MEDG Medgenics(Regs)

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 the three and nine months ended September 30, 2011 and the filing with the U.S. Securities and Exchange Commission (“SEC”) of the Company’s Quarterly Report on Form 10-Q. The Form 10-Q includes unaudited interim consolidated financial statements containing the information highlighted below, as well as additional information regarding the Company. The Form 10-Q is available at www.sec.gov or www.medgenics.com.

“Throughout the third quarter and in recent weeks we made important advances with our clinical development program for the Biopump as outlined in our recent clinical update,” said Andrew L. Pearlman, Ph.D., President and Chief Executive Officer of Medgenics. “We continue to be encouraged by the growing interest in our innovative Biopump platform technology among clinicians, potential investors and potential partners. We hope to build on this interest by advancing development both internally and through collaborations.”

The Company also announced that Baruch Stern, Ph.D., has stepped down as Chief Scientific Officer of the Company, effective immediately, and will be resigning his position with the Company’s wholly-owned subsidiary, Medgenics Medical Israel Ltd., effective February 9, 2012. Dr. Stern is leaving the Company to pursue other business opportunities, and the Company expects to enter into an ongoing consulting agreement with him. In the interim and until the Company determines its strategy with regard to this position, Dr. Pearlman will serve as Chief Scientific Officer, a position he held prior to the appointment of Dr. Stern.

“On behalf of Medgenics and its Board of Directors, we thank Dr. Stern for his many years of service to our company and for his valuable contributions to the development of the Biopump,” commented Dr. Pearlman. “With credit to Dr. Stern, we have an experienced and talented research and development team in place to ensure a smooth transition and continuation of all programs.”

Third Quarter Financial Results

The Company’s net research and development expense for the third quarter of 2011 was $1.35 million, compared with $0.44 million for the third quarter of 2010. This increase is due to the use of materials and sub-contractors in connection with our Phase I/II EPODURE clinical trial in 2011, increased expenses in developing our Factor VIII Biopump, and preparations for the clinical trial of INFRADURE, including the production of a GMP vector, as well as an increase in R&D personnel and patent expenses. These increases were partially offset by $0.43 million participation from the Israeli Office of the Chief Scientist (“OCS”) and a third party recorded during the third quarter 2011, compared with $0.58 million received from the OCS and a third party during the third quarter of 2010.

General and administrative expense for the third quarter of 2011 decreased to $1.88 million from $2.62 million for the third quarter of 2010, due primarily to larger stock-based compensation and fundraising expenses recorded in the 2010 third quarter.

Other income for the three months ended September 30, 2011 was $0.00 compared with $0.73 million for the same period in 2010. The income in 2010 was recognized in connection with the Company’s first collaboration agreement signed in October 2009, as the excess of the recognized amount received from the healthcare company over the amount of research and development expenses incurred during the period for that agreement was reflected as other income.

Financial expenses for the third quarter of 2011 decreased to $0.27 million, from $2.20 million for the same period in 2010, mainly due to the change in valuation of the warrant liability and the convertible debentures.

Financial income for the three months ended September 30, 2011 decreased to $0.07 million, from $0.91 million for the same period in 2010, primarily due to the change in foreign currency exchange rates.

The net loss for the third quarter of 2011 was $3.42 million or $0.35 per share, compared with a net loss of $3.61 million or $0.80 per share for the third quarter of 2010.

Nine Month Financial Results

For the nine months ended September 30, 2011, net research and development expense increased to $3.57 million from $1.13 million for the comparable prior-year period due to ongoing clinical development of the Biopump platform, partially offset by increases to participations in R&D costs from the OCS. General and administrative expense for the first nine months of 2011 was $3.71 million compared with $3.73 million for the first nine months of 2010. The Company’s net loss for the first nine months of 2011 was $6.09 million or $0.76 per share, compared with a net loss of $3.25 million or $0.79 per share for the same period of 2010.

Medgenics ended the third quarter of 2011 with $7.57 million in cash and cash equivalents, compared with $2.86 million as of December 31, 2010. In April 2011 the Company raised $13.2 million of gross proceeds (approximately $10.4 million, net) in its U.S. IPO.

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

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

• EPODURE (now completing a Phase I/II dose-ranging trial) to produce and deliver erythropoietin for many months from a single administration, has demonstrated elevation and stabilization of hemoglobin levels in anemic patients for six to more than 36 months;
• INFRADURE (planning to commence a Phase I/II trial in Israel in 1H12 in hepatitis C) to produce a sustained therapeutic dose of interferon-alpha for use in the treatment of hepatitis;
• HEMODURE is a sustained Factor VIII therapy for the prophylactic treatment of hemophilia, now in development.

Medgenics intends to develop its innovative products and 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.

 

TABLES TO FOLLOW

   

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands   September 30,   December 31, 2011   2010 2010 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 7,570 $ 4,778 $ 2,859 Accounts receivable and prepaid expenses   1,298     468     983     Total current assets   8,868     5,246     3,842     LONG-TERM ASSETS: Restricted lease deposits 59 40 46 Severance pay fund   346     276     318     Total long-term assets   405     316     364     PROPERTY AND EQUIPMENT, NET   428     237     243     DEFERRED ISSUANCE EXPENSES   -     405     672   Total assets $ 9,701   $ 6,204   $ 5,121     LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Trade payables $ 928 $ 780 $ 743 Advance payment - 330 - Other accounts payable and accrued expenses 1,413 1,474 1,235 Convertible debentures   -     5,251     5,460     Total current liabilities   2,341     7,835     7,438     LONG-TERM LIABILITIES: Accrued severance pay 1,252 1,043 1,087 Liability in respect of warrants   1,429     3,607     3,670     Total long-term liabilities   2,681     4,650     4,757     Total liabilities   5,022     12,485     12,195     STOCKHOLDERS' EQUITY (DEFICIT):

Common stock - $0.0001 par value; 100,000,000 shares authorized; 9,690,117, 5,147,115 and 5,295,531 shares issued and outstanding at September 30, 2011 and 2010 and December 31, 2010, respectively

1 1 1 Additional paid-in capital 52,172 34,232 34,334 Deficit accumulated during the development stage   (47,494 )   (40,514 )   (41,409 ) Total stockholders' equity (deficit)   4,679     (6,281 )   (7,074 ) Total liabilities and stockholders' equity (deficit) $ 9,701   $ 6,204   $ 5,121      

CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands (except share and per share data)

      Nine months ended

September 30,

Three months ended

September 30,

2011   2010 (*) 2011   2010     Research and development expenses $ 4,503 $ 2,377 $ 1 ,785 $ 1,011   Less - Participation by the Office of the Chief Scientist (860 ) (429 ) (357 ) (191 ) U.S. Government grant - - - - Participation by third party   (75 )   (817 )   (75 )   (385 )   Research and development expenses, net 3,568 1,131 1,353 435   General and administrative expenses 3,709 3,727 1,877 2,616   Other income: Excess amount of participation in research and development from third party   -     (2,026 )   -     (734 )   Operating loss 7,277 2,832 3,230 2,317   Financial expenses 203 1,382 267 2,199 Financial income   (1,398 )   (962 )   (74 )   (910 )   Loss before taxes on income 6,082 3,252 3,423 3,606   Taxes on income   3     -     1     -     Loss $ 6,085   $ 3,252   $ 3,424   $ 3,606     Basic and fully diluted loss per share $ 0.76   $ 0.79   $ 0.35   $ 0.80     Weighted average number of shares of Common stock used in computing basic and fully diluted loss per share   8,020,348     4,106,997     9,657,659     4,534,545  

(*) Restated see Note 4 in 10-Q