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The slight increase in net loss for the first quarter 2009 vs. first quarter 2008 is due to in process research and development costs which were related to a milestone payment of $1.2 million to the former Vela shareholders. These expenses were offset by a 28% decrease in research & development expenses and a 58% decrease in general and administrative expenses.
Research & development expenses decreased by $763,814 or 28% from $2,778,234 in 2008 to $2,014,420 in 2009, related to the Company's primary focus of cash resources on the Dextofisopam Phase 2b trial and the downsizing and curtailment of general research and development programs. The decline reflects decreases in virtually every research and development expense category. The primary reductions include a $285,000 reduction in payroll, a $157,000 reduction in consultant and professional fees, a $195,000 reduction in clinical studies and $127,000 reduction in various other areas. The decline in expenses primarily reflects the closing of the Rehovot facility.
In the quarter ended March 31, 2009, the Company advanced a Phase IIb trial of its lead compound, dextofisopam, in female IBS patients. The Phase IIb trial was fully enrolled on April 9, 2009 at 324 patients. Costs of $1,884,000 were incurred during the quarter in connection with the trial, comprising CRO-related activities and patient recruitment costs. All patients in the trial are expected to complete treatment by mid 2009 and top line clinical data is expected in early September 2009. At that point, the Company's R&D expenses will significantly decrease, although the continued development of this compound through late-stage clinical testing will significantly increase the research and development expenses going forward. The Company's strategy is to license or partner this product for further development.
In process research and development costs relate to the Vela milestone of $1,180,000. On April 9, 2009 the last patients were enrolled in the Phase 2b trial thus triggering the following milestone: $1 million cash + 2 million shares of Pharmos common stock valued at $180,000. The expense of the milestone of $1,180,000 has been reflected in the 1Q 2009 results. The payment of the cash portion of the milestone has been deferred under an amendment to the acquisition agreement until such time as 1) the Company enters a collaboration or licensing agreement with a third party resulting in an upfront fee of at least $10 million, and 2) payment of a cash milestone would still leave the Company with at least one year's operating cash. If these conditions are not met, then the cash components of these milestones will not be paid. The 2 million shares will be issued on November 2, 2009 at the earliest.
General and administrative expenses for the first quarter of 2009 decreased by $462,175, or 58%, from $796,924 in 2008 to $334,749 in 2008. The decline reflects decreases in virtually every general and administrative expense category. The primary reductions include a $282,000 reduction in payroll, an $86,000 reduction in consultant and professional fees and a reduction in facility fees of $79,000. The decrease in payroll costs reflect the impact of the 2008 restructuring plans which have reduced the Company's head count from 18 employees in December 2007 to 5 employees at the end of December 2008 and also March 2009.
Other income (expense) net, decreased by $161,985 from $14,828 in other income in 2008 to $147,157 in other expense in 2009. The majority of the decrease is from decreased interest income of $125,413 from a decline in cash, cash equivalents and short term investments. We also recorded a $30,685 translation loss on assets held in Israel due to currency translation fluctuations. In the first quarter of 2009 the Company recorded $119,838 in interest expense related to the issuance of $4,000,000 in convertible debentures issued on January 3, 2008.
About Pharmos Corporation
Pharmos discovers and develops novel therapeutics to treat a range of indications including specific diseases of the nervous system such as disorders of the brain-gut axis (IBS), pain/inflammation, and autoimmune disorders. The Company's only product in development, dextofisopam, is undergoing Phase 2b testing in IBS patients. Dextofisopam has completed a Phase 2a IBS study in which it demonstrated a statistically significant effect compared to placebo on the primary efficacy endpoint of adequate relief (n=141, p=0.033). The Company also has a proprietary technology platform focusing on discovery and development of synthetic cannabinoid compounds with a focus on CB2 receptor selective agonists. Various CB2-selective compounds from Pharmos' pipeline have completed preclinical studies targeting pain, multiple sclerosis, rheumatoid arthritis, inflammatory bowel disease and other disorders. These are available for licensing / partnering. On February 18, 2009, Pharmos Corporation and its Israeli subsidiary, Pharmos Ltd., entered into an Asset Purchase Agreement with Reperio Pharmaceuticals Ltd. for the sale of the patent rights and technical know-how related to the compound known as PRS-639,058 and certain follow-on molecules.
Safe Harbor Statement
Statements made in this press release related to the business outlook and future financial performance of Pharmos, to the prospective market penetration of its drug products, to the development and commercialization of its pipeline products and to its expectations in connection with any future event, condition, performance or other matter, are forward-looking and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause results to differ materially from those set forth in these statements. Additional economic, competitive, governmental, technological, marketing and other factors identified in Pharmos' filings with the Securities and Exchange Commission could affect such results.
(Tables attached)
PHARMOS CORPORATION
(Unaudited)
Consolidated Statements of Operations
Three months ended
March 31,
--------------------------------
2009 2008
------------ -----------
Expenses
Research and development $2,014,420 $2,778,234
In-process research & development
Vela milestone 1,180,000 -
General and administrative 334,749 796,924
Depreciation and amortization 2,126 34,552
------------ ------------
Total operating expenses 3,531,295 3,609,710
------------ ------------
Loss from operations (3,531,295) (3,609,710)
------------ ------------
Other (expense) income
Interest income 5,286 130,700
Interest expense (119,838) (122,862)
Other (expense) income (32,605) 6,989
------------ ------------
Other (expense) income, net (147,157) 14,827
------------ ------------
Net loss ($3,678,452) ($3,594,883)
------------ ------------
Net loss per share
- basic and diluted ($0.14) ($0.14)
Weighted average shares outstanding
- basic and diluted 26,697,649 25,739,855
Select Consolidated Balance Sheet Data
March 31, 2009 December 31, 2008
-------------- -----------------
Cash and short-term investments $2,937,025 $4,730,282
Working capital $1,786,622 $4,232,549
Shareholder's equity $(3,108,588) $341,219
www.pharmoscorp.com
SOURCE Pharmos Corporation
http://www.pharmoscorp.com
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