Cardium Reports on Fourth Quarter and Year-End 2009 Financial Results and Recent Developments
SAN DIEGO, March 16 /PRNewswire-FirstCall/ -- Cardium Therapeutics (NYSE Amex: CXM) today reported highlights and financial results for its fourth quarter and fiscal year ended December 31, 2009, and other important recent developments and outlook for 2010.
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Highlights of 2009 and Recent Developments
- Sale of Cardium's InnerCool Therapies business to Royal Philips Electronics for approximately $11.25 million and transfer of $1.5 million of InnerCool trade payables to Philips;
- Completion of Tissue Repair Company's Matrix Phase 2b clinical trial of collagen-based products for the potential treatment of non-healing diabetic ulcers;
- Application for Food and Drug Administration (FDA) 510(k) U.S. marketing clearance of ExcellagenXL™ and ExcellagenFX™, a professional-use fibrillar collagen gel (2.6%) for wound care management of diabetic ulcers, as well as pressure ulcers, venous ulcers, surgical and trauma wounds, second degree burns, and other types of wounds;
- Agreement with bioRASI to advance and broaden clinical development of Cardium's Generx™ product candidate for international markets;
- Plans to develop a DNA-based orthobiologics product portfolio based on a reformulation of the Company's Excellarate™ product candidate that will initially focus on non-union bone fractures and spinal fusions;
- Development of MedPodium™ product line covering six advanced foot care products for podiatry patients to complement the Excellagen platform;
- Completion of two registered direct investments of Cardium's common stock by institutional investors in 2009 with gross proceeds totaling $10.5 million, and an offering with institutional and retail investors in 2010 for gross proceeds of $11.3 million; and
- Retirement of outstanding corporate debt of approximately $10.75 million.
Sale of InnerCool Therapies to Royal Philips Electronics
During fiscal 2009, Cardium announced the completion of the sale of its InnerCool Therapies business to Royal Philips Electronics. The asset purchase transaction was for $11.25 million, as well as the transfer of approximately $1.5 million in trade payables. The acquisition of InnerCool by Philips represented an important step forward in Cardium's overall business strategy which is focused on the acquisition, strategic repositioning and partnering or sale of businesses.
Report on Matrix Phase 2b Clinical Trial
In late 2009, the Company reported data from the multi-center Matrix Phase 2b clinical trial of its collagen-based Excellarate™ product candidate for the potential treatment of patients with chronic non-healing diabetic foot ulcers. The study evaluated patients treated with the Excellarate product candidate (which is a combination of Ad5PDGF-B and a fibrillar 2.6% collagen formulation) or the fibrillar collagen alone, as compared to patients who received only the protocol specified standard of care. Nearly half of patients (48%) receiving a one-time Excellarate treatment had complete wound closure by 12 weeks, compared to a 31% wound closure rate for standard of care. Among combined one and two dose groups of Excellarate approximately 41% of patients achieved complete closure by 12 weeks. In addition to overall wound closures by 12 weeks, the Phase 2b study also evaluated wound closure rates and trajectories following product administration in order to assess the timing and extent of bioactivity. The data revealed that patients receiving Excellarate exhibited early and rapid wound healing responses as evidenced by substantial reductions in wound radius over the first several weeks following product administration, which responses were both greater and faster than those observed among patients that had received standard of care. For example, a 108% relative improvement (decrease in ulcer radius) compared to standard of care was observed over the first week following administration of Excellarate, and a 50% relative improvement was observed as an average over the first four weeks.
The Excellarate product candidate is designed to provide physicians and patients with a potentially simpler treatment regimen compared to most diabetic wound healing agents or devices in use that require repeated administrations over a long term (weeks to months). Based on recently announced advancements, Excellarate will be re-formulated and packaged in an easy-to-use single syringe that is pre-mixed and ready to be applied to patients' wounds. The reformulation will allow Excellarate to be maintained in a physician's office using a standard refrigerator (at a temperature of about 4 degrees C)
Plans for Commercialization of Excellagen and MedPodium Product Line
In December 2009, the Company filed a 510(k) premarket notification with the U.S. Food and Drug Administration (FDA) seeking marketing clearance of its Excellagen™ product candidate based on positive data from the Company's recently completed Phase 2b clinical trial that demonstrated substantial improvements in wound healing responses in patients with non-healing diabetic foot ulcers following one or two applications of Excellagen. Excellagen is designed for use by health care professionals in patients with dermal wounds, which can include diabetic ulcers, pressure ulcers, venous ulcers, tunneled/undermined wounds, surgical and trauma wounds, second degree burns, and other types of wounds. In addition, the Company plans to develop additional new product opportunities by incorporating other agents into Excellagen formulations, including antimicrobials, DNA and/or other biologics, which are designed to address particular wound healing and other tissue repair applications.
