Cypress Q4 Loss Narrows - Analyst Blog

Cypress Bioscience, Inc. (CYPB) reported a net loss of 13 cents per share in the fourth quarter, including the impact of a $1.1 million goodwill impairment charge associated with the company’s personalized medicine services business. Excluding this charge, net loss came in at 10 cents, much better than the year-ago loss of 19 cents and the Zacks Consensus Estimate of -13 cents.

Despite a significant increase in full year 2009 revenues, net loss for the full year increased to 74 cents, including the impact of the goodwill impairment charge, from the loss of 48 cents reported in 2008. Excluding the impact of the goodwill impairment charge, net loss for 2009 came in at 71 cents. The higher loss was due to higher operating expenses on account of costs associated with the setting up of Cypress’ commercial organization.

While full year revenues increased 64% to $27.3 million, fourth quarter revenues came in at $8.1 million, up significantly from the year-ago revenues of $0.9 million. Fourth quarter revenues consisted of $7 million in commercial revenues, $0.9 million in revenues under collaborative agreements, and $0.2 million in revenues from Cypress’ personalized medicine service business.

Commercial revenues of $7 million included royalty revenue of $2.1 million and $4.6 million in co-promotion reimbursement in connection with the launch of Savella. Savella is being co-promoted with partner Forest Laboratories (FRX).

Savella received FDA approval in January 2009 for fibromyalgia, a chronic and debilitating condition characterized by widespread pain and stiffness throughout the body, accompanied by severe fatigue, insomnia and mood symptoms.

Fibromyalgia syndrome (FMS) is estimated to affect about 6 million people in the U.S. We believe Savella may have multi-hundred million dollar potential.

Total fourth quarter operating expenses, including the goodwill impairment charge, increased to $13.3 million, up from $9 million recorded in the year ago period. While research and development expenses declined to $1.4 million from the $2 million recorded in the year-ago period, selling, general and administrative expenses increased to $10.3 million. The increase was due to costs incurred by Cypress related to the setting up of its commercial organization.

Full year operating expenses increased 44.4% to $57.2 million. Cypress exited the year with cash, cash equivalents and investments totaling $141.7 million.

We currently have a Neutral recommendation on Cypress. We view the approval of Savella as a transformational event for Cypress. We believe the company could achieve profitability in 2011 based on a strong ramp in sales.

Cypress has a strong partner in Forest Labs, and we believe Savella may have multi-hundred million dollar potential in the U.S. While we remain optimistic about Savella’s sales potential, we are concerned about the company’s early-stage pipeline. We expect the company to pursue acquisitions and in-licensing opportunities. In the meantime, we expect investor focus to remain on the sales ramp-up of Savella.
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