Affymax Reports Fourth Quarter and Year-End 2012 Financial Results

  Affymax Reports Fourth Quarter and Year-End 2012 Financial Results

Business Wire

PALO ALTO, Calif. -- April 2, 2013

Affymax, Inc. (Nasdaq: AFFY) today reported financial results for the fourth
quarter and year ended December 31, 2012. The net loss for the fourth quarter
of 2012 was $68.3 million (or ($1.85) per share) compared to a net loss of
$29.4 million (or ($0.82) per share) for the fourth quarter of 2011.

On February 23, 2013, Affymax and its partner, Takeda Pharmaceutical Company
Limited (Takeda) announced a nationwide voluntary recall of OMONTYS as a
result of postmarketing reports regarding safety concerns, including
anaphylaxis, which can be life-threatening or fatal. We and Takeda are
actively investigating the cause of these reactions but there can be no
assurance that a solution will be found. As of the result of the recall, we
re-evaluated a number of estimates made as of period-end and recorded
financial statement adjustments to reflect changes in those estimates as to
the recoverability of inventory and deposits made to our contract
manufacturing organizations, or CMOs, potential losses on firm purchase
commitments and changes in the short-term and long-term classification of
certain liabilities. In the aggregate, we recorded $45.0 million in impairment
due to inventory and firm purchase commitments in the quarter ended December
31, 2012, with no comparable charge in the prior year.

Earlier this month, the Company began reorganizing its operations in order to
significantly reduce operating costs and negotiating with Takeda to
collaboratively focus on the OMONTYS safety and other related FDA issues
associated with the recall of the product. In addition to the significant
reduction in force of approximately 230 employees (75% of the Company’s
workforce), including the commercial and medical affairs field forces as well
as other officers and employees throughout the organization, the Company is
continuing to transition many of the ongoing activities to Takeda and
negotiating with Takeda on costs allocated between the parties under the
collaboration arrangement. In connection with this restructuring, the Board
and management continue to review the Company’s current financial position,
including but not limited to: (i) the Company’s existing cash balance, which
as of February 28, 2013 was approximately $67 million, (ii) all currently
outstanding liabilities as well as commitments to third parties, which include
potential contract manufacturing organization (CMO) commitments of up to an
estimated approximately $33 million, (iii) outstanding debt obligations of up
to approximately $11 million under its existing credit facility, (iv)
estimated costs and expenses of the reduction in force of $8 to $10 million,
and (v) estimates of expenses pursuant to and in continuation of its
arrangement with Takeda under the collaboration agreement and conduct the
ongoing investigation and support the recall of OMONTYS and (vi) projected
costs for maintaining ongoing operations as a significantly smaller public
company. As a result, the Company is continuing the restructuring efforts
which is expected to include further efforts to transition responsibilities
for the investigation and recall of OMONTYS to Takeda, discussions with the
FDA including a potential withdrawal of the OMONTYS New Drug Application
(NDA), additional reductions in force and renegotiation of some or all of its
existing agreements with third parties, including Takeda, in order to support
a significantly smaller organization. If the Company is unable to rapidly and
successfully progress these efforts, its ability to continue operations will
be significantly in doubt and the Company may have to cease operations.

In addition to the evaluation of strategic alternatives for the organization,
including the sale of the company or its assets, or a corporate merger, the
company is considering all possible alternatives, including further
restructuring activities, wind-down of operations or even bankruptcy
proceedings.

About Affymax, Inc.

Affymax, Inc. is a biopharmaceutical company based in Palo Alto, California.
Affymax's mission is to discover, develop and deliver innovative therapies
that improve the lives of patients with kidney disease and other serious and
often life-threatening illnesses.

The company's first marketed product, OMONTYS^® (peginesatide) Injection, was
approved by the U.S. Food and Drug Administration (FDA) in March 2012. For
additional information, please visit www.affymax.com.

This release contains forward-looking statements, including statements
regarding the Company’s ability to continue operations, financial projections
and condition, the continuation and negotiation of the Company’s collaboration
with Takeda, evaluation of strategic alternatives and the commercialization of
OMONTYS. The Company’s actual results may differ materially from those
indicated in these forward-looking statements due to risks and uncertainties,
including risks relating to the recall and adverse events, the Company’s
ability to conduct the ongoing product investigation and identify the causes
of safety concerns, ability to renegotiate third party agreements, including
those with Takeda, ability to satisfy regulatory requirements to re-introduce
OMONTYS to the market and other factors affecting the commercial potential of
OMONTYS, the continued safety and efficacy of OMONTYS, industry and
competitive environment, regulatory requirements by the FDA or other
regulatory authorities, including withdrawal, existing and future litigation,
ability to reduce costs of operations in a timely manner, financing
requirements and ability to continue as a going concern and access capital,
and other matters that are described in Affymax’s Annual Report on Form 10-K
filed with the Securities and Exchange Commission. Investors are cautioned not
to place undue reliance on these forward-looking statements, which speak only
as of the date of this release. The Company undertakes no obligation to update
any forward-looking statement in this press release.