The Company recently announced plans to commercialize its MedPodium™ over-the-counter advanced skin care product portfolio for patients with the potential for foot disorders and ailments. The MedPodium product portfolio is designed to promote foot health and comfort and support preventative care, self examination and early detection of foot ulcers, especially for diabetic patients with lower extremity neuropathy. The commercial development of Cardium's MedPodium patient care product line is intended to provide a first line of defense for individuals at risk for foot ulcers and enhances and expands Cardium's product portfolio beyond the current Excellagen product candidate platform.
Gene Activated Matrix Technology Orthobiologics Initiative
During 2009, the Company announced plans to develop a DNA-based orthobiologics product portfolio based on research and development that will initially focus on non-union bone fractures for medically-compromised patients, and spinal fusions for patients with degenerative disc disease. The initial orthobiologics focus will be on the development of Osteorate™, a DNA-based non-surgical injectable bone graft gel to repair bone fractures and regenerate tissue in certain medically-compromised patient populations. Osteorate will be based on a reformulation of the Excellarate wound healing product candidate. The Gene Activated Matrix technology allows for a broad spectrum of formulations which would include, but not be limited to, collagen, demineralized bone matrices, allograft and synthetic graft materials. In addition, during 2009 the Company announced the results of preclinical research published in the scientific journal, Gene Therapy, demonstrating the potential benefits of its Gene Activated Matrix technology for accelerating and enhancing periodontal tissue repair and oral implant osseointegration. This research further supports Cardium's decision to expand the Company's focus of its regenerative medicine technologies to include the emerging new high growth market segment of orthobiologics.
Commercial Development Plans for Generx
Cardium recently announced its agreement with bioRASI, an international contract research organization, to assist Cardium in the evaluation of Generx clinical development opportunities within major newly-industrializing markets in Eastern Europe, Asia and Latin America, for patients with chronic coronary artery disease who are either not optimal candidates for or do not have access to costly angioplasty/stenting or cardiac bypass surgery procedures.
The U.S. Food and Drug Administration (FDA) has cleared Generx for a Phase 3 clinical study in the U.S. for women with late stage coronary artery disease who are unresponsive to traditional drug therapy and are not appropriate candidates for mechanical revascularization (angioplasty/stents or by-pass surgery), in connection with which Cardium previously announced plans to introduce an improved formulation of Generx that would not require storage at -70 degrees C. In view of published results from an independent 10-year study among men and women with chronic coronary heart disease showing that improved collateral circulation was associated with substantially lower cardiac mortality, and prior studies showing that a one-time infusion of Generx has the potential to achieve improved coronary collateral circulation in both men and women at levels approximately equivalent to bypass surgery as measured by SPECT imaging, the Company believes that Generx could potentially be developed as a cost effective front-line therapy for patients with coronary artery disease in the large markets of newly-industrializing countries who often do not have access to costly procedures such as bypass surgery. Having such additional clinical evidence confirming the safety and effectiveness of Generx for improving coronary collateral circulation in men and women with severe coronary artery disease could also potentially be used to optimize and broaden commercial development pathways in the U.S. and other major markets such as Europe.
"This was an important year for Cardium with the sale of our first portfolio business unit, InnerCool Therapies, to Royal Philips Electronics, completion of our Phase 2b Excellarate clinical study, an FDA application for 510(k) U.S. marketing clearance for our Excellagen product candidate, and the commercial development of our MedPodium advanced skin care line. We look forward to working with bioRASI to explore more rapid and cost effective opportunities to advance our Generx cardiovascular biologic candidate as a front-line therapy for patients with coronary artery disease in newly-industrializing markets in Eastern Europe, Asia and Latin America. Consistent with our current business model, we will continue to seek out new and innovative product opportunities and secure strategic partnership opportunities for our current product candidates," stated Christopher J. Reinhard, Chairman and Chief Operating Officer of Cardium Therapeutics.
