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Aradigm Announces Third Quarter 2013 Financial Results



  Aradigm Announces Third Quarter 2013 Financial Results

Business Wire

HAYWARD, Calif. -- October 28, 2013

Aradigm Corporation (OTC BB: ARDM.OB) (the “Company”)  today announced
financial results for the third quarter and nine months ended September 30,
2013.

Total revenue was approximately $4.6 million for the third quarter of 2013
compared with revenue of approximately $0.3 million for the third quarter of
2012. Revenue for the third quarter of 2013 consisted of approximately $4.3
million in collaboration revenue for the reimbursement of research and
development expenses associated with the Grifols collaboration agreement and
$0.2 million in royalty revenue for the quarterly royalty payment from Zogenix
for product sales of SUMAVEL® DosePro™ needle-free delivery system for
treatment of acute migraine and cluster headaches.

The Company’s net loss for the third quarter of 2013 was approximately $14.9
million, or $0.04 per share, compared with a net loss of approximately $2.0
million, or $0.01 per share, for the third quarter of 2012. The net loss
resulted primarily from the one-time, non-cash collaboration arrangement
acquisition cost and higher operating expenses. Total operating expenses for
the third quarter of 2013 were approximately $19.0 million, compared with
total operating expenses of approximately $1.8 million for the third quarter
of 2012. In the third quarter of 2013, the Company recorded $15.9 million as a
one-time, non-cash collaboration arrangement acquisition cost resulting from
the Grifols collaboration agreement as discussed below. The increase in other
operating expenses was primarily due to higher contract testing costs related
to the 9 month inhalation dog study which is underway for the inhaled
ciprofloxacin program and higher legal expenses and executive bonus expense
related to the Grifols transaction compared to the prior year period.

Grifols paid approximately $26.0 million for the shares of the Company’s
common stock at a purchase price of $0.124 per share, which reflected the
contractual price for the Company’s common stock as stated in the Stock
Purchase Agreement on May 20, 2013. Following the announcement of the
collaboration, execution of a supply agreement and satisfaction of other
conditions of closing, the stock price rose to $0.20 at the time of closing.
Consequently, the contractual price of $0.124 per share resulted in a $0.076
per share discount from the August 27, 2013 closing price of $0.20 per share,
or a discount of approximately $15.9 million from the fair market value of the
common stock on the effective date of the Grifols License and Collaboration
Agreement. The Company recorded the sale of common stock to Grifols at fair
value based on the closing price of the Company’s stock on August 27, 2013 of
$0.20 per share. This discount, which is a non-cash charge, has been recorded
as Collaboration Arrangement Acquisition Cost in the Company’s Condensed
Consolidated Statement of Operations for the three and nine-month period ended
September 30, 2013.

As of September 30, 2013, cash, cash equivalents and short-term investments
totaled approximately $38.9 million.

“The activities that were completed this quarter, most importantly the closing
of the collaboration transaction with Grifols and the associated equity
investment as listed below, very significantly improved our financial
resources and accelerated the process of taking Pulmaquin into the clinic to
begin our Phase 3 trials. We are also pleased that we have an excellent
partner in Grifols for the global commercialization of Pulmaquin. We look
forward to dosing the first patient in these trials in the first half of
2014,” said Igor Gonda, President and CEO.

Recent Highlights

  * August 2013: we completed the closing of the worldwide licensing
    transaction with Grifols, S.A. to develop and commercialize Pulmaquin®:
    The transaction includes an exclusive, worldwide license for Aradigm’s
    proprietary formulations of inhaled ciprofloxacin for the treatment of
    severe respiratory diseases, including non-cystic fibrosis bronchiectasis
    (BE). The parties have agreed to advance Pulmaquin into Phase 3 clinical
    trials in BE. Grifols will be responsible for all development and clinical
    expenses up to a maximum of $65 million for the BE indication. Aradigm is
    entitled to receive cash payments of up to $25 million upon achievement of
    development milestones. Grifols is responsible for all commercialization
    activities and will pay Aradigm tiered royalties on worldwide sales of
    products utilizing Aradigm’s proprietary inhaled ciprofloxacin
    formulations. Grifols was granted an option to license Aradigm’s AERx^®
    pulmonary drug delivery platform for use with another molecule. In
    conjunction with the licensing agreement, Grifols acquired 35% of
    Aradigm’s common stock on a fully diluted basis at a price per share of
    $0.124 for a total investment of approximately $26 million. Existing
    Aradigm shareholders, including Tavistock Life Sciences Company and
    accounts managed by First Eagle Investment Management, LLC, and new
    investor Great Point Partners, LLC co-invested in the stock purchase
    transaction and purchased an additional approximately $15.4 million in
    Aradigm common stock.
  * September 2013: we signed a manufacturing agreement with Sigma-Tau
    Pharmasource, Inc. (“Sigma-Tau”) for the clinical and commercial supply of
    Pulmaquin. Under the terms of the broad manufacturing services agreement,
    Sigma-Tau will manufacture all product for Aradigm’s Phase 3 clinical
    studies, and will support Aradigm in the preparation of its submissions to
    regulatory authorities in pursuit of marketing approval for the product.
    Subsequent to market approval, Sigma-Tau will produce the product
    commercially for patients using Pulmaquin.

