Medgenics Reports Third Quarter 2012 Financial Results

  Medgenics Reports Third Quarter 2012 Financial Results

Business Wire

MISGAV, Israel & SAN FRANCISCO -- November 14, 2012

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 reported
financial results for three and nine months ended September 30, 2012.

Business Highlights of the Third Quarter and Subsequent Weeks

  *Received approval from Israel’s Ministry of Health to initiate two Phase
    I/II studies to assess the safety and efficacy of INFRADURE™ to treat
    hepatitis C. These will be the first clinical proof-of-concept studies for
    the INFRADURE Biopump.
  *Enrolled the first patients in a Phase IIa trial in Israel with EPODURE™
    to treat anemia in patients with end-stage renal disease who are on
    dialysis, and presented preliminary data at the American Society of
    Nephrology’s Kidney Week 2012.
  *Expanded the executive management team with the addition of Marvin
    Garovoy, M.D., as Chief Medical Officer. Dr. Garovoy is a biotechnology
    and pharmaceutical industry executive with considerable drug development
    experience at Genentech, XOMA, Hyperion Therapeutics, and Arriva
  *Appointed Sol J. Barer, Ph.D. as Chairman of the Board. Dr. Barer is the
    former Chairman and Chief Executive Officer of Celgene Corporation.

Management Commentary

“We made important progress during the third quarter towards our strategic and
clinical goals,” stated Andrew L. Pearlman, Ph.D., Chief Executive Officer of

“Specifically, we received approval from the Israel Ministry of Health for our
Phase I/II trials in hepatitis C, with an objective of enrolling up to 16
untreated patients with hepatitis C genotype 3. This represents the first
proof of concept study of INFRADURE in man. We expect to use data from this
study to advance our broader INFRADURE hepatitis clinical development program,
starting in the U.S., where we have received Orphan Drug Designation for
hepatitis D from the U.S. Food and Drug Administration (“FDA”). Hepatitis D is
a rare and aggressive form of hepatitis whose standard treatment today
consists of weekly injections of interferon-alpha for a year or more, where
oral antiviral treatments have not been effective. In addition, we are
investigating the application of INFRADURE for hepatitis B towards addressing
the emerging need for a practical, shorter treatment alternative to years of
expensive oral antivirals. Hepatitis B is the most prevalent form of
hepatitis, with an estimated 350 million people infected worldwide, according
to the World Health Organization.

“We have also initiated a Phase IIa EPODURE study in Israel to treat anemia in
dialysis patients with end-stage renal disease ("ESRD"), and have recently
presented early data from that study in a poster at the 2012 Kidney Week of
the American Society of Nephrology. We continue preparations to initiate a
Phase II clinical trial in the U.S. in early 2013 with EPODURE in ESRD
patients on dialysis, as cleared by the FDA in May under an Investigational
New Drug (“IND”) application. Our objective with this EPODURE study is to
achieve recommended hemoglobin targets for months, while avoiding the risks of
supraphysiologic EPO concentrations associated with injections of
erythropoietin stimulating agents, It also has the potential to improve the
logistics of anemia management in a range of settings, whether in the clinic,
home or elsewhere, to the benefit of both patients and payors.

“We are in the process of performing a comprehensive pipeline review to assess
clinical applications we believe could benefit from our versatile Biopump
platform and to update our list of targeted indications that will maximize our
business development prospects,” added Dr. Pearlman.

“We are very pleased to have strengthened Medgenics leadership with the
addition of Dr. Sol Barer as Chairman of the Board, and to have bolstered our
clinical team with the appointment of Dr. Marvin Garovoy as Chief Medical
Officer,” concluded Dr. Pearlman.

Third Quarter Financial Results

Gross research and development (“R&D”) expense for the third quarter of 2012
increased to $1.89 million from $1.79 million for same period in 2011 due to
an increase in R&D personnel. Net R&D expense for the 2012 third quarter was
$1.61 million compared with net R&D expense of $1.35 million for the prior
year’s third quarter.

General and administrative expense for the third quarter of 2012 was $1.47
million compared with $1.88 million for the third quarter of 2011, primarily
due to a decrease in compensation for professional services.

Financial expense for the third quarter of 2012 decreased to nil from $0.27
million for the same period in 2011, mainly as a result of changes in
valuation of the warrant liability.

For the quarter ended September 30, 2012, the Company reported a net loss of
$3.03 million or $0.25 per share, compared with a net loss of $3.42 million or
$0.35 per share in the comparable 2011 period.

Nine Month Financial Results

Gross R&D expense for the nine months ended September 30, 2012 was $5.13
million, up from $4.50 million for the same period in 2011 due to an increase
in the use of materials and sub-contractors in connection with preparations
for the Company’s ongoing Phase II EPODURE clinical trial in Israel and
planned Phase II clinical trial in the U.S., preparations for the trials of
INFRADURE in Israel and an increase in R&D personnel. For the nine months
ended September 30, 2012, net R&D expense decreased to $3.36 million from
$3.57 million for the comparable prior-year period due to the participation by
the Israeli Office of the Chief Scientist of $1.77 million in the 2012 period
compared with $0.86 million for the 2011 period, which was partially offset by
higher gross R&D expenses as detailed above. General and administrative
expense for the first nine months of 2012 was $5.60 million compared with
$3.71 million for the first nine months of 2011 primarily due to increased
fees for legal and professional services and stock-based compensation granted
to consultants and directors. The Company’s net loss for the first nine months
of 2012 was $12.69 million or $1.20 per share, compared with a net loss of
$6.09 million or $0.76 per share for the same period of 2011.

