SOURCE: Novacea

November 10, 2008 16:30 ET

Novacea Reports Third Quarter 2008 Financial Results

SOUTH SAN FRANCISCO, CA--(Marketwire - November 10, 2008) - Novacea, Inc. (NASDAQ: NOVC) today reported a net loss for the third quarter of 2008 of $6.9 million, or $(0.27) per share, and net income of $39.1 million, or $1.51 per share, for the nine months ended September 30, 2008. This compares to a net loss for the third quarter of 2007 of $3.2 million, or $(0.13) per share, and a net loss of $29.9 million, or $(1.26) per share, for the nine months ended September 30, 2007. As of September 30, 2008, cash and cash equivalents, marketable securities and interest receivable totaled $90.0 million.

Novacea recently announced that it has entered into a definitive merger agreement with Transcept Pharmaceuticals, Inc. Subject to regulatory approvals and customary closing conditions, including obtaining the requisite shareholder approvals of both companies; the transaction is currently expected to be completed in late 2008 or in the first quarter of 2009. If the merger is completed, the Novacea name will be changed to Transcept Pharmaceuticals, Inc. and the new company expects to trade on The NASDAQ Global Market® under the symbol "TSPT."

The merger would result in a specialty pharmaceutical company focused on the development and commercialization of proprietary products that address important therapeutic needs in the fields of psychiatry and sleep medicine. On September 30, 2008, Transcept submitted a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) for its lead product candidate, Intermezzo® (zolpidem tartrate sublingual lozenge), a low dose, buffered, sublingual formulation of zolpidem intended to be the first prescription sleep aid to be indicated for use as-needed for the treatment of insomnia when a middle of the night awakening is followed by difficulty returning to sleep.

Novacea had been focused on in-licensing, developing and commercializing novel cancer therapies. Novacea has two product candidates, including Asentar™, which had been in a Phase 3 clinical trial for androgen-independent prostate cancer, and AQ4N, a hypoxia-activated prodrug. There are currently no clinical trials planned or underway for Asentar or AQ4N, and both programs are part of current out-licensing efforts by Novacea.

"Our activities are focused on completing the merger with Transcept. We believe that the merger has the potential to provide meaningful long-term value to our stockholders as Transcept seeks to complete its regulatory approval process and utilize our cash resources in their anticipated launch of Intermezzo, a product that addresses a newly-defined indication within the large insomnia market," said John P. Walker, Novacea chairman and chief executive officer.

Financial Results

Revenue for the third quarter of 2008 was $0.1 million, which represents the final amount due under an agreement with Aventis. During the third quarter of 2008, Novacea did not record any revenue under the agreement with Schering that was terminated in April 2008. Revenue for the third quarter of 2007 includes $2.5 million related to the amortization of upfront payments under the then existing agreement with Schering and $6.1 million related to reimbursement by Schering for Novacea development efforts on Asentar.

Total research and development expenses for the third quarter of 2008 were $1.9 million as compared to $9.6 million for the same period in 2007, which represents a decrease of $7.7 million between the two periods. The decrease was due primarily to the lower level of clinical development activities in the Asentar ASCENT-2 Phase 3 clinical trial, which began in the first quarter of 2006 and was terminated in November 2007, and reduced development activities and product manufacturing expenses for AQ4N. The reduction in development activity was partially offset by restructuring- related expenses during the third quarter of 2008. Novacea activities for Asentar in 2008 have been focused primarily on winding-down and finalizing the analysis of the ASCENT-2 clinical trial and preparing a complete response to the FDA regarding releasing the clinical hold on the Investigation New Drug (IND) application for Asentar. In September 2008, Novacea received notice from the FDA that the agency had released the clinical hold on Asentar. There are currently no clinical trials planned or underway for Asentar.

Total general and administrative expenses for the third quarter of 2008 were $5.6 million, as compared to $3.6 million for the same period in 2007. The increase of $2.0 million between the two periods was due primarily to an increase in: external expenses related to evaluating strategic alternatives and the potential merger with Transcept, including investment banking, legal and accounting fees; depreciation and amortization expense; and restructuring-related expenses.

The net loss for the third quarter of 2008 was $6.9 million, or $(0.27) per share, as compared to a net loss for the same period in 2007 of $3.2 million, or $(0.13) 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.

