Biotech Values

[canapeas]

WR Hambrecht

raised genr's FY04 R&D expense to $16.2 mil from $11.3 mil and FY EPS to a loss of .26 from .16, thus explaining today's action?

26 March 2004, 10:24am ET

GENR: Reit Buy - Investment Conclusion: We are reiterating our Buy rating and price target of $9 after Genaera reported Q4:03 results and, importantly, indicated it remains on track with development of its lead drug, Squalamine, for wet AMD. Genaera filed the IND for Squalamine in March and we believe will begin US Phase II trials in Q2:04. This anti-angiogenic drug has demonstrated safety and efficacy in treating wet AMD, and is likely to attract a lucrative pharmaceutical partnership. As a reminder, Squalamine is one of the only drugs for AMD that can be administered systemically rather than by injection in the eye, making this product particularly attractive. We continue to expect its anti-IL-9 antibody for asthma to gain greater visibility as its partner, MedImmune, filed the IND in Q4:03 and should initiate Phase I trials shortly.

Pipeline developments on track - Squalamine IND has been filed. We anticipate initiation of larger, controlled Phase II trials of Squalamine in the U.S. in Q2:04, marking a major step forward for Squalamine and potentially accelerating ongoing discussions for a high value partnership.

Genaera has shown impressive positive Phase I/II results for Squalamine in wet AMD, placing its lead candidate in strong competition with the current leaders in the field. Management also stated additional data on Squalamine for non-small cell lung cancer may be presented at the June 2004 ASCO meeting.

- Reports Q4:03 results. Genaera reported revenue of $0.1 million, in-line with our estimate of $0.1 million, and EPS of a loss of ($0.10) versus our estimate of ($0.05) primarily driven by $2.0 million in higher R&D expense related to pre-IND Squalamine developments. We are maintaining our 2004 revenue of $6.6 million but expect a continued higher level of R&D expenses in 2004. We are raising our FY04 R&D expense to $16.2 million from $11.3 million and our EPS goes to a loss of ($0.26) from a loss of ($0.16).