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EntreMed Inc. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: March 9, 2012 02:38PM
EntreMed Inc. (ENMD) filed Annual Report for the period ended 2011-12-31. Entremed Inc has a market cap of $25 million; its shares were traded at around $2.221 with and P/S ratio of 6.8.
Highlight of Business Operations:We have incurred substantial operating losses since our inception due in large part to expenditures for our research and development activities. At December 31, 2011, we had an accumulated deficit of $379 million. We expect to continue to incur expenses, resulting in operating losses, for the foreseeable future due to, among other factors, our continuing clinical trials, planned future clinical trials, and other anticipated research and development activities. Based on current plans, we expect our current available cash and cash equivalents to meet our cash requirements for the next twelve months, subject to approval of the Strategic Financing at our 2012 shareholder meeting. Therefore, until the approval of the Strategic Financing at the 2012 shareholder meeting, there exists substantial doubt about our ability to continue as a going concern. We will require significant additional funding to fund operations if we ever become profitable. Although the proceeds from the Strategic Financing allow us to have sufficient cash to meet its cash requirements into fiscal 2013, the financing is subject to approval by stockholders at our 2012 annual meeting. Our largest stockholder, Celgene Corporation (“Celgene”), has agreed to vote in favor of the transaction however, there can be no assurance that we will receive the requisite votes necessary to approve the transaction. If the stockholders do not approve the transaction, the convertible notes will not automatically convert into common stock, and we will be required to pay $1.2 million in liquidated damages to the investors. Additionally, the convertible notes mature on August 31, 2012, and we would be required to pay the principal and accrued interest if the notes do not convert. In such event, and if we are unable to raise additional financing, we will likely abandon its drug development plans and wind down our operations. Additionally, if we fail to raise additional capital when needed, or to enter into collaboration agreements with development partners to finance our clinical trials when funds are not otherwise available to us, we may be required to delay, scale back, or eliminate our clinical program.
Revenues. Revenues decreased 47% in 2011 to $1,941,000 from $3,693,000 in 2010. Our revenues for these two years primarily reflect royalty revenues received from the sales of Thalomid®. The decrease in 2011 revenue was consistent with our expectations and results from decreased royalty revenue earned on sales of Thalomid® in the United States. Beginning in 2005, we became entitled to share in the royalty payments received by Royalty Pharma Finance Trust on annual Thalomid® sales when Royalty Pharma Finance Trust receives more than $15,375,000 in royalties. Thalomid® sales in 2011 and 2010 surpassed the annual revenue targets and we recorded royalty revenues of $1,941,000 and $3,449,000, respectively. In the fourth quarter of 2010, we were awarded a Qualifying Therapeutic Discovery Project grant in the amount of $244,479 based on its application for ENMD-2076.
We expect that the majority of our 2012 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 2011 and 2010, we earned royalty-sharing revenue in the amount of $1,941,000 and $3,449,000, respectively. There can be no assurance on the future trends of Thalomid® sales and the amount of revenue we will receive and record in 2012. Based on the trend, we expect annual sales of Thalomid® in 2012 to continue to decrease, which will result in a reduction in our revenues in 2012.
Stocks Discussed: ENMD,