SOURCE: Facet Biotech Corporation

Facet Biotech Corporation

August 04, 2009 16:05 ET

Facet Biotech Reports Second Quarter 2009 Financial Results

Reduces Full Year 2009 Cash Utilization Guidance to Approximately $80 Million

REDWOOD CITY, CA--(Marketwire - August 4, 2009) - Facet Biotech Corporation (NASDAQ: FACT) today reported financial results for the second quarter ended June 30, 2009.

"I am pleased with the progress we've made at Facet over the past eight months, especially with our clinical development, where our daclizumab program in MS is poised to enter phase 3 in the first half of 2010 and our oncology programs continue on track," said Faheem Hasnain, president and chief executive officer of Facet Biotech. "At the same time, we continue to expand our leadership team with the recent appointment of Dr. Mark Rolfe as chief scientific officer, whose vast experience in oncology and molecular biology will complement our core capabilities in oncology research and translational medicine. We also remain vigilant about managing our financial resources, evidenced by our revised cash utilization guidance for 2009."

Summary of Financial Results

The financial results for the quarter ended June 30, 2009 represent the second full quarter of operations for Facet as an independent company since its spin-off from PDL BioPharma, Inc. (PDL) on December 18, 2008. The results for the quarter and six months ended June 30, 2008 are comprised of the results of PDL's former biotechnology operations, which were derived from PDL's historical consolidated financial statements, prior to the spin-off.

--  Total revenues for the second quarter of 2009 were $10.6 million
    compared to $2.0 million in the same period of 2008.  This increase was
    primarily due to revenue recognized under the company's collaboration
    with Bristol-Myers Squibb Company (BMS).  Because Facet did not enter
    into the collaboration agreement with BMS until the third quarter of
    2008, Facet did not recognize any revenue under this agreement in the
    second quarter of 2008.

--  Total costs and expenses for the second quarter of 2009 were $52.9
    million compared to $51.2 million reported for the comparable 2008
    period.  This increase was primarily due to $16.9 million in
    restructuring charges incurred during the quarter, which was partially
    offset by $12.8 million in lower expenses associated with research and
    development (R&D) and general and administrative (G&A) activities.

    --  R&D expenses decreased to $27.1 million for the second quarter of
        2009 from $37.0 million for the same period of 2008.  The decrease
        was due primarily to reduced personnel-related expenses as a result
        of prior period restructuring activities.  This decrease was
        partially offset by a $2.3 million increase in stock-based
        compensation, primarily resulting from at-the-money, fully-vested
        stock options granted to employees during the quarter as discussed
        below.

    --  In the second quarter of 2009, G&A expenses decreased to $8.1
        million from $11.0 million for the prior year comparable period.
        This decrease was primarily due to reduced personnel-related
        expenses as a result of prior period restructuring activities and
        reduced facility-related costs as a result of a lease-related
        restructuring charge taken during the quarter.  These decreases
        were partially offset by a $1.0 million increase in stock-based
        compensation, primarily resulting from at-the-money, fully-vested
        stock options granted to employees during the quarter as discussed
        below.

    --  Restructuring charges of $16.9 million were incurred in the second
        quarter of 2009 compared to $2.9 million for the comparable 2008
        period.  The $16.9 million in restructuring charges in the second
        quarter of 2009 resulted from Facet's vacating approximately
        240,000 square feet of leased space at its corporate headquarters
        during the quarter in accordance with the restructuring plan
        initiated in January 2009.

    --  Stock-based compensation for the second quarter of 2009 was $5.2
        million compared to $1.8 million for the second quarter of 2008.
        This increase was primarily due to the issuance of at-the-money,
        fully-vested stock options granted to employees during the quarter.
        As disclosed in prior filings with the Securities and Exchange
        Commission (SEC), the grants were provided to Facet employees to
        compensate them for the estimated value of any vested PDL stock
        options that were forfeited in connection with the spin-off.
        Because these stock options were fully vested as of the grant date,
        the company recognized 100 percent of the fair value of the grants
        as stock-based compensation upon issuance in the second quarter of
        2009.

--  Net loss for the second quarter of 2009 was $40.8 million, or $1.71 per
    basic and diluted share, compared to a net loss of $49.7 million, or
    $2.08 per basic and diluted share, for the second quarter of 2008.

--  Cash, cash equivalents, marketable securities and restricted cash
    totaled $371.1 million at June 30, 2009, a decrease from $403.4
    million at December 31, 2008.  Cash utilization was $12.3 million in
    the second quarter of 2009 and $32.3 million in the first half of 2009.

