AVANIR Pharmaceuticals Reports Fourth Quarter and Fiscal 2002 Year-End Results

Key Fiscal 2002 Achievements Highlighted

SAN DIEGO, Dec. 19 /PRNewswire-FirstCall/ -- AVANIR Pharmaceuticals (Amex: AVN) today reported financial results for the fourth fiscal quarter and fiscal year ended September 30, 2002.

"In fiscal 2002 we made important progress in four broad areas," stated Gerald J. Yakatan, Ph.D., President and Chief Executive Officer of AVANIR Pharmaceuticals. "We continued to expand our docosanol franchise, made significant progress in our clinical development of Neurodex, achieved advances in several preclinical programs, and added to the foundation of our Xenerex antibody technology. Specifically, our most important accomplishments in 2002 were in the following areas:

  • Docosanol 10% cream -- Obtained international regulatory approvals for the Company's first product, docosanol 10% cream, as an over-the-counter cold sore treatment in Canada, South Korea and Israel. In June, the Company's partner in South Korea launched docosanol 10% cream under the brand name Herepair. AVANIR also submitted a new drug application to Swedish regulatory authorities seeking marketing approval of the drug in Sweden and signed a licensing agreement with Bruno Farmaceutici to market the product in Italy.
  • Neurodex -- Completed a Phase II/III clinical trial of Neurodex(TM) (formerly AVP-923) for the treatment of pseudobulbar affect (PBA) in patients with Lou Gehrig's disease. The trial achieved all primary and secondary endpoints, paving the way to a Phase III clinical trial for the treatment of PBA in patients with multiple sclerosis (MS). If favorable results are achieved in 2003 from the second Phase III trial of Neurodex, we intend to file a new drug application for review by the U.S. Food and Drug Administration in 2004. In 2002, we also initiated a Phase II dose ranging clinical trial of Neurodex for the treatment of neuropathic pain.
  • Preclinical programs -- Advanced our lead small molecule targeted at lowering IgE, a protein that plays a significant role in allergy and asthma, into final toxicology studies in preparation for the filing of an investigational new drug application (IND). We have also made progress in increasing the potency of acquired compounds that regulate the target, MIF, a protein believed to be a significant mediator in several inflammatory diseases such as rheumatoid arthritis and inflammatory bowel disease.
  • Xenerex Biosciences -- Continued to develop our antibody generation technology through our subsidiary Xenerex Biosciences. Xenerex is currently engaged in three research collaborations to develop antibodies to selected cancer and inflammation targets and was recently awarded a government grant to aid in the development of an antibody to anthrax."

Fourth fiscal quarter operating performance

Revenues for the fourth fiscal quarter ended September 30, 2002 were $1.2 million, compared to $5.8 million in the same period a year ago. Revenues for the current period included $879,000 in royalties earned on sales of Abreva(R) by GlaxoSmithKline. Revenues for the same period a year ago included a $5.0 million milestone payment received from GlaxoSmithKline under the Company's Abreva license agreement and $774,000 in Abreva royalties. Royalty revenues increased by $105,000, or 14%, compared to the fourth quarter of fiscal 2001.

Operating expenses for the fourth fiscal quarter of 2002 were $5.7 million, compared to $4.2 million for the same period a year ago. The increase in operating expenses was primarily due to a $1.0 million increase in research and development (R&D) associated with the increased costs of toxicology work on the Company's lead compound for the treatment of allergy and asthma, and other pre-clinical development programs. R&D for the fourth fiscal quarter of 2002 amounted to $4.0 million, or 69% of total operating expenses, compared to $3.0 million, or 71% of total operating expenses, for the same period a year ago.

The net loss for the fourth fiscal quarter of 2002 amounted to $4.4 million, or $0.08 per share, compared to net income of $1.8 million, or $0.03 per share, for the same period a year ago.

Fiscal year results

Revenues for fiscal 2002 were $8.9 million, compared to $12.7 million in fiscal 2001. Fiscal 2002 revenues included the final $5.0 million milestone payment from GlaxoSmithKline and $3.4 million in Abreva royalties. Fiscal 2001 revenues included $10 million in milestone payments and $2.5 million in Abreva royalties from GlaxoSmithKline. Royalty revenues increased by $891,000, or 35%, compared to the same period in fiscal 2001.

Operating expenses for fiscal 2002 amounted to $19.8 million, compared to $13.6 million in fiscal 2001. Operating expenses increased by $6.2 million over the same period a year ago, primarily due to increased R&D activities related to preclinical research on allergy and asthma and inflammation, and clinical trials of Neurodex for the treatment of PBA and neuropathic pain. R&D expenses for fiscal 2002 amounted to $13.6 million, accounting for 69% of total operating expenses, compared to $8.1 million, or 60% of total operating expenses for fiscal 2001. General and administrative, and sales and marketing costs increased by a combined $1.5 million due to staff additions to support increased R&D and licensing activities.

The net loss attributable to common shareholders in fiscal 2002 amounted to $10.3 million, or $0.18 per share, compared to net income attributable to common shareholders in fiscal 2001 of $190,000, or approximately breakeven on a per share basis. As of September 30, 2002, AVANIR had cash and investments in securities of $13.2 million, and shareholders' equity of $14.1 million, compared to cash and investments in securities of $21.9 million, and shareholders' equity of $24 million as of September 30, 2001.

Outlook for 2003

"We expect our spending will approach $6 million a quarter in the next fiscal year as we pursue our development objectives," said Gregory P. Hanson, Vice President of Finance and Chief Financial Officer continued. Specifically, these objectives include:

  • Completing the Neurodex pivotal Phase III clinical trial for the treatment of PBA in MS patients, and the Phase II trial for the treatment of neuropathic pain;

  • Initiating a Phase I clinical trial for our lead anti-IgE compound, a potential treatment for allergy and asthma;

  • Advancing our docosanol franchise in other major markets, including additional international marketing licenses and regulatory filings in Europe and Asia; and

  • Continuing Xenerex's research in antibody generation.

