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GTx Inc. Reports Operating Results (10-Q)

August 10, 2009 | About:

GTx Inc. (GTXI) filed Quarterly Report for the period ended 2009-06-30.

GTX Inc is a biopharmaceutical company dedicated to the discovery development and commercialization of therapeutics primarily related to the treatment of serious men\'s health conditions. GTx\'s drug discovery and development programs are focused on small molecules that selectively modulate the effects of estrogens and androgens. GTx Inc. has a market cap of $343.06 million; its shares were traded at around $9.42 with and P/S ratio of 25.36.

Highlight of Business Operations:

Our net loss for the six months ended June 30, 2009 was $11.3 million. Our net loss included FARESTON® net product sales of $949,000 and the recognition of collaboration revenue of $2.9 million. We have financed our operations and internal growth primarily through public offerings and private placements of our common stock and preferred stock, as well as proceeds from our collaborations. We expect to continue to incur net losses as we continue our clinical development and research and development activities, apply for regulatory approvals, expand our sales and marketing capabilities and grow our operations.

We recognize net product sales revenue from sales of FARESTON® less deductions for estimated sales discounts and sales returns. We recognize revenue from product sales when the goods are shipped and title and risk of loss pass to the customer and the other criteria of SAB No. 104 and SFAS No. 48 are satisfied. We account for rebates to certain governmental agencies as a reduction of product sales. We allow customers to return product within a specified time period prior to and subsequent to the products labeled expiration date. As a result, we estimate an accrual for product returns, which is recorded as a reduction of product sales. We consider historical product return trend information that we continue to update each period. We estimate the number of months of product on hand and the amount of product which is expected to exceed its expiration date and be returned by the customer by receiving information from our three largest wholesale customers about the levels of FARESTON® inventory held by these customers. These three largest wholesale customers accounted for 95% of our product sales of FARESTON® for the six months ended June 30, 2009. Based on this information and other factors, we estimate an accrual for product returns. At June 30, 2009 and December 31, 2008, our accrual for product returns was $516,000 and $815,000, respectively.

Total share-based compensation expense for the three months ended June 30, 2009 was $1.1 million, of which $389,000 and $675,000 were recorded in the condensed statement of operations as research and development expenses and general and administrative expenses, respectively. Total share-based compensation expense for the three months ended June 30, 2008 was $838,000, of which $342,000 and $496,000 were recorded in the condensed statement of operations as research and development expenses and general and administrative expenses, respectively. Total share-based compensation expense for the six months ended June 30, 2009 was $2.1 million, of which $769,000 and $1.4 million were recorded in the condensed statement of operations as research and development expenses and general and administrative expenses, respectively. Total share-based compensation expense for the six months ended June 30, 2008 was $1.6 million, of which $687,000 and $932,000 were recorded in the condensed statement of operations as research and development expenses and general and administrative expenses, respectively. Included in share-based compensation expense for the three months ended June 30, 2009 and 2008 is share-based compensation expense related to deferred compensation arrangements for our directors of $39,000 and $44,000, respectively, and $84,000 and $95,000 for the six months ended June 30, 2009 and 2008 respectively. At June 30, 2009, the total compensation cost related to non-vested awards not yet recognized was approximately $13.2 million with a weighted average expense recognition period of 2.55 years.

Merck. During the three months ended June 30, 2009 and 2008, FARESTON® net product sales were $949,000 and $274,000, respectively, while cost of product sales were $431,000 and $155,000, respectively. FARESTON® net product sales for the three months ended June 30, 2009 increased from the same period in the prior year as a result of a price increase instituted in the fourth quarter of 2008, partially offset by a decrease of approximately 20% in sales volume of FARESTON® as compared to the three months ended June 30, 2008. The increase in cost of product sales was due to an increase in royalty expenses which was based on our net sales of FARESTON®. We expect FARESTON® sales volume to continue to decline in future periods, particularly as a result of aromatase inhibitors continuing to capture breast cancer market share from SERMs, including FARESTON®. Collaboration revenue was $2.9 million for the three months ended June 30, 2009, and $2.7 million for the three months ended June 30, 2008. Collaboration revenue for the three months ended June 30, 2009 consisted of approximately $1.5 million and approximately $1.4 million from the amortization of deferred revenue from Ipsen and Merck, respectively. Collaboration revenue for the three months ended June 30, 2008 consisted of approximately $1.5 million and approximately $1.3 million from the amortization of deferred revenue from Ipsen and Merck, respectively.

Revenues. Revenues for the six month periods ended June 30, 2009 and 2008 were $7.5 million. Revenues include net sales of FARESTON® marketed for the treatment of metastatic breast cancer in postmenopausal women and collaboration revenue from Ipsen and Merck. In the first six months of 2009 and 2008, FARESTON® net sales were $1.7 million and $531,000, respectively, while cost of product sales were $779,000 and $290,000 respectively. FARESTON® net product sales for the six months ended June 30, 2009 increased

from the same period in the prior year as a result of a price increase instituted in the fourth quarter of 2008, partially offset by a decrease of approximately 21% in sales volume of FARESTON® as compared to the six months ended June 30, 2008. The increase in cost of product sales was due to an increase in royalty expenses which was based on our net sales of FARESTON®. Collaboration revenue was $5.7 million for the six months ended June 30, 2009, which consisted of approximately $2.9 million and approximately $2.8 million from the amortization of deferred revenue from Ipsen and Merck, respectively. Collaboration revenue was approximately $7.0 million for the six months ended June 30, 2008, which consisted of approximately $2.9 million and approximately $2.5 million from the amortization of deferred revenue from Ipsen and Merck, respectively, and approximately $1.5 million from an earned milestone from Ipsen resulting from the achievement of the primary end

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