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A.P. Pharma Inc. Reports Operating Results (10-Q)

August 16, 2010 | About:
10qk

10qk

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A.P. Pharma Inc. (APPA) filed Quarterly Report for the period ended 2010-06-30.

A.p. Pharma Inc. has a market cap of $25.29 million; its shares were traded at around $0.64 with and P/S ratio of 20.05. APPA is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Contract revenue, which is derived from work performed under collaborative research and development arrangements, was $530,000 and $14,000 for the three months ended June 30, 2010 and 2009, respectively and $771,000 and $22,000 for the six months ended June 30, 2010 and 2009, respectively. The majority of our contract revenue for the three and six months ended June 30, 2010 was derived from an agreement with Merial we entered into in September 2009 for a long-acting pain management product for companion animals.

Research and development expense for the three months ended June 30, 2010 decreased by $1.0 million from $2.9 million for the three months ended June 30, 2009 to $1.9 million. Research and development expense for the six months ended June 30, 2010 decreased by $0.8 million from $5.0 million for the six months ended June 30, 2009 to $4.2 million. The decreases in research and development expenses for the three and six months ended June 30, 2010 as compared with comparable periods in 2009 are primarily due to decreased development, manufacturing and project-related expenses related to our NDA submission to the FDA, partially offset by the suspension of other research and development projects to conserve resources, as well as headcount reductions in May 2009. Research and development expense is expected to be slightly lower in 2010, as compared to 2009, as a result of expenditures associated with our response to the FDAs Complete Response Letter in order to obtain FDA approval, as well as pre-commercialization activities for APF530.

General and administrative expense for the three months ended June 30, 2010 increased by $1.2 million from $1.1 million for the three months ended June 30, 2009 to $2.3 million. General and administrative expense for the six months ended June 30, 2010 increased by $1.1 million from $2.0 million for the six months ended June 30, 2009 to $3.1 million. The net increases in both periods were primarily a result of compensation expense incurred in the three months ended June 30, 2010 related to the resignation of our chief executive officer, which was partially offset by cost containment measures associated with our headcount reductions in May 2009. General and administrative expense is expected to be higher in 2010, as compared to 2009, primarily due to the compensation expense related to the resignation of our former chief executive officer.

We had cash and cash equivalents of $5.7 million at June 30, 2010. Cash and cash equivalents decreased by $1.9 million at June 30, 2010 from December 31, 2009 due primarily to our net loss for the six months ended June 30, 2010, offset by the receipt of the $2.5 million milestone from an affiliate of the Paul Royalty Fund.

In October 2009, we sold 7,954,543 shares of our common stock in a private placement at $0.88 per share and warrants to purchase 3,977,270 shares of our common stock, exercisable through January 7, 2015, at $0.88 per share (the Private Placement). The purchasers paid an additional $0.125 per underlying share for the warrants. Additionally the purchasers had a right to purchase up to an additional 5,165,286 shares at $0.97 per share prior to May 14, 2010 and paid $0.125 per underlying share for the right to purchase such additional shares. No purchasers exercised their right to purchase up to an additional 5,165,286 shares of our common stock at $0.97 per share under the Private Placement and the right expired unexercised on May 14, 2010. Total proceeds were approximately $7.9 million, after deducting expenses associated with the issuance. We were required to prepare and file Form S-3 registration statements, as permissible under SEC rules and regulations, with the SEC for the purpose of registering for resale the securities sold in this transaction. On November 6, 2009, we filed a Form S-3 covering 7,532,617 shares of our common stock sold in a private placement, which was declared effective by the SEC on November 17, 2009. On June 30, 2010, we filed a Form S-3 covering the remaining 421,926 shares of our common stock related to the Private Placement and the 3,977,270 shares of our common stock underlying the warrants, which was declared effective by the SEC on July 8, 2010.

Net cash used in continuing operating activities for the six months ended June 30, 2010 was $1.9 million, compared to net cash used of $6.8 million for the six months ended June 30, 2009. The $4.9 million decrease in net cash used by continuing operating activities from 2009 to 2010 was primarily due to the $2.8 million decrease in net loss for the six months ended June 30, 2010, as compared to the same period in 2009, and a $1.8 million net change in accrued compensation and accrued expenses. Accrued compensation increased by $0.8 million in the six months ended June 30, 2010 primarily due to the resignation of our former chief executive officer and accrued expenses decreased by $1.0 million in the six months ended June 30, 2009 primarily due to the completion of clinical trials.

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