StemCells Announces Fourth Quarter And Year End 2008 Financial Results
PALO ALTO , Calif. , March 16, 2009, – StemCells, Inc. (NASDAQ: STEM) today reported its financial results for the fourth quarter and year ended December 31, 2008.
For the fourth quarter ended December 31, 2008, the Company reported a net loss of $10,082,000, or $0.11 per share, compared to a net loss of $7,826,000, or $0.10 per share, for the fourth quarter of 2007. The Company’s loss from operations in the fourth quarter of 2008 was $7,098,000, or 14.7% lower than the loss from operations of $8,323,000 in the fourth quarter of 2007.
For the fiscal year ended December 31, 2008, the Company reported a net loss of $29,087,000, or $0.35 per share, compared to a net loss of $25,023,000, or $0.31 per share, for 2007. The increase in net loss in 2008 as compared to 2007 was primarily attributable to two non-cash expenses incurred in the fourth quarter of 2008: a charge of $2,083,000 to write down the value of the Company’s investment in shares of ReNeuron Group Plc (marketable equity securities) and a charge of $937,000 to reflect an increase in our warrant liability. The Company’s loss from operations in 2008 was $26,738,000, which was 6.5% lower than the loss from operations of $28,591,000 in 2007. Operating expenses were approximately 6% lower in 2008 as compared to 2007, primarily due to a decrease in external services related to manufacturing and testing of our cells and to lower clinical trial expenses due to the completion of enrollment in January 2008 of our six-patient Phase I clinical trial. Total revenue, all primarily from grants and licensing agreements, was $232,000 in 2008, compared to $57,000 in 2007. In addition, interest income in 2008 was $803,000, or 67% lower than the $2,460,000 in 2007, due to lower yields on lower average investment balances. In 2008, cash used for operating activities was $22,740,000, compared to $20,857,000 in 2007.
Cash, cash equivalents and short-term marketable debt securities were $34,038,000 at December 31, 2008, compared with $36,456,000 at December 31, 2007. In the first quarter of 2009, we sold in aggregate 3,325,000 shares of our common stock for gross proceeds of approximately $6,999,000. Our cash, cash equivalents and short-term marketable debt securities at December 31, 2008, pro forma the sale of these shares and net of sales commissions, would be $40,687,000.
Highlights for 2008 and significant events since the end of the year included:
- In January 2008, we completed enrollment and dosing of a six-patient Phase I clinical trial of our HuCNS-SC ® product candidate as a treatment for infantile and late infantile neuronal ceroid lipofuscinosis (NCL, also often referred to as Batten disease) at Oregon Health & Science University (OHSU) Doernbecher Children’s Hospital.
- In January 2008, we entered into a research collaboration with OHSU Casey Eye Institute to evaluate our HuCNS-SC cells as a potential treatment for retinal degeneration, a leading cause of blindness.
- In April 2008, the U.S. Patent and Trademark Office (PTO) issued U.S. Patent Number 7,361,505 with broad claims covering human neural stem cells derived from any tissue source, including embryonic, fetal, juvenile, or adult tissue.
- In June 2008, the PTO issued U.S. Patent Number 7,381,561, which claims the use of monoclonal antibodies for the prospective isolation of rare cells from human neural tissue, such as our HuCNS-SC product candidate.
- In September 2008, Stewart Craig, Ph.D., joined us as Senior Vice President, Development and Operations, with responsibility for process design and engineering, GMP manufacturing operations, regulatory affairs, quality assurance, facilities, and supply chain management. Dr. Craig has over 25 years of experience in the biotechnology sector, the last 15 of which have been in the cell therapy field.
- In October 2008, we were awarded a $305,000 grant from the National Institute of Diabetes and Digestive and Kidney Diseases to research and develop a potential cell-based therapeutic for liver disease arising from infection by the hepatitis C virus.
- In November 2008, we reported that our HuCNS-SC cells, when transplanted into a well-established animal model, can protect the retina from progressive degeneration and prevent the loss of visual function. Retinal degeneration leads to loss of vision in diseases such as age-related macular degeneration and retinitis pigmentosa.
