUR 4.25) million --Pre-tax loss was EUR 6.34 million, compared with EUR 7.68 million --Net loss was EUR 6.34 million, compared with EUR 7.71 million --Basic and diluted net loss per share was EUR 0.64 compared with EUR 1.50 per share --Cash used in operating activities was EUR 4.87 million, compared with EUR 3.52 million --Cash and cash equivalents amounted to EUR 24.82 million as of June 30, 2006 Dr. Ferro commented, "Our increased spending on our clinical development programs, and the commensurate com·men·su·rate adj. 1. Of the same size, extent, or duration as another. 2. Corresponding in size or degree; proportionate: a salary commensurate with my performance. 3. increase in staffing, will contribute to increasing losses for the balance of this year and next year. Our general and administrative expenses have more than doubled, with much of the increased expense a result of the costs of being a public company. Our 2006 results will also reflect a significant decline in interest expense due to the repayment and redemption of our Series A notes in June 2005 in conjunction with our initial public offering." Operating Results and Trends The fluctuation Fluctuation A price or interest rate change. in total product sales for the three- and six-month periods compared with the prior year is primarily the result of changes in demand by our principal customer, Sirton, and by increased demand for sulglicotide by our Korean Korean, language of uncertain ancestry. It is thought by some scholars to be akin to Japanese, by others to be a member of the Altaic subfamily of the Ural-Altaic family of languages (see Uralic and Altaic languages), and by still others to be unrelated to any known customer. Total product sales for the six-month period ended June 30, 2006 increased by EUR 0.27 million, or 16%, compared with the same period in 2005. Cost of goods sold Cost of goods sold The total cost of buying raw materials, and paying for all the factors that go into producing finished goods. cost of goods sold was EUR 1.62 million for the six-month period ended June 30, 2006, which included a EUR 152 thousand inventory reserve attributable to slow-moving inventory, compared with cost of goods sold of EUR 1.50 million for the comparable period in 2005. Cost of goods sold as a percent of product sales decreased from 89% to 82%. The decrease is primarily due to a revision in the estimated useful life of certain manufacturing equipment resulting in a reduction in depreciation expense, offset to some extent by increased quality control costs. Research and development spending increased during the three- and six-month periods in 2006 compared with 2005, primarily due to the costs associated with the Company's Phase III trial in the U.S. for the treatment of Severe VOD, the Company's Phase II/III trial for prevention of VOD in children and preparations for the Phase II/III trial for the prevention of VOD in adults. Growth in headcount and outside services to support increased activity in our clinical trials including clinical product production costs and stock-based compensation expense also contributed to increased research and development expenses. The Company had 69 employees as of June 30, 2006, compared with 52 as of June 30, 2005. Other general and administrative expense increases were primarily the result of building corporate infrastructure, legal and public company expenses, an increase in internally provided administrative services to replace administrative services previously provided by affiliates, and stock-based compensation expense. The increase in internally provided services accounts for the decrease in charges from affiliates between the periods. Interest income (expense), net, changed primarily due to the repayment and conversion of the Company's Series A senior convertible notes in June 2005, and the higher level of invested funds compared with the prior year. For the six months ended June 30, 2005, interest expense on the Series A notes was EUR 4.1 million, including non-cash interest expense of EUR 3.8 million from the amortization of the issue discount and debt issue cost. These notes were converted or redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. in June 2005. Additionally, interest income increased by EUR 200 thousand from EUR 11 thousand in the period ended June 30, 2005 to EUR 211 thousand in the comparable 2006 period, as the result of a higher level of invested funds. The Company ended the second quarter of 2006 with EUR 24.8 million in cash and cash equivalents, compared with cash and cash equivalents of EUR 12.8 million as of December 31, 2005. About Gentium Gentium, S.p.A., located in Como, Italy, is a biopharmaceutical company focused on the research, discovery and development of drugs to treat and prevent a variety of vascular diseases vascular diseases, n.pl diseases of the peripheral circulatory system. and conditions related to cancer and cancer treatments. Defibrotide, the Company's lead product candidate, is an investigational drug that has been granted Orphan Drug orphan drug, drug developed under the U.S. Orphan Drug Act (1983) to treat a disease that affects fewer than 200,000 people in the United States. The orphan drug law offers tax breaks and a seven-year monopoly on drug sales to induce companies to undertake the status and Fast Track Designation by the U.S. FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. to treat Severe VOD and Orphan orphan: see adoption; foundling hospital; guardian and ward. See widow & orphan. Orphan See also Abandonment. Adverse, Anthony finally, at middle age, discovers origins. [Am. Lit. Medicinal Product medicinal product, n a substance administered to humans or animals through injection, application, oral ingestion, inhalation, and so forth, whose purpose is to ultimately restore health or eliminate disease in an individual. Designation by the European Commission European Commission, branch of the governing body of the European Union (EU) invested with executive and some legislative powers. Located in Brussels, Belgium, it was founded in 1967 when the three treaty organizations comprising what was then the European Community both to treat and to prevent VOD. Cautionary Note Regarding Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release contains "forward-looking statements." In some cases, you can identify these statements by forward-looking words such as "may," "might," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of these terms and other comparable terminology. These statements are not historical facts but instead represent the Company's belief regarding future results, many of which, by their nature, are inherently uncertain and outside the Company's control. It is possible that actual results may differ, possibly materially, from those anticipated in these forward-looking statements. For a discussion of some of the risks and important factors that could affect future results, see the discussion in our Form 20-F for the year ended December 31, 2005 under the caption "Risk Factors."
GENTIUM S.p.A.
