AVANIR Pharmaceuticals Reports Second Quarter of Fiscal Year 2004 Results

SAN DIEGO--(BUSINESS WIRE)--May 7, 2004--AVANIR Pharmaceuticals (AMEX:AVN) today reported financial results for the second quarter of fiscal 2004, ended March 31, 2004. AVANIR reported a net loss for the second quarter of $6.7 million, or $0.09 per share, compared to a net loss of $6.0 million, or $0.10 per share, for the same period a year ago.

The second quarter was highlighted by:

  • Completion of enrollment in AVANIR's Phase III clinical trial of Neurodex(TM) for the treatment of pseudobulbar affect (PBA) in patients with multiple sclerosis;
  • Discovery of orally-active small molecules that reduce the fatty deposits in blood vessel walls called plaque, typically associated with atherosclerosis;
  • Successful completion of AVANIR's initial Phase I clinical trial for its experimental drug AVP 13358, targeting IgE and other known mediators of allergy and asthma; and
  • Progress on pre-clinical development of AVANIR's monoclonal antibody candidate for the prevention and treatment of anthrax infection through the award of a $750,000 grant from the National Institute of Allergy and Infectious Diseases (NIAID) and the execution of a research collaboration agreement with VaxGen Inc.

Total operating expenses for the second quarter of fiscal 2004 were $7.6 million, compared to $6.7 million in the same period a year ago. Expenditures on research and development (R&D) programs accounted for 71% and 73% of total operating expenses for the quarters ended March 31, 2004 and 2003, respectively. R&D expenses for the second quarter of fiscal 2004 amounted to $5.4 million, compared to $4.9 million for the same period a year ago.

AVANIR is currently in late stage clinical development of Neurodex(TM) for the treatment of PBA, also known as pathological laughing or crying, and expects to complete the Phase III clinical trial at the conclusion of the third fiscal quarter ending June 30, 2004. In the second quarter, AVANIR also had expenses related to an open label safety trial of Neurodex in patients with neurodegenerative diseases, costs associated with the continued clinical development of a treatment for allergy and asthma (Phase I), and preclinical development expenses for treatments for high cholesterol and inflammatory and infectious diseases. A comparison of R&D spending by program is shown in the table that follows.


                    Three Months Ended           Six Months Ended
                          March 31,                  March 31,
              --------------------------------------------------------
                     2004          2003         2004          2003
              --------------------------------------------------------
               Amount     %  Amount     %  Amount     %  Amount     %
               (Mils.)       (Mils.)       (Mils.)       (Mils.)
              --------------------------------------------------------
Develop
 Neurodex for
 the treatment
 of PBA         $2.4     45% $ 1.5     31%  $4.2     39% $ 2.1     25%
Develop
 Neurodex for
 neuropathic
 pain            0.5      9%   0.6     12%   1.1     10%   0.7      8%
Development
 program for
 allergy and
 asthma (IgE
 regulator)      0.9     16%   1.2     26%   1.9     18%   2.5     29%
Preclinical
 anti-
 inflammatory
 research
 program (MIF
 inhibitor)      0.5      9%   0.4      8%   1.1     10%   1.0     12%
Other
 preclinical
 research,
 including
 cholesterol,
 antibody and
 antiviral
 research        1.1     21%   1.2     23%   2.4     23%   2.2     26%
              --------------------------------------------------------
    Total       $5.4    100%  $4.9    100% $10.7    100%  $8.5    100%
--------------========================================================

Revenues of $856,000 for the second quarter of fiscal 2004 included $268,000 from research contracts and licenses, $345,000 in revenues that the company recognized from the sale of Abreva(R) royalty rights in fiscal 2003 and $241,000 from government research grants.

Balance sheet highlights

As of March 31, 2004, AVANIR had cash, cash equivalents, and investments in securities totaling $13.4 million, compared to $17.5 million as of September 30, 2003. Net working capital balance was $5.2 million, deferred revenue was $21.7 million and shareholders' deficit was $4.0 million as of March 31, 2004.

Fiscal Year-to-Date Results

The net loss attributable to common shareholders for the first six months of fiscal 2004 was $13.0 million, compared to $10.2 million for the same period a year ago. The net loss per share was $0.18 for the first six months of fiscal 2004 and 2003.

Total operating expenses amounted to $15.4 million for the first six months of fiscal 2004, compared to $11.8 million in the same period in fiscal 2003. Total R&D expenses amounted to $10.7 million for the first six months of fiscal 2004, compared to $8.5 million in the same period a year ago.