- In November 2008, we raised approximately $20 million in gross proceeds through the sale of approximately 13.8 million units at $1.45 per unit. Each unit consisted of one share of common stock and a warrant to purchase 0.75 shares of common stock at an exercise price of $2.30 per share. We received total proceeds, net of offering expenses and placement agency fees, of approximately $18.6 million.
- In December 2008, the U.S. Food and Drug Administration (FDA) approved our IND to initiate a clinical trial of our HuCNS-SC product candidate to treat Pelizeaus-Merzbacher Disease (PMD), a fatal brain disorder that mainly affects young children. This Phase I trial, which is designed to evaluate the safety and preliminary efficacy of HuCNS-SC cells as a treatment for PMD, is expected to begin enrolling patients in 2009.
- In January 2009, we completed the six-patient Phase I clinical trial of our HuCNS-SC product candidate as a treatment for infantile and late infantile NCL.
- In March 2009, we entered into an asset purchase agreement with Stem Cell Sciences Plc (SCS) to acquire substantially all of the operating assets and liabilities of SCS. The transaction is subject to customary closing conditions, including the approval of the stockholders of SCS, and is expected to close shortly after the SCS extraordinary general meeting scheduled for March 27, 2009. As consideration, we will issue to SCS 2,650,000 shares of our common stock, plus waive certain commitments of SCS to repay approximately $715,000 in cash advanced by us to SCS for working capital purposes.
“Despite the worst economic and financial conditions in decades, StemCells made significant progress in 2008 on a number of fronts towards our longer-term goal of building a sustainable cell-based business enterprise,” said Martin McGlynn, President and Chief Executive Officer of StemCells. “We successfully completed our first clinical trial, a Phase I trial for Batten disease. The data obtained from this trial lays the foundation for the creation of a more extensive human safety database for our HuCNS-SC product. In December, the FDA authorized us to initiate a second clinical trial, this time in Pelizeaus-Merzbacher Disease, another rare, fatal, pediatric, neurodegenerative disease, and we initiated discussions with the FDA and other regulatory agencies with respect to our plans to open up clinical trials for other conditions affecting the CNS. In our Liver Program, we have settled on a process to isolate and purify our proprietary human liver engrafting cells (hLEC) and are now ready to pursue the necessary approvals to initiate clinical testing with our collaborators in Belgium.”
“From a financial perspective, we proactively maintained tight control over our operating expenses and carefully managed our burn rate,” continued Mr. McGlynn. “We managed to raise $20 million last November in extremely difficult market conditions, and have continued to strengthen our balance sheet this quarter. These additional resources enable us to remain focused on executing our strategic business agenda, as well as to plan ahead with more confidence and flexibility.”
“In that regard, we see a compelling industrial logic and strategic fit in our proposed acquisition of the business of Stem Cell Sciences,” remarked Mr. McGlynn. “We believe that the combination of people, expertise, technology platforms, and intellectual property after the acquisition will ultimately lead to the creation of a world class, sustainable stem cell company that will have the best chance of realizing the potential value of the technology by developing, in parallel, cell-based therapeutics and cell based assays for use in drug discovery and screening.”
About StemCells, Inc.
StemCells, Inc. is a clinical-stage biotechnology company focused on the discovery, development and commercialization of cell-based therapeutics to treat diseases of the central nervous system (CNS) and liver. StemCells’ product development programs seek to repair or repopulate CNS and liver tissue that has been damaged or lost as a result of disease or injury. StemCells has pioneered the discovery and development of HuCNS‑SC ® cells, its highly purified, expandable population of human neural stem cells. StemCells owns or has exclusive rights to approximately 50 issued or allowed U.S. patents and more than 150 granted or allowed non-U.S. patents. Further information about StemCells is available on its web site at: www.stemcellsinc.com.