Recent Developments

--  In August, Facet announced its decision, along with its partner Biogen
    Idec, to continue planning for the phase 3 trial of daclizumab high-yield
    process (DAC HYP) in multiple sclerosis (MS).  The companies expect to
    initiate the trial during the first half of 2010.  Facet plans to request a
    Special Protocol Assessment from the U.S. Food and Drug Administration
    (FDA) prior to the initiation of this study.  The companies continue to
    enroll patients in the SELECT phase 2b monotherapy study of DAC HYP in MS
    as they plan for the phase 3 study. The independent Safety Monitoring
    Committee (SMC) for the SELECT study conducted a planned interim futility
    analysis of a subset of the data and, based on that analysis, the SMC
    recommended the continuation of the SELECT trial.  SELECT remains a blinded
    study.  Additional details about the phase 3 study will be available prior
    to the start of the trial.
    
--  In July, Facet announced the appointment of Mark Rolfe, Ph.D. as
    senior vice president and chief scientific officer, effective August 20,
    2009.  Dr. Rolfe will be responsible for leading the company's research
    organization, including its target validation, translational medicine and
    protein engineering teams.  Dr. Rolfe held positions of increasing
    responsibility at Millennium: the Takeda Oncology Company, most recently as
    vice president, oncology discovery.  He also worked at Mitotix, Inc. as
    director, molecular biology, and at Celltech Ltd. as a principal scientist.
    He completed post-doctoral fellowships at the Columbia University College
    of Physicians and Surgeons in New York and the Imperial Cancer Research
    Fund in London.  He received his Ph.D. from the National Institute of
    Medical Research in London.
    
--  In May, Facet held its first Annual Stockholders Meeting at its
    corporate headquarters in Redwood City, Calif.  All five board of director
    nominees were elected: Brad Goodwin, Faheem Hasnain, Gary Lyons, David
    Parkinson, M.D. and Kurt von Emster.
    

Revised 2009 Guidance

--  Based on Facet's first half 2009 results and its expectations for the
    remainder of the year, the company is reducing its guidance for anticipated
    cash utilization for 2009 to approximately $80 million from its previous
    range of $95 to $100 million.  The updated cash utilization estimate
    continues to include approximately $10 million in workforce-related
    payments, including severance payments related to employees terminated in
    2009, compensation for such employees prior to their dates of termination
    and retention-related payments that will be made in 2009.  The cash
    utilization estimate excludes costs related to potential in-licensing
    opportunities and the potential receipt of collaboration milestone
    payments.  The company expects to receive the $30 million milestone payment
    from Biogen Idec associated with the enrollment of the first patient into
    the phase 3 trial for DAC HYP in the first half of 2010.  The company
    continues to seek opportunities to further reduce its ongoing cost
    structure, particularly with respect to its significant lease obligations.
    
--  Primarily as a result of the lease-related restructuring charge
    incurred during the second quarter, the company is updating its estimate of
    total costs and expenses for 2009.  The company currently anticipates 2009
    total costs and expenses of $155 to $165 million, a change from its
    previous estimate of $140 to $160 million.  The current estimate includes
    $22 to $25 million of anticipated depreciation, amortization and stock-
    based compensation, consistent with the company's previous estimate, and
    $22 million in total restructuring and asset impairment charges, an
    increase from the previously estimated $4 million in restructuring charges.
    

Forward-looking Statements

This press release contains forward-looking statements, including regarding Facet Biotech's

    (i)  expected initiation of a phase 3 trial of daclizumab in MS in the
         first half of 2010, plans to request a Special Protocol Assessment
         with respect to this trial and potential receipt of a $30 million
         milestone payment from Biogen Idec, which would be triggered upon
         the enrollment of the first patient in a phase 3 trial of
         daclizumab in MS; and

    (ii) expected cash utilization, total costs and expenses, depreciation,
         amortization and stock-based compensation expense and
         restructuring and asset impairment charges for 2009.

Each of these forward-looking statements involves risks and uncertainties. Actual results may differ materially from those, express or implied, in these forward-looking statements. Factors that may cause differences between current expectations and actual results include, but are not limited to, the following:

