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Altus Pharmaceuticals Reports Fourth Quarter and Year End 2008 Financial Results

Wednesday, March 11, 2009 8:08 AM


Company Initiates Phase 2 ALTU-238 Clinical Trial in Pediatric Subjects

Altus Pharmaceuticals Inc. (NASDAQ: ALTU) today reported financial results for the quarter and year ended December 31, 2008.

Fourth Quarter Results

For the fourth quarter of 2008, the Company reported a net loss attributable to common stockholders of $24.8 million, or $0.80 per basic share, compared to net income attributable to common stockholders of $5.4 million, or $0.18 per basic share, in the fourth quarter of 2007. Altus reported negative revenue of $0.5 million in the fourth quarter of 2008 compared to revenue of $26.8 million in the fourth quarter of 2007. The fourth quarter 2007 revenue included $25.1 million associated with our former ALTU-238 collaboration agreement with Genentech, which was terminated effective December 31, 2007.

Research and development expenses totaled $22.3 million in the fourth quarter of 2008 compared to $21.1 million in the fourth quarter of 2007. The increase in research and development expenses is primarily due to an increase in costs relating to the TrizytekTM program. General, sales and administrative expenses were $3.0 million in the fourth quarter of 2008 compared to $5.0 million in the fourth quarter of 2007.

Full Year Results

The Company reported a net loss attributable to common stockholders of $96.8 million, or $3.13 per share, for the full year ended December 31, 2008, compared to a net loss attributable to common stockholders of $63.5 million, or $2.23 per share, for the full year ended December 31, 2007. Total revenue was $2.2 million for 2008 compared to $28.5 million in 2007. The 2007 revenue reflects the termination of our ALTU-238 collaboration agreement with Genentech.

Research and development expenses totaled $83.6 million for 2008 compared to $70.6 million in 2007. Research and development expense for 2008 increased primarily due to increases in manufacturing and clinical costs relating to the Trizytek program. General, sales and administrative expenses were $17.8 million in 2008 compared to $18.2 million in 2007.

The Company's cash, cash equivalents and marketable securities balance at December 31, 2008 was $48.6 million. Altus believes the current cash, cash equivalents and marketable securities position will last into the fourth quarter of 2009. During the next three to six months, the Company will pursue raising additional capital.

On March 11, 2009, the Company filed with the SEC its Annual Report on Form 10-K, which included an audit opinion with a "going concern" explanatory paragraph. The going-concern explanatory paragraph from Altus' independent registered public accounting firm expressed substantial doubt, based upon current financial resources, as to whether Altus can continue to meet its obligations beyond 2009 without access to additional working capital.

2009 Financial Guidance

Based on our current operating plans, including the expected timing and cost of the ALTU-238 Phase 2 pediatric trial, Altus expects its net cash used in operating activities to be between $50 million and $60 million in 2009.

On January 26, 2009, Altus announced a strategic realignment of product development priorities to focus on the advancement of the Company's long-acting, recombinant human growth hormone candidate, ALTU-238, as a once-per-week treatment for adult and pediatric patients with growth hormone deficiency. To conserve capital resources, Altus is discontinuing its Trizytek program activities. This discontinuation resulted in the transfer of certain Trizytek intellectual property rights and regulatory filings to Cystic Fibrosis Foundation Therapeutics, Inc. (CFFT), the nonprofit affiliate of the Cystic Fibrosis Foundation, in accordance with Altus' 2001 strategic alliance agreement with CFFT. On February 20, 2009, Altus and CFFT entered into a letter agreement and a license agreement terminating the 2001 strategic alliance agreement. Under the terms of the license agreement, Altus assigned the Trizytek trademark and certain patent rights to CFFT and granted CFFT an exclusive, worldwide, royalty-bearing license to use certain other intellectual property owned or controlled by Altus to develop, manufacture and commercialize any product using, in any combination, the three active pharmaceutical ingredients which comprise Trizytek. In these agreements, Altus also agreed to assist CFFT with a transition of on-going development and regulatory activities and clinical trials relating to Trizytek through March 27, 2009, after which CFFT will be responsible for future development activities. In exchange, CFFT agreed to release Altus from all obligations and liabilities resulting from the strategic alliance agreement, and to pay Altus a percentage of any proceeds CFFT realizes associated with respect to any rights licensed or assigned to CFFT under the license agreement.

As a result of this strategic realignment, Altus is implementing a workforce reduction of approximately 75%, primarily in functions related to the Trizytek program as well as certain general and administrative positions. Following the staff reduction, which is expected to be completed in the first quarter of 2009, Altus will have approximately 35 employees at its headquarters in Waltham, MA.

"We believe that ALTU-238 represents a promising opportunity to make a major impact on the multi-billion dollar market for growth hormone replacement products. As a mid-stage program with a relatively straight-forward path toward regulatory approval, narrowing our focus on ALTU-238 will enable Altus to preserve capital, minimize clinical and regulatory risk, and build value for our shareholders," stated Dr. Georges Gemayel, President and Chief Executive Officer of Altus Pharmaceuticals.

