PharmAthene, Inc. (NYSE Amex: PIP), a biodefense company developing medical countermeasures against biological and chemical threats, today reported its financial and operational results for the year ended December 31, 2011.
"We were gratified by the favorable ruling from the Delaware Court of Chancery in September of 2011," remarked Eric I. Richman, President and Chief Executive Officer. "Under that ruling, the Court awarded PharmAthene the right to receive 50% of the net profits from worldwide sales of SIGA's ST-246 smallpox antiviral therapeutic and related products over 10 years, once SIGA receives the first $40 million in net profits. SIGA has stated publicly it anticipates deliveries of ST-246 to the government to start in the first quarter of 2013, which if achieved, will represent a near-term revenue stream for PharmAthene that allows us to accelerate our pathway to profitability and create enhanced value for PharmAthene shareholders in the near-term."
Mr. Richman continued, "We also made solid progress in each of our biodefense portfolio programs in 2011. We achieved important technical milestones in our SparVax™ anthrax vaccine program, which included demonstration of 36 months of final product stability, completion of the technology transfer of our manufacturing process, and manufacturing of a commercial scale cGMP production run. As a result of this progress, we are well positioned to initiate additional Phase II clinical testing of SparVax™ this year."
Linda L. Chang, Senior Vice President and Chief Financial Officer, commented, "In addition to these achievements, in late 2011 and early 2012, we took major steps towards increasing our overall operating efficiency and reducing our net cash burn rate. Our efforts will continue in 2012, and we expect to further reduce our monthly operating cash burn by at least 40% compared to the 2011 level, based on currently projected activities on our contracts."
Year-End 2011 Financial Results
For the year ended December 31, 2011, PharmAthene recognized revenue of $24.3 million, compared to $21.0 million in 2010. Revenues in 2011 were derived primarily from development contracts with the U.S. government for the SparVax™ and Valortim® programs.
Revenues for the SparVax™ program in 2011 were $19.3 million, compared to $11.7 million in 2010, a 65% year-over-year increase. The increase in revenue was attributable primarily to the additional work conducted for technology transfer, as well as related technical milestones achieved that totaled $3.5 million in 2011, compared to $1.8 million in 2010.
Revenues for the Valortim® program were $3.7 million and $3.0 million in 2011 and 2010, respectively. In addition, the Company generated revenue of $0.7 million under the $5.7 million fixed price contract awarded in 2011 from the Department of Defense for the development of an advanced expression system for rBChE, PharmAthene's nerve agent medical countermeasure.
Research and development expenses were essentially flat year-over-year at approximately $21.2 million in 2011, compared to $20.9 million in 2010. The year-over-year difference in research and development expenses was due primarily to increased technical activity and the achievement of key technical milestones in the Company's SparVax™ program, as well as completion of the Phase I Valortim® dose escalation clinical trial. These were offset partially by a decrease in development expenses related to the completion of the Protexia® program in 2010.
Expenses associated with general and administrative functions were over 20% lower in 2011 than 2010 at approximately $14.3 million and $18.0 million for the years ended December 31, 2011 and 2010, respectively. The decrease in general and administrative expense was primarily the result of bad debt expense recorded in 2010 and a one-time property loss insurance reimbursement in 2011 of approximately $1.4 million, which was recorded as an offset to G&A expense and was offset partially by an increase in non-cash stock compensation expenses, taxes and other expenses.
For the year ended December 31, 2011, PharmAthene's net loss was $3.8 million, or $0.08 per share, compared to $34.8 million, or $1.08 per share, for the year ended December 31, 2010. The year-over-year decrease in net loss included the impact of the change in fair value of the Company's derivative instruments, which resulted in other income of approximately $7.1 million for the year ended December 31, 2011, compared to an expense of approximately $5.5 million for the year ended December 31, 2010. The decrease in fair value realized as of December 31, 2011 was primarily the result of the decrease in PharmAthene's stock price from $4.23 per share on December 31, 2010 to $1.27 per share on December 31, 2011.
As of December 31, 2011, the Company had cash and cash equivalents, restricted cash, and U.S. government accounts receivables and unbilled receivables totaling approximately $19.2 million, compared to $21.2 million as of December 31, 2010. The decrease was due primarily to a combination of a loss from operations of $11.7 million, including $3.0 million of non cash expenses, substantially offset by net proceeds of $5.8 million from a registered direct public offering of common stock and warrants, $1.8 million related to the sale of real estate assets in Canada, and $1.4 million in insurance proceeds.
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