                                                        
AFFYMAX, INC.
CONDENSED BALANCE SHEETS
(in thousands, except share data)

                                               December 31,     December 31,
                                               2012              2011
                                               (Unaudited)       
Assets
Current assets
Cash and cash equivalents                      $ 68,265          $ 54,339
Short-term investments                           9,717             44,165
Receivable from Takeda                           18,365            6,937
Deferred tax assets                              363               351
Prepaid expenses and other current assets       5,800          1,828    
Total current assets                             102,510           107,620
Property and equipment, net                      2,981             3,013
Restricted cash                                  1,135             1,135
Long-term investments                            2,323             —
Deferred tax assets, net of current              6,876             6,888
Other assets                                    2,392          339      
Total assets                                   $ 118,217       $ 118,995  
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable                               $ 6,591           $ 941
Accrued liabilities                              52,522            13,999
Accrued clinical trial expenses                  2,844             3,365
Deposit from Takeda                              559               1,998
Advance from Takeda, current                     27,715            —
Notes payable, current                          8,844          —        
Total current liabilities                        99,075            20,303
Long-term income tax liability                   10,062            10,411
Advance from Takeda, net of current              —                 6,121
Deferred revenue, net of current                 —                 5,174
Other long-term liabilities                     799            989      
Total liabilities                               109,936        42,998   
Commitments and contingencies                    —                 —
Stockholders’ equity
Common stock                                     37                36
Additional paid-in capital                       551,959           526,244
Accumulated deficit                              (543,713 )       (450,301 )
Accumulated other comprehensive income          (2       )      18       
Total stockholders’ equity                      8,281          75,997   
Total liabilities and stockholders’ equity     $ 118,217       $ 118,995  
                                                                            

                                                              
AFFYMAX, INC.
CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
                                                 
                     Three Months Ended              Twelve Months Ended
                     December 31,                  December 31,
                     2012           2011            2012            2011
Revenue:
Collaboration        $ 14,796        $ 3,674         $ 94,358        $ 47,703
revenue
License and           3             3             12            17      
royalty revenue
Total revenue         14,799        3,677         94,370        47,720  
Operating
expenses:
Impairment of
inventory and
losses on firm         44,957          —               44,957          —
purchase
commitments
Research and           11,252          24,702          51,738          76,308
development
Selling, general
and                   26,778        8,392         89,714        32,818  
administrative
Total operating       82,987        33,094        186,409       109,126 
expenses
Loss from              (68,188 )       (29,417 )       (92,039 )       (61,406 )
operations
Interest income        21              33              77              169
Interest expense       (126    )       (33     )       (1,442  )       (144    )
Other income          (5      )      (24     )      (34     )      15      
(expense), net
Loss before
provision for          (68,298 )       (29,441 )       (93,438 )       (61,366 )
income taxes
Provision
(benefit) for         (27     )      —             (26)          1       
income taxes
Net loss             $ (68,271 )     $ (29,441 )     $ (93,412 )     $ (61,367 )
Net loss per
share:
Basic and            $ (1.85   )     $ (0.82   )     $ (2.57   )     $ (1.84   )
diluted
Weighted-average
number of shares
used in               36,846        35,704        36,342        33,288  
computing basic
and diluted net
loss per share
                                                                               

                                                              
AFFYMAX, INC.
COLLABORATION REVENUE
(in thousands)
(Unaudited)
                                                   
                           Three Months Ended         Twelve Months Ended
                           December 31,               December 31,
                           2012           2011        2012           2011
OMONTYS net product
sales (as provided by      $ 19,561       $ —         $ 34,569        $ —
Takeda)
Total Collaboration         26,355       —          69,275        —
costs & expenses (1)
OMONTYS collaboration       (6,794 )      —          (34,706 )      —
profit (loss)
                                                                      
Affymax share of
collaboration profit         (3,397 )       —           (17,353 )       —
(loss)
Net reimbursement of
Affymax costs &             16,893       —          43,897        —
expenses
Profit equalization
revenue earned by            13,496         —           26,544          —
Affymax (2)
Milestone payments           —              —           60,250          10,000
Revenue previously
deferred related to          495            —           936             —
API
Revenue recognized           —              —           —               26,606
under CAPM (3)
Net expense
reimbursement after         805          3,674      6,628         11,097
CAPM (4)
Total collaboration        $ 14,796      $ 3,674     $ 94,358       $ 47,703
revenue
                                                                        

  (1)  Total Collaboration costs and expenses include costs incurred by
          Affymax and Takeda including amounts provided to us by Takeda.
          
          Profit equalization payment earned is comprised of Affymax’s share
    (2)   of collaboration profit or loss as well as net reimbursement for
          commercialization costs and certain post-marketing development costs
          incurred subsequent to the launch of OMONTYS on March 27, 2012.
          
          Revenue recognized under CAPM (Contingency Adjusted Performance
          Model) includes amounts received related to upfront payments,
          development milestones, purchase of active pharmaceutical
    (3)   ingredient, or API, and reimbursement of development expenses. Under
          CAPM, revenue for these amounts was recognized ratably over the
          expected development period, which ended in May 2011 with the
          submission of the NDA for OMONTYS to the FDA.
          
          Net expense reimbursement after CAPM is comprised of two components:
          (i) net reimbursement at 50% of commercialization expenses and
          certain post-marketing development costs incurred subsequent to the
          submission of the NDA for OMONTYS in May 2011 and prior to the
    (4)   launch of OMONTYS on March 27, 2012, after which such costs are
          incorporated into the profit equalization payment, (ii) the
          reimbursement of those development expenses that fall under the
          70/30 expense split in our collaboration agreement with Takeda
          subsequent to the submission of the NDA for OMONTYS in May 2011 and
          (iii) certain MAA external costs eligible for 100% reimbursement.

Contact:

Affymax, Inc.
Herb Cross, 650-812-8847
Chief Financial Officer
 
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