Balance Sheet Highlights

As of September 30, 2012, Medgenics had cash and cash equivalents of $9.00
million, compared with $5.00 million as of December 31, 2011. For the nine
months ended September 30, 2012, the Company used $5.87 million in net cash to
fund operating activities, compared with $5.46 million for the nine months
ended September 30, 2011.

Full results may be viewed in the Company’s Quarterly Report on Form 10-Q
filed with the U.S. Securities and Exchange Commission (“SEC”). The Form 10-Q
includes unaudited consolidated financial statements containing the
information highlighted in this press release, as well as additional
information regarding the Company. The Form 10-Q is available at
and at

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 tissue for the treatment of a
range of chronic diseases including anemia, hepatitis and hemophilia, among
others. Medgenics believes this approach has multiple benefits compared with
current treatments, which include regular and costly injections of therapeutic

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

  *EPODURE™ to produce and deliver erythropoietin from a single
    administration, which has demonstrated elevation and stabilization of
    hemoglobin levels in anemic patients for periods of six months to more
    than 36 months in a Phase I/II dose-ranging trial in Israel and is
    currently in a Phase IIa trial in dialysis in Israel. An IND application
    has been cleared by the FDA to initiate a Phase IIb study to evaluate the
    safety and efficacy of EPODURE in the treatment of anemia in dialysis
    patients in the U.S.
  *INFRADURE™ for sustained production and delivery of interferon-alpha for
    use in the treatment of hepatitis, which has received approval for two
    Phase I/II trials in hepatitis C from the Israeli Ministry of Health with
    the first slated to commence in Q4 2012; and has received Orphan Drug
    Designation from the FDA for the treatment of hepatitis D.
  *HEMODURE™ for sustained production and delivery of clotting Factor VIII
    therapy for the sustained prophylactic treatment of hemophilia, which is
    now in development.

Medgenics is focused on the development and manufacturing of its innovative
Biopumps, aiming to 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.

CONSOLIDATED BALANCE SHEETS                                     
U.S. dollars in thousands                                       
                                      September 30,               December 31,
                                      2012         2011          2011
Cash and cash equivalents             $ 8,999       $ 7,570       $  4,995
Accounts receivable and prepaid        619         1,298        1,122   
Total current assets                   9,618       8,868        6,117   
Restricted lease deposits               59            59             52
Severance pay fund                     279         346          259     
Total long-term assets                 338         405          311     
PROPERTY AND EQUIPMENT, NET            380         428          434     
Total assets                          $ 10,336     $ 9,701      $  6,862   
Trade payables                        $ 769         $ 928         $  903
Other accounts payable and accrued     1,395       1,413        1,156   
Total current liabilities              2,164       2,341        2,059   
Accrued severance pay                   1,585         1,252          1,328
Liability in respect of warrants       3,373       1,429        478     
Total long-term liabilities            4,958       2,681        1,806   
Total liabilities                      7,122       5,022        3,865   
Common stock - $0.0001 par value;

100,000,000 shares authorized;

9,690,117 and 9,722,725 shares
issued and                              1             1              1

outstanding at September 30, 2012,
September 30,

2011 and December 31, 2011,
Additional paid-in capital              65,403        52,172         52,501
Deficit accumulated during the         (62,190 )    (47,494 )     (49,505 )
development stage
Total stockholders' equity             3,214       4,679        2,997   
Total liabilities and stockholders'   $ 10,336     $ 9,701      $  6,862   

STATEMENTS OF                                                              
U.S. dollars
in thousands
(except share
and per share
                                                                               Period from
               Nine months ended              Three months ended               January 27,
               September 30,                  September 30,                    (inception)
               2012                  2011    2012            2011            September
                                                                               30, 2012
Research and
development    $ 5,125          $ 4,503       $ 1,894          $ 1 ,785        $ 35,567
Less -
by the Office    (1,769     )   (860      )     (283       )     (357      )     (7,062  )
of the Chief
Government       -              -               -                -               (244    )
Participation   -             (75       )    -              (75       )    (1,067  )
by third party
Research and
development      3,356          3,568           1,611            1,353           27,194
expenses, net
General and
administrative   5,603          3,709           1,470            1,877           32,001
Other income:
Excess amount
in research     -             -             -              -             (2,904  )
from third
Operating loss   (8,959     )   (7,277    )     (3,081     )     (3,230    )     (56,291 )
Financial        3,721          203             -                267             (7,001  )
Financial       (4         )   (1,398    )    (55        )    (74       )    758     
Loss before
taxes on         (12,676    )   (6,082    )     (3,026     )     (3,423    )     (62,534 )
Taxes on        9             3             1              1             85      
Loss           $ (12,685    )   $ (6,085  )   $ (3,027     )   $ (3,424    )   $ (62,619 )
Basic and
diluted loss   $ (1.20      )   $ (0.76   )   $ (0.25      )   $ (0.35     )
per share
average number
of shares of
Common stock
used in         10,604,924    8,020,348     12,013,153     9,657,659 
basic and
diluted loss
per share


Medgenics, Inc.
Dr. Andrew L. Pearlman, +972 4 902 8900
Anne Marie Fields, 212-838-3777
Abchurch Communications
Adam Michael/Joanne Shears/Jamie Hooper
+44 207 398 7719
Nomura Code Securities (NOMAD & Joint Broker)
Jonathan Senior/Giles Balleny
+44 207 776 1200
SVS Securities plc (Joint Broker)
Alex Mattey/Ian Callaway
+44 207 638 5600
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