Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
GEVA > SEC Filings for GEVA > Form 10-Q on 7-Aug-2013All Recent SEC Filings

Show all filings for SYNAGEVA BIOPHARMA CORP | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for SYNAGEVA BIOPHARMA CORP


7-Aug-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains "forward-looking statements" as defined under federal securities laws. Many of these statements can be identified by the use of words such as "believes," "expects," "anticipates," "plans," "may," "will," "projects," "continues," "estimates," "potential," "opportunity" or the negative versions of these terms and other similar expressions. Our actual results or experience could differ significantly from the forward-looking statements. Factors that could cause or contribute to these differences include those discussed in "Risk Factors," in Part II, Item 1A of this Quarterly Report on Form 10-Q. You should carefully consider that information before you make an investment decision.

We cannot guarantee any future results, levels of activity, performance or achievements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Quarterly Report on Form 10-Q as anticipated, believed, estimated or expected. The forward-looking statements contained in this Quarterly Report on Form 10-Q represent our estimates as of the date of this Quarterly Report on Form 10-Q (unless another date is indicated) and should not be relied upon as representing our expectations as of any other date. While we may elect to update these forward-looking statements, we specifically disclaim any obligation to do so.

The following discussion of our financial condition and results of operations should be read in conjunction with our Financial Statements and the related Notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

Overview

We are a biopharmaceutical company focused on the discovery, development, and commercialization of therapeutic products for patients with life-threatening rare diseases for which there is an unmet medical need. Our management team is experienced in the development and commercialization of drugs for diseases with small patient populations, including clinical and translational research, working with payors to establish reimbursement, and designing and building commercial organizations to reach highly specialized physicians to facilitate patient identification. Our lead programs include sebelipase alfa for lysosomal acid lipase deficiency, or LAL Deficiency, and SBC-103 for mucopolysaccharidosis IIIB (MPS IIIB), also known as Sanfilippo B syndrome.

Sebelipase alfa for LAL Deficiency

LAL Deficiency is a rare autosomal recessive lysosomal storage disease, or LSD, caused by a marked decrease in LAL enzyme activity. LAL Deficiency in children and adults, sometimes called Cholesteryl Ester Storage Disease, or CESD, is an underappreciated cause of cirrhosis and accelerated atherosclerosis. These complications are due to the buildup of fatty material in the liver, blood vessel walls and other tissues and organs as a result of decreased LAL enzyme activity. Infants with LAL Deficiency, sometimes called Wolman disease, suffer from the most rapidly progressive form of LAL Deficiency that is usually fatal within the first six months of life. Affected infants develop severe malabsorption, growth failure and liver failure. There are no approved therapies for LAL Deficiency.

Sebelipase alfa is a recombinant form of the human lysosomal acid lipase enzyme, or LAL, currently under Phase 3 global clinical investigation for the treatment of infants, children and adults with LAL Deficiency. Sebelipase alfa has been granted orphan designations by the U.S. Food and Drug Administration (FDA), the European Medicines Agency (EMA), and the Japanese Ministry of Health, Labour and Welfare. Additionally, sebelipase alfa received fast track designation by the FDA, and Breakthrough Therapy designation by the FDA for early onset LAL Deficiency.

Phase 3 ARISE trial and Phase 1/2 extension study for sebelipase alfa in LAL Deficiency

The ARISE trial (Acid Lipase Replacement Investigating Safety and Efficacy), is a randomized, double-blind, placebo-controlled study with sebelipase alfa in children and adults with LAL Deficiency and is designed to assess the effects of sebelipase alfa on a broad range of abnormalities associated with the disease. Patients enrolled in the trial are randomized to infusions of sebelipase alfa (1 mg/kg, every other week) or placebo during the 20-week, double-blind treatment period and then allowed to enter into a long-term, open-label extension period. The efficacy and safety results from the double-blind treatment period will be used to support submissions for product registration. Dosing of patients in this trial began in February of this year and the company continues to expect enrollment to complete during 2014.

