Transcept Pharmaceuticals Inc. Reports Operating Results (10-Q)
Transcept Pharmaceuticals Inc. formerly Novacea Inc. is a biopharmaceutical company focused on in-licensing developing and commercializing therapies for the treatment of cancer. The Company's product portfolio features two clinical-stage oncology product candidates with worldwide rights Asentar and AQ4N each of which is a potential treatment for certain types of cancer. The Company continues to be primarily involved in performing research and development activities hiring personnel licensing new products and raising capital to support and expand these activities. Its goal is to become a leading specialty pharmaceutical company addressing important therapeutic needs in psychiatry and sleep medicine. Transcept Pharmaceuticals Inc. has a market cap of $26.9 million; its shares were traded at around $5.21 with a P/E ratio of 0.8 and P/S ratio of 1.7. Highlight of Business Operations: Research and development expenses decreased 38% to $2.2 million for the three months ended March 31, 2009 from $3.6 million for the comparable period in 2008. The decrease of $1.4 million for the three months ended March 31, 2009 is primarily attributable to Intermezzo® development costs declining by $1.1 million as a result of the following:
General and administrative expenses increased 179% to $4.2 million for the three months ended March 31, 2009 from $1.5 million for the comparable period in 2008. The approximate $2.7 million increase consists of the following:
Interest income decreased 74% to $88,000 for the three months ended March 31, 2009, from $336,000 for the comparable period in 2008. The decrease of approximately $248,000 for the three months ended March 31, 2009 is primarily attributable to changing the mix of investments toward lower risk, lower yield instruments due to the dramatic change in the U.S. and world economy during the second half of 2008. In addition, investments held during the first quarter 2008 were, in the aggregate, purchased at a discount to face value whereas investments held during the first quarter 2009 were primarily acquired at a premium in conjunction with the Merger. In the first quarter 2009, amortization of bond premiums were recorded as a reduction of interest income.
Interest expense decreased 30% to $166,000 for the three months ended March 31, 2009, from $237,000 for the comparable period in 2008. The $71,000 decrease for the three months ended March 31, 2009 was primarily attributable to lower average outstanding debt during the 2009 period as compared to the same period in the prior year. The three months ended March 31, 2009 included $54,153 related to a penalty for early repayment of the Hercules debt, repaid in February 2009, as well as the write off of the remaining debt discount of $47,332 and loan fees of $27,661.
In April 2006, we entered into a $10.0 million venture debt facility agreement with Hercules Technology Growth Capital, Inc., or Hercules, and drew down $4.0 million in May 2006 and $6.0 million in December 2006, against which interest accrued at rates of 10.69% and 10.94%, respectively. Outstanding principal, accrued interest, and unpaid interest under the loan and security agreement became due and payable on certain change of control transactions. In conjunction with the Merger noted above and pursuant to an agreement with Hercules, on February 3, 2009 we repaid in full all amounts outstanding related to this loan.
Net cash provided by investing activities was $42.0 million for the three months ended March 31, 2009, compared to net cash provided by investing activities of $6.7 million for the three months ended March 31, 2008. $48.0 million of net cash provided by investing activities during the first quarter 2009 relates to the cash and cash equivalents that came from our merger with Novacea. This was partially offset by $5.9 million used in investing activities for the three months ended March 31, 2009 due to purchases of marketable securities, net of maturities, during the period. $6.7 million provided by investing activities for the three months ended March 31, 2008 was primarily due to maturities of marketable securities, net of purchases, during the period. Uses of cash in investing activities for both periods also included net purchases of property and equipment.
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