GTC Biotherapeutics (fka GTCB)

[DewDiligence]

Re: ATryn accounting in 1Q08 financial statements

>…does the last line mean that manufacturing Atryn costs more than the selling price to LEO?<

For ATryn GTC supplies to Leo for use in clinical trials, GTC has a negative margin due to a ceiling on Leo’s reimbursement. This negative margin appears on GTC’s income statement as an R&D expense and it accounted for $2.5M of the $7.7M total R&D for the quarter (of which $5.1M pertained to the ATryn programs).

For ATryn GTC supplies to Leo for commercial sales in Europe, GTC has a positive gross margin. GTC also receives a royalty on Leo’s commercial sales, (which has essentially a 100% gross margin). During 1Q08, however, GTC did not sell any ATryn to Leo for commercial use because Leo’s existing inventory was sufficient. Moreover, ATryn royalties from Leo are always booked with a one-month time lag, so GTC’s 1Q08 revenue included only the de minimus royalties from Leo’s commercial sales during 4Q07.

GTC said on yesterday’s CC that the 2Q08 financials will include significant ATryn sales to Leo for commercial use.