Medgenics Announces 2011 Financial Results

Medgenics, Inc. (NYSE Amex: MDGN and AIM: MEDU, MEDG) (the “Company”), the developer of a novel technology for the sustained production and delivery of therapeutic proteins in patients using their own tissue, today announced financial results for the year ended December 31, 2011, and the filing with the U.S. Securities and Exchange Commission (“SEC”) of the Company’s Annual Report on Form 10-K. The Form 10-K includes audited annual consolidated financial statements containing the information highlighted below, as well as additional information regarding the Company. The Form 10-K is available at and at It will be mailed to shareholders on or about March 9, 2012.

2011 Financial Results

For the year ended December 31, 2011, net research and development (“R&D”) expense increased to $5.05 million from $1.53 million for the year ended December 31, 2010. This increase is due to the use of materials and sub-contractors in connection with the Phase I/II EPODURE™ clinical trial, increased expenses in developing our Factor VIII Biopump™ and preparations for the clinical trial of INFRADURE™, including the production of a GMP vector, as well as an increase in R&D personnel and patent expenses. These increases were partially offset by $0.94 million participation from the Israeli Office of the Chief Scientist (“OCS”) and a third party recorded during 2011, compared with $1.85 million participation from the OCS, a U.S. grant and a third party during 2010.

General and administrative expense for the year was $4.92 million compared with $4.41 million for 2010. The increase was largely due to legal and professional services fees in connection with Medgenics’ IPO and to stock-based compensation expense related to options granted to consultants.

Other income for 2011 was $0.00 compared with $2.58 million for 2010. Other income in 2010 reflects the excess of the recognized amount received from the third party collaboration agreement over the amount of R&D expense incurred during the period in connection with the agreement.

Financial expenses for 2011 decreased to $0.21 million from $1.66 million for 2010, mainly due to the decrease in the fair value of the convertible debentures, which were converted into common stock in April 2011.

Financial income for 2011 increased to $2.10 million from $0.87 million for 2010, primarily due to the decrease in the fair value of outstanding warrants.

The Company reported a net loss for 2011 of $8.10 million or $0.96 per share, compared with a net loss of $4.15 million or $0.95 per share for 2010.

As of December 31, 2011 Medgenics had $5.00 million in cash and cash equivalents, compared with $2.86 million as of December 31, 2010. In April 2011 the Company raised $13.2 million of gross proceeds (approximately $10.4 million, net) in its U.S. IPO. Net cash used in operating activities during the year was $8.02 million compared with $4.15 million used in 2010.

“2011 was a breakthrough year for Medgenics marked by a number of important corporate and clinical achievements that position the Company for growth and expansion in the coming year. We have exciting clinical development programs underway in a number of disease indications where the sustained production and delivery of therapeutic proteins by patients using their own tissue holds potential to greatly enhance current treatment paradigms,” stated Andrew L. Pearlman, Ph.D., Chief Executive Officer of Medgenics.

Highlights of 2011 include:
  • Significant enhancement of the Company’s leadership with the addition of accomplished executives and physicians with directly relevant experience to its management team, Board of Directors and Strategic Advisory Board.
  • Presentation at the American Society of Nephrology’s Kidney Week 2011 of positive data from the first two completed dose groups (low-dose and mid-dose) of our Phase I/II clinical trial of EPODURE to treat anemia in chronic kidney disease (“CKD”) patients . These data demonstrated that a single EPODURE administration maintained hemoglobin levels for six months or more in most of these patients, and as much as 36 months in one, without requiring any injections of erythropoietic stimulating agents (“ESAs”) such as erythropoietin (“EPO”).
  • Successful completion of our U.S. Initial Public Offering (“IPO”) raising net proceeds of approximately $10.4 million, to fund ongoing development programs towards Biopump™ applications to treat anemia, hepatitis, hemophilia and other diseases.

Dr. Pearlman commented further, “We are awaiting clearance from the Israeli Ministry of Health to begin two Phase I/II clinical trials of INFRADURE, our next product candidate in the Biopump pipeline, to provide sustained production and delivery of interferon-alpha to treat hepatitis. During 2011, our INFRADURE Biopump technology drew increasing interest from several leading experts in the field of hepatitis. As a consequence, while our initial focus is on hepatitis C, we believe INFRADURE can more broadly address the growing and unmet need in a variety of forms of hepatitis. To this end, we have added to our Strategic Advisory Board hepatologist Nezam H. Afdhal, M.D., Chief of Hepatology, Director of Liver Center, Beth Israel Deaconess Medical Center and an Associate Professor of Medicine, Harvard School of Medicine. A world-leading authority in hepatitis, Dr. Afdhal will be instrumental in guiding this strategy as we advance our clinical programs to address this worldwide health epidemic,” continued Dr. Pearlman.

“We continue to make considerable progress with our anemia program and are now in the process of expanding its application from the pre-dialysis patients we have treated thus far, to now address patients on dialysis. In the coming months, we expect to initiate a Phase IIa clinical study in Israel, evaluating the safety and efficacy of sustained EPO therapy using the EPODURE Biopump for the treatment of anemia in dialysis patients with end-stage renal disease (“ESRD”). ESRD represents the largest addressable market for anemia and is a logical indication for EPODURE. We hope this Phase IIa study will build on the positive Phase I/II results using EPODURE to treat pre-dialysis patients with CKD. In parallel, we continue our preparations in the United States towards a larger clinical trial in dialysis patients. We anticipate filing an Investigation New Drug application with the U.S. Food and Drug Administration for a Phase IIb clinical trial of EPODURE in ESRD in the second quarter of 2012. A safe, sustained delivery of EPO could reduce the risks of hemoglobin variability while achieving the recommended hemoglobin targets, without the supraphysiologic EPO concentrations and their attendant risks associated with the current injections of ESAs. It also could significantly improve the logistics of anemia management to the benefit of both patients and payors.”

