Zalicus Reports Financial Results for the Fourth Quarter and Year End 2012

Provides Key Goals for 2013

CAMBRIDGE, Mass.--()--Zalicus Inc. (Nasdaq Global Market: ZLCS), a biopharmaceutical company that discovers and develops novel treatments for patients suffering from pain, today reported financial results for the fourth quarter and year ended December 31, 2012.

“We are focused on advancing the development of our ion channel programs, including Z160, our first-in-class, oral N-type calcium channel blocker for the treatment of chronic neuropathic pain and Z944, a novel oral T-type calcium channel blocker,” commented Mark H.N. Corrigan, MD, President and CEO of Zalicus. “During 2012 we made a number of advances with our novel ion channel programs, including advancing Z160 into Phase 2a clinical development and Z944 into the clinic. We plan to build on this success in 2013 by generating proof-of-concept data for Z160 in multiple indications and continuing the clinical development of Z944.”

Fourth Quarter 2012 and Recent Accomplishments:

  • Z160. Advanced Z160, a first-in-class, oral, state dependent, selective N-type calcium channel (Cav 2.2) blocker into the second of two Phase 2a clinical trials for the potential treatment of chronic neuropathic pain, including lumbosacral radiculopathy which began in the third quarter of 2012 and postherpetic neuralgia which began in the fourth quarter of 2012. Top line data from both studies are expected to be available late in the second half of 2013.
  • Z944. Received a key U.S. patent issued in February 2013 providing broad patent coverage for Z944, a novel, oral, T-type calcium channel blocker, through April 2029. Z944 completed Phase 1 single and multiple ascending dose clinical studies in late 2012 and the Company plans to continue further clinical development with Z944 during 2013.
  • cHTS™. Generated approximately $7.3 million of revenue in 2012 from our combination High Throughput Screening (cHTS) collaborations.

2013 Zalicus Pipeline and Business Goals:

Zalicus has set the following goals for 2013, which include internal research and development programs, collaborations and financial goals:

  • Ion Channel Programs:
    • Successfully advance Z160 through Phase 2a proof-of-concept clinical studies and report top-line data by year-end 2013
    • Advance Z944 through further clinical development including completing one experimental medicine clinical study in 2013
    • Nominate a sodium channel lead for further preclinical development in 2013
  • Continue to expand and diversify our cHTS services to generate surplus cash for the Company
  • Target year-end on-going financial strength with sufficient cash through 2014

Fourth Quarter and Year-End 2012 Financial Results (Unaudited):

As of December 31, 2012, Zalicus had cash, cash equivalents, restricted cash and short-term investments of $36.4 million compared to $49.7 million on December 31, 2011.

For the year ended December 31, 2012, revenue was $12.6 million compared to $8.2 million for 2011. Zalicus recognized $5.2 million in royalty revenue from Mallinckrodt based on Exalgo® sales for the year ended December 31, 2012 and a total of $9.4 million in Exalgo royalty revenue from its commercial launch in April 2010 through December 31, 2012. The increase in revenue for the year ended December 31, 2012 was primarily due to an increase in Exalgo royalties and collaboration revenue from Novartis. We expect revenue for the year ending December 31, 2013 to be higher than that recorded in the year ended December 31, 2012 due to higher expected royalties on Mallinckrodt’s net sales of Exalgo and increased cHTS collaboration revenue.

For the year ended December 31, 2012, net loss was $44.3 million, or ($0.38) per share, compared to a net loss of $42.0 million, or ($0.43) per share, in the year ended December 31, 2011. Exalgo amortization expense was $3.9 million for the year ended December 31, 2012 and $5.1 million for the year ended December 31, 2011. Stock-based compensation expense was $1.8 million and $2.2 million in the years ended December 31, 2012, and 2011, respectively. Depreciation expense was $1.5 million and $2.1 million in the years ended December 31, 2012, and 2011, respectively.

Research and development expenses were $41.4 million in the year ended December 31, 2012 compared to $35.3 million in the year ended December 31, 2011. The $6.1 million increase from the 2011 period to the 2012 period was primarily due to an increase in expenses related to the clinical development of Z160 and Z944. We expect research and development expense to decrease for the year ending December 31, 2013 due to terminated development activities related to our discontinued product candidate Synavive.

General and administrative expenses were $9.0 million in the year ended December 31, 2012 compared to $10.4 million in the year ended December 31, 2011. We expect our general and administrative expense for the year ending December 31, 2013 to be consistent with the year ended December 31, 2012.