Apart from statements of historical fact, the text of this press release constitutes forward-looking statements regarding, among other things, the proposed transaction between StemCells and SCS, the expected timetable for completing this transaction, the future business operations of StemCells, Inc. (the “Company”) and of the combined company, the potential benefits and synergies arising from the proposed transaction, the Company’s ability to leverage the SCS assets and realize their value, and the future opportunities for the combined company, including its ability to conduct clinical trials as well as its research and product development efforts. These forward-looking statements speak only as of the date of this news release. The Company does not undertake to update any of these forward-looking statements to reflect events or circumstances that occur after the date hereof. Such statements reflect management’s current views and are based on certain assumptions that may or may not ultimately prove valid. The Company’s actual results may vary materially from those contemplated in such forward-looking statements due to risks and uncertainties to which the Company is subject, including uncertainty as to the timing of the shareholder meeting at which SCS’ shareholders will vote on approving the transaction and uncertainties on whether the SCS shareholders will vote to approve the transaction, the timing of the completion of the transaction, the possibility that various closing conditions may not be satisfied, the effects of disruption from the transaction making it more difficult to maintain relationships with employees, licensees, other business partners, or governmental entities, and uncertainties about the related transaction costs; risks whether the FDA or other applicable regulatory agencies will permit the Company to continue clinical testing in NCL, PMD or in future clinical trials of proposed therapies for other diseases or conditions despite the novel and unproven nature of the Company’s technologies; uncertainties about whether the Company will receive the necessary support of a clinical study center and its ethics board to initiate a clinical trial in PMD; uncertainties regarding the Company’s ability to obtain the increased capital resources needed to continue its current and planned research and development operations, including such operations of the combined company, and to conduct the research, preclinical development and clinical trials necessary for regulatory approvals; uncertainty as to whether HuCNS-SC and any products that may be generated in the future in the Company’s cell-based programs will prove safe and clinically effective and not cause tumors or other adverse side effects; uncertainties regarding the Company’s manufacturing capabilities given its increasing preclinical and clinical commitments; and other factors that are described under the heading “Risk Factors” in Item 1A of Part II of the Company’s Annual Report on Form 10-K.
StemCells, Inc.
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Condensed Consolidated Statement of Operations
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(in thousands, except share and per share amounts)
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Three months ended Twelve months ended
--------------------- -----------------------
December 31, December 31,
--------------------- -----------------------
2008 2007 2008 2007
---------- ---------- ------------ ----------
Revenue from grants and
licensing agreements $172 $30 $232 $57
Operating Expenses
Research and
development 4,721 5,798 17,808 19,938
General &
administrative 2,064 2,211 8,296 7,927
Wind-down expenses
related to our
former corporate
headquarters 485 344 866 783
--------------------------------------------
Total operating
expenses 7,270 8,353 26,970 28,648
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Loss from operations (7,098) (8,323) (26,738) (28,591)
Other income (expense)
Other than temporary
impairment of marketable
securities (2,083) - (2,083) -
Change in fair value
of warrant liability (937) - (937) -
License and settlement
agreement, net - - - 550
Interest Income 65 533 803 2460
Other income (expense) (29) (36) (132) 558
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Total other income
(expense) (2,984) 497 (2,349) 3568
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Net loss basic and
diluted ($10,082) ($7,826) ($29,087) ($25,023)
============================================
Net loss per share;
basic and diluted ($0.11) ($0.10) ($0.35) ($0.31)
Weighted average
shares - basic
and diluted 88,343,325 80,644,213 82,716,455 79,772,351
StemCells, Inc.
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Condensed Consolidated Balance Sheets
(in thousands)
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December 31, December 31,
-----------------------------
2008 2007
Assets
Current assets:
Cash & cash equivalets $30,043 $9,759
Marketable securities 4,182 26,697
Other current assets 1,107 2,297
-----------------------------
Total current assets 35,332 38,753
Marketable securities - 3,151
Property, plant & equipment, net 3,173 3,905
Other assets, net 2,725 2,473
-----------------------------
Total assets $41,230 $48,282
=============================
Liabilities and stockholders' equity
Current liabilities 5,318 5,848
Warrant liability 8,440 -
Non-current liabilities 5,663 7,222
Stockholders' equity 21,809 35,212
-----------------------------
Total liabilities and stockholders'
equity $41,230 $48,282
=============================
(a) Derived from audited financial statements included in
StemCells' annual report on form 10-K filed
with the SEC.
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CONTACT: StemCells, Inc.
Rodney Young
Chief Financial Officer
650-475-3100, Ext. 105
irpr@stemcellsinc.com
SOURCE: StemCells, Inc.
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