Aradigm reports $1.3M net income for third quarter 2010 vs. $3.0M net loss for third quarter 2009

Nov 11 2010

Aradigm Corporation (OTCBB:ARDM) (the "Company") today announced financial results for the third quarter and nine months ended September 30, 2010.

The Company recorded net income for the third quarter of 2010 of approximately $1.3 million, or $0.01 per share, compared to a net loss of approximately $3.0 million, or $0.03 per share, for the third quarter of 2009. The net income was the result of a non-recurring gain of approximately $4.5 million from the extinguishment of debt associated with the debt for equity transaction with Novo Nordisk A/S, which closed in September 2010. With the closing of the transaction with Novo Nordisk A/S, the Company eliminated all outstanding debt from the balance sheet. Total operating expenses for the third quarter of 2010 were approximately $3.3 million, compared to total operating expenses of approximately $5.4 million for the third quarter of 2009. The decrease in operating expenses was primarily due to expense reduction efforts and the absence of impairment expenses associated with the termination of the collaboration with Lung Rx, Inc.

Revenue of approximately $239,000 was recorded in the third quarter of 2010, compared to approximately $4.9 million in revenue recorded for the third quarter of 2009. The third quarter 2010 revenue represented the first recurring quarterly royalty payment received from Zogenix, Inc. for royalties from the sales of the SUMAVEL* DosePro* needle-free delivery system. The third quarter 2009 revenue represented the previously deferred revenue associated with the collaboration with Lung Rx, Inc., which was recognized upon the termination of the collaboration.

As of September 30, 2010, cash, cash equivalents and short-term investments totaled approximately $7.6 million. This amount does not include the approximately $733,000 in awards from the Qualifying Therapeutic Discovery Project grants referenced below.

Recent Highlights

The Company announced that:

• On October 20, 2010, the Company announced positive top line data from its recently concluded 6-month Phase 2b study (ORBIT-2) with Aradigm's once-daily dual release ciprofloxacin for inhalation (DRCFI, ARD-3150) in patients with non-cystic fibrosis bronchiectasis. Statistical significance was achieved in the primary endpoint and one of the secondary endpoints. The primary endpoint - the mean change in Pseudomonas aeruginosa density in sputum from baseline to day 28 - was met. In the full analysis population, there was a significant mean reduction of 4.2 log₁₀ units in the ARD-3150 group, reflecting an almost sixteen-thousand fold decrease in bacterial load, versus a very small mean decrease of 0.1 log₁₀ units in the placebo group.
• On September 20, 2010, the Company closed the transaction contemplated by the previously announced July 30, 2010 Stock Purchase Agreement with Novo Nordisk A/S. At the closing, the Company issued 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 A/S under which approximately $9.1 million was outstanding on July 30, 2010, representing an effective price per share of $0.3505. The promissory note that was terminated at closing represented a loan that was made by Novo Nordisk A/S to the Company in 2006 in the principal amount of $7.5 million, with interest accruing at 5% per annum.
• On September 23, 2010, the Company received proceeds of approximately $891,000 from the exercise of all of the warrants to purchase an aggregate of 7,527,214 shares of the Company's common stock that were issued in the private placement that closed on June 21, 2010. The warrants became exercisable following the Company's Special Meeting of Shareholders held on September 14, 2010, at which the Company obtained the requisite approval from the Company's shareholders on all three proposals presented at the Special Meeting to approve an amendment to the Company's Amended and Restated Articles of Incorporation to increase the total number of authorized shares of the Company's common stock.
• On November 2, 2010, the Company announced that it received notification from the U.S. Internal Revenue Service (IRS) that it was approved to receive three grants in the amount of $244,479.25 each for qualified investments in three qualifying therapeutic discovery projects. In July 2010, the Company applied for grants for three projects under the Qualifying Therapeutic Discovery Project. The three projects were: 1) ARD-3150 Liposomal Ciprofloxacin for the Treatment of Non-CF Bronchiectasis, 2) ARD-3100 Liposomal Ciprofloxacin for the Treatment of Non-CF Bronchiectasis and 3) ARD-3100 Liposomal Ciprofloxacin for the Treatment of Cystic Fibrosis. After a determination by U.S. Department of Health and Human Services (HHS) that all three projects met the definition of a "qualifying therapeutic discovery project", the IRS certified the qualifying investment and approved the award amount of $244,479.25 per project, for a total of $733,437.75 in awards to the Company. The qualified investments represent 2009 research and development expenses; there are no future performance obligations related to these grants.
• On November 4, 2010, the Company announced that it appointed Tamar D. Howson to its board of directors. Ms. Howson brings significant business development and life sciences industry expertise developed through her career as a senior professional at several leading pharmaceutical companies and as an advisor to several investor funds. She served as Senior Vice President of Corporate and Business Development and was a member of the executive committee at Bristol-Myers Squibb Company (Bristol-Myers) from 2001 until 2007. During her tenure at Bristol-Myers, Ms. Howson was responsible for leading the company's efforts in external alliances, licensing and acquisitions. From 1991 to 2000, Ms. Howson served as Senior Vice President and Director of Business Development at SmithKline Beecham plc, a global pharmaceutical company. She also managed SR One Ltd., a venture capital fund of SmithKline Beecham, plc. From 1990 to 1991, Ms. Howson held the position of Vice President, Venture Investments at Johnston Associates, Inc.,, and from 1987 to 1990, she served as Director of Worldwide Business Development and Licensing for Squibb Corporation. She previously served as Executive Vice President of Corporate Development for Lexicon Pharmaceuticals, Inc. and on the boards of Ariad Pharmaceuticals, Inc., SkyePharma, plc, NPS Pharmaceuticals, Inc., Targacept, Inc., and the Healthcare Businesswomen's Association. Ms. Howson received her MBA in finance and international business from Columbia University. She holds a MS from the City College of New York and a BS from Technion in Israel.

"The completion this quarter of two key financial transactions allowed us to significantly strengthen our balance sheet by eliminating all outstanding debt and adding to our cash reserves. Our focus for the next quarter is on collecting the funds from the Qualifying Therapeutic Discovery Project awards, completing patient enrollment for the ORBIT-1 clinical trial of our inhaled liposomal ciprofloxacin in bronchiectasis and reviewing the data from our successful ORBIT-2 clinical trial with potential partners with the goal of establishing a funded partnering agreement for this program," said Igor Gonda, the Company's President and Chief Executive Officer.