Clinical Data announces financial results for its second fiscal quarter ended September 30, 2009

Clinical Data, Inc. (NASDAQ: CLDA) today announced the Company’s operational and financial results for its second fiscal quarter ended September 30, 2009.

Second Quarter and Recent Highlights

• Completed a public offering which generated approximately $47.4 million in gross proceeds
• Hosted an investor day in New York City which focused on vilazodone and featured leading experts in the treatment of depression, antidepressants and related sexual dysfunction; Company on track to submit its new drug application (NDA) for vilazodone in the first quarter of calendar 2010
• Expanded the Board of Directors to include pharmaceutical industry leader, Scott Tarriff
• Generated proceeds from the sale of certain non-core assets from the Avalon Pharmaceuticals acquisition for $1.5 million, with an estimated annual cost-savings of $4.0 to $5.0 million
• Established a collaboration and licensing agreement for A_2A agonist ATL313, with the potential to receive up to $252.0 million in milestones, as well as royalties related to the commercialization of multiple myeloma and other B-cell cancer treatments
• Reported a 51% increase in FAMILION genetic testing gross revenue, as well as improved gross margins which rose from 36% to 47%, when compared to the same period a year ago

“The majority of our resources remain focused on driving our late-stage products toward key development milestones, several of which we anticipate over the next few quarters,” said Drew Fromkin, Clinical Data’s President and Chief Executive Officer. “We plan to submit our NDA for vilazodone for the treatment of depression in the first quarter of calendar 2010, and will initiate our Phase III program for Stedivaze for cardiac stress testing, shortly. During the quarter, we again demonstrated our ability to secure capital by selling non-core assets and executing transactions that will reduce overall expenses. More recently, we successfully obtained capital through the public markets, improving our stock’s liquidity and significantly expanding our shareholder base. We believe that our ability to attract high-quality investors in this recent financing is further evidence of the value we are building for shareholders.”

Financial Results for the Three Months Ended September 30, 2009

Gross revenue for the three months ended September 30, 2009 increased to $3.7 million, or 47%, from $2.5 million for the same period a year ago. This was primarily driven by an increase in gross sales from PGxHealth’s FAMILION tests of $1.2 million, or 51%, compared to the same period a year ago. The increase in gross revenue was partially offset by a rise in contractual allowances of $542,000, which represents an increase from 5% to 18% of gross genetic testing revenues when compared to the second quarter of fiscal year 2009. This increase in contractual allowances is due to additional coverage policies, as well as the revenue mix from third-party payors. Management also noted that weakened economic conditions had negatively impacted revenue as well as higher than normal contractual allowances for the period. The Company anticipates that future revenue will continue to be driven by expanding genetic test offerings, driving greater test adoption and increasing insurance coverage from third-party payors.

For the three month period ended September 30, 2009, gross profit margins increased to 47% from 36% for the same period last year. The year-over-year improvement in gross margins was due to an increase in revenues coupled with the realization of significant investments the Company has made in infrastructure improvements. Gross margins are anticipated to improve as revenues and test volumes and reimbursement increases over time.

Research and development expenses for the three months ended September 30, 2009 increased to $8.9 million, up from $8.6 million for the same period last year. This modest increase was attributable primarily to the concluding activities related to the vilazodone safety trial, Phase III clinical program and initial preparations for the NDA submission, which is anticipated in the first quarter of calendar year 2010. Ongoing research and development expenses are expected to increase with continued activities focused on NDA preparations and the imminent start of the Phase III program for Stedivaze, the Company’s potential best-in-class vasodilator for use in cardiac stress testing.

In August 2009, the Company sold certain non-core assets from the Avalon acquisition, which is expected to result in future cost savings in Avalon research and development activities of approximately $4.0 to $5.0 million annually.

Sales and marketing expense of $2.0 million was essentially flat when compared to the three months ended September 30, 2008. Expense in this area should continue at a similar rate for the next several quarters as the Company leverages a well-established FAMILION sales and marketing organization.

General and administrative expenses decreased to $5.3 million, down from $5.6 million in the second quarter of last fiscal year. The decrease was primarily driven by a reduction in stock-based compensation, however, this was partially offset by an increase in provisions for uncollectable accounts largely due to the current economic conditions.

Financial Results for the Six Months Ended September 30, 2009

Gross revenue for the six months ended September 30, 2009 increased to $7.8 million, or 65%, from $4.7 million for the six months ended September 30, 2008. This increase was mainly driven by the increase in gross sales of genetic tests of $2.9 million, or 67%, compared to the same period a year ago. Revenue has risen as a result of continued expansion of the commercial sales and marketing team in fiscal 2009, and increased coverage policies from third-party payors, such as Blue Cross and Blue Shield, Aetna and Humana. As of September 30, 2009, PGxHealth was an approved Medicare provider and a Medicaid provider in certain states. These increases were partially offset by in an increase in contractual allowances of $762,000 from $274,000, or 6% of gross genetic testing revenue, to $1.0 million, or 14% of gross genetic testing revenue. This increase in contractual allowances was due to increased coverage from third-party payers, as well as the mix of revenue from third-party payers.

Gross profit margins increased from 32% for the six months ended September 30, 2008 to 51% for the six months ended September 30, 2009. The improvement in gross profit from fiscal 2009 to 2010 was due to the increase in revenue, as well as the realization of infrastructure improvements and lab efficiencies in fiscal 2009. Gross profit margins are expected to continue to improve as revenue increases, since costs, including personnel, equipment and facilities, are expected to remain essentially fixed.

Research and development expenses increased to $20.4 million for the six months ended September 30, 2009, up from $16.2 million for the same period in 2008. The increase is primarily related to the concluding stages of the vilazodone safety and Phase III confirmatory trials and the preparation of the NDA for vilazodone, and to a lesser extent, costs associated with advancing Stedivaze and preclinical programs. Ongoing research and development costs are expected to continue to increase with supportive NDA activities for vilazodone and the commencement of the Stedivaze Phase III program.

Sales and marketing expenses increased to $4.1 million for the six months ended September 30, 2009, up from $3.7 million for the same period in 2008. The increase was mainly due to expenses relating to the expanded sales and marketing team from the same period a year ago. Sales and marketing expenses are expected to remain flat over the next several quarters as the Company leverages its established sales organization.

General and administrative expenses increased to $10.5 million for the six months ended September 30, 2009, up from $9.7 million for the same period in 2008. The increase was, in part, the result of a further provision for uncollectible accounts of $576,000 largely due to the current economic conditions.

Cash, cash equivalents and marketable securities were $37.2 million at September 30, 2009, which does not include the net proceeds of approximately $44.1 million (net of underwriting and transaction costs) from the Company’s public offering, which was completed November 2, 2009.