AVI BioPharma, Inc. (Nasdaq:AVII) today reported financial results
for the three and six months ended June 30, 2007. The net loss for
the second quarter of 2007 was $8.5 million, or $0.16 per share,
compared with a net loss for the second quarter of 2006 of $6.9
million, or $0.13 per share. Revenues for the 2007 second quarter
were $2.4 million, up from $19,000 in the prior-year quarter,
reflecting increases in research contracts revenues of $2.4 million
and license fees of $31,000, partially offset by decreases in
grants revenues of $8,000. Research and development (R&D)
expenses for the quarter increased to $9.2 million from $5.9
million last year, and general and administrative (G&A)
expenses increased to $2 million from $1.5 million in the prior
year. The increase in R&D expenses was due to higher clinical
costs of $1.4 million from the expansion of clinical programs. The
increase in R&D expenses also reflects $1.8 million in expenses
for government research contracts. The increase in G&A expenses
was due primarily to increases in legal expenses of $315,000 and
compensation costs of $225,000, partially offset by decreases in
SFAS 123R expenses of $75,000. For the six months ended June 30,
2007, AVI BioPharma reported a net loss of $18.3 million, or $0.34
per share, compared with a net loss for the comparable period in
2006 of $16.0 million, or $0.31 per share. Revenues for the first
half of 2007 were $2.9 million, up from $85,000 in the first half
of 2006, reflecting increases in research contracts revenues of
$2.9 million and license fees of $63,000, partially offset by
decreases in grants revenues of $55,000. R&D expenses for the
first six months of 2007 increased to $15.5 million from $12.7
million in the prior-year period, and G&A expenses increased to
$6.3 million from $4.3 million. The increase in R&D expenses
was due to higher net clinical costs of $700,000, and $170,000 in
contracting costs for the production of GMP subunits. The increase
in R&D expenses also reflects $2.1 million in expenses for
government research contracts. In addition, R&D expenses
include increases in chemical and lab supply costs of $390,000,
professional consultant costs of $240,000, and leasehold and patent
amortization expenses of $50,000. These R&D increases were
partially offset by decreases in employee costs of $980,000, of
which $430,000 was related to the acceleration of the vesting of
certain stock options in the first quarter of 2006 and decreases in
SFAS 123R expenses of $290,000 and salaries and bonuses of
$250,000. The increase in G&A expenses was due primarily to
increases in compensation costs of $1.4 million of which $1.6
million (including $562,500 in cash compensation and $1.1 million
in SFAS 123R expenses) was related to the Separation and Release
Agreement with the company�s former Chief Executive Officer,
partially offset by decreases in SFAS 123R expenses of $200,000.
G&A expenses also included increases in legal expenses of
$545,000 and accounting expenses of $60,000. AVI had cash, cash
equivalents and short-term securities of $19.3 million as of June
30, 2007, a decrease of $13.8 million from December 31, 2006. This
decrease was due primarily to $12.7 million used in operations and
$1.1 million used for purchases of property and equipment and
patent-related costs. �We have over the years explored numerous
promising development programs based on the versatility of our
next-generation NEUGENE� antisense technology and, following a
re-evaluation of our programs, have identified those we believe
have the greatest near-term commercialization potential,� said K.
Michael Forrest, interim chief executive officer of AVI. �Our
current plans are to advance the clinical development of NEUGENE
drug candidates targeting specific cardiovascular conditions; use
our new exon-skipping pre-RNA interference technology, or ESPRIT,
for the treatment of selected genetic diseases with the first
indication as Duchenne muscular dystrophy, or DMD; to pursue
opportunities provided under our relationships with the Department
of Defense to develop products that are potentially effective
against lethal biological weapons; and,to continue preclinical work
developing an effective compound in combating an outbreak of
pandemic influenza caused by the H5N1 strain of avian flu. �We have
decided to discontinue our current hepatitis C (HCV) clinical
development program. We are redirecting and tightly concentrating
our drug discovery activities on programs designed to improve the
potency, delivery systems, efficacy and safety of our compounds,
including those for potential use in HCV,� he added.