  * September 2013: we announced changes to our Board of Directors, including
    the retirement of Frank Barker and the appointment of David Bell and
    Lafmin Morgan. Mr. Barker had been a director of Aradigm since 1999 and
    the Board thanked him for his dedication and service to Aradigm. Mr. Bell
    and Mr. Morgan are the designees of Grifols, S.A. and their appointment is
    in conjunction with the closing of the collaboration transaction between
    Aradigm and Grifols, S.A.

About Aradigm

Aradigm is an emerging specialty pharmaceutical company focused on the
development and commercialization of drugs delivered by inhalation for the
prevention and treatment of severe respiratory diseases. The Company has
product candidates addressing the treatment of bronchiectasis, non-TB
mycobacteria, cystic fibrosis, inhalation tularemia and anthrax infections,
and prevention of respiratory and other diseases in tobacco smokers through
smoking cessation.

More information about Aradigm can be found at www.aradigm.com.

Forward-Looking Statements

Except for the historical information contained herein, this news release
contains forward-looking statements that involve risk and uncertainties,
including starting Phase 3 clinical trials and eventually obtaining approval
for Pulmaquin, as well as the other risks detailed from time to time in
Aradigm's filings with the Securities and Exchange Commission (SEC), including
its Annual Report on Form 10-K for the year ended December 31, 2012 filed with
the SEC on March 27, 2013, and Aradigm’s Quarterly Reports on Form 10-Q.

Aradigm, Pulmaquin, Lipoquin and the Aradigm Logo are registered trademarks of
Aradigm Corporation.

 
ARADIGM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
                                                      
                       Three months ended              Nine months ended
                       September 30,                   September 30,
                       2013            2012            2013            2012
                                                                        
Revenues               $ 4,552         $ 262           $ 5,079         $ 784      
Operating
expenses:
Research and             1,593           818             5,000           2,304
development
General and              1,463           1,013           3,801           3,009
administrative
Collaboration
arrangement              15,943          -               15,943          -
acquisition cost
Restructuring and        7               8               21              26
asset impairment
                                                                        
Total operating          19,006          1,839           24,765          5,339    
expenses
                                                                        
Loss from                (14,454 )       (1,577  )       (19,686 )       (4,555  )
operations
                                                                        
Interest income          1               2               4               9
Interest expense         (421    )       (383    )       (1,222  )       (1,135  )
Other income             -               (4      )       (5      )       (2      )
(expense), net
                                                                        
Net loss               $ (14,874 )     $ (1,962  )     $ (20,909 )     $ (5,683  )
Change in
unrealized losses
on                       -               -               -               (1      )
available-for-sale
securities
Comprehensive loss     $ (14,874 )     $ (1,962  )     $ (20,909 )     $ (5,684  )
Basic and diluted
net loss per           $ ( 0.04  )     $ (0.01   )     $ (0.07   )     $ (0.03   )
common share
                                                                        
Shares used in
computing basic
and diluted net          374,126         198,670         291,950         198,336  
loss per common
share
                                                                                  

 
ARADIGM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
                                                            
                                      September 30,            December 31,
                                      2013                     2012
                                      (Unaudited)              *
ASSETS
Current assets:
Cash and cash equivalents             $     38,693             $   7,414
Short-term investments                      230                    203
Receivables                                 13,111                 41
Prepaid and other current                   1,271                  106
assets
                                                                
Total current assets                        53,305                 7,764
Property and equipment, net                 461                    727
Other assets                                389                    475
                                                                
Total assets                          $     54,155             $   8,966     
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable                      $     572                $   330
Accrued clinical and cost of                263                    500
other studies
Accrued compensation                        566                    184
Deferred revenue                            8,770                  -
Facility lease exit                         162                    144
obligation
Other accrued liabilities                   263                    127       
                                                                
Total current liabilities                   10,596                 1,285
Deferred rent                               138                    144
Facility lease exit                         340                    465
obligation, non-current
Note payable, net of discount               8,885                  8,513
and accrued interest
Shareholders' equity                        34,196                 (1,441   )
(deficit)
                                                                
Total liabilities and
shareholders' equity                  $     54,155             $   8,966     
(deficit)
                                                                             
 
* The balance sheet at December 31, 2012 has been derived from the audited
financial statements at that date.
 

Contact:

Aradigm Corporation
Nancy Pecota, 510-265-8800
Chief Financial Officer
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