ALTU-238 Program Update

ALTU-238 is being developed as a subcutaneously administered, long acting formulation of recombinant human growth hormone (hGH) that employs Altus' proprietary protein crystallization and formulation technology, for patients with growth hormone deficiencies. Unlike current hGH therapies that are administered daily, ALTU-238 is being developed and tested to provide a once-per-week dosage formulation that can be administered through a fine gauge needle. Altus has successfully completed a Phase 2 trial with ALTU-238 in adult subjects and recently completed a Phase 1c trial confirming the safety, pharmacokinetic and pharmacodynamic (PK/PD) profile of a single dose of ALTU-238 compared to seven daily injections of Nutropin AQ.

Dr. Gemayel concluded, "I am pleased to announce that we have initiated the Phase 2 trial for ALTU-238 in growth hormone deficient pediatric subjects. We will begin to screen patients shortly and we anticipate that the first subject will be dosed within the next several weeks. We expect to report 6 month primary efficacy data in the second quarter of 2010."

Conference Call Access Information

The Company will host a conference call to discuss the results at 11:00 a.m. ET on March 11. The call may be joined via telephone by dialing (877) 718-5104 or (719) 325-4749 (for international participants) at least 5 minutes prior to the start of the call. The conference confirmation code is: 6842696. 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 6842696. 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. The Company's website is 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 requirements to be used to fund on-going development programs and operations in 2009, the amount of time that the Company's existing cash resources will be available to fund operating expenses, the amount of cash the Company expects to use in operating activities in 2009, the ability of the Company to raise additional capital in order to enable it to continue as a going concern, the expected market for ALTU-238, the timing for patient enrollment in the Phase 2 clinical trial for ALTU-238, the times at which the Company expects to be able to report clinical trial data and results for the ALTU-238 pediatric Phase 2 trial, and the future of the ALTU-238 program. 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 ability to obtain additional funding needed for further research and development of ALTU-238, the success in implementing the strategic realignment, including realizing anticipated cost reductions, the future cost, timing, enrollment and success of ongoing and planned clinical trials; the risk of demonstrating the ultimate potential of ALTU-238; the continuing risks associated with the development and manufacture of products to supply the clinical trials and the unproven safety and efficacy of ALTU-238. 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 in Item 1A "Risk Factors" and elsewhere in its Annual Report on Form 10-K for the year ended December 31, 2008. However, Altus undertakes no obligation to publicly update forward-looking statements, whether because of new information, future events or otherwise.

ALTUS PHARMACEUTICALS INC. (ALTU)                
Condensed Consolidated Statements of Operations      
(Unaudited, in thousands, except per share amounts)            
 
Three Months EndedYear Ended
December 31,December 31,
 

2008

2007

2008

2007

 
Contract revenue $ (461 ) $ 26,771   $ 2,161   $ 28,487  
 
Costs and expenses, net:
Research and development 22,327 21,111 83,555 70,569
General, sales and administrative 2,993 5,015 17,782 18,172

Reacquisition of European Marketing Rights from

Dr. Falk Pharma GmbH - - - 11,493
Gain on termination of Genentech, Inc.
collaboration and license agreement   -     (4,000 )   -     (4,000 )
 
Total costs and expenses —net   25,320     22,126     101,337     96,234  
 
Income (loss) from operations   (25,781 )   4,645     (99,176 )   (67,747 )
 
Other income (expense):
Interest income 259 1,600 2,921 6,683
Interest expense and other 826 (374 ) (215 ) (1,185 )
Foreign currency exchange loss   (36 )   (405 )   (152 )   (983 )
 
Total other income (expense) —net   1,049     821     2,554     4,515  
 
Net income (loss) (24,732 ) 5,466 (96,622 ) (63,232 )
 
Preferred stock dividends and accretion   (57 )   (57 )   (225 )   (225 )
 
Net income (loss) attributable to common stockholders $ (24,789 ) $ 5,409   $ (96,847 ) $ (63,457 )
 
Net income (loss) attributable to common
stockholders per share - basic $ 0.80   $ 0.18   $ (3.13 ) $ (2.23 )
 
Weighted average shares outstanding - basic   31,131     30,741     30,960     28,459  
 
Net income (loss) attributable to common
stockholders per share - diluted $ 0.80   $ 0.16   $ (3.13 ) $ (2.23 )
 
Weighted average shares outstanding - diluted   31,131     32,939     30,960     28,459  
 
 
         
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)        
 
December 31,December 31,
  2008     2007  
 
Cash, cash equivalents and marketable securities $ 48,600 $ 138,332
Accounts receivable - 3,454
Prepaid expenses and other current assets 2,350 2,001
Property and equipment, net 9,601 5,991
Other assets, net   3,700     4,332  
Total assets $ 64,251   $ 154,110  
 
Current liabilities $ 16,521 $ 19,616
Noncurrent liabilities 11,126 8,302
Redeemable preferred stock 6,731 6,506
Total stockholders' equity   29,873     119,686  
Total liabilities, redeemable preferred stock and
stockholders' equity $ 64,251   $ 154,110  

Altus Pharmaceuticals Inc.
John A. Jordan, 781-373-6452
Senior Director, Corporate Communications

(Source: Business Wire )

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