Aradigm reports net loss of $4.1M for second-quarter 2010

Aug 12 2010

Aradigm Corporation (OTCBB:ARDM) (the "Company") today announced financial results for the second quarter and six months ended June 30, 2010.

The Company's net loss for the second quarter of 2010 was approximately $4.1 million, or $0.04 per share, compared with a net loss of approximately $4.6 million, or $0.05 per share, for the second quarter of 2009. Total operating expenses for the second quarter of 2010 were approximately $4.1 million, compared with total operating expenses of approximately $4.5 million for the second quarter of 2009. The decrease in operating expenses was primarily due to expense reduction efforts and the elimination of R&D expenses associated with the collaboration with Lung Rx, Inc.

No revenue was recorded in either the second quarter of 2010 or the second quarter of 2009. The Company anticipates recording recurring royalty revenue based on sales of the SUMAVEL DosePro product beginning with the three months ending September 30, 2010 since the terms of the asset sale agreement with Zogenix provides for royalty payments to be based on cash received by Zogenix on their product sales and there is a sixty day lag following the end of the quarter in royalty reporting. The Company has been informed by Zogenix that wholesalers distributing the SUMAVEL DosePro product were given net 90 day payments terms for the first quarter sales, resulting in the effective delay of first quarter 2010 royalties until the second quarter 2010 royalty payment due in late August 2010. After the first quarter of 2010, the payment terms for wholesalers reverted to net 30 days.

As of June 30, 2010, cash and cash equivalents totaled approximately $9.6 million.

Recent Highlights

The Company announced that:

• On June 21, 2010, the Company closed a private placement in which it sold 34,702,512 shares of common stock and warrants to purchase an aggregate of 7,527,214 shares of common stock to accredited investors under the terms of a securities purchase agreement that was entered into with accredited investors (which included three existing significant investors) on June 18, 2010. At the closing of this private placement, the Company received approximately $4.1 million in aggregate gross proceeds from the sale of the common stock and the warrants. After deducting for fees and expenses, the aggregate net proceeds from the sale of the common stock and the warrants were approximately $3.7 million. The warrants have an exercise price of $0.1184 per share and are exercisable after the Company has called and held a special meeting of its shareholders to vote on a proposal to approve an amendment to the Company's Amended and Restated Articles of Incorporation to increase the number of authorized shares of common stock and has received the requisite shareholder approval for the shareholder proposal. The warrants also include a mandatory exercise provision whereby the Company has the right to require the holders to exercise the warrants after it has received the requisite shareholder approval for the shareholder proposal. Assuming the warrants are fully exercised at an exercise price of $0.1184 per share, the Company would receive approximately $0.9 million in additional aggregate net proceeds from the exercise of the warrants.
• On July 30, 2010, the Company entered into a Stock Purchase Agreement with Novo Nordisk A/S providing for the issuance by the Company of 26 million shares of the Company's common stock to Novo Nordisk A/S in a private placement as consideration for the termination of a promissory note in favor of Novo Nordisk under which approximately $9.1 million is currently outstanding, representing an effective price per share of $0.3505. The closing of the transactions contemplated by the Stock Purchase Agreement with Novo Nordisk is subject to the Company's receipt of shareholder approval to increase the number of authorized shares of the Company's common stock and other customary closing conditions. Aradigm will be required, among other things, to file a resale registration statement within 30 days following execution of the agreement that covers the resale by Novo Nordisk of the shares. Aradigm may satisfy its registration obligations by including the shares in the same registration statement covering the shares related to the June 2010 private placement. The promissory note represented a loan that was previously made by Novo Nordisk to the Company in 2006 in the principal amount of $7.5 million, with interest accruing at 5% per annum. The principal, along with the accrued interest, was payable in three equal payments of approximately $3.5 million in 2012, 2013 and 2014.

"In the last two months, we entered into two financial transactions that were very important to the Company. The equity for debt transaction with Novo Nordisk will allow us to significantly strengthen our balance sheet by eliminating all outstanding debt once we receive shareholder approval for the additional shares needed for this transaction, while the proceeds from the June 2010 private placement are being used to enable us to take further steps in the development of our lead product candidate, inhaled liposomal ciprofloxacin. We continue our focus on aggressive cost containment even as we conduct our two ongoing clinical trials, ORBIT-1 and ORBIT-2," said Nancy E. Pecota, the Company's Vice President, Finance and Chief Financial Officer.