Highlight of Business Operations:Summary. We reported net income of $4.8 million for the three months ended December 31, 2012 as compared to net loss of $7.0 million for the same three month period in 2011. The $11.8 million change from net loss in 2011 to net income in 2012 was primarily the result of an $8.2 million increase in revenue, the recording of a $7.8 million gain related to the merger, and the receipt of $4.4 million research and development credits, offset in part by a $7.7 million increase in total operating expenses, a $0.4 million decrease in interest income and a $0.5 million decrease in income tax benefits.
The increase in royalty revenue in 2012 was attributable to increased sales of both RelenzaTM and Inavir®, as well as the effect of negative royalty recorded in 2011 that reflected the return of products to GSK and an adjustment to royalties earned for calendar year 2011 that occurred in the three month period ended December 31, 2011. Service revenue under the BARDA contract increased in 2012 from 2011 due to the advancement of the laninamivir octanoate program toward Phase 2 clinical development and the expansion of the underlying activities covered under the contract. We anticipate that our revenue under the BARDA contract will continue to increase assuming the program continues to advance further into clinical development. Revenue under other contracts, grants and collaborations increased in 2012 due to a new government grant of $0.2 million.
Summary. We reported a net loss of $2.4 million for the six months ended December 31, 2012, as compared to net loss of $11.3 million for the same six month period in 2011. This $8.9 million decrease in net loss in 2012 was primarily the result of a $5.6 million increase in revenue, the recording of the $7.8 million gain we recorded pursuant to the merger, and the receipt of a $4.4 million research and development credits, offset in part by a $7.6 million increase in operating expense, a $0.9 million decrease in interest income and a $0.5 million decrease in income tax benefits
Net cash used in operating activities was $12.7 million for the six months ended December 31, 2012, which reflected our net loss for the period of $2.4 million that included a gain of $7.8 million we recorded as a result of the merger and an increase in net operating assets of $6.1 million, offset in part by non-cash charges of $3.4 million and a net increase in operating liabilities of $0.2 million. Our net loss resulted largely from our provision of contract services; funding research and development activities including basic research: conducting preclinical studies; manufacturing and formulation expenses; incurring ongoing general and administrative expenses; as well as expenses associated with the merger, offset to a large degree by contract service, royalty and other revenue from grants and collaborations, a $7.8 million gain we recorded pursuant to the merger, the receipt of a $4.4 million research and development credit, and interest income. The net change in operating assets and liabilities reflects a $5.4 million increase in accounts receivable due to higher royalty and contract revenue, a $1.1 million increase in prepaid expenses, offset in part by a $0.5 million increase in deferred revenue and $0.2 million in accounts payable and a decrease of $0.5 million in accrued severance obligations.
The Company has received and expects to continue to receive revenue and reimbursement for certain research and development activities pursuant to collaborations with other corporate entities, as well as for services performed pursuant to government grants and contracts. For the three months ended December 31, 2012 and December 31, 2011, we recorded approximately $8.4 million and $3.2 million respectively. For the six months ended December 31, 2012 and December 31, 2012, we recorded approximately $10.0 million and $4.8 million respectively.
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