Savient second-quarter net loss decreases to $5.0 million

Aug 4 2010

Savient Pharmaceuticals, Inc. (Nasdaq: SVNT) reported financial results for the three and six months ended June 30, 2010.  The net loss for the second quarter of 2010 was $5.0 million, or $0.07 per basic and diluted share, on total revenues of $1.0 million, compared with a net loss of $54.8 million, or $0.92 per basic and diluted share on total revenues of $0.7 million for the second quarter of 2009.  The net loss for the first six months of 2010 was $13.3 million, or $0.20 per basic and diluted share on total revenues of $2.1 million compared with a net loss of $76.8 million, or $1.35 per basic and diluted share, on total revenues of $1.8 million for the same period in 2009.  We ended the quarter with $89.0 million in cash and short-term investments, a decrease of $6.0 million for the quarter and $19.2 million since December 31, 2009.

Operational Highlights:  

• Completed and submitted to the Food and Drug Administration (FDA) the final six-month real-time stability analysis from the three consecutive validation batches of KRYSTEXXA™ (pegloticase). The FDA requested that this data package be submitted to the FDA at least 30 days prior to the Prescription Drug User Fee Act (PDUFA) action date of September 14, 2010.  This data package was submitted on July 28, 2010.
• Presented two abstracts and posters disclosing quality of life and utility index calculations in refractory chronic gout patients treated with KRYSTEXXA as well as gout practice and treatment patterns at the European League Against Rheumatism (EULAR) 2010 Annual Congress.
• Submitted three manuscripts to peer review journals and seven abstracts to the American College of Rheumatology (ACR) presenting a broad range of our Phase 3 and Open Label Extension Study clinical and related data.
• Submitted a Pediatric Investigational Plan (PIP) to the European Medicines Agency (EMA) and received the Committee's comments on the proposed Pediatric Plan.  The approval of the PIP is the gating event in our efforts to submit a marketing authorization application in Europe, late year-end 2010.

Financial Results of Operations for the Three Months Ended June 30, 2010

Total revenues increased $0.3 million, or 45%, to $1.0 million for the three months ended June 30, 2010, as compared to $0.7 million for the three months ended June 30, 2009.  Net sales of our branded product Oxandrin® increased by $0.6 million for the three months ended June 30, 2010 versus the same period in the prior year due primarily to higher prior year experience adjustments relating to reserves for product returns and customer rebates.  Partially offsetting the higher net sales variance were $0.3 million in lower sales of our authorized generic product oxandrolone resulting from increased generic competition.

Research and development expenses decreased by $4.4 million, or 38%, to $7.2 million for the three months ended June 30, 2010, from $11.6 million for the three months ended June 30, 2009. The lower expenses resulted from higher prior year expense of $2.0 million for consulting services primarily associated with our preparation for the June 2009 FDA Advisory Committee meeting for KRYSTEXXA. Additionally, clinical trial costs were lower by $1.1 million resulting from the wind down of the Open Label Extension Study for KRYSTEXXA during 2009.  

Selling, general and administrative expenses decreased $2.8 million, or 38%, to $4.6 million for the three months ended June 30, 2010, from $7.4 million for the three months ended June 30, 2009. The decrease was primarily due to $2.0 million in lower marketing expenses as the prior year included costs associated with our preparation for the possible commercial launch of KRYSTEXXA during that period.  

Other income, net for the second quarter of 2010 was $6.1 million compared with other expense, net of $36.1 million for the second quarter of 2009, an increase to income of $42.2 million primarily as a result of the mark-to-market valuation adjustment to our warrant liability.  We recorded a $6.2 million gain due to the depreciation in fair market value of our warrants during the three months ended June 30, 2010 that resulted from a reduction in the remaining term of the warrants coupled with a lower price per share of our common stock.  Additionally, we recorded a $35.9 million loss on the mark-to-market valuation adjustment to our warrant liability during the three months ended June 30, 2009, resulting from appreciation in the fair market value of our warrants during that quarter.

Financial Results of Operations for the Six Months Ended June 30, 2010

Total revenues increased $0.3 million, or 18%, to $2.1 million for the six months ended June 30, 2010, as compared to $1.8 million for the six months ended June 30, 2009. Gross sales of Oxandrin decreased by $0.4 million, or 29%, to $1.1 million for the six months ended June 30, 2010, from $1.5 million for the six months ended June 30, 2009.  The decrease was due to lower overall demand for the product resulting from increased generic competition. Net sales of Oxandrin increased by $0.9 million for the six months ended June 30, 2010 versus the prior year due to higher prior year experience adjustments relating to reserves for product returns and customer rebates.  Partially offsetting the higher net sales of Oxandrin were $0.6 million in lower sales of oxandrolone resulting from increased generic competition.

Research and development expenses decreased by $10.8 million, or 44%, to $13.6 million for the six months ended June 30, 2010, from $24.4 million for the six months ended June 30, 2009. The lower expenses resulted from a $1.9 million decrease in manufacturing development related expenses including $1.7 million of costs associated with the production of commercial batches of pegloticase active pharmaceutical ingredient (API) by our third-party manufacturer, Bio-Technology General (Israel) Ltd. (BTG) and $1.6 million of costs associated with technology transfer expenses at Diosynth RTP, our potential secondary source supplier of pegloticase API, during the six months ended June 30, 2009.  Partially offsetting these lower manufacturing development expenses was a $1.5 million increase in PEG raw material purchases during the six months ended June 30, 2010.  The decrease in research and development expenses also resulted from higher prior year expense of $3.0 million for consulting services primarily associated with our preparation for the June 2009 FDA Advisory Committee meeting for KRYSTEXXA. Additionally, compensation expense was lower by $3.9 million resulting from decreased headcount due to our reduction in force initiative implemented in September 2009 coupled with severance costs recorded in the prior year period.

Selling, general and administrative expenses decreased $7.4 million, or 44%, to $9.5 million for the six months ended June 30, 2010, from $16.9 million for the six months ended June 30, 2009. The decrease was primarily due to $3.4 million in lower marketing expenses as the prior year included costs associated with our preparation for the possible commercial launch of KRYSTEXXA during that period.  Additionally, the lower costs reflected a decrease of $1.9 million in compensation related expenses resulting from the reduction in force initiative implemented in September 2009 coupled with severance costs recorded in the prior year period.

Other income, net for the six months ended June 30, 2010 was $8.2 million compared with other expense, net of $36.2 million for the six months ended June 30, 2009, an increase to income of $44.4 million, primarily as a result of the mark-to-market valuation adjustment to our warrant liability.  We recorded a $8.3 million gain due to the depreciation in fair market value of our warrants during the six months ended June 30, 2010 that resulted from a reduction in the remaining term of the warrants coupled with a lower price per share of our common stock.  Additionally, we recorded a $35.9 million loss on the mark-to-market valuation adjustment to our warrant liability during the six months ended June 30, 2009, resulting from appreciation in the fair market value of our warrants during that period.