Orthologic Corp. Reports Operating Results (10-Q)

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Nov 10, 2010
Orthologic Corp. (CAPS, Financial) filed Quarterly Report for the period ended 2010-09-30.

Orthologic Corp. has a market cap of $37.5 million; its shares were traded at around $0.9196 . CAPS is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Research and Development Expenses: Research and development expenses were $1,911,000 for the third quarter of 2010 compared to $2,843,000 for the third quarter of 2009. Our research and development expenses decreased $932,000 in the third quarter of 2010 compared to the same period in 2009 primarily due to reduced clinical costs in 2010 compared to 2009 related to our Phase 2 clinical trials. Costs for our Phase 2 clinical trials were higher in 2009 primarily because costs for study initiation, surgeries and dosing all occurred in 2009, while 2010 costs consisted of monitoring and data gathering and analysis.

Net Loss: We incurred a net loss in the third quarter of 2010 of $2.6 million compared to a net loss of $3.3 million in the third quarter of 2009. The $0.7 million decrease in the net loss for the third quarter of 2010 compared to the same period in 2009 resulted primarily from reduced clinical costs in 2010 compared to 2009 related to our Phase 2 clinical trials. Costs for our Phase 2 clinical trials were higher in 2009 primarily because costs for study initiation, surgeries and dosing all occurred in 2009, while 2010 costs consisted of monitoring and data gathering and analysis. These cost decreases were partially offset by reduced interest income, due to the decrease in interest rates earned on investments between the two periods and reduction in the amount available for investment.

General and Administrative (“G&A”) Expenses: G&A expenses related to our ongoing development operations were $2,460,000 in the nine months ended September 30, 2010 compared to $2,172,000 in the same period in 2009. Our administrative expenses during the nine months ended September 30, 2010 reflect a comparable level of administrative activity to the same period of 2009 with the increase primarily related to increased investor relations, business development and legal expenses in 2010.

Research and Development Expenses: Research and development expenses were $6,094,000 for the nine months ended September 30, 2010, compared to $9,030,000 for the same period in 2009. Our research and development expenses decreased $2,936,000 in the nine months ended September 30, 2010 compared to the same period in 2009 primarily due to a $600,000 purchase in 2009 of peptide for pre-clinical studies, completion in 2009 of our planned partnering or development collaboration research support activities for Chrysalin, and reduced clinical costs in 2010 compared to 2009 related to our Phase 2 clinical trials. Costs for our Phase 2 clinical trials were higher in 2009 primarily because costs for study initiation, surgeries and dosing all occurred in 2009, while 2010 costs consisted of monitoring and data gathering and analysis. Given the overlapping nature of our research efforts it is not possible to clearly separate research expenditures between AZX100 and Chrysalin; however, the majority of our research and development expenses in 2010 and 2009 were directed toward AZX100 development efforts.

Net Loss: We incurred a net loss in the nine months ended September 30, 2010 of $8.5 million compared to a net loss of $10.6 million in the same period in 2009. The $2.1 million decrease in the net loss for the nine months ended September 30, 2010 compared to the same period in 2009 resulted primarily from the purchase in 2009 of peptide for pre-clinical studies, completion in 2009 of our planned partnering or development collaboration research support activities for Chrysalin, and reduced clinical costs in 2010 compared to 2009 related to our Phase 2 clinical trials. Costs for our Phase 2 clinical trials were higher in 2009 primarily because costs for study initiation, surgeries and dosing all occurred in 2009, while 2010 costs consisted of monitoring and data gathering and analysis.

We have historically financed our operations through operating cash flows and the public and private sales of equity securities. However, with the sale of our Bone Device Business in November 2003, we sold all of our revenue producing operations. We received approximately $93.0 million in cash from the sale of our Bone Device Business. On December 1, 2005, we received the additional $7.2 million, including interest, from the escrow balance related to the sale of the Bone Device Business. Since the sale of our Bone Device Business, we have relied on our cash and investments to finance all our operations, the focus of which was research and development of our Chrysalin and AZX100 product candidates. On February 27, 2006, we entered into an agreement with Quintiles (see Note 15 to our Annual Report on Form 10-K filed with the Securities Exchange Commission on March 5, 2008), which provided an investment by Quintiles in our common stock, of which $2,000,000 was received on February 27, 2006 and $1,500,000 was received on July 3, 2006. We also received net proceeds of $4,612,000 from the exercise of stock options during our development stage period and in January 2010 we received a tax refund of $1,009,000 for the tax year 2003, related to federal tax legislation enacted in the fourth quarter of 2009. At September 30, 2010, we had cash and cash equivalents of $11.7 million and short-term investments of $15.5 million.

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