Gentium Reports First Quarter Financial Results; Provides Financial and Clinical Update

VILLA GUARDIA, Italy--(BUSINESS WIRE)--Gentium S.p.A. (NASDAQ: GENT) (the “Company”) today reported financial results for the quarter ended March 31, 2008. Highlights of the first quarter of 2008 and recent weeks through June 26, 2008, include:

--Continued updates of the ongoing Phase III clinical trial in the U.S., which is evaluating the Company's lead product, Defibrotide, as a potential treatment for patients with Veno-Occlusive Disease ("VOD") with multiple organ failure ("Severe VOD"). In January the company announced the Data Safety Monitoring Board (“DSMB”) conducted a safety analysis of Defibrotide as part of the interim analysis and concluded that there were no safety concerns. Additionally, the DSMB evaluated stratification between the prospective treatment and historical control arms and indicated that the groups appear to be balanced. However, the DSMB asked the Company to clarify and supplement certain trial data in order to complete the remainder of the interim analysis. After providing additional data, the Company announced in June that the DSMB had reconfirmed their previous finding regarding safety and patient stratification, but recommended reconfirmation of the patient enrollment criteria, and “data clean-up” as is stated in the trial protocol. The Company has concluded enrollment in the study with 86 patients in the historical control group and 101 patients in the treatment arm.

-- Progress has been made with the Company's Phase II/III clinical trial in Europe which is evaluating Defibrotide for the prevention of VOD in children. In June, the Company announced that the DSMB concluded that there were no significant safety concerns, the prophylactic treatment arm (Defibrotide) and the control arm (no drug) were well balanced, and there was no evidence of clinical futility in the trial. Furthermore, the DSMB indicated that the results to date were satisfactory and recommended that the trial continue to accrue patients. The DSMB recommended increasing total patient enrollment to 180 patients per arm from 135 patients per arm to achieve a more statistically significant benefit of Defibrotide over the control. Currently, there are 142 patients in the treatment arm and 144 patients in the control arm. Additionally, the Company announced that following discussions with the EMEA, there is the possibility of an accelerated review for Defibrotide in this indication.

Clinical Highlights and Outlook

Commenting on Gentium’s clinical progress during the quarter, Laura Ferro, M.D., Chairman and Chief Executive Officer, said, “We are working with an independent medical review committee to ensure that the proper enrollment criteria were applied when identifying historical control patients for the Defibrotide Phase III treatment trial. Additionally, we are working closely with the European clinical sites to support the recruitment of the additional patients needed for the Phase II/III pediatric prevention trial.”

Dr. Ferro continued, “We look forward to announcing top-line results from the treatment trial in the fourth quarter of 2008 and top-line results from the pediatric prevention trial in the first half of 2009. We remain encouraged that Defibrotide has the potential to not only treat Severe VOD, but also prevent its occurrence.”

Financial Highlights

The Company reports its financial condition and operating results using U.S. Generally Accepted Accounting Principles (GAAP). The Company’s financial statements are prepared using the Euro as its functional currency. On March 31, 2008, €1.00 = $ 1.5812.

For the first quarter ended March 31, 2008 compared with the prior year’s first quarter:

• Total revenues were €2.68 million, compared with €1.25 million
• Operating costs and expenses were €7.53 million, compared with €5.42 million
• Research and development expenses, which are included in operating costs and expenses, were €3.61 million, compared with €2.74 million
• Operating loss was €4.84 million, compared with €4.16 million
• Interest income, net, was €0.1 million, compared with €0.2 million
• Pre-tax loss was €6.08 million, compared with €4.77 million
• Net loss was €6.08 million, compared with €4.77 million
• Basic and diluted net loss per share was €0.41 compared with €0.36 per share

Operating Results and Trends

The fluctuation in product sales revenues for the three month period compared with the prior-year periods is primarily due to varying demand for our products from our customers. Total product sales revenues for three months ended March 31, 2008 increased by €0.5 million, or 44%, compared with the same period in 2007. Sales to affiliates represented 30% and 77% of the total product sales in the three months ended March 31, 2008 and 2007, respectively. Sales to third parties increased to €1.20 million mainly due to higher demand for our active pharmaceutical ingredient sulglicotide in the Korean market and due to our acquisition of the Italian marketing authorization and trademarks regarding Defibrotide, which allowed the Company to sell Defibrotide directly to distributors instead of indirectly through Sirton.

Other revenues were €0.9 million for the three month period ended March 31, 2008, compared to €0.04 million in 2007. The increase is mainly attributable to the reimbursement of certain costs incurred in the Company's Phase III clinical trial of Defibrotide to treat Severe VOD under a cost-sharing agreement entered into with Sigma-Tau Inc.

Cost of goods sold was €1.42 million for the three-month period ended March 31, 2008 compared to €1.08 million in 2007. Cost of goods sold as a percentage of product sales was 81% in 2008 and 89% in 2007. The increase in margin is mainly due to changes in product mix and higher sales prices.

Research and development spending increased during the three-month period in 2008 compared with 2007, primarily due to the costs associated with the Company’s Phase III trial in the U.S. for the treatment of Severe VOD and the Company’s Phase II/III trial in Europe for the prevention of VOD. Growth in headcount and outside services to support increased activity in our clinical trials, including clinical product production costs, contract research organization expenses, regulatory activities, toxicology studies and stock-based compensation expenses also contributed to increased research and development expenses.

The Company had 87 employees as of March 31, 2008, compared with 81 as of March 31, 2007. Other general and administrative expense increases were primarily the result of increased headcount and facilities related expenses, general corporate expenses and stock based compensation expense.

