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AFFYMAX, INC. Reports Operating Results (10-Q)

August 05, 2009 | About:

AFFYMAX, INC. (AFFY) filed Quarterly Report for the period ended 2009-06-30.

AFFYMAX INC. is a biopharmaceutical company that is developing a pipeline of synthetic peptide-based drug candidates against clinically validated targets for the treatment of kidney diseases and cancer. Affymax\'s objective is to discover develop and commercialize novel therapeutics addressing large unmet medical needs. A collaboration of several venture firms created Affymax as an independent company a spin-out from GlaxoSmithKline. Affymax has leveraged its foundation to become a developer of peptide drugs.Their lead productHematide is a synthetic peptide-based erythropoiesis-stimulating agent in clinical development for the treatment of anemia. Hematide is currently entering Phase THREE clinical trials for the treatment of anemia associated with chronic renal failure and is in Phase TWO clinical trials for the treatment of anemia in cancer patients. AFFYMAX, INC. has a market cap of $379.3 million; its shares were traded at around $20.11 with and P/S ratio of 4.5.

Highlight of Business Operations:

We are a biopharmaceutical company committed to developing novel drugs to improve the treatment of serious and often life-threatening conditions. Our product candidate, HematideTM, is designed to treat anemia associated with chronic renal failure. Anemia is a serious condition in which blood is deficient in red blood cells and hemoglobin. It is common in patients with chronic renal failure, cancer, heart failure, inflammatory diseases and other critical illnesses, as well as in the elderly. If left untreated, anemia may lead to chronic fatigue or increase the risk of other diseases or death. Currently recombinant EPO, or rEPO, is used to manage the anemia of dialysis, pre-dialysis and cancer patients. According to IMS Health Incorporated, rEPO generated $11.5 billion in worldwide revenues for 2008, of which we believe approximately $6.8 billion was generated in the U.S. Of this $6.8 billion, we estimate that over one-half is attributable to use of rEPO in patients with chronic renal failure, and the remainder is attributable to other indications, primarily cancer patients. Hematide is a synthetic peptide-based erythropoiesis stimulating agent, or ESA, designed to stimulate production of red blood cells. Hematide is designed to be longer acting than currently marketed ESAs in the U.S. and therefore has the potential to offer both better care for patients and reduced cost and complexity for healthcare providers.

In March 2009, we completed a private placement raising $41.6 million of net proceeds through the issuance of common stock and warrants exercisable for common stock. Under the terms of one of two purchase agreements, we sold 2,844,708 newly issued shares of our common stock at a purchase price of $11.25 per share. In the other purchase agreement, we sold 652,262 newly issued units at a purchase price of $15.33 per unit, with each unit consisting of one share of common stock and one warrant to purchase 0.65 of a share of common stock. The warrants are immediately exercisable at $16.78 per share and expire in March 2014.

We have recognized $26.9 million and $18.5 million of collaboration revenue for the three months ended June 30, 2009 and 2008, respectively, and $52.8 million and $35.2 million for the six months ended June 30, 2009 and 2008, respectively. The increase in collaboration revenue for the three and six months ended June 30, 2009 compared to the three and six months ended June 30, 2008 was primarily due to the growth in third-party development expenses reimbursed by Takeda related to our Phase 3 clinical trials which completed enrollment in the last quarter of 2008. We expect collaboration revenue to be directly affected by milestone payments and expenses that are eligible for reimbursement from Takeda under the Arrangement in future periods. In the event our estimate of the development period were to extend past January 1, 2011, then the remaining deferred collaboration revenue would be recognized over a longer period.

The increase in research and development expenses for the three and six months ended June 30, 2009 compared to the three and six months ended June 30, 2008 was primarily due to an increase of $9.5 million and $23.2 million, respectively, in clinical trial costs resulting from management and full enrollment of the Phase 3 clinical program. Compared to the first two quarters of 2009, we do not expect quarterly research and development expenses to increase or decrease substantially in the remainder of 2009.

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