In addition to enrolling the ongoing Phase 3 ARISE trial in children and adults, patients continue to receive infusions with sebelipase alfa in the Phase 1/2 extension trial in adults with LAL Deficiency. One-year data from the Phase 1/2 extension trial with sebelipase alfa presented at the European Society for Paediatric Gastroenterology, Hepatology and Nutrition, or ESPGHAN, meeting in May of this year demonstrated sustained reductions in markers of liver damage with both ALT and AST, frequently into the normal range. In addition, sebelipase alfa improved the dyslipidemia associated with LAL Deficiency as measured by LDL-C, total cholesterol and triglycerides. Most adverse events were mild and unrelated to sebelipase alfa. As previously reported, one patient with a moderate (Grade 2) allergic type infusion-related reaction paused treatment with sebelipase alfa at nine months of the extension study, pending further tests. As an update, this patient has now completed these tests and the safety committee recommended the patient recommence treatment in the extension trial.

SBC-103 for MPS IIIB

The mucopolysaccharidoses (MPS) consist of a group of rare LSDs caused by a deficiency of enzymes needed to break down complex sugars called glycosaminoglycans. The MPS III syndromes (also known as Sanfilippo syndromes) share complications with other MPS diseases but represent a clinically distinct subset with marked central nervous system degeneration. MPS IIIB is caused by a marked decrease in alpha-N-acetyl-glucosaminidase (NAGLU) enzyme activity which leads to the buildup of abnormal sugars called heparan sulfate disaccharides (HSD) in the brain and other organs. The accumulation of abnormal HSD, particularly in the central nervous system, leads to severe cognitive decline, behavioral problems, speech loss, increasing loss of mobility, and premature death. There are no approved therapies for MPS IIIB.

SBC-103 is a recombinant form of the human NAGLU enzyme we are developing as an enzyme replacement therapy for MPS IIIB. Using various dosing approaches, SBC-103 reduced HSD substrate storage in the brains, liver and kidney tissues in an MPS IIIB animal model. SBC-103 has been granted orphan designation by the FDA and the EMA. We plan to be in clinical trials with SBC-103 during the first half of 2014.


Table of Contents

About our additional pipeline programs and manufacturing platform

Our additional pipeline programs include other proteins targeting rare diseases at various stages of preclinical development. These diseases are characterized by significant morbidity and mortality and are selected based on scientific rationale, high unmet medical need, potential to impact disease course and strategic alignment with our corporate focus. In addition to these first-mover pipeline programs, we are leveraging the manufacturing platform further to develop improved biologic therapies for diseases with high unmet medical need.

Our proprietary manufacturing platform utilizes technology to produce drug product with consistent characteristics that enable robustness and flexibility during scale-up. In addition, the platform can provide favorable structural properties for bio-distribution and cell targeting in comparison to glycoproteins produced from other sources.

Financial Operations Overview

General

Our future operating results will depend on the progress of drug candidates currently in our research and development pipeline. The results of our operations will vary significantly from year-to-year and quarter-to-quarter and will depend largely on, among other factors, the cost and outcome of any preclinical development or clinical trials then being conducted.

A discussion of certain risks and uncertainties that could affect our liquidity, capital requirements and ability to raise additional funds is set forth under the section entitled "Risk Factors" in this Quarterly Report on Form 10-Q.

Revenue

Royalty Revenue

Royalty revenues are recognized in the period earned, based on contract terms when reported sales are reliably measurable and collectability is reasonably assured. Royalty revenue relates to amounts earned from the sale of FUZEON by Hoffman-La Roche, Inc. ("Roche"). The FUZEON royalty stream was acquired in the Reverse Merger in the fourth quarter of fiscal 2011.