Financial Report
For the fourth quarter ended December 31, 2009, the Company reported net income of $9.3 million, or $0.17 per share, compared to a net loss of $5.1 million, or $(0.11) per share for the same period in 2008. For the year ended December 31, 2009, Cardium reported a net loss of $11.7 million, or $(0.24) per share, compared to a net loss of $24.6 million, or $(0.55) per share for the year ended December 31, 2008. The fourth quarter 2009 financial results also include an $11.4 million favorable adjustment to income for the non-cash change in fair market value of certain common stock warrants we recorded as derivative liabilities upon the adoption of ASC 815 (formerly Emerging Issues Task Force EITF 07-05), recorded in "Change in Fair Value of Derivative Liabilities." Grant revenue for the year ended December 31, 2009 was $445,000 compared to $417,000 for the previous year.
Research and development costs for the three months ended December 31, 2009 totaled $774,000 and general and administrative expenses were $1.0 million, compared to $2.0 million and $1.6 million, respectively, for the same period last year. For the year ended December 31, 2009, research and development expense totaled $4.3 million and general and administrative expenses were $4.9 million, compared to $11.0 million and $6.5 million, respectively, for 2008. The decrease was primarily due to reductions in the Generx Phase 3 clinical trial costs and related clinical support staff reductions and decrease in costs related to the completion of Cardium's Excellarate Phase 2b clinical study.
Interest expense for the year ended December 31, 2009 was $6.3 million compared to $550,000 for the year ended December 31, 2008 and includes $5.3 million representing the non-cash amortization of the fair market value of warrants issued with the notes and amortized over the term of the notes and other debt costs. The change in fair value of derivative liabilities was a favorable $11.4 million for the three months ended December 31, 2009 and an unfavorable $1.1 million for the year ended December 31, 2009, and we ended the year with derivative liabilities at December 31, 2009 of $4.8 million. This non-cash liability represents the fair market value of warrants which were previously issued with down round price protection provisions and therefore recorded as derivative liabilities and the non-cash changes in value are required to be recorded in the income statement quarterly. These non-cash activities are reported as a result of the adoption of ASC 815.
Cardium ended the year with cash and cash equivalents totaling $3.4 million compared to $1.1 million the previous year. During 2009, the Company completed a $3.5 million financing in the form of senior subordinated secured notes with accompanying warrants and a $750,000 unsecured debt financing involving the sale of unsecured notes and accompanying warrants, which were repaid from the proceeds received from the sale of InnerCool. In addition, two follow-on registered direct investments were made by institutional investors with gross proceeds totaling approximately $10.5 million before placement agent fees and offering expenses. On March 15, 2010, the Company announced the completion of a common stock offering with institutional and retail investors resulting in gross proceeds of $11.3 before placement fees and offering expenses.
The total shares of common stock outstanding at December 31, 2009 were 55.2 million compared to 46.9 million shares of common stock outstanding at December 31, 2008. The total shares of common stock outstanding following the offering announced March 15, 2010, were 77.9 million shares.
Cardium also reported that the audit opinion accompanying its consolidated financial statements for the year ended December 31, 2009, which statements were included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission in March 2010, again contained a going concern qualification from its independent registered public accounting firm, Marcum LLP. Consistent with its business strategy and as outlined in this press release, Cardium plans to raise additional funds through the strategic sale or monetization of its operating units, entering into strategic licensing agreements, through the approval and future sales of the Excellagen family of products, and/or other financing transactions.
