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Valentis Posts Sharp Revenue Decline, But R&D Cuts Help Narrow Q3 Loss

NEW YORK, Nov. 15 - Valentis today said a significant decrease in R&D and other expenses in the third quarter offset dismal revenue and helped narrow net loss.

 

Revenue for the period ended Sept. 30 fell to $339,000 from $1.7 million one year ago. Receipts were exclusively from sales and licensing agreements, Valentis said.

 

R&D in the third quarter also fell, to $2.9 million from $6.3 million during the same period last year. The decrease was largely the product of a restructuring that began in January.

 

As a result, third-quarter net loss was $5.7 million, or $.15 per share, from $8.7 million, or $.29 per share last year, Valentis reported.

 

The company said it had roughly $12 million in cash, cash equivalents, and short-term investments as of Sept. 30.

 

Valentis entered the fourth quarter, which began Oct. 1, at a financial crossroads. Eleven weeks ago the Nasdaq told Valentis it was planning to delist the company's stock because it failed to maintain a certain market capitalization. Yesterday, about a month after it laid off 45 employees in an attempt to shore up cash and drive the development of its two lead products, Valentis disclosed plans is says will keep its shares listed.

 

As GenomeWeb reported yesterday, the company said it has convinced holders of Series A preferred stock to convert their shares into common stock, a move that will allow the company to book the value of the stock as equity rather than debt.

 

Valentis said this will help the company's market cap reach the Nasdaq's minimum of $50 million. Its current market cap is around $9.2 million, according to Market Guide.

 

The firm also said it intends to initiate a reverse stock split in an attempt to hike its share price above $1. The stock closed down at $.21 yesterday afternoon.

 

The Nasdaq told Valentis it has until Jan. 15 to obtain shareholder approval. The company will stay listed in the meantime.

 

The company had formally kicked off the restructuring plan in early October when it announced it would dismiss 45 employees and focus more on drug discovery. As GenomeWeb reported last month, Valentis said the majority of the layoffs--which are targeted across the company and include executives, scientific staff, and administrative support--were effective immediately and would reduce the company's total staff to 20 people.

 

There were no plans for further layoffs, according to Joe Markey, senior director of finance at Valentis.

Valentis said it plans to save about $7 million per year, which can help it develop its Del-1 gene medicine for peripheral arterial disease and ischemic heart disease and EpoSwitch, its lead GeneSwitch product for chronic anemia.

 

"We now have to focus down on [these] programs with the remaining people and dollars," Markey said in October.

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