Collaboration and License Revenue

Collaboration and license revenue primarily relates to our collaboration agreements with Mitsubishi Tanabe whereby we utilize our proprietary expression technology in two development programs, in exchange for upfront license payments, funded development, and the potential for additional payments upon the successful completion of the development programs. Under the first program, which was entered into in August 2011, we received an upfront license payment of $3.0 million, on-going funding of development costs, and the potential for an additional payment of $3.0 million due upon the successful completion of the initial development. Additionally, we entered into a second agreement in March 2012, where we received an upfront license payment of $9.0 million, on-going funding of development costs, and the potential for an additional payment of $3.0 million due upon the successful completion of the initial development stage of the second program. We are recognizing revenue on consideration received under a proportional performance method. Under both agreements, Mitsubishi Tanabe has an option to obtain an exclusive royalty-bearing license, with the right to grant sublicenses, to further develop and commercialize the licensed compound. If Mitsubishi Tanabe exercises its option, the parties intend to negotiate a follow-on collaboration and license agreement that may include potential future development and commercial sales based milestone payments, and potential royalty payments.

Other Revenue

Other revenues relate to a National Institutes of Health ("NIH") grant where revenue was recognized through the first quarter of fiscal 2012.

Research and Development

We expense research and development costs as incurred. Research and development expense consists of costs incurred to discover, research and develop drug candidates, including personnel and facility-related expenses, outside contracted services including clinical trial costs, manufacturing and process development costs, research costs, outside consulting services and other external costs. Research and development expense includes any costs associated with generating collaboration or grant revenue.


Table of Contents

General and Administrative

General and administrative expense consists primarily of salaries, stock-based compensation expense and other related costs for personnel in executive, business development, commercial, finance, human resource, legal, information technology, and support personnel functions. We also expense patent costs and expenses associated with maintaining our intellectual property as incurred. Other costs include facility costs not otherwise included in research and development expense, insurance, and professional fees for legal, accounting and commercial services.

Amortization of Developed Technology

We provide for the cost of amortization of developed technology, computed using an accelerated method based on the undiscounted cash flows received from the FUZEON royalty stream, in proportion to the estimated total undiscounted cash flows.

Interest Income, net

Interest income relates to interest earned on our cash equivalent and short-term investment balances.

Results of Operations

Three and Six Months Ended June 30, 2013 and 2012

Revenues

The following table presents total revenue for the three months ended June 30,
2013 and 2012, respectively (in thousands):



                                       Three Months Ended
                                            June 30,
                                        2013          2012        $ Change        % Change

 Royalty revenue                     $    2,944      $ 1,447     $    1,497            104  %
 Collaboration and license revenue          469          802           (333 )           (42 )

 Total revenue                       $    3,413      $ 2,249     $    1,164              52 %

Total revenues increased by approximately $1.2 million for the three months ended June 30, 2013, as compared to the comparable period of the prior year. The increase in revenues was primarily the result of higher FUZEON royalty revenue.

Royalty revenues of $2.9 million increased $1.5 million from the comparable period of the prior year and relate to the royalty payment earned from Roche, based on total worldwide net sales of FUZEON. Royalty revenues were higher, primarily due to a large non-recurring sale. FUZEON royalty revenues are unpredictable, as we are not marketing the product and large scale sales in certain regions can cause quarter to quarter variability. Collaboration and license revenue for the three months ended June 30, 2013 primarily relates to revenue recognized from development programs with Mitsubishi Tanabe. For the three months ended June 30, 2013, we recognized $0.3 million and $0.2 million related to the first and second Mitsubishi Tanabe programs, respectively. In the comparable three month period of the prior year, we recognized $0.4 million and $0.4 million related to the first and second programs, respectively.

The following table presents total revenue for the six months ended June 30, 2013 and 2012, respectively (in thousands):

                                         Six Months Ended
                                             June 30,
                                         2013         2012        $ Change      % Change

   Royalty revenue                     $   4,649     $ 2,896     $    1,753           61  %
   Collaboration and license revenue       3,882       1,694          2,188           129 %
   Other revenue                              -           56             -             -

   Total revenue                       $   8,531     $ 4,646     $    3,885            84 %

Total revenues increased by approximately $3.9 million for the six months ended June 30, 2013, as compared to the comparable six month period of the prior year. The increase in revenues was the result of higher collaboration revenue of $2.2 million and higher FUZEON royalty revenue of $1.8 million (as discussed above). For the six months ended June 30, 2013, we recognized $0.8 million and $3.1 million related to the first and second Mitsubishi Tanabe programs, respectively. For the six months ended June 30, 2012, we recognized $1.2 million and $0.4 million for the programs, respectively.


