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Anesiva Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 16, 2009 04:20PM

Anesiva Inc. (ANSV) filed Quarterly Report for the period ended 2009-09-30. Anesiva, Inc. seeks to be a leader in the development of novel pharmaceutical products for pain management. The company's lead product candidate is Adlea, a novel small molecule formulation of capsaicin that is currently in development for the management of acute pain following orthopedic surgeries. Adlea has been shown in ACTIVE-2 and in previous clinical trials to provide well-tolerated and extended pain relief after only a single administration in multiple indications for site-specific, acute and chronic, moderate-to-severe pain. Anesiva Inc. has a market cap of $7.08 million; its shares were traded at around $0.175 with and P/S ratio of 23.6.

Highlight of Business Operations:

We have an accumulated deficit of $325.1 million as of September 30, 2009. Additionally, we have used net cash of $10.5 million and $60.8 million to fund our operating activities for the nine months ended September 30, 2009, and 2008, respectively, all of this which contributed to our ending cash and cash equivalent balance of approximately $8,000 at September 30, 2009. To date our operating losses have been funded primarily from outside sources of capital. Total assets decreased from $3.1 million at December 31, 2008 to $1.1 million at September 30, 2009.

We are pursuing financing opportunities through both private and public debt as well as through strategic transactions and corporate partnerships. We have an established history of raising capital through these platforms, and we are actively pursuing our options. On January 20, 2009, we entered into that certain Investor Agreement pursuant to which we sold and issued Investor Securities and received an initial $3.0 million on January 20, 2009, a second tranche of $2.0 million on March 3, 2009 and the final tranche of approximately $1.3 million on April 1, 2009. The Investor Securities are secured by a first priority security interest in all of the assets we own and are subordinate to the Arcion loan. We will pay interest at a continuously compounding rate of 7% percent per year. If we default under the Investor Agreement, we will pay interest at a continuously compounding rate of 14% per year. If a change of control event occurs as defined under the Investor Agreement, we will owe the Investors seven (7) times the amount of the outstanding principal amount of the Investor Securities, plus all accrued but unpaid interest. A sale of assets of the company under a bankruptcy, chapter 7 or chapter 11, will constitute a change of control event. As of July 20, 2009, we are obligated to pay the outstanding principal and accrued but unpaid interest at the request of a certain majority of the Investors, which has not been received by the Company.

On May 18, 2009, we entered into a secured note purchase agreement (the “Note Purchase Agreement”) with Arcion Therapeutics, Inc. (Arcion), pursuant to which we agreed to sell and issue a note (the “Arcion Note”) in the principal amount of $2.0 million, subject to the terms and conditions set forth in the Note Purchase Agreement. The Arcion Note is secured by a first priority security interest in all of the assets of the Company and AlgoRx Pharmaceuticals, Inc. (“AlgoRx”), one of our wholly-owned subsidiaries. The Arcion Note accrues interest at a continuously compounding rate of 10% per annum. During the occurrence and continuance of an event of default, the Arcion Note will accrue interest at a continuously compounding rate of 14% per annum. Unless earlier paid pursuant to the terms of the Note Purchase Agreement or accelerated in connection with an event of default, subject to the terms of the Note Purchase Agreement, the outstanding principal and accrued but unpaid returns will be immediately due and payable on December 31, 2009. We may prepay the Arcion Note at any time without penalty. An event of default is defined in the Note Purchase Agreement to include, among other things: (1) a default of the Company or a subsidiary of the Company beyond any applicable cure period under any monetary liability that results in the acceleration of payment of such obligation in an amount over $100,000; (2) any judgment(s) entered against the Company or any subsidiary which in the aggregate exceeds $100,000 and remains unsatisfied pending appeal for 45 days or more after entry; and (3) a failure to pay any principal or interest due under the Arcion Note or failure to pay any other charges due under the Note Purchase Agreement, with such failure continuing for at least three business days. On September 17, 2009 we entered into an amendment to the Arcion Note to, among other things, increase the aggregate principal amount of $200,000 and extend the maturity date to December 31, 2009.

In the event that the Merger is not consummated, substantial doubt may arise regarding the Company’s ability to continue as a going concern. If the Company is unable to continue as a going concern, the Company would have to liquidate its assets, and the Company may realize significantly less than the values at which they are carried on its financial statements. The Company currently has capital resources that it believes to be sufficient to support its operations approximately into December 2009. If the Merger is not approved by stockholders, the Company may not be able to raise sufficient capital to continue its existing operations beyond that time. For instance, in the Company’s dispute with 500 Plaza Corporation, on September 25, 2009, the Superior Court of New Jersey, in Hudson County, New Jersey, awarded 500 Plaza Corporation damages and attorney’s fees totaling approximately $333,000. Also, in the Company’s dispute with GKD-USA, Inc., on October 12, 2009, Anesiva received notice that on October 6, 2009, a default judgment was entered against the Company in the amount of approximately $273,000 plus interest as of October 1, 2009, and post-judgment interest that will accrue until the judgment is satisfied. Further, in the Company’s dispute with Microtest Laboratories, Inc., on September 16, 2009, a default judgment was entered against the Company in the amount of approximately $1,003,000 plus post-judgment interest that will accrue until the judgment is satisfied. Unless the Merger is completed, the Company will not have sufficient capital or liquidity to satisfy these court awards.

On November 5, 2009, we received a letter from Nasdaq stating that the Nasdaq Hearing Panel has granted our request for continued listing on The NASDAQ Global Market subject to the condition that Anesiva shall have completed the Merger with Arcion contemplated by the Merger Agreement on or before December 31, 2009. Unless the Merger is consummated, it is unlikely Anesiva will be able to satisfy the $1.00 per share minimum bid price requirement under Rule 5450(a)(1) and the $10.0 million stockholders’ equity requirement under Rule 5450(b)(1)(A), and its securities would therefore most likely be delisted from The NASDAQ Global Market. Notwithstanding the foregoing, there can be no assurance that the combined company’s stockholders’ equity following the Merger will remain in excess of the $10.0 million stockholders’ equity requirement or that the market price per share following the Merger and the reverse stock split will remain in excess of the minimum bid price for the requisite period of time for continued listing.

Assets related to the discontinued Zingo business are classified as assets held-for-sale when certain criteria are met. In accordance with ASC 360-10, Long-lived assets to be held and used, we classified these assets as assets held-for-sale on the consolidated balance sheet as of December 31, 2008, which includes prepaid and other assets, fixed assets and inventories related to Zingo. Since our Zingo assets were classified as held-for-sale as of December 31, 2008, we were required to report these assets at the lower of their respective carrying amounts or their fair values less costs to sell. The net book carrying value of the Zingo assets was approximately $20.1 million and, based upon our analysis as of December 31, 2008, the estimated fair value of the Zingo assets was $183,000. For the three and nine months ended September 30, 2009 and 2008, we did not recognize any impairment of long-lived assets.

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