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Biosante Pharmaceuticals Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 9, 2009 04:19PM
Biosante Pharmaceuticals Inc. (BPAX) filed Quarterly Report for the period ended 2009-09-30. 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 $58.16 million; its shares were traded at around $1.76 with and P/S ratio of 15.38.
Highlight of Business Operations:
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 from 10 percent to 20 percent depending primarily upon the annual sales levels. In April 2009, we announced the initiation of sales and marketing activity of Elestrin by Azur. Azur markets Elestrin to estrogen prescribing physicians, comprised mostly of gynecologists. It is our understanding that Azur increased its womens health sales force to 72 people, in part to support the marketing of Elestrin. 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. In June 2009, PharmaSwiss submitted a new drug application to the Israeli authorities based on our approved U.S. NDA and manufacturing information.
All options to purchase shares of Cell Genesys common stock, other than certain designated options held by certain of Cell Genesyss former officers (Assumed Options), became fully vested and exercisable until immediately prior to the effective time of the merger. At the effective time of the merger, such unexercised options other than the Assumed Options terminated. The Assumed Options were assumed by us and will remain outstanding following the merger, but converted into and became options to purchase shares of our common stock on terms substantially identical to those in effect prior to the merger, except for adjustments to the underlying number of shares and the exercise price based on the 0.1828 exchange ratio. As a result of the merger, the Assumed Options converted into options to purchase an aggregate of 234,429 shares of our common stock at a weighted average exercise price of $19.73 per share. All warrants to purchase shares of Cell Genesys common stock which by their terms survived the merger (Assumed Warrants) were assumed by us, but were converted into and became warrants to purchase shares of our common stock on terms substantially identical to those in effect prior to the merger, except for adjustments to the underlying number of shares and the exercise price based on the 0.1828 exchange ratio. As a result of the merger, these Assumed Warrants converted into warrants to purchase an aggregate of 395,246 shares of our common stock at a weighted average exercise price of $39.27 per share. In addition, as a result of the merger, we assumed $1.2 million in principal amount of 3.125% convertible senior notes due in November 2011 and $20.8 million in principal amount of 3.125% convertible senior notes due in May 2013 issued by Cell Genesys. Contractual interest payments on the convertible senior notes are due on May 1 and November 1 of each year through maturity. As a result of the merger and in accordance with the terms of the indentures governing such notes as supplemented by supplemental indentures entered into between us and the trustees thereunder, the November 2011 convertible notes became convertible into an aggregate of 24,789 shares of our common stock at a conversion price of $49.78 per share and the May 2013 convertible notes became convertible into an aggregate of 5,586,559 shares of our common stock at a conversion price of $3.72 per share, in each case subject to adjustments for stock dividends, stock splits, and other similar events.
In August 2009, we completed a registered direct offering of an aggregate of 6,000,000 shares of our common stock and warrants to purchase up to 2,400,000 additional shares of our common stock, resulting in net proceeds to us of approximately $11.4 million, after deducting placement agent fees and other offering expenses. We had cash and cash equivalents of approximately $13.2 million at September 30, 2009, which included the net proceeds from the registered direct offering.
Subsequent to September 30, 2009, we completed our merger with Cell Genesys. One of the primary reasons we merged with Cell Genesys was our need for additional funding to continue our Phase III clinical studies for LibiGel and the lack of other available acceptable alternatives for us to access capital prior to and at the time the merger agreement was entered into by the parties in June 2009, especially in light of the then state of the markets for equity offerings, which historically had been our primary method for raising additional financing. As of the completion of the merger on October 14, 2009, Cell Genesys had approximately $23.2 million in cash, cash equivalents and short-term investments, after deducting anticipated estimated merger-related and other expenses. As of such date, Cell Genesys also had, and we assumed by virtue of the merger, $1.2 million in principal amount of 3.125% convertible senior notes due in November 2011 and $20.8 million in principal amount of 3.125% convertible senior notes due in May 2013.
We incurred expenses of approximately $1.1 million per month on research and development activities during the nine months ended September 30, 2009. Our research and development expenses decreased 37 percent to $3.4 million for the third quarter 2009 compared to $5.3 million for the third quarter 2008, primarily as a result of our decision in April 2009 to delay screening new subjects for our LibiGel Phase III safety study. Since we have since reinitiated screening in our safety study, we expect our monthly research and development expenses to increase to approximately $1.5 million in the fourth quarter. The amount of our actual research and development expenditures, however, may fluctuate from period-to-period depending upon: (1) patient recruitment and enrollment in our current and future clinical studies, including in particular our Phase III clinical study program for LibiGel; (2) our development schedule, including the timing of our clinical trials; (3) results of studies, clinical trials and regulatory decisions; (4) whether we or our licensees are funding the development of our products; (5) the amount of resources, including cash and cash equivalents, available; and (6) competitive developments.
We recognized a net loss for the three and nine months ended September 30, 2009 of approximately $6.4 million and $15.0 million, respectively, compared to a net loss of approximately $6.6 million and $16.3 million, respectively, for the three and nine months ended September 30, 2008. These decreases primarily were due to the decreased LibiGel clinical development expenses discussed above and impairment charges incurred in 2008 related to other-than-temporary impairment of auction rate securities, which more than offset costs related to the acquisition of Cell Genesys and lower interest income as a result of depositing all of our cash into a non-interest bearing, 100% FDIC-insured checking account during the first quarter 2009. We expect to incur cash interest payment obligations of approximately $687,500 per year as a result of our assumption of convertible notes as a result of our merger with Cell Genesys.
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