Table of Contents

As of June 30, 2013, our deferred revenue balance related to both of the Mitsubishi Tanabe collaboration agreements, totaled $1.1 million and $1.0 million, respectively. We expect to recognize both the upfront payments and additional funded development payments related to both arrangements over the next year, in proportion to our performance under the arrangements.

Research and Development Expenses

Research and development expenses for the three months ended June 30, 2013 and
2012 are summarized as follows (in thousands):



                                                 Three Months Ended
                                                      June 30,
                                                 2013            2012         $ Change      % Change
Compensation and benefits-related             $     4,171       $ 2,312       $   1,859            80 %
Clinical trials and manufacturing                   7,254         3,727           3,527            95
In-process research and development                 2,500            -            2,500            -
Development and other external services             1,856           784           1,072           137
Facilities and related                              1,744           766             978           128
Stock-based compensation expense                      712           226             486           215
Other                                                 217            98             119           121

Total research and development expense        $    18,454       $ 7,913       $  10,541           133 %

Research and development expense increased by approximately $10.5 million, or 133%, to $18.5 million for the three months ended June 30, 2013 as compared to $7.9 million for the three months ended June 30, 2012. The increase in total research and development expense is due to increased clinical trial costs, manufacturing fees and other development related external services associated with on-going development of sebelipase alfa, SBC-103 and our pipeline programs, as well as higher compensation expense from hiring additional staff to move our programs forward. Also contributing to the period-over-period increase in research and development expense was $2.5 million of in-process research and development and higher facilities and related expenses of $1.0 million. In-process research and development expense relates to an upfront license payment made to Shire Human Genetics Therapies, Inc. and its affiliates ("Shire") to sublicense multiple patent and patent applications relating to the use of LAL for the treatment of LAL Deficiency and atherosclerosis, which complement our intellectual property portfolio covering our LAL Deficiency program. Higher facilities expenses primarily relates to increased costs to operate our manufacturing facilities and depreciation costs for both manufacturing and lab facilities. Additionally, for the three months ended June 30, 2013, research and development expense includes $0.7 million of stock-based compensation expense, compared to $0.2 million in the comparable prior year period. We expect research and development expense to continue to increase as development activities for sebelipase alfa, SBC-103 and our other pipeline programs continue.

Research and development expenses for the six months ended June 30, 2013 and 2012 are summarized as follows (in thousands):

                                             Six Months Ended
                                                 June 30,
                                             2013         2012       $ Change      % Change
 Compensation and benefits-related         $  7,909     $  4,576     $   3,333            73 %
 Clinical trials and manufacturing           13,264        6,043         7,221           120
 In-process research and development          2,500           -          2,500            -
 Development and other external services      3,091        1,446         1,645           114
 Facilities and related                       3,173        1,330         1,843           139
 Stock-based compensation expense             1,376          431           945           219
 Other                                          479          233           246           106

 Total research and development expense    $ 31,792     $ 14,059     $  17,733           126 %

Research and development expense increased by approximately $17.7 million, or 126%, to $31.8 million for the six months ended June 30, 2013 as compared to $14.1 million for the six months ended June 30, 2012. The increase in total research and development expense is due to increased clinical trial costs, manufacturing fees and other development related external services associated with on-going development of sebelipase alfa, SBC-103 and our pipeline programs, as well as higher compensation expense from hiring additional staff to move our programs forward. Also contributing to the period-over-period increase in research


Table of Contents

and development expense was $2.5 million of in-process research and development and higher facilities and related expenses of $1.8 million. In-process research and development expense relates to an upfront license payment made share, as discussed above. Higher facilities expenses primarily relate to increased costs to operate our manufacturing facilities and depreciation costs for our manufacturing and lab facilities. Additionally, for the three months ended June 30, 2013, research and development expense includes $1.4 million of stock-based compensation expense, compared to $0.4 million in the comparable prior year period. We expect research and development expense to continue to increase as development activities for sebelipase alfa, SBC-103 and our other pipeline programs continue.