The Company continues to provide information in accordance with GAAP, however, with the adoption of ASC 815 and its very substantial impact on our total liabilities including certain non-cash derivative liabilities and corresponding reported net gains and losses arising from changes in the underlying market value of Cardium's common stock, Cardium believes it is also helpful for investors to receive additional information relating more specifically to the Company's operating results. Accordingly, the Company additionally provides a pro forma income statement and pro forma balance sheet which excludes the non-cash effects of ASC 815, amortization of the value of warrants issued with debt, and stock-based compensation on its financial results and liabilities. The Company presents this information to investors as an additional tool for evaluating the Company's financial results in a manner that reflects ongoing operations and facilitates comparisons with operating results from prior periods. The presentation of this additional non-GAAP information is intended to provide investors with additional incremental tools for their review of the Company's results and is not meant to be considered in isolation or as a substitute for financial information presented in accordance with GAAP. As a result of this accounting, the balance sheet reports non-cash derivative liabilities of $4.8 million attributable to the fair market value of certain warrants. This liability represents a non-cash obligation and will be adjusted accordingly as warrants are exercised, changes in stock price occur, or when the warrants price protection provision expires. This non-cash liability and the change in value of these derivative liabilities have not been included in the non-GAAP reporting presentation that is included with this press release.
Cardium's common stock is currently listed on the NYSE Amex (the "Exchange"). To maintain that listing, we must continue to comply with various listing standards of the Exchange, as set forth in Part 10 of the Exchange's Company Guide. In December 2008, we received a notice from the staff of the Exchange noting that, based on their review of publicly available information, we did not meet certain of the Exchange's continued listing standards related to the maintenance of a minimum level of stockholders' equity and losses from ongoing operations. In January 2009, we submitted a plan of compliance (the "Plan") advising the Exchange of the actions taken or to be taken to regain compliance with the Company Guide. In February 2009, our Plan was accepted and in July 2009, following completion of the Philips Transaction, we were informed that Cardium was considered to have regained compliance with the Exchange's requirements, in advance of the June 23, 2010 deadline. On December 28, 2009, the Exchange noted that we were not considered to be in compliance with Section 1003(a)(iv) of the Company Guide because we reported stockholders' equity of less than $4,000,000 and losses from continuing operations and net losses in three of our most recent fiscal years. With losses from continuing operations and net losses in five of our most recent fiscal years, the stockholders' equity threshold would increase to $6,000,000. The Exchange asked us to supplement our previously-filed Plan advising the Exchange of the actions we have taken or will take to regain compliance with the Company Guide by June 23, 2010. Prior to the January 27, 2010 deadline, we provided a supplement to the Plan to the Exchange. On March 5, 2010, the Exchange notified the Company that based on its review of information provided, Cardium had made a reasonable demonstration of its ability to regain compliance with the requirements of sections 1003(a)(i) and 1003(a)(ii) of the NYSE AMEX company guide by June 23, 2010.
The Company will be subject to periodic review by the exchange staff during the extension period covered by the plan which is through June 23, 2010. Failure to make progress consistent with the plan or to regain compliance with the continued listing standards by the end of the applicable extension periods could result in the Company's shares being delisted from the exchange. If the Company's common stock was ultimately delisted from the exchange, it would be expected to trade on the OTC Bulletin Board, a regulated quotation service that provides quotes, sale prices and volume information in over-the-counter equity securities. The Company's common stock was traded on the OTC Bulletin Board until July 2007, when the Company elected to instead list its shares on the American Stock Exchange.
About Cardium
Cardium is focused on the acquisition and strategic development of new and innovative bio-medical product opportunities and businesses that have the potential to address significant unmet medical needs and definable pathways to commercialization, partnering and other economic monetizations. Cardium's investment portfolio includes the Tissue Repair Company and Cardium Biologics, medical technology companies primarily focused on the development of innovative therapeutic products for wound healing, bone repair, and cardiovascular indications. In July 2009, Cardium completed the sale of its InnerCool Therapies medical device business to Royal Philips Electronics, the first asset monetization from the Company's biomedical investment portfolio. News from Cardium is located at www.cardiumthx.com.