About Zalicus

Zalicus Inc. (Nasdaq Global Market: ZLCS) is a biopharmaceutical company that discovers and develops novel treatments for patients suffering from pain. Zalicus has a portfolio of proprietary clinical-stage product candidates targeting pain such as Z160 and Z944 and has entered into multiple revenue-generating collaborations with large pharmaceutical companies relating to other products, product candidates and drug discovery technologies. Zalicus applies its expertise in the discovery and development of selective ion channel modulators and its combination high throughput screening capabilities to discover innovative therapeutics for itself and its collaborators in the areas of pain, inflammation, oncology and infectious disease. To learn more about Zalicus, please visit www.zalicus.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning Zalicus, its product candidates, their potential, and its plans for clinical development, the Zalicus selective ion channel modulation technology, and related preclinical product candidates, Zalicus’ combination drug discovery technology, cHTS, and its financial condition, results of operations, including expected 2013 royalties on Mallinckrodt’s net sales of Exalgo, and other business plans. These forward-looking statements about future expectations, plans, objectives and prospects of Zalicus and its product candidates may be identified by words like "believe," "expect," "may," "will," "should," "seek," “plan” or “could” and similar expressions and involve significant risks, uncertainties and assumptions, including risks related to the formulation and clinical development of its product candidates Z160 and Z944, the unproven nature of the Zalicus ion channel drug discovery technology, risks related to the sale and marketing of Exalgo by Mallinckrodt, the ability of Zalicus’s collaboration partners to initiate and successfully complete clinical trials of their partnered product candidates, Zalicus’s ability to obtain additional financing or funding for its research and development and those other risks that can be found in the "Risk Factors" section of Zalicus' annual report on Form 10-K on file with the Securities and Exchange Commission and the other reports that Zalicus periodically files with the Securities and Exchange Commission. Actual results may differ materially from those Zalicus contemplated by these forward-looking statements. These forward-looking statements reflect management’s current views and Zalicus does not undertake to update any of these forward-looking statements to reflect a change in its views or events or circumstances that occur after the date of this release except as required by law.

(c) 2013 Zalicus Inc. All rights reserved.

Zalicus Inc.
Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(Unaudited)

           

Three months ended
December 31,

Twelve months ended
December 31,

 

2012 2011 2012 2011
 
 
Revenue:
Collaborations and other $ 3,674 $ 2,553 $ 12,097 $ 7,595
Government contracts and grants   114     84     453     589  
 
Total revenue   3,788     2,637     12,550     8,184  
 
Operating expenses:
Research and development 8,930 9,616 41,423 35,294
General and administrative 1,805 2,370 8,977 10,400
Amortization of intangible 972 1,286 3,892 5,141
Restructuring   (18 )       1,094      
 
Total operating expenses   11,689     13,272     55,386     50,835  
 
Loss from operations (7,901 ) (10,635 ) (42,836 ) (42,651 )
Interest income 30 36 150 136
Interest expense (487 ) (397 ) (2,173 ) (976 )
Other income   71     18     91     20  
 
Net loss before benefit for income taxes (8,287 ) (10,978 ) (44,768 ) (43,471 )
Benefit for income taxes       211     441     1,428  
 
Net loss $ (8,287 ) $ (10,767 ) $ (44,327 ) $ (42,043 )
 
Net loss per share—basic and diluted $ (0.06 ) $ (0.11 ) $ (0.38 ) $ (0.43 )
 

Weighted average number of common shares used in net loss
  per share calculation —basic and diluted

  126,989,856     99,231,443     117,316,968     97,347,193  
 
Net loss $ (8,287 ) $ (10,767 ) $ (44,327 ) $ (42,043 )
 
Other comprehensive loss:
Unrealized gain on investments       22     18     12  
 
Comprehensive loss $ (8,287 ) $ (10,745 ) $ (44,309 ) $ (42,031 )
 
 
Zalicus Inc.
Consolidated Balance Sheets

(in thousands, except per share data)

(Unaudited)

       
December 31,
2012 2011
Assets
Current assets:
Cash and cash equivalents $ 4,531 $ 2,750
Restricted cash 50 50
Short-term investments 30,059 45,124
Accounts receivable 3,045 1,886
Prepaid expenses and other current assets   684     1,397  
 
Total current assets 38,369 51,207
Property and equipment, net 3,535 5,258
Intangible asset, net 17,654 21,546
Restricted cash and other assets   1,817     1,872  
 
Total assets $ 61,375   $ 79,883  
 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 3,261 $ 1,743
Accrued expenses and other current liabilities 4,841 6,133
Deferred revenue 4,918 3,349
Current portion of term loan payable 6,327 4,035
Current portion of lease incentive obligation   284     284  
 
Total current liabilities 19,631 15,544
Term loan payable, net of current portion 8,772 15,099
Deferred revenue, net of current portion 600 3,000
Deferred rent, net of current portion 457 605
Lease incentive obligation, net of current portion 875 1,159
Other long-term liabilities 14 563
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued and outstanding

Common stock, $0.001 par value; 200,000 shares authorized; 127,019 and 99,239 shares issued
  and outstanding at December 31, 2012 and 2011, respectively

127 99
Additional paid-in capital 371,912 340,518
Accumulated other comprehensive income (loss) 10 (8 )
Accumulated deficit   (341,023 )   (296,696 )
 
Stockholders’ equity   31,026     43,913  
 
Total liabilities and stockholders’ equity $ 61,375   $ 79,883  
 

Contacts

Zalicus Inc.
Justin Renz, 617-301-7575
CFO
JRenz@zalicus.com
or
Gina Nugent, 617-460-3579
gnugent@zalicus.com

Release Summary

Zalicus Presents fourth quarter and year ended 2012 financial results

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Contacts

Zalicus Inc.
Justin Renz, 617-301-7575
CFO
JRenz@zalicus.com
or
Gina Nugent, 617-460-3579
gnugent@zalicus.com