Novavax's 2nd-quarter loss rose threefold

FDA denied OK of cream for estrogen replacement

August 13, 2002|By Julie Bell | Julie Bell,SUN STAFF

Novavax Inc. said yesterday that its second-quarter loss ballooned more than threefold as it spent heavily on manufacturing and marketing programs for its Estrasorb estrogen-replacement cream, a product whose launch is on hold.

The Columbia company announced in April that the Food and Drug Administration would not approve Estrasorb without additional information.

Chief Executive Officer John Spears said yesterday during a conference call with investors that the company expects to submit a new Estrasorb application, including information to address the agency's manufacturing and chemistry concerns, by the end of summer.

He declined to predict when the FDA might approve it and said the company is evaluating ways to cut costs and raise money in the meantime.

Novavax has cut about 15 of 75 sales positions through attrition and layoffs, and put the remainder of its multimillion-dollar Estrasorb manufacturing and marketing plans on hold, Chief Financial Officer Dennis Genge said in an interview.

"They're going to need additional funding, because we don't think [Estrasorb] will be approved within a year of filing," said analyst Michael Colon of A.G. Edwards & Sons Inc.

Novavax reported a net loss of $5.5 million, or 22 cents a share, compared with a net loss of $1.8 million, or 8 cents a share, in the corresponding period last year. Revenue was $4.7 million, down from $7.9 million, primarily because last year's figure included a one-time, $2.5 million payment from King Pharmaceuticals Inc.

Bristol, Tenn.-based King, which is providing financial backing for Estrasorb's development, holds rights to sell the cream outside the United States and rights to some proceeds from its U.S. sales.

Second-quarter selling and marketing costs grew to $3.5 million from $1.6 million, Novavax said, partly because it added about 15 sales positions - since eliminated - in preparation for co-marketing Estrasorb with King.

Novavax also estimated that product revenue for the year will be on the lower end of the $15 million to $18 million range it estimated earlier.

That's because packaging problems with its AVC cream for vaginal infections will cost it up to $1.5 million in lost sales to distributors this year. A supplier discontinued the tube in which the cream was packaged, and Novavax said a new one leaked. Genge said patients should be able to fill prescriptions for the cream because of inventory at distributors.

The manufacturing problems are the latest in a rash of bad news for Novavax.

The FDA's notification that it wanted more information on Estrasorb was closely followed by national news that put the merits of some kinds of estrogen-replacement therapy in doubt.

First, government scientists said the combination of estrogen and progestin in post-menopausal women raises the risk of stroke, heart attack, cardiovascular disease and breast cancer, though the overall risk of the diseases remained small. Then, a second study linked ovarian cancer with long-term estrogen-replacement therapy.

Yesterday, Novavax executives reiterated that Estrasorb is different because it contains estrogen only, is designed for short-term use and is delivered in relatively low doses through the skin with a cream.

"I think there's even greater opportunity for Estrasorb going forward, given the renewed interest in transdermal delivery of estrogen and natural estrogen forms," Spears told investors.

Novavax reported $15.9 million in cash and cash equivalents at the end of June. Its shares gained 20 cents yesterday to close at $3.93.

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