Forward-Looking Statements
Except for statements of historical fact, the matters discussed in this press release are forward looking and reflect numerous assumptions and involve a variety of risks and uncertainties, many of which are beyond our control and may cause actual results to differ materially from stated expectations. For example, there can be no assurance that results or trends observed in one clinical study or procedure will be reproduced in subsequent studies or procedures, or that clinical studies even if successful will lead to product advancement or partnering; that the U.S. Food and Drug Administration will grant marketing clearance of the Excellagen product candidates or that we or a partner can successfully introduce these or additional products into advanced wound care markets; that Excellagen, Excellarate or our other candidates will prove to be sufficiently safe and effective, or that results or trends observed in one clinical study or procedure will be reproduced in subsequent studies or procedures, or that clinical studies even if successful will lead to product advancement or partnering; that the Excellagen or Excellarate product candidates offer the potential for simpler or more cost-effective treatment for physicians and patients than other FDA-approved products that currently are or will be on the market; that improvements in the formulation or use of Generx will be commercially practicable, or that Generx could be successfully advanced as a therapeutic in developing markets or that the results of studies in such markets could be used to advance or broaden the commercialization of Generx in the U.S. or other markets; that our product candidates will not be unfavorably compared to competitive products that may be regarded as safer, more effective, easier to use or less expensive; that our clinical study programs can be conducted and completed in an efficient and successful manner; that we can develop a DNA-based orthobiologics product portfolio; that FDA or other regulatory clearances or other certifications, or other commercialization efforts will be successful or will effectively enhance our businesses or their market value; that our products or product candidates will prove to be sufficiently safe and effective after introduction into a broader patient population; or that third parties on whom we depend will perform as anticipated.
Actual results may also differ substantially from those described in or contemplated by this press release due to risks and uncertainties that exist in our operations and business environment, including, without limitation, risks and uncertainties that are inherent in the development of complex biologics and in the conduct of human clinical trials, including the timing, costs and outcomes of such trials, our ability to obtain necessary funding, regulatory approvals and expected qualifications, our dependence upon proprietary technology, our history of operating losses and accumulated deficits, our reliance on collaborative relationships and critical personnel, and current and future competition, as well as other risks described from time to time in filings we make with the Securities and Exchange Commission. We undertake no obligation to release publicly the results of any revisions to these forward-looking statements to reflect events or circumstances arising after the date hereof.
Copyright 2010 Cardium Therapeutics, Inc. All rights reserved.
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Cardium Therapeutics™ and Generx® and MedPodium™ are trademarks of Cardium Therapeutics, Inc.
Tissue Repair™, Gene Activated Matrix™, GAM™, Excellagen™, Excellarate™ and Osteorate™
are trademarks of Tissue Repair Company.
Cardium Therapeutics, Inc.
Selected Condensed Consolidated Results of Operations
The Three Months Ended December 31,
(Unaudited)
--------------------------------------------------------
Pro forma Pro forma
Actual Actual Results Results
2009 2008 2009* 2008*
---- ---- ----- -----
Revenues $183,397 $42,279 $183,397 $42,279
-------- ------- -------- -------
Research and
development (774,049) (2,009,826) (411,759)(1)(1,842,767)(1)
General and
administrative (1,036,109) (1,590,065) (984,007)(1)(1,391,568)(1)
--------- --------- ------- ---------
Loss from
operations (1,810,158) (3,599,891) (1,395,766) (3,234,335)
--------- --------- --------- ---------
Interest income
(expense), net (448,510) (543,290) (49,262) (109,029)(8)
Change in fair
value of
derivative
liabilities 11,391,398 - - (2) -
--------- --------- ------- ---------
Gain (loss)
from
continuing
operations 9,316,127 (4,100,902) (1,261,631) (3,301,085)
Income (loss)
from
discontinued
operations - (977,051) - (6) - (6)
--------- --------- ------- ---------
Net Income
(loss) $9,316,127 $(5,077,953) $(1,261,631) $(3,301,085)
