Affymax Tanks on Woeful Earnings, May Go Out of Business

Affymax AFFY is down big on Tuesday after wildly missing the mark on its fourth quarter and 2012 earnings. The Palo Alto, California firm posted a fourth quarter loss of $1.85 per share, down 126 percent year-over-year. This was far below the loss of $0.61 analysts expected. Fourth quarter revenue quadrupled to $14.8 million and finished approximately on par with the Wall Street consensus of $14.81 billion. For the year, the biopharmaceutical company lost $2.57 per share, down 40 percent from 2011. This was nearly double the loss of $1.31 analysts hoped for. Total 2012 revenue nearly doubled to $94.37 million and finished in line with estimates. OMONTSYS Disaster On February 25, Benzinga reported Affymax's catastrophic decline after it recalled its OMONTYS® drug. The company relied on OMONTYS to the tune of 93 percent of its sales in Q3 2012. Affymax's stock ultimately declined 85 percent that day in the aftermath of recalling its core product. Less than two weeks later, the US Food and Drug Administration (FDA) announced a voluntary recall of OMONTYS. Then, on March 18, the company announced it would cull approximately 230 employees - about 75 percent of its workforce - so it could “focus the company's resources on the ongoing investigation of reported hypersensitivity reactions in patients receiving OMONTYS.” Goodbye, Affymax? On March 18, Affymax noted it will retain a bank to evaluate strategic alternatives for the organization including a merger, restructuring, sale, wind-down of operations or bankruptcy proceedings. Now, on Tuesday, the company reports it will further its efforts to transition responsibility for the OMONTYS investigation and recall to partner company Takeda Pharmaceutical Company TKPHF. And, it will continue discussions with the FDA regarding the potential withdrawal of its new drug application (NDA) for OMONTYS. These developments appear to indicate a grim outlook for the future of the drug and, as a result, the company. Additionally, Affymax intends to renegotiate some or all of its agreements with third parties to support a significantly smaller organization. Note that more workers may be culled, as well. Importantly, if it is unable to rapidly and successfully rebound, Affymax concludes it may have to cease operations. Another Beating on Wall Street After dropping 85 percent to below $2.50 on February 25, the news has only gotten worse for the beleaguered firm. Affymax gained over $1 by March 7, but dropped to around $3 and hovered there until March 18. On that day, it took another massive nosedive, declining 64 percent on word of its intentions to cull 75 percent of its workforce and its grim prospects for a recovery. Now, on Tuesday, Affymax is the punching bag of choice yet again on Wall Street. The stock has dropped to around $1.25 as of this writing and is now worth just 7.5 percent of its February 22 closing value. Affymax is down around 8.5 percent on Tuesday.