Aradigm Announces Fourth Quarter 2013 and Full Year Financial Results

  Aradigm Announces Fourth Quarter 2013 and Full Year Financial Results

Business Wire

HAYWARD, Calif. -- March 13, 2014

Aradigm Corporation (OTC BB: ARDM.OB) (the “Company”)  today announced
financial results for the fourth quarter and full year ended December 31,
2013.

Fourth Quarter 2013 Results

The Company recorded $4.6 million in revenue in the fourth quarter of 2013
compared with $223,000 in revenue in the fourth quarter of 2012. Total
operating expenses for the fourth quarter of 2013 were $4.9 million, compared
with total operating expenses of $2.4 million for the fourth quarter of 2012.
The increase in operating expenses was primarily due to higher research and
development expenses related to the inhaled ciprofloxacin program. The
Company’s net loss for the fourth quarter of 2013 was $0.7 million, or $0.00
per share, compared with a net loss of $2.5 million, or $0.01 per share, for
the same period in 2012.

Full Year Results

Revenues for the year ended December 31, 2013 were $9.7 million, compared with
revenues of $1.0 million in 2012. The increase in revenue was due to the
recognition of revenue from the Grifols collaboration arrangement as the
Company is being reimbursed for Pulmaquin® project-related costs, including 9
month dog study-related expenses that were incurred starting in October 2012.

Total operating expenses for 2013 were $29.6 million, compared with total
operating expenses of $7.7 million in 2012. Research and development expenses
increased by $5.1 million and general and administrative expenses increased by
$0.9 million. The increase in research and development expenses was mainly due
to the completion of the 9 month inhalation dog study in 2013 and the
preparation for the start of the Pulmaquin Phase 3 clinical trials which
resulted in higher costs in contract manufacturing and testing as well as
higher clinical trial expenses. General and administrative costs increased in
2013 because of higher executive bonus payments and higher legal expenses both
associated with the Grifols collaboration. 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.

In August 2013, 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 May20, 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 August27, 2013 of
$0.20 per share. This discount, which is a non-cash charge, was recorded as
Collaboration Arrangement Acquisition Cost.

The net loss for the year ended December 31, 2013 was $21.6 million, or $0.06
per share, compared with a net loss of $8.2 million, or $0.04 per share, in
2012. The increase in the net loss resulted primarily from the $15.9 million
non-cash collaboration arrangement acquisition cost, higher operating expenses
due to the expenses associated with the 9 month inhalation dog study which
started in October 2012, the preparation costs associated with the Pulmaquin
Phase 3 trials, higher legal expenses and bonus expenses for executives
related to the Grifols collaboration offset by collaboration revenue from the
Grifols collaboration due to the reimbursement of Pulmaquin project-related
costs.

As of December 31, 2013, cash and cash equivalents totaled $48.1 million.

“2013 was a game changing year for Aradigm. Our collaboration with Grifols and
the accompanying equity raise not only provides the resources to fund the
Pulmaquin program in non-cystic fibrosis bronchiectasis in its entirety
through the completion of the Phase 3 clinical trials ORBIT-3&4, which are
being led by our experienced Chief Medical Officer, Juergen Froehlich, but
also brings to Aradigm in Grifols an experienced commercial partner with a
specialty respiratory sales force,” said Igor Gonda, the Company’s president
and chief executive officer. “In addition, this year we have initiated our
collaborations with university scientists to embark on exciting research into
new indications consistent with our mission to prevent and treat severe
respiratory diseases.”