�Discontinuation of the HCV clinical program is expected to allow
additional resources to be used in support of our cardiovascular
and DMD development programs.� Product Pipeline Update Technology
Overview AVI has developed proprietary next-generation NEUGENE
antisense compounds that are designed to bind to specific
disease-causing gene sequences to disable or inactivate the disease
process. AVI believes its NEUGENE antisense agents are more stable,
specific, efficacious and safer than second-generation antisense
compounds in clinical development by others. AVI�s NEUGENE-based
ESPRIT therapeutics function at the RNA processing level enabling
the deletion of disease-causing genetic sequences or the skipping
of mutated sequences, potentially allowing the expression of
functional proteins in certain diseases. Cardiovascular Disease
Program AVI-4126 and AVI-5126 are NEUGENE antisense drugs for
treating cardiovascular restenosis, the re-narrowing of a coronary
artery following angioplasty. These drugs inhibit the expression of
the c-myc gene, which the company believes plays a key role in the
development of the pathology leading to restenosis. In a completed
Phase II study, AVI demonstrated that AVI-4126 prevented restenosis
at the site of balloon angioplasty as measured by angiography at
six months. In March 2006, AVI announced a development and
commercialization agreement with Cook Group Inc., in which Cook
Group licensed NEUGENES for the down-regulation of c-myc gene
expression in certain vascular diseases. As part of this agreement,
Cook Group has assumed control of the APPRAISAL Phase II clinical
study, in which Resten-MP (AVI-4126 delivered with microparticles)
is being evaluated in the prevention of restenosis when delivered
intravenously in conjunction with the placement of one or more
bare-metal stents. In July 2007, Global Therapeutics, a Cook
Medical company, announced that it had completed six-month
follow-up on patients enrolled in the APPRAISAL Phase II study. In
July 2007, Global Therapeutics also reported plans to initiate a
clinical study for the inhibition of restenosis in patients
following angioplasty using a bare metal, cobalt chromium stent, a
drug delivery catheter and AVI-5126. In October 2006, AVI announced
its intention to initiate a clinical program to assess the safety
and effectiveness of AVI-5126 in coronary artery bypass graft
surgery (CABG). AVI-5126 is a combination of AVI-4126 and a
delivery peptide, and will be applied to the saphenous vein graft
ex vivo before engraftment. This is a 600-patient randomized,
double blind, placebo-controlled trial incorporating Phase Ib
through Phase III components. The Phase Ib/II stage of the trial is
underway in the Ukraine, with additional sites soon to come on line
in Poland. Enrollment of the first 110 patients is expected by the
first quarter of 2008. AVI has established a drug safety monitoring
committee comprised of independent third parties to periodically
evaluate safety data. No safety issues have been reported to date.
Infectious Disease Program AVI has published confirmation through
independent laboratories of NEUGENE antisense efficacy in in vitro
experiments against multiple strains of seasonal influenza, as well
as the H5N1 sub-strain, a potential worldwide public health threat.
AVI intends to test this compound for potential efficacy against
the H5N1 sub-strain in animal models. Duchenne Muscular Dystrophy
In February 2006, AVI announced publication of an article in Nature
Medicine indicating that AVI�s ESPRIT technology may hold
significant potential to bypass faulty dystrophin gene expression
in patients with muscular dystrophy. In December 2006 the company
announced the initiation of a clinical program with AVI-4658 for
the treatment of Duchenne muscular dystrophy (DMD). The first phase
of the clinical program has been designed as a dose-escalating
trial to be conducted in collaboration with MDEX Consortium in the
U.K. The trial is expected to commence shortly after approval of
the CTX (an IND equivalent), which is currently under review by the
UK health authorities. AVI has announced plans to begin a clinical
trial with cross-licensing and development partner Ercole Biotech,
Inc. with AVI-4658 for the systemic treatment of DMD. Bio-Defense
Program AVI has an active collaborative program with the Department
of Defense (DoD) in the area of bio-threats and emerging diseases.
In 2005 and early 2006, AVI received $4.6 million for ongoing
programs in drug development for the highly lethal Ebola and
Marburg viruses, and countermeasures for ricin and anthrax toxins.
In January 2006, AVI announced that the final version of the 2006
defense appropriations act had been approved, which included an
allocation of $11.0 million to fund AVI�s ongoing defense-related
programs. Net of government administrative costs, it is anticipated
that AVI will receive up to $9.8 million under this allocation.
