EntreMed's loss is wider than expected

Drug maker loses $1.29 a share as opposed to 81 cents analysts predicted

March 06, 2002|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

EntreMed Inc., the Rockville developer of anti-cancer drugs, reported a wider-than-expected loss in the fourth quarter yesterday due to a surge in manufacturing costs and a sharp drop in royalty revenues.

The company posted a net loss of $24 million, or $1.29 per share, for the quarter that ended Dec. 31 compared with a $13.74 million net loss, or 82 cents per share, in the fourth quarter 2000. Revenue was $129,478, down sharply from $1.2 million for the similar period in 2000.

The fourth-quarter loss exceeded the 81 cents per share predicted by three analysts surveyed by Thomson Financial/First Call. A big factor was EntreMed's manufacturing costs, which increased in the final quarter as the company stockpiled its three experimental drugs preparing to undertake more clinical trials this year.

"Our manufacturers came back and offered us an opportunity to do some manufacturing that we hadn't anticipated [and] booked several manufacturing runs to make sure we have enough product on hand to complete" clinical studies and expand them into the next trial phase, said John W. Holaday, EntreMed's chief executive and chairman.

EntreMed has 300 patients enrolled in clinical studies worldwide for its three experimental cancer-fighting drugs - Endostatin, Angiostatin, and Panzem. The drugs work to prohibit the growth of blood vessels that feed tumors.

For the year, EntreMed lost $43.3 million, or $2.39 per share, less than the $48.8 million, or $3.04 per share, it lost in 2000 but worse than analysts' predictions of $1.91 per share.

The company's annual revenue fell 49 percent to $1.86 million, from $3.67 million in 2000. The sharp decrease was due to EntreMed's sale of its royalty rights to thalidomide, which accounted for more than three-quarters of the company's revenue in the last two years.

For 2001, EntreMed's research and development costs rose 27 percent to $52.9 million, while general and administrative expenses climbed 24 percent to $15.8 million.

The company strengthened its cash position last year, first through the thalidomide rights sale - for $22.4 million to Royalty Pharma AG in August - and then through a private placement in December that raised $22.6 million. As of Dec. 31, cash and cash equivalents stood at $41.4 million vs. $24.5 million at the end of 2000.

Analysts said EntreMed would likely have to find ways to raise more money, either through equity offerings or through partnerships that tap into the potential of its drugs for treating diseases other than cancer. In January, EntreMed signed a $41 million deal with Allergan Inc., a California company that will explore eye disease treatments using Panzem.

"They're definitely going to have to go out again for more money ... sometime probably this year," said Peter J. McDonald, a biotechnology analyst for Gerard Klauer Mattison in New York.

But, he added, "it was a good thing that they have enough clinical material to get them through the year" because it will likely enable their spending to stay flat in 2002.

Alan A. Auerbach, an analyst at Wells Fargo Securities LLC, said the goal for EntreMed is to achieve successes in its clinical trials that could attract investment from a large pharmaceutical company.

"They don't have a large pharmaceutical company picking up the tab, and clinical trials are expensive," Auerbach said. For the next several years, he said, EntreMed is going "to have to raise a lot of money."

Shares of EntreMed fell 22 cents yesterday to $7.78.

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