Affymax Reports Fourth Quarter and Year-End 2012 Financial Results

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Affymax Reports Fourth Quarter and Year-End 2012 Financial Results

PALO ALTO, Calif.--(BUSINESS WIRE)-- Affymax, Inc. (NAS: AFFY) today reported financial results for the fourth quarter and year ended December 31, 2012. The net loss for the fourth quarter of 2012 was $68.3 million (or ($1.85) per share) compared to a net loss of $29.4 million (or ($0.82) per share) for the fourth quarter of 2011.

On February 23, 2013, Affymax and its partner, Takeda Pharmaceutical Company Limited (Takeda) announced a nationwide voluntary recall of OMONTYS as a result of postmarketing reports regarding safety concerns, including anaphylaxis, which can be life-threatening or fatal. We and Takeda are actively investigating the cause of these reactions but there can be no assurance that a solution will be found. As of the result of the recall, we re-evaluated a number of estimates made as of period-end and recorded financial statement adjustments to reflect changes in those estimates as to the recoverability of inventory and deposits made to our contract manufacturing organizations, or CMOs, potential losses on firm purchase commitments and changes in the short-term and long-term classification of certain liabilities. In the aggregate, we recorded $45.0 million in impairment due to inventory and firm purchase commitments in the quarter ended December 31, 2012, with no comparable charge in the prior year.


Earlier this month, the Company began reorganizing its operations in order to significantly reduce operating costs and negotiating with Takeda to collaboratively focus on the OMONTYS safety and other related FDA issues associated with the recall of the product. In addition to the significant reduction in force of approximately 230 employees (75% of the Company's workforce), including the commercial and medical affairs field forces as well as other officers and employees throughout the organization, the Company is continuing to transition many of the ongoing activities to Takeda and negotiating with Takeda on costs allocated between the parties under the collaboration arrangement. In connection with this restructuring, the Board and management continue to review the Company's current financial position, including but not limited to: (i) the Company's existing cash balance, which as of February 28, 2013 was approximately $67 million, (ii) all currently outstanding liabilities as well as commitments to third parties, which include potential contract manufacturing organization (CMO) commitments of up to an estimated approximately $33 million, (iii) outstanding debt obligations of up to approximately $11 million under its existing credit facility, (iv) estimated costs and expenses of the reduction in force of $8 to $10 million, and (v) estimates of expenses pursuant to and in continuation of its arrangement with Takeda under the collaboration agreement and conduct the ongoing investigation and support the recall of OMONTYS and (vi) projected costs for maintaining ongoing operations as a significantly smaller public company. As a result, the Company is continuing the restructuring efforts which is expected to include further efforts to transition responsibilities for the investigation and recall of OMONTYS to Takeda, discussions with the FDA including a potential withdrawal of the OMONTYS New Drug Application (NDA), additional reductions in force and renegotiation of some or all of its existing agreements with third parties, including Takeda, in order to support a significantly smaller organization. If the Company is unable to rapidly and successfully progress these efforts, its ability to continue operations will be significantly in doubt and the Company may have to cease operations.

In addition to the evaluation of strategic alternatives for the organization, including the sale of the company or its assets, or a corporate merger, the company is considering all possible alternatives, including further restructuring activities, wind-down of operations or even bankruptcy proceedings.

About Affymax, Inc.

Affymax, Inc. is a biopharmaceutical company based in Palo Alto, California. Affymax's mission is to discover, develop and deliver innovative therapies that improve the lives of patients with kidney disease and other serious and often life-threatening illnesses.

The company's first marketed product, OMONTYS® (peginesatide) Injection, was approved by the U.S. Food and Drug Administration (FDA) in March 2012. For additional information, please visit www.affymax.com.

This release contains forward-looking statements, including statements regarding the Company's ability to continue operations, financial projections and condition, the continuation and negotiation of the Company's collaboration with Takeda, evaluation of strategic alternatives and the commercialization of OMONTYS. The Company's actual results may differ materially from those indicated in these forward-looking statements due to risks and uncertainties, including risks relating to the recall and adverse events, the Company's ability to conduct the ongoing product investigation and identify the causes of safety concerns, ability to renegotiate third party agreements, including those with Takeda, ability to satisfy regulatory requirements to re-introduce OMONTYS to the market and other factors affecting the commercial potential of OMONTYS, the continued safety and efficacy of OMONTYS, industry and competitive environment, regulatory requirements by the FDA or other regulatory authorities, including withdrawal, existing and future litigation, ability to reduce costs of operations in a timely manner, financing requirements and ability to continue as a going concern and access capital, and other matters that are described in Affymax's Annual Report on Form 10-K filed with the Securities and Exchange Commission.Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release.The Company undertakes no obligation to update any forward-looking statement in this press release.

