Alexza second-quarter net loss decreases to $12.9 million

Alexza Pharmaceuticals, Inc.Jul 27 2010

Alexza Pharmaceuticals, Inc. (Nasdaq: ALXA) today reported financial results for the quarter ended June 30, 2010 and provided a business update.  The net loss for the three and six months ended June 30, 2010, as reported in accordance with accounting principles generally accepted in the United States (GAAP), was $12.9 million and $26.3 million, respectively, compared to a net loss of $17.0 million and $23.9 million in the respective comparable periods in 2009.  Alexza had consolidated cash, cash equivalents and marketable securities at June 30, 2010 of $41.7 million.

Alexza Business Updates

The following key events occurred since the beginning of the second quarter of 2010:

• Executed a $15.0 million working capital loan agreement with Hercules Technology Growth Capital
• Announced the selection of AZ-007 (Staccato zaleplon) for the treatment of insomnia as the next product candidate to move forward into active development
• Announced the formation of Addicere Therapeutics, Inc., a wholly-owned subsidiary, intended to develop all applications of the Staccato technology for the pharmaceutical uses of nicotine
• Secured an equity financing facility under which Alexza may sell up to the lesser of $25 million of its common stock or 10,581,724 shares of its common stock to Azimuth Opportunity, Ltd. over a 24-month period, replacing a similar facility that expired
• Presented AZ-004 clinical and scientific data at two meetings; the 2010 annual meeting of the American Psychiatric Association and the 2010 annual NCDEU meeting (co-sponsored by the National Institute of Mental Health and the American Society of Clinical Psychopharmacology)
• Joseph L. Turner joined the Alexza Board of Directors and will also serve as Chair of the Board's Audit and Ethics Committee

"In the second quarter of 2010, we continued on the path toward our planned AZ-004 commercialization," said Thomas B. King, President and CEO of Alexza.  "A majority of our focus and effort through the end of 2010 will be on executing a successful NDA process, finalizing the commercial manufacturing scale-up for AZ-004, supporting our Biovail collaboration and working on international commercial strategies for AZ-004."

Alexza Financial Results - Periods Ended June 30, 2010 and 2009

Alexza recorded no revenues in the three and six months ended June 30, 2010 or during the three months ended June 30, 2009.  In January 2009, Alexza and Endo Pharmaceuticals mutually agreed to terminate their development agreement for AZ-003 (Staccato fentanyl), at which time Alexza had fulfilled its obligations under the development agreement and recognized the remaining $9.5 million of deferred revenues into revenues.

GAAP operating expenses were $12.1 million and $24.7 million in the three and six month periods ended June 30, 2010, respectively, compared to operating expenses of $16.8 million and $33.2 million in the same periods in 2009, respectively.  Research and development expenses were $8.3 million and $15.9 million in the three and six-month period ended June 30, 2010, respectively, compared to $12.0 million and $23.0 million in the same periods in 2009, respectively.  The decrease in research and development expenses for the periods was primarily due to Alexza's restructuring announced in January 2009 at which time the Company reduced headcount by approximately 33% and focused its resources on the activities to support the AZ-004 NDA filing.

General and administrative expenses were $3.8 million and $8.9 million in the three and six months ended June 30, 2010, respectively, compared to $4.2 million and $8.1 million for the same periods in 2009, respectively.

In connection with the acquisition of Symphony Allegro, Inc. in August 2009, Alexza is obligated to pay the former Symphony Allegro shareholders certain percentages of cash payments that may be generated from collaboration transactions for AZ-002, AZ-004 or AZ-104.  Alexza recorded non-cash charges of $0.4 million and $1.2 million during the three and six months ended June 30, 2010, respectively, solely a result of the passage of three and six months, and resulting in an increase in the present value of the estimated possible future payments under this transaction.  Changes in the calculated fair value of this contingent liability are recognized in earnings in the period of the change.

Alexza anticipates that with current cash, cash equivalents and marketable securities along with interest earned thereon, the proceeds from option exercises and purchases of common stock pursuant to its Employee Stock Purchase Plan, it will be able to maintain its currently planned operations through the second quarter of 2011, which time period will extend into 2012 if Alexza achieves the eligible milestones under the Biovail collaboration during the next 12 months.  Changing circumstances may cause Alexza to consume capital significantly faster or slower than currently anticipated.