Safe Harbor

Except for the historical information contained herein, the matters set forth in this press release 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. One should not put undue reliance on any forward-looking statements. Examples of such forward-looking statements include, but are not limited to, statements related to the merger of Novacea and Transcept, including the business direction of Novacea in connection with such merger, and Novacea's development plans with respect its product candidates. Important factors that could cause actual performance and results to differ materially from the forward-looking statements made by Novacea include: failure of Novacea stockholders to approve the merger; Novacea or Transcept inability to satisfy the conditions of the merger, or that the merger is otherwise delayed or ultimately not consummated; developments relating to Novacea licensing agreements; and other risks detailed from time to time under the heading "Risk Factors" in the most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K filed by Novacea, as may be updated from time to time by future Novacea filings under the Securities Exchange Act. If one or more of these risks or uncertainties materialize, or if any underlying assumptions prove incorrect, Novacea actual performance or results may vary materially from any future performance or results expressed or implied by these forward-looking statements. Novacea assumes 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.

Additional Information about the Merger and Where to Find It

On October 3, 2008, Novacea filed a joint proxy statement/prospectus/information statement in connection with the merger with Transcept. Once declared effective by the SEC, the final proxy statement included in the Form S-4 will be mailed to Novacea stockholders prior to a meeting of Novacea stockholders to consider the merger proposal. Investors and security holders of Novacea and Transcept are urged to read the proxy statement/prospectus/information statement because it will contain important information about Novacea, Transcept and the proposed transaction. The proxy statement/prospectus/information statement, and any other documents filed by Novacea with the SEC, may be obtained free of charge at the SEC web site at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by Novacea by contacting Novacea Investor Relations by e-mail at IR@novacea.com or by telephone at (650) 228-1800. Investors and security holders are urged to read the proxy statement/prospectus/information statement and the other relevant materials before making any voting or investment decision with respect to the proposed transaction. Novacea and its respective directors and executive officers may be deemed to be participants in the solicitation of proxies from its stockholders in favor of the proposed transaction. Information about the directors and executive officers of Novacea and their respective interests in the proposed transaction is available in the proxy statement/prospectus/information statement.

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


                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2008       2007       2008       2007
                                ---------  ---------  ---------- ---------

Collaboration revenue           $      93  $   8,566  $   60,621 $   8,702
Operating expenses:
   Research and development         1,932      9,552      11,563    28,548
   General and administrative       5,612      3,634      12,263    12,893
                                ---------  ---------  ---------- ---------
Total operating expenses            7,544     13,186      23,826    41,441
                                ---------  ---------  ---------- ---------
Income (loss) from operations      (7,451)    (4,620)     36,795   (32,739)
Interest and other income, net        570      1,383       2,275     2,836
Net income (loss)               $  (6,881) $  (3,237) $   39,070 $ (29,903)
                                =========  =========  ========== =========

Net income (loss) per share:
   Basic                        $   (0.27) $   (0.13) $     1.52 $   (1.26)
                                =========  =========  ========== =========
   Diluted                      $   (0.27) $   (0.13) $     1.51 $   (1.26)
                                =========  =========  ========== =========

Shares used in computing net
 income (loss) per share:
   Basic                           25,870     24,923      25,785    23,787
                                =========  =========  ========== =========
   Diluted                         25,870     24,923      25,918    23,787
                                =========  =========  ========== =========







                         Condensed Balance Sheets
                              (in thousands)


                                                September 30, December 31,
                                                ------------- -------------
                                                    2008          2007
                                                ------------- -------------
                                                 (Unaudited)      ( 1 )

Assets
Current assets:
   Cash and cash equivalents                    $       8,158 $      24,720
   Marketable securities                               81,381        69,887
   Interest receivable                                    430           659
   Accounts receivable                                      -        11,522
   Other current assets                                   492           991
                                                ------------- -------------
Total current assets                                   90,461       107,779

Other assets                                            1,252         2,041
                                                ------------- -------------
Total assets                                    $      91,713 $     109,820
                                                ============= =============

Liabilities and stockholders' equity
   Deferred revenue                             $           - $       9,968
   Other current liabilities                            4,535         9,198
                                                ------------- -------------
Total current liabilities                               4,535        19,166
Non-current deferred revenue                                -        44,870
Other long-term liabilities                                64            36
Stockholders' equity                                   87,114        45,748

                                                ------------- -------------
Total liabilities and stockholders' equity      $      91,713 $     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
    E-mail: Email Contact