Total Revenue Increases 84% Year Over Year HOUSTON, Nov. 2
/PRNewswire-FirstCall/ -- Tanox, Inc. (NASDAQ:TNOX) today reported
financial results for the third quarter ended Sept. 30, 2006. Total
revenue for the third quarter of 2006 was $15.3 million, compared
to revenues of $8.3 million for the third quarter of 2005, and
$12.7 million for the second quarter of 2006. Net royalty revenue
from sales of Xolair(R) (omalizumab) was $10.2 million for the
third quarter of 2006, compared to net Xolair royalty revenue of
$7.7 million for the third quarter of 2005, and $9.9 million for
the second quarter of 2006. In addition to royalty revenue, Tanox
recorded third quarter 2006 manufacturing-rights revenue of $2.6
million versus manufacturing-rights revenue of $650,000 for the
third quarter of 2005, and $651,000 for the second quarter of 2006.
Manufacturing-rights revenue is based on the quantity of Xolair
produced, as defined in the company's collaboration agreement with
Genentech, Inc. and Novartis Pharma AG. Tanox also recorded net
profit-sharing revenue of $2.4 million for the third quarter of
2006, compared to net profit-sharing revenue of $562,000(1) for the
third quarter of 2005, and $1.2 million for the second quarter of
2006. Third quarter 2006 profit-sharing revenue represented the
company's share of Novartis' net profits from U.S. sales of Xolair
in the second quarter of 2006. Manufacturing-rights revenue and
profit sharing are recorded one quarter in arrears. Tanox reported
net income of $376,000, or $0.01 per share, for the third quarter
of 2006, compared to a net loss of $3.4 million, or $0.08 per
share, for the third quarter of 2005, and a net loss of $2.3
million, or $0.05 per share, for the second quarter of 2006.
(1)Recorded as deferred profit-sharing revenue, resulting from
Novartis' net profits from U.S. sales of Xolair in the first half
of 2005. Results for the third quarter of 2006 reflected the
company's Jan. 1, 2006 adoption of Statement of Financial
Accounting Standards No. 123R (FAS 123R). The impact of expensing
employee stock compensation is reflected below: Basic and Diluted
Reported Earnings Per Share Basic and Before Stock Stock Diluted
Compensation Compensation Earnings Expense Expense Per Share Third
Quarter 2006 $0.03 $(0.02) $0.01 Research and development costs for
the third quarter of 2006 were $14.5 million, compared to $11.4
million for the third quarter of 2005, and $14.0 million for the
second quarter of 2006. The year-over-year increase in research and
development costs was attributed to the write off of prepaid
expenses of $1.4 million associated with a manufacturing services
agreement, increased manufacturing activities in preparation for
planned clinical trials, increased spending for preclinical
programs and employee stock compensation expense. General and
administrative expenses were $2.6 million for the third quarter of
2006, compared to $1.5 million for the third quarter of 2005, and
$3.0 million for the second quarter of 2006. The majority of the
year-over- year increase in general and administrative costs for
the third quarter of 2006 was due to employee stock compensation
expense and expenses related to business-development activities. As
of Sept. 30, 2006, Tanox had $177.5 million in cash and
investments, compared to $164.5 million at Dec. 31, 2005. The
increase in cash was due to a one-time net milestone payment of
$12.8 million received in the first quarter of 2006, and increases
in royalty, profit-sharing and manufacturing- rights revenues.
Recent and Third Quarter Company Highlights * Tanox has received
positive feedback from the FDA regarding its proposed pivotal Phase
2b protocol for the next dose-finding clinical trial of its lead
clinical antibody, TNX-355. The Agency has concurred that the
trial, if appropriately designed, could be considered pivotal as
part of a registration program for TNX-355 in HIV
treatment-experienced patients. The company is in the latter stages
of discussions with the FDA and will provide an update on the
timing of future clinical trials once the discussions are complete.
* Tanox made an oral presentation at the 2006 Interscience
Conference on Antimicrobial Agents and Chemotherapy in September
that provided insight into the resistance profile of TNX-355.
Results of in vitro studies indicated that reduced susceptibility
to TNX-355 does not appear to alter the CD4 cell requirement for
HIV entry. * The company presented new Phase 2 clinical results at
the 2006 International AIDS Conference in August that confirmed
TNX-355, when used in combination with an optimized background
regimen of antiretroviral drugs, produced a sustained virologic
response in treatment-experienced HIV patients through 48 weeks. As
previously reported, the study met its primary endpoint of mean
viral-load reduction from baseline at Week 24. * Patient enrollment
continued ahead of schedule, with three of six cohorts completed,
in a Phase 1 clinical trial of anti-IL-13 antibody TNX-650 for the
treatment of Hodgkin's lymphoma. * The company initiated a second
Phase 1 trial of TNX-650. The trial is designed to evaluate the
antibody as a potential treatment for moderate-to-severe asthma.
The trial is a randomized, double-blind, placebo-controlled,
dose-escalation study of the safety, tolerability and
pharmacokinetics of single doses of TNX-650 in healthy volunteers.
A total of 32 subjects are expected to be enrolled in four cohorts
in the study, which is being conducted at a single site in the U.S.
