2008-08-14 11:01:00
$100 Million EGI Investment to Close in September, Subject to Stockholder
Approval; Company Prepares for Potential Launch of MOXATAG(TM)
GERMANTOWN, Md., Aug. 14 /EMWNews/ -- MiddleBrook
Pharmaceuticals, Inc. (Nasdaq: MBRK), a pharmaceutical company focused on
developing and commercializing novel anti-infective products, today
announced financial and operational results for the quarter ended June 30,
2008.
MiddleBrook reported second quarter 2008 revenue of $2.5 million,
compared to revenue of $2.4 million in the first quarter of 2008 and $2.7
million in the second quarter of 2007. Revenue for the first six months of
2008 increased to $4.9 million, from revenue of $4.5 million for the first
six months of 2007.
The Company reported research and development (R&D) expenses in the
second quarter of $3.6 million, compared to first quarter 2008 R&D expenses
of $3.7 million and second quarter 2007 R&D expenses of $5.4 million. Total
operating expenses for the second quarter of 2008 were $7.9 million, down
from $9.1 million in the first quarter of 2008 and $12.2 million in the
second quarter of 2007. Total operating expenses for the first half of 2008
decreased to $17.0 million, down from total operating expenses of $27.7
million for the first half of 2007. The Company also recorded a $1.7
million noncash gain in the second quarter of 2008 resulting from the
change in the contractual fair value of the Company's warrant liability.
Net loss was $3.7 million for the second quarter, compared to a net
loss of $13.8 million in the first quarter of 2008 and a net loss of $9.5
million in the second quarter of 2007. Net loss for the first six months of
2008 was $17.5 million, down from a net loss of $23.1 million in the first
six months of 2007.
Net loss per share applicable to common stockholders during the second
quarter of 2008 was ($0.07), compared to a net loss per share of ($0.26) in
the prior quarter, and a net loss per share of ($0.21) in the comparable
quarter of last year. Net loss per share applicable to common stockholders
during the first half of 2008 was ($0.32), down from a net loss per share
of ($0.57) in the first half of 2007.
"Having concluded our strategic review process over the second quarter,
we are now working to close the Equity Group transaction and prepare for
the potential commercial launch of MOXATAG," stated Edward M. Rudnic,
Ph.D., president and CEO of MiddleBrook. "The entire MiddleBrook team is
excited to now have the opportunity to introduce once-daily MOXATAG, our
first proprietary PULSYS product, into the marketplace by as early as the
first half of next year."
OPERATIONAL HIGHLIGHTS
Strategic Review Process Concluded with Agreement for $100 Million
Equity Investment
On July 1, 2008, MiddleBrook announced that it had concluded its
previously announced review of strategic alternatives with an agreement for
a $100 million equity investment in the Company by EGI-MBRK L.L.C. (EGI),
an affiliate of Equity Group Investments, L.L.C. On July 1, 2008,
MiddleBrook entered into a securities purchase agreement with EGI for the
sale of 30,303,030 shares of MiddleBrook common stock at $3.30 per share
and a five- year warrant to purchase a total of 12,121,212 shares of common
stock at an exercise price of $3.90 per share.
As part of the agreement with EGI and as previously announced, a new,
commercially-focused executive management team will be appointed. Proceeds
from the transaction are expected to allow the Company to move forward with
the commercial launch of MOXATAG(TM) and to continue the development of its
clinical pipeline.
The issuance of the new shares and the warrant is subject to approval
by MiddleBrook's common stockholders, and other customary closing
conditions, and assuming stockholder approval is obtained, is expected to
close promptly following the special meeting of stockholders scheduled for
September 4, 2008.
Keflex(R) Capsules (Cephalexin, USP) - Commercialization Update
During the second quarter, MiddleBrook continued the commercialization
of its 750 mg strength Keflex capsules through a targeted and dedicated
national contract sales force. Based on prescription data from IMS Health,
total prescriptions filled for Keflex 750 mg capsules in the second quarter
of 2008 were 66,811 prescriptions, compared to first quarter 2008
prescriptions of 68,064.
MiddleBrook is currently marketing Keflex 750 mg capsules through its
sales force of approximately 30 contract sales representatives and three
MiddleBrook district sales managers.
MOXATAG(TM) (amoxicillin extended-release) Tablets
On January 23, 2008, MiddleBrook received U.S. Food and Drug
Administration (FDA) approval of the Company's New Drug Application (NDA)
for its once-daily amoxicillin PULSYS(R) product, under the trade name,
MOXATAG(TM) (amoxicillin extended-release) Tablets. MOXATAG is approved for
the treatment of pharyngitis and/or tonsillitis secondary to Streptococcus
pyogenes (strep throat) in adults and pediatric patients 12 years or older.
