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Gentium Reports Second Quarter Financial Results; Provides Phase II/III Pediatric Prevention Trial and Financial Update

^{Published on 2008-12-17 14:42:09 - Market Wire}
 

VILLA GUARDIA, Italy--([ BUSINESS WIRE ])--Gentium S.p.A.(NASDAQ: GENT) (the "Company") today provided an update regarding the Phase II/III pediatric prevention trial and reported financial results for the quarter ended June 30, 2008.

Update on Phase II/III Pediatric Prevention Trial

There has been continued progress with the Company's Phase II/III European trial for Defibriotide evaluating the prevention of veno-occlusive disease (VOD) in pediatric patients. During the second quarter the Company announced results from an independent Data Safety and Monitoring Board (DSMB) review which concluded there were no significant safety concerns, the prophylactic treatment arm (Defibrotide) and the control arm (no drug) were well balanced, and there was no evidence of clinical futility in the trial. However, the DSMB did recommend increasing the total patient enrollment to 360 patients, 180 in each arm. Gentium continues to enroll patients per the DSMB's recommendation and currently there are 352 out of 360 total patients enrolled in the trial. Additionally, the Company has announced that following discussions with the EMEA, there is the possibility of an accelerated review for Defibrotide in this indication.

"Enrollment has progressed rapidly in our European phase II/III pediatric prevention trial and we anticipate completing enrollment in the next few weeks," stated Dr. Laura Ferro, CEO of Gentium, S.p.A. "We are excited by the potential that Defibrotide has shown in the prevention setting and look forward to announcing full results from this trial."

Financial Highlights

The Company reports its financial condition and operating results using U.S. Generally Accepted Accounting Principles (GAAP). The Company's financial statements are prepared using the Euro as its functional currency. On June 30, 2008, €1.00 = $ 1.5764.

For the second quarter ended June 30, 2008 compared with the prior year's second quarter:

• Total revenues were €1.86 million, compared with €1.14 million
• Operating costs and expenses were €6.50 million, compared with €20.11 million. Operating costs and expenses for second quarter 2007 include a €13.74 million write-down of the assets acquired from Crinos.
• Research and development expenses, which are included in operating costs and expenses, were €1.76 million, compared with €3.29 million. Research and development expenses for second quarter 2008 are net of €1.14 million government grants, in the form of a tax credit, accrued as a decrease of costs.
• Operating loss was €4.63 million, compared with €18.97 million.
• Interest income, net, was €0.03 million, compared with €0.39 million
• Net loss was €4.53 million, compared with €19.12 million.
• Basic and diluted net loss per share was €0.30 compared with €1.36 per share.

For the six months ended June 30, 2008 compared with the comparable prior-year period:

• Total revenues were €4.55 million, compared with €2.40 million.
• Operating costs and expenses were €14.03 million, compared with €25.53 million. Operating costs and expenses for six months period ended June 30, 2007 include a €13.74 million write-down of the assets the Company acquired from Crinos in 2007.
• Research and development expenses, which are included in operating costs and expenses, were €5.37 million, compared with €6.03 million. Research and development expenses for second quarter 2008 are net of €1.14 million government grants, in the form of a tax credit, accrued as a reduction of expense.
• Operating loss was €9.48 million, compared with €23.13 million.
• Interest income (expense), net, was €0.16 million, compared with €0.65 million.
• Net loss was €10.61 million, compared with €23.89 million.
• Basic and diluted net loss per share was €0.71 compared with €1.75 per share.

Operating Results and Trends

The fluctuation in product sales revenue for the six-month period ended June 30, 2008 compared with the same period in 2007 is primarily due to varying demand for our products from our customers. Total product sales revenue for the six-month period ended June 30, 2008 increased by €0.60 million, or 26%, compared with the same period in 2007. Sales to affiliates represented 19% and 79% of the total product sales for the six-month periods ended June 30, 2008 and 2007, respectively. Sales to third parties increased to €2.36 million mainly due to higher demand for our active pharmaceutical ingredient sulglicotide in the Korean market and due to our acquisition of the Italian marketing authorization and trademarks regarding Defibrotide, which allowed the Company to sell Defibrotide directly to distributors instead of indirectly through Sirton.

