Transcept Pharmaceuticals reports financial results for the third quarter of 2009

Nov 13 2009

Transcept Pharmaceuticals, Inc. (Nasdaq: TSPT), a specialty pharmaceutical company focused on the development and commercialization of proprietary products that address important therapeutic needs in neuroscience, today announced financial results for the three and nine months ended September 30, 2009.

Transcept previously announced that on October 28, 2009, the FDA issued a Complete Response Letter regarding the New Drug Application (NDA) for Intermezzo® (zolpidem tartrate sublingual tablet), the lead Transcept product candidate. The NDA seeks approval to market Intermezzo® for use as-needed for the treatment of insomnia when a middle of the night awakening is followed by difficulty returning to sleep. Transcept and Purdue Pharmaceutical Products, L.P. have entered into a collaboration agreement for the development and commercialization of Intermezzo® in the United States.

Glenn A. Oclassen, President and Chief Executive Officer commented, "Our focus is now on moving Intermezzo® forward through the remainder of the regulatory review process. With $93 million of cash, cash equivalents and marketable securities at September 30, 2009, we believe we have substantial resources on hand to cover a range of potential additional expenses that may be required to address the issues raised by the recent FDA Complete Response Letter. We expect to have more clarity on the FDA's remaining requirements for the Intermezzo® NDA after our planned meeting to discuss the Complete Response Letter. We are working with the FDA to schedule this meeting in early 2010."

"Purdue Pharma, our U.S. commercialization partner for Intermezzo®, has been actively engaged in our collaboration since we received the Complete Response Letter. We are working closely with the Purdue clinical, regulatory and packaging teams to address the concerns raised by FDA."

"With regard to other key Intermezzo® milestones, we announced last week that the United States Patent and Trademark Office issued a Notice of Allowance for one of our patent applications with claims that cover the use of our low-dose sublingual Intermezzo® formulation. Transcept is actively pursuing additional patents to protect Intermezzo® in the United States and key non-U.S. markets, and, as part of the NDA submission, has requested that the FDA grant three years of Hatch-Waxman marketing exclusivity to Intermezzo®."

Third Quarter 2009 Financial Results

Transcept recorded $2.08 million of revenue for the three month period ended September 30, 2009, related to recognition of a portion of the $25 million non-refundable license fee received from Purdue in connection with the signing of our collaboration agreement. Transcept plans to amortize the $25 million license fee over a 24 month period. There was no revenue for the three month period ended September 30, 2008.

Research and development expense for the quarter ended September 30, 2009 was approximately $2.14 million, compared to approximately $2.45 million for the same period in 2008. This decrease is primarily attributable to lower Intermezzo® development costs, the majority of which were incurred prior to the submission of the NDA in September 2008. The decrease was partially offset by severance expense incurred in connection with the reduction in force announced in August 2009. Research and development expense included non-cash stock compensation expense in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718 Compensation - Stock Compensation ("ASC Topic 718") (formerly Statement of Financial Accounting Standards No. 123R (SFAS No. 123R)) of approximately $234,000 for the quarter ended September 30, 2009 and approximately $62,000 for the quarter ended September 30, 2008.

General and administrative expense for the quarter ended September 30, 2009 was approximately $3.84 million, compared to approximately $2.14 million for the same period in 2008. The $1.70 million increase consists primarily of higher professional fees to operate as a public company and to negotiate our collaboration with Purdue, increased personnel costs primarily in marketing and administration functions, an increase in operating expenses associated with additional office space and severance expense for the reduction in force noted above. General and administrative expense included non-cash stock compensation expense in accordance with ASC Topic 718 of approximately $299,000 for the quarter ended September 30, 2009, as compared to approximately $106,000 for the quarter ended September 30, 2008.

Net loss for the quarter ended September 30, 2009 was approximately $3.8 million or $0.29 per share (basic and diluted), compared to a net loss of approximately $4.3 million or $10.08 per share (basic and diluted) for the quarter ended September 30, 2008. The weighted average shares used to calculate basic and diluted net loss per share were 13,174,807 and 422,777 for the quarters ended September 30, 2009 and September 30, 2008, respectively. At September 30, 2009 there were 13,336,431 common shares outstanding and 1,984,385 outstanding options, warrants and common stock subject to repurchase.

Nine months ended September 30, 2009 Financial Results

Revenue for the nine months ended September 30, 2009 was $2.08 million related to recognition of a portion of the $25 million non-refundable license fee received from Purdue in connection with the signing of our collaboration agreement, compared to no revenue for the nine months ended September 30, 2008.

Research and development expense for the nine months ended September 30, 2009 was approximately $6.61 million, compared to approximately $8.84 million for the same period in 2008. The $2.23 million decrease is primarily attributable to lower Intermezzo® development costs, the majority of which were incurred prior to the submission of the Intermezzo® NDA on September 30, 2008. Research and development expense included non-cash stock compensation expense in accordance with ASC Topic 718 of approximately $391,000 for the nine months ended September 30, 2009 and approximately $192,000 for the nine months ended September 30, 2008.

General and administrative expense for the nine months ended September 30, 2009 was approximately $13.07 million, compared to approximately $5.37 million for the same period in 2008. The $7.70 million increase consists primarily of higher professional fees to operate as a public company and to negotiate our collaboration with Purdue, increased personnel costs primarily in marketing and administration, increased marketing expense as we prepared to commercialize Intermezzo® and an increase in operational expenses associated with additional office space. General and administrative expense included non-cash stock compensation expense in accordance with ASC Topic 718 of approximately $693,000 for the nine months ended September 30, 2009, as compared to approximately $268,000 for the nine months ended September 30, 2008.

Year-to-date merger-related transaction costs of approximately $2.22 million were expensed during the first quarter of 2009.

Net loss for the nine months ended September 30, 2009 was approximately $19.5 million or $1.65 per share, compared to a net loss of approximately $13.8 million or $35.93 per share for the nine months ended September 30, 2008. The weighted average shares used to calculate net loss per share were 11,764,652 and 385,214, respectively, for the nine months ended September 30, 2009 and 2008.

Cash, cash equivalents and marketable securities totaled $93.0 million at September 30, 2009.

Financial Guidance

Transcept believes it has substantial cash resources to cover a range of potential additional expenses that may be required to address the issues raised by the recent FDA Complete Response Letter on the Intermezzo® NDA.

General and administrative expense declined from approximately $5.02 million in the quarter ended June 30, 2009 to approximately $3.84 million in the quarter ended September 30, 2009. We anticipate that general and administrative expense will be closer to the lower end of this range during the fourth quarter of 2009 and the first half of 2010.

Research and development expense was approximately $2.25 million in the quarter ended June 30, 2009 and approximately $2.14 million in the quarter ended September 30, 2009. During the fourth quarter of 2009 and the first half of 2010, we anticipate:

• Baseline research and development expense will remain substantially in line with these prior quarters;
• Additional research and development expense of approximately $1.05 million will be incurred in connection with manufacturing activities undertaken in anticipation of the previously planned launch of Intermezzo® in 2010; and
• Additional research and development expense will be incurred as Transcept determines and undertakes activities to support the planned resubmission of the Intermezzo® NDA.

Transcept is working with the FDA to schedule a meeting in early 2010, and plans to provide an update to investors as appropriate.