General and Administrative Expenses

General and administrative expenses for the three months ended June 30, 2013 and
2012 are summarized as follows (in thousands):



                                                Three Months Ended
                                                     June 30,
                                                2013            2012          $ Change       % Change
Compensation and benefits-related            $    2,665        $ 1,542       $    1,123             73 %
External services                                 2,471          1,567              904             58
Facilities related and other                        149             91               58             64
Stock-based compensation expense                  1,158            687              471             69

Total general and administrative expense     $    6,443        $ 3,887       $    2,556             66 %

General and administrative expense increased by approximately $2.6 million to $6.4 million for the three months ended June 30, 2013 as compared to $3.9 million for the comparable period of the prior year. The increase was primarily due to higher compensation-related expenses of $1.6 million, including increased stock-based compensation expense of $0.5 million, resulting from hiring additional staff to support the growing company and pre-commercial preparations. External service costs also contributed $0.9 million to the period-over-period increase, primarily due to increased consulting, accounting, patent and pre-commercial related activities.

General and administrative expenses for the six months ended June 30, 2013 and 2012 are summarized as follows (U.S. dollars in thousands):

                                                  Six Months Ended
                                                      June 30,
                                                 2013           2012          $ Change      % Change
Compensation and benefits-related              $   5,143       $ 2,953       $    2,190            74 %
External services                                  4,481         2,537            1,944            77
Facilities related and other                         263           236               27            11
Stock-based compensation expense                   2,210         1,081            1,129           104

Total general and administrative expense       $  12,097       $ 6,807       $    5,290            78 %

General and administrative expense increased by approximately $5.3 million to $12.1 million for the six months ended June 30, 2013 as compared to $6.8 million for the comparable period of the prior year. The increase was primarily due to higher compensation-related expenses of $3.3 million, including increased stock-based compensation expense of $1.1 million, resulting from hiring additional staff to support the growing company and pre-commercial preparations. External service costs also contributed $1.9 million to the period-over-period increase in expense and were primarily due to increased consulting, accounting, patent and pre-commercial related activities.

Amortization of Developed Technology

Costs recognized for the amortization of developed technology for the three and six months ended June 30, 2013 and 2012 are summarized as follows (in thousands):

Three Months Ended June 30, 2013 2012 $ Change % Change Amortization of developed technology 706 675 31 5 %


Table of Contents
Six Months Ended June 30, 2013 2012 $ Change % Change Amortization of developed technology 1,405 1,361 44 3 %

We recognized $0.7 million and $1.4 million of costs related to the amortization of developed technology in the three and six months ended June 30, 2013 and 2012, respectively. Amortization of developed technology is computed using an accelerated method based on the undiscounted actual cash flows received from the FUZEON royalty stream, in proportion to the estimated total undiscounted cash flows from the asset.

Liquidity and Capital Resources

Sources of Liquidity

We have financed our operations to date primarily through the placement of our equity and debt securities and debt financings, and, to a lesser extent, license and royalty fees, upfront cash payments and research and development funding from collaborators, government grants and licensors. In November 2011, we acquired $50.1 million in cash as a result of the Reverse Merger with Trimeris. On January 10, 2012, we announced the closing of a $90.0 million underwritten public offering of approximately 3.6 million shares of our common stock at a price of $25.18 per share. We received net proceeds of approximately $84.6 million from this offering. In addition, on July 13, 2012, we announced the closing of a $115.0 million, second underwritten public offering of approximately 2.8 million shares of common stock at a price of $41.20 per share. We received net proceeds of approximately $108.1 million. On January 9, 2013, we announced the closing of a $117.5 million underwritten public offering of approximately 2.5 million shares of common stock at a price of $47.53 per share. We received net proceeds of approximately $111.1 million from this offering. We intend to use the net proceeds from these offerings for general corporate purposes, which may include working capital, capital expenditures, research and development expenditures, preclinical and clinical trial expenditures, commercial expenditures, acquisitions of new technologies or businesses that are complementary to our current technologies and business focus and investments.

We do not expect to generate any revenue from the direct sale of products currently in development for several years, if ever. As a result of our . . .

  Add GEVA to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for GEVA - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.