During the second quarter, MiddleBrook was actively engaged in the
commercial manufacture, testing and validation of its MOXATAG scaled-up
tablet production process in cooperation with its contract manufacturer,
STADA Production in Clonmel, Ireland. The Company believes it will be
prepared for a potential commercial launch of MOXATAG during the first half
of 2009, assuming the closing of the EGI transaction in September 2008.
MOXATAG is the first and only once-daily aminopenicillin therapy
approved by the FDA to treat strep throat. Physicians prescribing MOXATAG
would be able to provide their patients the convenience of once-daily
dosing while utilizing approximately one-half the amount of amoxicillin
currently used. According to prescription data from IMS Health, more than
30 million prescriptions were written for strep throat, pharyngitis and
tonsillitis in the U.S. in 2007.
FINANCIAL DETAILS
-- Total revenue, resulting entirely from net Keflex product sales, was
$2.5 million in the second quarter of 2008, compared to revenue of $2.4
million in the prior quarter, and $2.7 million for the second quarter of
2007.
-- Operating expenses. Research and development expenses, which
primarily consist of salaries, stock-based compensation, and related
expenses for personnel and the costs of the Company's clinical trials and
research initiatives, were $3.6 million in the second quarter of 2008,
compared to $3.7 million in the previous quarter and $5.4 million in the
second quarter of 2007. Reduced R&D expenses in the second quarter compared
to the prior year resulted mainly from lower personnel and related costs
associated with reductions in research staff over the year.
Selling, general and administrative (SG&A) expenses totaled $3.9
million in the second quarter of 2008, down from $4.8 million in the first
quarter of 2008, and $6.3 million in the second quarter of 2007. Second
quarter SG&A costs declined from the prior periods due to lower third-party
costs associated with the reduced size of Company's contract sales force.
-- Loss from operations for the second quarter of 2008 was $5.4
million, down from $6.7 million in the prior quarter and $9.5 million in
the second quarter of last year. Reduced operating loss in the quarter
resulted primarily from lower operating expenses in the second quarter of
2008 compared to prior periods.
-- Other income and expenses for the second quarter of 2008 included a
$1.7 million noncash unrealized gain for the adjustment related to the
contractual fair value of warrants issued to Deerfield Management in the
fourth quarter of 2007. The Company recorded a $7.4 million noncash warrant
expense in the first quarter of 2008. There were no such gains or expenses
in the second quarter of 2007.
-- Net loss for the second quarter of 2008 was $3.7 million. This
compares to a net loss of $13.8 million in the first quarter of 2008, and
$9.5 million in the second quarter of 2007. The net loss for the three
months ended June 30, 2008, was increased by $0.1 million attributable to
the gain from noncontrolling interest in two companies affiliated with
Deerfield Management pursuant to the fourth quarter 2007 Keflex
transaction, resulting from MiddleBrook's consolidation of the two
affiliates under Financial Accounting Standards Board Interpretation No. 46
(revised 2003) "Consolidation of Variable Interest Entities." The net loss
for the three months ended March 31, 2008, was reduced by $0.2 million
attributable to the loss from noncontrolling interest during that quarter
and there were no such gains or losses for the second quarter of 2007.
-- Net loss per share applicable to common stockholders for the second
quarter of 2008 was ($0.07), compared to a loss per common share of ($0.26)
in the prior quarter and ($0.21) in the second quarter of 2007.
Per share figures were computed on the basis of an average of 56.0
million shares outstanding in the second quarter of 2008, 53.3 million
shares outstanding in the first quarter of 2008, and 45.3 million shares
outstanding in the second quarter of 2007.
-- Cash and marketable securities decreased by $5.4 million during the
second quarter. Changes were composed of $5.4 million of operating losses
in the quarter, and $1.4 million for working capital changes and other
items; offset by $1.2 million for non-cash expenses in the quarter and $0.2
million from the exercise of stock options.
-- The Balance Sheet at June 30, 2008 reflected $12.6 million of
unrestricted cash, cash equivalents and marketable securities, compared to
$18.0 million at March 31, 2008 and $2.0 million as of year-end 2007.
FINANCIAL GUIDANCE
Total revenue guidance for 2008 is unchanged from prior forecasts and
is expected to be approximately $10 million to $12 million, resulting from
Keflex product sales and assuming no generic competition to Keflex 750 mg
capsules occurs during the year. MiddleBrook intends to issue additional
financial guidance for 2008 following the completion of its anticipated
financing transaction with EGI.
