Biotech Values

[DewDiligence]

GTCB Reports 1Q06 Financial Results

[Items of interest:

1) The EMEA appeal has been submitted and a decision is expected in June.

2) The acquired-deficiency indication in which partner Leo Pharma will run a phase-2 trial in Europe is DIC/sepsis, which is a mild surprise to me as I had expected burns to be the selection. (Time to brush up on the ATryn studies in DIC – see #msg-10321910.)

3) Cash on hand at 3/31/06 was $26.1M, enough to last for quite a while given GTC’s cash-burn projection of $13-17M for the rest of 2006.]

http://biz.yahoo.com/bw/060428/20060428005321.html?.v=1

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Friday April 28, 8:00 am ET

FRAMINGHAM, Mass.--(BUSINESS WIRE)--April 28, 2006--GTC Biotherapeutics, Inc. ("GTC", Nasdaq: GTCB) reported today its financial results for the first quarter ended April 2, 2006. The total net loss for the quarter was $8.5 million, or $0.14 per share, compared with $8.0 million, or $0.18 per share, in the first quarter of 2005.

"Our ATryn® program is focused on the three goals we outlined in our year-end financial results. We believe we have strong arguments supporting our submission to the European Medicines Agency, or EMEA, for re-examination of the grounds for refusal of market authorization of ATryn for hereditary deficiency in the European Union. We are excited by LEO Pharma A/S's decision to pursue disseminated intravascular coagulation, or DIC, to develop a large market opportunity in the European Union. In addition, we are planning to complete enrollment in our phase III study of hereditary deficiency in the United States by the end of the year," stated Geoffrey F. Cox, Ph.D., GTC's Chairman of the Board and Chief Executive Officer. "We are enthusiastic regarding the progress we are making in the development of ATryn and the resulting significant commercial opportunity."

The European Union's statutes allow for a request for re-examination of the application for market authorization of ATryn® for hereditary deficiency. The basis of this re-examination has been submitted to the Committee for Medicinal Products for Human Use, or CHMP, of the EMEA. An ongoing dialogue with representatives of the CHMP has begun. A final determination from the CHMP is expected after their regularly scheduled meeting that concludes June 1.

LEO has submitted an application to the EMEA seeking scientific advice regarding the design of clinical studies of ATryn as a treatment for DIC, which is the widespread formation of clots within blood vessels and is often associated with severe sepsis. In this indication, similar to the mechanisms of other acquired deficiencies, the infection and resulting septic condition consume much of the patient's own antithrombin. This antithrombin deficiency then results in DIC. In addition to a number of research studies that support the potential therapeutic value of antithrombin for this indication, DIC is an approved indication for plasma-derived antithrombin in Japan. LEO is planning to begin recruitment into a phase II study before the end of this year. DIC occurs in an estimated 220,000 severe sepsis cases in the European Union each year, of which approximately 50% are fatal; representing a major unmet medical need of significant interest in critical care.

[This paragraph is as previously reported]: The design of the phase III study for the U.S. for the hereditary deficiency, or HD, indication follows on a review with the FDA of the clinical data generated for the European HD submission. There are 17 additional patients being recruited for this phase III study. The results of this study will be combined with the 14 patients in the European study and compared to historical data from at least 35 patients that were previously treated with antithrombin derived from plasma sources. Antithrombin is used in HD patients to reduce the risk of the formation of a blood clot known as a deep vein thrombosis, or DVT, during high risk procedures such as surgery or childbirth. The primary endpoint of the U.S. study is based on the observation of clinical symptoms of a DVT together with the comparison to historical data. These study characteristics represent important differences from the study performed for Europe. GTC plans to complete enrollment in this phase III study by the end of the 2006, with a projected filing of the associated BLA in the first half of 2007.

GTC's cash and marketable securities at the end of the first quarter of 2006 totaled approximately $26.1 million, a $10.1 million decrease compared to the $36.2 million total at the end of 2005. The decrease includes a $2.4 million final repayment on a promissory note to Genzyme Corporation, which was financed by the expanded loan from GE Capital at the end of 2005. Exclusive of the effects of the promissory note payment, $7.7 million of net cash was used in the quarter. GTC expects the net use of cash, exclusive of the promissory note payment, to be approximately $21 million to $25 million for the full year 2006 [i.e. $13.3-17.3M for the rest of 2006]. This includes additional manufacturing of ATryn to support clinical requirements in 2006.

Revenues were approximately $2.2 million for the quarter, a 66% increase from approximately $1.3 million in the first quarter of 2005. The first quarter of 2006 revenues were primarily related to continuation of the activities with Merrimack Pharmaceuticals. Revenues from the first quarter of 2005 were primarily related to activities with Merrimack Pharmaceuticals, funding of the malaria vaccine program by the National Institute of Allergy and Infections Diseases, and completion of the programs with Elan Pharmaceuticals.

Costs of revenue and operating expenses totaled $10.7 million in the current quarter, approximately 17% higher than the $9.2 million total in the first quarter of 2005. The increase was driven primarily by an increase of $3.4 million in the costs associated with the ATryn® program. This increase was partly offset by decreases in other program expenses as well as lower cost of revenue and selling, general and administrative expenses.

The per share results were affected by an increase in weighted average number of shares outstanding from 44.8 million shares for the first quarter of 2005 to 60.8 million shares in the first quarter of 2006. [I use 68M fully-diluted shares for valuation purposes.] The increases in the weighted average shares outstanding primarily reflect the issuance of approximately 21.4 million shares of common stock in three offerings during 2005. The gross proceeds to GTC from those offerings totaled approximately $35 million. GTC had approximately 61.4 million shares outstanding as of April 2, 2006.

Conference Call Information

GTC Biotherapeutics will discuss these results and expectations with financial analysts in a web cast conference call at 10:00 a.m. (Eastern) today. The call may be heard through GTC's web site, http://www.gtc-bio.com. The dial-in number from inside the United States is 1-800-435-1261. The dial-in number from outside the United States is 1-617-614-4076. The participant pass code number is 69634931.
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