2013 Highlights

  *November 2013: we announced the appointment of Juergen Froehlich, M.D. as
    Chief Medical Officer. On November 9, 2013, the Company announced that it
    appointed Dr. Juergen Froehlich as Aradigm’s Chief Medical Officer. He
    joins Aradigm from Vertex Pharmaceuticals where he was Head of Regulatory
    Affairs, overseeing submissions and approvals under accelerated review
    timelines of Kalydeco (ivacaftor) for the orphan indication of cystic
    fibrosis. Dr. Froehlich has more than 20 years of pharmaceutical industry
    experience in preclinical, clinical and regulatory activities at
    Boehringer Ingelheim, Genentech, Quintiles, Bristol-Myers Squibb, Ipsen
    and Vertex Pharmaceuticals. While at Genentech, Dr Froehlich directed the
    clinical development, submission and approval of Activase for acute
    ischemic stroke and the early development of Xolair for the treatment of
    allergic rhinitis and allergic asthma. At Bristol-Myers Squibb, Dr.
    Froehlich oversaw the global life cycle management for Plavix and Avapro.
    At Ipsen, he directed the FDA submission and approval for Somatuline for
    acromegaly, oversaw development Dysport for cervical dystonia as well as
    clinical studies and regulatory strategies for recombinant porcine factor
    VIII in hemophilia. Dr. Froehlich was closely involved in the
    commercialization of various drugs and biologics and alliance activities
    with other companies. Dr. Froehlich graduated from the Medical School at
    Wuerzburg University in Germany. He is a Diplomate of the American Board
    of Clinical Pharmacology, a Fellow of the American College of Clinical
    Pharmacology and a Fellow of the Faculty of Pharmaceutical Medicine. He
    also holds a dual executive MBA degree from the Graduate School of
    Business Administration in Zurich, Switzerland and from the State
    University of New York at Albany.
  *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 the drug product Pulmaquin and placebo for
    Aradigm’s Phase 3 clinical studies ORBIT-3 and ORBIT-4 in patients in
    non-cystic fibrosis bronchiectasis, 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.
  *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.

  *August 2013: we announced award of an NIH grant for PNTM. The National
    Institutes of Health (NIH) awarded the Company a Small Business Initiative
    Research (SBIR) grant in the amount of approximately $278,000 to
    investigate the treatment of pulmonary non-tuberculous mycobacteria (PNTM)
    infections with Aradigm’s inhaled liposomal ciprofloxacin products
    Pulmaquin and Lipoquin. The PNTM infection is chronic and it is an orphan
    condition with unmet medical need, often associated with cystic fibrosis
    and non-cystic fibrosis bronchiectasis. The research program is being
    conducted in collaboration with Oregon State University, Corvalis.
  *August 2013: we announced award of an NIH grant for new methods of
    diagnoses of aspirations of gastrointestinal contents into the respiratory
    tract. The NIH awarded the Company an SBIR grant in the amount of
    approximately $340,000 to investigate the development and validation of
    tests for gastro-esophageal reflux with aspirations into the respiratory
    tract which is suspected to be the cause of the origin or worsening of a
    number of severe respiratory diseases. The research program is being
    conducted in collaboration with scientists at the University of
    California, San Francisco (UCSF). The funding is for laboratory work and a
    human clinical trial to be conducted at UCSF.

About inhaled ciprofloxacin (Pulmaquin and Lipoquin®)

Ciprofloxacin is a widely prescribed antibiotic to treat infections of the
lung frequently experienced by cystic fibrosis (CF) and non-cystic fibrosis
bronchiectasis (BE) patients. It is often preferred because of its
broad-spectrum anti-bacterial action. The available oral and intravenous
formulations of the drug are used to treat episodes of acute exacerbations of
lung infections in CF patients. The Company’s once-a-day novel inhaled
formulations of ciprofloxacin are encapsulated in liposomes, allowing for a
sustained release of the drug within the lung and improving airway
tolerability. The formulations are to be used for chronic maintenance therapy
as they are expected to achieve higher antibiotic concentration at the site of
infection and relatively low systemic antibiotic concentrations to minimize
side-effects. Lipoquin is a liposomal formulation of ciprofloxacin. Pulmaquin
is a dual release formulation that is a mixture of Lipoquin with
unencapsulated ciprofloxacin.