Other revenues were €1.64 million for the six-month period ended June 30, 2008, compared to €0.09 million in 2007. The increase is mainly attributable to the reimbursement of certain costs incurred in the Company's Phase III clinical trial of Defibrotide to treat Severe VOD under a cost-sharing arrangement entered into with Sigma-Tau Pharmaceuticals Inc. in 2007.

Cost of goods sold was €2.95 million for the six-month period ended June 30, 2008 compared to €2.08 million for the same period in 2007. Cost of goods sold as a percentage of product sales was 102% for the six-month period ended June 30, 2008 compared to 90% for the same period in 2007. The decrease in gross margin was mainly due to the non-recognition of product sales to a related party, Sirton, during the three-month period ended as of June 30, 2008. The Company did not recognize these product sales due to Sirton's poor financial condition which caused concerns over the collectibility of such receivables.

If we would have recognized such revenue, cost of goods sold as a percentage of product sales would have been 85% for the six-month period ended June 30, 2008 compared to 90% for the same period in 2007. The increase in gross margin would have been mainly due to change in product mix.

Research and development spending increased during the six-month period in 2008 compared with 2007, primarily due to the costs associated with the Company's Phase III trial in the U.S. for the treatment of Severe VOD and the Company's Phase II/III trial in Europe for the prevention of VOD. Growth in outside services to support increased activity in our clinical trials, including clinical product production costs, contract research organization expenses, regulatory activities, toxicology studies and stock-based compensation expenses also contributed to increased research and development expenses. The 2008 research and development expenses are net of €1.14 million government grants accrued as a reduction of expenses.

General and administrative expenses were €4.80 million and €3.03 million for the six month period ended June 30, 2008 and 2007, respectively. The increase is primarily due to increased headcount and facilities-related expenses, general corporate expenses and stock based compensation expense. The 2008 general and administrative expenses reflect the establishment of an allowance for doubtful accounts of €1.5 million.

Interest income, net, decreased to €0.16 million in the six-month period ended June 30, 2008 over the same period in 2007. Interest income amounted to €0.34 million and € 0.83 million in the six months ended June 30, 2008 and 2007, respectively, a decrease of € 0.49 million. The decrease is due to a lower amount of invested funds and decrease in interest rates. Interest expense totalled €0.18 million in the six months period ended June 30, 2008 and 2007.

The Company ended the second quarter of 2008 with €15.65 million in cash and cash equivalents, compared with cash and cash equivalents of €25.96 million as of December 31, 2007. As of September 30, 2008, cash and cash equivalents were €13.5 million.

The Company has taken a number of cost saving measures across its business and estimates that its current cash and cash equivalents is sufficient to meet the current operating needs through the first half of 2009.

"Our ability to operate as a going concern beyond the second quarter of 2009 is dependent upon obtaining sufficient financing or alternative funding," stated Gary Gemignani, CFO of Gentium. "We remain committed to the development of Defibrotide and are evaluating our strategic and financing options."

About Gentium

Gentium, S.p.A., located in Como, Italy, is a biopharmaceutical company focused on the research, discovery and development of drugs to treat and prevent a variety of vascular diseases and conditions related to cancer and cancer treatments. Defibrotide, the Company's lead product candidate, is an investigational drug that has been granted Orphan Drug status and Fast Track Designation by the U.S. FDA to treat Severe VOD and Orphan Medicinal Product Designation by the European Commission both to treat and to prevent VOD.

Cautionary Note Regarding Forward-Looking Statements

This press release contains "forward-looking statements."In some cases, you can identify these statements by forward-looking words such as "may," "might," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of these terms and other comparable terminology.These statements are not historical facts but instead represent the Company's belief regarding future results, many of which, by their nature, are inherently uncertain and outside the Company's control.It is possible that actual results may differ, possibly materially, from those anticipated in these forward-looking statements.For a discussion of some of the risks and important factors that could affect future results, see the discussion in our Form 20-F for the year ended December 31, 2007 under the caption "Risk Factors."