Revenues for the first six months of fiscal 2004 amounted to $2.4 million, compared to $1.4 million for the same period a year ago.

Conference Call and Webcast

Management will host a conference call with a simultaneous webcast today, May 7, 2004, at 11 a.m. Pacific/2 p.m. Eastern to discuss second quarter of fiscal 2004 operating performance. The call/webcast will feature President and Chief Executive Officer Gerald J. Yakatan, Ph.D., and Vice President and Chief Financial Officer Gregory P. Hanson, CMA. 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. Go to either Web site at least 10 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 May 14, 2004, by dialing (888) 266-2086 and entering the passcode # 462117.

The Company

AVANIR Pharmaceuticals is a drug discovery and development company focused on novel treatments for chronic diseases. The company's most advanced product candidate, Neurodex(TM), is in Phase III clinical development for pseudobulbar affect, also known as pathological laughing or crying. Neurodex(TM) is in Phase II clinical development for neuropathic pain. A potential treatment for allergy and asthma, AVP-13358, is in Phase I clinical development. AVANIR also develops human monoclonal antibodies for infectious diseases and other therapeutic applications. The company's first commercialized product, Abreva(R), is marketed in North America by GlaxoSmithKline Consumer Healthcare and is the leading over-the-counter product for the treatment of cold sores. Further information about AVANIR can be found at www.avanir.com.

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.


                        AVANIR PHARMACEUTICALS
        Summary Consolidated Financial Information (Unaudited)

                      Three Months Ended          Six Months Ended
                            March 31,                 March 31,
                 -----------------------------------------------------
Consolidated
 Statement of
 Operations Data:      2004          2003        2004         2003
----------------------------------------------------------------------

Revenues             $855,837     $ 621,643   $2,365,482   $1,440,749
                 -----------------------------------------------------
Operating
 expenses
 Research and
  development       5,372,641     4,860,280   10,736,324    8,471,902
General and
 administrative     1,510,332     1,210,567    2,918,228    2,289,513
 Sales and
  marketing           722,086       606,339    1,580,597    1,031,468
 Cost of product
  sales                                          210,090        3,102
                 -----------------------------------------------------
Total operating
 expenses           7,605,059     6,677,186   15,445,239   11,795,985
                 -----------------------------------------------------
Loss from
 operations        (6,749,222)   (6,055,543) (13,079,757) (10,355,236)
 Interest income       56,726        85,128      112,268      153,150
 Other income          11,722         6,013       19,369       11,859
 Interest expense      (9,719)      (12,761)     (20,527)     (23,335)
                 -----------------------------------------------------
Loss before
 income taxes      (6,690,493)   (5,977,163) (12,968,647) (10,213,562)
    Provision for
     income taxes         (62)         (771)      (2,120)      (2,371)
                 -----------------------------------------------------
Net loss          $(6,690,555)  $(5,977,934)$(12,970,767)$(10,215,933)
                 =====================================================
Net loss
 attributable to
 common
 shareholders     $(6,690,555)  $(5,988,693)$(12,970,767)$(10,237,551)
                 =====================================================
Net loss per
 share:
   Basic and
    diluted            $(0.09)       $(0.10)      $(0.18)      $(0.18)
                 =====================================================
Weighted average
 number of
common shares
 outstanding:
   Basic and
    diluted        71,285,690    58,352,406   71,248,769   58,324,174
                 =====================================================

Consolidated        March 31,  September 30,
 Balance Sheet        2004         2003
 Data:
--------------------------------------------

Cash and cash
 equivalents      $ 7,910,493  $ 12,198,408
Short-term, long-
 term and
 restricted
 investments in
 securities         5,525,232     5,258,881
                 ---------------------------
    Total cash
     and
     investments  $13,435,725   $17,457,289
                 ===========================
Net working
 capital           $5,194,180   $10,619,216
Total assets      $24,786,399   $29,645,257
Deferred revenue  $21,662,136   $22,792,641
Total liabilities $28,416,547   $28,608,026
Shareholders'
 equity (deficit) $(4,005,148)   $1,037,231

CONTACT: AVANIR Pharmaceuticals, San Diego
Investor Relations:
Patrice Saxon, 858-622-5202
psaxon@avanir.com

SOURCE: AVANIR Pharmaceuticals