NPS Pharmaceuticals, a specialty pharmaceutical company developing innovative therapeutics for rare gastrointestinal and endocrine disorders, today reported its results for the third quarter 2010.
“We look forward to a number of near-term milestones including top line results from our Phase 3 STEPS study of GATTEX in short bowel syndrome and randomization of the last patient in our Phase 3 REPLACE study of NPSP558 in hypoparathyrodism.”
NPS reported a net loss of $15.7 million or $0.26 per diluted share for the third quarter 2010, compared to a net loss of $7.8 million or $0.16 per diluted share for the third quarter 2009. The change in the company's quarterly results was driven by an increase in research and development expenses in the third quarter 2010 due to the advancement of two Phase 3 registration programs. The company's cash, cash equivalents and marketable investment securities totaled $154.2 million at September 30, 2010 versus $74.9 million at December 31, 2009.
"This year continues to be marked by strong execution with two product development programs progressing well and on schedule," said Francois Nader, MD, president and chief executive officer of NPS Pharmaceuticals. "We look forward to a number of near-term milestones including top line results from our Phase 3 STEPS study of GATTEX in short bowel syndrome and randomization of the last patient in our Phase 3 REPLACE study of NPSP558 in hypoparathyrodism.
"Our market research continues to confirm the high patient and physician support for and commercial promise of GATTEX and NPSP558. And as a result of another successful financing, we further strengthened our cash position and we expect to deliver full-year cash burn at the lower end of our prior guidance."
Product Pipeline Update
NPS continues to expect to report top-line results from the STEPS study in early 2011. STEPS is a double-blind, placebo-controlled safety and efficacy study of patients with short bowel syndrome (SBS) who are chronically dependent on parenteral nutrition (PN). NPS is also advancing STEPS 2, an open-label continuation study in which all participants will receive up to 24 months of GATTEX therapy. To date, more than 95% of eligible patients who completed STEPS have elected to roll into STEPS 2. Under a collaboration agreement with NPS, Nycomed is paying 50% of the external clinical costs for these two studies.
NPS believes that a sufficient number of patients are currently enrolled, scheduled or identified to achieve the 110-patient randomization target for REPLACE, an international, double-blind, placebo-controlled Phase 3 registration study evaluating NPSP558 for the treatment of hypoparathyroidism in adults. Assuming a continuation of the current percentage of patients who have discontinued between enrollment and randomization, NPS expects to randomize the last patient in REPLACE in the second quarter of 2011.
NPS believes positive results from STEPS and REPLACE will enable it to seek U.S. marketing approval for GATTEX in SBS and NPSP558 in hypoparathyroidism.
Financial Results
Royalties
Royalty revenue was $21.0 million for the third quarter 2010 versus $20.1 million for the third quarter 2009. NPS earns royalties on (i) Amgen's sales of Sensipar® (cinacalcet HCl), (ii) Nycomed's sales of Preotact® (recombinant parathyroid hormone 1-84 [rDNA origin] injection), (iii) Kyowa Hakko Kirin's sales of REGPARA® (cinacalcet HCl), and (iv) Ortho-McNeil's sales of Nucynta® (tapentadol).
The components of royalties are summarized as follows:
The company's royalty rights related to Sensipar, Preotact, and REGPARA have been partially monetized and classified as non-recourse debt. After repayment of the obligations, as set forth in the agreements, any remaining cash flows from these royalties will return to NPS.
Research and development
Research and development expenses were $19.4 million for the third quarter 2010 versus $9.8 million for the third quarter 2009. The increase in research and development expense was largely due to the advancement of the company's short bowel syndrome and hypoparathyroidism registration programs.
General and administrative
General and administrative expenses decreased to $5.4 million for the third quarter 2010 as compared to $5.8 million for the third quarter 2009. The decrease was related to a decline in outside legal and other administrative costs, which was partially offset by expenses associated with market research.
Interest expense
Third quarter interest expense was $10.7 million for 2010 versus $12.1 million for 2009. Interest expense is largely attributable to non-recourse debt. With the exception of $50 million in 5.75% convertible notes due in 2014, all of the company's debt is non-recourse and secured by its Sensipar, Preotact, and REGPARA royalties.
Cash and investments
At September 30, 2010, the company's cash, cash equivalents, and marketable investment securities totaled $154.2 million compared to $74.9 million at December 31, 2009. During the nine months ended September 30, 2010, the company sold certain of its royalty rights from sales of REGPARA® (cinacalcet HCl) for $38.4 million. In April 2010, NPS sold 10.4 million shares of common stock for net proceeds of approximately $53.2 million and in September 2010, NPS sold 7.9 million shares of common stock for net proceeds of approximately $44.4 million.
The company's net cash burn was $57 million for the first nine months of 2010. NPS now expects its 2010 cash burn to be in the range of $76 to $84 million, versus its previous guidance of $75 to $90 million. The company's cash burn is defined as the net change in cash, cash equivalents, and marketable investment securities, excluding proceeds from external financing activities (approximately $136 million).
Cash burn is a non-GAAP financial measure that may be considered in addition to results prepared in accordance with U.S. generally accepted accounting principles (GAAP). This non-GAAP measure should not be considered a substitute for, or superior to, GAAP results. NPS believes that cash burn is relevant and useful information for the company and its investors as it provides a meaningful way of determining cash available for and net cash used in operations of the company.
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