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Biosante Pharmaceuticals Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 11, 2009 11:05PM
Biosante Pharmaceuticals Inc. (BPAX) filed Quarterly Report for the period ended 2009-03-31. Biosante Pharmaceutical is an emerging pharmaceutical company developing a pipeline of hormone therapy products to treat both men and women. BioSante also is developing its nanoparticulate-based platform technology for novel vaccines vaccine adjuvants and drug delivery systems. Biosante Pharmaceuticals Inc. has a market cap of $53.5 million; its shares were traded at around $1.98 with and P/S ratio of 14.2.
Highlight of Business Operations:
In August 2008, we entered into a termination, release and settlement agreement with Nycomed, pursuant to which we reacquired Elestrin and assumed all manufacturing, distribution and marketing responsibilities for Elestrin in exchange for, among other things, a $100,000 payment to Nycomed. In December 2008, we entered into a sublicense agreement and an asset purchase agreement with Azur for the marketing of Elestrin and the sale of certain assets related to Elestrin pursuant to which we received approximately $3.3 million, comprised of a $500,000 product sublicensing fee and approximately $2.8 million for transfer of the Elestrin trademark and inventories, among other items. Under the sublicense agreement, we are entitled to receive additional payments of up to an aggregate of $144.5 million if certain sales-based milestones are achieved. In addition, under the sublicense agreement, Azur has agreed to pay us royalties on sales of Elestrin ranging primarily from 10 percent to 20 percent depending primarily upon the annual sales levels. Azur has agreed to promote Elestrin using its womens health sales force that targets estrogen prescribing physicians in the U.S. comprised mostly of gynecologists. In addition, Azur has agreed to minimum marketing expenditures in the first two years of the agreement. As a result of our sublicense agreement with Azur, we were required to pay Nycomed an additional $150,000. In December 2008, we signed an exclusive agreement with PharmaSwiss SA for the marketing of Elestrin in Israel. PharmaSwiss is responsible for regulatory and marketing activities in Israel. PharmaSwiss intends to submit our approved U.S. NDA (new drug application) to the Israeli authorities based on our results and manufacturing information. Approval of Elestrin in Israel is expected approximately one year after such submission.
We have not commercially introduced any products and do not expect to do so in the foreseeable future. However, Nycomed, our former marketing sublicensee for Elestrin, commercially launched Elestrin in June 2007. As a result, from June 2007 until the termination of our agreement with Nycomed and reacquisition of Elestrin in August 2008, we received royalties on net sales of Elestrin. Subsequent to August 2008, we recognized other revenue resulting from sales of Elestrin less a fee paid to Nycomed for distributing, storing and processing of Elestrin sales. We recognized $142,656 in other revenue and $34,200 in royalty revenue from sales of Elestrin during the year ended December 31, 2008. This royalty revenue amount represents the gross royalty revenue we received from Nycomed through December 31, 2008 and not our corresponding obligation to pay Antares royalties. Our corresponding obligation to pay Antares a portion of the royalties received, which equaled $21,830 for the year ended December 31, 2008, is recorded within general and administrative expenses in our condensed statements of operations. We recognized $5,485 in royalty revenue from sales of Elestrin during the quarter ended March 31, 2009. Our corresponding obligation to pay Antares a portion of the royalties received equaled $4,887 for the quarter ended March 31, 2009, is recorded within general and administrative expenses.
Non-cash, stock-based compensation expense increased $54,037 as a result of the recognition of $347,776 in non-cash stock-based compensation and consideration expense during the three months ended March 31, 2009 compared to $293,739 for the three months ended March 31, 2008 due to an increase in the number of stock options granted and the number of stock options and warrants outstanding during the three months ended March 31, 2009 compared to the same period in 2008. Our outstanding stock options and warrants have remaining lives of one to ten years and will be amortized over the respective remaining vesting periods. Certain of our outstanding employee stock options have performance condition-based vesting provisions, which will result in recognition of expense when such performance conditions have been satisfied.
In December 2008, we entered into a Committed Equity Financing Facility with Kingsbridge Capital Limited in which Kingsbridge has committed to purchase, subject to certain conditions and at our sole discretion, up to the lesser of $25.0 million or 5,405,840 shares of our common stock through the end of December 2010. Under the terms of the CEFF, we are not obligated to utilize any of the $25.0 million available under the CEFF and there are no minimum commitments or minimum use penalties. We have access, at our discretion, to the funds through the sale of newly-issued shares of our common stock. The funds that can be raised under the CEFF over the two-year term will depend on the then-current price for our common stock and the number of shares actually sold, which may not exceed an aggregate of 5,405,840 shares. We may access capital under the CEFF by providing Kingsbridge with common stock at discounts ranging from eight to 14 percent, depending on the average market price of our common stock during the applicable pricing period. In connection with the CEFF, we issued a warrant to Kingsbridge to purchase 300,000 shares of common stock at an exercise price of $4.00. The warrant will become exercisable on June 15, 2009, the six-month anniversary of the date of the purchase agreement (December 15, 2008), and will remain exercisable, subject to certain exceptions, for a period of five years thereafter. Other than attorneys fees and other direct costs related to the registration of these shares, we did not make any other payments to secure the CEFF. The CEFF does not impose any material restrictions on our operating or financial activities. During the term of the CEFF, Kingsbridge is prohibited from engaging in any short selling or derivative transactions related to our common stock. Kingsbridge will not be obligated to purchase shares under the CEFF unless certain conditions are met, including a minimum price for our common stock of $1.15 per share. As of March 31, 2009, we had not sold any shares to Kingsbridge under the CEFF.
Net cash used in operating activities was $4.5 million for the three months ended March 31, 2009 compared to net cash used in operating activities of $2.5 million for the three months ended March 31, 2008. Net cash used in operating activities for the three months ended March 31, 2009 was primarily the result of the net loss for that period which was higher compared to the prior year period due to higher clinical trial related expenses, and to a lesser extent, a decrease in accounts payable and accrued liabilities. Net cash used in operating activities of $2.5 million for the three months ended March 31, 2008 was primarily the result of the net loss for that period, and to a lesser extent, an increase in prepaid expenses and other assets, offset primarily by an increase in accounts payable and accrued liabilities.
Net cash provided by investing activities was $2.9 million for the three months ended March 31, 2009 compared to net cash used in investing activities of $82,699 for the three months ended March 31, 2008. Net cash provided by investing activities for the three months ended March 31, 2009 was due to the redemption of approximately $3.0 million in short-term investments, partially offset by purchases of capital assets. Net cash used in investing activities for the three months ended March 31, 2008 consisted primarily of purchases and sales, respectively, of short-term investments.
Stocks Discussed: BPAX,