Gentium second-quarter total revenues increase to EUR 7.55 million

Aug 12 2010

• Total revenues of EUR 12.5 million and net income of EUR 2.32 million for the first half of 2010.
• Cash flow positive for the third consecutive quarter and expects to remain positive/neutral for 2010.
• Revised guidance for 2010 revenues increased from $20-$25 million to $28-$30 million.

Gentium S.p.A. (Nasdaq: GENT) (the "Company") today reported financial results for the first half of 2010 and for the quarter ended June 30, 2010.  The Company reports its financial condition and operating results using U.S. Generally Accepted Accounting Principles (GAAP). The Company's financial statements are prepared using the Euro as its functional currency.  On June 30, 2010, EUR 1.00 = $1.2271.

"The financial results of the first half 2010 and for the quarter ended June 30, 2010 are slightly above our prior guidance.  We now project that our previously announced 2010 forecast of $20-$25 million will be $28-$30 million. We are also pleased to report that for the first time the Company achieved profitability, posting net income of EUR 2.32 million for the six-month period ended June 30, 2010," stated Salvatore Calabrese, Senior Vice-President, Finance of Gentium S.p.A. "The Company remains cash flow positive for the third consecutive quarter."

"We are delighted that the number of clinics that use Defibrotide through the expanded access programs has significantly increased since the beginning of the year and are proud to make Defibrotide available to patients in more than 30 countries in 5 continents around the world.  Moreover, transplant clinics in 28 states across the U.S. have approved the use of Defibrotide under the Treatment IND," stated Dr. Khalid Islam, Chairman and Chief Executive Officer of Gentium S.p.A. "We remain focused on completing certain preclinical and clinical studies requested by the regulatory authorities in order to file our new drug application (NDA) for Defibrotide by the end of the second quarter 2011."

For the six months ended June 30, 2010 compared with the comparable prior-year period:

• Total revenues were EUR 12.53 million, compared with EUR 3.62 million. Product sales for the six-month period ended June 30, 2010 were EUR 10.02 million compared to EUR 3.53 million.  Defibrotide net sales through named-patient and cost recovery programs were EUR 6.60 million, or 66% of total product sales, compared to EUR 1.04 million for the same period of the prior year. Sales of the Company's active pharmaceutical ingredients (API) amounted to 3.42 million, or 34% of total product sales, compared to EUR 2.49 million.
• Operating costs and expenses, which include restructuring charges of EUR 0.95 million, were EUR 10.47 million, compared with EUR 7.17 million.
• Research and development expenses, which are included in operating costs and expenses, were EUR 3.45 million, compared with EUR 1.81 million.
• Operating income/(loss) was EUR 2.06 million, compared with EUR (3.55) million.
• Net income/(loss) was EUR 2.32 million, compared with EUR (3.45) million.
• Basic and diluted net income/(loss) per share was EUR 0.15, compared with EUR (0.23) per share.

For the second quarter ended June 30, 2010 compared with the prior year's second quarter:

• Total revenues were EUR 7.55 million, compared with EUR 2.61 million. Product sales for the three-month period ended June 30, 2010 were EUR 6.10 million compared to EUR 2.56 million.  Defibrotide net sales through named-patient and cost recovery programs were EUR 3.99 million, or 65% of total product sales, compared to EUR 1.04 million. Sales of the Company's API amounted to 2.11 million, or 35% of total product sales, compared to EUR 1.52 million.
• Operating costs and expenses were EUR 5.37 million, compared with EUR 3.02 million.
• Research and development expenses, which are included in operating costs and expenses, were EUR 2.04 million, compared with EUR 0.36 million.
• Operating income/(loss) was EUR 2.17 million, compared with EUR (0.41) million.
• Net income/(loss) was EUR 2.35 million, compared with EUR (0.49) million.
• Basic and diluted net income/(loss) per share was EUR 0.16, compared with EUR (0.03) per share.

Cash and cash equivalents were EUR 6.35 million and EUR 1.39 million as of June 30, 2010 and December 31, 2009, respectively. In February 2010, the Company received an initial payment of EUR 5.11 million ($7.0 million) from Sigma-Tau in connection with amending the existing license and supply agreement to include the commercialization of Defibrotide for the prevention of VOD in North America, Central America and South America.

