SOURCE: Novacea, Inc.

August 11, 2008 17:33 ET

Novacea Reports Second Quarter 2008 Financial Results

SOUTH SAN FRANCISCO, CA--(Marketwire - August 11, 2008) - Novacea, Inc. (NASDAQ: NOVC) today reported net income for the second quarter of 2008 of $47.1 million, or $1.82 per share, which resulted primarily from the recognition of $52.4 million in revenue that had been previously deferred related to the $60 million in upfront payments received from Schering-Plough Corporation ("Schering") in July 2007.

As was reported at the time by Novacea, the company's worldwide license, development and commercialization agreement with Schering was terminated in April 2008. Through the termination date of the agreement, Novacea had recognized revenues from the upfront payments ratably over an estimated six-year development period. As a result of the termination of the agreement, Novacea recognized as revenue in the second quarter of 2008 the entire remaining deferred revenue balance of $52.4 million related to the upfront payments from Schering.

As of June 30, 2008, cash and cash equivalents, marketable securities and accounts receivable totaled $95.0 million. The accounts receivable balance of $5.7 million as of June 30, 2008 reflects $4.3 million and $1.4 million of reimbursement revenue for the first quarter and second quarter of 2008, respectively, related to Novacea's development efforts on Asentar™ under the former agreement with Schering. In August 2008, the Company and Schering agreed that they would make the $5.7 million payment, which would fulfill Schering's remaining financial obligations for reimbursement of Novacea's development or related activities on Asentar™. Any future development or related activities on Asentar™ will be at the Company's expense.

"With approximately $95 million in cash and receivables at the end of the second quarter of 2008, a decreased level of R&D activities, and the workforce reduction we implemented during the second quarter, we continue to focus our efforts on evaluating various strategic alternatives for Novacea," said John P. Walker, Novacea's chairman and chief executive officer.

Financial Results

Revenue for the quarter ended June 30, 2008 under the collaboration agreement with Schering-Plough was $53.7 million, including $52.4 million attributable to the recognition of the entire remaining deferred revenue balance related to the upfront payments from Schering, and $1.4 million related to cost reimbursement for Novacea's development efforts on Asentar during the second quarter of 2008.

Total research and development (R&D) expenses for the second quarter of 2008 were $4.1 million as compared to $11.4 million for the same period in 2007. The $7.3 million decrease in R&D expenses during the quarter ended June 30, 2008 as compared to the same period in 2007 was related to: the lower level of clinical development activities on Asentar, which in 2008 were focused on winding-down, and finalizing the analysis of data from, the ASCENT-2 Phase 3 clinical trial that was terminated in November 2007; and reduced development activities and product manufacturing expenses for AQ4N. Total general and administrative (G&A) expenses for the second quarter of 2008 were $3.2 million, as compared to $5.4 million for the same period in 2007.

Net income for the second quarter of 2008 was $47.1 million, or $1.82 per share, as compared to a net loss for the same period in 2007 of $16.0 million, or $(0.69) per share. The basic net income (loss) per share amounts were calculated using the weighted average number of shares of common stock outstanding for each period.

Financial Guidance

Based on its current operating plans, including the reimbursement by Schering of certain of its Asentar development costs incurred in the first and second quarters of 2008, Novacea currently projects that for total year 2008 its usage of operating capital, comprised of cash and cash equivalents, marketable securities and accounts receivable, will be approximately $15 to $16 million.

