Affymax Reports Fourth Quarter and Year-End 2012 Financial Results

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,

2012

2011

(Unaudited)

Assets

Current assets

Cash and cash equivalents

$

68,265

$

54,339

Short-term investments

9,717

44,165

Receivable from Takeda

18,365

6,937

Deferred tax assets

363

351

Prepaid expenses and other current assets

5,800

1,828

Total current assets

102,510

107,620

Property and equipment, net

2,981

3,013

Restricted cash

1,135

1,135

Long-term investments

2,323

Deferred tax assets, net of current

6,876

6,888

Other assets

2,392

339

Total assets

$

118,217

$

118,995

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$

6,591

$

941

Accrued liabilities

52,522

13,999

Accrued clinical trial expenses

2,844

3,365

Deposit from Takeda

559

1,998

Advance from Takeda, current

27,715

Notes payable, current

8,844

Total current liabilities

99,075

20,303

Long-term income tax liability

10,062

10,411

Advance from Takeda, net of current

6,121

Deferred revenue, net of current

5,174

Other long-term liabilities

799

989

Total liabilities

109,936

42,998

Commitments and contingencies

Stockholders' equity

Common stock

37

36

Additional paid-in capital

551,959

526,244

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 Ended

Twelve Months Ended

December 31,

December 31,

2012

2011

2012

2011

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 development

11,252

24,702

51,738

76,308

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 income

21

33

77

169

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 Ended

Twelve Months Ended

December 31,

December 31,

2012

2011

2012

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)

13,496

26,544

Milestone payments

60,250

10,000

Revenue previously deferred related to API

495

936

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

(1)

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