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EntreMed Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 14, 2011 10:49AM
EntreMed Inc. (ENMD) filed Quarterly Report for the period ended 2011-09-30. Entremed Inc. has a market cap of $19.58 million; its shares were traded at around $1.6 with and P/S ratio of 5.3.
Highlight of Business Operations:The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As of September 30, 2011, the Company has operating and liquidity concerns. Since inception, the Company has incurred significant losses from operations and has incurred an accumulated deficit of $379.8 million. The Company expects to continue to incur expenses, resulting in operating losses, for the foreseeable future due to, among other factors, its continuing clinical activities and operations. During the nine-months ended September 30, 2011, the Company raised an aggregate of $1.1 million in connection with sales made to a purchaser under a Standby Equity Distribution Agreement (the “SEDA”) (see Note 4 in the notes to the financial statements included in this Quarterly Report on Form 10-Q). Assuming expenses are consistent with the trends of the previous quarter, the Company expects its current available cash and cash equivalents will be sufficient to meet its cash requirements into the second quarter of fiscal 2012. As part of its cash preservation efforts, the Company will continue to look for ways to reduce operating expenses in any nonessential areas. To improve the Company s cash position, the Company will continue to evaluate opportunities to raise funds from the capital markets and will continue to pursue development partnerships for ENMD-2076. If funding is not available to the Company, or available on acceptable terms, by the second quarter of 2012, the Company will be required to delay or stop further clinical activity on its ENMD-2076 program.
The Company s ability to continue as a going concern is dependent on its success at raising additional capital sufficient to meet its obligations on a timely basis, the ongoing receipt of royalty payments and its ability to ultimately attain profitability. As the amount of royalty payments to be received cannot be reasonably estimated, the Company will likely be required to raise additional capital sufficient to enable the Company to continue its operations through the next 12 months. If additional funds are raised by issuing equity securities, dilution to existing shareholders may result. There can be no assurance that adequate additional financing will be available to the Company on terms that it deems acceptable, if at all, or that the Company will be able to receive the maximum gross funds available under the SEDA. In the event the Company is unable to successfully raise additional capital, it is unlikely that the Company will have sufficient cash flows and liquidity to finance its business operations and ENMD-2076 development program, as currently conducted, by the second quarter of fiscal 2012. Accordingly, in the event new financing is not obtained, the Company will likely further reduce general and administrative expenses and delay, scale back, or interrupt the clinical development of ENMD-2076, until it is able to obtain sufficient financing to do so.
Revenues. Our 2011 revenues will likely result solely from Celgene s sale of Thalomid®. We earn royalties once sales of Thalomid exceed approximately $225 million annually, pursuant to a 2001 agreement with Royalty Pharma, as noted above. Thalomid® is distributed and sold by Celgene Corporation and/or its affiliates, and thus, we have no control over sales of Thalomid® or the amount, if any, of royalty payments we will receive. We recorded royalty revenue of $8,852 during the nine month period ended September 30, 2011. This royalty related to certain sales by Celgene of Thalomid in 2010 that were not reported to Royalty Pharma until the second quarter of 2011, at which time we received our share of the applicable royalty payment. We do not expect to record any additional revenue in fiscal 2011 until the fourth quarter.
We expect that the majority, if not all, of our 2011 revenues will continue to be from royalties on the sales of Thalomid®. Thalomid® is sold by a third-party and is subject to competition from other products and generic drugs, and we have no control over such party s sales efforts or the resources devoted to Thalomid® sales. In 2010 and 2009, we received royalty-sharing revenue in the amount of $3,449,000 and $4,990,000, respectively. There can be no assurance as to future sales trends of Thalomid® and the amount of revenue we will receive and record in 2011. Based upon the trend of declining sales over the past two years, together with recent publicly disclosed information from Celgene Corporation regarding sales of Thalomid®, we expect annual sales of Thalomid® in 2011 to continue to decrease, which will result in a reduction in our revenues in 2011. As we continue to incur costs for the clinical investigation and development activities of ENMD-2076 during the remainder of fiscal 2011, such a reduction in our royalty revenue would have a material adverse effect on both our short-term and long-term liquidity if we are unable to obtain other financial resources to replace the anticipated decrease in Thalomid® royalty revenues. There is no assurance that the amount of royalty-sharing revenues received for fiscal 2011 will be similar to amounts received during prior fiscal years.
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