Astex fourth quarter total revenues increase to $21.2 million

Astex Pharmaceuticals, Inc. (NASDAQ:ASTX), today reported financial results for the fourth quarter and year ended December 31, 2011.

The Company reported net income for the 2011 fourth quarter of $220,000, or $0.00 per basic and diluted share, compared with net income of $6.7 million, or $0.11 per basic and diluted share, for the same prior year period. The Company reported net income for the year ended December 31, 2011 of $5.5 million, or $0.07 per basic and diluted share, compared with net income of $16.3 million, or $0.27 per basic and diluted share, for the same prior year period.

Company Highlights of 2011 include:

• Dacogen® (decitabine) for Injection royalty revenue was $60.5 million for 2011 compared to $52.5 million for 2010, an increase of approximately 15% from the prior year.
• The Company ended 2011 with unrestricted cash, cash equivalents, and current and non-current marketable securities totaling $128.1 million compared to $120.4 million at December 31, 2010.
• The Company completed the acquisition of Astex Therapeutics Limited in July 2011, and the operating results of the acquisition have been consolidated in the Company's operating results effective July 20, 2011.
• The Company expanded its product pipeline following the Astex acquisition to include four company-sponsored phase II programs and four partner-sponsored clinical programs.
• In September 2011, the Company changed its name from SuperGen, Inc. to Astex Pharmaceuticals, Inc., trading on NASDAQ with ticker symbol "ASTX."

"In 2011 Astex Pharmaceuticals assembled all the tools necessary for spurring growth: rationalized operations, a prioritized portfolio that includes a deep clinical pipeline, a strong financial footing, and a proven discovery engine," said James S.J. Manuso, PhD, chairman and chief executive officer of Astex Pharmaceuticals. "We are pleased the worldwide sales of Dacogen have continued to grow steadily. In addition, we are initially anticipating our operational results for 2012 being near cash flow neutral. "

Dr. Harren Jhoti, president of Astex Pharmaceuticals, added, "We have much to look forward to in 2012, as we advance our discovery and development collaborations with our partners GSK, AstraZeneca, Janssen and Novartis. Within the first half of 2012 we expect to complete the optimization of lead drug candidates arising from our internal discovery efforts."

Dr. Mohammad Azab, chief medical officer of Astex Pharmaceuticals, commented, "New clinical data for SGI-110, our new hypomethylating agent, has been submitted for presentation at the upcoming AACR meeting, and for AT13387, our second-generation HSP90 inhibitor, at this year's ASCO conference. This year we will initiate an SGI-110 phase II dose expansion clinical trial in MDS/AML and a phase II program in solid tumors. By the end of 2012, we expect several clinical-stage programs currently in phase II trials to produce clinical data."

2011 Fourth Quarter Financial Results

Total revenues for the 2011 fourth quarter were $21.2 million compared with $15.3 million for the same prior year period. Total revenues for the 2011 fourth quarter includes royalty revenue of $15.4 million compared with $15.2 million for the same prior year period. Royalty revenue is earned pursuant to the license agreement entered into with MGI PHARMA (acquired by Eisai Corporation of North America in January 2008) during 2004, which granted MGI PHARMA exclusive rights to the development, manufacture, commercialization and distribution of Dacogen. The Company generally recognizes royalty revenue when it is received. Total revenues for the 2011 fourth quarter also include development and license revenue of $5.8 million compared with $127,000 for the same prior year period. Development and license revenue represents both milestones earned and the amortization of deferred revenue relating to payments received pursuant to various collaborative research and license arrangements. Development and license revenue for the 2011 fourth quarter includes multiple milestones earned of $4.4 million related to our GSK collaboration while there were no milestones earned for the same prior year period.

Total operating expenses for the 2011 fourth quarter were $21.9 million, compared with $8.8 million for the same prior year period. The primary reasons for the increase in total operating expenses for the 2011 fourth quarter compared with the same prior year period are the consolidation of research and development and general and administrative costs related to the acquisition of Astex Therapeutics Limited effective July 20, 2011; increased research and development activities from product development and clinical trial programs associated with SGI-110, AT13387, and amuvatinib; amortization of intangible assets and impairment charge; severance costs related to a reduction in force; and an increase in stock-based compensation expense. A non-cash charge for amortization of intangible assets including an impairment charge was $3.0 million for the 2011 fourth quarter while there was no similar amortization expense or impairment charge for the same prior year period. Severance costs associated with a reduction in force were $216,000 for the 2011 fourth quarter while there were no severance costs for the same prior year period. Stock-based compensation expense, a non-cash expense that is included in operating expenses, was $769,000 for the 2011 fourth quarter, compared with $183,000 for the same prior year period.

The Company reported net income for the 2011 fourth quarter of $220,000, or $0.00 per basic and diluted share, compared with net income of $6.7 million, or $0.11 per basic and diluted share, for the same prior year period. The net income for the 2011 fourth quarter includes an income tax benefit of $986,000 compared with an income tax provision of $26,000 for the same prior year period. The income tax benefit for the 2011 fourth quarter was primarily due to the recognition of a tax benefit associated with the amortization of deferred tax liabilities resulting from the acquisition and a foreign research and development tax credit related to the UK subsidiary.