Except for the historical information contained herein, the matters set forth in this press release, including statements as to financial guidance, development, clinical studies, regulatory review and approval, and commercialization of products, are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements speak only as of the date the statements are made and are based on information available at the time those statements are made and/or management's good faith belief as of that time with respect to future events. You should not put undue reliance on any forward-looking statements. Important factors that could cause actual performance and results to differ materially from the forward-looking statements made by Novacea include: early stage of development; the focus, conduct, enrollment and timing of Novacea's clinical trials; the Company's ability to identify and complete one or more strategic transactions, particularly in light of the termination of its ASCENT-2 trial in November 2007 and its decision to place the Phase 2a portion of its AQ4N trial on hold, which strategic transactions, if any, could result in a change in the focus of the Company's business; the Company's ability to acquire and develop other products or product candidates at all or on commercially reasonable terms; the Company's ability to retain key employees required to maintain its operations; regulatory review and approval of product candidates; success or failure of Novacea's future collaboration agreements, if any; commercialization of products; developments relating to Novacea's licensing and collaboration agreements; market acceptance of products; funding requirements; intellectual property protection for Novacea's product candidates; competing products; and other risks detailed from time to time under the heading "Risk Factors" in Novacea's most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K, as may be updated from time to time by Novacea's future filings under the Securities Exchange Act. If one or more of these risks or uncertainties materialize, or if any underlying assumptions prove incorrect, Novacea's actual performance or results may vary materially from any future performance or results expressed or implied by these forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual performance or results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws.

Novacea is a registered trademark of Novacea, Inc., and Asentar is a trademark of Novacea, Inc. All other trademarks are property of their respective owners.

                    Condensed Statements of Operations
                 (in thousands, except per share amounts)
                                (Unaudited)

                                     Three Months          Six Months
                                    Ended June 30,       Ended June 30,
                                --------------------  --------------------
                                  2008       2007       2008       2007
                                ---------- ---------  ---------- ---------
Collaboration revenue           $   53,739 $     136  $   60,528 $     136
Operating expenses:
  Research and development           4,124    11,444       9,631    18,996
  General and administrative         3,210     5,384       6,650     9,258
                                ---------- ---------  ---------- ---------
Total operating expenses             7,334    16,828      16,281    28,254
                                ---------- ---------  ---------- ---------
Loss from operations                46,405   (16,692)     44,247   (28,118)
Interest and other income, net         707       665       1,705     1,453
                                ---------- ---------  ---------- ---------
Net loss                        $   47,112 $ (16,027) $   45,952 $ (26,665)
                                ========== =========  ========== =========

Net income (loss) per share:
  Basic                         $     1.83 $   (0.69) $     1.79 $   (1.15)
                                ========== =========  ========== =========
  Diluted                       $     1.82 $   (0.69) $     1.77 $   (1.15)
                                ========== =========  ========== =========

Shares used in computing net
 income (loss) per share:
  Basic                             25,802    23,303      25,741    23,202
                                ========== =========  ========== =========
  Diluted                           25,951    23,303      25,895    23,202
                                ========== =========  ========== =========




                         Condensed Balance Sheets
                              (in thousands)

                                                  June 30,    December 31,
                                                ------------- -------------
                                                    2008          2007
                                                ------------- -------------
                                                (Unaudited)        (1)
Assets
Current assets:
  Cash and cash equivalents                     $      13,937 $      24,720
  Marketable securities                                75,335        69,887
  Accounts receivable                                   5,690        11,522
  Other current assets                                  1,514         1,650
                                                ------------- -------------
Total current assets                                   96,476       107,779

Other assets                                            1,781         2,041
                                                ------------- -------------
Total assets                                    $      98,257 $     109,820
                                                ============= =============

Liabilities and stockholders' equity
  Deferred revenue                              $           - $       9,968
  Other current liabilities                             4,897         9,198
                                                ------------- -------------
Total current liabilities                               4,897        19,166

Non-current deferred revenue                                -        44,870
Other long-term liabilities                                54            36
Stockholders' equity                                   93,306        45,748
                                                ------------- -------------
Total liabilities and stockholders' equity      $      98,257 $     109,820
                                                ============= =============

(1) Derived from audited financial statements.

Contact Information

  • Novacea Contact:
    Edward C. Albini
    Vice President and Chief Financial Officer
    Tel: 650-228-1825