AVI�s NEUGENE technology is expected to be used to continue
developing therapeutic agents against Ebola, Marburg and dengue
viruses, as well as to continue developing countermeasures for
anthrax exposure and antidotes for ricin toxin. AVI has received
signed contracts for three of the projects, with total government
expenditures of $7.1 million. AVI continues to work with the
government to define the scope of work to be performed on the
fourth project, dengue virus. AVI expects that funding under these
signed contracts will be received over the next 12 months. In the
second quarter of 2007, AVI recognized $1.1 million in research
contract revenue under this contract. In December 2006, AVI
announced the execution of a two-year $28 million research contract
with the Defense Threat Reduction Agency (DTRA), an agency of the
DoD, to fund AVI�s development of therapeutic agents to treat the
effects of Ebola, Marburg and Junin hemorrhagic viruses. In the
first half of 2007, AVI received $1.7 million under this contract.
Conference Call AVI BioPharma has scheduled an investor conference
call regarding this announcement, and the company�s current and
planned business activities, to be held August 8 beginning at 11:00
a.m. Eastern time (8:00 a.m. Pacific time). Individuals interested
in listening to the conference call may do so by dialing (888)
803-8271 within the U.S. and Canada, or (706) 634-2467 for
international callers. A telephone replay of the conference call
will be available for 48 hours beginning within two hours of the
conclusion of the call, by dialing (800) 642-1687 for domestic
callers, or (706) 645-9291 for international callers, and entering
reservation number 7205349. The live conference call also will be
available to private investors via the Internet at www.avibio.com.
A replay of the call will be available on the company�s Web site
for 14 days following the completion of the call. About AVI
BioPharma AVI BioPharma develops therapeutic products for the
treatment of life-threatening diseases using third-generation
NEUGENE antisense drugs and ESPRIT exon skipping technology. AVI�s
lead NEUGENE antisense compound is designed to target cell
proliferation disorders, including cardiovascular restenosis. In
addition to targeting specific genes in the body, AVI�s antiviral
program uses NEUGENE antisense compounds to combat disease by
targeting single-stranded RNA viruses, including dengue virus,
Ebola virus and H5N1 avian influenza virus. AVI�s NEUGENE-based
ESPRIT technology will initially be applied to potential treatments
for Duchenne muscular dystrophy. More information about AVI is
available on the Company�s Web site at http://www.avibio.com. �Safe
Harbor� Statement under the Private Securities Litigation Reform
Act of 1995: The statements that are not historical facts contained
in this release are forward-looking statements that involve risks
and uncertainties, including, but not limited to, the results of
research and development efforts, the results of preclinical and
clinical testing, the effect of regulation by the FDA and other
agencies, the impact of competitive products, product development,
commercialization and technological difficulties, and other risks
detailed in the company�s Securities and Exchange Commission
filings. AVI BIOPHARMA, INC. (A Development-Stage Company) �
STATEMENTS OF OPERATIONS (unaudited) � Three Months Ended June 30,
Six Months Ended June 30, � 2007 � � 2006 � � 2007 � 2006 �
Revenues, from license fees, grants and research contracts $
2,351,424 $ 18,558 $ 2,887,466 $ 84,520 � Operating expenses:
Research and development 9,160,816 5,921,929 15,478,457 12,685,174
General and administrative � 2,030,796 � � 1,515,711 � � 6,334,681
� � 4,337,437 � 11,191,612 7,437,640 21,813,138 17,022,611 � Other
income: Interest income, net � 303,568 � � 517,053 � � 666,077 � �
974,912 � Net loss $ (8,536,620 ) $ (6,902,029 ) $ (18,259,595 ) $
(15,963,179 ) Net loss per share� basic and diluted � $ (0.16 ) $
(0.13 ) $ (0.34 ) $ (0.31 ) Shares used in per share calculations �
53,560,360 � � 52,946,054 � � 53,381,256 � � 52,333,952 � BALANCE
SHEET HIGHLIGHTS (unaudited) � June 30, December 31, 2007 2006
Cash, cash equivalents and short-term securities $ 19,320,301 $
33,152,132 Total current assets 21,215,260 33,939,913 Total assets
31,208,514 40,862,746 Total current liabilities 4,886,894 3,150,845
Total shareholders� equity $ 24,214,945 $ 37,711,901
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