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Achillion Pharmaceuticals Inc. Reports Operating Results (10-Q)

October 27, 2010 | About:
10qk

10qk

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Achillion Pharmaceuticals Inc. (ACHN) filed Quarterly Report for the period ended 2010-09-30.

Achillion Pharmaceuticals Inc. has a market cap of $110.3 million; its shares were traded at around $2.83 with and P/S ratio of 27.4.

Highlight of Business Operations:

We have devoted and are continuing to devote substantially all of our efforts toward product research and development. We have incurred losses of $211 million from inception through September 30, 2010 and had an accumulated deficit of $225 at September 30, 2010, which includes preferred stock dividends recognized until our initial public offering in 2006. Our net losses were $19.2 million for each of the nine months ended September 30, 2010 and 2009. We have funded our operations primarily through:

Upon initiating our collaboration with Gilead, we received a payment of $10.0 million, which included an equity investment by Gilead determined to be worth approximately $2.0 million. The remaining $8.0 million is being accounted for as a nonrefundable up-front fee recognized under the proportionate performance model. Revenue under the proportionate performance model is recognized as our effort under the collaboration is incurred. Payments made by us to Gilead in connection with this collaboration are being recognized as a reduction of revenue. When our performance obligation is complete, we will recognize milestone payments, if any, when the corresponding milestone is achieved. We will recognize royalty payments, if any, upon product sales.

We have also recognized revenue under a Small Business Innovation Research, or SBIR, grant by the National Institutes of Health, or NIH, for the further study of a back-up series of compounds related to ACH-702 for the treatment of tuberculosis infection. During the three months ended September 30, 2010 and 2009, we recognized $125,000 and $0, respectively under this grant. During the nine months ended September 30, 2010 and 2009, we recognized $269,000 and $0, respectively, of revenue under this grant.

Revenue. Revenue was $170,000 and $(54,000) for the three months ended September 30, 2010 and 2009, respectively, and $431,000 and $(355,000) for the nine months ended September 30, 2010 and 2009, respectively. The increase in revenue in 2010 was due to lower external costs incurred by Gilead, which under our collaboration, are shared by us and recorded as a reduction in revenue. During the three and nine months ended September 30, 2009, external costs incurred by Gilead exceeded external costs incurred by us, resulting in a net payable from us to Gilead and negative revenue for the period. In addition, in 2010 we recognized revenue related to our SBIR grant for the further study and characterization of our series of compounds related to ACH-702.

Research and Development Expenses. Research and development expenses were $5.7 million and $4.4 million for the three months ended September 30, 2010 and 2009, respectively, and $14.4 million and $13.6 million for the nine months ended September 30, 2010 and 2009, respectively. The increase for the three months and nine months ended September 30, 2010 was primarily due to increased expenses related to clinical testing of ACH-1625 and preclinical testing of ACH-2684 and ACH-2928, combined with increased clinical consulting and intellectual property fees. These increases were offset by decreased clinical trial costs related to elvucitabine and decreased facilities costs related to our reduction of leased laboratory and office space. We expect research and development expenses to increase during the remainder of the year as we continue clinical testing of ACH-1625, complete the necessary CMC activities for ACH-1095, and complete IND-enabling preclinical testing for ACH-2684 and ACH-2928. Research and development expenses for the three and nine months ended September 30, 2010 and 2009 are comprised as follows:

General and Administrative Expenses. General and administrative expenses were $1.7 million and $1.5 million for the three months ended September 30, 2010 and 2009, respectively, and $5.0 million and $4.7 million for the nine months ended September 30, 2010 and 2009, respectively. The increase for the three months ended September 30, 2010 was primarily due to increased personnel costs related to the addition of business development personnel, combined with increased business development consulting fees and public relations costs. These increases were offset by decreased facility costs related to our reduction of leased laboratory and office space. The increase for the nine months ended September 30, 2010 was primarily due to increased personnel and travel costs related to the addition of business development personnel, combined with increased corporate fees, primarily related to the issuance of stock. These increases were offset primarily by decreased facilities costs related to our reduction of leased laboratory and office space. We expect that general and administrative expenses will be consistent for the remainder of the year. General and administrative expenses for the three and nine months ended September 30, 2010 and 2009 are comprised as follows:

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