2011 Year-End Financial Results

Total revenues for 2011 were $66.9 million compared with $53.0 million for the same prior year period. Total revenues for 2011 includes royalty revenue of $60.5 million compared with $52.5 million for the same prior year period. Total revenues for 2011 also include development and license revenue of $6.4 million compared with $509,000 for the same prior year period. Development and license revenue represents both milestones earned and the amortization of deferred revenue relating to payments received pursuant to various collaborative research and license arrangements. Development and license revenue for 2011 includes multiple milestones earned of $4.4 million related to our GSK collaboration while there were no milestones earned for the same prior year period.

Excluding the gain on sale of products, total operating expenses for 2011 were $65.2 million compared with $37.8 million for the same prior year period. The primary reasons for the increase in total operating expenses for 2011 compared with the same prior year period are the consolidation of research and development and general and administrative costs related to the acquisition of Astex Therapeutics Limited effective July 20, 2011; increased research and development activities from product development and clinical trial programs associated with SGI-110, AT13387, and amuvatinib; amortization of intangible assets and impairment charge; incremental transaction costs associated with the acquisition; severance costs related to a reduction in force; and an increase in stock-based compensation expense. Approximately $3.5 million of transaction costs associated with the acquisition were charged to general and administrative expenses during 2011. A non-cash charge for amortization of intangible assets including an impairment charge was $4.5 million for 2011 while there was no similar amortization expense or impairment charge for the same prior year period. Severance costs associated with a reduction in force were $995,000 for 2011 while there were no severance costs for the same prior year period. Stock-based compensation expense, a non-cash expense that is included in operating expenses, was $3.1 million for 2011 compared with $1.4 million for the same prior year period.

The gain on sale of products for 2011 was $700,000 compared with $750,000 for the same prior year period. The gain on sale of products relates to the receipt of additional contractual payments resulting from the 2007 sale of the worldwide rights for Nipent® (pentostatin for injection) to Mayne Pharma (acquired by Hospira, Inc. in February 2007).

The Company reported net income for 2011 of $5.5 million, or $0.07 per basic and diluted share, compared with net income of $16.3 million, or $0.27 per basic and diluted share, for the same prior year period. Net income for 2011 included in other expenses a net foreign currency transaction loss of $422,000 while there was no similar loss for the same prior year period. Net income for 2011 includes an income tax benefit of $3.3 million compared with an income tax provision of $39,000 for the same prior year period. The income tax benefit for 2011 was primarily due to the recognition of a tax benefit associated with the amortization of deferred tax liabilities resulting from the acquisition and a foreign research and development tax credit related to the UK subsidiary.

Financial Position

As of December 31, 2011, the Company had $128.1 million in unrestricted cash, cash equivalents, and current and non-current marketable securities compared to $120.4 million at December 31, 2010.

Operational Highlights

In 2012 the Company will learn the outcomes of our Dacogen partner Eisai's supplemental New Drug Application (sNDA) and Marketing Authorization Application (MAA) submissions to the U.S. Food and Drug Administration (FDA) and European Medicines Agency (EMA), respectively, seeking approval for Dacogen in the elderly acute myeloid leukemia (AML) indication. Eisai was advised that the PDUFA date for the sNDA is March 6, 2012. It is expected that the EMA will determine the outcome of the MAA, filed by Janssen-Cilag International NV, within the second half of 2012.

The FDA's Oncologic Drugs Advisory Committee (ODAC) voted 10 to 3 with one person abstaining that data in the sNDA for Dacogen did not support a favorable benefit-risk profile for the treatment of AML in adults 65 years of age or older who are not considered candidates for induction therapy. The FDA has the option of seeking the advice of its advisory committees when it is reviewing a new drug application, although it is not obliged to follow the committee's recommendation.

Astex's pipeline products continue to advance favorably in the clinic. Four products in or entering phase II trials are expected to produce data from clinical proof of concept trials in the next 12 months including AT13387, SGI-110, and amuvatinib. In addition, new phase II clinical proof of concept trials are expected to be initiated in the second half of 2012 for AT13387 and SGI-110 in solid tumors.

Among our partnered programs, AstraZeneca commenced a phase I study of AZD3839, a clinical candidate selected in October 2010 and derived from the collaborative program on beta-secretase - a key enzyme implicated in the progression of Alzheimer's disease. Janssen Pharmaceutica NV selected a development candidate from the collaborative drug discovery program aimed at identifying novel, small molecule inhibitors of Fibroblast Growth Factor Receptor (FGFR), for the treatment of cancer.

2012 Financial Guidance

The initial financial guidance for 2012 is as follows:

• Royalty revenue for Dacogen is expected to increase up to 10% from the prior year to a range from $64 million to $67 million.
• Development and license revenue is estimated at $1.4 million and represents the recognition of deferred revenue relating to prior payments received pursuant to a research and license agreement with GSK.
• The last remaining payment of $700,000 related to the sale of Nipent to Hospira to be classified as gain on sale of products is expected to be received during 2012.
• Research and development expenses are expected to increase from the prior year to a range from $62 million to $67 million.
• Amortization of intangible assets, a non-cash charge, is estimated at $7.6 million.
• General and administrative expenses are expected to decrease from the prior year to a range from $14 million to $15 million.
• An estimated income tax benefit associated primarily with the amortization of deferred tax liabilities resulting from the acquisition and a foreign research and development tax credit related to the UK subsidiary is anticipated to be in a range from $4 million to $5 million for the year.
• A net loss is forecasted in a range from $13 million to $15 million for the year.
• In addition to the amortization of intangible assets included in total operating expenses are other recurring non-cash operating charges such as stock-based compensation expense and depreciation estimated at $3.5 million for the year.
• Average annual shares outstanding are expected to be approximately 93 million common shares.