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AspenBio Pharma Inc. Reports Operating Results (10-Q)

November 05, 2009 | About:
TraderMark

10qk

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AspenBio Pharma Inc. (APPY) filed Quarterly Report for the period ended 2009-09-30.

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 $51.9 million; its shares were traded at around $1.6119 with and P/S ratio of 63.3.

Highlight of Business Operations:

Selling, general and administrative expenses in the nine months ended September 30, 2009, totaled $4,428,000, which is a $907,000 or 26% 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. The hiring of additional personnel resulted in approximately $1,050,000 of additional expenses in the 2009 period, which included approximately $480,000 in additional employee related stock based compensation expense in 2009 over 2008 amounts. This was offset by a decrease of approximately $320,000 in public company expenses for 2009 with $275,000 of this decrease due to a reduction in the stock option expense to the investor relations firm which was off-set by a $73,000 increase in Sarbanes-Oxley related expenses in 2009. Selling, general and administrative expenses also increased in the nine months ended September 30, 2009 by an additional $73,000 in insurance related costs primarily due to increased staff and an increase in general liability insurance.

Selling, general and administrative expenses in the three months ended September 30, 2009, totaled $1,602,000, which is a $565,000 or 54% 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. The hiring of additional personnel resulted in approximately $411,000 of additional expenses in the 2009 period, which included approximately $151,000 in additional employee related stock based compensation expense in 2009 over 2008 amounts. This was offset by a decrease of approximately $82,000 in public company expenses for 2009 with $98,000 of this decrease in public company expenses due to a reduction in the stock option expense to the investor relations firm which was off-set by a $16,000 increase in Sarbanes-Oxley related expenses being higher in 2009. Selling, general and administrative expenses also increased in the three months ended September 30, 2009 by an additional $48,000 in insurance related costs primarily due to health insurance for increased staff and an increase in general liability insurance.

Research and development expenses in the 2009 period totaled $2,275,000, which is a $312,000 or 16% 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 $707,000. This was offset by a decrease in the development expenses on the single-chain animal products of approximately $498,000 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 $61,000 in the 2009 period.

We reported a net loss of $10,331,000 during the nine months ended September 30, 2009, which included $1,476,000 in non-cash expenses relating to stock-based compensation totaling $1,215,000 and depreciation, amortization and other items totaling $261,000. At September 30, 2009, we had working capital of $7,245,000. Subsequent to September 30, 2009, the Company completed a public offering generating approximately $8,764,000 in gross proceeds from the sale of 5,155,000 shares of common stock ($8,300,000 in net proceeds). 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.

Net cash consumed by operating activities was $7,774,000 during the nine months ended September 30, 2009. Cash was consumed by the loss of $10,331,000, less non-cash expenses of $1,215,000 for stock-based compensation and $261,000 for depreciation and amortization and other non-cash items. Our base antigen business is generally not significant to our operations and therefore does not generally significantly impact operating cash flows. As of September 30, 2009 inventories had increased by $124,000 due to receipt of a recent raw material supply order and prepaid expenses and other current assets generated cash of $676,000 primarily related to collection of shared costs incurred under the Novartis agreement, payable by Novartis, in the amount of $425,000.

Net cash consumed by operating activities was $3,959,000 during the nine months ended September 30, 2008. Cash was consumed by the loss of $7,123,000 less non-cash expenses of $1,065,000 for stock-based compensation issued for services, $274,000 for depreciation and amortization and $311,000 in non-cash charges. A net increase in accounts payable and accrued liabilities of $28,000 generated cash. Deferred revenues increased by $1,560,000 from the Novartis license agreement.

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