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ALTU News Altus Pharmaceuticals Reports Fourth Quarter and Year End 2006 Financial Results and Provides Milestones for 2007

CAMBRIDGE, Mass.--(BUSINESS WIRE)--Altus Pharmaceuticals Inc. (NASDAQ: ALTU), a biopharmaceutical company focused on oral and injectable protein therapeutics for gastrointestinal and metabolic disorders, today reported financial results for the quarter and year ended December 31, 2006.

The Company reported a net loss attributable to common stockholders of $57.0 million for the full year ended December 31, 2006, compared to a net loss attributable to common stockholders of $38.0 million for the full year ended December 31, 2005. For the fourth quarter of 2006, the Company reported a net loss attributable to common stockholders of $14.5 million, compared to a net loss attributable to common stockholders of $10.8 million for the same period in 2005. The Company’s cash, cash equivalents and marketable securities balance at December 31, 2006 was $85.9 million. Altus Pharmaceuticals’ cash position increased during 2006 as a result of the Company raising proceeds of approximately $110 million in an initial public offering of its common stock in January 2006. The Company’s cash position at year end did not include any payments from Genentech related to the ALTU-238 collaboration. On February 27, 2007, Altus received a $15 million equity investment from Genentech related to the ALTU-238 collaboration. In addition, Altus expects to receive from Genentech a $15 million payment before the end of the first quarter of 2007.

“We are pleased to report that 2006 was a very successful year for Altus,” said Sheldon Berkle, President and CEO of Altus Pharmaceuticals. “We started and ended the year with significant achievements. In January, in one of the most successful initial public offerings in the biotech sector in 2006, we raised more than $110 million. In December, we announced a collaboration with Genentech for ALTU-238 that we believe represents a great finish to an important year for Altus.”

During the fourth quarter of 2006, Altus announced that it entered into an agreement with Genentech, Inc. to develop, manufacture and commercialize Altus’ product candidate ALTU-238. ALTU-238 is a subcutaneously administered, once-per-week formulation of human growth hormone, which employs Altus’ proprietary protein crystallization and formulation technology, for patients with growth hormone deficiencies. The strategic alliance is an exclusive North American collaboration and license arrangement, with an option for a global agreement. The waiting period under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976 relating to the Genentech agreement expired on February 21, 2007. In conjunction with this expiration, Altus received $15 million from the sale of 794,575 shares of its common stock to Genentech. In addition, Altus expects to receive, within 30 days of HSR expiration, a $15 million payment under the collaboration agreement from Genentech. The North American agreement also includes the potential for Altus to receive additional payments of approximately $148 million based upon the successful completion of certain development and commercialization milestones. If Genentech exercises the global option, Altus could potentially receive additional payments of more than $110 million, comprised of upfront and milestone payments.

“The Altus - Genentech collaboration is an important strategic move that we believe further validates ALTU-238 for growth hormone deficient patients as well as the value of our protein crystallization platform,” Berkle continued. “We are pleased to begin working with Genentech to finalize and execute the adult and pediatric clinical development plans for ALTU-238.”

Berkle concluded, “We enter 2007 positioned to execute our stated strategy, which is to drive our two lead products toward commercialization and accelerate our R&D product pipeline for gastrointestinal and metabolic diseases. Assuming the commencement of a Phase III trial for ALTU-135, a Phase III adult trial for ALTU-238, a Phase II pediatric trial for ALTU-238 and a Phase I trial for ALTU-237, we believe that 2007 will be another significant year for Altus."

Altus 2007 Corporate Milestones

During 2007 Altus expects to:

• Initiate ALTU-135 Phase III efficacy and safety trials in the second quarter of 2007
• File an investigational new drug application for ALTU-237 in the second quarter of 2007
• Complete ALTU-237 Phase I clinical trial in the fourth quarter of 2007
• Accelerate the Altus research and development product pipeline by:

        -- Completing ALTU-236 proof of concept in pre-clinical models            in the fourth quarter of 2007        -- Completing ALTU-242 proof of concept in pre-clinical models            in the fourth quarter of 2007

Altus’ Product Pipeline

ALTU-135, the Company’s orally administered enzyme replacement therapy under development for patients with pancreatic insufficiency, is manufactured by blending three drug substance enzymes: lipase, protease and amylase. This consistent and pure enzyme combination is designed to improve fat, protein and carbohydrate absorption in pancreatic insufficient individuals.

ALTU-238 is being developed as a once-per-week formulation of human growth hormone that employs Altus’ proprietary protein crystallization and formulation technology. ALTU-238 is designed to require fewer injections without the use of polymer encapsulation, chemical modification or fusion proteins, which the Company believes to be a significant advantage over other long-acting therapies in development.