ABOUT MIDDLEBROOK PHARMACEUTICALS:
MiddleBrook Pharmaceuticals, Inc. (Nasdaq: MBRK) is a pharmaceutical
company focused on the development and commercialization of anti-infective
drug products that fulfill substantial unmet medical needs in the treatment
of infectious disease. The Company is developing anti-infective drugs based
on its novel biological finding that bacteria exposed to antibiotics in
"pulses" are killed more efficiently and effectively than those under
standard treatment regimens. Based on this finding, MiddleBrook has
developed a proprietary, once-a-day pulsatile delivery technology called
PULSYS(R). The Company currently markets the Keflex(R) brand of cephalexin
and has received regulatory approval for MOXATAG(TM) -- the first and only
once-daily amoxicillin product approved for marketing in the U.S. For more
on MiddleBrook, please visit http://www.middlebrookpharma.com.
About MOXATAG:
MOXATAG(TM) (amoxicillin extended-release) Tablets are a once-a-day
extended-release formulation of amoxicillin for oral administration
consisting of three components: one immediate-release and two
delayed-release. The three components are combined in a specific ratio to
prolong the release of amoxicillin from MOXATAG compared to
immediate-release amoxicillin. MOXATAG is intended to provide a lower
treatment dose, once-daily alternative to currently approved penicillin and
amoxicillin regimens for the treatment of adults and pediatric patients 12
years and older with tonsillitis and/or pharyngitis.
About Keflex:
Keflex(R) (cephalexin capsules, USP) is a first-generation
cephalosporin antibiotic shown to be active against strains of both
gram-positive and gram- negative aerobes in vitro and in clinical
infections. Keflex is indicated for treatment of the following infections:
respiratory tract infections, otitis media, skin and skin structure
infections, bone infections, and genitourinary tract infections. More
information on Keflex and prescribing information are available at
http://www.middlebrookpharma.com/products_antibiotics/keflex_antibiotics.aspx.
This announcement contains historical financial information as of and
for three-month and six-month periods ended June 30, 2008 and June 30, 2007
that is unaudited, and MiddleBrook assumes no obligation to update this
information based on new information or future performance except as may be
specifically required by applicable law or regulation. The unaudited annual
financial information is subject to audit by independent accountants on an
annual basis following the close of each calendar year.
This announcement contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
statements are based on MiddleBrook's current expectations and assumptions.
These statements are not guarantees of future performance and are subject
to a number of risks and uncertainties that would cause actual results to
differ materially from those anticipated. The words, "believe," "expect,"
"intend," "anticipate," and variations of such words, and similar
expressions identify forward-looking statements, but their absence does not
mean that the statement is not forward- looking. Statements in this
announcement that are forward-looking include, but are not limited to,
statements about the Company's product development and commercialization
schedule, including, particularly, future plans with respect to its
Amoxicillin PULSYS products; any statements regarding Dr. Rudnic's comments
and expectations concerning the Company; the Company's initiatives to
develop improved antibiotics; the Company's existing and anticipated
collaborative agreements; and any financial forecasts and projections for
2008 and thereafter included under the Financial Guidance section of this
announcement.
The actual results realized by MiddleBrook could differ materially from
these forward-looking statements, depending in particular upon the risks
and uncertainties described in the Company's filings with the Securities
and Exchange Commission. These include, without limitation, risks and
uncertainties relating to the Company's financial results and the ability
of the Company to (1) raise additional capital and continue as a going
concern, (2) maintain its Keflex 750 sales, (3) retain marketing approval
for its MOXATAG product, (4) successfully reduce costs, (5) reach
profitability, (6) prove that the preliminary findings for its product
candidates are valid, (7) receive required regulatory approvals, (8)
successfully conduct clinical trials in a timely manner, (9) establish its
competitive position for its products, (10) develop and commercialize
products that are superior to existing or newly developed competitor
products, (11) develop products without any defects, (12) have sufficient
capital resources to fund its operations, (13) protect its intellectual
property rights and patents, (14) implement its sales and marketing
strategy, (15) successfully attract and retain collaborative partners, (16)
successfully commercialize and gain market acceptance for its Keflex
products, (17) successfully obtain sufficient manufactured quantities of
its drug products at acceptable rates, and (18) retain its senior
management and other personnel. Existing and prospective investors are
cautioned not to place undue reliance on these forward-looking statements,
which speak only as of today's date. MiddleBrook undertakes no obligation
to update or revise the information in this announcement, whether as a
result of new information, future events or circumstances or otherwise.