Balance Sheets
(in thousands, except share data)
As of As of June
December 30, 2006
31, 2005 (Unaudited)
----------- -----------
ASSETS
Cash and cash equivalents EUR 12,785 EUR 24,819
Receivables 8 178
Receivables from related parties 1,867 1,972
Inventories 1,628 1,867
Prepaid expenses and other
current assets 918 1,180
----------- -----------
Total Current Assets 17,206 30,016
Property, manufacturing facility
and equipment, at cost 17,456 18,552
Less: Accumulated depreciation 8,825 9,203
----------- -----------
Property, manufacturing facility
and equipment, net 8,631 9,349
Intangible assets, net of
amortization 267 536
Marketable securities - 519
Other non-current assets 9 12
----------- -----------
Total Assets EUR 26,113 EUR 40,432
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable 2,644 4,096
Payables to related parties 542 378
Accrued expenses and other
current liabilities 1,063 954
Current maturities of long-term
debt 916 261
Current portion of capital lease - 50
Deferred income 283 213
----------- -----------
Total Current Liabilities 5,448 5,952
Long-term debt, net of current
maturities 2,485 5,321
Capital lease obligation - 100
Termination indemnities 706 723
----------- -----------
Total Liabilities 8,639 12,096
----------- -----------
Share capital (par value: EUR
1.00; 12,690,321 and 15, 100,
292 shares authorized at
December 31, 2005 and June 30,
2006, respectively; 9,610,630
and 11,666,013 shares issued at
December 31, 2005 and June 30,
2006, respectively) 9,611 11,666
Additional paid in capital 33,090 48,247
Other comprehensive loss - (11)
Accumulated deficit (25,227) (31,566)
----------- -----------
Total Shareholders' Equity 17,474 28,336
----------- -----------
Total Liabilities and
Shareholders' Equity EUR 26,113 EUR 40,432
=========== ===========
GENTIUM S.p.A.
Statements of Operations
(Unaudited, in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------------------------------
2005 2006 2005 2006
------------------------------------------------------
Revenues:
Sales to
affiliates EUR 1,096 EUR 941 EUR 1,596 EUR 1,853
Third party
product
sales 2 107 95 110
---------- ----------- ----------- -----------
Total product
sales 1,098 1,048 1,691 1,963
Royalties - 7 - 7
Other income
and
revenues 70 97 140 132
---------- ----------- ----------- -----------
Total Revenues 1,168 1,152 1,831 2,102
Operating costs
and expenses:
Cost of goods
sold 998 853 1,500 1,616
Research and
development 1,084 1,979 1,728 3,602
Charges from
affiliates 310 166 581 381
General and
administra-
tive 482 1,353 894 2,649
Depreciation
and
amortization 20 61 43 103
---------- ----------- ----------- -----------
2,894 4,412 4,746 8,351
---------- ----------- ----------- -----------
Operating loss (1,726) (3,260) (2,915) (6,249)
Foreign currency
exchange loss,
net (465) (62) (520) (230)
Interest income
(expense), net (2,097) 88 (4,245) 140
---------- ----------- ----------- -----------
Pre-tax loss (4,288) (3,234) (7,680) (6,339)
Income tax
expense:
Current - - - -
Deferred (16) - (32) -
---------- ----------- ----------- -----------
Net loss EUR (4,304) EUR (3,234) EUR (7,712) EUR (6,339)
Weighted average
share:
Basic 5,303,242 10,244,414 5,152,459 9,929,273
Diluted 5,363,242 10,625,886 5,212,459 10,330,788
Net loss per
share:
Basic net loss
per share EUR (0.81) EUR (0.32) EUR (1.50) EUR (0.64)
Diluted net loss
per share (0.81) (0.32) (1.50) (0.64)
GENTIUM S.p.A.
Statements of Cash Flows
(Unaudited, in thousands)
For the Six Months
Ended June 30,
------------------
2005 2006
------- -------
Cash Flows From Operating Activities:
Net loss EUR (7,712) (6,339)
------- -------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Unrealized foreign exchange loss 569 224
Depreciation and amortization 733 458
Non cash interest expense 3,837 -
Inventory write off 50 182
Stock based compensation 106 423
Gain on asset disposal - (23)
------- -------
Changes in operating assets and liabilities:
Accounts receivable (485) (275)
Inventories (548) (421)
Prepaid expenses and other current assets 334 (228)
Accounts payable and accrued expenses (343) 1,180
Deferred income (143) (70)
Termination indemnities 79 17
------- -------
Net cash used in operating activities (3,523) (4,872)
------- -------
Cash Flows From Investing Activities:
Capital expenditures (478) (922)
Intangible expenditures (52) (352)
Proceeds on sale of asset - 11
Investment in marketable securities - (530)
------- -------
Net cash used in investing activities (530) (1,793)
------- -------
Cash Flows From Financing Activities:
Proceeds from warrants exercise - 884
Proceeds from long term debt, net - 4,563
Capital contribution 3,900 -
Repayments of long-term debt (307) (551)
Proceeds (repayment) from Series A convertible
Notes (1,929) -
Early extinguishment of long term debt - (1,868)
Proceeds (repayment) of affiliate's loan (1,200) -
Proceeds (repayment) from bank overdrafts and
short term borrowings (2,790) -
Proceeds from initial public offering and
private placement, net of offering expenses 14,584 15,896
------- -------
Net cash provided by financing activities 12,258 18,924
------- -------
Effect of foreign exchange rate - (225)
Increase in cash and cash equivalents 8,205 12,034
Cash and cash equivalents, beginning of period 2,461 12,785
------- -------
Cash and cash equivalents, end of period EUR 10,666 24,819
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