Threshold Pharmaceuticals Reports Fourth Quarter and Year End 2012 Financial and Operational Results

Threshold Pharmaceuticals Reports Fourth Quarter and Year End 2012 Financial 
and Operational Results 
SOUTH SAN FRANCISCO, CA -- (Marketwire) -- 03/07/13 --  Threshold
Pharmaceuticals, Inc. (NASDAQ: THLD), today reported financial
results for the fourth quarter and year ended December 31, 2012 and
provided a clinical outlook related to the development of TH-302, the
company's lead investigational hypoxia-targeted drug currently in
pivotal Phase 3 clinical studies for both soft tissue sarcoma and
pancreatic cancer. Revenue for the fourth quarter and year ended
December 31, 2012 was $2.0 million and $5.9 million, respectively.
Net income for the fourth quarter ended December 31, 2012 was $28.4
million, which included the operating loss of $6.0 million and
non-cash income of $34.4 million related to changes in the fair value
of the Company's outstanding and exercised warrants that was
classified as other income (expense). Net loss for the year ended
December 31, 2012 was $71.1 million, which included the operating
loss of $20.0 million and non-cash expense of $51.2 million related
to changes in the fair value of the Company's outstanding and
exercised warrants. As of December 31, 2012, Threshold had $70.8
million in cash, cash equivalents and marketable securities, with no
debt outstanding. Subsequent to December 31, 2012, Threshold received
an additional $42.5 million in milestone payments under its agreement
with Merck KGaA, Darmstadt, Germany. 
"2012 was a transformative year for Threshold during which we entered
a strategic partnership with Merck KGaA and made significant advances
in the clinical development of TH-302," said Barry Selick, Ph.D.,
Chief Executive Officer of Threshold. "We started early 2013 with
more than $100 million in cash and investments and with TH-302 in
eight actively recruiting clinical trials, including two pivotal
Phase 3 studies. We are pleased with progress in the Phase 3 trial of
TH-302 in patients with soft tissue sarcoma and look forward to
reporting data from our earlier-stage trials by the end of the year." 
Fourth Quarter and Year End 2012 Financial and Operational Results 
The net income for the fourth quarter of 2012 was $28.4 million
compared to a net loss of $5.3 million for the fourth quarter of
2011. Included in the
 net income for the fourth quarter of 2012 was
non-cash income of $34.4 million compared to non-cash income of $2.8
million in the fourth quarter of 2011. The net loss for 2012 was
$71.1 million compared to a net loss of $25.7 million in 2011.
Included in the net loss for 2012 was non-cash expense of $51.2
million compared to non-cash income of $4.4 million in 2011. The
non-cash income or expense is related to changes in the fair value of
the Company's outstanding and exercised warrants that was classified
as other income (expense). 
Revenue for the fourth quarter and year ended December 31, 2012 was
$2.0 million and $5.9 million, respectively, compared to $0.1 million
for the same periods in 2011. Revenue for 2012 was related to a $25
million upfront payment and $42.5 million in milestone payments
earned from our global license and co-development agreement for
TH-302 with Merck KGaA. Subsequent to December 31, 2012, Threshold
earned an additional $30 million milestone payment. The revenue from
the upfront payment and milestone payments earned under the agreement
is being amortized over the relevant performance period, rather than
being immediately recognized when the upfront payment and milestone
are earned or received. To date, the Company has received $97.5
million in upfront and milestone payments. Threshold could also
receive an additional $12.5 million in a potential milestone payment
in 2013. Re
venue for 2011 was related to a pre-existing license
agreement with Eleison Pharmaceuticals, Inc. 
Research and development expenses were $6.2 million for the fourth
quarter of 2012, compared to $6.7 million for the fourth quarter of
2011. The $0.5 million net decrease in research and development
expenses are primarily related to the $3.0 million reimbursement
credit obtained as part of Merck KGaA's 70% share of total TH-302
development funding under the Merck KGaA collaboration, partially
offset by an increase of $2.5 million in clinical development and
employee related expenses. Research and development expenses were
$18.8 million for 2012, compared to $24.4 million in 2011. The $5.6
million net decrease in research and development expenses are
primarily related to the $12.6 million reimbursement credit obtained
as part of Merck KGaA's 70% share of total TH-302 development funding
under the Merck KGaA collaboration, partially offset by an increase
of $3.6 million in clinical development expenses and $3.4 million in
employee related expenses. 
General and administrative expenses were $1.9 million for the fourth
quarter of 2012 versus $1.4 million for the fourth quarter of 2011.
General and administrative expenses were $7.1 million for 2012 versus
$5.7 million in 2011. The increase in general and administrative
expenses was due to an increase in employee related expenses and
consulting expenses. Non-cash stock-based compensation expense
included in operating expenses was $0.9 million for the fourth
quarter of 2012 versus $0.3 million for the fourth quarter of 2011.
Non-cash stock-based compensation expense included in operating
expenses was $3.0 million for 2012 versus $1.0 million in 2011. The
increase in stock-based compensation expense is due to the
amortization of a greater number of options with a higher fair value. 
As of December 31, 2012, and 2011 Threshold had $70.8 million and
$20.3 million in cash, cash equivalents and marketable securities.