MIDDLEBROOK PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2008 2007 2008 2007
Product sales $2,522,255 $2,680,558 $4,916,265 $4,453,595
Costs and expenses:
Cost of product
sales 374,177 447,236 995,617 680,871
Research and
development 3,627,051 5,447,199 7,354,910 12,976,071
Selling, general
and
administrative 3,937,109 6,309,553 8,690,435 13,998,205
Total expenses 7,938,337 12,203,988 17,040,962 27,655,147
Loss from operations (5,416,082) (9,523,430) (12,124,697) (23,201,552)
Interest income 89,806 221,173 215,088 355,200
Interest expense - (175,670) - (369,565)
Change in fair value
of warrant 1,680,000 - (5,760,000) -
Other income
(expense) 1,900 - (17,174) 75,000
Loss including
noncontrolling
interest $(3,644,376) $(9,477,927) $(17,686,783) $(23,140,917)
Loss (gain)
attributable to
noncontrolling
interest (62,875) - 180,030 -
Net loss $(3,707,251) $(9,477,927) $(17,506,753) $(23,140,917)
Basic and diluted
net loss per share $(0.07) $(0.21) $(0.32) $(0.57)
Shares used in
calculation of
basic and diluted
net loss per share 56,024,953 45,348,396 54,660,128 40,890,735
MIDDLEBROOK PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, 2008 December 31, 2007
ASSETS
Current assets:
Cash and cash equivalents $10,254,039 $1,951,715
Marketable securities 2,372,483 -
Accounts receivable, net 703,655 687,787
Inventories, net 456,173 687,933
Prepaid expenses and other current assets 1,961,526 1,142,905
Total current assets 15,747,876 4,470,340
Property and equipment, net 9,316,781 10,928,659
Restricted cash 872,180 872,180
Deposits and other assets 111,599 174,965
Intangible assets, net 6,640,813 7,219,651
Total assets $32,689,249 $23,665,795
LIABILITIES, NONCONTROLLING INTEREST AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $1,468,170 $1,659,752
Accrued expenses 5,344,762 5,613,544
Total current liabilities 6,812,932 7,273,296
Warrant liability 7,860,000 2,100,000
Deferred contract revenue 11,625,000 11,625,000
Deferred rent and credit on lease
concession 990,746 1,177,840
Total liabilities 27,288,678 22,176,136
Noncontrolling interest 7,157,781 7,337,811
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, undesignated - -
Common stock, par value 560,763 467,488
Capital in excess of par value 210,523,235 189,019,188
Accumulated deficit (212,841,581) (195,334,828)
Accumulated other comprehensive
income 373 -
Total stockholders' equity
(deficit) (1,757,210) (5,848,152)
Total liabilities,
noncontrolling interest and
stockholders' equity (deficit) $32,689,249 $23,665,795
MIDDLEBROOK PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
2008 2007
Cash flows from operating activities:
Net loss $(17,506,753) $(23,140,917)
Adjustments to reconcile net income
to net cash in operating
activities:
Loss attributable to
noncontrolling interest (180,030) -
Depreciation and amortization 1,841,675 1,929,978
Change in fair value of warrant 5,760,000 -
Stock-based compensation 791,908 1,290,286
Deferred rent and credit on lease
concession (187,094) (25,889)
Amortization of premium on
marketable securities (8,244) (60,642)
Loss on disposal of fixed assets 17,174 -
Changes in:
Accounts receivable (15,868) (2,467,478)
Inventories 231,760 244,566
Prepaid expenses and other
current assets (818,622) 49,456
Deposits other than on property
and equipment, and other assets 63,366 37,843
Accounts payable (191,582) 216,562
Accrued expenses (268,782) (3,239,993)
Deferred product revenue - 1,989,644
Net cash used in operating
activities (10,471,092) (23,176,584)
Cash flows from investing activities:
Purchases of marketable securities (2,363,866) (5,867,518)
Sale and maturities of marketable
securities - 500,000
Purchases of property and equipment - (19,592)
Deposits on property and equipment - (1,150,625)
Proceeds from sale of fixed assets 331,867 -
Net cash used in investing
activities (2,031,999) (6,537,735)
Cash flows from financing activities:
Proceeds from private placement of
common stock, net of issue costs 19,915,002 22,412,260
Payments on lines of credit - (1,333,333)
Proceeds from exercise of common
stock options 726,431 58,073
Proceeds from exercise of common
stock warrants 163,982 -
Net cash provided by financing
activities 20,805,415 21,137,000
Net increase (decrease) in cash and
cash equivalents 8,302,324 (8,577,319)
Cash and cash equivalents, beginning
of period 1,951,715 14,856,738
Cash and cash equivalents, end of
period $10,254,039 $6,279,419
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