AspenBio Pharma Inc. (NASDAQ:APPY) filed Quarterly Report for the period ended 2009-06-30.
ASPENBIO PHARMA INC. is an emerging bio-pharmaceutical company dedicated to the discovery development manufacture and marketing of novel proprietary products including those that enhance the reproductive efficiency of animals and that have large worldwide market potential. The company was originally formed to produce purified proteins for diagnostic applications and has become a leading supplier of human hormones to many of the nation\'s largest medical diagnostic companies and research institutions. The company has successfully leveraged this foundational science and technology expertise to rapidly develop an enviable late-stage pipeline of several novel reproduction hormone analogs for wide-ranging therapeutic use initially in bovine and equine species. AspenBio Pharma continues to make exciting progress in the development and testing of its two first-generation blood-based human diagnostic tests designed to rapidly help diagnose or rule out appendicitis in patients comp AspenBio Pharma Inc. has a market cap of $90.4 million; its shares were traded at around $2.85 with and P/S ratio of 110.3.
Highlight of Business Operations:Selling, general and administrative expenses in the six months ended June 30, 2009, totaled $2,826,000, which is a $343,000 or 14% increase as compared to the 2008 period. During late 2008 and into early 2009, the Company increased its overhead costs to support its development activities and advance its licensing activities and negotiations for the single-chain animal products. These changes have resulted in among other items, advancing the AppyScore product in clinical trials and filing a Premarket Notification [510(k)] with the FDA as well as the signing of a license agreement with Novartis Animal Health for the bovine LH and FSH products. The changes also resulted in increased expenses for the six months ended June 30, 2009 over the comparable period in 2008. The hiring of additional personnel resulted in approximately $639,000 of additional expenses in the 2009 period, which included approximately $348,000 in additional employee related stock based compensation expense in 2009 over 2008 amounts. This was offset by a decrease of approximately $238,000 in public company expenses for 2009 due primarily to Sarbanes-Oxley related expenses being higher in 2008 when procedures and documentation related activities were at an accelerated level.
Research and development expenses in the 2009 period totaled $3,658,000, which is a $1,297,000 or 55% increase as compared to the 2008 period. Development efforts and advances on the appendicitis test, including product development advances, the clinical trial, FDA submission related activities and market research resulted in an expense increase in 2009 of approximately $876,000. During the six months ended June 30, 2009, the Company incurred additional increases in the development expenses on the single-chain animal products of approximately $388,000 as the bovine products moved from feasibility development by AspenBio to a commercialization and licensing arrangement with Novartis commencing in late 2008. Additions to research staff, including temporary contract personnel, to support accelerating development efforts, increased expenses by approximately $86,000 in the 2009 period.
Research and development expenses in the 2009 period totaled $2,242,000, which is a $678,000 or 43% increase as compared to the 2008 period. Development efforts and advances on the appendicitis test, including product development advances, the clinical trial, FDA submission related activities and market research resulted in an expense increase in 2009 of approximately $202,000. An increase in development expenses on the single-chain animal products of approximately $449,000 in 2009 as the bovine products moved from feasibility development by AspenBio to a commercialization and licensing arrangement with Novartis commencing in late 2008. Additions to research staff, including temporary contract personnel, to support accelerating development efforts, increased expenses by approximately $43,000 in 2009.
Liquidity and Capital Resources We reported a net loss of $6,500,000 during the six months ended June 30, 2009, which included $968,000 in non-cash expenses relating to stock-based compensation totaling $806,000 and depreciation, amortization and other totaling $162,000. At June 30, 2009, we had working capital of $10,547,000. We believe that our current working capital position is sufficient to continue with the technology development activities and support the current level of operations for the near term. Our primary focus currently is to continue the development activities on the appendicitis and single chain products in order to attempt to continue to secure near-term value from these products from either additional entering licensing agreements for their rights or generating revenues directly from sales of the products. Based upon our current liquid asset balance and cash burn rate, we anticipate the need to obtain additional equity or debt financing or enter into a strategic transaction during late 2009 and / or early 2010. There can be no assurance that financing or a revenue generating strategic transaction will be available on reasonable terms, if at all.
Operating Activities Net cash consumed by operating activities was $4,989,000 during the six months ended June 30, 2009. Cash was consumed by the loss of $6,500,000, less non-cash expenses of $806,000 for stock-based compensation and $162,000 for depreciation and amortization and other non-cash items. Our base antigen business is generally fairly constant from year to year and therefore does not generally impact operating cash flows. As of June 30, 2009 inventories had increased by $78,000 due to receipt of a recent raw material supply order and prepaid expenses and other current assets generated cash of $598,000 primarily related to shareed costs incurred under the Novartis agreement, payable by Novartis, in the amount of $369,000.
Net cash consumed by operating activities was $1,619,000 during the six months ended June 30, 2008. Cash was consumed by the loss of $4,387,000 less non-cash expenses of $677,000 for stock-based compensation issued for services and $163,000 for depreciation and amortization and $73,000 in noncash charges. A decrease in accounts receivable of approximately $7,000 from lower sales levels during the six months ended June 30, 2008 provided cash. Decreases in inventory and prepaid expenses of $53,000 provided cash. A net increase in accounts payable and accrued liabilities of $236,000 also generated cash arising from the increased level of activities. Deferred revenues increased $1,560,000 from the net proceeds received under the Novartis license agreement.
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