The net increase in cash, cash equivalents and marketable securities
during 2012 is primarily due to the $55 million in upfront and
milestone payments received from our collaboration with Merck KGaA,
$12.3 million from equity issuances related to our at the market
sales offering and $8.8 million from the exercise of warrants.  
Clinical Development Outlook for Ongoing Studies of TH-302 
TH-302 Phase 3 Programs: The most advanced clinical study of TH-302
is a pivotal Phase 3 trial of TH-302 plus doxorubicin versus
doxorubicin alone in patients with soft tissue sarcoma (the "406
trial"); enrollment in the 406 study is currently expected to be
completed around the end of 2013. As announced in January 2013,
Threshold's partner Merck KGaA, through its division Merck Serono,
initiated the global Phase 3 MAESTRO (MetastAtic or unrESectable
pancreaTic aden
ocaRcinOma) study assessing the efficacy and safety of
TH-302 in combination with gemcitabine in patients with previously
untreated, locally advanced unresectable or metastatic pancreatic
adenocarcinoma.  
TH-302 Program in Hematological Malignancies: The "407 trial" in
patients with advanced leukemias continues to enroll patients with
the current objective of evaluating a second dosing regimen of TH-302
in which TH-302 is administered as a continuous infusion over a 5-day
period. The "408 trial" in patients with relapsed/refractory multiple
myeloma continues to enroll patients in the first part of the study
with the objective of determining the maximum tolerated dose of
TH-302 in combination with dexamethasone. 
TH-302 Program with Antiangiogenics: Based on preclinical studies,
Threshold is actively investigating combining TH-302 with
antiangiogenic therapies in a variety of tumor types in human
clinical trials. Current studies include: (1) a Phase 1
dose-escalation study of TH-302 in combination with sunitinib in
patients with advanced renal cell carcinoma, gastrointestinal stromal
tumors, and pancreatic neuroendocrine tumors; (2) a Phase 2
randomized study of TH-302 in combination with bevacizumab in
recurrent high grade astrocytoma following bevacizumab; (3) a Phase 1
dose-escalation study of TH-302 in combination with pazopanib in
advanced solid tumors; and (4) a Phase 1/2 study of TH-302 in
combination with sorafenib in advanced renal cell carcinoma and
advanced hepatocellular carcinoma. All four studies continue to
enroll patients. 
About TH-302 
TH-302 is an investigational hypoxia-targeted drug that is designed
to be activated under severe tumor hypoxic conditions, a hallmark of
many cancers. Areas of low oxygen levels (hypoxia) in solid tumors
are due to insufficient blood supply as a result of aberrant
vasculature. Similarly, the bone marrow of patients with
hematological malignancies has also been shown, in some cases, to be
severely hypoxic. 
TH-302 is currently under evaluation in two Phase 3 trials: one in
combination with doxorubicin versus doxorubicin alone in patients
with soft tissue sarcoma (STS), and the other in combination with
gemcitabine versus gemcitabine and placebo in patients with advanced
pancreatic cancer. Both Phase 3 trials are being conducted under a
Special Protocol Assessment agreement with the U.S. Food and Drug
Administration (FDA). The FDA and the European Commission have
granted TH-302 Orphan Drug Designation for the treatment of STS.
TH-302 is also being investigated in hematological malignancies and
other combination trials in solid tumors. 
Merck KGaA signed a global license and co-development agreement for
TH-302 with Threshold in February 2012, which includes an option for
Threshold to co-commercialize in the U.S. 
About Threshold Pharmaceuticals  
Threshold is a biotechnology company focused on the discovery and
development of drugs targeting Tumor Hypoxia, the low oxygen
condition found in microenvironments of most solid tumors as well as
the bone marrows of some hematologic malignancies. This approach
offers broad potential to treat a variety of cancers. By selectively
targeting tumor cells, we are building a pipeline of drugs that hold
promise to be more effective and less toxic to healthy tissues than
conventional anticancer drugs. For additional information, please
visit our website (www.thresholdpharm.com). 
Forward-Looking Statements 
Except for statements of historical fact, the statements in this
press release are forward-looking statements, including statements
regarding the potential uses and benefits of TH-302, anticipated
milestones, clinical trial plans, including enrollment and
anticipated results and announcements, and financial results,
estimates, projections and requirements, including anticipated and
potential payments from Merck KGaA. These statements involve risks
and uncertainties that can cause actual results to differ materially
from those in such forward-looking statements. Potential risks and
uncertainties include, but are not limited to, Threshold's ability to
enroll or complete its anticipated clinical trials, the time and
expense required to conduct such clinical trials and analyze data,
the results of such clinical trials (including product safety issues
and efficacy results), issues arising in manufacturing TH-302, Merck
KGaA's continued participation in the development of TH-302, and
actions of regulatory authorities, including the United States Food
and Drug Administration. Further information regarding these and
other risks is included under the heading "Risk Factors" in
Threshold's Quarterly Report on Form 10-Q, which has been filed with
the Securities Exchange Commission on November 2, 2012 and is
available from the SEC's website (www.sec.gov) and on our website
(www.thresholdpharm.com) under the heading "Investors." We undertake
no duty to update any forward-looking statement made in this news
release. 


