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Astex Pharmaceuticals Reports 2012 First Quarter Financial Results

Published: Tuesday, May 01, 2012
Last Updated: Tuesday, May 01, 2012
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Reports first quarter net income of $4.2 million.

Astex Pharmaceuticals, Inc. has reported financial results for the first quarter ended March 31, 2012.

The Company reported net income for the 2012 first quarter of $4.2 million, or $0.05 per basic share and $0.04 per diluted share, compared with $5.5 million, or $0.09 per basic and diluted share, for the same prior year period.

"During our 2012 first quarter we maintained a strong financial position and reported another profitable quarter. We advanced further a number of clinical programs and we expect to preview Phase II data on them by year end. Our partnered programs have also progressed and data from both internal and partnered programs should be presented at ASCO and ASH later this year," said James S.J. Manuso, PhD, chairman and chief executive officer of Astex Pharmaceuticals.

Total revenues for the 2012 first quarter were $22.0 million compared with $17.1 million for the same prior year period.

Total revenues for the 2012 first quarter includes royalty revenue of $20.6 million compared with $17.0 million for the same prior year period.

Royalty revenue is earned pursuant to the license agreement entered into with MGI PHARMA (acquired by Eisai Corporation of North America in January 2008) during 2004, which granted MGI PHARMA exclusive rights to the development, manufacture, commercialization and distribution of Dacogen.

Total revenues for the 2012 first quarter also includes development and license revenue of $1.4 million compared with $127,000 for the same prior year period.

Resulting from the first quarter transfer to GlaxoSmithKline (GSK) of epigenetic research work and assets generated under the former CLIMB™ collaboration with GSK, the recognition of all remaining deferred development and license revenue has been accelerated.

Total operating expenses for the 2012 first quarter were $20.6 million, compared with $11.6 million for the same prior year period. The primary reasons for the increase in total operating expenses for the 2012 first quarter compared with the same prior year period are the consolidation of research and development and general and administrative costs related to the acquisition of Astex Therapeutics Limited effective July 20, 2011, increased research and development activities from product development and clinical trial programs associated with SGI-110, AT13387, and amuvatinib, and an expense for the amortization of intangible assets related to the acquisition.

The non-cash amortization of intangible assets was $2.2 million for the 2012 first quarter while there was no similar amortization expense for the same prior year period.

Stock-based compensation expense, a non-cash expense that is included in operating expenses, was $765,000 for the 2012 first quarter, compared with $712,000 for the same prior year period.

The Company reported net income for the 2012 first quarter of $4.2 million, or $0.05 per basic share and $0.04 per diluted share, compared with net income of $5.5 million, or $0.09 per basic and diluted share, for the same prior year period.

The net income for the 2012 first quarter includes an income tax benefit of $2.8 million compared with an income tax provision of $44,000 for the same prior year period.

The income tax benefit for the 2012 first quarter was primarily due to the recognition of a tax benefit associated with the amortization of deferred tax liabilities resulting from the acquisition and foreign research and development tax credits related to the UK subsidiary.

Financial Position
As of March 31, 2012, the Company had $126.2 million in unrestricted cash, cash equivalents, and current and non-current marketable securities compared to $128.1 million at December 31, 2011.

Operational Highlights
During January 2012, Astex Pharmaceuticals, Inc. announced that the multi-year collaboration to discover cancer therapeutics based on epigenetic targets entered into by the Company and GSK in November 2009 was terminated, resulting in the transfer to GSK of existing research work and assets generated under the CLIMB epigenetic collaboration.

The Company has no further obligation to conduct additional research work on the program. This transfer arose from the review and rationalization of the Company's internal pipeline and drug discovery programs as part of the prior year merger of Astex Therapeutics Limited and SuperGen, Inc. to form Astex Pharmaceuticals, Inc., and discussions with GSK. The Company will continue to be eligible to receive milestones and royalties under the asset transfer agreement.

A separate Research and Development Collaboration and License Agreement that includes a multi-target drug discovery collaboration, entered into by the Company's UK subsidiary and GSK in November 2009 will continue.

During March 2012, the Company announced that the U.S. Food and Drug Administration (FDA) issued a Complete Response Letter to partner Eisai for their supplemental New Drug Application (sNDA) for Dacogen for patients with acute myeloid leukemia (AML) in adults 65 years of age or older who are not considered candidates for induction therapy.

The FDA declined to approve the application. A separate Marketing Authorization Application (MAA) was submitted to the European Medicines Agency (EMA) in May 2011 by Janssen-Cilag International NV for Dacogen in the treatment of patients with elderly AML. It is expected the EMA will issue a decision on this application later this year.

During April 2012, the Company presented interim Phase I/II clinical data showing that subcutaneous SGI-110, a novel hypomethylating agent and follow on to Dacogen, demonstrated a differentiated pharmacokinetic (PK) profile, good tolerability, and preliminary promising complete responses in heavily pretreated AML patients enrolled in the Phase I segment of the trial.

The data were presented at an oral session at the American Association for Cancer Research (AACR) 2012 Annual Meeting in Chicago, IL and were featured in a joint AACR-Stand Up To Cancer (SU2C) media forum.

SU2C has provided funding for the Epigenetics Dream Team that is collaborating on the scientific and clinical evaluation of SGI-110.

The randomized Phase I/II first-in-human dose escalation study of SGI-110 enrolled 66 patients with previously treated intermediate or high-risk myelodysplastic syndromes (MDS) or AML as of March 28, 2012.

Of seven evaluable refractory AML patients who had adequate hypomethylation with no prior resistance to hypomethylating agents (HMAs), two showed complete responses, and one showed a partial response.

Additionally, the PK data suggests that subcutaneous SGI-110 achieves higher decitabine exposure and longer half life compared to the intravenous (IV) infusion of Dacogen. The pharmacodynamic (PD) data shows potent dose-dependent hypomethylation induction in the daily regimen.

The Company's overall product pipeline continues to advance in the clinic. Four products in or entering Phase II trials are expected to produce data from clinical proof of concept trials in the next 12 months including AT13387, SGI-110, amuvatinib, and AT7519.

During the second half of 2012 we plan to initiate new Phase II clinical proof-of-concept trials for AT13387 and SGI-110 in solid tumors.

2012 Financial Guidance
The financial guidance for 2012 remains substantially unchanged from our previous guidance:
• Royalty revenue for Dacogen is expected to increase up to 10% from the prior year to a range from $64 million to $67 million.
• Development and license revenue is reported at $1.4 million. We do not guide to future potential development and license revenue from other partnered programs due to the uncertainty and timing of milestone achievements.
• The last remaining payment of $700,000 related to the sale of Nipent®(pentostatin for injection) to Hospira, Inc. to be classified as gain on sale of products is expected to be received during 2012.
• Research and development expenses are expected to increase from the prior year to a range from $62 million to $67 million.
• Amortization of intangible assets, a non-cash charge, has been revised upward from an estimated $7.6 million to $8.5 million.
• General and administrative expenses are expected to decrease from the prior year to a range from $14 million to $15 million.
• An estimated income tax benefit associated primarily with the amortization of deferred tax liabilities resulting from the acquisition and a foreign research and development tax credit related to the UK subsidiary has been revised upward from our prior guidance and is now anticipated to be in a range from $5 million to $6 million for the year.
• A net loss is still forecasted in a range from $13 million to $15 million for the year.
• In addition to the amortization of intangible assets included in total operating expenses are other recurring non-cash operating charges such as stock-based compensation expense and depreciation estimated at $3.5 million for the year.
• Average annual shares outstanding are expected to be approximately 93 million common shares.

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