Research and Development Expense
Research and development expense in the fourth quarter of 2010 decreased by approximately 39%, or $0.9 million, to $1.5 million compared with $2.4 million in the fourth quarter of 2009. The decrease was primarily related to lower clinical trial and regulatory expenses for Ceplene?®.
Other Income (Expense)
Other income (expense) during the fourth quarters of 2010 and 2009 amounted to net income of $0.4 million and net expense of $0.3 million, respectively. The primary component of other income in the fourth quarter of 2010 was a tax grant of $0.7 million received from the Internal Revenue Service (IRS) as part of the Qualifying Therapeutic Discovery Project Program, partially offset by interest expense and a foreign exchange loss. The primary component of other expense in 2009 was interest expense and foreign exchange loss.
Full Year 2010 vs. Full Year 2009
Revenue
During the years 2010 and 2009, the Company recognized deferred revenue of $0.8 million and $0.4 million, respectively, and product revenue from the sales of Ceplene?® of $0.2 million and zero, respectively. During 2010, revenue was primarily related to the recognition of deferred revenue from the Company's license agreements with its partners, as well as royalties with respect to certain technology and sales of Ceplene?®. During 2009 revenue was primarily related to the recognition of deferred revenue from the Company's license agreements with its partners, as well as royalties with respect to certain technology and sales of Ceplene?®.
Cost of Goods Sold
Cost of goods sold in 2010 was $1.0 million, consisting primarily of a $0.9 million expense for Ceplene?® inventory the Company believes will not be sold prior to reaching its product expiration date.
Selling, General and Administrative (SG&A) Expense
Selling, general and administrative expense in 2010 decreased by approximately 4%, or $0.3 million, to $7.2 million compared with $7.5 million in 2009. The decrease in SG&A expense can be attributed to lower investor relations, public reporting and stock-based compensation expenses.
Research and Development Expense
Research and development expense in 2010 decreased by approximately 30%, or $3.5 million, to $8.1 million compared with $11.6 million in 2009. The decrease compared with 2009 was primarily attributable to a $2.0 million reduction in salary and salary-related expenses and facility costs related to the closing of the Company's research facility in San Diego in 2009, lower clinical trial expenses for Ceplene?® of $0.9 million, lower license fees of $0.5 million and lower stock-based compensation expenses of $0.2 million, partially offset by higher regulatory fees for Ceplene?® of $0.3 million.
Other Income (Expense)
Other income (expense) during 2010 amounted to a net expense of $0.2 million compared with a net expense of $20.1 million during 2009. The $19.9 million decrease in other expense, net was primarily related to $10.5 million in amortization of debt issuance costs and discount and $9.3 million in interest expense, which was paid from restricted cash, as a result of the conversion of $24.5 million of the Company's 7.5556% convertible subordinated notes due 2014 into approximately 9.1 million shares of common stock in 2009. Other income (expense) was negatively impacted by a $0.5 million foreign exchange loss in 2010, compared with a $0.2 million foreign exchange gain in 2009. The Company received a $0.7 million tax grant in 2010 from the IRS as part of the Qualifying Therapeutic Discovery Project Program.
EpiCept also announced today that in its Annual Report on Form 10-K for the year ended December 31, 2010, the Company's independent registered public accounting firm is expected to express an unqualified opinion on the December 31, 2010 consolidated financial statements and will include an explanatory paragraph expressing substantial doubt about the Company's ability to continue as a going concern.
Liquidity
As of December 31, 2010 EpiCept had approximately $2.4 million in cash and cash equivalents. Subsequent to the end of the year, in February 2011, the Company announced that it received approximately $6.6 million in net proceeds from the issuance of approximately 8.9 million shares of its common stock at $0.80 per share, and five-year warrants to purchase up to approximately 3.6 million shares of common stock at an exercise price of $0.75 per share. The Company believes that its current cash is sufficient to fund operations through the third quarter of 2011.
In November 2010, the Company provided an update on its efforts to finance the Company's operations beyond 2010. The key element of the Company's plan is a non-equity financing transaction that, if completed, will support its current operations well into 2012. The completion of this transaction was delayed by due diligence and other considerations and, while EpiCept is continuing its efforts to secure this financing, there is no assurance that it will be completed. The Company may determine to seek additional or alternative sources or types of financing should the transaction not close or the proceeds are less than anticipated. The Company may receive cash from certain licensing activities during 2011.
Source: EpiCept Corporation