 
                                                                            
                      THRESHOLD PHARMACEUTICALS, INC.                       
              CONDENSED CON
SOLIDATED STATEMENTS OF OPERATIONS               
                  (in thousands, except per share amounts)                  
                                (Unaudited)                                 
                                                                            
                                  Three Months Ended        Year Ended      
                                     December 31,          December 31,     
                                 --------------------  -------------------- 
                                    2012       2011       2012       2011   
                                 ---------  ---------  ---------  --------- 
                                                                            
Revenue                          $   2,021  $      62  $   5,867  $      62 
                                                                            
Operating expenses                                                          
  Research and development           6,163      6,742     18,786     24,388 
  General and administrative         1,851      1,420      7,080      5,710 
                                 ---------  ---------  ---------  --------- 
      Total Operating Expenses       8,014      8,162     25,866     30,098 
                                 ---------  ---------  ---------  --------- 
                                                                            
    Loss from operations            (5,993)    (8,100)   (19,999)   (30,036)
                                                                            
  Interest income (expense), net        25          5         80         25 
  Other income (expense) (1)        34,356      2,820    (51,216)     4,358 
                                 ---------  ---------  ---------  --------- 
      Net income (loss)          $  28,388  $  (5,275) $ (71,135) $ (25,653)
                                 =========  =========  =========  ========= 
                                                                            
                                                                            
Net income (loss) per common                                                
 share                                                                      
  Basic                          $    0.50  $   (0.11) $   (1.31) $   (0.56)
                                 =========  =========  =========  ========= 
  Diluted                        $   (0.10) $   (0.11) $   (1.31) $   (0.56)
                                 =========  =========  =========  ========= 
                                                                            
Weighted-average shares used in                                             
 per common share calculation:                                              
  Basic                             56,298     49,128     54,219     45,900 
                                 =========  =========  =========  ========= 
  Diluted                           62,627     49,128     54,219     45,900 
                                 =========  =========  =========  ========= 
                                                                            
(1) Noncash income (expense) related to change in the fair value of the     
 Company's outstanding and exercised warrants, classified as other income   
 (expense).                                                                 
                                                                            
                       THRESHOLD PHARMACEUTICALS, INC.                      
                    CONDENSED CONSOLIDATED BALANCE SHEETS                   
                               (in thousands)                               
                                                                            
                                                 December 31,   December 31,
                                                     2012           2011    
                                                -------------  -------------
                                                 (unaudited)        (1)     
Assets                                                                      
                                                                            
  Cash, cash equivalents and marketable                                     
   securities                                   $      70,848  $      20,290
  Collaboration Receivable                             15,635              -
  Prepaid expenses and other current assets             1,167            254
  Property and equipment, net                             812            543
  Other assets                                          1,059          1,349
                                                -------------  -------------
    Total assets                                $      89,521  $      22,436
                                                =============  =============
                                                                            
Liabilities and stockholders' equity                                        
                                                                            
  Total current liabilities (2)                 $      17,451  $       8,591
  Deferred Revenue                                     53,097              -
  Long-term liabilities (3)                            32,826          9,362
  Stockh
olders' equity (deficit)                      (13,853)         4,483
                                                -------------  -------------
  Total liabilities and stockholders' equity                                
   (deficit)                                    $      89,521  $      22,436
                                                =============  =============
                                                                            
                                                                            
(1) Derived from audited financial statements                               
(2) Amount includes current portion of deferred revenue of $8.5 million as  
 of December 31, 2012                                                       
(3) Includes as of December 31, 2012 and December 31, 2011, $32.6 million   
 and $9.2 million of warrant liability, respectively.                       

  
Contact
Laura Hansen, Ph.D.
Senior Director, Corporate Communications
Phone: 650-474-8206
E-mail: lhansen@thresholdpharm.com