   
AFFYMAX, INC.
CONDENSED BALANCE SHEETS
(in thousands, except share data)
 
December 31, December 31,
20122011
(Unaudited) 
Assets
Current assets
Cash and cash equivalents$68,265$54,339
Short-term investments9,71744,165
Receivable from Takeda18,3656,937
Deferred tax assets363351
Prepaid expenses and other current assets 5,800   1,828 
Total current assets102,510107,620
Property and equipment, net2,9813,013
Restricted cash1,1351,135
Long-term investments2,323
Deferred tax assets, net of current6,8766,888
Other assets 2,392   339 
Total assets$118,217  $118,995 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable$6,591$941
Accrued liabilities52,52213,999
Accrued clinical trial expenses2,8443,365
Deposit from Takeda5591,998
Advance from Takeda, current

27,715

Notes payable, current 8,844    
Total current liabilities

99,075

20,303
Long-term income tax liability10,06210,411
Advance from Takeda, net of current6,121
Deferred revenue, net of current5,174
Other long-term liabilities 799   989 
Total liabilities 

109,936

   42,998 
Commitments and contingencies
Stockholders' equity
Common stock3736
Additional paid-in capital551,959526,244
Accumulated deficit

(543,713

)

 

(450,301)
Accumulated other comprehensive income (2)  18 
Total stockholders' equity 

8,281

   75,997 
Total liabilities and stockholders' equity$118,217  $118,995 
 
      
AFFYMAX, INC.
CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
 
Three Months EndedTwelve Months Ended
December 31,

 

 

December 31,
2012 201120122011
Revenue:
Collaboration revenue$14,796$3,674$94,358$47,703
License and royalty revenue 3  3  12  17 
Total revenue 14,799  3,677  94,370  47,720 
Operating expenses:

Impairment of inventory and losses on firm purchase commitments

44,957

44,957

Research and development11,25224,70251,73876,308
Selling, general and administrative 26,778  8,392  89,714  32,818 
Total operating expenses 

82,987

  33,094  

186,409

  109,126 
Loss from operations

(68,188

)(29,417)

(92,039

)(61,406)
Interest income213377169
Interest expense(126)(33)(1,442)(144)
Other income (expense), net (5) (24) (34) 15 
Loss before provision for income taxes

(68,298

)(29,441)

(93,438

)(61,366)
Provision (benefit) for income taxes (27)   (26)  1 
Net loss$

(68,271

)$(29,441)$

(93,412

)$(61,367)
Net loss per share:
Basic and diluted$

(1.85

)$(0.82)$

(2.57

)$(1.84)
Weighted-average number of shares used in computing basic and diluted net loss per share 36,846  35,704  36,342  33,288 
 
     
AFFYMAX, INC.
COLLABORATION REVENUE
(in thousands)
(Unaudited)
  
Three Months EndedTwelve Months Ended
December 31,December 31,
201220112012 2011
OMONTYS net product sales (as provided by Takeda)$19,561$$34,569$
Total Collaboration costs & expenses (1) 26,355   69,275  
OMONTYS collaboration profit (loss) (6,794)  (34,706

)

 
 
Affymax share of collaboration profit (loss)(3,397)(17,353)
Net reimbursement of Affymax costs & expenses 16,893   43,897  
Profit equalization revenue earned by Affymax (2)13,49626,544
Milestone payments60,25010,000
Revenue previously deferred related to API495936
Revenue recognized under CAPM (3)26,606
Net expense reimbursement after CAPM (4) 805  3,674 6,628  11,097
Total collaboration revenue$14,796 $3,674$94,358 $47,703
 
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(1)

 

Total Collaboration costs and expenses include costs incurred by Affymax and Takeda including amounts provided to us by Takeda.