We also intend to diversify our revenue base in fiscal 2003. In particular, we plan to increase our efforts to license one or more of our technologies or to seek partners that will share the costs of our R&D efforts."

The Company

AVANIR Pharmaceuticals, based in San Diego, is a biopharmaceutical drug discovery and development company that has a commercialized FDA-approved product and a product in Phase III clinical trials. AVANIR is engaged in small molecule research to develop treatments for central nervous system disorders and inflammatory diseases and, through its subsidiary, Xenerex Biosciences, antibody generation. The 2003 Annual Meeting of Shareholders of AVANIR Pharmaceuticals will be held on March 13th, 2003 at 10:00 a.m. at the Company's offices in San Diego. All shareholders are cordially invited to attend the meeting. Further information about AVANIR and Xenerex can be found at www.avanir.com .

Conference call and webcast

Management will host a conference call with a simultaneous webcast today at 8:00 a.m. Pacific/ 11:00 p.m. Eastern to discuss fourth fiscal quarter and fiscal year 2002 operating performance and the outlook for fiscal 2003. The call/webcast will feature President and Chief Executive Officer Gerald J. Yakatan, Ph.D. and Vice President and Chief Financial Officer Gregory Hanson. The webcast will be available live via the Internet by accessing AVANIR's web site at www.avanir.com or CCBN's www.companyboardroom.com . Please go to either web site at least ten minutes early to register, download and install any necessary audio software. Replays of the webcast will be available for 90 days and a phone replay will be available through December 26, 2002, by dialing (888) 266-2086 and entering the passcode # 6358325.

Except for the historical information presented herein, matters discussed in this press release contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Statements that are not historical facts, including statements that are preceded by, followed by, or that include such words like "estimate," "anticipate," "believe," "intend," "plan," or "expect" or similar statements are forward-looking statements. In regard to financial projections, risks and uncertainties include risks associated with milestones and royalties earned from licensees, and results of clinical trials or product development efforts, as well as risks shown in the Company's Annual Report on Form 10-K and from time-to-time in other publicly available information regarding the Company. Copies of such information are available from AVANIR upon request. Such publicly available information sets forth many risks and uncertainties related to AVANIR's business and technology. The company disclaims any intent or obligation to update these forward-looking statements.

For further information, please contact: general information, Kristen McNally, +1-310-407-6548, kmcnally@webershandwick.com, or analysts/investors, Tricia Ross, +1-310-407-6540, tross@webershandwick.com, or media, Tim Grace, +1-312-640-6667, tgrace@webershandwick.com, all of FRB|Weber Shandwick, for AVANIR Pharmaceuticals; or Greg Hanson, CFO, +1-858-622-5201, or Patrice Saxon, IR, +1-858-622-5202, both of AVANIR Pharmaceuticals.


                              AVANIR Pharmaceuticals
                          Summary Financial Information

                              Quarters Ended                Years Ended
    Statement of               September 30,               September 30,
     operations data:        2002        2001             2002       2001
    Revenues             $1,165,809   $5,826,927      $8,853,742 $12,678,602
    Expenses
     Cost of sales               --           --           4,731     728,148
     Research and
      development         3,971,191    2,061,666      13,602,484   7,227,488
     Purchased in-process
      research                   --      917,097              --     917,097
     General and
      administrative      1,211,655      861,122       4,587,769   3,481,735
     Sales and marketing    567,134      367,760       1,640,812   1,234,604
      Total operating
       expenses           5,749,980    4,207,645      19,835,796  13,589,072
    Income (loss) from
     operations          (4,584,171)   1,619,282     (10,982,054)   (910,470)
     Interest income        143,929      186,965         663,588   1,147,439
     Other income            33,917        2,700         129,514       2,700
     Interest expense       (13,843)      (1,239)        (60,560)     (6,547)
      Net income
       (loss)           $(4,420,168)  $1,807,708    $(10,249,512)   $233,122
      Net income
       (loss)
       attributable
       to common
       shareholders     $(4,431,027)  $1,796,849    $(10,292,798)   $189,888
    Net income (loss)
     per share
      Basic                  $(0.08)       $0.03          $(0.18)      $0.00
      Diluted                $(0.08)       $0.03          $(0.18)      $0.00
    Weighted average
     number of common
     shares:
      Basic              58,284,033   57,794,901      58,206,969  57,475,748
      Diluted            58,284,033   61,237,629      58,206,969  61,130,415


                                       September 30, 2002  September 30, 2001
    Balance sheet data:
    Cash and cash equivalents              $8,630,547          $16,542,545
    Short and long-term investments
     in securities                          4,538,457            5,308,691
    Total cash and investments
     in securities                        $13,169,004          $21,851,236
    Total assets                          $20,332,929          $27,053,953
    Total liabilities                      $5,752,259           $2,592,490
    Convertible preferred stock              $521,189             $502,903
    Shareholders' equity                  $14,059,481          $23,958,560

SOURCE AVANIR Pharmaceuticals

/CONTACT: general information, Kristen McNally, +1-310-407-6548, kmcnally@webershandwick.com, or analysts/investors, Tricia Ross, +1-310-407-6540, tross@webershandwick.com, or media, Tim Grace, +1-312-640-6667, tgrace@webershandwick.com, all of FRB|Weber Shandwick, for AVANIR Pharmaceuticals; or Greg Hanson, CFO, +1-858-622-5201, or Patrice Saxon, IR, +1-858-622-5202, both of AVANIR Pharmaceuticals/