--  The development of daclizumab could be adversely impacted by changes
    in Facet Biotech's development plans or timelines, including because of
    unexpected safety or efficacy data observed during clinical trials,
    enrollment rates in clinical trials, changes in expected competition and
    changes in regulatory support for the path towards registration.  As a
    result, the phase 3 trial of daclizumab in MS may not be initiated by the
    first half of 2010 or at all, which would adversely impact the receipt of
    or delay the receipt of the $30 million milestone payment Facet Biotech
    would otherwise receive upon enrollment of the first patient into the phase
    3 study.  The results observed to date in clinical trials of daclizumab in
    MS may not be predictive of results to be obtained in the additional
    evaluations and studies that would be necessary to demonstrate daclizumab
    to be safe and effective in the treatment of patients with MS.
--  Facet Biotech's ability to realize expected operating expense
    reductions could be adversely impacted by changes in Facet Biotech's
    development plans or timelines, enrollment rates in clinical trials,
    unexpected litigation or other disputes and the occurrence of other
    unexpected events that could affect anticipated expenses.
--  Facet Biotech could recognize additional restructuring
    charges or reduce its restructuring liability over the next several
    quarters in connection with its sublease efforts for its Redwood City
    property leases.   These sublease efforts also could trigger potentially
    significant asset impairment charges in future periods.
--  Facet Biotech's 2009 cash utilization could increase significantly if
    it enters into any in-licensing agreement, which requires the payment of
    upfront fees, the sharing of development costs or other payments.
--  Facet Biotech's revenue expectations depend in part on the success of
    third parties from which Facet Biotech expects to receive royalty,
    milestone and other payments.
    

Other factors that may cause Facet Biotech's actual results to differ materially from those expressed or implied in the forward-looking statements in this press release are discussed in Facet Biotech's filings with the Securities and Exchange Commission (SEC), including the "Risk Factors" sections of the Company's periodic reports on Form 10-K and Form 10-Q filed with the SEC. Copies of Facet Biotech's filings with the SEC may be obtained at the "Investors" section of Facet Biotech's website at www.facetbiotech.com. Facet Biotech expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Facet Biotech's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based for any reason, except as required by law, even as new information becomes available or other events occur in the future. All forward-looking statements in this press release are qualified in their entirety by this cautionary statement.


About Facet Biotech

Facet Biotech is a biotechnology company dedicated to advancing its pipeline of four clinical-stage products, leveraging its research and development capabilities to identify and develop new oncology drugs and applying its proprietary next-generation protein engineering technologies to potentially improve the clinical performance of protein therapeutics. Facet Biotech Corporation launched in December 2008 as a spin-off from PDL BioPharma, Inc.

NOTE: Facet Biotech and the Facet Biotech logo are considered trademarks of Facet Biotech Corporation.

                        FACET BIOTECH CORPORATION
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in thousands, except per share amounts)
                                (unaudited)


                                 Three Months Ended     Six Months Ended
                                      June 30,              June 30,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
REVENUES:
  Collaboration                 $   8,897  $   1,825  $  16,134  $   4,507
  Other                             1,654        150      4,016      2,150
                                ---------  ---------  ---------  ---------
    Total revenues                 10,551      1,975     20,150      6,657

COSTS AND EXPENSES:
  Research and development (1)     27,139     37,045     51,204     82,282
  General and administrative (1)    8,079     10,985     18,338     23,750
  Restructuring charges            16,865      2,904     21,070      8,451
  Asset impairment charges            843        263        843      3,784
  Gain on sale of assets                -          -          -    (49,671)
                                ---------  ---------  ---------  ---------
    Total costs and expenses       52,926     51,197     91,455     68,596
                                ---------  ---------  ---------  ---------
    Operating loss                (42,375)   (49,222)   (71,305)   (61,939)

Interest and other income           1,945          2      2,125          5
Interest expense                     (419)      (432)      (841)      (866)
                                ---------  ---------  ---------  ---------
    Loss before income taxes      (40,849)   (49,652)   (70,021)   (62,800)
Income tax expense                      -         31          -         59
                                ---------  ---------  ---------  ---------
    Net loss                    $ (40,849) $ (49,683) $ (70,021) $ (62,859)
                                =========  =========  =========  =========

NET LOSS PER BASIC AND DILUTED
 SHARE (2)                      $   (1.71) $   (2.08) $   (2.93) $   (2.63)
                                =========  =========  =========  =========

WEIGHTED-AVERAGE SHARES - BASIC
 AND DILUTED (2)                   23,917     23,901     23,911     23,901
                                =========  =========  =========  =========

(1) Amounts include stock-based
 compensation as follows:
  Research and development      $   3,714  $   1,388  $   4,121  $   3,026
  General and administrative        1,446        403      1,915      2,225
                                ---------  ---------  ---------  ---------
     Total stock-based
      compensation              $   5,160  $   1,791  $   6,036  $   5,251
                                =========  =========  =========  =========

(2) For the three and six months ended June 30, 2008, the computation of
 net loss per basic and diluted share and the weighted-average shares
 outstanding are based on 23.9 million shares that were issued in
 connection with the spin-off on December 18, 2008.



                      CONSOLIDATED BALANCE SHEET DATA
                              (in thousands)
                                (unaudited)

                                                    June 30,   December 31,
                                                      2009         2008
                                                  ------------ ------------
Cash, cash equivalents, marketable securities and
 restricted cash                                  $    371,130 $    403,418
Total assets                                      $    494,721 $    538,021
Total stockholders' equity                        $    372,611 $    435,633


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