Interest income, net, decreased to € 0.1 million in the three-month period ended March 31, 2008 over the same period in 2007. Interest income amounted to €0.2 million and € 0.3 million in the three months ended March 31, 2008 and 2007, respectively, a decrease of € 0.1 million. The decrease is due to a lower amount of invested funds and decrease in interest rates. Interest expense totaled € 0.1 million in both the three months ended March 31, 2008 and 2007.

The Company ended the first quarter of 2008 with €20.36 million in cash and cash equivalents, compared with cash and cash equivalents of €25.96 million as of December 31, 2007.

About Gentium

Gentium, S.p.A., located in Como, Italy, is a biopharmaceutical company focused on the research, discovery and development of drugs to treat and prevent a variety of vascular diseases and conditions related to cancer and cancer treatments. Defibrotide, the Company’s lead product candidate, is an investigational drug that has been granted Orphan Drug status and Fast Track Designation by the U.S. FDA to treat Severe VOD and Orphan Medicinal Product Designation by the European Commission both to treat and to prevent VOD.

Cautionary Note Regarding Forward-Looking Statements

This press release contains “forward-looking statements.” In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of these terms and other comparable terminology. These statements are not historical facts but instead represent the Company’s belief regarding future results, many of which, by their nature, are inherently uncertain and outside the Company’s control. It is possible that actual results may differ, possibly materially, from those anticipated in these forward-looking statements. For a discussion of some of the risks and important factors that could affect future results, see the discussion in our Form 20-F for the year ended December 31, 2007 under the caption “Risk Factors.”

GENTIUM S.p.A.
Balance Sheets
(Amounts in thousands, except share and per share data)
		December 31, 2007			March 31, 2008 (unaudited)
ASSETS
Cash and cash equivalents	€	25,964		€	20,363
Accounts receivable		805			1,084
Accounts receivable from related parties		4,149			4,816
Inventories, net		1,510			1,681
Prepaid expenses and other current assets		4,844			5,394
Total Current Assets		37,272			33,338
Property, manufacturing facility and equipment, at cost		20,590			20,810
Less: Accumulated depreciation		9,046			9,347
Property, manufacturing facility and equipment, net		11,544			11,463
Intangible assets, net of amortization		2,592			2,499
Available for sale securities		525			524
Other non-current assets		26			30
Total Assets	€	51,959		€	47,854
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	€	9,583		€	10,443
Accounts payable to Crinos		4,000			4,000
Accounts payable to related parties		2,095			2,568
Accrued expenses and other current liabilities		1,223			1,385
Current portion of capital lease obligations		107			108
Current maturities of long-term debt		1,262			1,323
Total Current Liabilities		18,270			19,827
Long-term debt, net of current maturities		4,421			4,237
Capital lease obligation		223			207
Termination indemnities		686			671
Total Liabilities		23,600			24,942
Share capital (par value: €1.00; 18,454,292 shares authorized; 14,946,317 and 14,956,317 shares issued at December 31, 2007 and March 31 2008, respectively)
		14,946			14,956
Additional paid in capital		88,618			89,245
Accumulated other comprehensive income/(loss)		(2)			(4)
Accumulated deficit		(75,203)			(81,285)
Total Shareholders’ Equity		28,359			22,912
Total Liabilities and Shareholders’ Equity	€	51,959		€	47,854

GENTIUM S.p.A.
Statements of Operations
(Unaudited, amounts in thousands except share and per share data)
	Three Months Ended March 31,
		2007			2008
Revenues:
Product sales to related party	€	951		€	555
Product sales to third parties		267			1,199
Total product sales		1,218			1,754
Other revenues		35			935
Total revenues		1,253			2,689
Operating costs and expenses:
Cost of goods sold		1,088			1,429
Research and development		2,741			3,611
General and administrative		1,291			2,020
Depreciation and amortization		75			277
Charges from related parties		226			195
		5,421			7,532
Operating loss		(4,168)			(4,843)
Interest income, net		263			124
Foreign currency exchange (loss), net		(868)			(1,363)
Loss before income tax expense		(4,773)			(6,082)
Income tax expense		-			-
Net loss	€	(4,773)		€	(6,082)
Net loss per share:
Basic and diluted net loss per share	€	(0.36)		€	(0.41)
Weighted average shares used to compute basic and diluted net loss per share		13,117,049			14,956,096

GENTIUM S.p.A.
Statements of Cash Flows
(Unaudited, amounts in thousands except share and share per data)
	Three Months Ended March 31,
		2007			2008
Cash Flows From Operating Activities:
Net loss	€	(4,773)		€	(6,082)
Adjustments to reconcile net loss to net cash used in operating activities:
Unrealized foreign exchange loss		815			1,396
Depreciation and amortization		278			459
Stock based compensation		241			599
Deferred income		(35)			-
Loss on fixed asset disposal		-			7
Changes in operating assets and liabilities:
Accounts receivable		(897)			(946)
Inventories		(347)			(171)
Prepaid expenses and other current and noncurrent assets		109			(554)
Accounts payable and accrued expenses		1,034			1,340
Net cash used in operating activities		(3,575)			(3,952)
Cash Flows From Investing Activities:
Capital expenditures		(228)			(227)
Intangible assets expenditures		(120)			(66)
Net cash used in investing activities		(348)			(293)
Cash Flows From Financing Activities:
Proceeds from private placements, net of offering expense		34,485			-
Proceeds from warrant and stock option exercises, net		549			38
Repayments of long-term debt		(82)			(124)
Proceeds from short term borrowings		-			217
Principal payment of capital lease obligations		-			(15)
Net cash provided by financing activities		34,952			116
Increase/(decrease) in cash and cash equivalents		31,029			(4,129)
Effect of exchange rate on cash and cash equivalents		(827)			(1,472)
Cash and cash equivalents, beginning of period		10,205			25,964
Cash and cash equivalents, end of period	€	40,407		€	20,363