Pulmaquin has been tested extensively in preclinical tests, as well as in the
ORBIT-2 Phase 2b bronchiectasis study in which outstanding antimicrobial
activity coupled with good safety and tolerability was found, and, most
importantly, the positive impact on prevention of exacerbations compared to
placebo was also observed. The Company is preparing to initiate two global,
double-blind, placebo-controlled Phase 3 clinical trials in BE (ORBIT-3 and
ORBIT-4) in the first half of 2014. The Company previously reported positive
results in Phase 2a studies of 22 CF patients and 36 BE patients who received
Lipoquin once-a-day for 2 (CF) or 4 (BE) weeks, respectively.

The Company was recently awarded an NIH grant to fund studies to investigate
the treatment of pulmonary non-tuberculous mycobacteria (PNTM) infections with
Aradigm’s inhaled liposomal ciprofloxacin products. Additionally, Aradigm’s
inhaled ciprofloxacin has been successfully tested in animal models of the
bioterrorism infections inhalational tularemia, pneumonic plague and Q-fever.
Aradigm has been granted orphan drug designation for liposomal ciprofloxacin
for cystic fibrosis in the U.S. and the E.U., and for inhaled ciprofloxacin
and for liposomal ciprofloxacin for BE in the U.S.

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. Aradigm has product
candidates addressing the treatment of bronchiectasis, 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 statements regarding the conduct and completion of clinical trials
and the availability and sufficiency of financial resources to complete those
trials, as well as the other risks detailed from time to time in the Company's
filings with the Securities and Exchange Commission (SEC), including the
Company's Annual Report on Form 10-K for the year ended December 31, 2012
filed with the SEC on March 27, 2013, and the Company’s Quarterly Reports on
Form 10-Q.

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


ARADIGM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
                                                  
                       Three months ended              Year ended
                       December 31,                    December 31,
                       2013          2012            2013          2012
                                                                       
Revenue                $ 4,638      $ 223          $ 9,717      $ 1,007   
Operating
expenses:
Research and             3,884           1,477           8,884           3,781
development
General and              974             887             4,775           3,896
administrative
Collaboration
arrangement              -               -               15,943          -
acquisition cost
Restructuring and        6               8               27              34
asset impairment
                                                                
Total operating         4,864       2,372         29,629      7,711   
expenses
                                                                       
Loss from                (226    )       (2,149  )       (19,912 )       (6,704  )
operations
                                                                       
Interest income          2               1               6               10
Interest expense         (427    )       (395    )       (1,649  )       (1,530  )
Other income            (4      )    -             (9      )    (2      )
(expense), net
Net loss               $ (655    )   $ (2,543  )     $ (21,564 )   $ (8,226  )
Change in
unrealized gains
(losses) on              -               -               -               (1      )
available-for-sale
securities
Comprehensive loss     $ (655    )   $ (2,543  )     $ (21,564 )   $ (8,227  )
Basic and diluted
net loss per           $ (0.00   )   $ (0.01   )     $ (0.06   )   $ (0.04   )
common share
                                                                       
Shares used in
computing basic
and diluted net         586,391     210,137       366,165     201,310 
loss per common
share
                                                                                 


ARADIGM CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
                                                             
                                                 December 31,     December 31,
                                                 2013           2012
ASSETS
Current assets:
Cash and cash equivalents                        $   48,131       $  7,414
Short-term investments                               -               203
Receivables                                          92              41
Prepaid and other current assets                     1,448           106
                                                               
Total current assets                                 49,671          7,764
Property and equipment, net                          400             727
Other assets                                         353             475
                                                               
Total assets                                     $   50,424     $  8,966   
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable                                     619             330
Accrued clinical and cost of other studies           1,831           500
Accrued compensation                                 198             184
Deferred revenue                                     4,379           -
Facility lease exit obligation                       168             144
Other accrued liabilities                           82           127     
                                                                  
Total current liabilities                            7,277           1,285
Deferred rent, non-current                           132             144
Facility lease exit obligation, non-current          297             465
Note payable and accrued interest                    9,035           8,513
Shareholders' equity (deficit)                       33,683          (1,441  )
                                                               
Total liabilities and shareholders' equity       $   50,424     $  8,966   
(deficit)
                                                                             

Contact:

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