ALXA

Alexza Pharmaceuticals, Inc. (ALXA)

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Alexza Pharmaceuticals (ALXA)

Q4 2012 Earnings Call

March 26, 2013 5:00 pm ET

Executives

Mark K. Oki - Chief Financial Officer, Principal Accounting Officer and Senior Vice President of Finance

Thomas B. King - Chief Executive Officer, President, Director and Chairman of Finance Committee

Analysts

Stephen G. Brozak - WBB Securities, LLC, Research Division

Scott R. Henry - Roth Capital Partners, LLC, Research Division

Charles C. Duncan - Piper Jaffray Companies, Research Division

Presentation

Operator

Good afternoon, everyone, and welcome to the Alexza Pharmaceuticals 2012 Fourth Quarter and Year-End Financial Results Conference Call. [Operator Instructions] Today's conference is also being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn today's conference over to Mr. Mark Oki, Senior Vice President, Finance, and Chief Financial Officer at Alexza. Mr. Oki, you may begin.

Mark K. Oki

Thank you. Good afternoon, and thank you for joining us today. On the phone with me is Tom King, Alexza's Chief Executive. In addition to reviewing the company's financial results, which I will walk through in a moment, management will discuss Alexza's recent accomplishments and ongoing activities. Following, we will open the line for investor questions.

Before we get started, I would like to remind you that the matters discussed on this call contain forward-looking statements that involve risks and uncertainties, including our ability to support operations based on existing cash resources, our ability to commercialize products, the timing of the commercialization of products and our projected revenues and expenses. Actual results may differ materially from the results predicted, and recorded results should not be considered an indication of future performance.

These and other risk factors are more fully discussed in our annual report on Form 10-K that was filed with the SEC earlier today, most particularly, under the caption Risk Factors. Alexza disclaims any obligation to update or revise any forward-looking statement made on this call as a result of new information or future developments.

As a reminder, Alexza's policy is to only provide guidance on product, product candidates and corporate goals for the next 1 to 2 fiscal quarters and to provide, update or reconfirm its guidance only by issuing a press release or filing updated guidance with the SEC in a publicly accessible document.

Clinical and corporate milestone guidance is as of today, March 26, 2013, and financial guidance relating to the company's current cash, cash equivalents, marketable securities and restricted cash is based upon balances as of December 31, 2012. With that, I would now like to summarize the financial information for the fourth quarter and full year of 2012.

We recorded $0.7 million and $4.1 million of revenue in the quarter and year ended December 31, 2012, respectively, compared to $1.9 million and $5.7 million in the same period in 2011. In 2012, we recorded a full year revenue earned under the Grupo Ferrer license and 1 quarter of revenue from the license agreement with Cypress. In comparison, in 2011, we recognized a full year of revenue under the Cypress license agreement and 1 quarter of revenue under the Grupo Ferrer license agreement.

GAAP operating expenses were $11.6 million in the fourth quarter and $32.9 million for the year ended December 31, 2012, compared to $10.4 million and $40 million in the same periods in 2011. Broken down, R&D expenses were $7 million and $21.8 million in the quarter and year ended December 31, 2012, respectively. This compared to R&D expenses of $7.3 million and $28.3 million in the same period in 2011.

During 2012, we reduced costs through reductions in our workforce, completion of our outlined work on Staccato nicotine and the suspension of the spending on AZ-007, Staccato zaleplon. These reductions were partially offset by approximately $1.1 million and $0.9 million of cash bonuses and share-based compensation expense incurred in the fourth quarter of 2012 that were not incurred in 2011. These were the results of achieving certain specific corporate goals related to the ADASUVE marketing approvals, as specified in the company's bonus plans.

G&A expenses were $4.6 million for the fourth quarter and $11.1 million for the year ended December 31, 2012. This compares to G&A expenses of $3.1 million and $11.8 million in the same period in 2011.

In March of 2012, we recorded a nonrecurring, noncash, net contra expense of $1.4 million related to the termination of one of our building leases and associated subleases. Alexza incurred approximately $0.9 million and $1.0 million of cash bonuses and share-based compensation expense in the fourth quarter of 2012 that, again, were not incurred in 2011, the result of meeting certain corporate goals related to the ADASUVE marketing approvals, as specified in the company's bonus plans.

Alexza ended the year with cash, cash equivalents, marketable securities and restricted cash of $22.8 million. We believe that with our cash, current cash, cash equivalents, marketable securities and restricted cash and our current expected cash usage, we have sufficient capital resources to meet our anticipated cash needs into the second quarter of 2013. Changing circumstances may cause us to use capital at a faster or slower rate than currently anticipated or to alter our operations.

We're managing our resources very carefully and driving our commercial strategy partnering negotiations for ADASUVE hard, which Tom will discuss later in our call. Our expectation is that a commercial arrangement for ADASUVE will include near-term cash in the form of an upfront payment, as well as a longer-term revenue stream. At the same time, we are aware of multiple options to extend this runway, only if absolutely necessary, which we will hold in reserve.

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