TNX- 650 has the potential to be a therapeutic option for
non-allergic asthma patients, as well as asthmatics whose disease
is not currently well controlled. "We delivered strong revenue
growth in the third quarter due to the substantial impact of our
Xolair alliance," said Danong Chen, Ph.D., president and chief
executive officer. "As sales continued to increase, we experienced
year-over-year growth in royalty revenue and considerable increases
in manufacturing-rights revenue and profit sharing. "In addition,
we advanced our drug-development programs and took an important
step forward with the expansion of our TNX-650 antibody program
into clinical testing as a potential treatment for asthma."
Financial Outlook The company anticipates breakeven cash burn in
2006. The revised forecast reflects lower than anticipated capital
expenditures and the company's expectation that certain costs
associated with continued development of TNX- 355 will now occur in
2007 and beyond. Conference Call Tanox will host a conference call
for investors today at 10 a.m., EST. The conference call can be
accessed at 1-800-591-6923 (domestic) or 1-617-614-4907
(international). The pass code is 4544-2572. Live audio of the call
will be webcast on the Internet. The webcast can be accessed from
the Tanox Web site at http://www.tanox.com/ in the Investor
Relations section. An audio replay of the webcast will be available
beginning at noon, EST, Nov. 2, 2006 through 11 a.m., EST, Dec. 2,
2006. Access phone numbers for the replay are 1-888-286-8010
(domestic) and 1-617-801-6888 (international); conference pass code
5361-7610. About Tanox, Inc. Tanox is a biotechnology company
specializing in the development of monoclonal antibodies. The
company develops innovative biotherapeutics for the treatment of
immune-mediated diseases, inflammation, infectious disease and
cancer. Tanox's lead investigational therapy, TNX-355, is a
viral-entry inhibitor antibody to treat HIV/AIDS. TNX-355 has shown
significant antiviral activity in Phase 2 clinical testing. Tanox's
first-approved drug, Xolair(R) (omalizumab), is the first antibody
approved to treat moderate-to-severe confirmed, allergic asthma.
Xolair was developed in collaboration with Genentech, Inc. and
Novartis Pharma AG and is approved for marketing in the United
States, Canada and major European countries. Tanox is based in
Houston and has a manufacturing facility in San Diego. Additional
corporate information is available at http://www.tanox.com/ . This
news release contains forward-looking statements regarding Tanox's
expectations for net cash usage and the timing of clinical
developments, as well as statements regarding the therapeutic
potential for TNX-355 and TNX- 650. These statements are based on
Tanox's current beliefs and expectations, and are subject to risks
and uncertainties that could cause actual results to differ
materially due to a number of factors, including the continued
market acceptance of Xolair(R); the results of our collaborators,
Genentech and Novartis, in growing sales of Xolair; our ability to
successfully recruit participants for clinical trials; the
potential failure to achieve positive results in clinical trials;
and the strength of our patent portfolio. The therapeutic potential
of TNX-355 as a treatment for HIV-1-infected patients or TNX-650 as
a treatment for Hodgkin's lymphoma and/or asthma is subject to the
risks inherent in drug development. The conduct or timing of any
future trials of TNX-355 can depend on many factors, including our
discussions with the FDA, whether we choose to partner the program,
and availability of sufficient quantities of clinical-trial
material. Success in early stage clinical trials does not ensure
that later-stage or larger-scale clinical trials will be
successful, and the results achieved in later-stage trials may not
be sufficient to meet applicable regulatory standards. Problems or
delays may arise during clinical trials or in the course of
developing, testing or manufacturing drugs. For more detailed
information on the risks and uncertainties associated with Tanox's
drug development and other activities, see Tanox's periodic reports
filed with the Securities and Exchange Commission. The Tanox logo
is a registered trademark with the U.S. Patent and Trademark
Office. TANOX, INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In
thousands, except per-share data) Summary of Operations (unaudited)
Three Months Ended Nine Months Ended September 30, September 30,
2006 2005 2006 2005 Revenues, net $15,293 $8,347 $37,853 $21,652
Operating expenses: Research and development 14,491 11,402 42,432
35,156 Acquired in-process research and development --- --- ---
13,680 General and administrative 2,611 1,515 8,368 5,270 Total
operating expenses 17,102 12,917 50,800 54,106 Loss from operations
(1,809) (4,570) (12,947) (32,454) Other income, net 2,185 1,187
5,869 3,192 Net income (loss) $376 $(3,383) $(7,078) $(29,262)
Income (loss) per share - basic and diluted $0.01 $(0.08) $(0.16)
$(0.66) Shares used in computing income (loss) per share Basic
44,836 44,063 44,861 44,596 Diluted 44,924 44,063 45,064 44,596
Employee stock compensation expense included in operating expenses:
Research and development $411 $--- $1,170 $--- General and
administrative 387 --- 1,713 --- Total $798 $--- $2,883 $---
Summary Balance Sheet Information September 30, December 31, 2006
2005 (Unaudited) Assets: Cash, cash equivalents and investments
$177,468 $164,501 Property and equipment, net 29,868 31,214 Other
assets 15,677 34,221 Total assets $223,013 $229,936 Liabilities and
Stockholders' Equity: Accounts payable, accrued liabilities and
deferred revenue $11,332 $16,495 Stockholders' equity 211,681
213,441 Total liabilities and stockholders' equity $223,013
$229,936 http://www.newscom.com/cgi-bin/prnh/20050207/TNOXLOGO
DATASOURCE: Tanox, Inc. CONTACT: Steve Sievert of Tanox, Inc.,
+1-713-578-4211, or Web site: http://www.tanox.com/
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