ALTU-237 is an oral form of an oxalate-degrading enzyme for the treatment of primary hyperoxaluria and enteric hyperoxaluria, as well as to prevent the recurrence of kidney stones.

Full Year Results

The Company reported a net loss attributable to common stockholders of $57.0 million, or $2.75 per share, for the full year ended December 31, 2006, compared to a net loss attributable to common stockholders of $38.0 million, or $22.13 per share, for the full year ended December 31, 2005. Total revenues were $5.1 million for 2006 compared to $8.3 million in 2005. Revenues in these periods consisted primarily of amounts earned under collaborative research and development agreements relating to ALTU-135.

Research and development expenses totaled $50.3 million for 2006 compared to $26.7 million in 2005. Research and development expense for 2006 increased due primarily to an increase in third-party development costs relating to ALTU-135, ALTU-238 and our pre-clinical product candidates, increased non-cash compensation expense and an increase in personnel.

General, sales and administrative expenses were $14.8 million for 2006 compared to $8.6 million in 2005. The increase in 2006 GS&A expenses was primarily due to increased costs associated with being a public company. As a result of completing an initial public offering in January 2006, Altus’ legal costs, general insurance costs and consulting and professional service costs increased significantly compared to 2005. In addition, the Company’s stock based compensation expense for 2006 increased significantly as it added personnel into the general, sales and administrative group.

Fourth Quarter Results

For the fourth quarter of 2006, the Company reported a net loss attributable to common stockholders of $14.5 million, or $0.63 per share, compared to a net loss attributable to common stockholders of $10.8 million, or $5.88 per share, in the fourth quarter of 2005. Total revenues were $1.1 million in the fourth quarter of 2006 compared to $1.6 million in the fourth quarter of 2005. Revenues in these periods consisted entirely of amounts earned under collaborative research and development agreements relating to ALTU-135.

Research and development expenses totaled $12.3 million in the fourth quarter of 2006 compared to $7.0 million in the fourth quarter of 2005. The increase in research and development expenses is primarily due to an increase in costs relating to preparations for Phase III studies for ALTU-135, ALTU-238, the development of our pre-clinical product candidates, and the investigation of certain ALTU-135 manufacturing issues, as previously reported.

General, sale and administrative expenses were $4.2 million in the fourth quarter of 2006 compared to $2.6 million in the fourth quarter of 2005. The increase in 2006 general, sale and administrative expenses was primarily attributable to additional investments in corporate infrastructure to support the Company’s growth and public company reporting requirements.

2007 Financial Guidance

Based on current operating plans, expected timing and cost of the ALTU-135 Phase III efficacy and safety clinical trials and the ALTU-237 Phase I clinical trial and other product development programs, Altus expects its net cash used in operating activities to be between $55 million and $65 million in 2007.

Conference Call Access Information

The company will host a conference call to discuss the results at 11:00 a.m. ET on March 12. The call may be joined via telephone by dialing (877) 704-5378 or (913) 312-1292 (for international participants) at least 5 minutes prior to the start of the call. The conference confirmation code is: 1194786. For 72 hours following the call, an audio replay can be accessed by dialing (719) 457-0820 or (888) 203-1112 and using the conference confirmation code 1194786.

A live audio webcast of the call will also be available on the "Investor Relations" section of the Company's website, www.altus.com. An archived audio webcast will be available on the Altus website approximately two hours after the event and will be archived for 30 days.

About Altus Pharmaceuticals Inc.

Altus Pharmaceuticals is a biopharmaceutical company focused on the development and commercialization of oral and injectable protein therapeutics for patients with gastrointestinal and metabolic disorders. The Company's website is http://www.altus.com.

Safe Harbor Statement

Certain statements in this news release concerning Altus’ business are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, those relating to the anticipated net cash to be used in operating activities by the Company in 2007, the timing for planned initiation of Phase III clinical trials for ALTU-135, the timing of progress under the ALTU-238 Genentech collaboration, the planned IND filing and completion of a Phase I clinical trial for ALTU-237, and the acceleration of our ALTU-236 and ALTU-242 research and development programs. Any or all of the forward-looking statements in this press release may turn out to be wrong. They can be affected by inaccurate assumptions Altus might make or by known or unknown risks and uncertainties, including, but not limited to uncertainties as to the future success of ongoing and planned clinical trials; and the unproven safety and efficacy of products under development. Consequently, no forward-looking statement can be guaranteed, and actual results may vary materially. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in Altus’ reports to the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2006. However, Altus undertakes no obligation to publicly update forward-looking statements, whether because of new information, future events or otherwise.