Operating Results

Product sales for the six-month period ended June 30, 2010 were EUR 10.02 million compared to EUR 3.53 million for the same period in 2009, an increase of EUR 6.49 million. The increase was primarily due to the distribution of Defibrotide through the named-patient and cost recovery programs which were initiated in April 2009 and October 2009, respectively. For the six-month period ended June 30, 2010, named-patient and cost recovery programs sales amounted to EUR 6.60 million, which are net of EUR 1.05 million in service fees.

API revenues increased to EUR 3.42 million for the six-month period ended June 30, 2010 from EUR 2.49 million for the same period in 2009, reflecting the increase in demand for Gentium-produced products by international pharmaceutical companies.

Other revenues were EUR 2.51 million for the six-month-period ended June 30, 2010 compared to EUR 0.10 million for the same period in 2009. Fluctuation versus the prior period is primarily attributable to an increase in activities that were reimbursed from Sigma-Tau under a cost sharing arrangement with the Company, which amounted to EUR 0.77 million and EUR 0.04 million as of June 30, 2010 and 2009, respectively, and a ratable recognition of EUR 1.70 million ($2.33 million) of the EUR 5.11 million ($7.0 million) up-front payment made by Sigma-Tau in connection with the amendment of the existing license and supply agreement with the Company. The up-front payment is being recognized ratably through the second quarter of 2011, which is when the Company expects to file an NDA for Defibrotide.

Cost of goods sold was EUR 2.87 million for the six-month period ended June 30, 2010 compared to EUR 2.00 million for the same period in 2009.  Cost of goods sold as a percentage of product sales was 29% for the six-month period ended June 30, 2010 compared to 57% for the same period in 2009. The percentage decrease is primarily due to higher margins on Defibrotide sold through the named-patient and cost recovery programs.

The Company incurred research and development expenses of EUR 3.45 million for the six-month period ended June 30, 2010 compared to EUR 1.81 million for the same period in 2009. 2009 research and development expenses were net of EUR 0.71 million of government grants in the form of a tax credit, accrued as a reduction of expenses.  Excluding such grants, 2009 research and development expenses would have been EUR 2.52 million.  Research and development expenses were primarily for the development of Defibrotide to treat and prevent VOD. The increase from the comparable period in 2009 was primarily due to the completion of a technology transfer to a third party and progress on some pre-clinical and Phase I clinical studies such as reproductive toxicity, hERG channel, and QT/QTc as well as obtaining additional data on the pharmacokinetics of Defibrotide in healthy volunteers.

General and administrative expenses were EUR 2.61 million for the six-month period ended June 30, 2010 compared to EUR 2.76 million for the same period in 2009.   2010 and 2009 general and administrative expenses include a release of a reserve for doubtful accounts for EUR 0.27 million and EUR 0.34 million, respectively, due to the deemed payment of accounts receivable through the elimination of the same amount of account payables due to the same counterparty. The slight decrease in general and administrative expenses was primarily due lower legal expenses, public company expenses and payroll costs.  

Corporate restructuring charges resulting from a strategic decision to close the Company's New York office amounted to EUR 0.95 million for the six-month period ended June 30, 2010.

Our net income was EUR 2.32 million for the six-month period ended June 30, 2010 compared to a net loss of EUR (3.45) million for the comparable period in 2009. The difference was primarily due to higher sales generated with launch of the named-patient and cost recovery programs, increase in other income and revenues (including the ratable recognition as revenue of a portion of the up-front payment made by Sigma-Tau in connection with the amendment of the existing license and supply agreement with the Company), decrease in general and administrative expenses and higher margin on product sold through the named-patient and cost recovery programs, offset by an increase on research and development expenses.

The Company ended the second quarter of 2010 with EUR 6.35 million in cash and cash equivalents, compared with cash and cash equivalents of EUR 1.39 million as of December 31, 2009. The increase was primarily due to the upfront payment of EUR 5.11 million ($7.0 million) received from Sigma-Tau in connection with the amendment of the existing license and supply agreement, revenues generated from named patient and cost recovery programs, and deferment of the payment of principal debt outstanding, offset by the payment of the one-time restructuring charges of EUR 0.95 million  for the closure of our New York office and payment of outstanding payables from the prior year.