Anacor first quarter revenues increase to $2.2 million

Anacor Pharmaceuticals (NASDAQ:ANAC) reviewed today its first quarter accomplishments and reported financial results for the quarter ended March 31, 2011.

First Quarter 2011 Highlights and Recent Developments

Clinical

• AN2690 - our lead topical antifungal product candidate for the treatment of onychomycosis, a fungal infection of the nail and nail bed that affects approximately 35 million people in the United States:
  • Continued enrollment in two Phase 3 trials for AN2690 in onychomycosis. Each Phase 3 trial is expected to enroll approximately 600 patients, with full enrollment in both trials anticipated in the second half of 2011.
• AN2728 - our lead topical anti-inflammatory product candidate for the treatment of psoriasis, a chronic inflammatory skin disease that affects approximately 7.5 million people in the United States and over 100 million people worldwide:
  • Announced results in February 2011 from a Phase 1 absorption trial which demonstrated that 2% AN2728 topical ointment was well-tolerated and provided a substantial margin of safety for both acute and chronic effects when applied twice daily to healthy volunteers.
  • Completed enrollment in a Phase 2b trial for AN2728 in mild-to-moderate plaque-type psoriasis in March 2011. This trial enrolled 68 patients, with results anticipated in mid-2011.
• GSK '052 (GSK2251052 or GSK '052, formerly known as AN3365) - our lead systemic antibiotic for the treatment of infections caused by Gram-negative bacteria:
  • We believe GlaxoSmithKline (GSK) remains on track to initiate Phase 2 trials for GSK '052 in patients with complicated urinary tract infections (cUTI) and complicated intra-abdominal infections (cIAI) in 2011.

Business Development

• Medicis Collaboration
  • Established a research and development collaboration in February 2011 with Medicis Pharmaceutical Corporation (Medicis) to discover and develop boron-based small molecule compounds directed against a target for the potential treatment of acne. Under the terms of the agreement, Anacor received a $7 million upfront payment and in the future may receive up to $153 million in milestones as well as royalties in the high single-digits to the low double-digits on sales by Medicis of any products that Medicis elects to license from Anacor.
• Neglected Diseases Initiatives
  • Entered into a development agreement in March 2011 with Medicines for Malaria Venture (MMV) to fund Anacor's development of AN3661 for the treatment of malaria.
  • Announced a joint research agreement in March 2011 with the Institute for OneWorld Health to develop new treatments for diarrheal disease.

Corporate

• Appointed William J. Rieflin to Anacor's Board of Directors in March 2011. Mr. Rieflin will also serve as chair of Anacor's Audit Committee. Mr. Rieflin brings over 20 years of industry experience to Anacor and is currently Chief Executive Officer of NGM Biopharmaceuticals, a privately held biotechnology company.
• Entered into a loan facility in March 2011 with Oxford Finance Corporation and Horizon Technology Finance Corporation to provide up to $30.0 million in capital. Anacor has drawn $10.0 million from this loan facility and used $6.6 million of the proceeds to repay the remaining obligations under its loan facility with Lighthouse Capital Partners. Anacor may use the remainder of the capital, if needed, to fund development activities related to AN2690, AN2728 and AN2898.

Anticipated Milestones in 2011

• We expect to complete enrollment of our two Phase 3 trials for AN2690 in onychomycosis in the second half of 2011.
• We expect to announce results from our current Phase 2b trial for AN2728 in mild-to-moderate plaque-type psoriasis in mid-2011.
• Subject to the results from our current Phase 2b trial, we expect to complete an end of Phase 2 meeting with the FDA regarding AN2728 and, subject to the outcome of that meeting, we plan to initiate a Phase 3 trial for AN2728 in mild-to-moderate plaque-type psoriasis in the second half of 2011.
• We expect to initiate a Phase 2 trial in atopic dermatitis evaluating AN2728 and AN2898 in the second quarter of 2011, with results expected in the second half of 2011.
• We expect GlaxoSmithKline (GSK) will initiate Phase 2 trials for GSK '052 in patients with complicated urinary tract infections (cUTI) and complicated intra-abdominal infections (cIAI) in 2011.

Selected First Quarter 2011 Financial Results

Revenues for the quarter ended March 31, 2011 were $2.2 million, compared to $0.7 million for the comparable period in 2010. The increase in revenues was primarily due to additional revenue recognized under our collaboration agreements with Eli Lilly and Company (Lilly) and Medicis and increased revenues from our neglected diseases initiatives.

Research and development expenses for the first quarter of 2011 were $12.7 million, compared to $6.6 million for the comparable period in 2010. The increase in expenses in the first quarter of 2011 compared to the same quarter in the prior year was primarily due to the increase in development, manufacturing and clinical trial activities for AN2690, AN2728 and AN2898. In addition, our research activities increased due to our new collaborations with Lilly and Medicis.

General and administrative expenses for the first quarter of 2011 were $2.6 million, compared to $1.9 million for the comparable period in 2010. The increase in expenses reflects the higher costs of operating as a public company.

Net loss for the first quarter of 2011 was $13.7 million, compared to $8.2 million for the same quarter of 2010.

Cash, cash equivalents and short-term investments totaled $76.5 million at March 31, 2011, compared to $78.6 million at December 31, 2010. In the first quarter, Anacor received an upfront payment of $7.0 million in connection with the Medicis agreement, $2.3 million related to contract funding from Medicines for Malaria Venture and $3.4 million in net cash in connection with the initial drawdown on the Oxford/Horizon loan facility and the repayment of the Lighthouse loan facility.

Financial Guidance

Anacor is maintaining its previously stated guidance that it expects to end 2011 with at least $50 million in cash.