========== =========== =========== ===========
Net income
(loss) per
common share
– basic and
diluted $0.17 $(0.11) $(0.02) $(0.07)
===== ====== ====== ======
Weighted average
common shares
outstanding
– basic 54,207,761 46,930,439 54,207,761 46,930,439
Weighted average
common shares
outstanding
– diluted 54,374,522 46,930,439 54,374,522 46,930,439
The Year Ended December 31,
--------------------------------------------------------
Pro forma Pro forma
Audited Audited Results Results
2009 2008 2009* 2008*
---- ---- ----- -----
Revenues $444,946 $416,912 $444,946 $416,912
--------- --------- ------- ---------
Research and
development (4,302,298) (11,041,930) (3,633,251)(1) (9,965,058)(1)
General and
administrative (4,855,582) (6,529,346) (4,615,487)(1) (5,623,029)(1)
--------- --------- --------- ---------
Loss from
operations (9,157,880) (17,571,276) (8,248,738) (15,588,087)
--------- ---------- --------- ----------
Interest income
(expense), net (6,327,363) (447,626) (1,025,036)(8) (13,365)(8)
Change in fair
value of
derivative
liabilities (1,118,120) - - (2) -
--------- --------- ------- ---------
Loss from
continuing
operations (16,158,417) (17,601,990) (8,828,828) (15,184,540)
Loss from
discontinued
operations (1,930,636) (6,996,068) - (6) -
Gain on sale
of business
unit 6,408,603 - (7) -
========= ======== ========== ===========
Net loss $(11,680,450)$(24,598,058) $(8,828,828) $(15,184,540)
============ ============ =========== ============
Net loss
per common
share –
basic and
diluted $(0.24) $(0.55) $(0.18) $(0.34)
====== ====== ====== ======
Weighted
average common
shares
outstanding
– basic
and diluted 48,976,917 44,978,169 48,976,917 44,978,169
Selected Condensed Consolidated Balance Sheet Data
Pro Forma Pro Forma
Results Results
2009 2008 December 31, December 31,
(Audited) (Audited) 2009* 2008*
--------- --------- ------ -------
Cash and cash
equivalents $3,363,665 $1,102,894 $3,363,665 $1,102,894
Accounts
receivable 115,138 42,279 115,138 42,279
Prepaid expenses
and other current
assets 597,592 509,168 597,592 509,168
Property and
equipment, net 351,539 746,169 351,539 746,169
Other long-term assets 1,047,730 532,438 1,047,730 532,438
Assets of business
held for sale - 7,363,973 - -(5)
--------- --------- --------- ---------
Total assets $5,475,664 $10,296,921 $5,475,664 $2,932,948
========== =========== ========== ==========
Accounts payable and
accrued liabilities $2,637,243 $4,691,600 $2,637,243 $4,691,600
Short-term debt - 4,036,776 - 6,000,000(3)
Current liabilities
of business held
for sale - 2,127,986 - -(5)
Derivative
liabilities 4,802,882 - - (4) -
Long-term
liabilities 190,114 195,315 190,114 195,315
------- ------- ------- -------
Total liabilities 7,630,239 11,051,677 2,827,357 10,886,915
--------- ---------- --------- ----------
Stockholder's
(deficiency)
equity (2,154,575) (754,756) 2,648,307 (7,953,967)
--------- ------- --------- ---------
Total liabilities
and
stockholder's
(deficiency)
equity $5,475,664 $10,296,921 $5,475,664 $2,932,948
========== =========== ========== ==========
*Note: additional pro forma information is included the Company presents
this information to investors as an additional tool for
evaluating the Company's financial results in a manner that
reflects ongoing operations and facilitates comparisons with
operating results from prior periods. The presentation of this
additional non-GAAP information is intended to provide investors
with additional incremental tools for their review of the Company's
results and is not meant to be considered in isolation or as a
substitute for the actual net income information prepared and
provided in accordance with GAAP. The following pro forma
adjustments were made solely as supplemental financial information
to help investors and the financial community make meaningful
comparisons of operating results from one financial period to
another.
(1) Stock based compensation was removed.
(2) The change in the fair market of derivative liabilities was
removed. This is the effect of non-cash charges associated with
the treatment of the value of certain derivative securities under
newly-adopted ASC 815, which effects can vary substantially each
quarter along with changes to the price of the underlying common
stock during the quarter.
(3) Debt discount (non cash) was added back to reflect the actual
amount of debt owed at the end of each period reported.
(4) Non cash derivative liabilities were removed.
(5) All the assets and liabilities of business held for sale were
removed.
(6) Net income (loss) from discontinued operations was removed.
(7) Gain on sale of business unit was removed.
(8) The non-cash amortization of the fair market value of warrants
issued with the notes and amortized over the term of the notes
were removed.
SOURCE Cardium Therapeutics
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