In closing, Dr. Pearlman stated, “We look forward to an exciting year ahead, launching multiple clinical trials in the treatment of kidney disease and hepatitis, which affect millions of people. We believe that these new trials will provide significant data further supporting our Biopump platform technology for the autologous production and sustained delivery of therapeutic proteins via the patients’ own tissue.”

About Medgenics

Medgenics is developing and commercializing Biopump™, a proprietary tissue-based platform technology for the sustained production and delivery of therapeutic proteins using the patient's own skin biopsy for the treatment of a range of chronic diseases including anemia, hepatitis C and hemophilia. Medgenics believes this approach has multiple benefits compared with current treatments, which include regular and costly injections of therapeutic proteins.

Medgenics has three long-acting protein therapy products in development based on this technology:

  • EPODURE (now completing a Phase I/II dose-ranging trial) to produce and deliver erythropoietin for many months from a single administration, has demonstrated elevation and stabilization of hemoglobin levels in anemic patients for six to more than 36 months;
  • INFRADURE (planning to commence a Phase I/II trial in Israel in 1H12 in hepatitis C) to produce a sustained therapeutic dose of interferon-alpha for use in the treatment of hepatitis; and
  • HEMODURE is a sustained Factor VIII therapy for the prophylactic treatment of hemophilia, now in development.

Medgenics intends to develop its innovative products and bring them to market via strategic partnerships with major pharmaceutical and/or medical device companies.

In addition to treatments for anemia, hepatitis and hemophilia, Medgenics plans to develop and/or out-license a pipeline of future Biopump™ products targeting the large and rapidly growing global protein therapy market, which is forecast to reach $132 billion in 2013. Other potential applications for Biopumps™ include multiple sclerosis, arthritis, pediatric growth hormone deficiency, obesity and diabetes.

Forward-looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and as that term is defined in the Private Securities Litigation Reform Act of 1995, which include all statements other than statements of historical fact, including (without limitation) those regarding the Company's financial position, its development and business strategy, its product candidates and the plans and objectives of management for future operations. The Company intends that such forward-looking statements be subject to the safe harbors created by such laws. Forward-looking statements are sometimes identified by their use of the terms and phrases such as "estimate," "project," "intend," "forecast," "anticipate," "plan," "planning, "expect," "believe," "will," "will likely," "should," "could," "would," "may" or the negative of such terms and other comparable terminology. All such forward-looking statements are based on current expectations and are subject to risks and uncertainties. Should any of these risks or uncertainties materialize, or should any of the Company's assumptions prove incorrect, actual results may differ materially from those included within these forward-looking statements. Accordingly, no undue reliance should be placed on these forward-looking statements, which speak only as of the date made. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. As a result of these factors, the events described in the forward-looking statements contained in this release may not occur.

- Tables to Follow –

U.S. dollars in thousands (except share and per share data)
  December 31,
2010   2011
Cash and cash equivalents $ 2,859 $ 4,995
Accounts receivable and prepaid expenses   983     1,122  
Total current assets   3,842     6,117  
Restricted lease deposits 46 52
Severance pay fund   318     259  
  364     311  
Total assets $ 5,121   $ 6,862  
Trade payables $ 743 $ 903
Other accounts payable and accrued expenses 1,235 1,156
Convertible debentures   5,460     -  
Total current liabilities   7,438     2,059  
Accrued severance pay 1,087 1,328
Liability in respect of warrants   3,670     478  
Total long-term liabilities   4,757     1,806  
Total liabilities   12,195     3,865  

Common stock - $0.0001 par value;
100,000,000 shares authorized; 5,295,531 shares and
9,722,725 shares issued and outstanding at December
31, 2010 and 2011, respectively 1 1
Additional paid-in capital 34,334 52,501
Deficit accumulated during the development stage   (41,409 )   (49,505 )
Total stockholders' equity (deficit)   (7,074 )   2,997  
Total liabilities and stockholders' equity (deficit) $ 5,121   $ 6,862  

U.S. dollars in thousands (except share and per share data)

Year ended December 31

Period from January 27, 2000 (inception) through December 31,
2010   2011 2011
Research and development expenses $ 3,377 $ 5,987 $ 30,442
Less - Participation by the Office of the Chief
Scientist (705) (860) (5,293)
U.S. Government Grant (244) - (244)
Participation by third party   (902)   (75)   (1,067)
Research and development expenses, net 1,526 5,052 23,838
General and administrative expenses 4,405 4,924 26,398
Other income:
Excess amount of participation in research
and development from third party   (2,577)   -   (2,904)
Operating loss (3,354) (9,976) (47,332)
Financial expenses (*) (1,664) (214) (3,280)
Financial income (*)   873   2,097   754
Loss before taxes on income (4,145) (8,093) (49,858)
Taxes on income   2   3   76
Loss $ (4,147) $ (8,096) $ (49,934)
Basic and diluted loss per share $ (0.95) $ (0.96)
Weighted average number of Common stock used
in computing basic and diluted loss per
share   4,374,520   8,447,908

Copyright Business Wire 2010

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